• European bourses are mixed/flat ahead of US CPI and the ECB while US futures are marginally diverging as the NQ modestly lags on firmer yields
• The USD is firmer with peers mixed but contained while fixed income modestly pares recent upside and the US 10yr yield back to 1.50%
• US and Chinese commerce chiefs reportedly agreed to push forward with trade and investment ties; supporting APAC trade
• A bipartisan House group unveiled an 8-year package valued at USD 1.25tln which would avoid corporate and income tax increases
• US House Budget Chairman Yarmuth said the bipartisan infrastructure deal looks unrealistic
• Looking ahead, highlights include ECB policy announcement & press conference with President Lagarde, US CPI & IJC, OPEC MOMR, BoE's Haldane, BoC's Lane, supply from the US

CORONAVIRUS

Moderna (MRNA) intends to expand manufacturing capabilities to potentially supply as much as 3bln doses of its COVID-19 vaccine next year. (Newswires/Washington Post)

The EU has opted not to order 100mln doses of Johnson & Johnson's (JNJ) COVID-19 vaccine that were an option under their supply contract, according to sources. (Newswires)

UK PM Johnson and US President Biden will vow to restart air travel between their countries as soon as possible. (Telegraph)

G7 draft communique will commit to paying for 1bln additional COVID-19 vaccine doses and call for a new study into the origins of the virus, while it will also call on Russia to crackdown on ransomware and cyber-attacks. Furthermore, G7 is to support common travel standards on testing and vaccines, while the document outlines the plan to end the COVID-19 pandemic by December next year. (Newswires)

ASIA

Asian equity markets traded higher as US-China dialogue helped the region shrug off the early cautiousness that had stemmed from the losses on Wall Street, although the gains in Asia were modest heading towards the US CPI data. ASX 200 (+0.5%) was lifted back above the 7,300 level and to within proximity of its record highs led by outperformance in the real estate and tech industries, with domestic banks also set to swoop in for the remaining AUD 64bln in low-cost funds from the RBA during the next 3 weeks before the Term Funding Facility expires. Nikkei 225 (+0.4%) was encouraged following the recent rebound in USD/JPY and with the government said to be mulling major economic stimulus as early as the summer prior to a snap election in September. Hang Seng (U/C) and Shanghai Comp. (+0.5%) were underpinned with the PBoC mulling additional support for small companies and following a call between US and China’s commerce chiefs in which they agreed to push forward with trade and investment ties, while it was also reported that President Biden revoked Trump-era executive orders to ban TikTok and WeChat but instructed the Commerce Department to conduct a broader evaluation on the security risk such foreign apps could pose for Americans and their data. Finally, 10yr JGBs were higher as they followed suit to the rally in global counterparts which resulted in the Japanese 10yr yield printing its lowest since early February, while the enhanced liquidity auction for longer-dated JGB also attracted a higher b/c than previous.

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 6.3972 vs exp. 6.3971 (prev. 6.3956)

Chinese New Yuan Loans* (May) 1500B vs. Exp. 1410.0B (Prev. 1470.0B)

• M2 Money Supply YY* (May) 8.3% vs. Exp. 8.1% (Prev. 8.1%)
• Outstanding Loan Growth* (May) 12.2% vs. Exp. 12.2% (Prev. 12.3%)

US and China commerce chiefs reportedly spoke over the phone regarding pragmatic solutions and are to manage differences properly, while they agreed to push forward with trade and investment ties. (Newswires)

China has passed a law to counter foreign sanctions, according to state media. (Newswires)

US President Biden is to use the G7 to encourage allies to take a tougher stance on China, while UK PM Johnson and US President Biden are set to concentrate on China in a new UK-US cooperation agreement. In relevant news, China is said to have hurried work on anti-sanctions legislation after US President Biden disappointed Beijing by continuing to take a tough stance, according to reports citing government advisers. (FT/SCMP)

PBoC Governor Yi said China's potential economic growth will slow and that an aging society will help curb inflation, while he sees China's CPI below 2% this year and expects China's GDP expansion to be close to potential growth rate. Governor Yi also stated that monetary policy should focus on impact from structural changes on prices and that they will stick with implementing normal monetary policy, as well as deepen interest rate market reforms. Furthermore, they will improve market-based floating exchange rate mechanism with reference to basket currencies, will keep CNY FX rate basically stable and noted that Chinese rates are at appropriate levels. (Newswires)

China Banking and Insurance Regulatory Commission Chairman said China will regulate online platforms, promote fair competition and speed up financial system restructuring. China's banking regulator also said some local real estate bubbles remain serious and debt service pressure is high on many government financing platforms, while default rate for large and medium enterprises has risen which exacerbates credit risks at financial institutions. (Newswires)

