• The risk tone across the Asia-Pac region was mostly positive with the regional bourses spurred by the firm handover from Wall St
• The DJIA led gains, the S&P 500 turned positive YTD and the Nasdaq printed a fresh record high
• The DXY attempted to nurse some of the recent weakness although remained firmly below the 97.00 level
• The Fed eased terms of its main street lending facility to encourage more businesses to participate
• WTI crude futures consolidated after the prior day’s losses in which prices retreated from the USD 40/bbl level before finding a floor around USD 38.00/bbl
• Looking ahead, highlights include Swiss Unemployment, German Trade Balance, Norges Bank Regional Network Report, EZ GDP (revised), US NFIB Business Optimism, JOLTS, BoE's Cunliffe, supply from Germany and the US

CORONAVIRUS UPDATE

US COVID-19 cases +17,919 at 1,938,823 (prev. 1,920,904); death toll +474 at 110,475 (prev. 109,901). (Newswires)

White House said US President Trump remains open to another coronavirus relief package and that the President still wants a payroll tax holiday. Furthermore, it stated that new COVID-19 cases have stabilized and many new cases are due to proactive monitoring, while it added the US is heading in a positive direction on coronavirus even as the economy reopens. (Newswires)

WHO's Tedros said although the situation in Europe is improving, the global situation is worsening, while there were also comments from WHO’s head of WHO’s emerging diseases and zoonosis unit Dr. Van Kerkhove who suggested the data shows it is rare that an asymptomatic person actually transmits the coronavirus onward to a secondary individual. (Newswires)

China's Global Times tweeted that Chinese experts predict a global second wave of virus as the West rushes to loosen border controls and Southern Hemisphere countries become hot spots, while the spread of protests is also seen to make things worse. (Twitter)

ASIA

The risk tone across the Asia-Pac region was mostly positive with the regional bourses spurred by the firm handover from Wall St where the DJIA led the respectable gains across the major indices and the Nasdaq printed a fresh record high as there wasn’t much to derail the ongoing reopening and recovery narrative. Furthermore, the S&P 500 turned positive YTD and all sectors closed in the green with substantial gains seen in energy names following the OPEC+ output cut extension, despite an actual pullback in oil prices that was attributed to participants selling the news and concerns regarding compliance issues. ASX 200 (+2.1%) and Nikkei 225 (-0.6%) traded mixed with Australia the outperformer as it played catch up on return from the holiday closure and with gains spearheaded by financials and energy, while the Japanese benchmark lagged as exporters suffered from the ill effects of a stronger currency. The KOSPI (-0.6%) was subdued after North Korea announced to sever communication with South Korea completely from today and with index heavyweight Samsung Electronics failing to hold on to most the opening gains despite the court ruling to reject the arrest of de facto head Jay Y. Lee. Elsewhere, Hang Seng (+1.4%) climbed back above the 25k milestone with the government planning to bailout Cathay Pacific through a HKD 30bln loan and the Shanghai Comp. (+0.5%) conformed to the predominantly upbeat tone after the PBoC resumed its liquidity efforts, albeit with a reserved CNY 60bln injection. Finally, 10yr JGBs extended on this week’s rebound amid a similar recovery in USTs and underperformance of Japanese stocks, but with upside capped amid the lack of BoJ presence in the market today.

PBoC injected CNY 60bln through 7-day reverse repos in which it maintained the rate at 2.20%. (Newswires) PBoC set USD/CNY mid-point at 7.0711 vs. Exp. 7.0626 (Prev. 7.0882)

US President Trump reported plans to sign Uighur human rights bill, according to a reporter citing a source. (Twitter)

UK/EU

UK government reportedly assured travel and hospitality industry heads that 'air bridges' which will facilitate international travel will be permitted from June 29th. (Telegraph)

UK PM Johnson has been warned by senior Conservative MPs that he must set a legally-binding date to remove Huawei from the nation's 5G network or face a defeat in the House of Commons. (Telegraph)

The UK and Japan are to begin trade talks today with a view to replace Britain’s existing FTA with the EU. (Newswires)

EU reportedly proposed holding its high-level meeting with the UK where they'll take stock of trade negotiations for Monday June 15th, but the two sides are still yet to agree on the date and are in discussions. (BuzzFeed/Twitter)

UK BRC Retail Sales YY (May) 7.9% (Prev. 5.7%). However, BRC said that May total sales fell 5.9% Y/Y vs. 19.1% decline in April which was the 2nd largest drop on record, while it added that weak consumer confidence and social distancing is likely to limit sales when non-essential stores reopen on June 15th. (Newswires)

UK Barclaycard May consumer spending fell 26.7% Y/Y vs. decline of 36.5% Y/Y in April. (Newswires)

FX

The DXY attempted to nurse some of the recent weakness although remained firmly below the 97.00 level which has acted as resistance so far this week and with any meaningful recovery in USD hampered by tentativeness heading into Wednesday’s FOMC. The greenback’s major counterparts were uneventful as EUR/USD continued to oscillate back and forth of 1.1300 after recent comments from ECB President Lagarde provided little in the way of fresh insight, while GBP/USD marginally retreated from its best levels in nearly 3 months although held on to the 1.2700 status. Elsewhere, JPY extended its strengthening and eyed the 108.00 level against the greenback after the recent rotation out of the USD into other hard currencies, which had also saw CHF as a notable benefactor yesterday, while antipodeans were mixed amid a lack of significant overnight catalysts with AUD/USD just about slipping below the 0.7000 level.

