• Equities are firmer but contained in a quiet session pre NFP & OPEC+, Euro Stoxx 50 +0.2% and ES +0.1%
• The DXY remains bid and is forging fresh highs to the modest detriment of peers ahead of significant EUR & JPY opex at today's NY cut
• WTI and Brent are holding steady ahead of the resumption/start to the JMMC/OPEC+ events at 09:00EDT & 10:30EDT respectively
• Core debt is bolstered going into the long-weekend and data with the US yield curve currently bull-flattening
• Looking ahead, highlights include US NFP, Trade, Canadian Trade, US Factory Orders, ECB's Lagarde, Schnabel

CORONAVIRUS UPDATE

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)

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 (+0.6%) 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 (+0.3%) 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. (-2.0%) 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

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)

UK/EU

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

German engineering orders (May) +47% Y/Y, according to the VDMA; domestic +33%, foreign +55%. (Newswires)

ECB's Supervisory Board Chairman Enria says uncertainty has abated and the economic system is on the path to recovery. (Newswires)

GEOPOLITICAL

Russia Foreign Minister Lavrov says Russia is working on a concept for security in the Persian Gulf, via Sputnik. (Twitter)

EQUITIES

The tone across the equity space remains tentative heading into the US labour market report, with European equities choppy within relatively tight ranges after a lukewarm cash open. European cash and futures saw a bought of buying in the first half-hour of cash trade, although this dissipated thereafter. US equity futures have been mimicking the direction of the price action of peers across the pond, but to a lesser degree, with the ES (Unch), NQ (+0.1%), YM (Unch), and RTY (-0.1%) all flat intraday heading into the main event of the week. Ahead of the US jobs report, SGH Macro’s Tim Duy reminds us that today’s release will be the first of three reports before the September FOMC (the earliest date a tapering announcement can be telegraphed – barring the Jackson Hole Symposium), suggesting that this report is important, “but it’s unlikely that any one of those reports alone will decide the timing of tapering.” Back to Europe, cash is currently mixed with some mild outperformance in the FTSE 100 (+0.3%) amid gains in mining names. Sectors are mostly firmer and portray no firm risk nor cyclical/defensive bias - with Basic Resources leading the gains as base metal prices stabilise, whilst Anglo American (+2.4%) also experiences tailwind from a broker upgrade at Bernstein. Travel & Leisure cheer reports that Germany is set to relax restrictions on British travelers entering the nation ahead of a meeting between German Chancellor Merkel and UK PM Johnson. Tech resides as a top performer following yesterday’s underperformance and the pullback in yields. Subsequently, banks trade at the bottom of the bunch, closely followed by Retail and Oil & Gas. In terms of individual movers, Mediobanca (-0.1%) succumbs to the broader weakness in financials despite shareholder Del Vecchio upping his stake in the Co. to 18.9% from 15.4%, whilst Ambu (-12%) plumbs the depths after cutting guidance due to an increased impact from COVID.

FX

DXY - The Dollar looks reset and almost literally recharged after losing some impetus intermittently yesterday when crude oil was gushing, as it continues to rally and pick off more technical or psychological levels in index and Usd/other currency pair terms. The DXY has now been up to 92.699, leaving just a high from early April guarding the next big figure (92.790 from the 6th of the month to be specific) before attention turns to NFP in earnest and then the latest CFTC spec positioning updates that are odds-on to reveal another short squeeze and paring of Greenback shorts. Moreover, Monday is a US market holiday to mark Independence Day and this could prompt more Buck buying bar a really bad BLS report (check out the Research Suite for a preview of the event).

EUR/CHF/AUD/NZD - By no means the only major casualties, but weaker than their G10 peers on the day and the Euro down to a new w-t-d base below a key Fib at 1.1837 (76.4% retracement of the rebound from 2021 trough in March at 1.1704 to 1.2266 May peak), leaving option expiry interest as the only real remaining source of support into 1.1800. On that note, 1.8 bn resides between 1.1825-20, but by the same token Eur/Usd seems capped, if not trapped on any upturn given 2.7 bn from 1.1850-55, 1 bn at 1.1865 and 2.36 bn at 1.1890-1.1900, not to mention more big expiries up to 1.1950 all rolling off at the NY cut. Meanwhile, the Franc is still trying to contain losses beneath 0.9250, the Aussie hold above 0.7450 and Kiwi keep afloat of 0.6950 as Aud/Nzd hovers in the low 1.0700s after just maintaining round number+ status.

