• APAC stocks declined across the board following the hot US CPI and amid fresh COVID concerns in China.
• European equity futures are indicative of a lower open with Eurostoxx 50 -1.5% after the cash market closed with losses of 3.4% on Friday.
• DXY held on to recent gains, EUR/USD is back below 1.05 and USD/JPY breached 135 for the first time since February 2002.
• UK government will publish legislation on the Northern Ireland Protocol today.
• Looking ahead, highlights include UK GDP and Speech from ECB’s de Guindos.

US TRADE

• US stocks and bonds plunged on Friday after data showed US headline inflation rising to the highest in 40 years in May ahead of the upcoming FOMC meeting.
• S&P 500 -2.9%, Nasdaq-100 -3.6%, Dow Jones -2.7%, Russell 2000 -2.7%.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• White House plans to announce this week that President Biden will travel to Israel and Saudi Arabia next month, according to a source familiar with the planning cited by Reuters.
• US CDC rescinded COVID-19 international air testing rules effective from Sunday, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

• UK military intelligence said Russia is using its overmatch in force ratio and artillery to gradually seize territory in and around Severodonetsk and that Russia likely began preparing to deploy the third battalion from some combat formations in recent weeks, according to the MoD.
• European Commission President von der Leyen told Ukrainian President Zelensky during a visit to Kyiv that the opinion on Ukraine’s membership in the EU will be ready by the end of the week ahead, according to Reuters.

OTHER

• NATO Secretary General Stoltenberg said the Madrid summit was never a deadline for approving NATO applications by Finland and Sweden, while he added that concerns raised by Turkey are legitimate and that they must accept that no NATO ally suffered more terrorist attacks than Turkey, according to Reuters.
• US and South Korean defence ministers plan to expand the scale of joint military exercises and said that North Korea’s nuclear test preparations are provocations that threaten peace and safety in the region, according to Reuters.
• South Korea said that North Korea looks to have launched multiple artillery shots, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks declined across the board following the hot US CPI data which rose to a 40-year high and amid fresh COVID concerns in China.
• Nikkei 225 fell below the 27k level with sentiment not helped by a deterioration in BSI All Industry data.
• Hang Seng and Shanghai Comp. conformed to the downbeat mood with heavy losses among tech stocks owing to the higher yield environment and with mainland bourses constrained after the latest COVID outbreak and containment measures.
• US equity futures remained pressured after Wall St's worst week since January; ES -1.4%
• European equity futures are indicative of a lower open with Eurostoxx 50 -1.5% after the cash market closed with losses of 3.4% on Friday.

FX

• DXY held on to recent gains around the 104.50 level after last week’s hot CPI data which raised the prospects of a more aggressive Fed action.
• EUR/USD retreated beneath 1.0500 as the greenback remained firm and with French President Macron’s majority in parliament seen to be on a knife-edge after the first round of the lower house elections.
• GBP/USD failed to hold on to the 1.2300 handle as PM Johnson’s government set to unveil legislation today to override the Northern Ireland protocol.
• USD/JPY extended its upward trend and reclaimed the 135.00 handle for the first time since February 2002 which spurred the familiar jawboning although this did little to derail the momentum as the pair eventually climbed to its highest since 1998.
• Antipodeans were on the back foot amid the risk-off tone, weaker CNY reference rate setting and with participants in Australia away for a holiday.

FIXED INCOME

• 10yr UST futures were pressured amid continued bear flattening as the front-end rose on expectations the Fed may need to be more aggressive to contain inflation which pushed the 2yr/10yr spread curve closer to inversion.
• Bunds were lacklustre beneath 147.00 as the German 10yr yield sat at its highest since 2014 above 1.50%.
• 10yr JGBs declined on spillover selling from global counterparts and with the BoJ only present in the market under its daily fixed-rate buying operations.

