• European bourses are marginally pressured while US futures tread water in quiet newsflow ahead of month-end; ES +0.2%
• ECB's Panetta says that current conditions do not justify reducing the pace of purchases, and a discussion about phasing out PEPP is premature
• Antipodeans remain the clear outperformers post-RBNZ while the USD has remained bid after EUR slipped on Panetta and JPY errs lower
• RBNZ stood pat on the OCR and LSAP as expected, but provided rate forecasts which suggested a 25bps hike in September 2022
• European governments are reportedly growing increasingly confident regarding a G7 tax accord; though Ireland has significant reservations
• Looking ahead, highlights include DoEs, Fed's Quarles and supply from the US

CORONAVIRUS UPDATE

Australia's Victoria state government reported that there were 10 new local cases yesterday and press reports noted concerns of a snap lockdown after a COVID-positive person was confirmed to have attended a match at the Melbourne Cricket Ground. (Newswires/The Australian)

ASIA

Asia-Pac stocks were mostly positive in what was a modest improvement from the subdued performance on Wall Street where most major indices posted marginal losses following mixed data releases, although the Nasdaq 100 bucked the trend amid resilience in tech and as softer yields helped stem downside in duration sensitive stocks. ASX 200 (-0.3%) was kept afloat for most of the session amid notable strength in tech and outperformance in gold miners after the precious metal reclaimed the USD 1900/oz level. Furthermore, the top-weighted financials were also higher as shares in big-4 leader CBA briefly topped AUD 100 for the first time, although gains in the broader marker were limited amid snap lockdown concerns in Victoria state which reported 10 new locally transmitted cases and after a COVID-positive person was confirmed to have attended a match at the Melbourne Cricket Ground. Nikkei 225 (+0.9%) traded positively amid reports that Japan's government is considering another cash handout program of up to JPY 100k for households in need, but with upside restricted amid expectations of state of emergency extensions and further calls for the cancellation of the Olympics, this time coming from an editorial by Asahi Shimbun press, which is an official partner of the Tokyo Olympics. Hang Seng (+0.6%) and Shanghai Comp. (+0.3%) held on to the spoils from the prior day’s outperformance where northbound flows into the Chinese mainland through the stock connect reached record levels. Focus was also on Xiaomi after it received the final US District Court ruling which removed its designation as a Communist Chinese Military Company and lifted all restrictions on the Co.'s shares, although this failed to boost its share price with participants awaiting its earnings results. Finally, 10yr JGBs were rangebound with upside restricted amid the mild positive risk tone and with the BoJ only in the market for treasury bills, while New Zealand 10yr yields gained around 8bps following the RBNZ rate hike projections.

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 6.4099 vs exp. 6.4139 (prev. 6.4283)

China's banking regulator has asked lenders to stop the sale of investment products which are linked to commodities futures to 'mom & pop' (retail) buyers, according to sources; asking banks to unwind their exposure to commodity linked investment products. (Newswires)

Xiaomi (1810 HK) received the final US District Court ruling which removes the Department of Defense designation regarding the Co. being a Communist Chinese Military Company. (Newswires)

BoJ's board member Suzuki said Japan's economy is picking up as a trend and is expected to recover, but the level of activity will remain low for the time being and noted uncertainty on the vaccine rollout which could weigh on economic activity. Furthermore, Suzuki stated the BoJ is ready to extend pandemic-relief measures beyond the current deadline and take additional easing steps if required, while he added that fewer market players anticipate the BoJ to reduce rates further which could be due to the impact on financial intermediation. (Newswires)

Japanese government has lowered its economic view and the view on consumer spending/business outlook amid the impact of COVID-19, according to an economic report. (Newswires)

Japanese ruling party official Yamamoto said Japan is likely to proceed with Olympics as scheduled without spectators and that holding Olympics is good for the economy, while he added that the government should compile an extra budget valued at JPY 26tln around October or November. Furthermore, Yamamoto said the BoJ must seek to weaken JPY further by boosting asset purchases and that it is making a mistake by stealth tapering of purchases as deflation remains a risk. (Newswires)

