• Asian equity markets began the new month higher across the board as the region sustained the late relief seen last Friday on Wall Street
• US President Trump’s press conference on Friday saw the US leader revoke Hong Kong’s special status but refrained from making any adjustments to the China trade deal
• This underpinned sentiment in Asia and helped US equity futures recoup the initial losses that were triggered by nationwide violent protests and mixed Chinese PMI data over the weekend
• Official Chinese Manufacturing PMI missed expectations but remained in expansionary territory, Non-Manufacturing PMI and Caixin Manufacturing PMI topped estimates
• In FX, the DXY attempted a breakdown of the 98.00 level, EUR/USD extended gains above 1.1100 and GBP/USD briefly breached 1.2400
• OPEC+ is reportedly close to bringing the next meeting forward to June 4th following a proposal from the Algerian Energy Minister
• Looking ahead, highlights include EZ, UK & US PMIs (F), US Construction Spending, US ISM Manufacturing

CORONAVIRUS UPDATE

US CDC reported total coronavirus cases rose by 23553 to 1,761.503 and the death toll rose by 915 to 103,700, while AFP tweeted the US coronavirus death toll rose by 598 citing the Johns Hopkins tracker. (Newswires/Twitter)

US President Trump said he is terminating the relationship between the US and WHO, while he had accused China of taking control of the WHO. In other news, President Trump is planning to delay the next G7 meeting until September and wants to include Australia, India, Russia and South Korea. (Newswires)

South Korea based Celltrion (068270 KS) reported positive preclinical trials for coronavirus treatment which showed 100-fold reduction in the viral load and the Co. will begin human trials in July. (Business Wire)

Sunday: UK COVID-19 death toll rises to 38,489 (Prev. 38,376); deaths rise by 113 vs. yesterday's 215. Case count rises 1,936 vs. prev. 2,445 increase. (DHSC)

The UK Government's plans to enact quarantine measures for all international travellers and returning Brits are likely to face a Conservative revolt when they hit the HoC this week due to fears over the impact on the economy. (Telegraph) 

ASIA

Asian equity markets began the new month higher across the board as the region sustained the late relief seen last Friday on Wall Street where the S&P 500 capped off its strongest 2-month performance in over a decade after US President Trump’s press conference, where he announced to revoke Hong Kong’s special status but refrained from any ‘nuclear’ action on China which could have derailed the Phase One trade deal. This underpinned sentiment in Asia and helped US equity futures recoup the initial losses that were triggered by nationwide violent protests and mixed Chinese PMI data over the weekend. ASX 200 (+0.7%) declined at the open led by real estate stocks after the latest data showed a contraction in home prices, although the index later recovered in tandem with the overall constructive risk tone and as various states in Australia further eased lockdown restrictions, while Nikkei 225 (+0.6%) was underpinned as exporters welcomed the recent favourable currency moves. Hang Seng (+3.4%) and Shanghai Comp. (+2.0%) were also higher after US President Trump’s slap on the wrist retaliation to China and with the outperformance in Hong Kong fuelled by dip buying, while participants also digest the latest varied Chinese PMI data which showed Official Manufacturing PMI missed expectations but remained in expansionary territory and both Non-Manufacturing PMI and Caixin Manufacturing PMI topped estimates. Finally, 10yr JGBs were lower with demand subdued by gains in riskier assets and amid a similar lacklustre tone in T-notes, as well as a reserved BoJ Rinban announcement with the central bank in the market for a total of just JPY 400bln of JGBs mostly concentrated in 1yr-3yr maturities.

PBoC skipped open market operations and are net neutral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.1315 vs. Exp. 7.1380 (Prev. 7.1316)

Chinese Manufacturing PMI (May) 50.6 vs. Exp. 51.1 (Prev. 50.8) Chinese Non-Manufacturing PMI (May) 53.6 vs. Exp. 53.5 (Prev. 53.2) Chinese Composite PMI (May) 53.4 (Prev. 53.4) Chinese Caixin Manufacturing PMI (May) 50.7 vs. Exp. 49.6 (Prev. 49.4)

US President Trump announced he has stripped Hong Kong of its special status and will take steps to sanction Hong Kong, as well as PRC officials involved in eroding the autonomy of Hong Kong from China. President Trump also noted that foreign nationals from China who are identified as possible security risks will have entry suspended and there will also be visa restrictions imposed on Chinese students and researchers with ties to the PLA. Furthermore, President Trump accused China of covering up the “Wuhan virus” and that they unlawfully broke their word to ensure the autonomy of Hong Kong, while he also noted that China unlawfully claimed territory in the Pacific Ocean and instructed a working group to study differing practices of Chinese companies listed on US stock markets. It was also reported prior to the press conference that US President Trump would not be announcing additional tariffs on China or changes to the trade deal. (Newswires)

US President Trump and UK PM Johnson agreed to cooperate closely responding to any action on China that undermines the Sino-British joint declaration, while the two also discussed progress in trade talks and telecommunications security. (Newswires)

US Secretary of State Pompeo tweeted that Chinese Communist Party has come to view itself as intent upon the destruction of Western ideas, democracies and values, while he added that it puts Americans at risk whether it’s stealing IP or destroying US jobs. (Twitter)

US lawmakers are to unveil a bill which bans investment in firms with ties to China's military. (Newswires)