JPY/GBP/CAD - The Yen is pivoting 111.50 and also in the midst of hefty option expiries that could keep Usd/Jpy contained before and even after the US labour update, with 2 bn down at the 111.00 strike, 1.78 bn between 111.40-50 and 1.9 bn at 111.75. Elsewhere, Sterling continues to straddle 1.3750 and tussle to stay within sight of 0.8600 vs the Euro and the Loonie is back under 1.2400 alongside a deeper pull-back in WTI awaiting the delayed OPEC+ meeting, Canadian trade data and manufacturing PMI in the interim.

SCANDI/EM - Little solace for the Nok via a sub-forecast Norwegian unemployment rate, while the Sek reflects on Thursday’s less hawkish than expected Riksbank policy outcome, overall, and on the EM front it’s essentially a sea of red against the mighty Usd, though the Brl may glean some comfort amidst all the political uncertainty in Brazil stirred by the upcoming election and impeachment clamour surrounding current President Bolsonaro from significantly stronger than consensus CAGED payrolls and IPC-Fipe inflation accelerating nearly twice as fast in June compared to May.

Notable FX Option Expiries, NY Cut:

• EUR/USD: 1.1750 (1.12BLN), 1.1800-05 (730M), 1.1820-25 (1.8BLN). 1.1850-55 (2.7BLN), 1.1865 (1.0BLN), 1.1875 (413M), 1.1885 (500M), 1.1890-00 (2.36BLN), 1.1915 (1.1BLN), 1.1940 1.2BLN), 1.1950 (2.5BLN)
• USD/JPY: 110.75-80 (1.6BLN), 111.00 (2.0BLN), 111.40-50 (1.78BLN), 111.75 (1.9BLN), 112.00 (478M)

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)

FIXED

Having played second fiddle to FX quite frequently of late, and getting somewhat side-lined by the sheer magnitude of gains in oil yesterday, bonds seem determined to grab a bit of the limelight and headlines approaching the monthly US employment release that may be more market moving than normal given the impending long Independence Day holiday weekend. Moreover, pandemic related factors are clouding data and other jobs market indicators and proxies for June are rather conflicting, but bulls have taken control of direction as Bunds rebound towards 173.00 (172.98 high so far), Gilts extend beyond 128.00 (to 128.32 and only 7 ticks shy of the current m-t-d apex posted on the 11th) and the 10 year T-note touches trendline resistance at 132-16. Also ahead, NA trade data, ECB’s Lagarde and Schnabel, Canada’s Markit manufacturing PMI and US factory orders.

COMMODITIES

WTI and Brent front-month futures trade sideways as the JMMC and OPEC+ meetings are poised to resume today at 14:00BST/09:00EDT and 15:30BST/10:30EDT respectively after ministers failed to reach an accord yesterday. In terms of where things stand, it was reported that it appears differences between UAE and Saudi Arabia at the JMMC meeting heated up and that the UAE, Iraq, and Kazakhstan have asked for a new baseline. The UAE is reportedly looking to raise the OPEC baseline to about 3.8mln BPD and would allow UAE to pump an extra 700k BPD. As a reminder, October 2018 production levels were used as baselines for producers apart from Saudi and Russia - who were both given baselines of 11mln BPD each (Click here for a full recap of yesterday’s event). Nonetheless, participants will keep their eyes peeled for source reports through the session, whilst the crude complex also keeps the US jobs report on the radar for sentiment-induced volatility. WTI Aug trades around the USD 75/bbl mark (74.94-75.54 range), whilst Brent Sep remains north of USD 75.50/bbl (75.47-76.13 range). Elsewhere, spot gold and silver eke mild gains after finding support at USD 1,774/oz and USD 26/oz respectively – with little new to mention on this front ahead of the jobs report. Over to base metals, LME copper is firmer on the day, but in the grand scheme, the contract remains near recent lows. Dalian iron ore overnight also nursed some losses but overall closed lower on the week, with traders citing the Chinese crackdown as a persisting mood-dampener in the complex. On that note, next week's Chinese inflation metrics will be of interest as they will encapsulate China’s crackdown on the rise in base metal prices amid Beijing’s concerns over PPI spilling over to CPI.

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)

An explosion has occurred at Romanian Black Sea refinery Petromidia. (Newswires)