• European indices and US futures have come under pressure as the session progressed going into June, Q2 & H1 end; Euro Stoxx 50 -0.80%, ES -0.1%
• DXY remains bid above 92.00 with peers contained and Sterling the lone G10 outperformer while fixed is firmer & USTs yields flatter
• Chinese Manufacturing PMI topped estimates but showed slower growth in tandem with the softer Non-Manufacturing and Composite readings; capping APAC performance
• Looking ahead, highlights include US ADP, Canadian GDP, Chicago PMI, BoE's Haldane, Fed's Barkin, Bostic & Kaplan

CORONAVIRUS UPDATE

Health Canada announced an update to the monograph or product label for AstraZeneca (AZN LN) and Covishield vaccines to add capillary leak syndrome as a potential side effect and warned that patients with history of the syndrome to not get the aforementioned vaccines. (Newswires)

Double vaccinated Britons will no longer have to isolate if they come into contact with a COVID patient from July 19th. (The Sun)

ASIA

Asian equity markets head into month-end mostly positive but with gains capped as the early momentum and attempt to improve upon the flat performance stateside, was tempered as participants digested a slew of data releases including the latest Chinese PMIs. Nonetheless, ASX 200 (+0.2%) was led higher by telecoms after Telstra announced the sale of a 49% stake in its towers business for AUD 2.8bln and with the index also propped up by strength in most commodity-related sectors aside from energy which suffers due to hefty losses in AGL Energy following its decision to demerge. Nikkei 225 (Unch.) failed to hold on to early gains with participants indecisive amid reports Japan is considering extending its quasi-virus emergency in Tokyo by 2-4 weeks and after disappointing Industrial Production data which showed the steepest contraction in a year, while the KOSPI (+0.3%) was also influenced by data with Industrial Production showing its largest growth in more than a decade despite actually missing forecasts. Hang Seng (-0.6%) and Shanghai Comp. (+0.5%) lacked firm direction following the Chinese PMI data in which the headline Manufacturing PMI topped estimates but showed slower growth in tandem with the softer Non-Manufacturing and Composite PMI readings. There were also reports that China’s leadership is straining to dial back its country’s chest-thumping “Wolf Warrior” approach to foreign policy on concerns it could undermine the country’s interests, while focus was also on IPO news with Didi pricing its US IPO at the top of the indicated USD 13-14/shr range ahead of today's debut. Finally, 10yr JGBs were subdued heading into month-end with price action hampered by the lack of BoJ presence in the market and after the central bank also reduced its purchase intentions across three tranches for the July-September quarter.

PBoC injected CNY 30bln via 7-day reverse repos with rates at 2.20% for a net CNY 20bln injection. (Newswires) PBoC set USD/CNY mid-point at 6.4601 vs. exp. 6.4578 (prev. 6.4567)

China NBS said output activities of some enterprises slowed due to the shortage of chips, coal and power supply and other factors, while a slight rise in new orders index reflected continued growth in market demand. (Newswires)

• Chinese NBS Manufacturing PMI (Jun) 50.9 vs. Exp. 50.8 (Prev. 51.0)
• Chinese NBS Non-Manufacturing PMI (Jun) 53.5 vs. Exp. 55.3 (Prev. 55.2)
• Chinese Composite PMI (Jun) 52.9 (Prev. 54.2)
• Japanese Industrial Production MM (May) -5.9% vs. Exp. -2.4% (Prev. 2.9%)
• Japanese Industrial Production YY (May P) 22.0% (Prev. 15.8%)

US

Fed's Waller (voter) said he did not shift his 'dot' regarding rate hike view and he has a very optimistic economic outlook but will not say when he expects a rate hike. Waller stated that inflation expectations seem anchored and that this year has been a surprise as the economy has progressed better than expected, while he added the pandemic is over and they are now dealing with the aftermath. Waller suggested there is a lot to decide regarding a potential taper and there is wide range of views on timing, pace and sequence, while he is in favour of tapering MBS before treasuries and would like to see tapering before hiking rates. Furthermore, he suggested that if the thought is that rates may need to be increased by end-2022 or early-2023, then tapering must be conducted before then. (Newswires)

US Republican leadership sources expect fewer than 10 GOP lawmakers in the House to support a bipartisan Senate infrastructure deal, if it ever makes it across the Capitol, according to Punchbowl News. (Newswires)

UK/EU

UK Chancellor Sunak is preparing GBP 15bln for green savings scheme for public, while the UK is to set out plans today for a more simple and nimble system for state subsidies which will be utilized to boost selected industries. (The Times/FT)

UK GDP QQ (Q1) -1.6% vs. Exp. -1.5% (Prev. -1.5%); YY (Q1) -6.1% vs. Exp. -6.1% (Prev. -6.1%)

• UK BRC Shop Price Index YY (Jun) -0.7% (Prev. -0.6%)
• UK Lloyds Business Barometer (Jun) 33 (Prev. 33)

EU HICP Flash YY (Jun) 1.9% vs. Exp. 1.9% (Prev. 2.0%)

