• APAC stocks traded mixed following last Friday's post-NFP losses on Wall St; European equity futures are indicative of a firmer open
• DXY traded flat overnight but remained above the 102.00 level; G10s were uneventful 
• China’s Beijing will continue to roll back its COVID-19 restrictions in most districts
• UK Conservative rebels expect the 1922 Committee's Brady to make a statement this morning announcing PM Johnson will be subject to a no-confidence vote, according to ITV's Brand
• EU began preparing a new package of sanctions against Russia, according to Poland’s Deputy Minister
• North Korea fired 8 short-range ballistic missiles into the sea from Pyongyang on Sunday
• Looking ahead, a light calendar with Holiday Closures in Switzerland, Sweden, Denmark, Norway, Austria, Hungary & Iceland

6th June 2022

SNAPSHOT

• Click here for the Week Ahead preview

US TRADE

• US stocks ended last week on the backfoot with the major indices pressured amid a firmer dollar and higher yields following better than expected NFP data.
• SPX -1.60% at 4,108, NDX -2.67% at 12,548, DJIA -1.05% at 32,898, RUT -0.77% at 1,883.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed Chair Powell is to deliver his semi-annual Monetary Policy Report at the Senate on June 22nd and it was also reported that the Senate Banking Committee will vote on Fed nominee Barr on June 8th, according to Reuters.
• US Treasury Secretary Yellen said she never urged the adoption of a smaller American rescue plan package and that the rescue package played a central role in driving strong growth throughout 2021 and afterwards, while she added that addressing high inflation is the Biden administration’s top economic priority, according to Reuters.
• US Commerce Secretary Raimondo said she does not believe the American rescue plan package caused high inflation and said the economic recovery is robust despite inflation, while she said President Biden asked his team to look at China tariff and she agrees that the semiconductor shortage will likely persist into 2024, according to a CNN interview.
• US Democrat Senator Murphy said he thinks a package including mental health investment, school safety money and some changes to gun laws can pass the Senate, according to Reuters.
• US President Biden’s visits to Israel and Saudi Arabia were postponed until July, according to Reuters.
• US President Biden is said to use executive action on Monday to bridge the solar panel supply gap in which he will invoke the Defense Production Act to spur US manufacturing of solar panels and clean energy technologies for the future, while President Biden will issue a proclamation to allow solar panels to be imported from Thailand, Malaysia, Cambodia and Vietnam without the risk of tariffs for 24 months, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

TALKS/NEGOTIATIONS

• US, EU and UK were reportedly discussing terms of a ceasefire and negotiated settlement in the Ukraine war during regular meetings, although Ukraine did not participate in the discussions, according to CNN.

MILITARY/DEFENSIVE/NATO

• Russian President Putin said western weapons were destroyed by the dozens in Ukraine, according to Reuters. Putin also stated that the US supplying Ukraine with multiple launch rocket systems does not change anything in practice, and warned that Russia will have to strike facilities it has yet to touch if the west starts supplying Ukraine with longer-range missiles, according to TASS.
• Russian Defence Ministry noted that Russia shot down a Ukrainian military plane carrying weapons near Odesa and said its missiles hit an artillery training centre in Ukraine’s Sumy region where foreign instructors worked, according to TASS.
• Russian security council deputy head Medvedev warned that Russia will respond proportionately to the expulsion of its diplomats from a number of western countries, according to Reuters. Medvedev also warned that Moscow could target western cities if Ukraine uses rocket systems supplied by the US to carry out strikes on Russian territory, according to The Times.
• Ukrainian President Zelensky visited front-line troops in Zaporizhzhia. There were also separate reports that powerful explosions were heard in Ukraine’s capital of Kyiv on Sunday, according to Reuters.
• Ukrainian President Zelensky’s chief of staff hit back at comments made by French President Macron after Macron warned against humiliating Russia and said that maintaining dialogue with Russian President Putin was crucial so that it is possible to build an exit ramp through diplomatic means when the fighting stops, according to FT.
• Governor of Ukraine’s Luhansk region said the Russian army is destroying bridges in Severodonetsk to prevent Ukrainian reinforcements and that Ukrainian forces are pushing Russian troops back in some places in the city, according to Reuters.
• UK MoD said Ukrainian forces have counterattacked in the city of Severodonetsk and that the counterattack will likely blunt operational momentum Russian forces previously gained.
• Britain will send Ukraine multiple-launch rocket systems with up to 80km range, according to Reuters citing the Defence Secretary.

