EQUITIES

Asia-Pacific stocks were mixed in Tuesday trade. The Shanghai Composite in mainland China advanced 0.90% while in Hong Kong, the Hang Seng index climbed 0.78%. Over in South Korea, the KOSPI climbed 0.45%.

Australian stocks were lower as the S&P/ASX 200 fell 0.76%. The Nikkei 225 in Japan declined 0.16%.

OIL

Oil prices extended gains on Tuesday as demand was seen to improve on the reopening of large cities in China, coupled with the European Union’s collective consent to slash oil imports from Russia, fuelling worries of a tighter market already strained for supply amid rising demand ahead of peak U.S. and European summer driving season.

Shanghai has announced an end to its two-month-long COVID-19 lockdown and will allow the vast majority of people in China's largest city to leave their homes and drive their cars from Wednesday.

The European Union leaders agreed in principle to cut 90% of oil imports from Russia by the end of 2022 after weeks of haggling, resolving a deadlock with Hungary over the bloc's toughest sanction yet on Moscow since the invasion of Ukraine three months ago. Though the practice on how the sanctions will work will be decided for later. The next summit is scheduled for June 23-24.

International benchmark Brent crude futures gained 1.45% to $123.48 per barrel. U.S. crude futures jumped 3.16% to $118.71 per barrel.

Both benchmarks have posted daily gains since Wednesday last week. Oil prices soared in March to their highest since 2008 and are up over 55% so far this year.

On the production side, OPEC+ is set to stick to last year's deal in its meeting on Thursday, with a modest July output hike by 432,000 barrels per day, six OPEC+ sources said, rebuffing Western calls for a faster increase to lower surging prices. Members of the group and allies led by Russia maintained that the oil market is balanced and that the recent price hikes are not related to fundamentals.

CURRENCIES

Benchmark U.S. 10-year Treasury yields leaped on Tuesday after bond markets in the U.S. were closed in the previous session for the Memorial Day holiday, sending it up nearly 10-bps to 2.837%.

The U.S. dollar index was at 101.618, having fallen to a five-week low of 101.29 overnight, with the largest weighting by the euro. The index is on track for its first monthly drop in five, although it remains up about 6% on the year.

The euro is set for a 2.2% gain in May, which would be its biggest monthly rise in a year.

Bitcoin was on the front foot at around $31,600 having rallied hard overnight to $32,000 for the first time in over three weeks.

GOLD

Gold prices dropped on Tuesday as a higher dollar and rising U.S. Treasury yields weighed on demand for greenback-priced bullion, which is set for a second straight monthly loss for the first time since March 2021.

Spot gold was down 0.05% at $1,853.20 per ounce. U.S. gold futures also were down 0.05% at $1,856.40. Gold prices are down about 2.6% so far this month, their most since September.

Spot silver dipped 0.7% to US$21.80 per ounce, fallen about 4.1% so far this month. Palladium eased 0.2% to $2,029.61, and has dipped about 12.6% this month, its most since November.

Platinum fell 0.8% to $951.31 but is still set for its first monthly gain in three of about 2.1%.

ECONOMIC OUTLOOK

Stocks wobbled and bonds fell in Asia on Tuesday after a hot inflation reading in Germany heightened nerves about the pace and scale of looming interest rate hikes. An easing of COVID-19 restrictions in China meanwhile supported the regional sentiment.

German bund yields rose overnight after German consumer prices increased at their fastest pace in half a century, strengthening the case for an outsized ECB interest rate hike in July. Data showed that German EU-harmonized inflation came in at an annual 8.7% in May, marking a sharp incline from the 7.8% seen in April.

European stocks set for cautious open as investors watch the May’s initial flash inflation prints from France, Italy and the broader euro zone, due later today.

Putin said on Monday that Russia is ready to facilitate the unhindered export of grain from Ukrainian ports in coordination with Turkey, according to a Kremlin readout of talks with President Tayyip Erdogan. The remarks were made after Putin told leaders of Germany and France that Russia is willing to discuss ways to resume Ukrainian grain shipments over the weekend. Chicago wheat futures fell the news. Corn also ticked lower, while soybeans edged up.

Global markets are also reacting to another jump in oil prices after EU leaders agreed late on Monday to ban 90% of Russian crude by the end of the year, as part of the bloc’s sixth sanctions package against Moscow since its invasion of Ukraine.

Chinese PMI figures showed another month of contraction in services and manufacturing activity, though at a reduced pace of decline. May figures showed China's official PMI at 49.6, indicating a contraction in factory activity but at a slower pace than in April, when the figure was 47.4.