• Asia-Pac equities picked up momentum throughout the session; Nikkei 225 climbed back above 29k
• US equity futures overnight traded with a mild upside bias with the YM marginally outperforming
• In FX, the DXY was contained, USD/JPY remained sub-111.00 and NZD outperformed
• US Senate Minority Leader McConnell has gone from optimism to pessimism on infrastructure after Biden's veto threat
• A US State Department official said the US still has serious differences with Iran on the possible resumption of compliance with JCPOA
• Looking ahead, highlights include German GfK Consumer Sentiment, US PCE Price Index, Personal Income and Consumption, Fed's Williams, Rosengren, Mester, Kashkari; ECB's de Cos and supply from Italy

CORONAVIRUS UPDATE

Four areas in Australia's Sydney will go into lockdown until at least July 2nd. (Newswires)

ASIA

Asia-Pac equities picked up momentum throughout the session and traded with gains across the board following the firm performance stateside, which saw the S&P 500 and Nasdaq Composite notch record closes whilst the DJIA ended the day above the 34,000 mark. Participants have been attributing some of the upside on Wall Street to President Biden endorsing the bipartisan US infrastructure plan, although this positive sentiment surrounding the deal was somewhat sullied overnight after Senate Minority Leader McConnell suggested he is now more pessimistic than optimistic on the passage of the bipartisan bill – which came after President Biden threatened a veto unless Congress also passes his ambitious social spending agenda in a linked reconciliation package. US equity futures overnight traded with a mild upside bias and modest outperformance in the YM (+0.4%) vs the ES (+0.1%), NQ (+0.1%), and RTY (+0.2%). Over in APAC, the ASX 200 (+0.8%) was led by gains in its mining and financial sectors, whilst the Nikkei 225 (+0.8%) initially probed 29k before gaining a firmer footing above the level as the JPY remained near YTD lows, whilst Panasonic shares rose almost 5% after it confirmed that it sold its entire stake in Tesla, but maintained its relationship with the EV name. The KOSPI (+0.8%) saw its gains accelerate after topping the 3,300, whilst reports suggested that bank dividend restrictions will be lifted in July and the country is to invest KRW 23.5tln in R&D projects aimed at bolstering its tech sector. Over in China, the Hang Seng (+1.0%) was supported by its heavy-weight energy and financial stocks, whilst the Shanghai Comp (+0.8%) saw mild gains after another liquidity injection by the PBoC at the recently increased amount of CNY 30bln. On that note, Industry insiders via the Chinese Securities Journal noted that the increase in PBoC reverse repo intended to signal "stable mid-year liquidity". Finally, JGB futures trade modestly softer as it tracks the price action across the UST and Germany Bund futures.

• PBoC set USD/CNY mid-point at 6.4744 vs exp. 6.4732 (prev. 6.4821)
• PBoC inject CNY 30bln via 7-day reverse repos for a net daily injection of CNY 20bln; at a maintained rate of 2.20%
• PBoC injected CNY 50bln for the week via OMO

Industry insiders via the Chinese Securities Journal note that the increase in PBoC reverse repo intended to signal "stable mid-year liquidity". The article said "If seasonal factors such as regulatory assessments have a greater impact on liquidity supply and demand, the central bank may increase liquidity supply in a timely and appropriate manner." (China Securities Journal)

US President Biden stated the infrastructure deal is a big move towards being able to compete with China. (Newswires)

US President Biden says Beijing must stop targeting the independent press and release journalists and media executives who have been detained. Biden added that Beijing is denying basic liberties and assaulting Hong Kong's autonomy and democratic institutions and processes; this is inconsistent with its international obligations. (Newswires)

China's Bitmain has suspended sales of cryptocurrency rigs to ease selling pressure on the market; looking for overseas power supplies. (Newswires)

• New Zealand Trade Balance (May) 469M (Prev. 388.0M, Rev. 414M)
• New Zealand Exports (May) 5.87B (Prev. 5.37B, Rev. 5.40B)
• New Zealand Imports (May) 5.40B (Prev. 4.98B, Rev. 4.99B)

