• Asian stocks traded mostly negative following a predominantly softer handover from Wall St. where focus remains on the COVID-19 case count
• US-China tensions also remained in focus as China responded to President Trump’s recent signing of the Uighur human rights legislation
• The DXY was relatively flat around the 97.00 level, EUR/USD and GBP/USD were uneventful overnight around 1.1250 and 1.2550 respectively
• Former US National Security Adviser Bolton’s book claims US President Trump asked Chinese President Xi to help him win the 2020 election
• Looking ahead, highlights include SNB, Norges and BoE policy announcements, US initial jobless claims, Philadelphia Fed business index, JMMC meeting, ECB's de Guindos, BoE's Broadbent & Tenreyro, supply from Spain, France & US and ECB's TLTRO allotment 

CORONAVIRUS UPDATE

US CDC said COVID-19 cases rose by 27,975 (Prev. 18,577) and the death toll increased by 722 (Prev. 494). NY COVID-19 cases rose 0.1% vs. 7-day avg. 0.2%; NY again reported the lowest daily hospitalisations since March and reported 17 new deaths, which is the lowest since start of pandemic. Elsewhere, California COVID-19 cases +2.2% vs. Prev. 7-day average 2.0%, while Texas coronavirus cases rose 3.4% vs. Prev. 7-day average of 2.7%. (Newswires)

US President Trump suggested the US is very close to a vaccine and close to therapeutics, while he added they won’t be closing the country again. (Newswires)

Beijing reportedly shut down all hotels and similar entities in areas considered high risk, while it was also reported that 1460 flights were cancelled in and out of Beijing as of Thursday morning, although there were comments from a local security officials that Beijing is not sealed off. (Newswires/Twitter)

ASIA

Asian stocks traded mostly negative with investor sentiment dampened by concerns regarding a resurgence of coronavirus cases stateside and as participants digested the latest bout of weak data from the region, as well as ongoing US-China tensions. ASX 200 (-0.5%) and Nikkei 225 (-0.4%) were lower with Australia pressured by losses in nearly all sectors including early underperformance in the top-weighted financials and with disappointing employment data adding to the soured mood, while exporters in Japan buckled under the strain of a firmer currency. Elsewhere, Hang Seng (+0.1%) and Shanghai Comp. (Unch.) were both subdued amid ongoing US-China tensions as China responded to President Trump’s recent signing of the Uighur human rights legislation which it firmly opposed and warned the US to correct its mistakes or it will resolutely respond with the US to bear the consequences. However, losses were cushioned in the mainland after the PBoC conducted open market operations to inject liquidity in which it utilized 14-day reverse repos for the first time since February and lowered the respective rate by 20bps to 2.35%, while JD.com was among today’s success stories in which the Co. shares rose about 6% at the open of its Hong Kong debut. Finally, 10yr JGBs were higher with prices underpinned in tandem with upside in T-notes and amid the broad negative risk tone in the region, although some of the gains were retraced after weaker results at the 5yr JGB auction.

PBoC injected CNY 50bln via 7-day reverse repos and CNY 70bln via 14-day reverse repos for a daily net injection of CNY 40bln, while it maintained the 7-day reverse repo rate at 2.20% but cut the 14-day reverse repo rate by 25bps to 2.35% vs. Prev. 2.55%. (Newswires) PBoC set USD/CNY mid-point at 7.0903 vs. Exp. 7.0866 (Prev. 7.0873)

US President Trump signed the bill on Uighur human rights in a rebuke to China. China later expressed strong indignation and firm opposition to the US law regarding Uighurs and noted that Xinjiang is purely China's affairs and urged US to correct its mistakes or it will resolutely respond and US must bear consequences. Furthermore, China’s Foreign Ministry said China demands US handles Taiwan-related issue carefully and properly. (Newswires)

China said the two sides articulated their positions in the meeting between top diplomat Yang and US Secretary of State Pompeo in Hawaii and agreed this was constructive dialogue, while the sides also agreed to implement consensus reached by their leaders and to continue engagement, as well as communication. Furthermore, Yang told Pompeo cooperation between the 2 countries is the only correct choice and conveyed China's position on issues including Taiwan, Hong Kong and Xinjiang, while he added the US should stop using Xinjiang related issues to interfere with China's internal affairs. (Newswires)

China State Council said the country needs to better leverage policy tools such as RRR cuts and re-lending to maintain reasonably sufficient liquidity and intensify efforts to make financing more accessible to help enterprises. (Newswires)

China Vice Premier Liu He said China and US should jointly create conditions and atmosphere to implement Phase 1 trade agreement. Liu also noted that the economic situation has gradually improved and that China is maintaining appropriate levels of overall liquidity, while he added China will firmly support reforms and opening up, as well as support Hong Kong's position as a key financial centre. (Newswires)

Asia Development Bank lowered 2020 growth forecast for developing Asian countries to 0.1% from 2.2%, while it cut China 2020 growth forecast to 1.8% from 2.3% but sees 2021 China growth at 7.4%. (Newswires) 

UK/EU

ECB's Weidmann has informed lawmakers in Germany that he is optimistic a solution can be found to address the German constitutional court's ruling on ECB bond purchases. (FT) 

USTR Lighthizer has warned that it will be almost impossible to sign a UK-US FTA ahead of the November Presidential election. (Telegraph) 

BoE said stress test showed the insurance sector is robust to downside risks and that highest uncertainty centres on certain general insurers' liabilities. (Newswires)

