• Asian equity markets traded with a slight positive bias after momentum from global peers provided the initial constructive setting for the region
• This followed a positive lead from Wall St. where the Nasdaq printed all-time highs, although some gains were trimmed as US COVID concerns mounted
• A Texas County Official said that the Houston area COVID-19 ICU beds are to hit capacity in 11 days
• The DXY was subdued below 97.00, EUR/USD and GBP/USD remain above 1.13 and 1.25 respectively 
• RBNZ maintained the OCR at 0.25% and LSAP at NZD 60bln as expected, whilst continuing to tout further easing
• US Treasury Secretary Mnuchin said the administration is very seriously considering another stimulus bill and that the bill may pass in July
• Looking ahead, highlights include German IFO, SNB Quarterly Bulletin, DoEs, ECB's Lane, Fed's Evans, Bullard, supply from UK, Germany and the US 

CORONAVIRUS UPDATE

US COVID-19 cases rose by 26,643 vs. Prev. 27,616 increase and the death toll rose by 410 vs. Prev. 308 increase. Texas coronavirus cases increased by a record 5,489 (+4.8%) and hospitalizations increased by 10.3% to 4,092. Furthermore, a Texas County Official said that the Houston area COVID-19 ICU beds are to hit capacity in 11 days, while there were also comments from NJ Governor Murphy that transmissions are beginning to creep up. (Newswires)

NIH's Fauci repeated he is "cautiously optimistic " on having a COVID vaccine by early 2021 and he noted one vaccine is in phase 3 trials, while others are showing promise. Fauci added that part of the reason why COVID cases have surged in areas of the US is due to an increase in community spread and that the spread of cases in Florida, Arizona, Texas are "disturbing". (Newswires)

EU officials were reportedly racing to agree on who can visit the bloc from July 1st as it reopens its borders although US may not be included in the countries permitted amid failures on the coronavirus. (NYT)

UK Chief Medical Officer said there will be a significant amount of COVID circulating through winter and into next spring. (Newswires)

ASIA

Asian equity markets traded with a slight positive bias after momentum from global peers provided the initial constructive setting for the region. This followed the advances for all major indices on both sides of the Atlantic with sentiment helped by stronger than expected data and the UK further easing lockdown restrictions, while the Nasdaq notched a fresh all-time high, although some of the gains were later pared stateside amid ongoing concerns regarding the increasing pace of infection numbers in parts of the US. ASX 200 (+0.4%) and Nikkei 225 (Unch.) were rangebound with the Australian benchmark treading water for much of the session as strength in the commodity related sectors was offset by weakness in the top-weighted financials, and a non-committal tone was also observed in Tokyo as exporters contended with the recent currency strength, while the KOSPI (+1.7%) outperformed on positive geopolitical developments in which North Korea Leader Kim decided to suspend military action against South Korea. Elsewhere, Hang Seng (+0.2%) and Shanghai Comp. (+0.2%) eked mild gains after another firm liquidity effort by the PBoC and with Tencent shares posting a record high in Hong Kong, but with upside contained due to ongoing US-China tensions. Finally, 10yr JGBs were lacklustre as the mild positive tone in stocks and lack of BoJ presence in the market kept prices subdued, which also saw the 30yr yield increase to its highest since April last year during early trade.

PBoC injected CNY 180bln via 7-day reverse repos for a net daily injection of CNY 180bln. (Newswires) PBoC set USD/CNY mid-point at 7.0555 vs. Exp. 7.0564 (Prev. 7.0671)

SCMP report suggested the risk of military conflict between US and China is higher than ever, citing experts. (SCMP)

BoJ Summary of Opinions stated that the economy is in a severe situation and is under pressure from virus fallout but is showing some signs of bottoming out, while it added that a delay in the economic recovery could destabilize markets and that the BoJ must respond quickly if the need arises to take additional measures. BoJ noted that CPI Y/Y is likely to be negative for the time being and it is important to continue to support financing of firms and maintain stability in financial markets through the following three measures including the Special Program to support financing in response to the coronavirus, an ample provision of funds without upper limits and active purchases of assets such as ETFs. (Newswires)

