• Equities have slipped/stalled in proximity to all-time-highs, Euro Stoxx 50 -0.6% and ES U/C, amid quiet newsflow
• The USD is subdued with peers modestly firmer ex-JPY which has dropped to fresh YTD lows surpassing 111.00
• EZ flash PMIs were firmer than expected though the French measures missed on expectations while the UK prints were more mixed
• US and China are discussing a possible meeting between Secretary of State Blinken and Foreign Minister Wang Yi at the G20, FT
• China said its military is ready to respond to all provocations after a US ship sailed through the Taiwanese Strait
• China State Planner has sent teams to investigate commodity prices and supplies
• Looking ahead, highlights include US PMIs (Flash), ECB's Lagarde; Fed's Bowman, Bostic, Rosengren, and supply from the US

CORONAVIRUS UPDATE

AstraZeneca's (AZN LN) COVID-19 vaccine shows effectiveness against Indian/Delta variant. (Newswires)

New Zealand raises the alert level in the capital city of Wellington to level 2 from Wednesday. (Newswires)

Australia's New South Wales is urgently investigating four mystery COVID cases overnight and the premier has outlined new restrictions of hotspots including in Sydney. (Guardian)

ASIA

Asia-Pac equities saw mixed trade and failed to fully benefit from the firmer performance seen on Wall Street, where the Nasdaq Composite closed at an all-time high as Microsoft joined Apple in the USD 2trl club, whilst the S&P 500 was just short of a new closing record. US equity futures held a mild upside bias - the NQ (+0.2%), ES (+0.1%), RTY (+0.1%), and YM (+0.1%) all saw modest broad-based gains ahead of the next raft of Fed speakers. ASX 200 (-0.4%) was pressured as the gains across its mining, telecoms, and tech stocks failed to offset the losses in the Financials and Healthcare sectors. The Nikkei 225 (Unch) briefly topped 29k as the softer currency underpinned the exporter-heavy index. The KOSPI (+0.4%) remained cautious as tensions between Washington and Pyongyang simmered in the background. The Hang Seng (+1.6%) was bolstered by gains across its large-cap oil and financial stocks, whilst the Shanghai Comp (+0.5%) was contained, with friction reported in the Taiwanese Strait after a US destroyer sailed through the waters in what was seen as a sign of provocation in Beijing. Finally, JGB futures are relatively flat as it tracks price action across UST futures.

China Securities Journal noted that China should be alert to risks regarding CNY depreciation. (Newswires)

Japanese government is looking at tightening regulation on investment from foreign entities in Japanese firms with important tech (areas such as nuclear and defence), according to Japanese press

BoJ April Minutes said that members agreed that the Japanese economy will likely recover ahead. (Newswires)

Japanese Composite PMI (Jun) 47.8 (Prev. 48.8)

Australian Composite PMI (Jun) 56.1 (Prev. 58.0)

PBoC injected CNY 10bln via 7-day reverse repo at a maintained rate of 2.20%.

PBoC set USD/CNY mid-point at 6.4621 vs exp. 6.4641 (prev. 6.4613)

US

US and China are discussing a possible meeting between US Secretary of State Blinken and China's Foreign Minister Wang Yi at the G20 next week, FT citing sources; additionally, the White House is considering a call with China's President Xi. (FT)

US NEC Director Deese will unveil the Biden administration’s industrial policy on Wednesday June 23rd, according to Axios sources. (Axios)

GOP whip Thune said infrastructure talks are getting rockier on how to fund it. Thune added that the White House is rejecting bipartisan group’s suggestions, via Politico's Everett. (Twitter) US bipartisan group of senators and admin officials are still struggling to finalise the deal on how to pay for infrastructure package, CNN's Raju reported. (Twitter)

US Democratic Senator Manchin is open to President Biden's 'human infrastructure' plans and undoing some Trump tax cuts, NBC reported. (NBC)

US President Biden is encouraged by the bipartisan work to address problems within large tech; Biden believes the need to protect privacy, generate more innovation, and ensuring big tech grows within the US. (Newswires)

The White House said Fed Chair Powell's testimony shows that President Biden's economic plan is working. (Newswires)

UK/EU

The Times' Shadow MPC believes the BoE should refrain from carrying out the final GBP 50bln of purchases under its QE plans. 4/9 members think that the Bank should look to hike rates by the end of the year. (Times)

German Election Poll: Merkel’s German Conservative Bloc at 29% (+1), Greens at 21% (Unch), Forsa poll for RTL/NTV. (Newswires)

ECB Vice President de Guindos says the central bank's recommendation on banks' dividend cap could be lifted sooner or later, alongside economic recovery. (Newswires)

EU Markit Composite Flash PMI (Jun) 59.2 vs. Exp. 58.8 (Prev. 57.1)

