• European equities now see more of a mixed picture whilst US equity futures move sideways, with the ES and NQ just off ATHs
• In FX, the DXY traded on either side of 90.50, GBP/USD lost 1.4100 status whilst USD/TRY extended gains above 8.5000
• Copper prices plumb the depths upon China's return with speculation of the release of state copper reserves
• EU and US have reached a deal to resolve the Boeing (BA)/ Airbus (AIR FP) dispute, whilst the UK and Australia have agreed to a free trade deal
• US Senator Manchin said further bipartisan infrastructure talks are coming this week and the group of Senators will set a proposal by the end of the week
• Looking ahead, highlights include NY Fed Manufacturing, PPI, Retail Sales, Industrial Production, ECB's Lane, Holzmann Panetta, BoE's Bailey, supply from the US

CORONAVIRUS UPDATE

NIH said US clinical trial results show Novavax (NVAX) vaccine is safe and prevents COVID-19, while it added that safety data indicates the Novavax vaccine was generally well-tolerated and the results from the Phase 3 trial in US and Mexico demonstrated 90.4% efficacy in preventing symptomatic COVID-19 disease. (Newswires)

UK Ambassadors have been warned that Britain is unlikely to reopen overseas travel to major European holiday locations until the beginning of August. (Telegraph)

ASIA

Asia-Pac bourses were mixed as the early positive bias following a late ramp up on Wall St that propelled the S&P 500 and NDX to fresh all-time highs, was offset after Chinese markets returned from the extended weekend and digested the increasing global criticism following the G7 and NATO summits. ASX 200 (+0.9%) followed suit to its stateside peers in which it also reached unprecedented levels with advances led by consumer stocks and financials, with risk appetite also helped after the RBA minutes affirmed the central bank’s accommodative stance. Nikkei 225 (+1.0%) was boosted by a weaker currency and although PM Suga’s cabinet is facing a no-confidence vote submitted by the opposition, the ruling party members are to vote against the motion. Hang Seng (-0.7%) and Shanghai Comp. (-0.9%) were subdued amid the global frictions as aside from being called out for human rights abuses at the G7, NATO also designated China's behaviour as a systemic challenge. This prompted a response from China which urged NATO to stop exaggerating China's threat and said that it does not pose systemic risks to other countries, while the announcement by the PBoC to inject CNY 200bln through its one-year medium-term lending facility did little to spur risk appetite. Finally, 10yr JGBs continue on the gradual retreat from the 152.00 resistance with demand hampered as Japanese stocks remained afloat and amid weaker headline results at the enhanced liquidity auction for longer-dated JGBs.

PBoC injected CNY 10bln through 7-day reverse repos with the rate at 2.20% for a net neutral daily position and it also injected CNY 200bln through its one-year Medium-term Lending Facility with the rate maintained at 2.95%. (Newswires)PBoC set USD/CNY mid-point at 6.4070 vs exp. 6.4053 (prev. 6.3856)

China's mission to the EU said it urges NATO to stop exaggerating the various forms of China's threat and stated that China does not pose systemic risks to other countries. (Newswires)

Businesses and customers are reportedly bracing for another shipping crisis in southern China amid a disruption of port services due to the virus outbreak and which threatens to increase costs. (CNBC)

A no confidence motion was submitted by the opposition party against Japanese PM Suga's Cabinet, while there were also comments from Japanese Chief Cabinet Secretary Kato that ruling party members will vote against the no confidence motion against the cabinet. (Newswires)

US

US Senator Manchin said further bipartisan infrastructure talks are coming this week and the group of Senators will set a proposal by the end of the week. There were also comments from Democratic Senator Tester that it his understanding is that indexing the gas tax to inflation is now out of the bipartisan infrastructure plan, although other reports noted the bipartisan group have kept the idea of indexing the national gasoline tax to a measure of inflation despite White House opposition. (Newswires)

EU and US have reached a deal to resolve the Boeing (BA)/ Airbus (AIR FP) dispute. (Newswires)

UK/EU

ECB's Rehn says the ECB needs to continue with significant PEPP purchases; did not discuss a transition away from PEPP; Rehn fully stands behind last week's decision; assumes that in September the ECB will discuss a way forward. (Newswires)

UK and Australia have agreed to a free trade deal; confirming earlier reports. (Newswires)

• UK Employment Change (Apr) 113k vs. Exp. 150k (Prev. 84k) (Newswires)
• UK Avg Earnings (Ex-Bonus)* (Apr) 5.6% vs. Exp. 5.3% (Prev. 4.6%)

