· The U.S. dollar fell on Monday after St. Louis Federal Reserve President James Bullard said an interest rate cut “may be warranted soon,” given the rising economic risk posed by global trade tensions as well as weak U.S. inflation.
Bullard said that while the Fed cannot respond to every change in the rapidly evolving trade feud, recent events like the unexpected announcement of new tariffs on Mexican imports have created “an environment of elevated uncertainty... that could feed back to U.S. macroeconomic performance” as the global economy slows.
Also on Monday, a national survey showed U.S. manufacturing activity slowed in May to its weakest pace in more than two years as factory managers raised concerns about a trade war between the United States and China.
Against a basket of six major currencies, the dollar was 0.56% lower at 97.20, though it is still up about 1% this year.
The yen hit its strongest level against the dollar since Jan. 10, at 107.88, last down about 0.31% from the prior session close.
The yield on the benchmark 10-year Treasury note fell below 2.07% on June’s first day of trading as mounting global growth fears pushed the rate to its lowest level since September 2017.
At around 3:16 p.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, had fallen 7 basis points to 2.067%, its lowest level in about 20 months. The yield on the 30-year Treasury bond was also lower at around 2.53%.
The 2-year Treasury note yield extended an 12-basis-point drop after St. Louis Federal Reserve president James Bullard said Monday that a U.S. interest rate cut “may be warranted soon” given the rising risk to economic growth posed by global trade tensions. It was last seen at 1.83%.
The 10-year yield’s tumble from 2.5% at the beginning of May inverted a portion of the yield curve, with the 3-month bill rate trading above its 10-year counterpart. An inverted yield curve is seen by experts as a sign that a recession may loom ahead.
· As the U.S.-China tariff battle increasingly heats up, analysts from J.P. Morgan and Morgan Stanley say it’s looking likely that there will not be any trade deal coming out of the G-20 summit in Japan this month.
The summit has been cast as a possible opportunity for the opposing sides to ink a deal, with market watchers expecting that both Presidents Donald Trump and Xi Jinping would be in attendance.
· Donald Trump will plunge into Britain’s Brexit crisis on Tuesday and is likely to demand that Prime Minister Theresa May’s successor ban China’s Huawei from 5G networks as thousands of protesters mock the U.S. president across London.
Trump brings demands for the United States’ closest ally in Europe, including calls by his envoys for a tougher British stance towards telecoms giant Huawei Technologies Co Ltd.
· The Reserve Bank of Australia will announce its decision on interest rates at 2:30 pm AEST am in Sydney, Australia, 4:30 am GMT and 12:30am EDT Tuesday June 4th
RBA: A new easing cycle
Markets are convinced that the Reserve Bank of Australia will initiate its first rate cutting cycle on Tuesday reducing the cash rate by 25 basis points to 1.25%. It will be the first rate move by the central bank in almost three years and comes in answer to weak inflation and growth, rising unemployment and the escalating trade war between China, Australia’s largest customer and the United States, it greatest ally.
· Oil futures ended the session lower after back-and-forth trading on Monday, as Saudi comments indicating OPEC would extend supply cuts supported prices, while concerns that U.S. tariffs on China and Mexico would hurt demand weakened crude market sentiment.
Saudi Arabia signaled that OPEC, together with Russia, would continue managing global crude supplies to avoid a surplus.
U.S. West Texas Intermediate crude futures settled 25 cents lower at $53.25 per barrel, slipping half a percent to the weakest closing price since Feb. 12. Earlier in the session, WTI hit a session high of $54.63 per barrel.
Front-month Brent crude futures fell 71 cents, or 1.2%, to $61.28 per barrel, settling at a four-month low. Prices dropped by more than 3% on Friday, with May recording the biggest monthly loss in six months.
Brent crude prices have dropped almost 20% from their 2018 peak as global supplies tighten following output curbs by OPEC and Russia, as well as a reduction in Iranian and Venezuelan exports due to U.S. sanctions.
Reference: CNBC
Thai
Eng