• Equities remain subdued post-FOMC with pressure exacerbated on base-metal prices while banks are the clear outperformers; ES -0.3%, Euro Stoxx 50 -0.2%
• The USD remains supported surpassing/testing mid-April highs sub-92.00 with peers pressured across the board; SNB and Norges Bank were largely as expected
• US bipartisan group of around 20 Senators said they support an infrastructure investment framework without raising taxes and looks forward to developing legislation
• China NDRC said it achieved preliminary results in curbing surges of commodity prices and it will step up supervision on spot and futures market, as well as safeguard normal market order
• Looking ahead, highlights include the CBRT rate decision, US IJC, ECB's Lane & Elderson

CORONAVIRUS UPDATE

Pfizer's (PFE) TOFACITINIB met the primary endpoint in a Brazilian study of patients hospitalised with COVID-19 pneumonia, according to data publish in NEJM. The trial demonstrated cumulative incidence of death or respiratory failure through Day 28 was at 18.1%, while death from any cause through Day 28 occurred in 2.8% of patients in TOFACITINIB group vs. 5.5% for those that were given a placebo. It also reported that serious adverse events occurred in 20 patients (14.1%) in TOFACITINIB group vs. 17 (12.0%) in placebo group. (Newswires)

CureVac (CVAC/5CV GY) said its COVID-19 vaccine demonstrated an interim vaccine efficacy of 47% against COVID-19 disease of any severity and did not achieve the prespecified statistical success criteria. (Newswires)

UK may allow fully vaccinated people to travel to amber list countries without needing to quarantine. (Telegraph)

Japanese Economic Minister Nishimura said Japan will lift the state of emergency in Tokyo on June 20th with Tokyo and Osaka to move to focused restrictions, while he later announced the experts panel approved the government plan to lift the state of emergency in Tokyo and other prefectures. (Newswires)

ASIA

Asian equity markets traded mostly lower with risk appetite subdued in reaction to the FOMC where the Fed kept rates and QE unchanged as expected but caught markets off guard with hawkish Fed dot plots where median projections were for a rate lift off and total 50bps hike in 2023. ASX 200 (-0.4%) was led lower by the mining related sectors after underlying commodity prices succumbed to the pressure from a stronger USD and amid heavy losses in Whitehaven Coal after it downgraded its FY production again, but with downside in the index stemmed following blockbuster employment data and with financials underpinned by the rise in global yields. Nikkei 225 (-0.9%) underperformed in the aftermath of the FOMC amid a mixed currency and although Japan is reportedly set lo lift the state of emergency for nine prefectures, nearly all of them including Tokyo and Osaka will be subject to quasi-restrictions, while KOSPI (-0.4%) also weakened amid a pullback from record highs. Hang Seng (+0.1%) and Shanghai Comp. (+0.2%) were choppy amid lingering US-China tensions as Treasury Secretary Yellen reiterated the US is looking at a full range of tools to push back against China's practices that harm US national security but added that she would be worried about a complete technological decoupling from China. Participants also got to digest the latest activity data from China in which Industrial Production and Retail Sales missed expectations but still registered respectable growth of 8.8% and 12.4%, respectively. Finally, 10yr JGBs were lower on spillover selling from T-notes and with yields in the region boosted which saw gains of around 10bps in the Aussie 10yr and 13bps in its Kiwi counterpart, while focus for Japan turns to the BoJ which begins its 2-day policy meeting today.

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 6.4298 vs exp. 6.4231 (prev. 6.4078)

CENTRAL BANKS

ECB Chief Economist Lane says the EZ and US are in different situations, will take a long-time for the labour market to recover. Unnecessary and premature to talk about the winding-down of PEPP (in-fitting with the broader ECB stance). Focus, for Lane going into an 'interesting Summer', is on the challenge to preserve favourable financing conditions. (Newswires)

SNB maintains its Policy Rate at -0.75% as expected; maintains CHF remains "highly valued"; reiterates it will remain in FX markets as necessary taking the overall currency situation into consideration. SNB expects strong Q2 and Q3 growth; upgraded their GDP and inflation views though the change to the 2023 inflation view is minimal. Little reaction seen in the CHF immediately after the decision (SNB)

