• European equities are mixed but contained while US futures are steady as we await infrastructure updates, ES +0.1%
• US Senate Minority Leader McConnell has gone from optimism to pessimism on infrastructure after Biden's veto threat
• FX is rangebound with the USD lower and NZD outperforming post-data while GBP lags but magnitudes are minimal overall
• Nike beat on top and bottom lines and are +14% in the pre-market while US banks are bolstered after the stress test results
• Looking ahead, highlights include US PCE Price Index, Personal Income and Consumption, Fed's Williams, Rosengren, Mester, Kashkari

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. Over in APAC, the ASX 200 (+0.5%) 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 (+0.5%) 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 (+1.4%) was supported by its heavy-weight energy and financial stocks, whilst the Shanghai Comp (+1.2%) 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)

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

S&P affirms China's rating A+/A-1, outlook stable; China is likely to maintain above average economic growth relative to other middle-income economies over the next few years. (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)

US

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)

People close to Senate Democrats say they will start drafting a budget resolution that will allow passage of a second infrastructure bill totalling USD 2-2.5trln to pass as soon as October, according to NBC's Moynihan. (NBC)

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

UK/EU

EU Money-M3 Annual Growth (May) 8.4% vs. Exp. 8.5% (Prev. 9.2%)

• Loans to Non-Financials (May) 1.9% (Prev. 3.2%)
• Loans to Households (May) 3.9% (Prev. 3.8%)

German GfK Consumer Sentiment (Jul) -0.3 vs. Exp. -4.0 (Prev. -7.0, Rev. -6.9). (Newswires)

GEOPOLITICAL

Chinese President Xi will hold a video meeting with Russian President Putin on Monday, according to the Chinese Global Times. (Twitter)

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)

Russian Foreign Minister say Britain and the US are attempting to incite conflict within the Black Sea, citing the recent UK warship incident, according to Ria. (Newswires)

EQUITIES

European indices trade with little in the way of firm direction in what has been a particularly quiet session thus far. From a macro perspective, the main topic of focus has been the agreement on the USD 1.2tln bipartisan infrastructure plan which includes USD 579bln in new spending. Some concerns have been flagged over the passage of the accompanying legislation after President Biden threatened to veto the deal if it was not accompanied by a much larger reconciliation package, however, markets remain relatively unfazed by this threat at the time of writing. Stateside, futures trade near the unchanged mark after the e-mini S&P printed an ATH during APAC hours. In the pre-market, banking names are broadly firmer with Bank of America (+1.5%) best-in-class in the wake of the Fed’s stress test results with restrictions on bank share buybacks and dividends to be lifted on June 30th. From a European perspective, JP Morgan notes that the aggregate signal from its Quant Macro Index remains at a cycle high and recommends the ‘Expansion phase’ which would support “Value vs Growth, rising vs falling Momentum, low vs high Quality, high vs low Risk and small vs large Caps”. Sectoral performance in Europe is relatively mixed with Retail and Basic Resources topping the leaderboard whilst Travel & Leisure and Autos lag peers. Travel & Leisure names are seen lower in the wake of the UK’s publication of its “green travel list” yesterday, which was met with disappointment by industry bosses. Adidas (+5.2%) are the best performer in the Dax following after-hours earnings from US competitor Nike (+11.3% pre-market). Finally, Credit Suisse (+2.0%) are firmer amid source reports suggesting the Co's top management is under pressure to work out an overhaul plan, which could feature a potential merger with UBS (U/C).

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

• JPM +1.1%, BAC +1.4%, WFC +1.8% in the pre-market

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) +11.3% in the pre-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). -4.4% in the pre-market

FX

USD - Little sign of the Dollar and DXY by default deviating much from their largely rangebound and sideways trajectory, with only a few exceptions to the rule on specific factors. Indeed, the index has essentially been in a holding pattern since Monday’s failure to surpass last week’s peak and fade before losing 92.000+ status the following day, with subsequent daily parameters all compressed between the round number and 91.500 that also aligns very closely with technical support via the 200 DMA. However, today is spot month end and this could compound the usual pre-weekend volatility, especially as June 30 is with the final trading day of the current quarter and last of H1 as well. In the interim, PCE price data has the potential to move markets as the Fed’s preferred inflation measure, while there is even more Fed speak from a quartet of officials to round out the week as the index roams within a 91.861-696 band.

