• European bourses are firmer but off highs after a holiday-thinned APAC handover; US equity futures meanwhile trade sideways
• DXY trades around 90.50 in a tight range, with peers somewhat mixed and GBP underperforming and NZD outperforming
• The White House said the G7 agreed to a new global infrastructure initiative named the Build Back Better World or B3W to rival China’s Belt & Road initiative
• UK government approves a four-week delay to the removal of the lockdown that was scheduled for June 21st, with a review to take place in two weeks
• EU noted that progress was being made in Iranian nuclear talks, but negotiations are intense and a number of issues remain
• Looking ahead, highlights include ECB weekly purchases Schnabel and BoE's Bailey

G7/GLOBAL NEWS

US President Biden stated that China has to act more responsibly on human rights and that the G7 explicitly agreed to call out human rights in the Communique, while he added that they are going straight forward in dealing with China and that China needs to be more transparent. Furthermore, President Biden stated there has not been access to the laboratories in Wuhan to reach a conclusion regarding the origins of the virus and that access is needed to ensure there will not be another type of pandemic. (Newswires)

White House said the G7 agreed to a new global infrastructure initiative named the Build Back Better World or B3W to rival China’s Belt & Road initiative, while it was also reported that Canadian PM Trudeau led a G7 discussion regarding China in which he called for building consensus for a unified approach to the challenges from China and said there are some areas where we need to contest China directly, particularly in the area of human rights. (Newswires)

UK PM Johnson said we were clear that we all need to build back better and that the G7 needs to demonstrate the benefits of democracy and freedom to the rest of the world. Furthermore, PM Johnson said there has been harmony at the G7 including on Brexit but noted that the vast majority of conversations the UK had at the G7 were about other subjects instead of Brexit. (Newswires)

IMF Managing Director Georgieva said richer economies can use loans and other means to achieve USD 100bln target for most vulnerable countries in addition to lending SDR reserves. Georgieva also stated that China and some middle-income countries expressed interest in a new SDR trust, while she welcomes G7 action to accelerate vaccinations as a key step to ending the pandemic and looks to the G20 for additional steps. (Newswires)

CORONAVIRUS UPDATE

UK government approves a four-week delay to the removal of the lockdown that was scheduled for June 21st and PM Johnson will appeal for the country to be patient today. However, this will be reviewed in two weeks and will be data-dependent. Additionally, UK Junior Health Minister Argar says that a further delay to the final relaxation of coronavirus restrictions beyond a month is possible, according to Times' Swinford. (Newswires/FT/Twitter)

German Health Ministry demanded that Johnson & Johnson (JNJ) must deliver 6.5mln vaccine doses to Germany next month to make up for the shortfall in June. (Newswires)

Italian PM Draghi stated that there is no fear that their vaccination plan will be hampered by decision not to use the AstraZeneca (AZN LN) shot on people under the age of 60, while he added that Italy could reimpose mandatory quarantines for travellers from England if COVID-19 cases keep increasing there. (Newswires)

EMA stated the PRAC concluded that a causal relationship between the use of Gilead's (GILD) remdesivir and adverse event of bradycardia is at least, a reasonable possibility. (Newswires)

Novavax (NVAX) announced positive data from three complementary studies of the COVID-19 Beta variant strain vaccine and will initiate further human testing this autumn. (Newswires)

Celltrion (068290 KS) Phase 3 trial showed its antibody COVID-19 treatment Rekirona is safe and effective, while the treatment slowed severe symptoms of COVID-19 in more than 70% of patients. (Newswires)

