• European bourses are firmer though US futures are little changed, Euro Stoxx 50 +0.4%, ES +0.1%, amid relatively quiet newsflow pre-FOMC minutes
• Crude has continued to consolidate amid limited OPEC+ updates and attention turning to US base attacks in Syria and Iraq
• USD is off best levels and now little changed with peers mostly firmer though JPY lags after failing to convincingly surpass 110.50
• China has completed the release of 100k/T of copper, aluminium and zinc from State reserves on July 5th; will continue to release national reserves in the near-term
• Looking ahead, highlights include FOMC Minutes, Fed's Bostic and the EIA STEO

CORONAVIRUS

A study found that arthritis drugs tocilizumab and sarilumab reduced the risk of death and need for ventilators among hospitalized COVID-19 patients whereby administering one of the drugs in addition to corticosteroids lowered the risk of death by 17% compared with just administering corticosteroids, while the risk of progressing to mechanical ventilation or death was lowered by 21% for patients not on ventilators. (Newswires)

Fully vaccinated holidaymakers are set to get fast-track lanes at Heathrow in an attempt to open-up quarantine-free overseas travel to amber list countries. Additionally, UK Ministers are set to sign off on a plan that would permit people to travel from amber-list nations without having to isolate for up to ten days. (Telegraph/Times)

Spain's COVID-19 rate has reportedly increased to the highest in mainland Europe amid the spread of the Delta variant and infections among younger, unvaccinated people, according to FT research. (Newswires/FT)

Osaka prefecture in Japan is seeking an extension to the quasi-emergency. In relevant news, Japan's top health adviser Omi said it is necessary to take effective anti-coronavirus measures prior to the start of the Olympics and the summer vacation, while there were also reports that Japan is considering banning fans from all Olympic events, although a separate report stated that Japan is mulling a 5.0k limit on spectators at the Tokyo Olympics. Subsequently, Japanese PM Suga says discussions with experts on extending COVID-19 restrictions will take place on Thursday (Newswires)

New Zealand granted provisional approval for Johnson & Johnson (JNJ) unit Janssen's COVID-19 vaccine for those aged 18-years old and above. Elsewhere, authorities in Sydney, Australia confirmed that the lockdown will be extended for an additional week until at least July 16th. (Newswires)

Brazil's lower house approved the text of the bill that would allow breaking of patents for production of vaccines and medicines in the event of a public emergency. (Newswires)

ASIA

Asian equity markets traded subdued after the similar picture in global counterparts as risk appetite was dampened by China crackdown concerns and soft US ISM data, with the recent slump in oil prices amid OPEC uncertainty, and looming FOMC Minutes adding to the cautiousness. This resulted in most major US indices finishing in the red although growth and tech were underpinned by the lower yield environment to lift the Nasdaq to fresh record highs. ASX 200 (+0.9%) bucked the trend to reclaim the 7,300 level despite the announcement of a lockdown extension in Sydney for a third week, as the index was buoyed by strength in tech which found inspiration from Wall St counterparts whilst the largest weighted financials sector was also kept afloat. Nikkei 225 (-1.0%) was pressured by the weight of currency inflows and ongoing COVID-19 concerns with Osaka also seeking an extension of the quasi-emergency restrictions, while KOSPI (-0.6%) was subdued with index top component Samsung Electronics failing to benefit from better-than-expected preliminary Q2 results as the virus situation clouded over investor sentiment after daily infections increased by over 1,200 which was near South Korea’s record high. Hang Seng (-0.4%) and Shanghai Comp. (+0.7%) were mixed amid China crackdown concerns after its cabinet announced it will take tough action on illegal activities in the securities market and will step up regulation of Chinese firms listed abroad. In addition, the NDRC announced enhanced security checks for buildings taller than 100 metres and stated that construction of skyscrapers with a height of 500+ metres will not be approved, while losses in Hong Kong were exacerbated by pressure in the large oil names, weakness in Geely Auto after its sales dropped 9% and with Tencent suffering from the increased Beijing tech scrutiny which pressured its shares to a YTD low. Finally, 10yr JGBs tracked the advances in T-notes which had been spurred by haven flows and weak data to push the US 10yr yield to its lowest since February. The BoJ were also present in the market today for over JPY 900bln of JGBs and although it slightly reduced purchases in 5yr-10yr maturities, this was inline with its previously flagged buying intentions for Q3.

