• Asian equities were sluggish following the mixed lead from Wall Street where the NDX posted a fresh record high
• White House National Security Adviser Sullivan said they are considering a call between US President Biden and Chinese President Xi
• BoJ maintained policy settings as expected and extended pandemic relief measures by six months
• In FX, the DXY eyes 92.00 to the upside as EUR/USD and GBP/USD lost 1.19 and 1.39 status respectively
• US State Department said it has been able to achieve progress in Iran talks but challenges still remain
• Looking ahead, highlights include UK retail sales, Fed's Kashkari, quadruple witching

CORONAVIRUS UPDATE

UK could reportedly end the lockdown two weeks early with Downing Street said to be open for a potential end of restrictions on July 5th if the data continues to improve. (Daily Mail)

Japanese experts' report noted there is a possibility that holding the Olympics would add to the burden on Japan's medical system and noted that holding the games without spectators would allow a maximum reduction to the risks of infection spreading, while it suggested it is important to scale down Olympics as much as possible. (Newswires)

Taiwan said it is continuing discussions with BioNTech (BNTX) regarding COVID-19 vaccine purchases with the help of the German government, while it added that BioNTech told Foxconn's founder that it will only sell vaccines to governments. (Newswires)

CureVac's (CVAC; 5CV GY) CEO said its manufacturing partners may make other vaccines if the firm's own shot fails. (Newswires)

ASIA

Asian equity markets were sluggish following the mixed lead from Wall Street where the mood was indecisive amid an unwinding of inflation hedges, looming quadruple witching and following weaker than expected US data, although tech outperformed and the NDX posted a fresh record high helped by a pullback in yields. ASX 200 (+0.3%) was led higher by tech as the sector found inspiration from US peers although upside in the broader market was limited by commodity-related losses with energy names dragged after WTI crude briefly dipped beneath USD 70/bbl. Nikkei 225 (Unch.) lacked conviction amid an unsurprising BoJ policy conclusion in which the BoJ maintained policy settings as expected and extended pandemic relief measures by six months beyond the September deadline as was flagged by source reports, although Eisai was the biggest gainer due to a global strategic collaboration with Bristol Myers Squib in which Eisai will receive USD 650mln and also be entitled to as much as USD 2.45bln in milestones. Hang Seng (+0.7%) and Shanghai Comp. (-0.5%) were varied with the mainland bourse weakened by lingering tensions with the West, while outperformance in Hong Kong was driven by tech and retailers as JD.com celebrated its birthday with the 6.18 shopping festival and with Anta Sports also lifted after forecasts of a minimum 110% jump in H1 net. Finally, 10yr JGBs were marginally higher after yesterday’s bounce back from support at 151.50, but with price action very quiet as Japanese stocks were kept rangebound and amid a lack of fireworks from the BoJ policy announcement.

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 6.4361 vs exp. 6.4333 (prev. 6.4298)

US President Biden's executive order which seeks to safeguard data of Americans, would force some Chinese apps to take tougher measures to protect private information if they want to stay in the US market, according to sources. It was also reported that the US Commerce Secretary may negotiate with companies to curb risks of apps linked to foreign adversaries and US is talking with allies on taking a similar stance, while app firms may object or propose measures after unacceptable risk is determined. (Newswires)

White House National Security Adviser Sullivan said they are considering a call between US President Biden and China's President Xi. In other news, a top US general said he believes China has little intent to militarily seize Taiwan. (Newswires)

BoJ kept policy settings unchanged as expected with rates kept at -0.10% and 10yr JGB yield target maintained at 0.0%, while it extended the pandemic relief programme by six months beyond the September deadline with the decision on YCC made by 7 votes for, 1 vote against and 1 abstained with Kataoka the dissenter and Masai the abstainer. BoJ said the economy remains in a severe state but is picking up as a trend, while exports and output are increasing steadily although it downgraded the assessment of consumption which it stated is stagnating. Furthermore, the BoJ said it will introduce a new scheme to back finance climate change loans and expects to roll out new climate change scheme at year-end with the outline of the scheme to be released at next month's meeting. (Newswires)

• Japanese National CPI (May) Y/Y -0.1% vs. Exp. -0.2% (Prev. -0.4%)
• Japanese National CPI Ex. Fresh Food (May) Y/Y 0.1% vs. Exp. 0.1% (Prev. -0.1%)
• Japanese National CPI Ex. Fresh Food & Energy (May) Y/Y -0.2% vs. Exp. -0.3%

UK/EU

UK Chancellor Sunak has reportedly refused to help businesses hit by extended COVID restrictions. (FT)

UK has reportedly asked the EU for an extension to the Northern Ireland trade grace period and is looking for a grace period extension on chilled meats to September 30th, while the European Commission is to “assess” the UK request for an extension of the chilled meats grace period till Sept 30th. (Newswires) Separate reports note that the EU is prepared to agree to a three-month extension in an attempt to avert a "sausage trade war". (Times)

CBI sees UK output to return to pre-pandemic levels by end-2021 which is a year earlier than it had previously forecast. (FT)

Northern Ireland's DUP leader Poots has quit amid criticism from within the party regarding concessions to nationalists. (FT)

ECB's Visco said large issues in supply and demand caused by the pandemic, coupled with the pickup in commodity prices, will complicate the assessment of the inflationary outlook, while he added that the path of global recovery is still uncertain. (Newswires)