Australian NAB Business Confidence (May) -20 (Prev. -46). (Newswires) Australian NAB Business Conditions (May) -24 (Prev. -34)

New Zealand ANZ Business Confidence (May) -33.0 (Prev. -41.8). (Newswires) New Zealand ANZ Activity Outlook (May) -29.1 (Prev. -38.7)

COMMODITIES

WTI crude futures consolidated after the prior day’s losses in which prices retreated from the USD 40/bbl level before finding a floor around USD 38.00/bbl despite the recent OPEC+ output extension agreement, with the reversal attributed to participant concerns regarding compliance, while focus turns to the latest stockpile numbers beginning with the private inventory report due later today. Elsewhere, gold prices were choppy in which it just about gave up the USD 1700/oz level as the greenback tried to recoup some of its losses and copper prices gradually edged higher throughout the session amid the mostly positive risk tone.

Tropical Storm Cristobal has shut in 629k bbls of oil and 952mln cubic feet of nat gas in the Gulf of Mexico, with 179 platforms and 3 rigs evacuated as of Monday. (Newswires)

Iran oil and energy journalist Reza Zandi tweeted that the idea within OPEC+ is to try to push near-term or spot prices higher than forward contracts, otherwise known as backwardation citing a delegate, while he suggested OPEC wants oil today to be more sought after than oil for future deliveries to encourage refiners and traders to take crude out of inventories. (Twitter)

Libya's NOC stated that armed forces entered El Sharara oil field and told employees to stop working. (Twitter)

New Iraq Oil Minister Ismaeel affirmed to the Saudi Energy Minister full commitment to the OPEC+ output cut agreement and commented that Iraq is also fully committed to the deal after June and July. (Newswires)

Goldman Sachs said updated Brent short-term price forecasts is now at USD 35/bbl and year-end spot forecast now at USD 45/bbl, while it noted a similar USD 6/bbl average forecast increase through H2 for WTI to USD 45/bbl, Furthermore, Goldman Sachs sees Brent crude prices at USD 37/bbl in Q3 and USD 43/bbl in Q4, as well as WTI crude at USD 34/bbl in Q3 and USD 40/bbl in Q4. (Newswires)

Chile's Codelco copper production rose 2.8% Y/Y in April and increased 3.8% in first 4 months of 2020, while its Escondida mine production rose 11.4% to 102,600 tonnes in April. (Newswires)

GEOPOLITICS 

North Korea will cut off communication lines with South Korea completely from noon today according to state media, while South Korea press suggested North Korea is to shift inter-Korean work into 'one against enemy'. (Newswires/Yonhap)

US and Russia are to meet in Vienna on 22nd June for nuclear arms talks and US reportedly invited China to the nuclear arms talks, according to sources. (Newswires)

US

The Treasury curve was mixed, though shorter-dated curve spreads had a bias towards bull-flattening on Monday, albeit modestly in the context of the last week’s crescendo of a bear-steepener, and on less aggressive volume. The self-reinforcing liquidation of Treasury longs seems to have run its course in the near term. By settlement, 2s +1bps at 23bps, 5s -3bps at 45bps, 10s -2bps at 88bps, and 30s -2bps at 1.66%. Heading into the US session yields had been firming amid decent risk appetite overnight, with CTAs reported to have been on the offer. However, real money took advantage of the yield breakout, seeing the 10-year back below 90bps – Nomura highlights that USTs have cheapened enough to see both foreign and domestic real money seize the yield offerings. This demand was seen at today’s 3-year auction: tailed the 0.283% WI by 3bps, Directs and Indirects both took larger shares than average, and was covered more than average. The auction bodes well for the 10- and 30-year Treasury offerings later this week, where the respective yields rose by 27bps and 28bps last week, while the more FFR/ZLB-anchored 3-year yield rose by just 10bps, although evidently still found solid demand at today’s auction – anticipation of progression to front-end YCC at Wednesday’s FOMC could also be creating an arbitrage opportunity (3-year yield currently trading above the FFR) for those who believe the Fed will do such. T-note futures (U0) settled 6 ticks higher at 137-09+.

Federal Reserve eased terms of its main street lending facility to encourage more businesses to participate by lowering the minimum loan amount to USD 250k from USD 500k and it raised the maximum loan size to USD 300mln. Furthermore, it increased the term of each loan option to five years from four years and extended the repayment period for all loans by delaying principal payments for two years rather than one. (Newswires)

US President Trump tweeted positive remarks about the stock market and that jobs are coming back fast, while he added that next year will be our greatest ever. (Twitter)