UK/EU

European governments are reportedly growing increasingly confident regarding a G7 tax accord, although other reports noted that Ireland has significant reservations concerning US President Biden's global corporate tax plan. (Twitter/AFP) On this, Irish Finance Minister Donohoe says they have significant reservations regarding a global minimum tax rate and predict their corporate tax rate will remain at 12.5% for many years. (Sky News)

ECB's Panetta says that the conditions that we see today do not justify reducing the pace of purchases, and a discussion about phasing out the PEPP is still clearly premature. Says, he has not seen changes in financing conditions or the economic outlook that would shift the inflation path upwards; financing conditions are tightening. In this environment, it is not surprising that we have also seen a persistent, non-negligible appreciation of the exchange rate, which – if sustained – would weaken inflationary pressures. (ECB)

GEOPOLITICAL

Russia's Kremlin advises against excessive expectations of progress at the summit between US President Biden and Russian President Putin; Russia does not expect to be able to find common ground on some issues after just one meeting. (Newswires)

IAEA Head says Iran is enriching uranium at purity levels which ‘only countries making bombs are reaching’, adding the situation is concerning. (FT)

US President Biden said Nord Stream 2 is continuing as it is almost finished and that sanctions now would be counterproductive, while he added that US sanctions against Belarus are in play although he won't speculate further about them. (Newswires)

US Secretary of State Blinken tweeted that he was very pleased to meet with Palestinian civilian society leaders and that they discussed the path forward and US commitment to working with regional leaders and the civil society to advance the freedom, security and prosperity of Palestinians. (Twitter)

Belarussian President Lukashenko says the ill-wishers have crossed red lines and abandoned common sense and morals. (Newswires)

EQUITIES

Major bourses in Europe kicked off the day with mild gains but have since drifted off best levels (Euro Stoxx 50 -0.2%) with the region now seeing a mild downside bias amid a light European morning in terms of data and news flow, and as month-end looms. US equity futures meanwhile hold onto modest gains, but the breadth of the price action remains narrow with no clear stand-out performers. Analysts at Barclays note that fatigue and inflation woes have seen investors trimming bullish bets over the last month. “Cyclical exposure has moderated, but Value has recovered its 2020 outflows, with buying of Financials, Energy and Materials outpacing Tech. Value is thus more consensus and prone to profit-taking but can still benefit from higher rates and momentum rebalancing, in our view.”, the bank says. Barclays also suggests that the correlations between the broader equity market vs cryptos and SPACs have been relatively lower, meaning little contagion in the bank’s view. “Overall, less complacency reduces correction risk, and investors have dry powder to keep buying on dips, which should support a further grind higher in equities.”, the analysts note. Back to Europe, cash bourses are trading either side of neutral while sectors have been tilting more towards a defensive bias as Personal Household Goods, Food & Beverages and Healthcare reside among the better performers. Travel & Leisure is the clear outperformer as sector heavyweight Flutter Entertainment (+2%) is underpinned by an upgrade at HSBC – note, Flutter accounts for over 1/5th of the sector. Banks and Basic resources meanwhile reside at the bottom of the pile amid the recent pullback in yields and as some base metal prices in Asia slumped. Tech also resides as laggards following its recent outperformance. In terms of individual movers, Marks & Spencer (+4.8%) is among the top gainers post-earnings as the group notes that its balance sheet has emerged stronger than expected and online sales doubled in the period. Meanwhile, Spire Healthcare (+24%) was bolstered as Ramsay Healthcare offered to purchase 100% of Spire for GBP 2.40/shr in a deal valued at around GBP 2bln. On the downside, Nordea (-0.6%) sees losses as its largest shareholder Sampo (-1.0%) offloaded 162mln shares to institutional investors.

