• European bourses began tentative but have picked up modestly as the session progressed, while US futures pivot the U/C mark
• Basic resource names outperform given base metals overnight while banks lag on the ongoing yield pullback and crude remains supported
• DXY remains bid but off the weekly high with peers lower across the G10 board but magnitudes relatively slim
• UK PM Johnson is said to mull a four-week postponement before ending COVID-19 restrictions
• US bipartisan group of Senators reached an agreement on infrastructure which will be fully paid for and does not include tax hikes
• Looking ahead, highlights include the University of Michigan Prelim. and the G7 Summit

CORONAVIRUS UPDATE

Pfizer (PFE) CEO said the COVID-19 vaccine protects against all variants so far, while other reports noted that China's Sinovac and India's Covaxin vaccines were said to be more effective on the Delta strain of COVID-19. (Newswires)

UK PM Johnson is said to mull a four-week postponement before ending COVID-19 restrictions, with ministers considering such a delay to provide business with certainty and give more time for second vaccinations. In other news, PM Johnson's spokesman said the UK and US are keen to get travel up and running as soon as possible but when it is safe to do so. (Newswires/The Times)

UK Vaccine Minister Zahawi says Pfizer (PFE) COVID-19 vaccine supplies will be tight over the next few weeks. (Newswires)

UK said G7 is to provide 1bln vaccine doses to the world by end-2022, while the US said it would donate 500mln doses to 92 poor and lower-middle-income nations and UK is to donate at least 100mln surplus doses within the next year. (Newswires/AFP)

EU countries have cleared a plan to ease travel restrictions over the summer period, according to a diplomat. (Newswires)

ASIA

Asian equity markets traded mixed as the region only partially benefitted from the momentum in the US where the Nasdaq outperformed, and the S&P 500 posted fresh record highs after a dovish ECB more than offset the hot US CPI print to pressure yields, which was conducive for risk appetite. ASX 200 (+0.1%) just about kept afloat with outperformance in gold miners and tech counterbalanced by losses in the largest-weighted financials sector and with a non-committal tone heading into the extended weekend. Nikkei 225 (U/C) mirrored the tentative mood in the domestic currency despite reports Japan is considering lifting the COVID emergency for Tokyo on June 20th and with Toshiba shares pressured on allegations the Co. and government officials had previously conspired to lean on foreign investors to back company management in a key vote, while the KOSPI (+0.8%) was underpinned following the early trade figures which showed Exports rising 40.9% Y/Y during the first ten days of June. Hang Seng (+0.4%) and Shanghai Comp. (-0.6%) were varied with participants tentative before the long weekend due to the Dragon Boat Festival across Greater China on Monday, and after China passed the legislation to counter foreign sanctions. IPO newsflow was also in the spotlight after China’s largest ride-hailing company Didi filed for a US listing which is expected to be the world’s largest IPO in 2021. However, this failed to significantly boost key stakeholders SoftBank (21.5% stake) and Tencent (6.8% stake). Finally, 10yr JGBs extended above the 152.00 level as the global bond bid persisted in the aftermath of the dovish ECB and with yields stateside remaining pressured in which both the US 10yr and 20yr yields declined to three-month lows in which the former briefly dipped beneath 1.4350.

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 6.3856 vs exp. 6.3860 (prev. 6.3972)

China's Huawei Technologies has opened a new cybersecurity centre that allows independent parties to inspect its wares, although there were also reports that the US warned UAE regarding the use of Huawei equipment and wants Huawei removed from its networks in 4 years. (Newswires)

BoK Governor Lee suggested they will normalize policy if the recovery is certain and that a recovery will be more clearer in H2, while he also noted that household debt has become more serious recently and that they will communicate sufficiently with markets on policy. (Newswire)

South Korea's June 1st-10th Exports rose 40.9% Y/Y and Imports rose 31.0% Y/Y. (Newswires)

US

US bipartisan group of Senators reached an agreement on infrastructure which will be fully paid for and does not include tax hikes, with the infrastructure deal said to cost USD 1.2tln over eight years and includes USD 579bln of new spending in the first five years. There were later comments from the White House that questions need to be addressed especially regarding details of policy and pay-fors, among other matters, while it added that senior White House staff and cabinet members will work with the bipartisan Senate group on the infrastructure deal in the days ahead. (Newswires/Twitter)

White House is said to be against any EV mileage tax or indexing gasoline taxes to adjust for inflation as part of an infrastructure deal, according to a source familiar with US President Biden's thinking. (Newswires)

US Consulate-General in Hong Kong said the new national security law has created a atmosphere of coercion in the City, threatening its international business standing. (Newswires)

G7 leaders are to endorse the global minimum tax of at least 15%. (Newswires) Follows the Finance Ministers agreeing on this

