• Asian equity markets were mostly higher after a positive post-NFP close on Wall St., albeit stocks finished off best levels
• US COVID-19 cases rose yesterday by over 54k, Texas hospitalizations rose to a 4th consecutive high with Governor Abbot imposing a mandatory face mask requirement
• Chinese Caixin Services PMI printed the highest in a decade and Caixin Composite PMI added to this week’s streak of encouraging PMIs
• The DXY heads into the EU open modestly firmer and above the 97.00 mark with FX trade relatively contained overnight
• Looking ahead, highlights include EZ & UK services & composite PMIs (F), US markets are closed in observance of Independence Day
• Note, the desk will shut at 1800BST/1200CDT. The service will resume on Sunday 5th July for the beginning of Asia-Pac coverage at 2000BST/1600CDT**

CORONAVIRUS UPDATE

1. US COVID-19 cases rose by 54,357 (Prev. +43,644) and the death toll rose by 725 (Prev. +560). It was later reported that US coronavirus cases were said to have increased by a record of nearly 55000 on Thursday according to a Reuters tally, while AFP tweeted that US coronavirus cases rose by a record 53,069 in 24 hours citing the Johns Hopkins tracker. (Newswires/Twitter) California COVID-19 cases rose by 4,056 (Prev. +9,740) representing an increase of 1.7% (Prev. +4.4%). Texas coronavirus cases increased by a near-record 7,915 and hospitalizations rose by 478 to a total of 7,382 which was a 4th consecutive record high, while Texas Governor Abbot imposed an order for mandatory face mask requirement in public for all counties that have at least 20 COVID-19 cases. (Newswires)

US President Trump said three vaccines are looking really good, while traders suggested he is referring to Inovio (INO), Pfizer (PFE) and Moderna (MRNA). (Newswires)

Moderna (MRNA) COVID-19 vaccine has been delayed according to investigators but a July start still possible, while they noted the Co. is making changes to the trial plan which has pushed back the expected start date of the Phase 3 study. (Stat News)

Hydroxychloroquine reportedly lowers COVID-19 death rate, according to a Henry Ford Health study. (Detroit News)

NIH's Fauci said a new mutation may allow COVID-19 to more easily replicate and he added there are vaccines entering Phase 3 trials at the end of July with others to begin at the beginning of August, September and October. (Newswires)

UK COVID-19 death toll rises to 43,995 (Prev. 43,906) which was an increase of 89 (Prev. +176), while the case count rose by 576 (Prev. +829). (Newswires)

ASIA

Asian equity markets were mostly positive as the region reacted to the stronger than expected US NFP jobs data which stoked the global risk appetite and briefly pushed the DJIA to above 26K and the Nasdaq to a fresh all-time high, although US stocks finished well off their best levels as the simultaneous jobless claims data was less encouraging and as participants headed out for the early weekend due to Independence Day celebrations. ASX 200 (Unch.) and Nikkei 225 (+0.2%) began higher with early upside in Australia led by outperformance consumer stocks buoyed by stronger than expected Retail Sales data which posted a record increase although gains were later pared as the financials and mining sectors lagged, while the mood in Tokyo remained upbeat but with gains limited by recent currency flows and with Japan reportedly mulling revising coronavirus regulations following a surge of cases in Tokyo. Hang Seng (+0.9%) and Shanghai Comp. (+1.0%) advanced after Chinese Caixin Services PMI printed the highest in a decade and Caixin Composite PMI added to this week’s streak of encouraging PMI figures, which overshadowed the PBoC’s total CNY 490bln net weekly liquidity drain, as well as the ongoing Hong Kong related tensions in which the US Senate passed the bill to sanction banks over the security law and with China threatening retaliation against the UK regarding its citizenship offer to Hong Kong residents. Finally, 10yr JGBs were marginally higher as prices tracked the rebound in T-notes and amid the BoJ’s presence in the market for nearly JPY 900bln of JGBs in which it increased purchases of 1yr-3yr maturities, although the upside in bonds  is also contained given the mostly constructive risk tone.

