• Asian equity markets were mixed after failing to sustain the early momentum from the constructive mood on Wall Street
• All major US indices finished higher amid a tech-led rebound. EU equity futures head into the open slightly firmer
• The DXY remains subdued beneath 90.00, EUR/USD and GBP/USD maintain 1.22 and 1.41 status respectively
• Israel and Hamas have agreed to a cease-fire on the Gaza Strip, commencing today
• US President Biden’s administration has proposed a global tax on multinational corporations of at least 15%
• Looking ahead, highlights include EZ, UK and US Flash PMIs, UK Retail Sales, Canadian Retail Sales, EZ Consumer confidence, Baker Hughes Rig Count, ECB’s Lagarde and de Guindos, Fed’s Kaplan, Bostic, Barking, and Daly, S&P on South Africa

CORONAVIRUS UPDATE

US is said to be considering prioritizing COVID-19 shipments to countries in its hemisphere and Pfizer is exporting millions of US-produced vaccine doses to Latin America, according to sources. (Newswires)

BioNTech (BNTX) CEO expects that its vaccine with Pfizer (PFE) will protect against infections of the India COVID-19 variant by 70-75%. (Newswires)

Ontario, Canada expects to permit outdoor gatherings of up to 10 people starting June 14th and is expected to permit limited outdoor dining, as well as non-essential retail at 15% capacity from June 14th although re-opening is contingent on vaccination rates and will be confirmed closer to the date. (Newswires)

EU member states and European Parliament have reportedly reached a deal on a COVID travel pass, according to AFP citing EU sources. It was separately reported that an EU official said drug makers are set to announce a commitment to supply a large number of vaccines to poorer countries at cost, or low cost on Friday. (Newswires/AFP)

Japan is to expand the state of emergency to include Okinawa from May 23rd-June 20th. (Newswires/Nikkei)

South Korea approved the Moderna (MRNA) COVID-19 vaccine, while it was also reported to maintain social distancing rules for another 3 weeks. (Newswires)

ASIA

Asian equity markets were mixed after failing to sustain the early momentum from the constructive mood on Wall Street, where all major indices finished higher amid a tech-led rebound and as concerns regarding future Fed taper discussions abated. ASX 200 (+0.1%) was initially lifted by outperformance in tech but then faltered due to weakness in the commodity-related sectors, in particular energy names, amid prospects of a return of Iranian oil supply following yesterday's comments from Iranian President Rouhani who suggested an agreement was reached in Vienna for world powers to lift all major sanctions although they are still discussing the final details. Nikkei 225 (+0.8%) took impetus from its US counterparts but with gains capped after soft CPI data and mixed COVID-related headlines including reports that Japan is said to be mulling extending the virus state of emergency in Tokyo and Osaka. Furthermore, Japan approved the Moderna and AstraZeneca COVID-19 vaccines today but may wait before administering the AstraZeneca vaccines due to blood clot concerns. Hang Seng (Unch.) and Shanghai Comp. (-0.5%) gave back early gains with underperformance in the mainland amid China’s ongoing frictions including with the EU after the latter voted to freeze its investment deal with China until Beijing lifts sanctions on EU officials, while MSCI also stated that it is to delete four more securities from the MSCI China All Shares Indexes at the close on June 9th if it doesn't receive OFAC guidance. Finally, 10yr JGBs eventually eked marginal gains as the risk momentum in Asia petered out although gains were limited with price action confined to within this week’s tight range of around 11 ticks and following mixed results at 20yr JGB auction.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.4300 vs exp. 6.4282 (prev. 6.4464)

• Japanese National CPI (Apr) Y/Y -0.4% vs. Exp. -0.5% (Prev. -0.2%)
• Japanese National CPI Ex. Fresh Food (Apr) Y/Y -0.1% vs. Exp. -0.2% (Prev. -0.1%)
• Japanese National CPI Ex. Fresh Food & Energy (Apr) Y/Y -0.2% vs. Exp. -0.1% (Prev. 0.3%)

Japanese CPI data showed cellphone fees declined 26.5% Y/Y in April, while Chief Cabinet Secretary Kato stated that without the effect of cheaper cellphone charges, consumer prices are moving stably. (Newswires)

South Korean May 1st-20th Trade Balance was at a deficit of USD 350mln, Exports rose 53.3% Y/Y and Imports rose 36.0% Y/Y. (Newswires)

UK/EU

• UK GfK Consumer Confidence (May) -9 vs. Exp. -12 (Prev. -15); highest since March 2020

FX

In FX markets, the DXY remained lacklustre overnight beneath the 90.00 level after having fully reversed the advances from the FOMC Minutes as the initial hawkish consensus surrounding the Minutes faded. The main argument for the reversal was that the meeting did not encompass the dismal jobs report for April and therefore, the recovery could be slower which would delay the start of taper discussions. Furthermore, the mixed data releases did little to spur the buck including a disappointing Philly Fed Business Index and although the Initial Jobless Claims were below forecasts, there was an increase in Continued Jobless Claimants. EUR/USD held on to its recent gains at the 1.2200 handle but with further upside restricted as the risk appetite soured overnight, while GBP/USD was off yesterday’s best levels after stalling just shy of the 1.4200 territory. USD/JPY was contained by the flimsy risk tone and soft CPI data which was attributed to the decline in cell phone charges, while antipodeans marginally pulled back overnight due to their high-beta statuses, subdued commodity prices and with stronger than expected Australian Retail Sales largely ignored.

