• European bourses are hampered across the board, Euro Stoxx 50 -2.5%, in a continuation of the fallout from Friday's US CPI and amid fresh COVID concerns in China.
• US futures are in-fitting with this price action, ES -2.4% (sub-3800 at worst), ahead of the FOMC where the likes of Barclays now look for a 75bp hike after the May inflation release.
• DXY continues to climb and has peaked at 104.75 thus far, ahead of the 105.01 YTD best; peers are pressured as such though JPY has lifted from lows amid risk-related moves
• Core debt continues to fall amid broad flattening action with US 2s10s briefly inverting while BTP-Bund spread has widened above 240bps
• WTI & Brent are hampered amid the broader market pressure; though, did experience a fleeting move off lows during a break in the newsflow.
• Looking ahead highlights include speeches from ECB’s de Guindos & Schnabel.

As of 11:15BST/06:15ET

LOOKING AHEAD

• speeches from ECB’s de Guindos & Schnabel.
• Click here for the Week Ahead preview

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

• US and Taiwan are reportedly in the final stages of preparation for strategic bilateral discussions between officials, according to Nikkei citing sources; talks expected before end-June in the US.
• 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.

EUROPEAN TRADE

CENTRAL BANKS

• BoJ announces new offer for bond buying programme in which it is to purchase JPY 500bln in 5yr-10yr JGBs tomorrow and will increase amount of offers for its bond buying as needed.
• BoJ fixed-rate bond purchases exceed JPY 1tln, at their highest since 2018, via Bloomberg; Further reported that the BoJ accepts JPY 1.5tln of bids for the daily offers to purchase 10yr bonds.
• BoJ Governor Kuroda says they must support the economy with monetary easing to achieve higher wages; adding, the domestic economy is still in the midst of a COVID recovery. Increasing raw material costs are increasing downward pressure, recent sharp JPY dalls are undesirable. Additionally, Japan's Finance Minister says a weak JPY has both merits and demerits.
• BoJ buys JPY 70.1bln in ETF, according to a disclosure.

EQUITIES

• European bourses are hampered across the board, Euro Stoxx 50 -2.5%, in a continuation of the fallout from Friday's US CPI and amid fresh COVID concerns in China.
• US futures are in-fitting with this price action, ES -2.4% (sub-3800 at worst), ahead of the FOMC where the likes of Barclays now look for a 75bp hike after the May inflation release.
• Sectors in Europe are all in the red and feature Travel & Leisure as the underperformer given further cancellations going into the summer period.
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FX

• Greenback extends US inflation data gains as near term Fed hike expectations crank up; DXY hits 104.750 to eclipse May 16 high and expose 105.010 YTD peak.
• Pound undermined by negative UK GDP and output prints plus NI protocol jitters, Cable perilously close to 1.2200 and EUR/GBP tops 0.8575.
• Aussie hit by heightened Chinese Covid concerns and demand implication for commodities, Kiwi feeling contagion and Loonie lurching as oil prices retreat; AUD/USD sub-0.7000, NZD/USD near 0.6300 and USD/CAD just shy of 1.2850.
• Euro and Franc make way for outperforming Buck, but Yen claws back losses on risk dynamics allied to technical retracement; EUR/USD under 1.0500, USD/CHF above 0.9900 and USD/JPY below 134.50 vs 135.20 apex overnight.
• Yuan falls as Beijing suffers ferocious and explosive virus outbreak and Shanghai reimposes restrictions in most districts, USD/CNH pivots 6.7500 and USD/CNY straddles 6.7350.
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Notable FX Expiries, NY Cut:

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FIXED INCOME

• Bond bears still in control and pushing futures down to fresh troughs, at 145.85 for Bunds, 112.33 for Gilts and 115-30+ for 10 year T-note.
• Cash yields test or breach psychological levels, like 1.50%, 2.5% and 3.25%, while 2-10 year US spread inverts briefly on rising recession risk.
• Monday agenda very light, but big week ahead including top tier data and multiple Central Bank policy meetings.
• Click here for more detail.

COMMODITIES

• WTI & Brent are hampered amid the broader market pressure; though, did experience a fleeting move off lows during a break in the newsflow.
• Currently, the benchmarks are lower by circa. USD 2.00/bbl given Friday's CPI, China COVID, geopolitics around US-China-Taiwan and Iran-IAEA developments (or lack of) following last week's camera removal.
• 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 is pressured by circa. USD 15/oz amid a stronger USD and pronounced yield action; however, the yellow metal is yet to drop below USD 1850/oz and the 10-, 21- & 200-DMAs at USD 1852, 1847 & 1842 respectively.
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NOTABLE EUROPEAN 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.
• UK Foreign Minister Truss says she has spoken to EU VP Sefcovic about the Nothern Ireland protocol and the preference is for a negotiated solution; adding, the EU needs to be willing to change the protocol.
• 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

NOTABLE EUROPEAN DATA

• UK GDP Estimate MM (Apr) -0.3% vs. Exp. 0.2% (Prev. -0.1%); YY (Apr) 3.4% vs. Exp. 3.9% (Prev. 6.4%)

NOTABLE US HEADLINES

• Click here for the US Early Morning note.

CRYPTO

• Bitcoin is hampered amid broad-based losses in the crypto space with the likes of Celsius pausing withdrawals/transfers due to the "extreme market conditions". Currently, Bitcoin is at the bottom-end of a USD 23.7-27.9 range for the session.

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.

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.
• Beijing government spokesperson says that the Beijing COVID-19 bar outbreak still presents risks to the community; Beijing City reports 45 new local cases of 3pm, according to a health official, via Reuters, adding that the COVID-19 bar outbreak is still developing and epidemic control is at a critical juncture.
• 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.
• China urges local governments to raise revenue and sell assets to resolve debt risks, via Reuters. Urges local govt's to lower the debt burden; adding, they will crackdown on illegal debt raising.
• 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 DATA

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