• Manufacturing Flash PMI (Jun) 63.1 vs. Exp. 62.1 (Prev. 63.1)
• Services Flash PMI (Jun) 58.0 vs. Exp. 57.8 (Prev. 55.2)

German Markit Comp Flash PMI (Jun) 60.4 vs. Exp. 57.5 (Prev. 56.2) French Markit Comp Flash PMI (Jun) 57.1 vs. Exp. 59.0 (Prev. 57.0)

UK Flash Services PMI (Jun) 61.7 vs. Exp. 63.0 (Prev. 62.9)

• Composite PMI (Jun) 61.7 vs. Exp. 62.8 (Prev. 62.9)
• Manufacturing PMI (Jun) 64.2 vs. Exp. 64.0 (Prev. 65.6)

GEOPOLITICAL

Chinese PLA Eastern Theatre Command tracked and monitored the USS Curtis Wilbur destroyer when it sailed through Taiwan Straits on Tuesday, according to Global Times; China said its military is ready to respond to all provocations. (Global Times/Newswires)

Iranian Outgoing President Rouhani Chief of Staff says "lifting of economic sanctions on Iran has been agreed in Vienna", according to an NBC journalist; while the Iranian Outgoing President Rouhani Chief of Staff says "lifting of economic sanctions on Iran has been agreed in Vienna", according to an NBC journalist. (Twitter)

US DoJ confirmed that websites have been seized belonging to Iranian Islamic Radio, Television Union and Kata'ib Hizballah. Al-Jazeera reported "Number of Iranian websites confiscated [total] 33 in addition to 3 battalion". (Newswires/Twitter)

Iran Press TV says a sabotage attempt on a Atomic Energy Organisation of Iran building has been stopped. (Newswires)

EQUITIES

European equities (Stoxx 600 -0.5%) painted a relatively mixed picture at the start of the session with initial pressure seemingly stemming from misses across the board on French flash PMIs for June. A better-than-expected report from Germany and the Eurozone was unable to help revive sentiment with the Stoxx 600 unable to surmount the index’s record high of 460.5 posted on June 14th. As the morning progressed the initial equity pressure has picked up with fresh catalysts slim though cash bourses remain somewhat mixed as the FTSE 100, for instance, benefits from mining strength. Separately, analysts at JP Morgan note that Europe is currently experiencing a faster pace of upgrades than any other region and still has room to continue its uptrend vs. the US. Stateside, futures trade largely unchanged ahead of the US entrance to market with no real bias towards growth/value. From a sectoral standpoint, Oil & Gas names sit at the top of the leaderboard with Brent crude rising to its best level since October 2018. Basic Resources are also performing well with BHP (+0.8%) a notable gainer in the sector after being upgraded to overweight from equal weight at Morgan Stanley. While Pernod Ricard (+2.4%) is currently the biggest gainer in the Stoxx 600 after raising guidance amid a stronger than expected recovery from the pandemic. At the other end of the spectrum, Luxury names have been in focus after a slew of broker moves at HSBC which has sent the likes of Kering (-3.0%), Hermes (-1.9%) and Burberry (-0.2%) lower.

IHS Markit Ltd (INFO) Q1 21 (USD): EPS 0.81 (exp. 0.80), Revenue 1.181 (exp. 1.13bln)

FX

GBP/JPY - A stellar start to Wednesday’s session for Sterling amidst reports of optimism on both sides of the NI protocol divide that a stop-gap solution can be found to the trade spat, while the Pound also scaled several chart and psychological hurdles vs the Dollar and Euro respectively that have been capping upside momentum. Specifically, the 100 DMA at 1.3944 and yesterday’s 1.3963 high that aligns with a Fib retracement (38.2% of the retreat from 1.4250 peak on June 1st to this Monday’s 1.3787 low) were all breached to expose 1.4000 in Cable, and Eur/Gbp crossed 0.8550 to the downside on the way to a circa 0.8530 multi-month low before bouncing in wake of somewhat contrasting flash UK PMIs. Conversely, the Yen’s fortunes are going from bad to worse it seems as Usd/Jpy has now surpassed 111.00 inching beyond prior YTD peaks and now eyeing 111.10, with reports that the Japanese Government is thinking about tightening regulations regarding foreign investment in important tech firms hardly helping.

USD - Aside from Yen underperformance and a fragile Franc (latter still straddling 0.9200), the Greenback is gradually losing more of its post-FOMC vigour vs G10 peers and EM counterparts. Indeed, the DXY is slipping further from 92.000 having already retreated into another lower range from last week’s peak (92.408), and in tech terms closing below a Fib support level for the 2nd consecutive day following a round of Fed speak offering a less hawkish/more dovish spin compared to Monday. However, the index is holding just above yesterday’s 91.643 trough, for now, within a 91.900-682 band awaiting more US housing data, Markit’s prelim PMIs and the next batch of Fed officials, including Bowman, Bostic and Rosengren.

