• Sentiment remains strong after a choppy APAC handover; albeit, US futures have been drifting lower following remarks from China
• China has vowed to take countermeasures against the US move to sanction 33 Chinese firms and institutions
• OPEC+ ministerial meeting is now planned for June 6th after Iraq, and other non-complying countries pledge better commitment to the oil cuts
• 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
• FX sees the USD towards session highs with major peers mixed at present and the Treasury curve bear-steepening again
• Looking ahead, highlights include US & Canadian Labour Market reports, Baker Hughes Rig Count, Moody's on Turkey

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 (+0.1%) 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 (+0.7%) was initially lower but gradually reversed the downside amid currency weakness, while Hang Seng (+1.7%) and Shanghai Comp. (+0.4%) 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 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)

China has vowed to take countermeasures against the US move to sanction 33 Chinese firms and institutions. (Newswires)

China has not halted the purchase of US soybeans and new purchases are continuing, according to CEO of the US Soybean Export Council cited by the Global Times. (Twitter)

The Beijing municipal government is set to reduce the coronavirus emergency response to level 3 from level 2 as of June 6th, according to State media. (Newswires)

US

US Secret Service is closing areas around the White House complex until June 10th (Newswires)

UK/EU

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. Subsequently, EU sources say, on Brexit, it is far too early for a compromise which will come later with the added time pressure; but, talks have been more constructive and useful this week - not necessarily a breakthrough coming soon, Express' Barnes. (Newswires/Twitter)

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

ECB's Lane says the Governing Council stands ready to adjust all instruments as needed; without sufficient policy response, pandemic-related shock to inflation poses a threat to medium term stability. (Newswires)

ECB's Holzmann says that it is very likely that deflation will be seen in some countries for months, however, no deflation should be seen across the Eurozone. Holzmann agreed with the ECB's decision to increase PEPP by EUR 600bln, but argued that perhaps decision on PEPP should have been taken in autumn; however, other members of the Governing Council disagreed with this. (Newswires)

GEOPOLITICAL

US President Trump thanks Iran for releasing the US veteran, adds that he will make a big deal with Iran after the election. (Twitter)

EQUITIES

European equity futures are on course for respectable weekly gains with Eurostoxx 50 eyeing double-digit weekly gains as we stand. The morning has seen the core bourses extending on the upside with sentiment potentially underpinned amid comments from USTR who 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. That being said, more recent headlines from China vowed to retaliate against the US’ 33 Chinese entity list in relation to the Uygur minority population. However, details remain light – the news prompted some losses in equities, but nonetheless, Euro Stoxx 50 (+1.7%) holds onto gains of almost 2%. Desks also note that there is a significant cyclical/value bias as sectors such as autos, banks and energy all post substantial gains – with the SX7E European banking index poised to end the with over 13% higher W/W. The sectorial breakdown sees banks (+3.5%) topping the charts amid the higher yield environment and with Oil and & Gas closely following amid gains in the oil complex. Travel & Leisure meanwhile surges with some pointing to impetus form the America Air update yesterday – Air France (+12.3%), Carnival (+10.9%) trade at the top of the Stoxx 600. Broader sectors are mostly higher with cyclicals clearly outpacing defensives, while Staples and Healthcare reside in the red. In terms of individual movers – Deutsche Wohnen (+1.5%) holds onto opening gains after being tipped to replace Lufthansa (+6.0%) – whose shares see tailwind from the broader sector performance. Telefonica (+3.8%) meanwhile is underpinned amid talks of an imminent sale of its German Towers unit.

Broadcom (AVGO) Q2 2020 (USD): Adj EPS 5.14 (exp. 5.14); Revenue 5.74 (exp. 5.69bln). Q2 Revenue breakdown: semi solutions 4.07bln (exp. 3.9bln); infrastructure software 1.7bln (exp. 2.1bln). Q3 guide: Revenue 5.75bln (exp. 5.79bln). Ending the quarter with over $9 billion of cash. CEO does not expect revenue to uptick until Q3, citing a major product cycle delay in wireless

L Brands (LB) - Co's UK unit has filed for protection from creditor today amid disruptions from the pandemic which could result the sale of the British business, according to WSJ. (WSJ)

FX

NZD/AUD - The Antipodean Dollars have both overcome several wobbles on the way to fresh highs against their rival, with the Kiwi and Aussie now trying to establish footholds above new big figures, at 0.6500 and 0.7000 respectively. A firm rebound in risk sentiment has helped the Nzd and Aud extend their winning streaks, but the former has also gleaned impetus from upbeat comments overnight via NZ Finance Minister Robinson noting a faster recovery in the domestic economy and pick up in retail sales. Hence, the cross remains well off post-RBA peaks and pivoting 1.0750, with some mild hindrance for the Aud on strained relations with its main global trading partner and investment reforms designed to tighten the criteria for foreign entities.

