• Asian equity markets traded mixed following a similar indecisive performance in the US where the mood was tentative
• DXY remains below 90.0, EUR/USD maintains 1.22 status and GBP/USD sits sub-1.42
• Brent crude futures settled above USD 70/bbl yesterday for the first time since May 2019
• Looking ahead, highlights include German Retail Sales, US Private Inventories, RBA’s Debelle, Bullock, ECB’s Elderson, Lagarde, Fed’s Harker, Evans, Bostic, Kaplan, Kashkari, supply from the UK and Germany

CORONAVIRUS UPDATE

Moderna (MRNA) announced an agreement with Thermo Fisher (TMO) for fill/finish manufacturing of Moderna's COVID vaccine, with the deal to support the manufacturing of hundreds of millions of doses of the vaccine. (Newswires)

UK reported its first day of no COVID-related deaths since the beginning of the pandemic although Downing Street insisted that it was too soon to commit regarding the final stage of the lockdown exit road map on June 21st. In relevant news, UK ministers are reportedly preparing to include several destinations to the government’s “green list” for places to travel this week in what will be a limited expansion of the green list which could include Malta, as well as the Balearic and Canary Islands. (FT)

Australia's Victoria state acting Premier announced the extension of the lockdown in Melbourne for another week from Thursday night. (Newswires)

Hong Kong lowered the eligible age regarding the BioNTech (BNTX) COVID-19 vaccine to 12-years old. (Newswires)

ASIA

Asian equity markets traded mixed following a similar indecisive performance in the US where the mood was kept tentative on return from the extended weekend alongside mixed data releases and as this week’s key event remained on the horizon with the NFP jobs data on Friday. ASX 200 (+1.0%) was led higher by outperformance in the energy sector after recent upside in oil prices and with better-than-expected GDP data for Q1 contributing to the tailwinds, although participants also digested confirmation of the one-week lockdown extension to Australia’s second most populated city of Melbourne. Nikkei 225 (+0.4%) briefly reclaimed the 29k level, helped by favourable currency flows and after recent comments by BoJ board member Adachi who stuck to the dovish message in which he suggested to be ready for a long battle to reach the 2% price goal and that the BoJ must ease further without hesitation if an external shock places large downward pressure on the economy. Elsewhere, Hang Seng (-0.6%) and Shanghai Comp. (-0.8%) were lacklustre amid mixed US-China headlines including a call between US Treasury Secretary Yellen and Chinese Vice Premier Liu He where they agreed bilateral ties between the two countries are very important and expressed a willingness to maintain communication, although there was also a recent US congressional advisory report that alleged the US Commerce Department is failing to do its part to protect national security and keep sensitive technology out of the hands of China's military. Finally, 10yr JGBs were flat as price action was contained by resistance at the 151.50 level and with demand sapped due to the positive mood in Japanese stocks, although downside was also limited with the BoJ present in the market for over JPY 1.1tln of JGBs ranging from 1yr-5yr and 10yr-25yr maturities.

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 6.3773 vs exp. 6.3792 (prev. 6.3572)

Chinese Vice Premier Liu He held discussions with US Treasury Secretary Yellen in which they agreed US-China ties are very important and expressed a willingness to maintain communication. It was also reported that Treasury Secretary Yellen discussed the Biden administration's plan to support a strong economic recovery and discussed the importance of cooperating on areas of US interests, as well as frankly tackling issues of concern, while Yellen said she looked forward to future talks with Liu. (Newswires/Xinhua)

US Commerce Department is reportedly failing to do its part to protect national security and keep sensitive technology out of the hands of China's military, according to a US congressional advisory report. (Newswires)

UK/EU

BoE's Cunliffe said house price inflation is something we are watching very carefully and what we are seeing in the housing market is a result of the stamp duty holiday. (Newswires)

UK government was warned by business associations, consumer rights groups and unions that post-Brexit trade deals must prioritize high-quality British jobs and the groups have set a framework of objectives they want ministers to agree on prior to signing deals. (Telegraph)

Japanese Economy Minister Nishimura said that TPP members have agreed to launch the process for the UK to join the TPP. (Newswires)

EU negotiators agreed on rules to force multinational companies to publicly disclose where they book profits and pay tax in the EU as part of efforts to crackdown on tax avoidance. (FT)

• UK BRC Shop Price Index (May) Y/Y -0.6% (Prev. -1.3%)

FX

In FX, the DXY consolidated beneath the 90.00 level after mixed data releases. The latest Fed rhetoric did little to sway the currency as Fed's Brainard reiterated that we are far from goals but are seeing welcome progress and noted that 'remaining steady' will help ensure economic momentum is not reduced by premature tightening. EUR/USD was steady at the 1.2200 handle with price action contained within yesterday’s tight range of less than 45 pips, and GBP/USD languished after its recent aggressive pullback from 3yr highs to below 1.4200, whilst BoE policymakers continue to flag concerns over the housing market. USD/JPY and JPY-crosses were higher amid the constructive risk tone in Japan and antipodeans kept afloat following better-than-expected Australian GDP data, although the biggest move came from the EM space whereby TRY weakened to a record low against the USD after comments from Turkish President Erdogan said that Turkey needs to lower interest rates, although the majority of the reaction in the currency has since been reversed.