ENERGY/SANCTIONS/ECONOMIC

• EU began preparing a new package of sanctions against Russia, according to Poland’s Deputy Minister of Foreign Affairs Yablonskyhis cited by TASS.

OTHER

• Iran’s Supreme Leader Khamenei said enemies are triggering unrest in Iran to overthrow the Islamic Republic, according to Reuters citing a televised speech.
• EU's Borrell admitted that the possibility of returning to the Iran nuclear deal is shrinking but added that they can still do it with extra effort, according to a tweet.
• North Korea fired 8 short-range ballistic missiles into the sea from Pyongyang on Sunday, according to Reuters. It was later reported that US and South Korea test-fired 8 missiles at 'various targets' in response to North Korea's latest missile launches, according to Yonhap
• South Korean President Yoon ordered an expanded South Korea-US deterrence and continued reinforcement of the united defence posture, according to Yonhap.
• Japan’s Defence Minister Kishi said North Korea’s missile launch cannot be tolerated and said at least one of the missiles was of a variable trajectory, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded mixed following last Friday's post-NFP losses on Wall St and ahead of this week's global risk events - including central bank meetings and US inflation data, while participants also digested the latest Chinese Caixin PMI figures and the North Korean missile launches.
• ASX 200 was pressured by weakness in tech and mining, with sentiment not helped by frictions with China.
• Nikkei 225 pared early losses but with upside limited by geopolitical concerns after North Korean provocations.
• Hang Seng and Shanghai Comp. were encouraged by the easing of COVID restrictions in Beijing, while the Chinese Caixin Services and Composite PMI data improved from the prior month but remained in contraction.
• US equity futures were marginally higher overnight and partially recovered some of Friday's steeper losses.
• European equity futures are indicative of a firmer open with Eurostoxx 50 +0.7% after the cash market closed lower by 0.3% on Friday.

FX

• DXY traded flat overnight but remained above the 102.00 level after last Friday’s gains which were helped by a rise in yields as better-than-expected NFP jobs data keeps the Fed on its policy tightening course and with the focus for the greenback shifting to this week’s US CPI data.
• EUR/USD was rangebound after quiet news flow from Europe aside from the headlines surrounding Ukraine, and with participants awaiting the ECB meeting on Thursday.
• GBP/USD remained lacklustre beneath 1.2500 with PM Johnson facing the threat of Tory rebels triggering a no-confidence vote as soon as this week.
• USD/JPY pulled back from recent highs after hitting resistance at the 131.00 handle but with downside limited amid dovish Kuroda comments.
• Antipodeans conformed to the uneventful mood across the FX space ahead of tomorrow's RBA rate decision and with New Zealand on holiday.

FIXED INCOME

• 10yr UST futures were uneventful but partially nursed the declines seen last Friday from the stronger than expected US jobs data.
• Bunds found some respite from recent selling pressure but remained beneath 150.00.
• 10yr JGBs were subdued after Japanese stocks shrugged off early losses and with the BoJ only present in the market under its daily fixed-rate operations.

