• European bourses remain caged amid a lack of catalysts; US equity futures are similarly flat
• DXY reclaimed 90.00, EUR/USD lost 1.22 status and GBP/USD sits sub-1.4150
• Brent crude futures reclaimed USD 71/bbl whilst Iranian nuclear parties talks are adjourned for at least a week
• Looking ahead, highlights include US Private Inventories, ECB’s Lagarde, Weidmann, Fed’s Harker, Evans, Bostic, Kaplan, Kashkari

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 (+1.1%) 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 (+0.5%) 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)

G7 leaders are said to be planning to back Japan's efforts to stage Olympics and Paralympics in a joint statement to be released later this month. (Kyodo)

• 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%)

CENTRAL BANKS

ECB's Knot said that the European recovery appears to be going faster than expected and a sustainable recovery is only possibly if COVID-19 is contained on a global scale. (Newswires)

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)

RBA Deputy Governor Debelle does not expect wage growth to be high enough until 2024. (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)

US

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

GEOPOLITICS

Iranian nuclear talk parties will hold a meeting today to wrap up the latest round of talks before adjourning for at least a week. Iranian President Rouhani says nuclear deal talks are progressing and key issues with the US have been resolved. (Newswires/Twitter)

UK/EU

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. UK will present their Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) plan to parliament before starting negotiations. (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)

EQUITIES

European bourses thus far have been inspired, with flat and caged trade seen across the board (Euro Stoxx 50 Unch), with the European calendar on the light side and news flow also quiet. US equity futures have also been trading horizontally ahead of a slew of Fed speakers later today, and Friday's looming US jobs report also likely prompting trader to keep some dry powder. Back to Europe, sectors are mostly firmer but do not portray a particular theme nor bias, whilst the breadth of the market also remains narrow. Oil & Gas modestly outperform following the post-OPEC+ gains across the crude complex, whilst there is little to report regarding the other sectors. In terms of individual movers, Volvo (+3.4%) resides near the top of the pack after Co's board has proposed a SEK 9.5/shr share distribution of the proceeds, corresponding to around SEK 19bln, from the sale of UD Trucks. Lufthansa (+2.2%) is firmer alongside source reports that Germany is said to be taking part in a Lufthansa capital raise. Alstom shares (Unch) gave up gains seen at the open as shareholder Bouygues (+0.3%) offloaded 11ml Alstom shares at EUR 45.35/shr.

Tesla (TSLA) is to recall 5,974 Model 3 and Y in the US, due to potential problems with brake caliper bolts, according to a NHTSA filing. (Newswires)

FX

USD - The Greenback continues to grind higher having formed a base or at least finding underlying bids on Tuesday to bounce off post-Memorial Day lows, and has now probed 90.000 to the upside in DXY terms amidst a broad if not all round recovery vs major counterparts. The Buck appears to have overcome initial disappointment with elements of the manufacturing ISM, while also taking comfort from the failure of other currencies to maintain momentum and breach key resistance or psychological levels when it was floundering. Moreover, the Dollar may be benefiting from some short covering ahead of another raft of Fed speakers flanking the Beige Book for June’s FOMC meeting as the index hovers between 90.193-89.856 parameters vs yesterday’s 89.941-662 session range.

TRY - Scant respite for the Lira, though it has clambered off extreme and fresh all time lows circa 8.7775 hit on the back of latest attempts by Turkish President Erdogan to steer CBRT monetary policy towards lower rates. In short, he met with the Governor and reiterated that the country needs to ease in order to bring down inflation in typically unorthodox fashion, and Usd/Try is now trying to regain composure, but failing to get near 8.5000 again.