ASIA

Asian equity markets began the week quiet amid holiday-thinned conditions with the absence of key markets in the region as Australia was closed in observance of the Queen’s Birthday and with mainland China, Hong Kong and Taiwan on an extended weekend for the Dragon Boat Festival. In addition, participants got to digest last week’s G7 meeting where leaders called out China on human rights and agreed to a new global infrastructure initiative dubbed the Build Back Better World to rival China’s Belt & Road initiative. Furthermore, this week’s busy slate of central bank updates, including the FOMC and BoJ further contributed to the tentative mood. US equity futures traded with incremental gains overnight, and the NQ reclaimed a 14k handle. Nikkei 225 (+0.7%) moved above the 29k level after it coat-tailed on the recent upside in USD/JPY, which has resulted in outperformance among Japan’s exporters and with firm gains also in Toshiba after it ousted four executives in the fallout from the recent probe findings regarding collusion with government officials against foreign investors. The KOSPI (+0.1%) was flat with the largest automakers lackluster despite a near 58% jump in South Korea’s auto exports last month led by Hyundai Motor and Kia Motors, with their shipments higher by 73.8% and 70.8%, respectively. However, Hyundai also announced to temporarily suspend output in its US plant for three weeks due to chip shortages and maintenance. Conversely, Celltrion shares outperformed after its Phase 3 trial showed its antibody COVID-19 treatment Rekirona was safe and effective whereby it slowed severe symptoms of COVID-19 in more than 70% of patients. India's NIFTY Index (U/C) underperformed somewhat on a pullback from record highs and with heavy pressure on Adani Group companies after the National Securities Depository froze three foreign accounts that have exposure to the group, which could be due to disclosure issues. Finally, 10yr JGBs traded sideways on both sides of the 152.00 level after it plateaued late last week, with demand hampered as Japanese stocks remained afloat due to the lack of BoJ bond purchases in the market with the central bank only seeking Treasury Discount Bills and Commercial Paper.

No-confidence motion against Japanese PM Suga's Cabinet reportedly to be submitted Tuesday, according to Kyodo. (Kyodo)

US

US President Biden's Plan B for infrastructure reportedly looks like a bust as getting 51 Democratic votes would be a long, uphill battle with moderates in the party opposed to the costs of the spending. (Axios)

UK/EU

UK employers' groups, such as the Federation of Small Businesses and UK Hospitality and the British Chambers of Commerce, have suggested an extension to UK COVID restrictions will be devastating for firms and that they were poised to ask for further aid such as loan forbearance, generous furlough terms and an extension to an eviction ban and business rates holiday. (Times)

UK PM Johnson said he thinks there will be pragmatic solution with the EU on Northern Ireland and that the UK would do whatever it takes to ensure that trade flows freely with Northern Ireland, while he thinks it can be sorted out and suggested it is up to EU to understand that the UK will do whatever it takes but also thinks that if the protocol continues to be applied in this manner, the UK will obviously not hesitate to invoke Article 16. Furthermore, UK PM Johnson stated that he now feels less optimistic about reopening the country than he was in May. (Newswires)

UK Foreign Minister Raab stated that the UK wants to ease tensions regarding Northern Ireland and that the EU needs to show respect for Northern Ireland, while he noted that various EU figures have incorrectly characterised Northern Ireland as a separate country which he suggested creates deep consternation and is a failure to understand the facts. Raab also stated the UK is willing to be flexible but need reciprocal good will and that the EU needs to step up with proposals. (Newswires)

ECB's Holzmann says it is too early to discuss the end of stimulus; transition from pandemic-era to 'normal' stimulus will be discussed in the Autumn. (Newswires)

French President Macron told UK PM Johnson that there needs to be a reset of Franco-British relations but added that bilateral ties can only improve if the UK keeps its word regarding the Brexit agreement. Macron also stated that we cannot create controversies on issues such as sausage wars when we have such serious issues to resolve, while he added that they want the Brexit treaty to be respected and that inconsistencies from the British side should not be blamed on the EU. (Newswires)

Irish Foreign Minister Coveney said he wouldn’t read too much into British rhetoric at the G7 summit and that we have to be open to flexibility and pragmatism but must be within parameters of the current protocol, while he warned that unilateral action from the UK would be problematic. (Newswires)

UK manufacturing is expected to grow at twice the speed for 2021 than was predicted at the start of the year with Make UK upgrading its forecasts for manufacturing growth to 7.8% from 3.9% after a surprisingly strong recovery in output. (FT)

GEOPOLITICAL

White House said that US President Biden will reaffirm the transatlantic bond at the NATO summit and underscore US Commitment with Article 5, while it added that the US will continue to stand with allies and partners in NATO’s non-combat advisory mission in Iraq. White House also stated that allies will revise NATO’s strategic concept in which it will focus on Russian aggression and challenges posed by China, as well as endorse new cyber defence policy. (Newswires)

US President Biden reportedly said he is open to exchanging cybercriminals with Russian President Putin, although White House National Security Adviser Sullivan separately commented that President Biden did not talk about exchanging cyber criminals but about accountability, while Sullivan also commented that President Biden is willing to show cyber criminals are held accountable in US if Russian President Putin offers the same for Russia. (Newswires)

