• European bourses exhibit indecisive and lacklustre trade; US equity futures are also uneventful
• DXY has waned off best levels but remains above 90.50, EUR/USD holds on to 1.21 status and GBP/USD reclaimed 1.4100
• EU regulators have opened a probe into Facebook (FB) marketplace; Facebook -1% pre-market
• Looking ahead, highlights include US and Canadian Jobs Reports, US Factory Orders, Fed’s Powell, ECB’s Lagarde, Villeroy, PBoC’s Yi Gang

CORONAVIRUS UPDATE

UK government refrained from opening up any more destinations for quarantine-free trips, while it moved Portugal from the green list to amber and seven countries were added to the red list. In relevant news, Public Health England said early data in England and Scotland suggested an increased risk of hospitalisation from the Indian variant than the UK variant. (Newswires/Mirror)

ASIA

Asian equity markets traded cautiously following the tech-led declines in the US and with sentiment constrained by US-China tensions, as well as the looming NFP jobs data. ASX 200 (+0.5%) was initially subdued with underperformance in the mining-related sectors after underlying metal prices suffered the ill-effects of a stronger dollar, although the index managed to recover helped by strength in healthcare and resilience in the top-weighted financials industry. Nikkei 225 (-0.4%) was dragged lower amid the early broad cautious tone and a predominantly firmer currency which overshadowed the better-than-expected Household Spending data for Japan that printed the largest Y/Y increase since comparable data was made available in 2001. Hang Seng (-0.3%) and Shanghai Comp. (+0.2%) initially declined amid ongoing frictions between the world’s two largest economies after US President Biden signed an order which expanded on the Trump investment ban and included 59 companies linked to China's military and surveillance technology, while there were also reports that China’s market regulator warned another eight sharing-economy companies regarding unclear prices which resulted in early heavy pressure for Meituan shares. However, Chinese markets gradually recovered, helped by easing of mainland money market rates and with China also proposing an appropriate reduction in stamp duty. Finally, 10yr JGBs were lower on spillover selling from T-notes after the strong data stateside and with some questions raised following the Fed’s recent plan to unwind its corporate bond holdings, while a lack of BoJ presence in the market today also contributed to the constrained demand for Japanese government bonds.

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 6.4072 vs exp. 6.4056 (prev. 6.3811)

China aims at using incremental steps to slow Yuan rise whilst avoiding drastic measures, sources state. (Newswires)

Hong Kong police have detained a democracy leader on the anniversary of the Tiananmen Square Incident, while other reports noted that Hong Kong are to deploy 7,000 police to prevent protests on the Tiananmen anniversary. (Newswires/AFP)

The RBI kept the Repurchase Rate and Reverse Repo Rate unchanged at 4.00% and 3.35%, as expected, through unanimous decision and maintained an accommodative stance which it will continue with as long as necessary. RBI Governor Das stated that April inflation brought with it some relief and policy elbow room but also noted that the second wave of the virus and restrictions posed upside risks for inflation. Furthermore, he announced the RBI will conduct another GSAP 1.0 operation of INR 400bln on June 17th and will undertake GSAP 2.0 in Q2 of fiscal 2021/22 with INR 1.2tln of GSAP to be conducted in Q2, while he also announced a INR 150bln on tap liquidity window for contact intensive sectors and INR 160bln special liquidity facility to assist MSMEs. (Newswires)

UK/EU

Irish Foreign Minister Coveney said the UK should align with the EU for Northern Ireland border checks to be relaxed. (Telegraph)

British officials are "cautiously optimistic" that a broad outline on a global taxation can be agreed on at the G7 finance summit on Friday and Saturday, according to sources. (FT) Note, this is in-fitting with recent commentary. Finance ministers are expected to announce an agreement in principle over the weekend.