EQUITIES

Bourses across Europe now see more of a mixed picture (Euro Stoxx 50 +0.4%) after the region opened with broad-based gains before diverging. US equity futures see horizontal trade with the ES and NQ just off all-time highs (ATH) of 4,257 and 14,146, respectively, heading into tomorrow's FOMC. Back to Europe, performance varies with the DAX (+0.4%) continuing to notch fresh ATHs and narrowing its distance to the 16k mark. The FTSE 100 (+0.3%) came under some early pressure due to miners' losses as copper prices collapse. In the periphery, Spain's IBEX (-0.5%) and Italy's FTSE MIB (-0.3%) reside as the regional laggards - pressured by their respective banking sectors. The sectorial performance in Europe is mixed with Basic Resources, the underperformer amid price action across the base metal complex upon China's return (see commodities section below), whilst the banking sector remains suppressed but the recent pullback in yields. Travel & Leisure is also a straddler after the UK confirmed a four-week extension to COVID restrictions for vaccinations to outpace the Delta variant. Meanwhile, the upside sees Tech coat-tailing from the sectorial performance on Wall St, whilst Construction reaps the rewards from lower raw material prices. Some of the more defensive names also reside towards the top, including Healthcare and Staples. In terms of individual movers, Airbus (+1.3%) cheers the US-EU accord on the Airbus/Boeing (+1% pre-mkt) dispute – with the suspension of tariffs seen for five years under the deal, according to sources. Meanwhile, Deutsche Lufthansa (-1.0%) reversed earlier gains seen in the wake of new targets set amid surging summer demand. Turning to commentary, BofA's European Fund Manager Survey suggests that investors are still bullish on European equities despite the sharpest rally in decades - 51% of survey respondents expecting the bull market to continue until next year (up from 36% last month), while the proportion believing that equities will peak in H2 this year has declined from 47% to 38%. In terms of broader risks, 72% of fund managers believe that inflation is transitory; 63% believe the Fed will signal tapering in August or September – with the Fed Jackson Hole Symposium slated for August 26-28.

EU top court says national privacy regulators could act against violations even if they are not the lead regulators in a blow to Facebook (FB). (Newswires)

UK CMA is to scrutinise Apple (AAPL) and Google's (GOOG) duopoly on mobile ecosystems, app stores and web browsers. (Newswires

FX

EUR/GBP/JPY/AUD - Not the biggest G10 movers or grouped together due to their standings within the major ranks, but all potentially under the influence of expiry option interest, barring any big factor or event that may prompt a significant change in circumstances from a technical or fundamental perspective. Indeed, the Euro is among the best performers or most resilient and edged nearer 1.2150 vs the Greenback at one stage, while Sterling still seems relatively cautious when above 1.4100 following strong UK wage data and confirmation that ‘Freedom Day’ will not be next Monday, but on July 19 pending a review in another 2 weeks. Hence, the Eur/Gbp cross is probing 0.8600 and 1.1 bn expiries residing from the round number up to 0.8610, while the Yen did paring declines from 110.15 and could yet trigger 1.26 bn sitting at the 110.00 strike irrespective of the challenge against Japanese PM Suga and ongoing spread of COVID-19. Elsewhere, dovish RBA minutes and weakness in metals alongside other non-oil commodities may be undermining the Aussie, but it remains close to the 0.7700 handle and has touched the base of 1.3 bn rolling off between 0.7715-30.

CHF/NZD/CAD/USD - The Franc rebounded quite firmly against the Buck, albeit less so vs the Euro from sub-0.9000 and sub-1.0900 lows respectively in wake of mixed SECO forecasts for growth and inflation ahead of the SNB policy review on Thursday, while the Kiwi is consolidating within 0.7161-31 extremes in advance of NZ Q1 current account data tonight and GDP on Wednesday when the Loonie will have already seen Canadian CPI for some independent pre-Fed impetus. Usd/Cad is currently meandering between 1.2129-65 amidst some retracement in oil prices and the DXY is straddling 90.500 off a lower 90.343 base vs 90.547 at best awaiting NY Fed manufacturing, PPI, Retail Sales and IP before the Usd 24 bn 20 year auction that could all impact directly or via any Treasury yield and curve reaction.

