• Sentiment has slipped in a quiet session after a positive APAC handover as the OPEC meeting is seemingly delayed and with risk events looming
• Energy Journalist Reza Zandi says the OPEC+ meeting is unlikely to be held today amid complicated negotiations for compliance
• President Trump stated that he does not think they will need to send the military in response to protests
• China's Agricultural Ministry confirms they are continuing to purchase US soybeans
• Looking ahead, highlights include ECB rate decision & press conference, US IJC

ASIA

Asian stocks were mostly higher as the region partially upheld the firm handover from Wall St where sentiment was underpinned by recovery hopes and encouraging data after ISM Non-Manufacturing PMI topped estimates and ADP employment numbers showed a much narrower than feared drop ahead of Friday’s NFP release. ASX 200 (+0.8%) was lifted by broad sector gains aside from commodity related stocks, in particular gold miners after the precious metal briefly slipped below the USD 1700/oz focal point, while Nikkei 225 (+0.4%) was underpinned by the favourable currency moves but with gains momentarily reversed amid fears of a second virus wave in Tokyo after a jump in cases recently prompted an alert and with officials said to consider flagging the city as an area where coronavirus is increasing. Hang Seng (+0.2%) and Shanghai Comp. (-0.1%) were mixed with mainland China the laggard following another substantial liquidity drain and as trade tensions remained in the spotlight with the US to designate additional Chinese media outlets as foreign missions and announced a ban on Chinese airline flights to the US in response to China refusing to allow US airlines to resume passenger service, although Beijing has since changed its tune regarding this. Furthermore, it was also reported that Chinese state-controlled companies cancelled some shipments from US farm exporters including livestock feed, corn, pork, cotton and have postponed some meat imports. Finally, 10yr JGBs declined at the open after the sell-off seen in USTs and which saw the benchmark 20yr JGB yield at its highest level in more than a year, while prices were also pressured after all metrics of the 30yr JGB auction pointed to a weaker result. 

PBoC injected CNY 70bln via 7-day reverse repos for a net daily drain of CNY 170bln. (Newswires) PBoC set USD/CNY mid-point at 7.1012 vs. Exp. 7.1027 (Prev. 7.1074)

China’s civil aviation regulator said foreign airlines currently unable to operate routes to China can pick one city to operate international flights beginning June 8th. (Newswires)

China's Agricultural Ministry confirms they are continuing to purchase US soybeans, and that state-owned firms have purchased in excess of 180k tons to be delivered Oct/Nov, according to Global Times. (Twitter)

Hong Kong Legislative Council has passed the National Anthem Bill. (Newswires) Note, this is a different bill from the National Security Legislation

US

US President Trump said the economy will be a little better with a little bit of time and that he wants a return to normal but added it is too early and confirmed social distancing is not over yet, while he criticized Amazon (AMZN) for destroying a lot of shopping centres. Furthermore, President Trump stated that he does not think they will need to send the military in response to protests (Newswires/Twitter)

US Senate approved the Small Business Loan extension bill through unanimous consent which was overwhelmingly approved by the House last week and which would give small businesses 24 weeks to use the emergency loans, as well as permits them to spend as low as 60% instead of 75% of the loan proceeds on payroll. (Newswires)

UK/EU

UK government fears that a no-deal Brexit will jeopardise medicine supplies in the event a second wave of the pandemic hits Britain. Whitehall officials said the impact of COVID-19 on stockpiles is causing serious concern. (FT)

German Chancellor Merkel's ruling coalition reached a deal on the German stimulus package, while Merkel stated that the coalition agreed EUR 130bln stimulus package (Exp. EUR 50bln-100bln) and which includes lowering VAT rate to the end of the year to boost consumption. (Newswires)

Italy are reportedly preparing a formal request for the EUR 20bln SURE fund, according to La Repubblica. (La Repubblica)

EU IHS Markit Construction PMI (May) 39.5 (Prev. 15.1)

UK Markit/CIPS Construction PMI (May) 28.9 vs. Exp. 29.7 (Prev. 8.2)

GEOPOLITICAL

India and Australia have signed a military logistics support pact at the virtual summit between respective PMs, according to Foreign Ministry. (Newswires)