AUD/JPY/NZD/CHF - The high betas and low yielders are conceding most ground to the Greenback as the pendulum changes direction and Aussie loses traction around 0.7750, Kiwi retreats through 0.7250, Yen succumbs to stop-sales beyond 109.70 and Franc slips back below 0.9000. Note, Aud/Usd was only briefly uplifted by firmer than forecast Q1 GDP data as the good news was countered by a week long extension to lockdown in Melbourne, while upbeat comments from the RBA’s Head of Economic Analysis, jones were tinged with caution, but the headline pair may still be drawn to decent option expiry interest between 0.7740-50 (1.3 bn) even though RBA Deputy Governor Debelle is adamant that wage growth will not be strong enough to boost overall inflation until 2024. Meanwhile, NZ Q1 terms of trade were mixed and Head of Financial Markets at the RBNZ, Raynor, stated that the balance sheet is likely to be enlarged for a long time, and BoJ Board member Adachi chimed with the usual dovish script that further easing must be implanted without hesitation if an external shock puts large downside pressure on the economy.

EUR/GBP/CAD - Stops also contributed to the Euro’s downfall with market contacts noting sell orders at 1.2200, but the headline pair has held around recent lows in the 1.2170-80 region with ongoing support from the Eur/Gbp cross that remains elevated on the 0.8600 handle, as Sterling slips further from yesterday’s new multi-year highs vs the Buck around 1.4250 to pivot 1.4150 and hover mostly below. Conversely, the Loonie continues to outperform above 1.2100 against the backdrop of lofty crude and awaiting Canadian building permits for further direction before Friday’s face-off with the US on employment.

EM - More load-shedding announced by SA’s Eskom and a retreat through Usd 1900/oz in Gold has taken the shine off the Zar, while the Brl may lose a bit of its vigour as Brazilian IPC-Fipe inflation slowed fractionally in May and the Rub will be taking on board commentary from CBR Governor who said US sanctions are a persistent risk for Russia and ‘de-dollarization’ is part of a wide policy to control foreign currency risks, adding that digital currencies are the future for Russia's financial system.

FIXED INCOME

Core bonds remain bid and close to new intraday highs of 170.14, 127.09 and 131-27+ for Bunds, Gilts and the 10 year T-note respectively, but the peaks fall just shy of Tuesday’s session pinnacles and best levels reached recently, as the 2nd tranche of DMO issuance still poses a supply risk even if the 2031 tap was pretty well received compared to a tepid German Bobl sale. Also ahead, another busy line-up on the global Central Bank speaker front, weekly US mortgage apps and Redbook updates before the Beige Book and API crude/product inventories.

COMMODITIES

WTI and Brent front month futures see modest gains, but the benchmarks have eclipsed overnight ranges – with the former just north of USD 68/bbl (67.78-68.48 range) and the latter testing USD 71/bbl (vs 70.35 low) at the time of writing. OPEC+ saw a swift meeting yesterday with quotas through to July maintained as expected, whilst the producers also reiterated a proactive stance against the backdrop of the Iranian JCPOA talks, which are poised to resume next week after a wrap-up meeting later today – with the Iranian President also noting that talks are progressing well. OPEC+ refrained from giving guidance past July, given the fluidity of the supply/demand situation. Analysts at ING have maintained the view that ICE Brent will average USD 70/bbl over the second half of this year. As a reminder, the weekly Private Inventory data will be released later today due to the US Memorial Day holiday on Monday. Meanwhile on the geopolitical front, Iran's largest warship caught on fire and sunk in the Gulf of Oman, with the circumstances currently unclear. This situation is one to keep on the radar, given that the Gulf of Oman is the mouth of the Strait of Hormuz chokepoint. Elsewhere, precious metals are mildly pressured by the recent Dollar strength, although some losses are cushioned as yields remain stable following a modest pullback from yesterday's best levels. Spot gold and silver trade within narrow parameters under USD 1,900/oz and USD 28/oz respectively. Over to base metals, LME copper is subdued but holds onto its USD 10,000/t status, with the red metal facing headwinds from the firmer Buck alongside continuing operations at BHP's Chilean copper mines despite strike action. Meanwhile, Dalian iron ore and coking coal futures saw another session of gains as traders continue to cheer the relaxation of restrictions at the top steelmaking Chinese city of Tangshan.