PBoC injected CNY 10bln via 7-day reverse repos with rate at 2.20% for a net daily drain of CNY 20bln. (Newswires) PBoC set USD/CNY mid-point at 6.4762 vs exp. 6.4708 (prev. 6.4613)

Chinese FX Reserves (Monthly) (Jun) 3.214Trl vs. Exp. 3.202Trl (Prev. 3.222Trl)

• Gold reserves USD 110.45bln vs. prev. USD 119.02bln

US urged China and the private sector to raise their involvement in a G20 debt moratorium for low-income countries impacted heavily by the pandemic and on a common framework for debt restructuring. (Newswires)

US

USTR Tai requested that Canada abandon its proposed digital tax in light of the OECD agreement on corporate tax, while she emphasised the importance of Canada upholding USMCA commitments on home shopping. (Newswires)

NHC issued a hurricane warning issued for a portion of the Florida gulf coast and later stated that Elsa regained hurricane strength southwest of Tampa Bay, while there were comments from Florida Governor DeSantis that Elsa is expected to make landfall on Florida's northern Gulf coast between 08:00:00-10:00EDT. (Newswires)

US' Cifus is to receive an expanded role amid the US-China rivalry, looking to share information with similar review bodies and focus more on President Biden's priorities. (WSJ)

UK/EU

German Industrial Output MM (May) -0.3% vs. Exp. 0.5% (Prev. -1.0%, Rev. -0.3%)

EU Commission Summer Forecasts: Eurozone 2021 GDP upgraded to 4.8% from 4.3%, 2022 upgraded to 4.5% from 4.4%. 2021 inflation seen at 1.9%, 2022 seen at 1.4%. (EU Commission) Link to full GDP forecasts

GEOPOLITICAL

There were reports of a drone attack on Erbil International Airport in Iraq where US forces are base, although a Pentagon spokeswoman later stated that according to initial information, there was no structural damage, injuries or casualties from attack in Erbil, Iraq. Subsequently, reports of drone/rocket attacks at US bases in Syria and Iraq, al-Omar and Ain Al Assad respectively. Further updates indicated the Syria-base attack was intercepted with no damage. (Newswires/Twitter)

US Special Representative for North Korea Sung Kim conducted a phone call with his Chinese counterpart which was the first of its kind since Kim was appointed to the position in May, while a US State Department spokesman later highlighted the critical role China can play in addressing the North Korean nuclear issue. (Yonhap)

Russian government hackers reportedly breached the Republican National Committee systems last week, around the time a Russia-linked criminal group carried out a large-scale ransomware attack, according to two sources familiar with the matter. (Newswires)

Russian Defence Ministry says it is monitoring a Spanish Navy ship in the Black Sea, according to Interfax. (Newswires)

EQUITIES

European equities (Stoxx 600 +0.4%) trade on the front-foot in an attempt to claw back some of yesterday’s losses with fresh macro drivers otherwise relatively light. The attempted rebound can be observed via sectoral performance in the region with today’s gainers predominantly comprised of yesterday’s pro-cyclical laggards as Basic Resources and Oil & Gas sit near the top of the pile in the Stoxx 600. That said, Tech names remain on a firm footing on both sides of the pond with NQ (+0.5%) outpacing its US counterparts (ES +0.1%, RTY U/C). Today’s docket is a relatively light one with the main highlight being the release of the FOMC minutes from the June meeting. Expectations are for the account to reflect the common view that tapering discussions should begin in the coming meetings. Elsewhere in Europe, Travel & Leisure names lag peers despite reports suggesting that UK ministers are set to sign off on a plan that would permit people to travel from amber-list nations without having to isolate for up to ten days. Concerns over the Delta-variant continue to persist with FT research highlighting that holiday-hot spot Spain’s COVID-19 rate is the highest in mainland Europe amid mounting infections amongst younger, unvaccinated people. Individual movers include SAP (+3.7%) who are benefiting from the broad strength in tech and a broker upgrade at BofA and accompanying price target upgrade to EUR 150 from EUR 92. Shell (+2.2%) sits at the top of the FTSE 100 after announcing that it will be moving to the next stage of its capital allocation framework and, subject to approval, increase shareholder distributions to 20-30% of CFFO from the Q2-report.

China is reportedly considering closing the loophole used by tech giants for US IPOs, according to sources. (Newswires)

Chinese Market Regulator says it has punished internet platform companies for 22 illegal M&A deals; includes Alibaba (BABA) and Tencent (0700 HK). (Newswires)

FX

DXY - Some calm and consolidative trade after Tuesday’s frenetic session when the Greenback was grounded early on, but staged a dramatic recovery on a combination of factors including safe-haven demand amidst pronounced risk aversion in several asset classes and a deep pull-back in crude prices from new multi-year peaks. The index remains anchored around 92.500, though considerably more contained for now between 92.606-462 parameters compared to 92.665-003 extremes yesterday and the Dollar is more mixed vs major and EM peers as broad sentiment improves. Ahead, weekly mortgage applications and Redbook sales before JOLTS, the FOMC minutes and another speech from Fed’s Bostic.

NZD/AUD - Still a long way to go for full redemption, but the Kiwi and Aussie have both clawed back some lost ground against their US rival to leave the former on a firmer footing above 0.7000 following ANZ joining others now looking for the RBNZ to begin tightening in November. Meanwhile, the latter is probing 0.7500 again irrespective of a slowdown in AIG’s services index and a softer PBoC Cny midpoint fix overnight, but could be capped by hefty option expiry interest from the round number to 0.7505 in 1.3 bn.