EU Commission is demanding that Facebook (FB), Google (GOOG) and Twitter (TWTR) adjust their algorithms to stop the spread of disinformation online. (Newswires)

FX

NZD/AUD - The Kiwi was already taxiing in preparation for the RBNZ policy meeting, but took off in wake of the Bank signalling lift-off for the OCR at the end of Q3 next year and flagging the end of the LSAP remit by June 2022. Indeed, Nzd/Usd scaled the 0.7300 handle and Aud/Nzd cross retreated through 1.0650 even though the Aussie is holding gains vs the Greenback following firmer than forecast Q1 construction work completed that offset a dip in Westpac’s leading index for April. However, Aud/Usd ran into resistance just ahead of 0.7800 and will now be looking towards Q1 Capex and the breakdown for further impetus, while observing decent option expiry interest for the NY cut in the interim given 1.2 bn rolling off between 0.7750-40 and 1.1 bn from 0.7770-85.

USD/GBP/CHF/CAD/EUR/JPY - There may be an element of intraday or short term jobbing rather than strictly technical impulses behind the latest Buck bounce as the DXY managed to hold above 89.500 again and pare losses off a slightly higher low compared to Tuesday, but other factors have contributed, including the latest dovish interjection from the ECB. Indeed, GC member Panetta went further than his peers in a speech containing rationale for delaying any decision about unwinding the pace of QE in Q3 when he noted a non-negligible appreciation of the Euro exchange rate to knock the single currency back down below 1.2250. Predictably, the ensuing Dollar rebound that lifted the index to 89.794 at one stage, rippled across to the remaining basket constituents, with Cable off peaks circa 1.4172, Usd/Chf firmer around a 0.8950 axis post-more dovish remarks from SNB head Jordan, Usd/Cad towards the upper end of a 1.2043-82 range and Usd/Jpy in the high 108.00 area again as the Japanese Government downgrades its official view of the economy amidst further contagion from COVID-19.

SCANDI/EM/PM - Some payback for the Sek vs the Nok and Eur after an uptick in Sweden’s sa jobless rate and the Riksbank’s latest FSR revealing a brighter outlook, but risks to stability still deemed to be elevated. Conversely, the Nok may be deriving some underlying support from a mild bid in Brent and Q2 Norwegian oil investment forecasts showing increases in the current year and 2022, while the Cnh and Cny are going from strength to strength, partly on the back of a higher onshore fixing from the PBoC overnight (in fact the loftiest midpoint in almost 3 years) and the CSJ highlighting analyst predictions for more Yuan upside based on Usd weakness, China’s trade surplus and economic recovery. Elsewhere, the Try has regained a bit of composure after sliding to a fresh all time low near 8.4850 on Tuesday and the Zar continues to glow in the shadow of Gold that has topped Usd 1900/oz.

RBNZ maintained policy settings as expected with the OCR kept at 0.25% and both LSAP and Funding for Lending Programme were also left unchanged, although it provided rate forecasts which pointed to a 25bps hike in September 2022 and to 1.75% by June 2024. RBNZ stated that it will maintain stimulatory monetary settings until it is confident inflation and employment targets are achieved, while it added that domestic economic activity has returned to near pre-pandemic levels and that the medium-term outlook is similar to scenario presented in February, but they remain cautious due to ongoing virus-related restrictions to activity. In terms of forecasts, the RBNZ sees the OCR at 0.25% in September 2021, 0.31% in June 2022, 0.49% in September 2022 and 1.78% in June 2024, while Governor Orr stated at the press conference that he feels comfortable using the OCR projection as a guidance but noted that the projection will only occur if the economy pans out as expected and Deputy Governor Hawkesby also suggested the important message is that OCR is not forward guidance. (Newswires)

Notable FX Expiries, NY Cut:

• USD/JPY: 108.00 (1.1BLN), 108.25 (410M), 108.50-60 (611M), 108.80 (604M), 108.95-109.00 (410M), 109.25 (725M), 109.50 (1.1BLN)
• AUD/USD: 0.7740-50 (1.2BLN), 0.7770-85 (1.1BLN), 0.7820 (268M)
• EUR/GBP: 0.8600-15 (1.1BLN)

