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[Quick Facts]

1. Fed's Williams: Restoring price stability is the key goal right now.

2. Prigozhin says he never intends to overthrow the government.

3. Fed's hawkish signals push the interest rate market to withdraw bets on rate cuts.

4. OPEC is inviting Guyana to become its new member.

5. "Wagner incident" drives European gas price rise.

[News Details]

Fed's Williams: Restoring price stability is the key goal right now

The U.S. New York Fed President John Williams downplayed the link between monetary policy and financial stability in a public speech on Monday while warning that using rate policy to tame bubbles may bring unwanted economic pain.

Williams did not comment on the outlook for monetary policy in his remarks, although he did note that restoring price stability is of paramount importance because it is the foundation of sustained economic and financial stability. Price stability is not an either/or, it's a must-have.

Markets have long argued that the ultra-low interest rate stance taken by the Fed and other major central banks in the years following the outbreak of the COVID-19 pandemic distorted markets and laid the groundwork for later troubles. Williams, however, said it's not clear whether monetary policy actions played a central role in affecting financial stability vulnerabilities.

Prigozhin says he never intends to overthrow the government

The head of Russia's Wagner Group mercenary force said on Monday that he had never intended to overthrow the Russian government. Yevgeny Prigozhin did not mention where he was or provide further details of the mysterious agreement reached on stopping the mutiny.

Vladimir Putin made a televised speech on Monday, his first public address since last Saturday. He said that the rebellion was putting Russia's survival at risk and those behind it would be punished. Thanking the mercenary commanders and soldiers who made it possible to avoid bloodshed, Putin said he would keep his promise to allow Wagner fighters to move to Belarus, or sign contracts with the Russian Defense Ministry if they wanted to, or simply return to their families.

But Putin did not mention Prigozhin. A Kremlin spokesperson said Putin met on Monday with the heads of Russia's security services, including Defense Minister Sergei Shoigu. Earlier, one of Prigozhin's main requirements was to dismiss Shoigu along with Russia's top generals.

Prigozhin led an abortive mutiny two days ago. He said in an 11-minute audio clip: We went to demonstrate our protest, and not to overthrow the government in the country. Our goal was to prevent the destruction of Wagner's militia ranks and to force accountability on Russian commanders who have blundered in military operations in Ukraine.

Fed's hawkish signals push interest rate market to withdraw bets on rate cuts

Traders in the U.S. short-term interest rate market are abandoning expectations that the Federal Reserve will cut rates this year, prompting the unwinding of a large number of dovish bets. Preliminary data released on Monday by the Chicago Mercantile Exchange showed a series of open interest in options fell sharply, a sign of retreat after a sharp pullback due to rate-cut bets on Friday.

Before that, Fed Chairman Jerome Powell stressed the Fed may resume monetary tightening after suspending rate hikes this month. He told lawmakers that rates could be raised by another 50 basis points this year. Powell's emphasis on his hawkish message appears to be having the desired effect on the short-term interest rate market, and traders are readjusting their bets. Swap contracts tied to Fed meeting dates now expect policy rates to peak after another 25 basis points of rate hikes, which, while in stark contrast to the earlier pricing of a rate cut this year, is inconsistent with the 50 bps hike implied by the dot plot.

The latest position data from the U.S. Commodity Futures Trading Commission showed that hedge funds increased their net long position in SOFR futures by a record amount, suggesting that some funds may not have completely abandoned their bets that rates will be cut several times in the near future.

According to CME's FedWatch Tool, the probability of a 25 basis point rate hike in July and September is 75.4% and 67.6%, respectively; and the probability of a 50 basis point rate hike is 0% and 10.4%, respectively.

OPEC is inviting Guyana to become its new member

Both Saudi Energy Minister Abdulaziz bin Salman and OPEC Secretary General HE Haitham Al Ghais are reported to have invited Guyana to join the organization in recent months. But so far, Guyana has chosen not to join it. The country needs to maximize production and profits in the short term, given the expected decline in oil demand in the coming decades, Bharrat Jagdeo, Vice President of Guyana, told the Wall Street Journal.

If Guyana joins OPEC in the future, it will be the first new member of the organization in five years. As a small country with a population of less than 1 million, it is expected to be one of the largest oil producers in terms of per capita production.

"Wagner incident" drives European gas price rise

European natural gas prices jumped as tensions over the short-lived Russian "Wagner incident" fueled supply concerns in an already volatile market. Benchmark gas rose as much as 13% on Monday, while gas prices have soared more than 30% this month. In addition, an extended outage at Norway's major gas fields offset weaker demand.

The geopolitical risk for Russia is now significantly higher than it was before the weekend. Uncertainties over what may happen within Russia, rather than in Ukraine, in the coming weeks are pushing gas prices higher.

[Focus of the Day]

UTC+8 16:00 ECB President Christine Lagarde speaks

UTC+8 16:30 Bank of England member Tenreiro speaks

UTC+8 17:30 Kocicki, Deputy Governor of the Bank of Canada, speaks

UTC+8 20:00 ECB Executive Board member Schnabel speaks

UTC+8 20:30 U.S. Durable Goods Order MoM (May)

UTC+8 20:30 Canada CPI YoY (May)

UTC+8 22:00 U.S. Conference Board Consumer Confidence Index (Jun)