• China's Foreign Ministry says there is no information relating to a soybean halt and reports indicate soybeans from the most recent crop were sold to China state-buyers
• Sentiment strengthens after a tentative APAC lead bolstered by soybean updates, US futures higher by 0.6% as DXY deteriorates and US Treasury curve beginning to modestly steepen
• Trump stated he is mobilizing civilian and military resources to stop the rioting and warned he will deploy the military to states if local law enforcement cannot curb protests
• Russia and other nations are reportedly favouring current oil output cuts to be extended by one month, sources stated; no decision on date for upcoming OPEC meeting
• UK is expected to signal willingness for a compromise on fisheries and level playing field trade rules if the EU drops its maximalist approach on regulatory alignment and fishing access
• RBA kept the Cash Rate Target unchanged at 0.25% as unanimously expected, while it maintained the 3-year bond yield target at 0.25%
• Looking ahead, highlights include ECB purchases & ISM New York

CORONAVIRUS UPDATE

The Hong Kong government is set to unveil a two-week extension of social distancing rules that will prohibit gatherings of more than eight people following the emergence of a new cluster of COVID-19 infections, according to SCMP sources. (SCMP)

WHO spokesman says new reported COVID-19 cases are steadily declining in Western Europe but not in Russia or Eastern Europe. (Newswires)

Cellenkos have announced FDA clearance to begin a Phase 1 trial for the treatment of COVID-19 acute respiratory distress syndrome. (Newswires)

ASIA

Asian equity markets traded with cautious gains following the positive performance on Wall St but with upside limited after US President Trump’s announcement that he will deploy military forces in response to the riots which triggered a mild pull-back in US equity futures. ASX 200 (+0.3%) and Nikkei 225 (+1.2%) were positive but with the gains in Australia capped by weakness in mining names and amid a largely uneventful RBA rate decision where the central bank kept rates unchanged and provided no major fireworks as expected, while Japanese exporters were bolstered by recent favourable currency flows. KOSPI (+1.1%) was also underpinned despite the weak Final Q1 GDP data which was revised higher from the preliminary reading but still showed the worst contraction since 2008 with Q/Q at -1.3%, although notable strength was seen in the top shipbuilders after Qatar Petroleum signed  a KRW 23.6tln agreement with Daewoo Shipbuilding, Hyundai Heavy Industries and Samsung Heavy Industries for more than 100 ships. Elsewhere, Hang Seng (+1.1%) and Shanghai Comp. (+0.2%) were mixed with the mainland indecisive after the PBoC liquidity drain and due to ongoing US-China tensions, although it was also reported that the PBoC will purchase some bank loans issued to small firms in an effort to bolster lending, which it expects could spur about CNY 1tln of new unsecured loans. Finally, 10yr JGBs were initially marginally higher after a rebound off support near 152.00 and amid a similar recovery observed in T-notes from the prior session’s bear steepening and Amazon’s USD 10bln offering where the order book rose to above USD 30bln, although weaker results from the 10yr JGB auction later hampered prices.

PBoC skipped reverse repo operations for a net daily drain of CNY 10bln. (Newswires) PBoC set USD/CNY mid-point at 7.1167 vs. Exp. 7.1284 (Prev. 7.1315)

China's Foreign Ministry says there is no information relating to a soybean halt. Prior to this, it was reported that American soybean exporters sold multiple cargoes to Chinese state-run buyers, with as many as 4-cargoes from the recent crop sold, according to sources. Reports which were later echoed by the Global Times. (Newswires/Twitter/Global Times)

South Korea says talks to resolve the dispute with Japan have failed to make progress - South Korea decided to resume WTO dispute settlement proceedings over export controls. Subsequently, Japan's Gov't spokesperson says that the recent announcement out of South Korea is extremely regrettable. (Newswires)

US

US President Trump said his first duty is to defend country and its people and that they cannot allow the angry mob to drown out peaceful protestors, while Trump stated he is mobilizing civilian and military resources to stop the rioting and warned to deploy the military to states if local law enforcement cannot curb protests. Furthermore, he recommended for state governors to deploy the national guard and noted he is dispatching thousands of armed soldiers with a 7PM curfew to be strictly enforced in Washington DC. (Newswires)

US senior defence official said the National Guard has been fully activated in Washington DC, while the officials added that some active US military forces have been moved to national capital region but not yet in Washington DC and have been placed on heightened alert status. (Newswires)

New York AG responded to President Trump's threat to deploy the military in which the AG stated he is not a dictator and we will guard the right to peaceful protest, while we will not hesitate to go to court to protect our constitutional rights. (Newswires)