Norges Bank maintains its Key Policy Rate at 0.00% as expected; policy rate will most likely be raised in September (vs prev. "latter half of 2021”); decision unanimous. Repo forecasts: Sep'21 0.02% (prev. 0.01%), Dec'21 0.28% (prev. 0.13), Mar'22 0.57% (prev. 0.31%), Jun'22 0.78% (prev. 0.48%), Sep'22 0.96% (prev. 0.63%), Dec'22 1.07% (prev. 0.75%). The NOK saw modest appreciation heading into the release, though this was somewhat short-lived. Norges Bank Governor Olsen says the interest rate could increase twice in 2021; could also hike rates in Q1 and Q2 2022. (Norges Bank)

Brazil Central Bank hiked the Selic rate by 75bps to 4.25% as expected. BCB removed the reference to partial normalisation process in the statement and sees another policy adjustment of the same magnitude at the next meeting. (Newswires)

RBA Governor Lowe said it is premature to consider ending bond purchases and that bond buying has reduced funding costs across the economy, as well as contributed to lower AUD. Lowe reiterated that options include another AUD 100bln programme, scaling bank or spreading out bond buying, while he noted the Board has considered a range of possible scenarios for the three-year yield curve and in some scenarios conditions for a 2024 rate increase could be met, but in others not. Furthermore, he stated the economy is still in recovery stage with some way to go yet, that inflation pressures remain subdued which is likely to persist and that wage growth is subdued as firms focus on reducing costs. (Newswires)

BoC Governor Macklem said the economy is making good progress and that a complete recovery will take some time with the third wave of the virus a setback. Macklem also stated that following a sharp rebound in economic activity during fall and winter, there has been choppiness seen in growth again during Q2 2021, while he added that further adjustments to the QE program will be gradual and they will be deliberate in assessing incoming data and communicating their analysis. (Newswires)

US

US bipartisan group of around 20 Senators said they support an infrastructure investment framework without raising taxes and looks forward to developing legislation. (Newswires)

UK and US have found an accord on the Airbus (AIR FP)/Boeing (BA) dispute; the sides will not impose tariffs related to this dispute for five years. (Newswires)

EU's Vestager says the US and EU are to boost economic cooperation following President Biden's trip, WSJ; sees a chance of joint work on microchips. (WSJ)

UK/EU

UK Chancellor Sunak refused to confirm whether state pensions would rise as quickly as wages this year but did insist that the government policy was still for the so-called "triple lock". (GB News/Telegraph)

UK Trade Secretary Truss will begin trade discussions with New Zealand. (Telegraph)

British Chambers of Commerce's new chief called for the UK government to extend its COVID-19 support scheme and stated that a withdrawal of support is disappointing amid a delay to the lockdown exit. (FT)

Sources familiar with EU ban on banks from bond syndications said lenders were aware of this issue regards to bond sales and a number of banned banks have submitted information on remedial action and EU expects others to follow soon, according to sources. Furthermore, assessment of banks excluded from bond sales will be done very soon and sources expect some banned banks will receive the green light to soon re-join bond sales. (Newswires)

EU HICP Final YY (May) 2.0% vs. Exp. 2.0% (Prev. 2.0%); Ex-Food & Energy Final YY (May) 0.9% vs. Exp. 0.9% (Prev. 0.9%)

• Ex-F, E, A & T Final YY (May) 1.0% vs. Exp. 0.9% (Prev. 0.9%)

GEOPOLITICAL

Senior US administration official said the tone of discussions between US President Biden and Russia President Putin was very direct, constructive, non-polemical and very matter of fact. Furthermore, strategic stability initiative will look at additional practical measures in arms control and the US will look whether Russia will take action against those responsible for the colonial pipeline attack, while the meeting did not end early, it covered an extensive agenda. (Newswires)

Russian Kremlin says it is concerned about Ukraine joining NATO saying that it would be a "red line". (Newswires)

The current round of negotiations on Iran's nuclear deal will conclude within days, according to Al Arabiya. Separately, reports indicate that progress on Iranian nuclear talks has been slow but could speed up after elections. There may be a break in Iranian talks, although no one currently has this in mind, according to WSJ's Norman. (Twitter)