EQUITIES

Major bourses in Europe exhibit the same indecisive and lacklustre trade seen throughout most of the week in the run-up to the US jobs report (full preview available in the Newsquawk Research Suite), with US equity futures trading sideways in the absence of any fresh catalysts. From a macro perspective, the noise surrounding the possible start of taper discussions has grown over the week, especially after the Fed opted to end its Secondary Market Corporate Credit Facility - which although was not meant to be seen as a broader unwind signal - has riled up conversations about what lies ahead at the bank. Further, Fed’s Harker (2023 voter), Rosengren (2022 voter), and Kaplan (2023 voter) all hinted at the possibility of beginning to talking about the taper plan as soon as this month (meeting on June 15-16), albeit the more influential members have yet to come on board. Back to European trade, some mild underperformance can be seen in Spain’s IBEX (-0.5%) as its heavy-weighted Travel & Leisure sector sees headwinds from the UK’s latest travel list revisions which reminds us of the threats to the tourism-dependent countries going ahead. The overall breadth of the market remains narrow, but the UK’s FTSE 100 (-0.2%) also errs lower due to the overnight losses across base metals coupled with a modestly firmer Sterling. Sectors are mixed with no overarching theme nor bias, and again with a narrow breath. In terms of individual movers, Vivendi (-0.4%) is softer despite confirming that Pershing Square SPAC is to acquire 10% of Universal Music Group for around USD 4bln, representing an enterprise value of EUR 35bln. Meanwhile, NN Group (+0.2%) failed to garner much traction from source reports that its asset management unit valued at EUR 1.5bln has reportedly drawn interest from UBS, Allianz, Generali, and DWS.

EU regulators have opened a probe into Facebook (FB) marketplace, and will investigate whether data advertising breached EU rules. (Newswires) FB -1.1% pre-market

German Competition Authority has launched a probe against Alphabet's Google (GOOG) News showcase. (Newswires) GOOG -0.3% pre-market

Tesla (TSLA) is reportedly looking at bringing Model 3 cars to India by July/August for testing; back-end work is underway for sales before end-2021, according to CNBC TV 18. (Newswires) TSLA +1.2% pre-market

FX

USD - The Dollar is mixed vs major counterparts, but maintaining recovery momentum after extending gains in wake of yesterday’s largely supportive US releases (ADP, final Markit services/composite PMIs and several elements of the non-manufacturing ISM), and now looking towards NFP for further validation or another fall from grace if the headline number disappoints again. The index made a firm break above 90.000 on Wednesday and is now forming a solid base around 90.500 between 90.629-464 parameters awaiting the BLS report, while also keeping eyes on technical levels and some hefty option expiries in G10 pairings that might curtail price action ahead of 13.30BST if not the actual NY cut itself.

GBP/JPY/AUD/NZD - Sterling caught a bid even before a firmer than expected UK construction PMI, lifting Cable back above the 1.4100 mark to touch the 21 DMA (circa 1.4132 today) and the move seemed to be Eur/Gbp cross related as it reversed through 0.8600 to retest a low congestion zone from 0.8578 to 0.8575. Meanwhile, the Yen has pared some loses from a virtual double bottom in wake of considerably better than forecast Japanese household spending data, though not quite to the extent of threatening option expiry interest starting at the 110.00 strike and reaching 109.90 in 1.4 bn. Similarly, the Aussie and Kiwi have regained a bit of poise to trade back above 0.7650 and around 0.7150 respectively, and with the former flanked by big option expiries at 0.7730-50 (1.8 bn) and 0.7780-0.7800 (2.3 bn).