CAD/NOK/RUB/MXN - The Loonie and Norwegian Krona along with fellow petro currencies like the Russian Rouble and Mexican Peso are looking a bit more composed following the aforementioned oil spill that hit them especially hard on Tuesday, as WTI and Brent bounce off lows approaching Usd 73/brl and Usd 74/brl respectively. Usd/Cad is straddling 1.2450 after rebounding to within a whisker of 1.2500 and looking towards Canada’s Ivey PMIs for further impetus, while Eur/Nok is back under 10.3100 with extra incentive via much stronger than expected monthly mainland growth and an acceleration in GDP overall. Elsewhere, Usd/Rub has retreated through 74.4000 and Usd/Mxn is eyeing 20.0000 again.

CHF/EUR/GBP/JPY - All narrowly mixed vs the Buck, as the Franc pares declines from circa 0.9251 and Euro meanders inside some decent technical levels in the form of a Fib retracement at 1.1837 and an effective 1.1808-7 double bottom, while the Pound pivots 1.3800 after topping out precisely halfway within its recent range, at 1.3815 and feeling some pressure from RHS demand in Eur/Gbp. Elsewhere, the Yen has handed back some gains after breaching 110.50, but not sustaining momentum to clear late June highs convincingly with Usd/Jpy hovering near 107.80 in advance of Japanese trade and current account data tomorrow.

SEK/EM - It may be a formality, but the Swedish Crown is treading cautiously either side of 10.1500 vs the Euro before the Riksdag vote on handing Lofven the job of PM again, but the SA Rand does not appear that concerned by Gold’s struggle to regain Usd 1800/oz+ status after recovering from another fall beneath the 100 DMA against the Dollar. However, Brazil’s Real will be looking for some political respite via IGP inflation and/or therapy from retail sales later.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1760 (420M), 1.1850-60 (420M), 1.1865-70 (780M), 1.1920-25 (1.7BLN), 1.1935 (563M)
• USD/JPY: 109.00 (1.23BLN), 109.70-75 (615M), 111.00 (1.1BLN), 111.50 (1.1BLN)
• AUD/USD: 0.7500-05 (1.3BLN), 0.7575-80 (550M)
• NZD/USD: 0.7140 (1.2BLN), 0.7170 (558M), 0.7185 (557M)
• USD/CAD: 1.2475 (360M), 1.2560-70 (785M), 1.2590-00 (1.3BLN)

FIXED

Little sign of a wobble in wake of a rather lacklustre German Bobl auction and certainly no supply issues in terms of the UK’s 2051 linker sale, but bonds are hovering below best levels in the run up to half time in Europe and waiting to see whether the revival continues or more consolidation ensues before tonight’s FOMC minutes that are bound to be relatively hawkish in nature given the tone of the last policy meeting, guidance, SEP dot plots and start of the conversation about when in might be time to discuss tapering. Looking at prices in more detail, Bunds have been as high as 173.89, Gilts 129.22 and the 10 year T-note 133-16 before losing steam as oil returns to the boil on the back of reports of a drone or rocket attack on a US base near a field in Eastern Syria.

COMMODITIES

WTI and Brent have continued to consolidate from the losses seen in yesterday’s session after the initial rally fizzled out amid the broader risk tone and lack of OPEC+ developments; benchmarks posting gains in excess of USD 1.00/bbl at present. Updates on the OPEC+ front remain few and far between; however, as the current agreement runs until month-end the UAE and Saudi/Russia still have over 3-weeks to come to an agreement. ABN AMRO’s scenario analysis has a 50% chance of OPEC+ coming to an agreement before August, 30% probability that OPEC+ is dissolved as there is no deal and the remaining 20% to the current agreement being extended. For these scenarios respectively the bank says prices would ‘fall’, ‘fall sharply’ and rise significantly to at least USD 86-87/bbl. OPEC aside, attention has recently turned to reports of drone/rocket attacks on two US bases in Syria and Iraq, details around this are sparse but initial indications are that the attack at the Syria, al-Omar oil field have been successfully intercepted - thus far, crude is unreactive to this. Turning to metals, spot gold and silver are firmer this morning experiencing a similar level of consolidation where gold has, once again, reclaimed the USD 1800/oz mark. Such upside comes amid somewhat mixed but relatively contained USD performance while the US yield curve is, for the most part, subdued and likely lending support to the metal. Elsewhere, base metals remain supported this morning amid reports that China has completed the release of copper, aluminium and zinc from their State reserves. However, participants remain attentive to the signalling that releases will continue from national reserves in the near-term.

Saudi Energy Minister said there is no similarity between the situation OPEC is in now compared to March last year, while he added that the current agreement will remain in place, according to Energy Intel's Bakr. (Twitter)

Mexico's Economy Ministry said the San Rafael mine in Mexico which is operated by Americas Gold and Silver Corp and primarily produces silver, zinc and lead, will reopen following talks with unions that lasted for months. (Newswires)

China has completed the release of 100k/T of copper, aluminium and zinc from State reserves on July 5th; will continue to release national reserves in the near-term. (Newswires)