• Australian Retail Sales (Apr P) M/M 1.1% vs. Exp. 0.5% (Prev. 1.3%)

COMMODITIES

Commodities were mostly subdued following recent losses and as the risk momentum waned overnight with WTI crude futures constrained as expectations of returning Iranian supply were stoked by recent comments from Iranian President Rouhani who suggested that an agreement in principle was reached in which world powers agreed to lift all major sanctions, while EnergyIntel also noted that Iran is preparing to hike oil exports to maximum capacity in the approaching months. Nonetheless, WTI crude futures are off the prior day's lows with support near the USD 62.00/bbl level. Gold prices were uneventful as the greenback traded sideways overnight and copper was pressured amid the underperformance in China but with losses stemmed by a floor around USD 4.50/lb.

OPEC internal briefing stated that IEA assessment to stop new oil and gas investments to reach net-zero, could be a source of oil market instability. (Newswires)

Iran is preparing to hike oil exports to maximum capacity in the approaching months, according to EnergyIntel's Bakr citing two Iranian sources. (Twitter)

NHC said there is a 20% chance of a cyclone in the next 48 hours for the system over the western Gulf of Mexico. (Newswires)

GEOPOLITICAL

Israel and Hamas began a truce overnight and a Hamas official later stated that the battle ends today but they still have their hands on the trigger, while they demand that Israel end the violations in Jerusalem including evictions and to address damages from the bombardment of Gaza. (Newswires)

US President Biden earlier stated that Israeli PM Netanyahu confirmed the ceasefire with Gaza and Biden also assured Netanyahu that the US will replenish Israel's iron dome defense system. Furthermore, US Secretary State of Blinken will meet with Israeli, Palestinian and regional counterparts as he travels to the region in the coming days. (Newswires)

US State Department senior official said the US saw 'meaningful progress' at the latest Iran talks although the official added that important differences remain which still need to be addressed, while the US position has always been prepared to lift sanctions inconsistent with the JCPOA and the benefits it provided but only in the context of a mutual return to compliance with the deal. (Newswires/Politico)

US

Treasuries bull-flattened to bring long-end yields to levels seen just prior to Wednesday's FOMC Minutes, as participants pared back the knee-jerk lower move to taper mentioning. 2s -0.8bps at 0.151%, 5s -4.7bps at 0.816%, 7s -5.2bps at 1.281%, 10s -4.9bps at 1.634%, 20s -4.9bps at 2.256%, 30s -4.4bps at 2.343%; TYM1 volumes were average. 5yr TIPS +10.1bps at -1.788%, 10yr TIPS +8.4bps at -0.823%, 30yr TIPS +4.6bps at 0.044%. The bid for bonds was part inflation-linked as commodity prices continued to pare from highs. Furthermore, as the dust settled from the FOMC Minutes, people re-digested the taper mentioning with some more caution given caveats that it is not a majority view and employment figures have not been as strong as required for Fed tightening. Performance in Europe for USTs was more mixed amid some continued bearish EGB flows. However, a mixed Philly Fed survey overshadowed a slightly better-than-forecast Initial Jobless Claims print, supporting further short-covering into the US session. There was also Fed support as it stepped into the long-end for its buyback operation today. Yields continued to fall into the futures settlement, with the cash 20s leading the charge after recent underperformance and supply now in the rear window, seeing yields pare all the move higher seen in wake of the Fed minutes. US sold USD 13bln of 10-year TIPS, tailing by 2.5bps. This is the first 10yr TIPS tail (2.5bps) in five auctions, or since July 2020 when the Fed was building its share in the TIPS market as its QE ramped up. However, the Fed is stepping back somewhat now, both in its allocation (of total purchases) to TIPS and potential QE tapering down the line, meanwhile, a slump in inflation expectations the last few days amid downside in commodities are likely weighing on the outlook for TIPS. T-note (M1) futures settled 14+ ticks higher at 132-15+.

US President Biden’s administration proposed a global tax on multinational corporations of at least 15% in the latest round of international tax negotiations which is a lower-than-expected offer as the US looks to reach a deal with countries that fear hiking their rates will deter investment. Furthermore, Treasury officials said their offer was met enthusiastically and characterized it as a pivotal moment in the negotiations which have dragged on for more than two years, while they reportedly view the 15% level as a floor and will continue to push for a higher rate. (NYT)

US President Biden directed US agencies to analyse and mitigate climate change risks to individuals, industry and government, while the Executive Order calls for a comprehensive climate risk strategy across the government within 120 days. Furthermore, the White House stated that the order will strengthen the US financial system and ensure rules are in place to mitigate climate risks, while it added that the order allows the Labor Department to reverse former President Trump's curbs on sustainable investing by pension funds and requires consideration of new rules for large federal suppliers to disclose climates risks, as well as greenhouse gas emissions. (Newswires)

White House adviser Rouse said now is not the time to pull-back fiscal support. (Newswires)