NOK/GBP - The next best majors, as the Norwegian Crown continues its bull run irrespective of more bleak data in the form of manufacturing output and GDP while perhaps drawing more encouragement from accompanying remarks from the Stats Office that economic activity appears to be improving. Eur/Nok has dipped below 10.5400 even though the Euro remains relatively strong in its own right post-ECB, and another rise in oil prices on reports that OPEC and OPEC+ are now set to meet tomorrow is no doubt keep the cross on a downward trajectory. Meanwhile, the Pound forged more gains at the expense of the Buck in Cable terms when stops were tripped at resistance just ahead of 1.2650 and more when the 200 DMA (1.2678) was breached, but hit buffers before 1.2700 despite Eur/Gbp remaining much nearer the bottom of 0.9009-0.8954 parameters awaiting a speech from EU’s Barnier after latest Brexit trade talks with the UK that are expected to end with no breakthrough, albeit apparently more constructive and useful this week per EU sources.

CAD/EUR/JPY/CHF - All more narrowly mixed vs their US counterpart as the DXY bounces from a deeper 96.438 low to 96.849 in wake of latest Chinese warnings about countermeasures against US sanctions on firms, but with the Loonie supported by the aforementioned upturn in crude and also mega option expiry interest at 1.3500 (2.3 bn). Elsewhere, the Euro extended ECB inspired advances to circa 1.1384, ignoring more weak Eurozone data and mixed GC rhetoric, though taking heed of the China headlines, as did the Yen and Franc to various degrees when paring some declines from around 109.40 and 0.9580, though still undermined by overall safe-haven unwinding and technical impulses as Usd/Jpy breached another upside chart level (109.38 was the April 6 lower high) and Eur/Chf straddles 1.0850 after breaking back above the 200 DMA.

EM - Mixed starts to Friday’s session and in the run up to potentially pivotal US jobs data, as the Yuan maintains bullish momentum and petro-currencies derive more traction from crude in contrast to the Lira that displays some nerves ahead of Turkey’s next ratings review at the hands of Moody’s and President Erdogan’s decision to reimpose lockdown over the coming weekend due a rise in COVID-19 cases..

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)

FIXED

Aside from the early EU selling and a rebound when China issued its latest pledge to retaliate against US sanctions, core bonds have been comparatively side-lined and lethargic ahead of upcoming US jobs data. However, Bunds are back to within striking distance of their initial flat Eurex print vs -40 ticks at one stage and Gilts got closer to parity at 135.81 vs Thursday’s 135.86 before waning again, while USTs are holding just off even deeper overnight session lows, albeit with the curve still bear-steepening as more longs throw in the towel.

COMMODITIES

WTI and Brent front month future continue to grind higher on the final trading session of the week with a few factors at play in the energy complex. On the OPEC front, a meeting has reportedly scheduled for 13:00BST and OPEC+ for 15:00BST on June 6th, according to delegates - Russian Energy Minister Novak confirmed the date. However, early signs indicating that Mexico might have objections to extending the current OPEC+ pact – which may prove to be somewhat of a deja-vu from the April meeting. In terms of the agreement, aside from the pledge for full compliance, Saudi Arabia and Russia reportedly agreed on a preliminary 1-month extension on existing OPEC+ oil cuts, according to sources. Meanwhile, Gulf OPEC members (Saudi, UAE and Kuwait) are reportedly not discussing deeper cuts than the voluntary over-compliance of 1.18mln BPD in June. Sources also added that Saudi Arabia is set wind down on voluntary over-compliance to bring 1mln BPD of production back online. In terms of other factors – with US hurricane season looming, Tropical depression Cristobal is set to strengthen and head over to the Gulf of Mexico over the weekend – potentially shuttering the several oil refineries as it makes landfall. The upside in oil prices is also underpinned by the current risk appetite across the marketplace as prices also tracked stocks higher early-doors. WTI July reclaimed a USD 38/bbl (vs. low 37.05/bbl) while Brent breached USD 41/bbl having printed an intraday base at 39.72/bbl. Elsewhere, spot gold remains lacklustre just above USD 1700/oz and with little action ahead of the US labour market report. Copper prices meanwhile extend on upside in-line with the risk sentiment and stocks as it overlooks US-Sino difficulties for now.

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. OPEC meeting reportedly scheduled for 13:00BST and OPEC+ for 15:00BST on June 6th, according 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)