EU Brexit negotiator Barnier criticised the UK for attempting to reopen an agreement to protect EU regional food specialities such as champagne and feta, while he stated the move was “not compatible” with a sustainable future relationship (FT)

FX

The DXY was relatively flat with price action range-bound around the 97.00 level amid another bout of unsurprising central bank commentary from Fed Chair Powell who stated the Fed has not decided on yield curve control and leaned back again on negative rates, while Fed’s Mester suggested interest rates need to stay low for a lot longer to support the economy and dismissed the idea of negative rates for the US. EUR/USD and GBP/USD were uneventful overnight at the 1.1200 and 1.2500 handles respectively amid the ongoing stubbornness in Brexit negotiations with EU Brexit negotiator Barnier criticising the UK for attempts to reopen a prior agreement on protection regarding EU regional food specialities, which he stated was “not compatible” with a sustainable future relationship. Elsewhere, USD/JPY and JPY-crosses traded subdued amid the lack of risk appetite and antipodeans were dampened by weaker than expected New Zealand GDP and Australian Employment Data in which the latter showed jobs declined by 227.7k vs. Exp. 100.0k decline, while the Unemployment Rate surged to 7.1% from 6.2% and would have been around 9.6% if those who had lost jobs were considered actively looking for work according to the ABS.

Australian Employment Change (May) -227.7k vs. Exp. -100.0k (Prev. -594.3k). (Newswires) Australian Unemployment Rate (May) 7.1% vs. Exp. 7.0% (Prev. 6.2%) Australian Participation Rate (May) 62.9% vs. Exp. 63.7% (Prev. 63.5%)

Australian Bureau of Statistics said total job losses at 835k since March and that the increase in unemployment rate was reduced by larger than usual amount of people leaving the labour force, while it added that said unemployment rate would have reached about 9.6% if those who had lost jobs were considered actively looking for work. (Newswire)

New Zealand GDP (Q1) Q/Q -1.6% vs. Exp. -1.0% (Prev. 0.5%) (Newswires) New Zealand GDP (Q1) Y/Y -0.2% vs. Exp. 0.3% (Prev. 1.8%)

Brazilian Central Bank cut the Selic Interest Rate by 75bps to 2.25%, as expected. Brazil Central Bank said inflation risks are pointing both directions and the current state of affairs continues to recommend unusually strong stimulus, but it recognizes remaining space for stimulus is uncertain and should be small. (Newswires)

COMMODITIES

Commodities were mostly rangebound but with mild weakness seen in WTI crude futures amid the lacklustre risk tone following this week’s bearish inventory reports, while focus turns to today’s JMMC which begins at 1300BST where sources noted that Iraq and Kazakhstan are to present a plan for oil production cuts and compensation for overproduction. Elsewhere, gold prices were little changed amid the uneventful greenback and copper just about remained afloat amid some resilience in its largest purchaser China.

Oman reportedly stepped up its plan to build the largest oil tank farm in the Middle East. (Newswires)

Vale is to resume iron ore mining at the Itabira complex gradually. (Newswires)

GEOPOLITICS 

US President Trump extended existing sanctions on North Korea for one-year. (Yonhap)

North Korea newspaper warned the demolition of liaison office was just the beginning and there could be additional retaliatory steps against South Korea that could go far beyond imagination. Furthermore, North Korea appeared to have deployed soldiers to empty guard posts in the DMZ and a South Korea nuclear envoy arrived in US, although the government have not disclosed reason for the visit. (Yonhap)

US

The Treasury curve was little changed amid subdued risk appetite on Thursday and chunky supply. The T-Note traded in a tighter range compared to recent sessions, as did equity futures. Yields have been gyrating to risk appetite as of recently, which has seen yields rise with hopes of economic reopening, and vice versa. At the same time, the supply/issuance side of the market has not had much sway over price discovery, although Wednesday’s pipeline was busy, so there could have been some digestion pressure from letting rates fall further. The US held its second 20-year bond auction today, with the USD 17bln taken down well: stopped through 1.329% WI by 1.5bps (prev. tail of 0.7bps), B/C 2.63x (prev. 2.53x), and dealers took 21.9% (prev. 24.6%). On the corporate front, a dozen issuers came to the dollar market, including Pfizer’s Upjohn unit with a USD 7.45bln M&A bond for its Mylan (MYL) acquisition – CTAs were reported to have been hefty 10-year and 30-year sellers against the deal. By settlement, 2s and 30s both unch. at 20bps and 154bps, respectively, while yields in the belly were down marginally – 10s at 74bps. US T-note futures (U0) settled 5 ticks higher at 138-19.

Fed chair Powell reiterated that it would be a concern if Congress pulled back support too quickly and urged Congress to support businesses and households in this critical phase. Powell added that the Fed has not decided on yield curve control and leaned back again on negative rates. (Newswires)

Fed's Mester (voter, hawk) said a lot of Americans will remain out of work and that further fiscal support will be required. Mester added that the Fed is continuing to search for gaps where it can use tools and that interest rates need to stay low for a lot longer to support the economy, while she also stated that negative rates is not a tool they would want to use in US and that she could envision the Fed using yield curve control in tandem with forward guidance on the short end of the curve. (Newswires)

President Trump also stated that no one has been tougher on China and Russia than him and added that former National Security Adviser Bolton broke the law by writing his book. Bolton’s books contains several damaging claims against the President, including one suggesting that Trump asked Chinese President Xi to help him win the 2020 election. (WSJ)