PBoC skipped reverse repo operations for a weekly net drain of CNY 490bln. (Newswires) PBoC set USD/CNY mid-point at 7.0683 vs. Exp. 7.0712 (Prev. 7.0566)

Chinese Caixin Services PMI (Jun) 58.4 vs. Exp. 53.2 (Prev. 55.0); Highest since April 2010 Chinese Caixin Composite PMI (Jun) 55.7 (Prev. 54.5)

US Sec. of State Pompeo tweeted the Chinese Communist Party implemented the security law on HK in violation of commitments and disregarding human rights, while he suggested Hong Kong was one of the world's most stable, prosperous and dynamic cities and will now become just another communist-run city. (Newswires)

US Senate passed the bill to sanction banks over Hong Kong security law, sending it to US President Trump for signing. In related news, China's Global Times tweeted that the top political advisory body strongly condemns the passage of the HK bill by US Congress and alleged the move is not about democracy or freedom of HK residents, but about containing China's development which will never succeed. (Newswires/Twitter)

UK/EU

UK PM Johnson is to urge the country to act responsibly and note that the economic health of the country will be dependent on everyone acting responsibly, ahead of pubs reopening and other lockdowns being lifted on Saturday, according to ITV's Paul Brand. Furthermore, it was also reported that UK PM Johnson is to warn weekend pubgoers that England is not out of the woods yet. (ITV/The Guardian)

UK lifted quarantine rules for arrivals from countries including Germany, France, Italy and Spain from July 10th with the full list of countries to be published on Friday. (Sky News)

UK GfK Consumer Confidence (Jun F) -27 vs. Prev. -30 in mid-June. The survey showed 42% of UK manufacturers plan redundancies vs. Pre. 25% in May survey, while other reports noted that three-quarters of UK manufacturers are set to reduce jobs. (Newswires/FT)

ECB's Schnabel said there is no evidence that ECB policy has reduced budgetary discipline, while she added that policy might have prevented a more severe crisis. (Newswires)

FX

The DXY was subdued with a lack of follow-through in the hard currency from the stronger than expected NFP data as the risk sentiment remained the overall catalyst for price action, while the coinciding release of jobless claims data was less encouraging and led to some second-guessing regarding the recovery in the labour market going forward. The greenback’s major counterparts were also uneventful in which EUR/USD loitered around its 200-Hour MA level of 1.1250 and with GBP/USD subdued after its foray into the 1.2500 territory was short-lived amid a lack of progress at this week’s Brexit discussions. Elsewhere, USD/JPY and JPY-crosses were rangebound, while antipodeans mirrored the humdrum trade seen across the currency space with the effects of stronger than expected Retail Sales on AUD/USD nullified by a weaker PBoC reference rate setting.

Australian Retail Sales MM (May) 16.9% vs. Exp. 16.3% (Prev. -17.7%)

COMMODITIES

Commodities were lacklustre overnight with a mild pullback seen in WTI crude futures to pare back some of the recent gains that had been spurred by this week’s larger than expected inventory draws and the predominantly upbeat risk appetite which underpinned oil prices to above the USD 40/bbl. Nonetheless, oil prices retraced some of their gains overnight after hitting resistance around USD 40.50/bbl, while the latest Baker Hughes Rig Count failed to impact prices with this week’s change relatively stable. Elsewhere, gold was relatively unchanged as an uneventful greenback contained the precious metal to within a tight range, while copper prices were slightly pressured as the gains across equities moderated.  

Baker Hughes Rig Count showed oil rigs -3 at 185, natgas +1 at 76 and total rigs -2 at 263. (Newswires)

UBS increased its gold price forecasts for H2 to USD 1900/oz from USD 1800/oz, while it sees prices at USD 1850/oz in March next year. (Newswires)

US

The TPLEX settled little changed but traded choppy, where a consensus beating NFP saw yields and stocks rise, although the move ultimately faded to see yields settle marginally lower. By settlement, 2s unch. at 16bps, 10s -1bps at 67bps, and 30s unch. at 143bps. Following the BLS reporting 4.8mln jobs were added in the US economy in June, duration came under selling pressure, which saw the benchmark US 10-year yield touch a high of 72.4bps in a knee-jerk reaction from 68bps, before quickly gravitating back to the 70bps region, perhaps as the more present weekly jobless claims printed above expectations, again. As the session advanced, and Europe began clocking out, stocks began to falter, sacrificing a sizeable amount of their gains, sending yields back down with them – note, with many US participants likely to be absent due to the long holiday weekend, the thinner liquidity conditions are more likely to accentuate moves in either direction. The bond market is now looking towards next week’s auctions where the Treasury announced it will sell USD 46bln of 3-year on Tuesday, USD 29bln of 10-year on Wednesday, and USD 19bln of 30-year on Thursday; all three auction sizes were in line with expectations. Meanwhile, with many away on Friday, the session looks to be a dull one, with the addition of ugly liquidity conditions. US T-note futures (U0) settle 4+ ticks higher at 139-03.