US

US House Budget Chairman Yarmuth says bipartisan infrastructure deal looks unrealistic, while it was earlier reported that a bipartisan House group unveiled an 8-year package valued at USD 1.25tln which would not raise corporate taxes nor income taxes. (Newswires)

US Senator Warren said cryptocurrencies need increased regulation and that Congress should conduct more hearing regarding crypto. In relevant news, Coinbase (COIN IS) is to increase the number of states where customers can borrow cash using Bitcoin as collateral, while eligible customer can now borrow as much as 40% of Bitcoin holdings in cash without having to sell their Bitcoin holdings. (Newswires)

US House Democrats are planning to introduce five bills as soon as this week to address the dominance of big tech companies. (Politico)

UK/EU

US President Biden reportedly accused the UK government of inflaming tensions in Ireland and Europe with its opposition checks at ports, while America's most senior diplomat in the UK Yael Lempert was to issue London with a demarche. (Times)

• UK RICS Housing Survey (May) 83 vs. Exp. 77.0 (Prev. 75.0, Rev. 76); highest since 1988.

German Election Poll: CDU/CSU 28 (+4), Green 22 (-3), SPD 15 (+1), AfD 11 (U/C), FDP 7 (U/C) and Linke 7 (U/C), via Forschungsgruppe (ZDF TV Poll) Survey period June 7th-9th capturing 1.2k respondents; the error range is 3pp for a 40% share and 2pp for a 10% share

GEOPOLITICAL

US President Biden stated the US will respond in a robust and meaningful way when Russia engages in harmful activities, while he added that US commitment to NATO is 'rock solid'. (Newswires)

US Pentagon is reportedly considering possibility of air strikes to support Afghan forces in the event that Kabul is in danger of falling to the Taliban, although no decisions have been made. (NYT)

EQUITIES

European equities see another mixed and directionless morning thus far (Euro Stoxx 50 -0.1%) as the tentative sentiment reverberated from the APAC session in the run-up to the ECB and US CPI/IJC figures. US equity futures are similarly mixed with some mild underperformance in the NQ as the US 10yr cash yield attempts to reclaim 1.50%. Back to Europe, the FTSE 100 (+0.3%) sees mild outperformance, and a weaker Sterling aids the exporter-heavy index. Sectors are also mixed and lack a particular bias or theme. Tech outperforms as the sector catches up to yesterday’s decline in yields. Basic Resources rebounds from yesterday’s underperformance, whilst Travel & Leisure, Autos, and Oil & Gas reside as the laggards. In terms of individual movers, BT (+2.8%) is bolstered on reports that Altice announced that it has acquired a 12.1% stake remarking that the Co. has a significant opportunity to upgrade and extend its full-fiber broadband network – in turn supporting the broader sector as it accounts for around 5.5% of the Stoxx 600 Telcom sector. Meanwhile, Daimler (-0.4%) trimmed some of its earlier losses after rejecting pre-market reports that it is looking to lower investments in autonomous driving.

United Airlines (UAL) is in discussions for a major single-aisle jet order that will be split between Airbus (AIR FP) and Boeing (BA), according to sources. (Newswires)

AT&T (T) unit entered into a USD 10bln term loan credit agreement; Tranche 1 commitments under bridge commitment letter of USD 31.5bln remains in effect; Tranche 2 commitments reduced to zero. (Newswires)

FX

NOK, SEK - A double whammy for the Norwegian Krona as oil prices pull back a bit further from their heady midweek peaks and core CPI comes in well below consensus to compound less pronounced misses on the headline front, with Eur/Nok hovering near the top of a 10.1420-10.0620 range in response. Moreover, Nok/Sek is back under parity even though Swedish inflation metrics also fell shy of expectations, albeit not to the same extent and as Eur/Sek remains anchored around 10.0700.

USD, EUR - The Dollar has regained some composure after its yield-related downturn on Wednesday as attention switches from US supply to CPI that is due for release alongside the latest jobless claims updates. Indeed, the DXY has reclaimed 90.000+ status and seems to be forming a base within a 90.128-281 range, though assisted by weakness several index components and facing external risk via the ECB and any major reaction in the Euro as the largest currency in the basket by individual weighting. On that very note, break-even pricing in options has risen ahead of the data and Central Bank event in similar vein for NFP last Friday to circa 53 pips, and this could confirm a break in Eur/Usd outside of the current 1.2181-53 range. However, expiries may also play a role today given a hefty number rolling off at the NY cut and spanning 1.2100 to 1.2210 – see 7.20BST post on the Headline Feed for details and for a preview of the ECB see the Research Suite.