• Australian Westpac Leading Index (Apr) M/M 0.2% (Prev. 0.4%, Rev. 0.5%)
• Australian Construction Work Done (Q1) 2.4% vs. Exp. 2.2% (Prev. -0.9%)
• New Zealand Imports (Apr) 4.98B (Prev. 5.65B, Rev. 5.66B)
• New Zealand Exports (Apr) 5.37B (Prev. 5.68B, Rev. 5.69B)
• New Zealand Trade Balance (Apr) 388M (Prev. 33.0M, Rev. 39M)

Brazil's Economic Minister Guedes said we are looking at negative income tax and at a package of measures to address high unemployment. (Newswires)

FIXED

Almost déjà vu for Bunds, as a far from well received 15 year offering only prompted a fleeting dip in prices, like IFO yesterday, and the core Eurozone bond rapidly returns to winning ways alongside a grinding bid 1n debt peers. Indeed, having already breached chart resistance at 170.07, buyers/bulls are now aiming for 170.25 to the upside from a 170.17 Eurex high thus far, while Gilts have eclipsed the last high before their current May best, at 128.56 vs 128.80 set way back on the 7th and the 10 year T-note is gradually inching towards 133-00 again. Ahead, weekly US MBA mortgage apps, a double dose of supply and 2 scheduled appearances by Fed’s Quarles.

COMMODITIES

WTI and Brent front month futures have been choppy within relatively narrow bands with the former on either side of USD 66/bbl (65.81-66.43 range) and the latter around USD 69/bbl (68.44-69.17 range). Crude markets have been somewhat uneventful throughout the European morning after a relatively mixed Private Inventory report (Crude -0.44mln vs exp. -1.1mln), and ahead of the DoEs where the headline is forecast to draw 1.05mln bbls. Elsewhere, eyes remain on Iranian nuclear talks with the Iranian president recently noting that a common understanding has been found on some key points, but the US must take the first step - several officials hope for this to be the final round of talks. On this, Russian Deputy PM Novak hit the wires ahead of the June 1st JMMC/OPEC+ meeting, stating that the group will have to keep Iranian output growth in mind. Iran is currently exempt from the OPEC+ quotas amid US sanctions. Elsewhere, spot gold and silver remain buoyed by the recent Dollar, and yield declines. Spot gold reclaimed USD 1,900/oz status overnight (vs low 1,897/oz) before encountering a barrier at USD 1,910/oz in early European hours. Spot silver meanwhile surpassed USD 28/oz. Over to base metals, LME copper trades on a firmer footing and eclipsed USD 10,000/t to the upside, underpinned by reports that unions at BHP's Escondida mine rejected the labour offer, thus paving the way for strikes. The Escondida copper mine is currently the world’s largest copper mine by reserve. Overnight, steel rebar futures in Shanghai extended on losses, whilst Singapore and Dalian iron ore futures fell over 5% apiece after China's NDRC held a meeting with key enterprises in the steel industry.

US Private Energy Inventory Data (bbls): Crude -0.44mln (exp. -1.1mln), Cushing -1.15mln (exp. -1.4mln), Gasoline -1.99mln (exp. -0.6mln), Distillate -5.14mln (exp. -1.9mln). (Newswires)

Russian Deputy PM Novak says OPEC+ needs to take into account Iran's oil output growth; current oil market deficit seen at 1mln BPD. (Newswires)

Norwegian Oil Investment Forecast Current Year (Q2) 181.9B NO (Prev. 173.6B NO); next year (Q2) 142.8B NO (Prev. 138.5B NO)

Shanghai Futures Exchange Chairman said crude oil options will be listed June 21st which will be open to international traders. (Newswires)

Remote operations union at BHP (BHP AT) Spence and Escondida copper mines in Chile have rejected the labour contract offer. (Newswires)