EU negotiators suggested that international talks regarding an Iran nuclear deal that resumed on Saturday, were on track to revive the agreement as EU representative Matton noted that progress was being made but negotiations are intense and a number of issues remain, while he added that the EU will continue discussions with all participants and the US to find ways to move very close to a final agreement in the approaching days. (Politico)

The US Gov't has reportedly been, for the past week, analysing reports of a leak at a nuclear power plant in China, according to CNN citing US officials. The assessment was spurred by Framatome, a Co. that helps operate the facility, warning of an "imminent radiological threat"; officials do not believe the facility is at crisis level, according to sources. (CNN)

US President Biden congratulated the new Israeli government which the US is committed to work and said the US remains unwavering in its support for Israel’s security, after Naftali Bennett was sworn in as the new Israeli PM. (Newswires)

An explosive-laden drone fell on a school in Saudi Arabia’s Aseer province although there were no injuries reported. (Newswires)

EQUITIES

European cash and futures kick the risk-packed week off on a modestly firmer footing (Euro Stoxx 50 +0.4%) but have since waned off best levels after the DAX hit an all-time high (ATH) and the FTSE 100 hit levels last seen in February 2020. Nonetheless, the cash open contrasts the directionless European session experienced all last week. That being said, US equity futures see marginally less pronounced gains and trade closer to the flat-mark – but the NQ reclaimed 14k+ status overnight and tested its April peak/ATH around 14,060. From a central bank perspective, heading into the cash open, ECB-hawk Holzmann suggested it is too early to discuss the end of stimulus and that a transition from pandemic-era to 'normal' stimulus will be discussed in the Autumn, which did not do much in terms of immediate price action across EUR assets at the time; although, may help underpin sentiment against the backdrop of the ECB sources last week which suggested some diverging views on PEPP among the GC members. The macro focus this week undoubtedly falls on the FOMC decision on Wednesday for any signals regarding the potential start of the taper conversation. Back to Europe, most bourses are experiencing mild and broad-based gains with some underperformance experienced in the SMI (+0.1%) and FTSE MIB (+0.2%) – with the former’s gains hampered by a downbeat performance among its heavyweights Nestle, Roche, and Novartis, whilst the FTSE MIB is pressured by Ferrari (-1.0%) following a downgrade at Goldman Sachs. Turning to sectors, Oil & Gas is the clear outperformer as Shell (+2.0%) underpins the sector (14% weighting in the Stoxx 600 Oil & Gas Index) following source reports that it is reviewing the potential sale of its Permian Basin which could fetch over USD 10bln, but a deal is not guaranteed. Travel & Leisure meanwhile was the underperformer at the cash open as England’s lockdown is poised to be extended by four weeks – with a review to take place in two. The Basic Resources sector is now the laggard as LME base metals remain lackluster with a lack of Chinese demand amid the domestic holiday.

Tesla (TSLA) CEO Musk said Co. offloaded about 10% of Bitcoin holdings to confirm that Bitcoin could be liquidated easily without impacting the market and the Co. will resume Bitcoin transactions when there is confirmation of reasonable clean energy usage by miners with a positive future trend. (Newswires)

FX

DXY - The Dollar is narrowly mixed against major counterparts and a bit more divergent vs EM currencies in the run up to Wednesday’s FOMC and some data that could impact along the way, including US PPI, Retail Sales and IP. However, the index has faded just shy of Friday’s 90.612 high and is now probing support or underlying bids under 90.500 within a 90.602-461 band in somewhat thinner trade due to several market holidays overnight (mainland China, HK, Australia and Taiwan).

NZD/AUD/EUR/CAD - A couple of positives for the Kiwi, as the aforementioned absence of Australian participants to mark the Queen’s Birthday kept the Aud/Nzd cross capped around 1.0800, while Nzd/Usd got an independent fillip via 2021/22 and 2022/32 GDP forecast upgrades from NZIER’s quarterly economist survey to stay firmly above 0.7100 between 0.7122-50 parameters. Conversely, Aud/Usd is only just staying afloat of 0.7700 ahead of RBA minutes. Elsewhere, the Euro is holding just above the 50 DMA vs the Buck (1.2093), but well below option expiry interest at 1.2150 (1.3 bn) and the Loonie is meandering from 1.2168-45 amidst strength in crude prices pre-Canadian manufacturing sales.