UK/EU

ECB's Villeroy said there is no need to alter monetary policy, which is working. Inflation is increasing but remains below target. (Newswires)

ECB's Holzmann says that inflation above 3% would lead to a re-thinking of the ECB's strategy. (Newswires)

Bundesbank economic outlook for Germany: HICP in 2021 2.6% (prev. 1.8%), 2022 1.8% (prev. 1.3%) and 2023 1.7% (prev. 1.6%). (Bundesbank) Link to full release

UK GDP Estimate MM (Apr) 2.3% vs. Exp. 2.20% (Prev. 2.10%); YY (Apr) 27.60% vs. Exp. 27.60% (Prev. 1.40%)

• 3M/3M (Apr) 1.5% vs. Exp. 1.50% (Prev. -1.50%)

The EU will take a measured response to any further unilateral moves by the UK to delay implementation of the Northern Ireland protocol, RTE's Connelly; Commission VP Sefcovic has signaled a 'staggered approach' to such action. (Twitter)

French President Macron warned UK PM Johnson that he would veto any Brexit renegotiations on Northern Ireland. (Times)

UK mortgage borrowers interest payments in the 12 months to April was at GBP 31.6bln which was the lowest in 20 years. (FT)

EQUITIES

European cash kicked off the day in the same directionless manner throughout the week but have since adopted a very mild upside bias (Euro Stoxx 50 +0.3%), despite a lack of fresh macro news flow. US equity futures meanwhile remain closer to the flat mark. Back to Europe, the UK’s FTSE 100 (+0.6%) outperforms as its heavyweight mining sector underpins the index amid tailwinds from the rebound in base metal prices. As such the Basic Resources sector resides as the clear outperformer (Glencore +2.7%, Fresnillo +2.5%, Antofagasta +2.1%, BHP+1.8%), whilst the banking sector bears the brunt of the collapse in yields. Overall, European sectors are mostly firmer but it’s difficult to discern a particular theme/bias. In terms of individual movers, Deutsche Bank (-3.7%) sits at the foot of the Stoxx 600, pressured by the yield environment coupled with source reports suggested the ECB has asked the bank several times in recent months to name a successor to chairman Achleitner as the end of his term nears.

Taiwan Semiconductor (TSM) is mulling building another advanced plant in the US. (Nikkei)

Indian court has dismissed petition of Amazon (AMZN) and Walmart's Flipkart (WMT) to quash antitrust probe, according to lawyers. (Newswires)

India's enforcement directorate has issued a show cause notice to the Wazirx crypto exchange. Seperately, BIS' Coeure believes Bitcoin is a speculative asset and should be regulated as such. (Newswires)

FX

USD - It remains to be seen whether the Dollar can weather any further downside pressure as the global bond revival rages on and the index hovers precariously around the 90.000 handle having failed to glean any real impetus or even traction from the latest US inflation data that surpassed consensus by some distance. Moreover, the Buck got little in the way of support from a back-up in yields following a subdued end to this week’s Treasury refunding, and still looks technically weak in DXY terms between 90.170-89.951 vs Wednesday’s 89.833 w-t-d low and the brief post-CPI spike high at 90.321. Ahead, prelim Michigan sentiment does not offer much hope for a meaningful Greenback recovery, but pre-weekend short covering and position paring may provide a lifeline.

AUD/NZD - The Aussie and Kiwi continue to extract most from their US counterpart’s predicament, with the former establishing a firmer base above 0.7750 and latter retesting resistance above 0.7200. However, Aud/Usd may yet be hampered by decent option expiry interest straddling the half round number (1.2 bn from 0.7755 to 0.7740) as volumes thin before Monday’s market holiday to mark the Queen’s birthday.

EUR - 1.2200 is still proving to be elusive for the Euro relative to the Dollar, irrespective of reports from sources about 3 GC members wanting to reduce the pace of PEPP buying and divergence on the amount of asset purchases required over the Summer period when turnover is seasonally lower. Perhaps Eur/Usd bulls are taking heed of ECB President Lagarde’s latest statement about monitoring currency developments and/or the proximity of hefty option expiries is prohibiting buyers (2.5 bn rolls off between 1.2190-1.2200). On the flip-side, expiry interest from 1.2155 down to 1.2150 (2.3 bn) should underpin the headline pair and for good measure there is more at the round number below (also 2.3 bn).

