• European bourses are subdued as newsflow slows, while US futures remain firmer with a quiet stateside schedule ahead
• OPEC+ unanimously agreed to extend current cuts for one month through July and will review if a longer extension is needed this month
• Saudi raised selling prices to Asia by between USD 5.60-7.30, while Storm Cristobal also prompted the evacuation of platforms and rigs in the Gulf of Mexico
• Trade figures from China mostly topped estimates with a record trade surplus in USD terms and a surprise expansion in CNY-denominated Exports
• Fed is reportedly debating whether to reinforce its promise to keep rates low through capping yields; not ready to announce anything at the upcoming FOMC
• FX sees the DXY modestly firmer with major peers largely resilient while the UST yield curve is a touch steeper
• Looking ahead, highlights include ECB's Lagarde & US 3yr supply

CORONAVIRUS UPDATE

US CDC reported 29214 new coronavirus cases as of Saturday for a total of 1,920,904 cases and there were 709 new deaths for a total of 109,901. (Newswires)

UK COVID-19 death toll rises to 40,542 (Prev. 40,465); deaths rise by 77 vs. yesterday's 204. Case count rises 1,326 vs. prev. 1,557 increase; first sub-100 and lowest death toll since March 23rd; the day lockdown was announced. (DHSC) UK PM Johnson ordered ministers to accelerate the re-opening to avert millions of jobs losses after Chancellor Sunak and Business Secretary Sharma warned 3.5mln jobs could be lost if the hospitality sector remains closed over the summer. (Sunday Times/PoliticsHome)

New Zealand PM Ardern said they will lift all coronavirus restrictions except from border closure and that the country will move to Alert Level 1 from midnight. (Newswires)

ASIA

Asian equity markets began the week relatively upbeat as the region took its first opportunity to react to the strong US jobs data which firmly lifted all major indices on Wall St last Friday and the Nasdaq to a fresh all-time high, with mostly encouraging Chinese trade data and early strength in oil prices following the OPEC+ extension agreement, adding to the constructive risk tone. As such, Nikkei 225 (+1.4%) gapped above the 23k level but with some of the gains later reversed after Final Q1 GDP missed expectations despite showing a significant improvement from the preliminary release, and the KOSPI (+0.1%) outperformed shortly after the open before it briefly wiped out all its gains amid a cooling of inter-Korean relations, as well as weakness in index heavyweight Samsung Electronics as de facto chief and Samsung Group heir Jay Y. Lee attended a court hearing on the arrest warrant related to accounting fraud. Elsewhere, Hang Seng (U/C) and Shanghai Comp. (+0.2%) were kept afloat after the PBoC injected CNY 120bln of liquidity and announced to conduct an MLF operation in around a week’s time, while the latest trade figures from China over the weekend mostly topped estimates which included a record trade surplus in USD terms and a surprise expansion in CNY-denominated Exports. Finally, ASX 200 remained closed for the Queen’s Birthday Holiday and 10yr JGBs were higher despite the gains in stocks as prices reversed Friday’s selling pressure, in which the rebound in JGBs also followed the weaker than expected Japanese GDP data.

PBoC injected CNY 120bln via 7-day reverse repos in which it maintained the rate at 2.20% and announced it will conduct MLF operations around June 15th with the amount to be determined by market demand. (Newswires) PBoC set USD/CNY mid-point at 7.0882 vs. Exp. 7.0838 (Prev. 7.0965)

Chinese Trade Balance (USD)(May) 62.9B vs. Exp. 39.0B (Prev. 45.3B) Chinese Exports (USD)(May) Y/Y -3.3% vs. Exp. -7.0% (Prev. 3.5%) Chinese Imports (USD)(May) Y/Y -16.7% vs. Exp. -9.7% (Prev. -14.2%)

Chinese Trade Balance (CNY)(May) 442.8B vs. Exp. 283.2B (Prev. 318.2B) Chinese Exports (CNY)(May) Y/Y 1.4% vs. Exp. -3.2% (Prev. 8.2%) Chinese Imports (CNY)(May) Y/Y -12.7% vs. Exp. -3.8% (Prev. -10.2%)