JPY/CHF/GBP - The Yen is straddling 109.70 in wake of firmer final Japanese ip data, while the Franc is hovering above 0.9000 and 1.0900 vs the Euro following a pick up in Swiss producer/import prices, but dip in sight deposits at domestic banks before attention turns to SNB and BoJ policy meetings later this week. In contrast, Sterling is flagging against the Buck and Euro amidst reports that UK PM Johnson will confirm a 4 week delay to lifting the remaining lockdown restrictions that were due on June 21, with Cable under 1.4100 and recent lows, while Eur/Gbp is probing 0.8600 to the upside after a post-ECB retreat as wrangling with the EU on the NI protocol continues.

SCANDI/EM/PM - Nok/Sek has traversed parity again, as the Norwegian Krona derives traction from Brent topping Usd 73.50 at one stage, while the Swedish Crown takes note of warnings from the Stability Board about considerable risks associated with high property prices. However, the Try has picked up right where it left off last week by reclaiming more losses, and perhaps with assistance from a narrower than anticipated Turkish current account deficit to compound the general technical retracement from record lows. On the flip-side, the Cnh has depreciated without guidance from the PBoC due to China’s Dragon Boat Festival and on recriminations out of Beijing over the G7’s human rights rebuke, while the Rub has handed back post-CBR rate hike gains and Zar reverses alongside Gold that is testing key support levels having failed to retain Usd 1900+/oz status. Specifically, technicians have been underlining the significance of Usd 1855 that aligns with a Fib retracement and is just beneath a recent trough at Usd 1856.18 from June 4.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.2025 (382M), 1.2050 (283M), 1.2150 (1.3BLN), 1.2175 (279M), 1.2200 (1.26BLN)
• AUD/USD: 0.7750-65 (933M)

Turkish President Erdogan stated the CBRT agreed with China's PBoC to raise the existing their existing swap facility to USD 6bln from USD 2.4bln which could boost their foreign reserves. (Newswires)

Israel's parliament has voted in favour of a new coalition government, ending Benjamin Netanyahu's 12-year consecutive tenure as premier. Naftali Bennett will take power for two years before handing the position to Yair Lapid in 2023 for two years. (Sky News)

FIXED

It may well be largely technical, but supply is also a consideration along with buoyant oil and sentiment in general, thus core bonds have back-tracked after extending on initial gains but topping out short of the recovery highs reached on Friday. Bunds, Gilts and the 10 year T-note are all just off lows of 172.78, 128.07 and 132-25+ in thinner volumes than usual for a Monday due to several holidays and perhaps many side-lined or keeping positions light given the sheer raft of data and Central Bank meetings to come this week.

COMMODITIES

WTI and Brent front-month futures trade on a firmer footing with the former extending on gains above USD 71.50/bbl (vs low USD 70.65/bbl) and the latter testing USD 73.50/bbl at the time of writing (vs low USD 72.59/bbl). In terms of developments, JCPOA talks entered the sixth round yesterday, but a deal is seemingly not imminent with issues reportedly outstanding. That being said, Iran expressed optimism that an accord can be reached by the time the IAEA technical agreement with Tehran expires – which was extended to June 24th. Aside from that, the grind higher during the European morning was in conjunction with gains across stocks, although technical then took the helm as key levels were mounted in the crude contracts. Ahead, the week will see an abundance in geopolitics for the crude complex to keep tabs on (JCPOA, NATO, US-EU, US-Russia), whilst the FOMC takes the spotlight on a more macro front. Turning to base metals, spot gold and silver err lower despite relatively stable yields and a caged Dollar – the yellow metal is inching closer towards USD 1,850 ahead of its 200 DMA (1,839/oz) and its 50DMA (1,825/oz) – with technicians on golden-cross-watch. In terms of base metals, copper prices eased with the LME 3M contract back below the USD 10,000/t mark – with some citing a lack of appetite as Chinese players observe a long weekend.

Iraq Oil Minister said he expects oil prices to be at USD 68.00-75.00/bbl in H2 due to commitment to the OPEC+ output cut. (Newswires)

Ukraine is ready to take legal action against Gazprom to unblock supplies of natgas from central Asia in a move that could ensure sufficient supply and transit revenues even if the Nordstream 2 pipeline begins operation this year. (FT)