COMMODITIES

• Crude futures were underpinned after Saudi Aramco hiked its premiums for Asia and Europe but with gains capped amid several supply headlines, while Citi also raised its Brent price forecast by USD 14 to USD 113/bbl due to a delay of the Iran deal although still sees a downward trend on loosening supply-demand imbalances.
• Saudi Aramco increased its prices to Asia for July with the light crude premium raised to USD 6.50/bbl from USD 4.40/bbl vs Oman/Dubai, while it raised the premium to North West Europe to USD 4.30/bbl from USD 2.10/bbl vs ICE Brent but maintained premiums to the US unchanged from the prior month.
• Oman announced new oil discoveries that will increase output by 50k-100k bpd in the next 2-3 years, while it noted that its crude reserves stand at 5.2bln bbls and gas reserves are at around 24tln cubic feet, according to the state news agency citing the energy and minerals minister.
• Libya's El Sharara oil field resumed production at around 180k bpd after having been shut by protests for more than six weeks, according to Argus.
• French Finance Minister Le Maire said that France is in discussions with the UAE to replace Russian oil supplies, according to Reuters.
• US will permit Italy’s Eni and Spain’s Repsol to begin shipping oil from Venezuela to Europe as early as next month to replace Russian crude, according to Reuters citing sources familiar with the matter.
• Austria released strategic fuel reserves to cover for loss of production at a key refinery due to a mechanical incident, according to Reuters.
• Indonesia will adjust its palm oil export levy with the regulations that will outline the changes expected soon, according to a senior official in the economy ministry cited by Reuters.
• Spot gold eked marginal gains above USD 1850/oz but with price action limited by an uneventful dollar.
• Copper traded lower in an extension on Friday's gradual declines amid the tentative mood in Asia.
• Turkish presidential spokesman Kalin said deliveries of Ukrainian grain via the Black Sea and through the area of the strait could begin in the near future, according to TASS citing an interview with Anadolu news agency.

CRYPTO

• Bitcoin broke out of the tight weekend range and climbed to above the 31,000 level.

NOTABLE APAC HEADLINES

• China’s Beijing will continue to roll back its COVID-19 restrictions on Monday including allowing indoor dining and public transport to resume in most districts aside from Fengtai and some parts of Changping, according to Reuters and Bloomberg. Furthermore, a China health official called for more targeted COVID control efforts and warned against arbitrary restrictions for COVID, while an official also said that Jilin and Liaoning should stop the spread of COVID at the border.
• Australia accused China of intercepting a surveillance plane and said that a Chinese military jet conducted a dangerous manoeuvre during routine surveillance by an Australian plane over international waters on May 26th, according to FT.
• BoJ Governor Kuroda said Japan is absolutely not in a situation that warrants tightening monetary policy and the BoJ's biggest priority is to support Japan's economy by continuing with powerful monetary easing, while he added Japan does not face a trade-off between economic and price stability, so can continue to stimulate demand with monetary policy, according to Reuters.

DATA RECAP

• Chinese Caixin Services PMI (Apr) 41.4 (Prev. 36.2)
• Chinese Caixin Composite PMI (Apr) 42.2 (Prev. 37.2)

EU/UK

NOTABLE HEADLINES

• Most of the ECB governing council members are expect to back proposals to create a bond-purchase programme to buy stressed government debt, such as Italy, according to sources cited by the FT.
• UK Conservative rebels expect the 1922 Committee's Brady to make a statement this morning, announcing PM Johnson will be subject to a no-confidence vote, according to ITV's Brand.
• UK PM Johnson’s allies concede that rebels within the Tory party are close to triggering a no-confidence vote and his allies are preparing to defend him in the leadership challenge, according to FT. Furthermore, some Tory MPs said that a confidence vote could be triggered this week although Transport Secretary Schapps disagreed and said that the PM would win a confidence vote, according to BBC.
• London’s Heathrow Airport ordered carriers to limit ticket sales for flights until July 3rd to maintain safety amid understaffing and overcrowding, according to The Times.
• French Finance Minister Le Maire expects positive economic growth this year although will revise economic forecasts in July, according to Reuters.
• EU Commissioner Gentiloni said he aims to propose reform for the EU stability pact after summer which could envisage a specific debt/GDP target for each country, while he added that Italy should show commitment to keeping public debt under control and needs to avoid increasing current spending in a permanent way, according to Reuters.