Libya's internationally recognised government forces state they that they are in full control of Tripoli, according to military sources. (Newswires)

EQUITIES

European equities trade with modest losses [Euro Stoxx 50 -0.7%] – with some touting potential profit-taking ahead of key risk events including the ECB’s latest policy decision later today (full preview available on the Research Suite). At the same time, tomorrow’s NFP could also prove to be another dire reading. Macro-news flow has remained light early-doors, although reports suggested US Department of Transport ordered to ban Chinese passenger airlines from flights to the US from June 16th in response to China refusing to allow US airlines to resume passenger service, whilst China's Agricultural Ministry confirmed they are continuing to purchase US soybeans, which followed reports Chinese state-controlled companies reportedly cancelled some shipments from US farm exporters. Back to Europe, sectors are mostly negative with cyclicals largely lagging defensives – suggesting more of a risk-averse mood. The sectorial breakdown adds little colour to the current state of play, although its seemingly a mirror image of yesterday’s performance – possibly implying consolidation. In terms of movers and shakers, German auto names are pressured (Daimler -4%, BMW -1.9%, Volkswagen -1.8%) after the German relief package failed to include incentives to purchase petrol and diesel vehicles. Meanwhile, LVMH (-1.5%) drifted lower after the open after the group confirmed source reports that it is backing away from the Tiffany (-0.7% pre-mkt) deal for now. On the flip side, AstraZeneca (+1.8%) holds onto gains as the Trump admin selected the Co’s COVID-19 vaccine as a candidate finalist.

Apple (AAPL) iPhone products are to be included in Beijing’s recently announced USD 1.7bln consumption sales promotion from Saturday, discount of up to USD 56/unit, Global Times citing a report. (Newswires)

FX

EUR/JPY/GBP/CHF/AUD/NZD/CAD - A quirk of fate perhaps or simply coincidental, but a broad and firmer Dollar recovery from recent lows amidst some signs of sated risk appetite has culminated in Eur/Usd, Usd/Jpy, Cable, Usd/Chf, Aud/Usd, Nzd/Usd and Usd/Cad all close to big figures, at 1.1200, 109.00, 1.2500, 0.9600, 0.6900, 0.6400 and 1.3500 respectively. Meanwhile, the DXY has pared more losses from a minor new base at 97.180 on Wednesday to trade nearer the top of a 97.638-314 range awaiting final pre-NFP employment signals via Challenger layoffs and initial claims, though latter not the survey week for Friday’s BLS report. Back to the other major currencies, Germany’s bigger than expected Eur130 bn fiscal package gave the Euro enough momentum to breach Fib resistance at 1.1237, but not the amount required sustain 1.1250+ levels, and decent option expiry interest may now keep the headline pair in check ahead of the ECB policy meeting, if not the NY cut given 1 bn rolling off between 1.1245-50 and 1.4 bn just above 1.1200 and yesterday’s 1.1190 low from 1.1205 to 1.1215. However, the ECB event and Lagarde presser will be pivotal with focus on more PEPP stimulus or a pause until September, with the market split over the 2 main potential outcomes – for a full preview see the Newsquawk Research Suite. Elsewhere, the Yen is still eyeing broad risk sentiment, Greenback moves and US Treasury yields/spreads for direction, but also Japanese budget supplements to counter COVID-19 with the latest injection said to be equivalent to 2% in terms of real GDP. Technically, 109.38 (April 6 lower high) has not seriously been tested, but pull-backs could be limited following the rally through key chart levels on the way up and beyond 109.00. Turning to the Pound, stops were tripped at 1.2525 after a fade ahead of 1.2600 and the midweek 1.2615 peak pulled Sterling back below the 100 DMA (1.2564) against the backdrop of rising no deal Brexit prospects assuming no breakthrough in trade talks or an extension to the transition period, while the Franc is firmer despite deflationary Swiss CPI data, as Eur/Chf retreats towards 1.0750 from over 1.0800 yesterday. Down under, the Kiwi is holding up better than its Antipodean neighbour as Aud/Nzd hovers around 1.0750 and the Aussie digests somewhat mixed macro news in the form of weak retail sales vs a wider than forecast trade surplus. Last, but not least, the Loonie is still reflecting on a relatively encouraging if not quite upbeat assessment and outlook from the BoC in the run up to Canadian trade data and a speech from Gravelle later.