Japanese GDP (Q1 F) Q/Q -0.6% vs. Exp. -0.5% (Prev. -0.9%) Japanese GDP (Q1 F) Y/Y -2.2% vs. Exp. -2.1% (Prev. -3.4%)

China's Foreign Ministry, in response to US Senator accusations against China in relation to COVID-19, says does hope the senator will present evidence. (Newswires)

Chinese passenger car sales (May) +1.9% Y/Y, according to the CPCA. (Newswires)

US

Fed Chair Powell is reportedly expected to reaffirm Fed will use full liquidity backstops in post FOMC speech. In related news, the Fed is reportedly debating whether to reinforce its promise to keep rates low through capping yields and are said to be examining the RBA’s program which has been targeting a 3-year yield of 0.25%, although the reports added that officials aren’t prepared to announce any decision regarding capping yields at this week’s FOMC. (Newswires/WSJ)

US President Trump tweeted that he built the greatest economy in the World and the best the US has ever had, while he added that he is doing it again. In other news, President Trump ordered the National Guard to begin withdrawal from Washington DC and suggested that everything was under control related to the nationwide protests, while it was also reported that the Minneapolis police department is to be dismantled according to the city council. (Twitter/The Hill/AFP)

CNN Election Poll sees Trump at 41% and Biden at 55%; Trump sees the lowest in CNN's tracking on this question back to April 2019. (CNN)

UK/EU

UK PM Johnson is to announce laws to prevent foreign takeovers that pose risks to national security backed by threat of criminal sanctions, with the PM pushing for legislation to force companies to report takeovers that increase security risks. (The Times)

China's Ambassador to the UK has stated that the UK's plans to seek an alternative to Huawei Technologies in the 5G network could ruin its plans for Chinese companies to construct nuclear power plants and the HS2 rail network. (Sunday Times) 

UK PM Johnson reportedly wants to change some terms of its Brexit withdrawal agreement to rectify unfair defects as much of the deal was from former PM May’s plans that had been rejected by Parliament on 3 occasions. (City AM)

BoE Governor Bailey was alerted that GBP 36bln of emergency coronavirus loans to small businesses risk turning toxic and could hamper a recovery, with the warning regarding unsustainable debts to be published in a report on Monday. In other news, UK banks are reportedly in discussions with the FCA regarding extensions on credit card and personal loan payments. (Sunday Times/FT)

EU diplomats have raised concerns that the European Commission is proposing to use a series of “outdated” economic measures to determine how much member states will receive from the recovery fund. (FT)

ECB's Holzmann did not rule out the prospect of ECB purchasing shares, stating "If the need is there, this discussion will definitely have to take place. But currently that discussion does not exist," (Die Presse)

EU Sentix Index* (Jun) -24.8 vs. Exp. -22.5 (Prev. -41.8)

Fitch affirmed Sweden at 'AAA', Outlook Stable. (Newswires)

EQUITIES

European equities attempted to nurse earlier losses [Euro Stoxx 50 -0.5%] following on from firm APAC trade as the region had the first chance to react to the blockbuster US jobs data. Europe kicked the session off with broad losses of over 1%, but thereafter recouped amid a lack of fresh catalysts and with investors focusing on reopening economies alongside Central Bank support. Major bourses now see a more mixed performance, as is the case for broader sectors which started trade mostly in the red; stateside, futures remain modestly in positive territory. Energy remains the top gainer, but overall sectors do not reflect a clear risk tone. The sectoral breakdown sees banks and oil & gas topping the charts whilst financial services and IT. In terms of individual movers – the story in focus: AstraZeneca (-2.2%) reportedly approached Gilead (+3% pre-mkt) regarding a potential merger, which would mark the largest healthcare deal on record. However, sources via The Times downplayed the prospect of any AstraZeneca interest, stating that it has abandoned a tentative interest. Meanwhile, Intesa Sanpaolo (+3.4%) and UBI Banca (+4.1%) are higher after the ECB authorised the former’s takeover of the latter. Wirecard (-1.6%) opened lower by over 7% amid reports late-doors Friday that Munich prosecutors said Co’s premises have been searched as part of a market manipulation probe initiated by Bafin; prosecutors have opened a probe against the Co, including the whole management board. Co. said it is cooperating with authorities and reaffirmed guidance. Elsewhere, IAG (+7.8%) extend on gains after British Airways has threatened to dismiss all its 4.3k pilots and rehire them on individual contracts unless it can reach a new employment agreement with the Balpa union. Finally, Danske Bank (+8.9%) has extended on initial gains after the group agreed to sell its troublesome Estonian business in a EUR 312mln deal.