• Ex-Food & Energy Flash YY (Jun) 0.9% vs. Exp. 0.9% (Prev. 0.9%)
• Ex-Food, Energy, Alcohol & Tobacco Flash YY (Jun) 0.9% vs. Exp. 0.9% (Prev. 1.0%)

German Unemployment Change SA (Jun) -38k vs. Exp. -20.0k (Prev. -15.0k, Rev. -19k)

• Unemployment Total SA (Jun) 2.691M (Prev. 2.739M, Rev. 2.729M)
• Unemployment Rate SA (Jun) 5.9% vs. Exp. 5.9% (Prev. 6.0%, Rev. 5.9%)

GEOPOLITICAL

Saudi coalition TV states that air defenses have intercepted an explosive-laden march by the Houthis towards the southern region, via Al Jazeera. (Twitter)

Russian President Putin says the British Navy Destroyer in the Black Sea attempted to deliberately test the defensive capabilities of Russia; Putin adds that UK wanted to uncover the location of Russian forces in Crimea and see how they react. (Newswires)

EQUITIES

European equities have adopted a more pronounced downside bias (Euro Stoxx 50 -0.9%) following a relatively mixed and directionless cash open – with fresh macro news flow also on the lighter side thus far on the final day of June, Q2, and H1. US equity futures have also succumbed to the losses seen across the pond, but with losses notably less pronounced. The NQ (-0.1%) is cushioned as bond yields are pressured, whilst the YM (-0.3%) and ES (-0.2%) fare better than the RTY (-0.5%). Back to Europe, sectors are now in the red across the board with the broader sectors portraying more of a defensive bias – with Healthcare, Telecoms, and Staples among the “better” performers. Delving deeper into the sectors, Oil & Gas (-1.5%) and Banks (-1.7%) reside among the laggards amid losses in the crude and yield complexes respectively – but Autos and Parts (-2.4%) are the marked underperformers amid the ongoing chip crunch weighing on production heading into earnings and delivery releases. On that note, Renault (-2.3%) announced plans to accelerate its EV strategy, with the launch of 10 new Battery EVs (BEVs) by 2025, whilst Volkswagen (-3.8%) is lagging, with reports yesterday suggesting that Ohio's Supreme Court green-lighted the state's attorney general to move forward with a lawsuit against the car maker over its "Dieselgate" scandal and manipulation of emissions-control systems. On the flip side, Unipol (+3.7%) shares remain supported by Investment vehicle Koru stating that it is mulling a 3.35% stake in the Co. via reverse accelerated book building and at a 6.6% premium to Tuesday's closing price. Morrisons (+0.6%) meanwhile is kept afloat by the broader defensive flows alongside shareholder J O Hambro (2.9% stake) stating that CD&R must hike its bid from GBP 2.30/shr to GBP 2.70/shr if it wants the takeover to succeed. In terms of equity commentary, Barclays warns that risk appetite could wane heading into the summer lull, and spikes in real rates would be a key tail risk for the equity complex. “Yet we expect the bid for equities to continue, supported by earnings fundamentals, still high bond/cash positions, and buybacks.” The bank says. Barclays also suggests that some reflation trades were reset following last month’s FOMC meeting, with cyclicals reduced and value still appearing to be well-owned.

FX

DXY/SEK - The Greenback has slipped back from Tuesday’s highs, but remains underpinned awaiting any late or final month end rebalancing flows that may apply some downside pressure around the end of the European session and/or over the NY close. However, the Dollar continues to resist the bulk of June 30’s negative signals via various bank models in the interim, and from a macro perspective will be looking towards ADP for direction along with pointers for Friday’s NFP release after the first of today’s four scheduled Fed speakers, the Chicago PMI as a proxy for tomorrow’s manufacturing ISM and then US housing data again. In index terms, 92.00 is still proving to be pivotal and the range thus far is 92.162-91.998 vs 92.194-91.852 yesterday, with one basket component in particular keeping the DXY capped. Usd/Sek is trading down near 12.0300 and Eur/Sek around 10.1200 amidst few signs of disappointment over Sweden’s Euro defeat at the knock-out stage last night, as SEB signals a strong Krona buying requirement against the Buck especially.

CHF - At the other end of the G10 spectrum and hardly helped by a significantly weaker than forecast Swiss KOF leading indicator or investor sentiment, the Franc is floundering and striving to contain losses under 0.9200 vs the Greenback and sub-1.0950 against the Euro, regardless of the country’s Finance Minister lowering the estimated cost of pandemic debt relief to Chf 25 bn from Chf 30 bn.

NZD/CAD/AUD - Very little respite for the non-US Dollars, and a marked downturn in broad risk sentiment as the month, quarter and half year draws to a close is also weighing on the Kiwi, Loonie and Aussie. Indeed, Nzd/Usd is now eyeing and relying on support circa 0.6975 to arrest a slide following a mixed NBNZ business survey overnight, while Usd/Cad has scaled 1.2400 before Canadian monthly GDP and PPI updates, and Aud/Usd is probing 0.7500 to the downside in wake of Chinese NBS PMIs that revealed a sub-consensus services print and the CBA flagging latest lockdowns as a reason why the RBA could be less inclined to halve the pace of bond purchases at next week’s policy meeting.