GBP - Another G10 laggard, as Cable and Eur/Gbp continue to retrace from post-hawkish BoE Haldane highs and lows respectively. Market contacts noted stops on a break of 1.4080 in the former and presumably there were sell orders triggered prior to that when 1.4100 gave way, but for now more suspected to be sitting at or sub-1.4170 are unscathed. Meanwhile, the cross touched 0.8641 before fading and there is technical resistance above in the form of the 100 DMA that stands at 0.8651 today, while support could come from decent option expiry interest down at the 0.8600 strike (0.8600) barring any breakthrough on the NI Protocol stalemate between the UK and EU.

JPY, AUD, NZD, CAD, CHF - All narrowly mixed vs the Greenback, with the Yen hovering around 109.50 and also enshrined in layered option expiries beyond the current 109.68-45 band, from 108.95 all the way up to 110.00 – see Headline Feed at 7.20BST. Elsewhere, the Aussie hovering below 0.7750, Kiwi under 0.7200 and Loonie beneath 1.2100 before a speech from BoC’s Lane hot on the heels of yesterday’s holding policy convene. Meanwhile, Aud/Cad could be contained by option expiries at 0.9380 and 0.9450 in 1.2 bn and Nzd/Usd has NZ manufacturing PMI to look forward to after a slowdown in card spending, and the Franc is straddling 0.8960 in the run up to next week’s quarterly SNB policy review.

EM - Constructive talks on resolving differences and a pact to pursue trade and investment relations between Chinese and US heads of commerce have underpinned the Yuan, but the Lira and Rand are outperforming as the former pares more of its recent losses and the latter takes on board a much wider than forecast SA Q1 current account surplus.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.2100 (1.1BLN), 1.2140 (631M), 1.2170-80 (1.4BLN), 1.2185-90 (1.2BLN), 1.2200-10 (1BLN)
• EUR/GBP: 0.8600 (1.2BLN)
• AUD/CAD: 0.9380 (1.2BLN), 0.9450 (1.2BLN)
• USD/JPY: 108.95-109.10 (1.5BLN), 109.60-65 (2.4-BLN), 109.70-80 (1.1BLN), 110.00 (1.1BLN)

Swedish CPIF YY (May) 2.1% vs. Exp. 2.2% (Prev. 2.5%); MM (May) 0.2% vs. Exp. 0.4% (Prev. 0.3%)

• Ex Energy YY (May) 1.2% vs. Exp. 1.4% (Prev. 1.7%); MM (May) 0.2% vs. Exp. 0.4% (Prev. 0.2%)

Basel has proposed that banks set aside enough capital to cover any losses from Bitcoin in full; proposes capital treatment of stablecoins in-line with assets such as stocks/bonds. (Newswires)

FIXED

Bonds are now trying to contain losses rather than probe resistance as long positions are pared and intraday specs implement shorts for Thursday’s main events that start with the ECB’s policy pronouncements and proceed through top tier US data and the post-meeting press conference from President Lagarde. Bunds sit just above a 172.33 Eurex low (-23 ticks vs +12 ticks at best), Gilts a few ticks over 127.81 (-12 ticks compared to +22 ticks) and the 10 year T-note is hovering close to the base of its 132-27/20 overnight range. However, Eurozone periphery debt have arguably even more to lose if the GC fails to keep the PEPP rolling at the higher pace and the long end of the US curve still has Usd 24 bn 30 year refunding to make room for and absorb.

COMMODITIES

WTI and Brent front-month futures have nursed the losses seen during APAC hours, but overall sentiment remains indecisive heading into this week’s main events – which are likely to dictate much of price action today, ceteris paribus. Crude-specific news flow has remained light since the bearish DoEs yesterday – whilst the OPEC MOMR is poised for release today but will likely take a back seat given the more macro events. Turning to geopolitics, little news has come out in terms of JCPOA talks which are due to resume on Saturday, however, reports reaffirmed that the US and EU are set to take a united stance against Russia and China as the G7 gets underway. WTI Jul resides around the USD 70/bbl mark near session highs (vs low 69.29/bbl) while Brent Aug hovers around USD 72.25/bbl (vs low 71.50/bbl). Elsewhere, spot gold and silver drifted lower in early hours as the USD and yields clawed back some lost ground. Copper dipped on worries regarding Chinese price curbs in a continuation of the move seen after yesterday's Chinese PPI release. Meanwhile, Dalian iron ore futures saw mild gains overnight despite China's commodity crackdown with some traders citing supply woes.

Keystone XL Pipeline sponsor TC Energy said it is terminating the project after Canadian officials failed to persuade US President Biden to reverse his cancellation of the permit. (AP)