UK/EU

BoE Governor Bailey reportedly warned the Secretary of State for Work and Pensions that pension superfunds could threaten financial stability. (Sky News)

UK and EU are likely to miss the June-end deadline for financial services equivalence assessments, according to sources. There were also comments from an EU Commission official that the UK has not completed all of the EU's questionnaires which ask if the UK will stay aligned to EU rules. (Newswires)

FX

The DXY remained subdued below 97.00 as the mildly positive risk tone continued to drag on the haven currency and as coronavirus concerns persisted as California, Florida and Texas all reported higher infection numbers, with Texas suffering a record increase of nearly 5500 new cases. The weakness in the greenback kept its major counterparts near the prior day’s highs with EUR/USD also propped up by support at 1.1300 and with GBP/USD back above 1.2500. Elsewhere, USD/JPY languished around 106.50 owing to the USD-woes, while antipodeans traded mixed with NZD/USD the underperformer after the RBNZ policy announcement in which it maintained the OCR at 0.25% and Large Scale Asset Purchases at NZD 60bln as expected, but continued to tout future policy easing was on the cards and noted that members discussed the pros and cons of expanding QE now, in which any expansion would need to be of a sufficient magnitude to make a meaningful difference.

RBNZ maintained the OCR at 0.25% and LSAP at NZD 60bln as expected. RBNZ said it will review the LSAP quantum at regular intervals and that monetary policy will continue to provide additional support. RBNZ also stated that it is prepared to provide additional stimulus as necessary and that the committee continues to prepare for additional tools, while it will outline the outlook for its LSAP program and readiness for further policy tools in August. Furthermore, the central bank stated that a strengthening NZD is placing further pressure on export earnings and that members discussed the pros and cons of expanding the LSAP program now, in which any expansion would need to be driven by the economic outlook and would also need to be of a sufficient magnitude to make a meaningful difference. (Newswires) 

COMMODITIES

Commodities were mixed with WTI crude lacklustre after the yesterday’s pullback from the USD 41.00/bbl with prices dampened following a larger than expected build in headline private crude inventories, while Energy Intel noted that the lack of signs for an OPEC presser this week could suggest under-complying countries may need to present better plans for cuts. Nonetheless, downside was minimal overnight amid rangebound trade across the complex and with the USD 40/bbl level providing a base for WTI. Elsewhere, gold was uneventful as it took a breather following its recent surge to 7 year highs but with the precious metal kept afloat by the lacklustre greenback, while copper prices reflected the flat performance seen in commodities and tepid performance in stocks. 

US Private Inventory Crude Stocks +1.7mln vs. Exp. +0.3mln (Prev. +3.9mln). (Newswires)

GEOPOLITICS

North Korea Leader Kim reportedly suspended anti-South Korea military plans during the Central Military Commission meeting which he chaired. (Yonhap)

US

The TPLEX was little changed by settlement, where excluding the overnight Navarro risk knock, yield ranges were tight, and volumes light. After Navarro’s “China trade deal is done” remarks, benchmark 10-year yields dipped below 70bps, to swiftly return above it as the comments were walked back. There had been some jitters in the FX and equity space after the US PMIs, where both Manufacturing and Services came in just above expectations, although Treasuries were little bothered. It’s worth noting that today’s volumes in Treasuries were beneath recent averages, with summer trading conditions seemingly creeping in, so it’s possible that rates participants are less likely to be reactive to minute changes in risk tone or on the data front. US T-note futures (U0) settled 1+ ticks higher at 138-24.

US Treasury Secretary Mnuchin said the administrations is very seriously considering another stimulus bill and that the bill may pass in July, while he added that they will consider a further delay of tax filing as July 15th deadline approaches in which other reports suggested a potential delay to September 15th. Furthermore, Mnuchin also commented that the Fed did a phenomenal job and that there is a lot of liquidity with the cost of debt very low, while he believes the US will be out of recession by end of the year and noted the main job of further stimulus would be to focus on that which brings back jobs quickly. (Newswires)