Gilead (GILD) – Sources over the weekend said AstraZeneca (AZN LN) reportedly approached Gilead regarding a potential merger which would mark the largest healthcare deal on record. However, sources via The Times downplayed the prospect of any AstraZeneca interest, stating that it has abandoned a tentative interest. (Newswires/Times) Gilead is 3.3% higher in pre-market

FX

USD - Although risk sentiment has stalled somewhat after Friday’s unexpected rise in US employment, the Greenback remains shy of best levels amidst doubts about the validity and accuracy of the data due to misrepresentation or reporting irregularities. Hence, the DXY has not been able to maintain momentum or revisit post-NFP peaks just above the 97.000 level with the index meandering between 96.985-741 as attention turns to the FOMC and the prospect that the Fed may edge a bit closer to enhancing forward guidance via a more targeted approach yield control.

AUD/NZD/NOK - In contrast to the Buck, bullish impetus is keeping the Aussie, Kiwi and Norwegian Krona elevated as the former hovers a fraction below 0.7000 in holiday-thinned trade, but underpinned alongside the YUAN (Usd/Cnh and Usd/Cny either side of 7.0700) in wake of significantly wider than forecast Chinese trade surpluses forged on above consensus exports even though relations between the 2 countries continue to deteriorate. Note, Aud/Usd has essentially carved out a double top, while the Kiwi is building a firm base on the 0.6500 handle and Aud/Nzd is straddling 1.0700 ahead of NZ fully reopening from COVID-19 lockdown due to no further cases and an impending shift to Alert Level 1. Elsewhere, Eur/Nok has now breached 10.5000 and eyeing the 200 DMA beyond technical support at 10.4387 (March 2 high) against the backdrop of firmer oil prices on the back of OPEC+ reaching agreement to extend the reduced output pact by a further month to the end of July.

GBP/EUR/CAD - Sterling has also retained its upward trajectory and sights on the 1.2700 marker in terms of Cable following a retest of Friday’s circa 1.2730 peak as UK PM Johnson comes under pressure to press ahead with the next stages of lifting coronavirus restrictions, with Eur/Gbp pivoting 0.8900 even though the Euro is keeping tabs on 1.1300 against the US Dollar after last week’s impressive gains and despite more weaker than anticipated Eurozone macro releases in the form of German ip and Sentix sentiment. Meanwhile, the Loonie is gleaning more crude traction around 1.3400 in advance of Canadian housing starts and the aforementioned Fed policy meeting.

JPY/CHF - Both narrowly mixed vs the Greenback and relatively rangebound between 109.69-39 and 0.9639-13 parameters with the Yen noting downward tweaks to final Japanese Q1 GDP and Franc paring some declines against the Euro from sub-1.0900 irrespective of mixed weekly Swiss bank sight deposit balances.

EM - Regional currencies have largely picked up where they left off las week, with the oil and commodity focused Rub, Zar and Mxn all on the front foot as oil remains buoyant, but the Try underperforming as an importer.

Australia said China is unresponsive despite weeks of pleas to ease tensions, according to reports citing comments from Trade Minister Birmingham. (Newswires) China is advising its citizens not to visit Australia, citing racial discrimination and violence against Asians, seemingly Beijing’s latest attempt to hit back at Australia for advocating an investigation into the coronavirus pandemic. (Japan Times) 

FIXED

Even though BTPs have bounced and EU equities are well off worst levels, the 10 year German debt future appears primed to maintain or even build on its post-US jobs data recovery gains, and perhaps the June Eurozone Sentix survey has encouraged dip buyers ahead of speeches from ECB President Lagarde. Conversely, Gilts and US Treasuries seem more reluctant to extend their rebounds from Friday’s lows after the former retreated to a deeper Liffe low at 135.27 (-1 tick vs +29 ticks at best) and the latter prepares for this week’s auctions either side of the FOMC.