CENTRAL BANKS

Fed's Bullard (2022 voter) said there is a tangible risk inflation could be even stronger than expected, policymakers will need to account for new inflation risks in coming months and further upside could push inflation beyond what is needed for the Fed to account for weak inflation in the past. Bullard reiterates that data is moving too quickly for the Fed to put taper on "automatic pilot". He has become a little bit more worried about the possible home price bubble. He expects Europe to be 3 to 6 months behind the US in recovery but it will boom as well. (Newswires)

Fed's Kaplan (2023 voter) said there is upside risk for his 3.4% inflation forecast this year and 2.4% inflation forecast next year. He said demand is strong and he expects the strength to continue, and added that inflation is broadening out to more sectors. Kaplan noted that some of the inflation will moderate but some will be persistent and there is uncertainty. He suggested that the housing market does not need support from the Fed's asset purchases and adjusting asset purchases sooner will give greater flexibility in 2022 and 2023 regarding rate decisions. (Newswires)

ECB's Schnabel stated that the ECB cannot transfer all of PEPP's flexibility to other programmes. She said incoming indicators are very strong and European economy now at a turning point. She added that the ECB is not at the effective lower bound, but is getting closer. (Newswires)

Banxico decided to increase the target for the overnight interbank interest rate by 25 basis points to 4.25% (exp. 4.00%); Two members opted to leave rates unchanged at 4.00%. (Newswires)

FX

FX markets were relatively quiet with the DXY caged in a tight overnight range under the 92.00 mark, but with a mild downside bias after the mood surrounding US infrastructure talks soured overnight. Meanwhile, participants look ahead to the final wave of Fed speakers for the trading week ahead of next week’s ISM manufacturing and US jobs metrics. EUR/USD and GBP/USD moved in tandem with the Dollar and remained within recent ranges north of 1.1900 and 1.3900 respectively. USD/JPY meandered under 111.00 after re-encountering resistance at the level. Antipodeans narrowly outperformed with the NZD supported by constructive NZ trade data, whilst the Aussie’s gains were capped as four areas in Australia's Sydney are poised to go into lockdown until at least July 2nd amid COVID infections in the areas. Finally, the CNY saw some strength at the open following a firmer Yuan fix by the PBoC, and the central bank also opted to match yesterday’s increased liquidity injection.

S&P forecasts Mexico Economy to grow 5.8% in 2021 and 2.9% in 2022; Mexico is benefitting from and will continue to benefit from a strong US recovery through manufacturing exports and remittances. (Newswires)

El Salvador President Bukele announced that Bitcoin will become legal tender on September 7th and its use will be optional. Bukele said the USD will continue to circulate, whilst salaries and pensions will continue to be paid in USD. (Newswires)

COMMODITIES

WTI and Brent front month futures traded within tight ranges having had waned off their overnight bests, with the former finding some overnight resistance around USD 73.60/bbl and the latter hit a wall just under USD 76/bbl. In the grander-scheme the benchmarks remain elevated near recent highs in the run-up to a plethora of risk events for the complex in the upcoming week. News flow for the oil market remained light overnight as eyes remain on the JMMC and OPEC+ meetings next week, whilst Iranian nuclear talks remain in the balance after a US State Department Official voiced serious differences with Iran, whilst a date has not yet been set for the seventh round of talks. Elsewhere, spot gold and silver remained contained around USD 1,775/oz and USD 26/oz apiece amid steady yields and a caged Dollar. Finally, LME copper lost momentum after a test of USD 9,500/oz to the upside, but the breadth of the price action was relatively narrow and newsflow light.

