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Financial Markets Morning Commentary
By: Tom Pawlicki, Senior Specialist, Market Intelligence
Economic
- 10-year futures are -9/32. Yields are +3.60 bps at 4.491%. S&P futures are -15.00. Fighting between US and Iran was sparked again overnight, and oil prices are +$2.39/bbl. An S&P Global energy conference in the Middle East brought comments from Kuwait suggesting that its oil output could recover to 70% within 6-8 weeks of hostilities ending, while Iraq said it is planning to expand pipeline exports through Syria to get its oil to market. That can be done in 2 1/2 months. Russia’s strike on Ukraine yesterday killed 23 and wounded 130, and Ukraine is retaliating today with a strike on an oil terminal in St. Petersburg. JOLTS job openings were stronger yesterday and ADP beat estimates this morning.
- The ISM non-manufacturing PMI is due later today, weekly jobless claims, Challenger layoffs and revised productivity are on Thursday, and nonfarm payrolls are on Friday.
- (Reuters) MBA 30-year mortgage rate was 6.57% in the w/e May 29 vs. 6.65% previously.
- (Reuters) ADP payrolls were +122K vs. +117K expected and +105K previously (revised from +109K).
- (Reuters) JOLTS job openings released yesterday morning were 7.618 mln in April vs. 6.88 mln expected and 6.887 mln previously.
- (Reuters) The OECD said the global economic outlook hinges on how long the war in the Middle East lasts, with recession in some countries and sharply higher inflation a real possibility if it drags on into next year. In that baseline scenario, global growth is projected to slow from 3.4% in 2025 to 2.8% in 2026 before picking up to 3.1% in 2027, broadly in line with the OECD's March forecasts.
- (Reuters) The Trump administration has proposed new tariffs of up to 12.5% on imports from 60 economies after determining they had failed to curb trade in goods made with forced labor, an assertion that was rejected by its trading partners. The USTR proposed 10% additional duties on imports from Canada, Ecuador, the European Union, Indonesia, Mexico, Pakistan, Argentina, Bangladesh, Cambodia, El Salvador, Guatemala, Malaysia, Taiwan and Britain. The USTR said all had plans or partial schemes in place.
- (Reuters) In a surprise move ahead of its investor roadshow, Elon Musk's SpaceX plans to fix its IPO price at $135 per share to raise a record-setting $75 billion, according to a source familiar with the matter. The rocket and satellite communications company plans to sell 555.6 million shares, the source said. It is aiming for a valuation of $1.75 trillion, two other people said. A fixed price ahead of presentations to investors and bookbuilding is highly unusual.
- (Bloomberg) The yen remained near the 160 level versus the dollar following remarks by Bank of Japan Governor Kazuo Ueda that make an interest rate hike this month sound likely but not certain. Ueda said that the BOJ needs to keep raising interest rates in response to developments in the economy and inflation. While the remarks indicate that there’s a good chance of a rate hike on June 16, they weren’t as explicit as comments he made telegraphing the previous two increases.
- (Bloomberg) Goldman Sachs Group Inc. boosted its outlook for South Korean and Taiwanese stocks, as the artificial intelligence boom drives profits in the tech-heavy markets. They lifted their target for Korea’s Kospi to 12,000 from 9,000.
- (Reuters) The European Central Bank is set to raise its deposit rate to 2.25% on June 11, with another increase likely in September, as it balances energy-driven inflation against a weakening economy, a Reuters poll of economists showed.
Geopolitical
- (Bloomberg) The US and Iran clashed again overnight, with Kuwait and Bahrain caught in the crossfire of one the most serious flare-ups since a ceasefire went into effect in early April. Shortly after “disabling” an empty oil tanker heading to Iran, the US military said it came under missile and drone attack. Iran targeted the US’s main naval base in the region, located in Bahrain, and the Ali Al-Salem airbase in Kuwait. At least one person at Kuwait’s civilian airport was killed in a separate strike.