CAD/GBP/CHF/JPY - No independent direction from BoC’s Lane for the Loonie, so sticking close to 1.2100 against the backdrop of choppy waters in crude and eyeing option expiries stretching from the 1.2080 trough to 1.2085 (1.2 bn) then 1.2090 (1.65 bn) up to 1.2150 (1.3 bn). Meanwhile, the Pound largely shrugged aside UK data and is tracking the Buck and Euro within a 1.4185-52 band and around the 0.8600 axis respectively, and the Franc continues to pivot 0.8950 pre-SNB. Similar constraints for the Yen that is tethered either side of 109.50 and conscious of expiry interest nearby, given downside protection at 109.75-80 (1.2 bn) and the 110.00 strike (1.7 bn) vs a barrier encircling 109.00 (2.3 bn from 109.10 to 108.90).

EM - The Try’s impressive rebound from record lows has gathered more momentum with some fundamental incentive following firmer than forecast Turkish ip, but mainly corrective in nature as the latest CBRT survey revealed rises in year end estimates for CPI and the repo rate 1 year ahead. Elsewhere, the Rub is holding circa cycle highs and looking towards the CBR for further direction.

Major FX Expires, NY Cut:

• EUR/USD: 1.2100 (2.3BLN), 1.2150-55 (2.3BLN), 1.2190-1.2200 (2.5BLN)
• AUD/USD: 0.7740-55 (1.2BLN), 0.7800 (557M)
• USD/CAD: 1.2080-85 (1.2BLN), 1.2090 (1.65BLN), 1.2100 (496M), 1.2150 (1.3BLN)
• USD/JPY: 108.90-109.10 (2.3BLN), 109.75-80 (1.2BLN), 110.00 (1.7BLN)

FIXED

Some signs of Friday fatigue maybe, or just a pause before the buying resumes as debt futures drift back down from fresh intraday peaks. Bunds are still above 173.00 having breached the big figure on the way up to 173.16 and Gilts are more securely fastened to the 128.00 handle after fading at 128.39, while US Treasuries are firmer and the curve flatter, albeit off overnight highs awaiting the return of cast traders for what appears to be a light agenda on paper, but the Michigan survey findings providing the first look at economic sentiment, conditions, expectations and inflation projections for the current month.

COMMODITIES

WTI and Brent front-month futures have been uneventful thus far just under the USD 70.50/bbl (69.68-70.52 range) and around USD 72.50.bbl (71.88-72.78 range). The complex was unfazed by the release of the IEA MOMR which - in a slightly unorthodox fashion – noted that demand is set to surpass pre-COVID levels by the end-2022 (as opposed to the typical upgrade/downgrade headlines). The agency also called on OPEC+ to “open the taps” to keep world oil markets adequately supplied, and that production hikes at the current pace set are to be nowhere near the levels needed to prevent further stock draws. Nonetheless, the demand trajectory is still dictated by COVID developments – with reports also noting that the UK could delay its full reopening plans by a month. That being said, the summer period is expected to see demand buoyed by the US driving season, whilst an EU official also notes that EU countries have cleared a plan to ease travel restrictions over the summer. Elsewhere, Iranian nuclear deal talks are poised to resume on June 12th for what would be the sixth round of negotiations. US sources, after the last round wrapped up, poured some cold water over the optimism expressed by the Iranian President. Note – the oil market was briefly in disarray on Thursday as reports that the US lifted sanctions on Iranian oil officials stoked expectations for a return to the nuclear deal and of Iranian oil supply, however, a US official clarified that the Treasury action was routine and had nothing to do with Iran's nuclear deal talks. Spot gold and silver diverge with the former now trundling lower after failing to meaningfully breach and hold above USD 1,900/oz, whilst the latter gleans support from the lower yields and extends gains above USD 28/oz. Over to base metals, LME copper reclaimed a USD 10,000/t handle as sentiment for the red metals seems more constructive post-US CPI, with some potential tailwinds from the rise in iron ore overnight – with Dalian futures bolstered by signs of strong demand and as Chinese port inventory hit a four-month low last week, according to traders.

Goldman Sachs forecasts the oil rally to continue with Brent crude to reach USD 80/bbl this summer and it believes a narrowing of the WTI-Brent spread through its USD 2.50/bbl forecast is noteworthy. Goldman Sachs stated that despite OPEC upstream and refinery downstream excess capacity, it expects OPEC+ to fall behind the demand rebound and it anticipates the demand recovery to persist with global demand to reach 99mln bpd in August. Furthermore, it views WTI returning to its pre-shale role as a leading indicator of upcoming tightness in the Atlantic basin and ultimately the global oil market, at least for this year. (Newswires)

IEA states that oil demand is set to surpass pre-COVID levels by end-2022; OPEC+ needs to open the taps to keep world oil markets adequately supplied; production hikes at current pace set to be nowhere near the levels needed to prevent further stock draws. (Newswires)

Japanese Gov't has issued a complaint to the WTO of China dumping activities in stainless steel products. (Newswires)