China's Q3 copper floor treatment and refining charges (TC/RCs) set at USD 55/t or USD 0.055/lb, sources state. (Newswires)

GEOPOLITICAL

A US State Department official said the US still has serious differences with Iran on the possible resumption of compliance with JCPOA. The US would not be going back for the next round of talks if it did not think a deal was possible, but we are not there yet. The US will go back for the seventh round of talks in the not-too-distant future. The US has not heard about any IAEA-Iran monitoring deal (expired on June 24th) but hopes Iran will extend its technical understandings with IAEA. The US has indicated it would be an extremely complicating factor if Iran did not extend its technical understanding with IAEA. If the US and Iran are not able to bridge differences in the foreseeable future, Washington will need to regroup and consider the path forward. The officials do not know when the next round of Vienna talks will begin. He added that the identity of the Iranian President does not affect core US interests with Iran. (Newswires)

Russian Representative to the Iranian talks suggested that his instincts tell him that JCPOA talks will resume no later than July 4th, but caveated that this is not for sure. (Twitter)

German Chancellor Merkel said there has been no agreement on a summit with Russia. The European Council threatened new economic sanctions should Russia persist in “malign, illegal and disruptive activity.” (Newswires/Politico)

US

US President Biden states they have an infrastructure deal but neither side got everything they wanted. The bipartisan Infrastructure deal is for USD 1.2trln which includes USD 579bln in new spending, including USD 312bln in spending on transportation and USD 266bln on water, broadband, environmental remediation and power infrastructure. There is no new money for electric vehicle rebates. This will be financed by the sale from strategic petroleum reserve, 5G spectrum auction proceeds and extending expiring customs user fees. Republican Senator Collins said both sides agreed on a price tag, scope and how to pay for the infrastructure deal. (Newswires)

US Senate Minority Leader McConnell said less than two hours after endorsing the agreement, President Biden threatened to veto it, McConnell hopes bipartisan group can recover and get "good faith" efforts back on track regarding infrastructure talks. (Twitter) US Senate Minority Leader McConnell has gone from optimism to pessimism on infrastructure after Biden's veto threat. (Newswires) Biden threatened to veto the proposal it if it’s not accompanied by a much larger reconciliation package. (The Hill)

US Democratic Senator Manchin stated that there is going to be a reconciliation bill, just do not know the size it will be. Manchin added that reconciliation is inevitable because of GOP opposition to raising taxes, according to CNN's Raju. (Twitter) People close to Senate Democrats say they will start drafting a budget resolution that will allow passage of a second infrastructure bill totaling USD 2-2.5trln to pass as soon as October, according to NBC's Moynihan. (NBC)

FED STRESS TESTS: Fed is to lift pandemic restrictions on bank share buybacks and dividends on June 30th after banks clear stress tests (as expected). The test found 23 of the largest firms would suffer a combined USD 474bln in losses under a hypothetical severe downturn, but that would still leave them with more than twice as much capital required under Fed rules

Nike Inc (NKE) Q4 2021 (USD): EPS 0.93 (exp. 0.51), Revenue 12.3bln (exp. 11.01bln). Gross margin 45.8% (exp. 43.8%) Inventory 6.85bln (exp. 7.58bln) Effective tax rate 18.6% (exp. 14.6%). Cash and cash equivalents 9.89bln (exp. 8.17bln). North America 5.38bln (exp. 4.31bln). Greater China 1.93bln (exp. 2.25bln). Asia Pacific & Latin America 1.46bln (exp. 1.40bln). EMEA 2.98bln (exp. 2.54bln). (Newswires) Shares rose 14% after market

FedEx Corp (FDX) Q4 2021 (USD): Adj. EPS 5.01 (exp. 4.99), Revenue 22.6bln (exp. 21.51bln). FY22 EPS view 20.50-21.50 (exp. 20.60). Shares fell 4.4% after-marker

Panasonic (6752 JT) confirmed it has sold its entire stake in Tesla (TSLA); YEN 400bln during FY2020/21

US Department of Justice is ramping up its cryptocurrency crackdown advertising for a seasoned trial lawyer in the "Special Financial Investigations" unit focusing on digital-currency fraud, according to FBN's Gasparino citing sources. (Twitter)