GBP/EUR/JPY - All narrowly mixed vs their US peer, but Sterling unable to regain 1.3850+ status with any real conviction or pull away from 0.8600 against the Euro in the manner that England did at Wembley when facing Germany to reach the Quarter Finals. Meanwhile, 1.1900 continues to act as the focal point for the Euro vs the Buck and 110.50 is keeping the Yen tethered with hefty option expiry interest at the strike (1.9 bn) and either side (1.6 bn from 110.25-20 and 1.5 bn from 110.70-75), irrespective Japanese ip falling over twice as much as expected in May on the m/m basis.

NOK/EM - The Nok is flat in line with Norges Bank foreign currency purchases for July at Nok 1.7 bn again, but Try is on the rebound even though Turkey’s trade deficit widened last month. Conversely, the Rub has retreated further on geopolitical and diplomatic factors rather than gleaning traction from hawkish CBR commentary.

Notable FX Expiries, NY Cut:

• USD/JPY 109.45-50 (1.6BLN), 110.20-25 (1.6BLN), 110.50 (1.9BLN), 110.70-75 (1.5BLN), 110.95-00 (750M), 111.50 (415M)
• New Zealand NBNZ Business Confidence (Jun) -0.6% (Prev. 1.8%)
• New Zealand NBNZ Activity Outlook (Jun) 31.6% (Prev. 27.1%)

FIXED

Index extensions for this month are not unusually lengthy, but debt futures are on track to end June, Q2 and the first half of 2021 with a flourish amidst a sharp retracement in equities that seems to be prompting a bout of asset-switching even though stock-to-bond rebalancing flows have not been flagged as especially large via the normal bank models. In fact, Bunds, Gilts and US Treasuries have all made upside forays to register fresh w-t-d highs before midday in Europe and a busy pm agenda to wrap up the midweek session, including ADP, more Fed rhetoric, the Chicago PMI and housing data. New peaks on Eurex, Liffe and overnight electronic trade come in at 172.40, 128.13 and 132-14 for the respective 10 year benchmarks, while corresponding yields are approaching -20 bp, 70 bp and 1.45%.

COMMODITIES

WTI and Brent front-month futures are choppy as the complex attempts to balance broader market sentiment with OPEC and Iranian developments. WTI and Brent hit session lows of USD 72.82/bbl (vs high 73.61/bbl) and USD 73.93 (vs high 74.80/bbl) respectively in a move that coincided with declines across equities, whilst a base was found in conjunction with reports that Iranian nuclear talks have been postponed to an unspecified date – suggesting a smaller likelihood of Iranian oil returning to the market in the initially expected time frame. Elsewhere, the OPEC JTC on Tuesday did not provide a recommendation for ministers to consider. The JTC signalled uncertainty about the spread of COVID variants and the speed of vaccine rollouts. It also said that it is monitoring sovereign debt levels, inflation rates, and central bank actions. In fitting with the June MOMR, the JTC expects a rebound in oil demand and strong growth in H2. All-in-all, the technical committee reviewed a range of scenarios and aligned their base case with the June MOMR. Sources suggested Moscow and Riyadh have different views regarding the pace at which oil should be brought back to the market, with the latter favouring a more gradual approach. The Kuwaiti oil minister suggested the group is cautious about raising output amid challenges. The OPEC, JMMC, and OPEC+ meetings are all slated for Thursday at 12:00BST, 15:30BST and 17:00BEST respectively. The JMMC meeting was pushed back with some citing Russian Deputy PM Novak’s calendar, although sources suggested it is to allow for more time to negotiate a compromise (newsquawk’s updated primer is available here). Turning to metals, spot gold and silver are flat within tight ranges and near yesterday’s lows around the USD 1,750/oz and USD 26.75/oz respectively awaiting tomorrow’s US ISM Manufacturing and Friday’s US jobs report. In terms of base metals, LME copper is modestly firmer but in the grander scheme, the red metal is consolidating near recent lows. Dalian iron ore futures fell over 3%, with traders citing China's continued crackdown whilst the regions Official PMIs also underwhelmed

US Private Energy Inventory (bbls): Crude -8.2mln (exp. -4.7mln), Cushing -1.3mln, Gasoline +2.4mln (exp. -0.9mln), Distillate +0.43mln (exp. +0.5mln). (Newswires)

CME raised Henry Hub Natural Gas maintenance margins by 9.8% to USD 2,250 for August 2021. (Newswires)

Goldman Sachs expects base-case increase to OPEC+ output by 500k bpd and forecasts oil demand to rise by additional 2.2mln bpd by year-end resulting to a 5mln bpd shortfall. Goldman Sachs added that while a new infection wave could slow market rebalancing, it expects OPEC+ to continue tactical production hikes and estimates that the current global oil deficit is at 2.3mln bpd. (Newswires)

Morgan Stanley sees gold at USD 1.69k/oz in Q3 and USD 1.67k/oz in Q4; silver at USD 26/oz in Q3 and USD 25/oz in Q4; copper at USD 9,039/mt in Q3 and USD 9,149/mt in Q4. (Newswires)