Austria is pushing back on some of the economic sanctions being worked on for Belarus, stating it is important the sanctions will not have an impact on the civilian population, according to an Austrian diplomat. (Politico)

EQUITIES

Europe bourse trade mostly lower in the aftermath of the hawkish Fed announcement yesterday, albeit losses in the region are marginal (Euro Stoxx 50 -0.2%). US equity futures meanwhile hold onto a bulk of the post-FOMC losses with marginal underperformance seen in the tech-laden NQ amid the rates environment. Back to Europe, sectors are mostly lower with no real theme nor bias. Banks outperform amid favourable yields, in turn pressuring Tech towards the bottom of the bunch. Travel & Leisure names see tailwinds amid reports that the UK may allow fully vaccinated people to travel to amber list countries without needing to quarantine. Basic Resources are the clear underperformers on the back of the continuing decline in base metal prices. As such, the IBEX (+0.2%) nursed its initial losses on the back of a strong performance in its heavyweight sectors – the Banks and Travel & Leisure names, whilst the FTSE 100 (-0.5%) narrowly underperforms the region as gains in the banking sector fails to offset losses in the mining names. In terms of individual movers, Airbus (+1.3%) is firmer as the UK and US reached an accord on the Airbus/Boeing (-0.4%) dispute whereby the sides will not impose tariffs related to this dispute for five years, in a deal that seemingly echoes that made between the US and the EU.

FX

DXY - The Dollar index is as good a proxy as any for gauging currency market perceptions and general sentiment in wake of the June FOMC meeting that threw few surprises in terms of policy settings, but was accompanied by more upbeat SEP forecasts, dot plots bringing forward rate hike projections and ended with Fed chair Powell announcing that the eagerly awaited and much hyped talk about when to talk about tapering has now officially started. In response, the DXY shot up through 91.000 having struggled to break free from restraints around the 90.500 level for several sessions and has subsequently extended beyond Wednesday’s best (91.408) to 91.840, so far, while firmly breaching technical resistance in the form of the 200 DMA (91.511) in the process. Ahead, jobless claims and the Philly Fed survey provide the first post-FOMC macro releases as the process of weighing substantial progress towards employment and inflation targets begins in earnest.

CHF/NOK/BRL - Also looking for direction and independent impetus from latest Central Bank guidance, but getting mixed messages as the SNB stood pat and effectively delivered a repeat statement on FX interventions having retained a highly valued classification for the Franc. However, the Norges Bank nailed down September as the month to raise its depo rate and the path was adjusted accordingly, with Governor Olsen subsequently underscoring that this might result in 2 hikes before the end of 2021 followed by 1 per quarter through H1 next year. Meanwhile, the BCB stuck to its 75 bp consecutive meeting tightening trend last night and indicated that it plans to make it 4 in a row after a tweak to the language regarding normalisation to remove the word ‘partial’ (in view of the unwinding already undertaken to lift the SELIC closer to neutral). Usd/Chf is hovering around 0.9135, Eur/Nok circa 10.1600 and Usd/Brl closed above 5.0500 compared to just under 5.0000 at one stage pre-Fed and BCB.

NZD/AUD - The Kiwi and Aussie have both been trying hard to swim against the tide with assistance coming via significantly stronger than expected data in the form of Q1 GDP and May jobs respectively, but Nzd/Usd has faded from a fraction above 0.7100 to test support/underlying bids around 0.7050 and Aud/Usd is skirting 0.7600 compared to 0.7646, with dovish comments from RBA Governor Lowe taking some shine off the outstanding labour report.

CAD/EUR - No such props for the Loonie or Euro to lean on, so both are making way or yielding to the almost universal Greenback revival, as Usd/Cad rebounds over 1.2300 and Eur/Usd recoils to sub-1.1950 lows to leave hefty option expiry interest between 1.2000-1.1985 (1.7 bn) behind, barring a major change in trend.

JPY/GBP - Both narrowly mixed against the Dollar, but well off pre-FOMC levels with the Yen consolidating within a 110.82-54 band and Sterling striving to contain losses beneath 1.4000 with external help from the Eur/Gbp cross that has pulled back considerably further from 0.8600+ to probe 0.8550. Note, Usd/Jpy be drawn to 1 bn option expiries at the 110.50 strike, though 1.4 bn from 110.25 to 110.20 appear safe in the run up to the BoJ on Friday.