UK/EU

UK Chancellor Sunak said employers will have to pay 10% of furloughed staff wages in September and 20% in October, while furloughed employees will be allowed to work part time from July which is one month earlier than planned. Furthermore, it was also reported that the Chancellor is working on an emergency budget statement which will be unveiled in July and which targets saving 2mln jobs at risk due to the coronavirus outbreak. (Newswires)

UK reportedly accuses EU of stretching out trade discussions until November in the hope UK will cave in at the last minute, while there were separate reports of comments from EU Brexit Negotiator Barnier who suggested the UK need to be more realistic regarding trade demands and that the EU wants an agreement but it cannot be at any cost and they will never accept anything which makes the single market more fragile. (Telegraph/Sunday Times)

UK PM Johnson is looking at options to increase state investment into domestic telecoms companies to help them be more competitive in the 5G market, according to The Times. (Times) This would be part of a strategy aimed at lowering the nation's reliance on Huawei.

European Budget Commissioner Hahn has called on EU members to support new taxes as there are no practical alternatives but to give the Commission a new source of direct revenue to service debt under the proposed EUR 750bln Recovery Fund. (FT)    

FX

The DXY was softer and attempted a breakdown of support at the 98.00 level with the greenback hampered by the current risk environment, as well as the rioting that had spread to over 30 US cities resulting to curfews being imposed and the deployment of the National Guard. As such, the greenback’s major counterparts benefitted in which EUR/USD extended above 1.1100 and GBP/USD broke through resistance at its 50DMA of 1.2350 to briefly reclaim the 1.2400 handle despite the ongoing bickering with Brussels, which the UK reportedly accuses of stretching out Brexit talks in the hope UK will cave in at the last minute. Elsewhere, JPY-crosses were mostly driven by the risk appetite, while antipodeans were underpinned by their high-beta statuses and firmer than expected CNY reference rate setting, with AUD/USD propelled above 0.6700 ahead of tomorrow’s RBA meeting and with NZD/USD unphased by the absence of participants in New Zealand for holiday to gain a stronger hold on the 0.6200 handle.

COMMODITIES

WTI crude futures were choppy despite reports of OPEC+ nearing an agreement to bring the next meeting forward to this Thursday and a source also noted that they will discuss an extension of the current output cuts for up to 2 months. Nonetheless, this failed to support prices with early downside seen as reopening efforts were threatened by the mass disruptions from violent protests in US and after the mixed Chinese data, but with losses also stemmed by the constructive risk tone. Elsewhere, gold prices gained amid a softer greenback and copper reflected the broad positive sentiment, as well as the strength in Dalian iron ore prices.

Baker Hughes Rig Count (May 29): oil rigs -15 to 222, nat gas -2 to 77 and total -17 to 301. (Newswires)

OPEC+ is reportedly close to bringing the next meeting forward to June 4th following a proposal from the Algerian Energy Minister, while Russia is said to have no objection to the proposal. (Newswires)

OPEC+ source said OPEC will discuss extending the current 9.7mln bpd cuts for 1-2 months and will also discuss option of holding JMMC monthly to help maintain a stringent grasp on compliance levels, according to Energy Intel's Bakr. (Twitter)

GEOPOLITICS

Beijing has reportedly been making plans for an air defence identification zone in the South China Sea since 2010 which would cover Pratas, Paracel and the Spratly Islands in the contested region, according to PLA source. (SCMP)

US

The TPLEX caught a bid to end the week amid month-end flows and tentative risk appetite ahead of Trump announcements and the weekend. By settlement, the curve had flattened, with yields lower between 1-4bps across the curve. Real money was reported to have been behind the bid amid duration extension due to portfolio rebalancing, at the same time fast money/spec accounts were said to be sellers, keeping pressure on yields. However, the selling pressure abated into the latter part of the session seeing the curve bull flatten further. Additionally, the bid was supported further due Treasury supply out the way, as well as little corporate issuance on the radar today. NY Fed announced its week ahead Treasury/TIPS purchases too, where the total weekly purchases will rise to USD 22.5bln (prev. 20bln), while owing to this week’s market holiday on Monday, next week’s daily purchases will fall to USD 4.5bln from 5bln. The Fed also released data on its SMCCF, where as of Thursday, it held USD 1.177bln across corporate bonds. The Fed also released ETF holding breakdowns, albeit only up till May 19th, where its largest holdings in corporate bond ETFs appeared most correlated to those with the largest AUM, with the IG Corp ETF LQD being the largest holding, followed by LQD, VCIT, DCSH, and HYG (the largest US corporate HY ETF). US T-note futures (U0) settled 13 ticks higher at 139-02.

US riots following the death of George Floyd have widened to over 30 cities forcing a deployment of the National Guard which have responded with firing rubber bullets and tear gas, as well as other measures. Furthermore, it was reported that curfews were imposed across the country including in Atlanta, LA County, Tampa and Washington DC where the DC National Guard was also activated. (Newswires)

US President Trump was reportedly urged by numerous advisers during the past few days to tone down his violent rhetoric amid concern it could escalate racial tensions and hurt him politically after he recently tweeted "When the looting starts, the shooting starts". (Axios)

According to the latest Washington Post-ABC News poll Democrat Joe Biden now holds a 10-point lead (53 vs. 43) over US President Trump amongst registered voters for the November election. (The Hill) Note, the poll in March saw Biden and Trump level.