Turkish President Erdogan said that Turkey needs to lower interest rates to slow inflation and that he spoke to the central bank governor on Tuesday. Erdogan also commented that the country will announce good news regarding Black Sea natural gas reserves on Friday, while he also hopes to widen cooperation with Egypt and Gulf countries to maximum level (Newswires)

RBA's Head of Economic Analysis Jones said there are reasons to hope that the pandemic will not cause much economic scarring for Australia but added it is premature to completely rule out the possibility of an overhang of cautious behaviour by households and firms. Furthermore, Jones said he is encouraged economic activity snapped back after COVID restrictions were lifted and suggested that many households and balance sheets are healthier than prior to the pandemic, while he added that the optimistic scenario is consistent with the surprising strength of the recovery so far. (Newswires)

RBNZ Head of Financial Markets Rayner said the balance sheet will remain large for a long time and the decision to reduce it will be up to the MPC, while she added that they are reviewing foreign reserves management framework. (Newswires)

Russian Central Bank Governor Nabiullina said US sanctions are a persistent risk for Russia and that "de-dollarization" is part of a wide policy to control foreign currency risks, while she added that digital currencies are the future for Russia's financial system. (Newswires)

South Africa's Eskom said Stage 2 load shedding will be implemented from 10:00 on Wednesday morning until 22:00 on June 4th. (Newswires)

• Australian Real GDP QQ SA (Q1) 1.8% vs. Exp. 1.6% (Prev. 3.1%)
• Australian Real GDP YY SA (Q1) 1.1% vs. Exp. 0.7% (Prev. -1.1%, Rev. -1.0%)

COMMODITIES

Commodities were mixed with WTI crude futures kept afloat slightly beneath the USD 68.00/bbl level and with Brent crude above the USD 70.00/bbl after having recently printed its best levels in more than two years following a swift OPEC+ meeting where producers stuck to the existing plan to gradually hike production through to July, refrained from discussing output beyond July, and will continue to meet monthly until its agreement expires. There were also comments from the Saudi Energy Minister that oil demand in China, US and Europe have shown signs of improvement but added there are still clouds on the horizon and that OPEC+ should take proactive measures to balance the oil market, while focus shifts to the holiday-delayed inventory reports beginning with the private sector data later today. Elsewhere, gold prices saw marginal losses after prices trickled back below the psychological USD 1900/oz level which has acted as resistance overnight, while copper prices were mildly pressured in tandem with the underperformance in its largest purchaser China.

Kuwait Oil Minister stated that Kuwait is fully committed to OPEC decisions and that the oil market will be able to absorb the gradual output increase decided by OPEC+ that began last May. (KUNA)

Russian Deputy PM Novak said it sees risks of high uncertainty in the oil market and said oil inventories are set to reach the 5yr average already in June, while the Industry Ministry stated that Russia mulls adding metals to state reserves. (Newswires/Interfax)

US has issued a general license authorising transactions involving Venezuela's PDVSA needed to maintain or wind down operations in Venezuela for Chevron (CVX) and other companies. (Newswires)

India gold imports in May surged 823% Y/Y to 12 tonnes, according to a government source. (Newswires)

US

Treasuries bear-steepened amid commodity strength and returning US/UK players, although close off worst levels as stocks faltered and oil prices faded somewhat. By settlement, 2s +0.2bps at 0.147%, 5s +0.9bps at 0.809%, 7s +1.6bps at 1.278%, 10s +2.3bps at 1.616%, 20s +3.5bps at 2.223%, 30s +2.9bps at 2.300%. TYU1 volumes were average. 5yr TIPS -1.5bps at -1.819%, 10yr TIPS -1.2bps at -0.861%, 30yr TIPS -0.3bps at -0.049%. SOFR unchanged at 1bp, although EFFR fell to 5bps from 6bps, but note that this is most likely a result of month-end factors, with historic trends suggestive of the rate rising back in the coming sessions - although noteworthy if it does not. Bonds were on the back foot on decent volume out of the catalyst-lite APAC session: the RBA affirmed its dovishness, while Chinese Caixin Manufacturing PMI for May was fractionally better than expected. A break out higher in crude benchmarks from multi-month ranges supported the inflationary impulse. T-Notes were choppy and rangebound as European trade got underway however, failing to pare losses to the same extent as German Bunds were - some taper-friendly reiterations from Fed's Bullard (2022 voter) in the FT provided some headwinds for Treasury bulls, and perhaps some fresh long bond short recommendations from Goldman's strats. The morning loss-pairing in EGBs came despite Eurozone inflation and PMIs printing slightly better than expected, with desks also cognizant of heavy roll activity in the German contracts amid the return of US/EU players from the long weekend. T-Notes (U1) danced between a range of 131-20 to 131-25 for most of the session. Yields failed to find any meaningful impulses after the slightly better than expected US May Manufacturing ISMs, with attention very much looking ahead to Friday's jobs report. But, perhaps the fall in the Employment and Prices Paid sub-indices in the ISMs encouraged bidders to bring Treasury prices off their lows into the afternoon, seeing T-Notes break above 131-25, a chunky pare back off highs in the oil benchmarks likely played their part too. T-note (U1) futures settled 4+ ticks lower at 131-25+.

Fed's Brainard (voter) said we are far from goals but are seeing welcome progress and she expects 'further progress' towards Fed goals in coming months, while she added that the best way to achieve Fed's goals is to remain steady and clear in their approach, and alert to changing conditions. Brainard noted that 'remaining steady' will help ensure economic momentum is not reduced by premature tightening as tailwinds shift to headwinds next year and she will be monitoring inflation data over the next several months on a variety of measures. Furthermore, she noted that "sustained" inflation at 2% is the Fed's goal and that the aim of Fed's asset purchases is to put downward pressure on longer-term rates with the composition of asset purchases chosen to provide certainty to markets and added that the existing composition is providing accommodation effectively. (Newswires)

US President Biden will meet with Republican Senator Capito regarding infrastructure today at 14:45EDT. (Newswires)