• Asian equity markets were mixed as the initial tailwinds from the mild gains on Wall St were offset by weakness in China
• The S&P 500 eked a fresh record high and the energy sector led the gains as focus centred on OPEC deliberations
• In FX, the DXY has held above 92.50, EUR/USD and GBP/USD remain lacklustre on 1.18 and 1.37 handles respectively
• Yesterday's OPEC+ meeting has been postponed until today amid frictions over the proposed baseline references for production cuts
• US won international backing for the global minimum corporate tax rate after officials from 130 countries agreed to the broad outlines
• Looking ahead, highlights include US NFP, Trade, Canadian Trade, US Factory Orders, ECB's Lagarde, Schnabel

CORONAVIRUS UPDATE

US CDC Director Walensky said seven-day average of cases are up 10% from the prior period and that about 25% of cases are attributable to the Delta variable but it may eclipse the Alpha variant in the US in weeks. (Newswires)

Johnson & Johnson (JNJ) announced positive data on its single-shot vaccine which demonstrated strong results against the Delta variant and provided long-lasting durability of response. Furthermore, it stated that in the ensemble trial, the single-dose vaccine had 85% effectiveness against severe/critical disease and dose demonstrated protection against hospitalization and death. (Newswires)

Germany is set to relax restrictions on British travellers entering the nation ahead of a meeting between Chancellor Merkel and UK PM Johnson. (Times)

UNICEF signed a COVID-19 vaccine supply agreement with Janssen Pharmaceuticals (JNJ) in which deliveries of the vaccine are expected to begin towards the end of Q3 21 once Johnson & Johnson has confirmed a timeline for the supply start. (Newswires)

Australian PM Morrison said the National Cabinet agreed to a new pathway out of COVID-19 which will be through a four-phase plan, while the plan will switch from virus suppression to prevention of serious illnesses and will cut international arrival caps by half. In relevant news, the Queensland Premier announced to remove lockdown restrictions for certain areas today although the state capital of Brisbane is expected to remain in lockdown until at least Saturday, while the Northern Territory Chief Minister announced to remove lockdown measures. (Newswires)

ASIA

Asian equity markets were mixed as the initial tailwinds from the mild gains on Wall St, where the S&P 500 eked a fresh record high and the energy sector led the gains as focus centred on OPEC deliberations, were offset by weakness in China and with the key risk NFP jobs data on the horizon. ASX 200 (+0.4%) was kept afloat amid the removal of lockdown restrictions for parts of Queensland and following PM Morrison's announcement the Cabinet agreed to a new pathway out of COVID-19 through a four-phase plan, while the energy sector outperformed after oil prices gained, although some of the advances for oil were retraced and the OPEC+ meeting was postponed to Friday amid disagreements on baseline production levels from the UAE. Nikkei 225 (+0.2%) was underpinned by recent currency weakness and with automakers boosted by sales updates including Mazda which notched a 28.7% jump in North American sales last month, although upside for the local benchmark was limited as Japan was said to consider an extension to the quasi-state of emergency in Tokyo by a month. Hang Seng (-1.8%) and Shanghai Comp. (-1.6%) were pressured despite a lack of significant catalysts for the declines which was led by firm losses in tech, consumer stocks and blue chips, while there was also further criticism from the US State Department regarding China's nuclear build-up, as well as its actions concerning Xinjiang, Tibet and Hong Kong. Finally, 10yr JGBs were flat after prices recently stalled just shy of the 152.00 level and amid mild gains in Japanese stocks, while the BoJ’s Rinban announcement also showed a reduction in buying of 1-3yr and 10-25yr maturities which the central bank had previously flagged for Q3.