- (Reuters) Secretary of State Marco Rubio said on Tuesday that President Donald Trump's negotiating team has not offered Iran sanctions relief in exchange for reopening the Strait of Hormuz and insisted that any sanctions relief was tied to Tehran giving up its nuclear program.
- (Reuters) Russia downed 50 drones over the Leningrad region northwest of Moscow overnight and continues to repel the suspected Ukrainian attacks, Governor Alexander Drozdenko said on Wednesday, as a major annual economic forum was about to start. The Leningrad region, home to crucial energy export infrastructure and a major oil refinery, is hosting the economic conference, President Vladimir Putin's "Russian Davos", in St. Petersburg from Wednesday.
- (Reuters) Ukraine's military struck Russia's St. Petersburg Oil Terminal overnight, around 1,100 km (682 miles) from Ukrainian border, President Volodymyr Zelenskiy said on Wednesday.
- (Reuters) The Kremlin said on Wednesday that Russia would keep striking Ukraine systematically after Ukrainian drones struck an oil terminal and naval base in St Petersburg hours before President Vladimir Putin's showcase economic forum got under way.
Energy
- WTI is +$2.39/bbl at $96.15/bbl, while Brent is +$2.44/bbl at $98.44/bbl. Natural gas is -$0.01/MMBtu at $3.157/MMBtu.
- (Reuters) API crude stocks fell by 6.8 million barrels in the week ended May 29. Gasoline inventories rose by 3.5 million barrels, while distillate inventories fell by 214,000 barrels compared with a week earlier.
- (Reuters) Two tankers carrying oil products exited the Strait of Hormuz over the past week, while a liquefied natural gas carrier loaded cargo in the United Arab Emirates, shipping data showed - rare movements as traffic through the chokepoint remains limited.
- (Reuters) Kuwait could recover its oil production to almost 70% of normal levels in 6-8 weeks after the Strait of Hormuz reopens, Kuwait Petroleum Company's managing director for international marketing, Shaikh Khaled Ahmad Al-Sabah, said on Wednesday. The remaining 30% would take around a month longer, Al-Sabah added at the S&P Global Energy Middle East Petroleum and Gas Conference, while KPC could recover its refinery production levels to normal levels in around 2-3 weeks.
- (Reuters) Iraq plans to more than triple crude oil exports through pipelines to 770,000 barrels per day from 220,000 bpd within two and a half months, a government statement said on Tuesday. Iraq plans to sign a deal with Syria to transport, store and handle shipments of Basrah Light, Basrah Medium and Basrah Heavy crude through the Mediterranean ports of Baniyas and Tartous.
- (Bloomberg) The first oil supertanker in almost a month has been spotted moored at Iran’s main crude-export facility in the northern Persian Gulf, highlighting the largely effective nature of an American blockade on Tehran’s shipping. No similarly-sized ships had been observed at the island since May 6.
- (Reuters) The U.S. military said on Tuesday it disabled a Botswana-flagged oil tanker, M/T Lexie, after it attempted to sail toward Iran's Kharg Island.
- (Reuters) Russia's oil and gas tax revenue, which accounts for around a fifth of total budget income, increased by 32.4% year-on-year in May to 678.9 billion roubles ($9.3 billion), Finance Ministry data showed on Wednesday, thanks to a global oil price rally fueled by the Middle East war.
Metals
- Gold is -$32.60/oz, trading at $4,487.30/oz, while silver is -$1.246/oz at $74.31/oz.
- The dollar index is +0.222 points at 99.441.
- (Reuters) Gold fell on Wednesday, weighed by a stronger dollar and rising oil prices as continuing conflict in the Middle East dimmed hopes for a swift resolution to the U.S.-Iran conflict.
- (Reuters) Copper prices retreated on Wednesday after fresh hostilities in the Iran war punctured optimism that a resolution was imminent and lifted the dollar, though the prospect of U.S. tariffs limited the downside.
- Interest Rates
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