NZD/AUD - The Kiwi continues to outperform, and NZ trade data gave it more impetus overnight to inch nearer 0.7100 vs the Greenback and 1.0725 against the Aussie. In short, exports outpaced imports to inflate the surplus, albeit the latter picking up more pace from the prior month and the rolling annual trade balance turned marginally negative in May from a small surplus previously. Meanwhile, Aud/Usd has probed 0.7600, but unconvincingly as for areas in Sydney enter lockdown until July 2 at the earliest.

CAD/CHF/JPY/EUR - All mildly firmer vs their US counterpart, but contained within recent ranges as noted above, as the Loonie stays anchored around 1.2300 eyeing oil prices and the Franc regains composure following its latest decline to 0.9200. Similarly, the Yen has defended its closest round number support, at 111.00, and is retesting resistance circa 110.70, but could yet be scuppered by decent option expiry interest at the big figure (1.3 bn), while the Euro is sitting tight between 1.1951-27 with expiries capping the upside from 1.1950 to 1.1960 (1.1 bn).

GBP - Sterling is still suffering a hangover from its post-BoE reversal, though holding around 1.3900 vs the Buck and above a double bottom in Cable circa 1.3890, while the Eur/Gbp cross is propped in the high 0.8500 zone in wake of dovish messages emanating from the latest set of MPC minutes.

EM - Broad advances against the Usd and the Cnh/Cny getting an extra fillip to embellish a firmer PBoC fixing and net 7-day liquidity injection via reports of state bank intervention. Moreover, prop accounts are said to have pared long Dollar positions and hefty inflows into Chinese stocks may have underpinned Yuan sentiment. Elsewhere, the Mxn is extending gains irrespective of a pull-back in WTI crude to touch Usd 73/brl in wake of Banxico’s unexpected 25 bp rate hike to 4.25% from 4%, even though the decision was not unanimous.

Notable FX Expiries, NY Cut:

• EUR/USD 1.1895-00 (565M), 1.1915-20 (500M), 1.1950-60 (1.1BLN), 1.2000 (545M), 1.2085 (540M), 1.2111 (470M)
• USD/JPY 110.00 (843M), 110.25 (310M), 110.50 (834M), 111.00 (1.3BLN), 111.15 (300M)

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)

FIXED

No obvious catalyst behind the broad retreat in bonds, but for Gilts and US Treasuries it could simply be the lack of follow-through from dovish BoE vibes and cashing in on a decent 7 year note auction to end this week’s supply schedule that was not going down that well. The former is now just off a new 127.69 Liffe intraday low vs 127.95 high and the 10 year T-note is nearer 132-02 than 132-06+, albeit still very contained. Meanwhile, technical momentum is also waning after Bunds got a tick closer to parity, at 172.30, but fell away again and are now below Fib support and eyeing or relying on psychological props around 172.00 having fallen to 172.04 (-29 ticks on the day vs -3 ticks at best). Ahead, potentially pivotal US inflation data in the form of PCE and ECB’s de Cos precedes a Fed quartet.

COMMODITIES

Crude benchmarks have experienced a contained and uneventful session thus far with little in the way of notable price action having occurred since yesterday afternoon. Currently, WTI and Brent August’21 contracts are within USD 0.30/bbl of the unchanged mark but at the lower-end of a circa USD 0.50/bbl range for today’s session and as such off the near multi-year highs we approached earlier in the week. Newsflow has been very limited as participants gear up for next week’s OPEC+ gathering and we await any substantial developments on the Iranian nuclear front seeing as the monitoring agreement expired last night; with no firm indications of a meeting date just yet, though likely to occur in the near-term. Elsewhere, spot gold and silver are firmer this morning though again relatively rangebound with gold’s range still within yesterday’s parameters. While base metals are supported as well but trading for the most part in similarly contained parameters after initial upside in the likes of LME copper was not sufficient to breach near-term resistance.

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