EUR/CHF/CAD/NOK/SEK - G10 laggards, albeit marginally, as the Euro strives to keep hold of the 1.2100 handle amidst mixed Eurozone construction PMIs and a retail sales miss, though also looks enshrined and liable to have its direction defined by expiry interest covering a large part of the expanse from 1.2100 to 1.2200. Indeed, 1.4 bn resided between 1.2100-10, 1 bn at 1.2150, 1.2 bn from 1.2170-75 and 1.1 bn at 1.2200. Elsewhere, the Franc is still striving to contain the downside beneath 0.9050, but remains firmer against the Euro near 1.0950 vs 1.1000 earlier this week, while the Loonie is trading defensively under 1.2100 irrespective of ongoing strength in crude ahead of Canada’s payrolls showdown with the US. Turning to Scandinavia, the Swedish Crown is holding around 10.1000 vs the Euro following a solid Q1 current account surplus, but the Norwegian Krona is lagging sub-10.1700 after mixed revisions to core inflation and growth estimates from Stats Norway for 2021 and next year.

EM/PM - More verbal and physical intervention to curb Yuan via a lower Cny fix by the PBoC and reports flagging incremental steps rather than drastic measure to this effect, while the Indian Rupee has been volatile in wake of the RBI matching market expectations on rates by keeping benchmarks unchanged, but subsequently unveiling further QE. Meanwhile, some much needed respite for the Turkish Lira even though the CBRT indicates that lockdown may have capped inflation in some sectors as a mitigating factor behind the weaker than anticipated May CPI prints, but the SA Rand is tracking the broadly weaker trend vs the Dollar as Eskom’s load-shedding rumbles on and Gold retreats deeper below Usd 1900/oz.

Major FX expiry options for today's NY cut:

• EUR/USD: 1.2050 (477M), 1.2100-10 (1.4BLN), 1.2120-30 (684M), 1.2150 (1BLN), 1.2170-75 (1.2BLN), 1.2200 (1.1BLN)
• AUD/USD: 0.7600 (392M), 0.7660-75 (422M), 0.7700 (236M), 0.7730-50 (1.8BLN), 0.7780-0.7800 (2.3BLN)
• USD/JPY: 109.90-110.00 (1.4BLN), 110.20-25 (580M), 110.40-50 (612M)

FIXED INCOME

In many ways the lack of clarity in terms of direction and real conviction behind the choppy price action can be attributed to normal pre-NFP trade, but the mild underperformance in Gilts could be assigned to the stronger UK construction PMI compared to consensus, pervious and corresponding Eurozone readings. Hence, following a firmer rebound alongside Bunds, the 10 year bond retreated to a deeper Liffe base to extend the early range by a few ticks either side at 126.74-91 vs the 126.87 prior close, while the core EZ debt future remains above par within 171.64-41 confines and US Treasuries are essentially idling before the headline event that coincides with the Canadian labour report and precedes US factory orders alongside Ivey PMIs.

COMMODITIES

WTI and Brent front month futures err higher in early European trade but remain within recent ranges, with WTI Jul just north of USD 69/bbl (68.33-69.26 range), whilst Brent Aug hovers above USD 71.50 (70.73-71.76 range). Participants will be looking ahead to the US jobs release for influence on the crude complex, with scheduled oil-specific events/data for the week out of the way, barring the Baker Hughes Rig Count. Meanwhile, the week ahead sees the release of the EIA STEO followed by the OPEC and IEA MOMR towards the latter part of the week. However, these releases are unlikely to provide much colour given the fluidity of energy fundamentals and OPEC+ holding monthly meetings. Elsewhere spot gold and silver remain on standby for the key data release, with the former around its 21 DMA (1,870/oz) ahead of the 200 DMA at 1,840/oz, whilst spot silver consolidates in the low USD 28/oz levels. LME copper has clambered off worst levels but remains sub-USD 10,000/t as it moved in sympathy to the losses seen in Shanghai futures as US-Sino relations remain sour despite the recent constructive engagement. Overnight, Chinese steel rebar futures logged in its first weekly gain in four, with some citing off-peak season demand as a factor.

Russian Deputy PM Novak says that Russian compliance to the OPEC+ deal last month was much better than in April. (Newswires)

Shell's Deer Park, Texas refinery (340k bpd) reported unauthorized discharge into Patrick's Bayou, while an onsite response team was assessing the situation and will take appropriate action to mitigate the discharge. (Newswires)