SCANDI/EM - Somewhat divergent data and the aforementioned pull-back in crude could well be attributed to marginal Sek outperformance in relation to the Sek as Sweden’s registered jobless rate declined to 7.9% from 8.2% in May, but Norway’s trade surplus narrowed to Nok 15.5 bn from Nok 17.0 bn. Meanwhile, the Cny/Cnh have taken on board a softer PBoC midpoint fix on return from Monday’s Chinese market holiday and more post-G7 angst after NATO also delivered a damning verdict on Beijing’s behaviour, though the real EM loser is the Try on the back of Turkish President Erdogan’s insistence that the US gave the country no choice other than buying Russia’s S-400 missile system.

RBA Minutes from the June meeting stated the Board agreed it would be premature to consider ending the bond-buying programme and that policy needs to remain highly accommodative to achieve full employment, while it added that a return to a tight labour market and actual inflation target band is unlikely until 2024 at the earliest. RBA stated that options for the bond-buying programme include another round of AUD 100bln, scaling back purchases or spreading them out, while they also talked about approach of reviewing bond purchases more frequently depending on data. Furthermore, it stated the domestic economy is transitioning from a recovery to expansion and that annual wage growth would need to be sustainably higher than 3% for inflation to achieve its target, although members anticipate only a gradual pick up in wages for the following few years. (Newswires)

FIXED INCOME

It’s 2 down and 2 still to go in terms of debt auctions, but Bunds and Gilts are not displaying any sign of digestion problems even though 2028 DMO supply was hardly snapped up at a much more attractive yield on face value and Germany’s 2 year offering was only covered fractionally better than last time. In fact, the 10 year bonds are hugging new intraday highs on Eurex and Liffe, at 172.80 and 127.99 respectively (+16 and +7 ticks on the day vs -5 ticks each at worst), with the latter probably waiting to see results of the 30 year UK sale before making a firm decision. Meanwhile, US Treasuries are a tad firmer and the curve slightly flatter in the run up to a raft of data and then 20 year supply on the eve of the FOMC.

The EU has received in excess of EUR 107bln (prev. EUR 76bln) of demand for its debut recovery fund bond, according to the lead manager; guidance revised to MS-2 (prev. around flat to mid-swap level). (Newswires)

COMMODITIES

WTI and Brent front-month futures remain within recent ranges around the USD 71/bbl (70.81-71.55/bbl range) and USD 73/bbl (72.79-73.56 range) marks respectively as eyes remain on the Iranian nuclear talks from a complex-specific standpoint, whilst the FOMC policy decision is on the radar for a more macro impulse. In terms of the nuclear negotiations, the prospect of an imminent deal has diminished as key sticking points remain unresolved. Analysts caution that if an agreement is not reached by the Iranian election day (June 18th), the incoming government may take a different approach that could threaten the June 24th deadline – when Iran's extended technical agreement with the IAEA expires. The morning, however, has thus far seen an abundance in oil-related commentary at the FT Commodities and Global Summit, with the Vitol and Glenore oil heads both dismissing an oil super-cycle, whilst the former also suggests that the Iranian return to the market has been priced in and sees oil prices around USD 70-80/bbl this year owing to OPEC+ support. Aside from that, the morning has seen very little to shift the dials from a fundamental perspective, with traders eyeing US PPI data for any sentiment-induced action ahead of the weekly Private Inventory Report. Turning to metals, spot gold and silver remain steady within recent ranges. As a reminder, spot gold sees its 200 and 50 DMAs at USD 1,838 and USD 1,828, respectively – with technicians on golden-cross-watch. Focus this morning has been on the demise of copper – with 3M LME seeing intraday losses of almost USD 400/t - triggered upon China's return from its long weekend, and with some reports overnight speculating that the largest copper consumer may attempt to stem the consistent price rise with the release of copper reserves.

Glencore (GLEN LN) head of oil expects OPEC+ to increase output gradually to 40mln BPD; return of Iranian oil has already been priced in. (Newswires)

Vitol CEO says oil will not be in a super-cycle due to the peak demand from the energy transition; predicts the return of 5.5mln BPD of oil to the markets in the next 12 months; predicts pre-COVID oil demand in mid-to-second half of 2022. Gasoline demand is to reach pre-COVID levels in Q1, diesel is already back to normal, but aviation fuel demand is long way behind. Return of Iranian oil will likely be in Sept/Nov 2021.Vitol CEO sees oil prices around USD 70-80/bbl this year as OPEC+ will support prices. (Newswires)

GEOPOLITICAL

Russia's Kremlin reiterates that no concrete deals are expected from the meeting between US President Biden an Russian President Putin. (Newswires)