EM - A sea of red vs the resurgent Usd, but the Rub is going against the bearish grain and a cordial enough encounter between Russian President Putin and his US peer yesterday, while the Try will be seeking some sort of support if not salvation from the CBRT at noon – preview on the Headline Feed at 7.22BST, and for the BoJ tomorrow at 10.19BST.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1985-1.2000 (1.7BLN), 1.2045-50 (1.2BLN), 1.2085-1.2100 (1.3BLN)
• USD/JPY: 110.20-25 (1.4BLN), 110.50 (1BLN), 110.75 (370M), 111.00 (500M)

Swedish Left Party says it will seek support from other parties to table a motion of no-confidence in PM Lofven. (Newswires)

• Australian Employment (May) 115.2k vs. Exp. 30.0k (Prev. -30.6k)
• Australian Full Time Employment (May) 97.5k (Prev. 33.8k)
• Australian Unemployment Rate (May) 5.1% vs. Exp. 5.5% (Prev. 5.5%)
• New Zealand GDP (Q1) Q/Q 1.6% vs. Exp. 0.5% (Prev. -1.0%)
• New Zealand GDP (Q1) Y/Y 2.4% vs. Exp. 0.9% (Prev. -0.9%, Rev. -0.8%)

FIXED

Debt futures are still attempting to draw a line in the sand, but with varying degrees of success depending on relative closing times and considering whether individual Central Bank policy makers are likely to follow the FOMC down a more hawkish path. Bunds, Gilts and US Treasuries all carved out new recovery highs earlier, at 172.25, 127.29 and 131-24+, but have waned again, with the 10 year UK bond and Short Sterling strip looking especially vulnerable after breaching 127.00 to trade at 126.91 (3 ticks away from Fib support) and extending declines amidst more pronounced bear-steepening (to -8 ticks in Mar23 at worst). Ahead, initial jobless claims, the Philly Fed business survey and leading index provide post-Fed pointers as markets really start to assess whether substantial progress towards twin policy remits is being made.

ECB allots EUR 109.8bln 3-yr TLTRO tender (vs prev. EUR 330.5bln). (Newswires)

COMMODITIES

WTI and Brent front-month futures have been clambering off their post-Fed lows with the former back on a USD 72/bbl handle (vs low 71.33/bbl) and the latter within reaching distance of the USD 74.50/bbl mark (vs low 73.55/bbl). Fundamentals for the oil complex remain bullish as demand is expected to surge in the summer whilst the taps will remain controlled by OPEC+ on the supply side. Sticking with supply, an Iranian deal seems more out of reach than what had initially been expected, with the outstanding sticking points likely to take negotiations past the domestic elections on June 18th and closer to the expiry date of the IAEA/Iran agreement on June 24th – although the agency has been hinting at a possible extension to the monitoring deal. Nonetheless, desks have noted that the return of Iranian oil has been priced into the markets, but a deal remains in the balance. In terms of metals, spot gold and silver remain suppressed by the rampant Dollar and elevated yields, with the yellow metal probing USD 1,800/oz to the downside ahead of its 100 DMA at USD 1,795/oz. Spot silver drifts meanwhile dipped under USD 27/oz. In terms of base metals, LME copper remains under pressure with the 3M back under USD 9,500/t amid the firmer Buck, mild risk aversion, and the ongoing China crackdown against unfavourable prices. Finally, steel-making raw materials in China consolidated overnight following the hefty losses in the prior session.

Qatar set August loading Al-Shaheen crude term price at AUD 2.57/bbl higher than Dubai quotes which is the largest premium in 17 months, according to sources. (Newswires)

Norway's Industri Energi labour union said it has agreed a wage deal for oil drilling workers and SAFE labour union also agreed a wage deal for oil drilling workers. (Newswires)

China NDRC said it achieved preliminary results in curbing surges of commodity prices and it will step up supervision on spot and futures market, as well as safeguard normal market order. Furthermore, the NDRC will work with other departments to release state reserves at an appropriate time to boost market supply, lower firms' cost pressure and guide prices to revert to a normal range, while it will issue new rules on price indexes for key commodities and services effective August 1st. (Newswires)