PBoC injected CNY 10bln via 7-day reverse repos with rate at 2.2% for a CNY 20bln net daily drain. (Newswires) PBoC set the USD/CNY mid-point at 6.4712 vs. Exp. 6.4676 (Prev. 6.4709)

US State Department spokesperson said China's nuclear build-up is concerning and that China appears to be deviating from decades of nuclear strategy based around minimal deterrence, while the State Department released its annual human trafficking report earlier in which it added Turkey to its list of governments implicated in use of child soldiers and criticised China over Xinjiang, Tibet and Hong Kong. (Newswires)

UK/EU

European Commissioner for Financial Services stated the EU will not grant equivalence to the UK based on the regulatory situation governing the City of London today, but on what occurs in the future, according to RTE's Connelly. (Twitter)

ECB's Weidmann supports a symmetric inflation goal at 2% over the medium term but is sceptical about tolerating an inflation overshoot and average inflation targeting. Furthermore, he stated the ECB should communicate it will raise rates when price stability requires it, regardless of states' financial needs. (Newswires)

Labour held its seat in the Batley and Spen by-election with a narrow majority of 323 votes. (BBC)

FX

In FX markets, the DXY held above the 92.50 level after yesterday’s strength which was in tandem with upside in yields and amid US economic growth forecast updates from the IMF and CBO in which they forecast 7.0% and 7.4% growth this year. There were also recent hawkish comments from Fed's Harker who reiterated support for tapering this year, as well as suggested that they should taper sooner rather than later and that it is reasonable for the tapering process to last a year with a USD 10bln/month reduction. EUR/USD was lacklustre after the recent gains in the greenback and was unreactive to the latest ECB commentary in which Weidmann suggested the ECB should communicate it will raise rates when price stability requires it, regardless of states' financial needs and he favours a symmetric inflation goal at 2%. GBP/USD was lacklustre after slipping back beneath the 1.3800 handle although has since found a floor near 1.3750. USD/JPY retained a firm grip on the 111.00 status owing to the USD strength which has also kept antipodeans constrained alongside the weaker-than-expected PBoC fix, lack of data releases and despite calls by ANZ Bank that the RBNZ could either scale back or end QE as early as August or September.

Brazilian President Bolsonaro said he will hand over power to whoever wins the election cleanly but added that he will not handover power if there is fraud. (Newswires)

COMMODITIES

Commodities were uneventful overnight with WTI crude futures flat after retracing some of yesterday's advances as the initial tailwinds from source reports that the OPEC+ deal will likely include a monthly oil output increase of 400k BPD vs the median expectations of 500k in August, eventually faded and with the OPEC+ meeting postponed till later amid frictions as the UAE proposed a review of baseline references for production cuts which threatens to result in no further output hikes if the situation is left unresolved. On the geopolitical front, Iran was reported to have been restricting access for UN nuclear inspectors to the main Natanz enrichment plant over security concerns. although diplomats have suggested that the issue is being resolved. Gold prices were flat amid a steadfast greenback and with participants lacking conviction ahead of the key US jobs data, while copper was also lacklustre with its attempts to nurse recent losses hampered by underperformance in its largest buyer China.

OPEC+ meeting has been delayed until Friday 2nd July which will take place at 16.30 Vienna time (15:30BST/10:30EDT) and the JMMC ended without a recommendation, while it was separately reported that it appears differences between UAE and Saudi Arabia at the JMMC meeting heated up and that OPEC+ countries have asked for a new baseline are the UAE, Iraq, and Kazakhstan. Furthermore, UAE is reportedly looking to raise the OPEC baseline to about 3.8mln BPD and would allow UAE to pump an extra 700k BPD, while UAE suggested OPEC+ revises baseline for oil production cuts and that the one-day delay is due to UAE's reservations about the extension of the deal until the end of 2022, according to sources. There had also been prior source reports that OPEC+ JMMC Ministerial Committee proposed OPEC+ extend oil supply management until the end of 2022 and for OPEC+ to raise oil output by 400k BPD a month in August - December. (Newswires/Twitter/EnergyIntel)

Iraq Oil Minister said the OPEC+ meeting was postponed to Friday to complete consultations and discussions, while Bloomberg Chief Energy Correspondent Blas tweeted that unless the dispute with the UAE is resolved, OPEC+ falls back on its current oil deal which means no further output hikes until April 2022. (Newswires/Twitter)

GEOPOLITICAL

US and UK revealed a Russian password hacking campaign that started in mid-2019 and had targeted political parties, government offices, defense contractors, energy companies, think tanks, law firms, media outlets and universities. (CNN)

