Stock Market Update

The S&P 500 futures currently trade 14 points below fair value.

Equity indices in the Asia-Pacific region closed Tuesday's session on a relatively mixed note, largely brushing off concerns about Iran and stubbornly high energy prices. Hong Kong's Hang Seng (+2.5%) was the standout winner, bolstered by AI enthusiasm and optimism regarding the property market. The AI trade has been pushed along by the start of Computex 2026 in Taiwan, which will run June 2-5 and will key on AI's evolving capabilities. Chatter about a possible rate hike by the Bank of Korea was ignited by a hotter-than-expected CPI report for May that featured the highest annualized rate (3.1%) since early 2024. The Bank of Korea is expecting the inflation rate to maintain a 3-handle for some time. Notably, the PBOC's open market operations included a fund injection of just CNY200 mln, which was the smallest OMO since 2015.

• In economic data:
  • Japan's May Monetary Base -12.2% yr/yr (expected -9.5%; last -11.3%)
  • Hong Kong's April Retail Sales 8.6% yr/yr (last 12.8%)
  • South Korea's May CPI 0.5% m/m (expected 0.3%; last 0.5%) and 3.1% yr/yr (expected 3.0%; last 2.6%)
  • Australia's Q1 Current Account Balance -AUD27.1 bln (expected -AUD23.1 bln; last -AUD23.0 bln); April Building Approvals -3.4% m/m (expected -1.5%; last -10.5%); Q1 Business Inventories 0.5% (last -0.1%)

---Equity Markets---

• Japan's Nikkei: -0.3%
• Hong Kong's Hang Seng: +2.5%
• China's Shanghai Composite: +0.4%
• India's Sensex: +0.5%
• South Korea's Kospi: +0.2%
• Australia's ASX All Ordinaries: flat

Major European indices are trading with some positive energy ahead of the U.S. open, aided by sliding energy prices and ongoing enthusiasm about AI-related stocks. They have clearly brushed off worries about inflation as a trading catalyst, as this morning's data showed CPI running at 3.2% yr/yr and core CPI at 2.5%. Those readings are reportedly solidifying expectations of a rate hike by the ECB.  Higher energy costs were the main driver of CPI inflation. There are reports that the European Commission is discussing plans to allow countries more fiscal flexibility as they deal with attempts to mitigate the impact of higher energy costs. Notably, sovereign bond yields are lower in the wake of the inflation report.

• In economic data:
  • Eurozone's May CPI 0.1% m/m (last 1.0%) and 3.2% yr/yr (expected 3.2%; last 3.0%); May core CPI 0.3% m/m (last 0.9%) and 2.5% yr/yr (expected 2.4%; last 2.2%)
  • UK's April Mortgage Approvals 65,940 (expected 62,000; last 63,980); BoE Consumer Credit GBP1.859 bln (expected GBP1.700 bln; last GBP1.904 bln)
  • Spain's May Unemployment Change -36,300 (expected -56,800; last -62,700)

---Equity Markets---

• STOXX Europe 600: +0.5%
• Germany's DAX: +0.6%
• U.K.'s FTSE 100: +0.1%
• France's CAC 40: +0.5%
• Italy's FTSE MIB: +0.9%
• Spain's IBEX 35: +0.6%