COMMODITIES

WTI and Brent futures hold onto modest gains amid the fallout from the OPEC+ meeting – which saw an extension of 9.6mln BPD cuts (barring Mexico’s 100k BPD) by an extra month to the end of July as anticipated. Focus meanwhile has now turned to compliance and how the heads of the group plan to enforce full/over-compliance – namely among the known laggards Iraq and Nigeria – who reaffirmed commitment to the pact over the weekend. On that front, Iraq has already hinted at possible problems regarding making up for its shortfall. In terms of over-compliance, Gulf OPEC producers (Saudi, UAE, Kuwait) are not planning to continue with their voluntary deeper oil cut of 1.18mln BPD beyond June, according to sources. Eyes will now be on the June 18th JMMC meeting where the committee will review secondary source data alongside current market fundamentals before proposing policy recommendations. Note: sources last week said that OPEC+ is to move cautiously to rebalance the market amid easing lockdowns, while possible Shale resumptions could also weigh on eastern producers’ minds. Thereafter, Saudi Aramco also released its July Official Selling Prices (OSPs) which showed steep increases for all crude grades to all regions. Furthermore, Libya’s El Sharara oilfield (300k BPD) has restarted output at 30k BPD and is expected to reach capacity within 90 days after 142 days of inactivity. Reports also note that the El Feel field (70k bpd) has restarted operations. Meanwhile, Cristobel made landfall over the weekend but has since weakened to a Tropical Storm as it moves further inland. Heavy Rainfall and storm surges continue along the gulf coast from Southeastern Louisiana eastward to the Florida Panhandle. It was reported that energy firms evacuated 195 Gulf of Mexico production platforms and 3 rigs ahead of Storm Cristobal on Sunday and that producers had cut 34% of offshore oil and 32% of nat gas output as of mid-Sunday. WTI July trades on either side of USD 40/bbl (vs high. 40.44/bbl) and Brent August dipped back below USD 43/bbl (vs. high 43.41/bbl). Spot gold trades on the firmer side of a USD 1678-97/oz range with little specific for the metal, whilst copper prices extend gains above USD 2.50/lb amid falls in stocks at exchange warehouses – falling to 139k tons which is the lowest since Jan 17th. Meanwhile, around 90% of the large Peruvian mines have received the green light at resuming operations following a pandemic-related disruption.

OPEC+ unanimously agreed to extend current cuts for one month through July and will review if a longer extension is needed this month, while Saudi and Russia emphasised they want stronger compliance from other nations and both Iraq and Nigeria agreed to slightly deeper cuts. (Newswires/WSJ)

Saudi Arabia set July Arab light crude oil OSP to Asia at Oman/Dubai +USD 0.20 and to north-west Europe at ICE Brent + USD 0.30, while reports noted that the July pricing for all grades to Asia was higher by between USD 5.60-7.30 and the largest hike in prices in 2 decades. (Newswires)

Gulf OPEC producers are not planning to continue with their voluntary deeper oil cut of 1.18mln BPD beyond June, according to sources. (Newswires)

Iraqi Finance Minister stated that the output cut agreement contributed to a 3-fold increase in oil prices and that Iraq is committed to OPEC+ cut deal until the end of its term. (Newswires)

NHC noted that tropical storm force winds were lashing the Gulf Coast from Southern Louisiana eastward to Mississippi and Alabama, while it later stated that Cristobal began to weaken as it moved over south-eastern Louisiana but added that heavy rainfall and storm surge continued along the Gulf Coast from south-eastern Louisiana to Florida. It was reported that energy firms evacuated 195 Gulf of Mexico production platforms and 3 rigs ahead of Storm Cristobal on Sunday and that producers had cut 34% of offshore oil and 32% of nat gas output as of mid-Sunday. (Newswires) Recent reports have noted, NHC says Cristobal has now weakened to a Tropical Storm as it Moves Farther Inland. Heavy Rainfall and Storm Surge Continue Along the Gulf Coast From Southeastern Louisiana Eastward to the Florida Panhandle. (Newswires)

Libya’s El Sharara oilfield (300k bpd) has restarted output and is expected to reach capacity within 90 days. Reports also note that the El Feel field (70k bpd) has restarted operations. (Newswires)