US CBO said the economy could take 10 years to catch up after the coronavirus and that the virus is to reduce real GDP by 3% or USD 7.9tln between 2020-2030. (Newswires)

UK/EU

UK Chancellor Sunak is looking at whether or not to provide National Insurance holidays to companies as part of his stimulus package set to be announced in July, according to sources. (Telegraph) 

UK is expected to signal willingness for a compromise on fisheries and level playing field trade rules if the EU drops its maximalist approach on regulatory alignment and fishing access, according to reports citing EU sources. (The Times) The Telegraph reports that negotiators from both sides are set to clash over the terms of a new extradition treaty with the UK expected to demand that its judges have greater powers to refuse extradition requests than under the current scheme that it will have to leave at the end of the year. (Telegraph)

British Growth Fund proposed a public-private fund valued at GBP 15bln to support thousands of businesses that face difficulties in repaying coronavirus-related loans. (FT)

EQUITIES

Europe stocks continue to plough higher [Euro Stoxx 50 +3.6%] as the region built on the positive APAC handover, and with sentiment somewhat underpinned by the Foreign Ministry stating that they have no information regarding the US soybean halt leaked by sources yesterday. Europe sees more noticeable gains now that the DAX (+3.9%) joins the fray following a long weekend, and with US riots somewhat hampering gains in US futures. Cash bourses have tested several key levels, with DAX briefly breaching 12k, FTSE 100 topping 6200, Euro Stoxx 50 trading above 3150 and IBEX rising above 7400 in a fleeting move. German specifically, awaits updates from Chancellor Merkel this afternoon who is looking to agree a compromise around a second stimulus package. Sectors are mostly in the green with cyclicals heavily outpacing defensives. Energy outperforms whilst Healthcare and Consumer Staples lag. The breakdown also sees risky sectors topping the charts with Auto, Insurance, Banks and Oil & Gas among the top performers. Meanwhile, Travel & Leisure descended from its earlier top spot but remains in firm positive territory. In terms of individual movers, Lufthansa (+5.8%) opened higher by almost 9% amid the Co’s board approving revised terms for their EUR 9bln bailout. Bayer (+5.0%) remains supported this morning with the Co’s Glyphosate dispute progressing to the next phase today, with the first hearing before the Court of Appeals to occur today in San Francisco at 17:00BST. Elsewhere, Airbus (+5.1%), Safran (+3.6%), Thales (+2.2%) all glean support from an anticipated support package for the French aeronautical sector.

The EU has put its support behind Twitter (TWTR) in its fight with US President Trump after raising alarm about the amount of false information on social media, according to Political Journalist Keating. (Twitter)

Qatar Airways updates they are to keep their 10 Airbus (AIR FP) A380's grounded until mid/late 2021; in discussion with Airbus & Boeing (BA) to defer all pending craft orders - in the future, will not do business with Co's who make it hard to defer orders

FX

AUD/GBP/NZD - The Aussie has now extended its rally to fresh multi-month highs in wake of the RBA’s latest policy meeting that reaffirmed wait-and-see guidance and was accompanied by a less downbeat economic outlook based on some sectors re-opening from COVID-19 lockdown sooner than previously envisaged. Moreover, the Q1 current account surplus beat consensus and net export contribution firmer than forecast, suggesting an upside bias for Wednesday’s GDP data and all helping to lift Aud/Usd through 0.6865, while Aud/Nzd has rebounded over 1.0800 again and towards 1.0875 amidst various offers in Nzd/Usd just above 0.6300. Note also, the Kiwi has been hampered by a bigger than expected decline in NZ Q1 terms of trade and further, albeit less pronounced weakness in building consents. Conversely, the Pound continues to claw back May’s largely seasonal losses with Cable now above 1.2550 and testing the 200 DMA (1.2571 vs 1.2575 at best thus far), but Eur/Gbp retreating further from yesterday’s 0.9000+ peaks to sub-0.8900 at one stage on the back of some positive reports indicating leeway on the UK side of the Brexit divide on fishing and the level playing field if the EU softens its stance on regulatory alignment and fishery access.