FX

In FX markets, the DXY was flat overnight but held on to most of its post-FOMC gains having tested the 92.00 level to the upside, with the greenback unfazed despite the recent pullback in yields and disappointing US data in which Philly Fed Business Index missed forecasts and Jobless Claimants numbers were higher than expected. EUR/USD suffered from the USD strength and briefly gave up the 1.1900 status, while the latest central bank commentary had little bearing on the single currency, in which ECB’s Weidmann called for the PEPP to end soon and ECB's Visco noted the path of the global recovery is still uncertain and that large supply and demand issues caused by the pandemic, coupled with the pickup in commodity prices, will complicate the assessment of the inflationary outlook. GBP/USD was pressured and eyes 1.39 to the downside amid the weight of a firmer USD and with the currency not helped by Chancellor Sunak’s refusal to provide help for businesses hit by extended COVID restrictions. USD/JPY and JPY-crosses were subdued after the prior day’s slump and following an uneventful BoJ policy decision where the central bank maintained policy settings and extended its pandemic-relief programme as expected, while antipodeans drifted lower ahead of the European entrance to market following the recent downturn across the commodities complex.

COMMODITIES

Commodities were mixed overnight with WTI crude futures despondent following the prior day's heavy selling pressure alongside a broad slump across the commodities complex as the greenback extended on gains and amid suggestions from the US that progress was achieved in Iran talks although challenges remain. There were also updates overnight from the NHC which announced a tropical storm warning will likely be required for a portion of the northern Gulf of Mexico, while Chevron (CVX) withdrew staff from offshore facilities in the area due to the potential tropical storm and Occidental Petroleum was also implementing storm procedures. Gold nursed some losses overnight although the recovery was insignificant compared to the circa USD 90/oz drop suffered since the FOMC and copper's attempts to recoup losses were also limited by the tentative mood across risk assets.

NHC announced a tropical storm warning will likely be required for a portion of the northern Gulf of Mexico Thursday tonight or early Friday, while it later added that the potential tropical cyclone is about 475 miles south of Morgan City, Louisiana with maximum sustained winds of 30 miles per hour. In relevant news, Chevron (CVX) withdrew staff from US Gulf of Mexico offshore facilities due to the potential tropical storm and Occidental Petroleum is also implementing storm procedures at its Gulf of Mexico offshore facilities. (Newswires)

CME raised platinum futures initial margins for speculators by 15% to USD 5,060 per contract and raised palladium futures NYMEX initial margins for speculators by 14.8% to USD 34,100 per contract. (Newswires)

GEOPOLITICAL

US State Department said it has been able to achieve progress in Iran talks but challenges still remain and it does not have time for a sixth round. (Newswires)

US Secretary of State Blinken spoke to Israel Foreign Minister Lapid about need to improve Israeli-Palestinian relations in practical ways, while it was separately reported that Israel's IDF conducted a drone strike against a Hamas position in northern Gaza. (Newswires/Twitter)

White House National Security Adviser Sullivan that US President Biden and Turkish President Erdogan discussed the S-400, while he added there was no resolution but dialogue will continue. (Newswires)

North Korean leader Kim said North Korea is prepared for both dialogue and confrontation with the US. (Yonhap/KCNA)

US

Treasuries bull-flattened after a long-end bid extended post FOMC tumbled into a broader short-squeeze in duration. By settlement, 2s +1.2bps at 0.217%, 3s +2.9bps at 0.437%, 5s +0.2bps at 0.884%, 7s -2.9bps at 1.259%, 10s -5.5bps at 1.514%, 20s -9.1bps at 2.052%, 30s -10.1bps at 2.108%. TYU1 volumes were solid, and even higher than Wednesday: current volume at over 2.4mln vs Wednesday's 2.15mln. 5yr TIPS -0.1bps at -1.533%, 10yr TIPS +0.7bps at -0.762%, 30yr TIPS -3.9bps at -0.145%. Eurodollar futures: Z2 -3.5bps at 99.52, Z3 -5bps at 98.89, Z4 +2bps at 98.405, Z5 +10.5bps at 98.15, Z6 +14bps at 97.955. SOFR and EFFR both unchanged at 1bp and 6bps, respectively, but note this is for Wednesday before the IOER/RRP hike. Treasuries were on the back foot overnight with reports of Asian accounts seizing the blip higher post-FOMC. Furthermore, a strong Australian jobs report kept the risk tone buoyed, providing headwinds for bond bulls. Yields hovered close to their peaks in choppy range trade into the US session, where a disappointing Initial Jobless Claims print and surprise fall in the Philly Fed survey for June saw bond strength pickup. Although note the long bond had entered the US session quietly on the front foot regardless, with traders likely unwinding some curve steepener trades post-Fed. T-notes (U1) futures settle 8+ ticks higher at 132-00+.

US President Biden hasn’t publicly indicated if he will re-nominate Fed Chair Powell although Democrats close to the administration said there is a chance he'll make an announcement by Labor Day which will be well ahead of the end of Powell’s term in February. (Axios)

US President Biden signed a bill for a new Juneteenth federal holiday on June 19th to commemorate the end of slavery in US. SIFMA stated it is not recommending a fixed income market close as June 19th falls on a Saturday this year but will incorporate the new holiday into the holiday schedule going forward, while the NY Fed also stated Juneteenth will be incorporated into the desks' operations schedules and reference rates publication policies going forward. (Newswires)

US chip investment would reportedly receive a 25% investment tax credit in the bipartisan bill. (Newswires)