NZD/AUD - The Kiwi and Aussie have both recovered well from overnight lows just under 0.7000 and sub-0.7550 against their US rival irrespective of latest COVID-19 outbreaks in Wellington and NSW that prompted NZ to lift the capital’s alert status to level 2 and the state premier to announce new restrictions for hotspots including Sydney. Nzd/Usd is back up near 0.7050 and Aud/Usd is eyeing 0.7575 having cleared the 200 DMA (0.7560) with some belated assistance perhaps via the CBA revising its RBA outlook markedly (the bank now anticipates a hike in November 2022 vs 2024 previously).

CAD/EUR - Another and firmer rebound in oil prices has helped the Loonie pare more of its recent losses to probe resistance offers through 1.2300 in the run up to Canadian retail sales, while mostly better than expected Eurozone flash PMIs (after an initial French scare) are contributing to the Euro’s efforts to stay comfortably afloat of 1.1900.

SCANDI/EM - Brent’s bounce beyond Usd 75/brl alongside WTI on the back of bullish private crude inventory data is boosting the Nok, Rub and Mxn, while the Sek is deriving some underlying support from a sharp upgrade to this year’s GDP estimate from the Swedish Finance Ministry and the Try is taking remarks from the CBRT about protecting the Lira at face value. Elsewhere, the Zar has shrugged off slightly weaker than forecast SA core CPI against the backdrop of relative stability in Gold, but the Cnh and Cny remain on a weaker footing in line with PBoC fixings.

Notable FX Expiry, NY Cut:

• USD/JPY 109.00 (500M), 109.50-60 (1.0BLN), 109.73 (500M), 110.00 (722M), 110.95-00 (665M)

CBA expects RBA to raise the cash rate in November 2022 (vs prev. 2024); sees Cash Rate Target at 0.5% in late-2022 and then peaking at 1.25% by Q3 2023. (Newswires)

RBA's Ellis said the board remains committed to highly supportive monetary conditions; Australia's recovery exceeded all expectations, even before the roll-out. (Newswires)

FIXED

Almost déjà vu for European bonds that have rebounded from worst levels across the board, and Bunds may well be more relieved to see 2036 German supply receive a modestly warmer welcome at a lower yield with a much smaller retention than Gilts in wake of a solid, but typically small DMO linker auction. Hence, a firmer recovery on Eurex, to 172.15 (+20 ticks vs -19 ticks at the earlier post-PMI low) compared to Liffe at 127.49 (+5 ticks vs -19 ticks at one stage), while EZ periphery debt is also outperforming in contrast to the belly of the US Treasury curve ahead of the Usd 61 bn 5 year note sale, US housing data, Markit PMIs and another round of Fed speak.

COMMODITIES

A slower session for the crude complex in terms of newsflow updates after yesterday’s multiple source reports relating to OPEC+ potentially considering increasing production and the benchmarks are now back at prices near/above yesterday’s best levels. Specifically, WTI and Brent August’21 contracts post gains of ~1.0% on the session at the top end of a USD 1/bbl range for Brent which is now trading in the mid USD 75.50/bbl region. Focus this morning has been on yesterday’s bullish private inventory report, particularly referencing the headline crude figure which posted a draw of -7.2mln vs exp. -3.9mln, ahead of the EIA release due later today. Elsewhere, geopolitical development has seen outgoing Iranian President Rouhani’s Chief of Staff announced that parties in Vienna have agreed to lift economic sanctions on Iran; however, Rouhani is the outgoing President so it remains to be seen how relations will transfer and develop when Raisi, who has already refused a President Biden meeting, takes over. Subsequently, Germany’s Foreign Minister says that there are still some issues but acknowledges progress has been made on the nuclear talks. Moving to metals, spot gold and silver have been very contained throughout the morning though modestly firmer on the session taking advantage of USD pressure. For base metals attention remains firmly on the action of China whose State Planner has sent teams to begin investigation commodity pricing and supply. Nonetheless, the likes of platinum, palladium and LME copper remain firmer on the session.

US Private Energy Inventories (w/e June 18th; bbls): Crude -7.2mln (exp. -3.9mln), Cushing -2.6mln, Gasoline +0.96mln (exp. +0.8mln), Distillate +0.99mln (exp. +1.1mln)

Chinese State Planner has sent teams to investigate commodity prices and supplies. (Newswires)

Glencore CEO said copper supply must be raised by 1mln tonnes per year in order to meet future demand. (Newswires)

Earthquake magnitude 5.7 hits the coast of Peru. (Newswires) Note, Peru is the worlds second largest copper producer