EUR/CAD/DXY - The Euro and Loonie are taking advantage of deeper US Dollar depreciation, as the index clearly breaches Fib support (97.837), the psychological 97.500 level and the next downside chart target at 97.446 (March 16 low) before finding a few underlying bids ahead of 97.400. In contrast, Eur/Usd has now overcome resistance between 1.1163-67 and eyeing 1.1200, while Usd/Cad is testing 1.3500 with some assistance from crude climbing on OPEC+ output cut extension momentum, though oil prices paring back from circa Usd36.50 and Usd39.50 for WTI and Brent respectively on talk that Russia and other producers prefer 1 month on top of the current 2 that expires at the end of June.

CHF/JPY/SEK - Relative G10 underperformers or laggards, as the Franc retreats below 0.9600 vs the Buck and under 1.0750 against the Euro after a sharp fall in Swiss retail sales, modest recovery in the manufacturing PMI and fairly tame rises in weekly sight deposits. Similarly, the Yen has reversed from 107.50+ to within a whisker of Monday’s 107.85 low amidst a broad recovery in risk sentiment after China denied knowledge of any suspension of soy purchases from the US under the terms of the Phase 1 trade deal, while the Swedish Crown has faded into 10.4190 vs the Euro following a downbeat NIER business survey.

NOK/EM - The Norwegian Krona is outpacing its Scandi and Eurozone counterparts due to the aforementioned buoyancy in oil and with the manufacturing PMI not far from the key 50.0 level, while EM currencies are firmer across the board on a combination of renewed risk appetite and the ongoing Greenback weakness noted above.

RBA kept the Cash Rate Target unchanged at the record low 0.25% as unanimously expected, while it maintained the 3yr bond yield target at 0.25% and reiterated it will not raise the cash rate until progress is made towards full employment and the inflation target. RBA also stated it will maintain efforts to keep funding costs low and credit available to households and businesses. Furthermore, it stated accommodative approach will be maintained for as long as necessary but also stated it is possible the depth of the downturn will be less than previously anticipated. (Newswires)

Australian Current Account Balance SA (AUD)(Q1) 8.4B vs. Exp. 6.3B (Prev. 1.0B). (Newswires) Australian Net Exports Contribution (Q1) 0.5% vs. Exp. 0.3% (Prev. 0.1%)

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1010-15 (1.5BLN), 1.1100 (1.1BLN)

FIXED

A steady incline in risk sentiment, helped, but not visibly stoked by China downplaying reports about pausing US soybean imports at the time, has applied more pressure on bonds that were already looking leggy or top heavy from a technical perspective. In fact, Bunds, Gilts and the longer end of the US Treasury curve appeared lethargic and reluctant to push their recovery boundaries too much further from 172.15, 137.17 and 139-03+/178-01 even before stocks extended gains and are now vulnerable either side of yesterday’s closing levels ahead of the US open and a relatively sparse pm agenda.

COMMODITIES

WTI and Brent futures extend on gains amid the broader risk appetite coupled with USD softness heading into the OPEC+ confab, albeit a date and timing are yet to be confirmed.  Participants will be eyeing whether OPEC continues its current deal of tapering cuts from July or extend this. Saudi is reportedly vying for current cuts of around 10mln BPD to be extended to year-end, while Russia is opting for a one-month extension to the existing curbs, according to sources. Many believe that middle ground is likely to be found between the two nations at the next meeting. Some also advise on keeping US influence on the radar, given how the US President and oil-state Republicans welcomed Saudi’s over compliance. “We do not entirely rule out that OPEC+ could extend the 9.7 mb/d cut for the duration of 2020, especially if President Trump makes the specific ask and offers sufficient inducements”, RBC writes. WTI July eyes USD 36.50/bbl (vs. low 35.28/bbl) whilst the Brent August takes aim at USD 40.0/bbl, having printed a base at 38.26/bbl. Elsewhere spot gold does not see much action despite the DXY’s continuing decline amid fighting forces with investors shifting to riskier assets whilst a weaker USD keeps the yellow metal buoyed around USD 1740/oz. In terms of base metals, copper tracks stocks higher with participants also noting that focus for the metals remain on the demand prospect from reopening economies.

OPEC+ have not yet decided on a meeting date, according to Energy Intel's Bakr. (Twitter) 

Russia and other nations are reportedly favouring current oil output cuts to be extended by one month, sources stated. (Newswires)

OPEC+ compliance estimates, according to Energy Intel, total compliance at 87.6% in May among the following countries: Saudi Arabia, 100.1%; Iraq, 49.5%; UAE, 106.4%; Kuwait, 98.6%; Angola, 54.0%. (Energy Intel)

Global Times tweeted that the PBoC and China's customs amended import and export regulations for gold and gold products, in which they asked financial institutions to provide additional internal gold business risk control materials. (Twitter)