• Asian equity markets were choppy with the region cautious following a mostly negative handover from Wall St. and as participants await the looming NFP report
• USTR Lighthizer said he feels very good about the Phase 1 US-China trade deal and that the report that China was not honouring the soybean purchases was false
• UK and EU officials are reportedly set to end Brexit talks this week without coming to an agreement on the terms of their future relationship
• In FX, DXY enters the EU session softer with EUR/USD just below 1.1350 and GBP/USD maintaining 1.26 status
• OPEC+ ministerial meeting is now "tentatively" planned for June 6th or 7th after Iraq, and other non-complying countries pledged better commitment to the oil cuts
• Looking ahead, highlights include German Industrial Orders, US & Canadian Labour Market reports, Baker Hughes Rig Count, Moody's on Turkey

CORONAVIRUS UPDATE

US COVID-19 cases rose 14,676 to 1,842,101 and the death toll rose by 827 to 107,029. (Newswires)

US CDC Director expects there will be one or more vaccines for COVID available by the end of the year. (Newswires)

UK COVID-19 cases rose by 1,805 vs. prev. 1,871 increase and the death toll rose by 176 to 39,904 vs. Prev. increase of 359. (Newswires)

ASIA

Asian equity markets were choppy with the region cautious as participants awaited the looming NFP jobs data and after the rally in stocks petered out for its global peers which saw Wall Street end a choppy session mixed albeit with a negative bias. ASX 200 (+0.2%) was dragged by notable weakness in tech and healthcare names but with downside in the index stemmed by resilience in financials. Furthermore, the government announced to increase rules on foreign investment into key industries which raised some questions regarding the ramifications its protectionism could have on its ties with its largest trading partner China although PM Morrison suggested the investment reforms are unlikely to increase ongoing tensions. Nikkei 225 (+0.4%) was initially lower but gradually reversed the downside amid currency weakness, while Hang Seng (+0.3%) and Shanghai Comp. (-0.3%) traded indecisively after the PBoC’s operations resulted to a CNY 450bln weekly net liquidity drain and following mixed US-China rhetoric including USTR Lighthizer expressing confidence regarding the Phase 1 deal and with the US to continue permitting Chinese passenger flights in reciprocation to a similar gesture by China, although plenty of criticism remained following the anniversary of the Tiananmen Square massacre and Hong Kong’s passage of the national anthem bill. Finally, 10yr JGBs were subdued following the resumption of the bear steepening seen in USTs, but with some of the losses in 10yr JGBs briefly retraced after prices rebounded off a floor at 151.55 and with the BoJ present in the market for nearly 1.1tln of JGBs in which it boosted purchase amounts in 5yr-10yr maturities.

PBoC injected CNY 150bln via 7-day reverse repos for a net daily drain of CNY 150bln and a weekly drain of CNY 450bln vs. last week's CNY 670bln net injection PBoC set USD/CNY mid-point at 7.0965 vs. Exp. 7.0826 (Prev. 7.1012)

US President Trump issued a memo calling for recommendations within 60 days on how to protect US investors from China's failure to allow audits of US-listed Chinese companies. In other news, the White House Statement on Tiananmen Square anniversary noted that China should fulfil its commitments on Hong Kong and end persecution of ethnic and religious minorities, while the White House also reportedly stated that the China's Tiananmen Square slaughter is not forgotten. (Newswires/AFP/Twitter)

US is to issue a revised order on Chinese passenger flights, which will likely now allow some Chinese flights to continue following China's announcement earlier, according to sources. (Newswires)

USTR Lighthizer said he feels very good about the Phase 1 US-China trade deal and that the report that China was not honouring the soybean purchases was false, while he added that the virus is to impact trade ties with China and India. (Newswires)

US Secretary of State Pompeo said Nasdaq rules on listing is particularly important considering pattern of fraudulent accounting practices by Chinese firms, while he added that Nasdaq’s actions should serve as a model for other exchanges in US and around the world. (Newswires)

Senate Majority Leader McConnell said the Chinese Communist Party has cheated on trade, stolen foreign technology, executed long-term plans to target the industrial bases of the US and allies, weaponised foreign aid, manipulates developing countries and repressed its own people. (Twitter)

UK/EU

USTR Lighthizer said he wants a full-blown trade agreement with the UK and that the next round begins on June 15th, according to FBN's Lawrence. (Twitter)

The BoE should abandon its inflation target and replace it with a GDP goal in order to best manage the economy in the wake of the fallout from COVID-19, according to the Policy Exchange think tank. (Newswires) 

UK and EU officials are reportedly set to end Brexit talks this week without coming to an agreement on the terms of their future relationship with key sticking-points still unresolved, according to sources. (Newswires) 

UK GfK Consumer Confidence (May) -36 vs. Exp. -34 (Prev. -33); lowest since January 2009. (Newswires)

FX

The DXY attempted to pick itself up following another bout of selling the prior day in which it slipped below the 97.00 level and posted an 8th consecutive losing streak, as it suffered the ill-effects of the gains in EUR/USD which surged above 1.1300 after the ECB meeting. Nonetheless, the single currency has since pulled back from its best levels in nearly 3-months and GBP/USD oscillated around 1.2600 to hold on most the prior day’s gains. USD/JPY sat on recent gains above the 109.00 level despite the indecisive risk tone, whilst antipodeans remained afloat after AUD/USD recently approached closer towards 0.7000 and with NZD/USD uplifted amid optimism from New Zealand Finance Minister Robertson who noted the domestic economy seems to be recovering quicker and that retail sales have picked up well. This also followed a firmer reference rate setting by the PBoC, while the HKMA went the opposite direction in which it intervened by selling HKD after the currency breached the strong end of trading range.