COMMODITIES

• Crude futures retreated at the open as fresh COVID concerns in China dampened demand prospects and following reports of deal to avert a strike by offshore workers in Norway.
• Iraq set July Basrah medium crude OSP to Asia at a premium of USD 3.30/bbl vs Oman/Dubai average and set OSP to Europe at a discount of USD 7.60/bbl vs dated Brent, while it set OSP to North and South America at a discount of USD 1.70/bbl vs ASCI, according to Reuters citing Iraq’s SOMO.
• Libya’s Minister of Oil and Gas Aoun said Libya is currently losing more than 1.1mln bpd of oil production and that most oil fields are closed except for the Hamada field and the Mellitah complex, while the Al-Wafa field continues operations from time to time, according to The Libya Observer.
• QatarEnegy signed an agreement with TotalEnergies (TTE FP) for the North Field East expansion project, while it will announce subsequent signings with partners in the gas field expansion in the near future and possibly at the end of next week, according to Reuters.
• Norwegian Oil and Gas Association reached an agreement in principle with three unions of offshore workers to avert a strike although two of the unions will ask members before signing a deal, according to Reuters.
• Spot gold traded choppy with early upside in the precious metal capped by a steadfast greenback.
• Copper prices retreated amid the broad risk aversion amid COVID woes in China and growth concerns.

CRYPTO

• Bitcoin extended on the weekend slump and briefly approached the 25k level to print its lowest since Dec. 2020.

NOTABLE APAC HEADLINES

• Beijing government said the scale of Beijing’s latest outbreak linked to bars is ferocious and explosive in nature after the city reported 166 cases in a bar cluster and with 6,158 people determined as close contacts linked to the bar cluster, while Beijing announced to halt offline sports events from today and the district of Chaoyang is to launch mass COVID testing on June 13th-15th, according to Reuters.
• Shanghai re-imposed a ban on dine-in restaurant services in most districts and punished officials for a management lapse at a quarantine hotel, according to Business Times.
• At least three Chinese cities of Beijing, Nanjing and Wuhan are trialling a shorter quarantine period of 7+7 days for international arrivals at entry points, according to Global Times.
• Chinese Defence Minister Wei said China firmly rejects accusations and threats by the US against China, while he added the US Indo-Pacific strategy will create confrontation and that Taiwan is first and foremost China’s Taiwan. Wei also said those that pursue Taiwan's independence will come to no good end and that China will fight to the end if anyone attempts to secede Taiwan from China, according to Reuters. Furthermore, Wei reiterated that Beijing views the annexation of Taiwan as a historic mission that must be achieved which its military would be willing to fight for but added that peaceful unification remained the biggest hope of the Chinese people and they are willing to make the biggest effort to achieve it, according to FT.
• Japanese Defence Minister Kishi met with his Chinese counterpart in Singapore and said Japan and China agreed to promote defence dialogue and exchanges, while Japan warned China against attempting to alter the status quo in the South and East China sea, according to Reuters.
• Australian and Chinese defence ministers met in Singapore on Sunday for the first time in three years at the sidelines of the Shangri-La Dialogue summit with the talks described as an important first step following a period of strained ties, according to AFP News Agency.

NOTABLE APAC HEADLINES

• Japanese BSI Large Manufacturing QQ (Q2) -9.9 (Prev -7.6)
• Japanese BSI Large All Industry QQ (Q2) -0.9 (Prev -7.5)

EU/UK

NOTABLE HEADLINES

• UK Northern Ireland Secretary Lewis said the government will publish legislation on the Northern Ireland Protocol on Monday and that the bill will rectify the issues in the protocol, according to Reuters. Reports suggest that the new law could see European judges blocked from having the final say on Northern Ireland-related disputes, according to the Telegraph.
• UK Tory MPs accused PM Johnson of ‘damaging the UK and everything the Conservatives stand for’ as he plans to release legislation on Monday to tear up the Northern Ireland protocol, according to FT.
• UK government ministers are drawing up plans to cut the link between gas and electricity to help reduce household bills for millions of families, according to The Times.
• French President Macron’s majority in parliament is at risk as an IFOP initial estimate showed that Macron’s centrist camp is seen qualified for winning 275-310 out of 577 seats after the first round of the French lower house elections, while the IPSOS initial estimate shows the centrist camp is qualified for winning 255-295 seats, according to Reuters. Note, 289 seats are required for a majority