SCANDI/EM - The Swedish Krona is underperforming on the back of a steep decline in new orders, as Eur/Sek rebounds further from sub-10.4000, but Eur/Nok has recoiled from an oil-induced spike even though latest reports suggests no OPEC+ meeting this week and crude prices remain off their recovery peaks. On the EM front, widespread depreciation or retracement in line with the less bullish risk tone and Dollar reprieve, as the Rand and Rouble reverse back below 17.0000 and 69.0000 handles respectively.

Australian Retail Sales (Apr) M/M -17.7% vs. Exp. -17.9% (Prev. 8.5%). (Newswires) Australian Trade Balance (AUD)(Apr) 8.8B vs. Exp. 7.5B (Prev. 10.6B) Australian Exports (Apr) M/M -11% (Prev. 15%) Australian Imports (Apr) M/M -10% (Prev. -4%)

FIXED

Core bonds are off best levels, but Bunds have recovered around ¼ point of their latest decline to a fresh multi-month low of 170.74 as Eurozone peripheral peers trade more cautiously into the ECB and equities pare more of their recent exuberance. Meanwhile, Gilts have taken some heed of non-MPC BoE rhetoric playing down the prospect of NIRP in the short term at least, as has the Short Sterling strip, with the 10 year debt future drifting back from 136.51, albeit still comfortably above 136.00 and US Treasuries are a few ticks shy of overnight session highs, but the curve unwinding a degree of recent pretty significant steepening awaiting the last couple of pre-NFP jobs pointers in the form of Challenger layoffs and weekly claims alongside trade and productivity data.

COMMODITIES

WTI and Brent futures remain subdued in European trade as traders are no closer to clarity on an OPEC+ meeting date – with conflicting sources noting a meeting in late June, whilst others highlight the possibility of a meeting today. Either way reports yesterday posited that Saudi and Russia have agreed to extend current curbs for an extra month – albeit the two nations want compliance among other states, with Iraq and Nigeria letting down the group after complying only 42% and 33% respectively. Reports early-morning also touted a potential delay to the July Official Selling Price (OSP) release until at least Sunday – possibly alluding to a meeting before then based on history and assuming no further delay, with sources also noting the possibility of a meeting this week if non-complying countries pledge to improve compliance. However, reports via journalist Reza Zandi notes the OPEC+ meeting is unlikely to be held today amid complicated negotiations for compliance, "As of now, the next meeting is scheduled for 9-10 June, as scheduled previously". Meanwhile, Russian Energy Minister Novak emerged on the wires, again with little clarity in regard to a meeting date, but stated that Russia is in talks with the US on the oil market – but does not expect US regulators to import production curbs. WTI July futures trade sub-USD 37/bbl and Brent August remains sub-USD 40/bbl, both off worst levels of USD 36.40/bbl and USD 39.03/bbl respectively. Elsewhere, spot gold was relatively flat on either side of 1700/oz amid light news flow and heading into the ECB monetary policy decision, but picked up in recent trade to trade closer to 1710/oz. Copper prices have retreated after failing to sustain prices above USD 2.5/lb as the red metal tracks sentiment and the brewing US-Sino tensions in the background.

Russian Energy Minister Novak says that he is not expecting the US to make a formal decision regarding oil output, according to Interfax. Subsequently, Russia's Kremlin says President Putin has no immediate plans to talk to President Trump and Saudi Crown Prince MBS, but Energy Minister Novak is in talks with other countries (Newswires)

Saudi Aramco are reportedly set to delay announcing July selling prices until at least Sunday, according to sources. (Newswires)

Energy Journalist Reza Zandi says the OPEC+ meeting is unlikely to be held today amid complicated negotiations for compliance, "As of now, the next meeting is scheduled for 9-10 June, as scheduled previously, "unless the negotiations with the 5 countries who have violated the quotas reach an accepted outcome. Otherwise, the meeting on June 10th will turn out to be a very tough one". Prior to this, it was reported that the OPEC+ meeting could still go ahead this week if Iraq and other non-compliant nations commit to improving compliance levels, according to sources. (Twitter/Newswires)