Australian PM Morrison said foreign investment in Australia must be on our terms and suggested that investment reforms should not increase tensions with its largest trading partner China. There were also comments from Treasurer Frydenberg that they are to create new national security tests for foreign investment with the new rules to cover telecoms, energy, utilities, defence supply and data, while he added they will be able to impose controls and force divestment in special cases. (Newswires)

New Zealand announced to extend the wage subsidy scheme to an additional 40k businesses, while there were also comments from New Zealand Finance Minister Robertson that the domestic economy seems to be recovering quicker and that retail sales have picked up well. (Newswires)

COMMODITIES

Commodities traded mixed alongside the indecisive risk tone overnight with only marginal gains seen in oil prices as sources suggested that the OPEC+ meeting is tentatively planned for over the weekend, although there also conflicting  reports that suggested a meeting mid-month so that output data would be available as focus turns to compliance issues. Elsewhere, gold prices were lacklustre as the USD attempted to nurse losses but with price action contained ahead of the looming US jobs data, while copper edged mild gains as stocks slightly improved throughout the session.

OPEC+ ministerial meeting is now "tentatively" planned for June 6th or 7th after Iraq, and other non-complying countries pledge better commitment to the oil cuts, according to an OPEC+ source, while there were also reports from Algeria’s Ennahar TV that OPEC and producer allies are to meet on Saturday to discuss extension of oil output cuts deal citing a source. However, there were earlier reports that OPEC+ moved the JTC meeting to June 17th and the JMMC meeting June 18th so that May output data will be available to delegates. (Newswires)

Energy Intel's Amena Bakr tweeted that there are early signs indicating that Mexico might have objections to extending the current OPEC+ pact and that the OPEC+ meeting date remains up in the air, while she added there is still a big push by Gulf states and Moscow to get countries that didn’t comply to the cuts in May to improve their compliance and makeup for the shortfall in coming months. (Newswires)

CME lowered COMEX copper futures maintenance margins by 13.3% to USD 3250/contract from USD 3750/contract for June and lowered RBOB gasoline futures maintenance margins by 14.2% to USD 8150/contract from USD 9500 for July. Furthermore, it also cut NY Harbor heating oil futures maintenance margins by 17.1% to USD 6050/contract from USD 7300/contract for July. (Newswires)

US President Trump signed executive order to expedite infrastructure investments and help US government investment in energy development. (Newswires)

GEOPOLITICS US President Trump tweeted that he spoke to American hostage Michael White who was released from Iran and is returning to the US. President Trump added over 40 hostages/detainees have been returned since he took office, while he thanked Iran and stated that it shows a deal is possible. (Twitter)

US

The bear-steepener struck again on Thursday as global risk appetite was bolstered (at times) and the Treasury market’s resolve tested. The move kick-started after the ECB surprised to the upside on its PEPP expansion, while the US 10-year yield broke back above the 75bps level, taking its cues from the German Bund decline; the greenback was also sold more broadly. There was some retracement of the move after continued jobless claims surprised to the upside, although duration pressure briefly resumed with pace, as the 10-year broke above 80bps shortly after the cash equity open. Desks noted that the selling was exacerbated as delta-hedging emerged amid heavy selling across the UST futures – strong volumes were recorded again. The selling found its limit after the NDX tested its all-time-high, to which yields drifted sideways through the rest of the session. With long-end yields now at their highest since March, we are now entering somewhat of a “no-mans-land”, excluding Treasury market turbulence in mid-March, after the strong fall in rates in February as the virus broke out – the 10-year rate fell from above 150bps. However, Nomura’s quants note that the 84bp level for the 10-year yield is a key resistance level at which Treasury weakness would exacerbate, and would cause a “crash in the US equity momentum factor” if exceeded. By settlement, 2s and 3s little changed at 19bps and 40bps, respectively (an anchored Fed and potential YCC has suppressed the front-end and amplified the curve’s steepening), 10s +6bps at 82bps, and 30s +7bps at 162bps. T-note futures (U0) settled 12+ ticks lower at 137-25+.

US Secret Service is closing areas around the White House complex until June 10th. In related news, a White House spokesman said all options are on the table when it comes to protecting Americans in response when asked about the use of Federal troops, while it was also  reported that Washington DC refrained from imposing a curfew on Thursday. (Newswires/ABC)