US

Treasuries were lower in light, summer trade as month-end passes and traders position into NFP and July 4th weekend. By settlement, 2s +0.8bps at 0.257%, 3s +1.6bps at 0.471%, 5s +2.6bps at 0.901%, 7s +3.0bps at 1.245%, 10s +3.4bps at 1.478%, 20s +2.0bps at 2.016%, 30s +1.7bps at 2.084%. TYU1 volumes were very light. 5yr TIPS -0.7bps at -1.645%, 10yr TIPS +0.8bps at -0.884%, 30yr TIPS +0.5bps at -0.197%. SOFR unchanged at 5bps. Wednesday's EFFR fell to 8bps from 10bps amid month-end factors. A post-pandemic low in Initial Jobless Claims failed to move the dial - perhaps as the miss on Continued Claims weighed. T-Notes hit a morning peak (but still lower on the day) of 132-15, with cash 10yr yields printing lows of 1.455%. Bonds returned to better selling into the US cash equity open, ahead of ISMs. The miss on headline Manufacturing, and return to contractionary territory for the Employment sub-index ahead of Friday's NFP, was offset by another chunky rise in the Prices Paid index, with the selling of T-Notes extending the September contract to session lows of 132-06 (10s peaked at 1.485%) - there was muted reaction for the final few hours of trade, not phased by fresh hawkish commentary from Fed's Harker. Some draw attention to likely positioning into Friday's jobs report in light trade for today's selling pressures. Friday's trade will all gravitate around the report into the long weekend, where JPM's strategists note that Treasury market moves are historically up to twice as volatile in wake of a US jobs report ahead of the July 4th holiday weekend amid market depth between 15-20% lower.

Fed's Harker (2023 voter) reiterated support for tapering this year and said that they should taper sooner rather than later, while he added it is reasonable for the tapering process to last a year, reducing it by USD 10bln a month. Furthermore, Harker believes Treasury and MBS purchases should be trimmed equally and would like to see the taper process completed before the Fed raises rates, while he does not expect lift-off until 2023 but added that what happens to inflation is key to that outlook. (Newswires)

US CBO forecasts fiscal year 2021 budget deficit at USD 3.003trln, or 13.4% of US GDP, while fiscal deficit is projected at USD 1.153trln in 2022 and USD 789bln in 2023 based on current laws. CBO also sees Real GDP growth at 7.4% in 2021, 3.1% in 2022 and 1.1% in 2023 - averaging 1.2% for 2024-25 and 1.6% for 2026-2031. Furthermore, CPI is seen at 3.4% in 2021, 2.3% for 2022 and 2023, while Unemployment is seen at 5.5% for 2021, 3.8% for 2022 and 3.7% for 2023 - averaging 4.4% for 2026-2031. (Newswires)

IMF raised US GDP growth forecast for this year to 7.0% from 6.4% due to unprecedented fiscal and monetary support, while it also raised 2022 GDP growth forecast to 4.9% from 3.5%. Furthermore, its forecasts assume President Biden's American Jobs and American Families Plans are enacted this year with the size similar to what the administration proposed, while IMF also sees significant labour market slack working as a safety valve to contain wage and price pressures. (Newswires)

US won international backing for the global minimum corporate tax rate after officials from 130 countries agreed to the broad outlines. The countries negotiating global tax reform said they have agreed a two-pillar solution to address the tax challenges coming from the digitalisation of the economy, while the minimum tax rules provide for an exclusion for international shipping income and they agreed implementation plan that contemplates that Pillar Two should be brought into law in 2022 and be effective 2023. In relevant news, a US Administration Official said there was no China-specific carveout included in the OECD tax agreement and the Irish Finance Minister said Ireland broadly supports the OECD framework agreement on tax but did not sign the statement due to reservations. (WSJ/Newswires)

Wall Street banks have been accused in a lawsuit of Credit Default Swap price manipulation, while the lawsuit alleges banks rigged the CDS final auction price. (Newswires)

Robinhood (HOOD) filed for an IPO of up to USD 100mln; applied to list Class A stock on the Nasdaq under the ticker HOOD. (Newswires)