• APAC stocks were pressured following the global stock and bond slump; S&P 500 -3.9%, NQ -4.6%
• A WSJ piece noted the Fed is likely "to consider surprising markets with a larger-than-expected 0.75-percentage-point interest rate increase at their meeting this week".
• European equity futures are indicative of a higher open with Eurostoxx 50 +0.9% after the cash market closed with losses of 2.7% yesterday.
• DXY pulled back overnight, EUR/USD sits on a 1.04 handle, antipodeans outpace peers in G10 FX.
• Looking ahead, highlights include Swedish CPIF, UK Unemployment, German ZEW, US PPI, OPEC MOMR, Speech from ECB's Schnabel, Supply from the Netherlands, Italy & Germany.

US TRADE

• US stocks, bonds and metal prices sold off heavily as money markets now price in greater chances of a 75bp move from the Fed on Wednesday in the wake of the recent hot CPI report, upwardly revised inflation expectations from UoM and the NY Fed surveys, while the moves were also emboldened after a WSJ piece noted the Fed is likely "to consider surprising markets with a larger-than-expected 0.75-percentage-point interest rate increase at their meeting this week".
• SPX -3.88% at 3,750, NDX -4.60% at 11,288, DJIA -2.79% at 30,516, RUT -4.76% at 1,715.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• WSJ reported that "A string of troubling inflation reports in recent days is likely to lead Federal Reserve officials to consider surprising markets with a larger-than-expected 0.75-percentage point interest rate increase at their meeting this week", while it was also reported that CNBC's Liesman said the Fed is very likely to hike rates by 75bps this week.
• Goldman Sachs revised its Fed forecasts to include 75bps rate hikes in June and July, while it now expects the median dot to show rates at 3.25%-3.50% by year-end followed by two further hikes in 2023 to 3.75%-4.00% and one 25bps cut in 2024.
• US House passed legislation to ease ocean shipping delays which awaits President Biden's signature, according to Reuters.

GEOPOLITICS

OTHER

• South Korea's Foreign Minister believes North Korea has completed preparations for a nuclear test and it only requires a political decision, according to Reuters.
• US Secretary of State Blinken said the US remains concerned about the prospect of a seventh North Korean nuclear test and that the US is preparing for all contingencies, while the US is prepared to make short- and longer-term adjustments to military posture as appropriate.

APAC TRADE

EQUITIES

• APAC stocks were pressured following the global stock and bond slump as the aftershock from recent hot US inflation reverberated across risk assets and spurred further expectations for a 75bps Fed rate hike this week.
• ASX 200 was the worst performer as the losses caught up to the index on return from the extended weekend and with the declines led by underperformance in tech and metals.
• Nikkei 225 extended its declines despite the BoJ’s efforts to cap yields and with the recent rapid currency moves adding to the uncertainty.
• Hang Seng and Shanghai Comp. were negative as lockdown concerns lingered with China’s Vice Premier Sun suggesting it is necessary to strengthen COVID-19 prevention and control of key places, while Shanghai's Minhang district plans to conduct mass testing on Saturday.
• US equity futures nursed losses to provide some solace after the S&P 500 slipped into a bear market; +1.2%
• European equity futures are indicative of a higher open with Eurostoxx 50 +0.9% after the cash market closed with losses of 2.7% yesterday.

FX

• DXY pulled back from its best levels since 2002 but held on to most of the prior day's gains near the 105.00 level amid the broad risk aversion and following a WSJ report that troubling inflation is likely to lead Fed officials to consider a 75bps hike this week, while Barclays, JPMorgan and Goldman Sachs are all in the 75bps camp.
• EUR/USD nursed some of its recent losses after support held at the 1.0400 level.
• GBP/USD rebounded overnight but remained below 1.2200 following disappointing monthly GDP and output data, as well as Brexit-related frictions after the UK introduced the bill to override the Northern Ireland Protocol.
• USD/JPY was choppy as the Japanese currency held its ground against the dollar on haven inflows although the yen was later pressured after the BoJ announced additional bond purchases to contain yields.
• Antipodeans bounced off yesterday’s lows but with the recovery contained by the broad risk-averse mood and recent weakness in commodities.

FIXED INCOME

• 10yr UST futures remained subdued on expectations of a more aggressive Fed which resulted in inversion of the 2s/10s yield curve and with markets pricing around a 93% probability for a 75bps rate hike this week.
• Bunds were despondent after the decline beneath 145.00 with focus remaining on the widening of the IT/GE 10yr spread.
• 10yr JGBs were pressured on spillover selling from global counterparts but pared some of the losses after the BoJ announced it is to purchase JPY 800bln on 5yr-10yr JGBs which was larger than what it previously flagged, while the central bank also announced an addition to its buying schedule and a boost of purchases for tomorrow.

COMMODITIES

• Crude futures were choppy as growth concerns were counterbalanced by a tightening supply environment.
• US and Saudi Arabia will announce on Tuesday that US President Biden will visit Saudi Arabia on July 15th and 16th, according to NBC's Pegram citing sources.
• US total shale regions oil production (July) is seen increasing by 143k BPD at 8.9mln BPD (vs 143k BPD in June), according to the EIA
• Spot gold traded rangebound which provided respite from the prior day's losses.
• Copper prices were contained amid the risk aversion across the Asia-Pac region.

CRYPTO

• Bitcoin remained pressured amid the rout in risky assets and briefly fell beneath 21,000.

NOTABLE APAC HEADLINES

• Shanghai's Minhang district is planning mass COVID-19 testing on Saturday, according to Bloomberg.
• White House said National Security Adviser Sullivan's meeting with China's top diplomat Yang included discussions on a number of regional and global security issues, as well as key issues in US-China relations, according to Reuters.
• Senior US administration official said nothing specific is planned at this time when asked about a possible presidential meeting between Biden and Xi but added that they expect to see additional official meetings between US and China in the months ahead, according to Reuters.
• US bipartisan lawmakers are proposing new government powers to block US investments in China and other nations to limit US involvement in China’s tech sector and rebuild supply chains, according to WSJ.
• BoJ announced additional bond purchases for Wednesday in which it will increase purchases of JGBs across several maturities, while it will continue to conduct additional buying as needed, according to Reuters.

DATA RECAP

• Australian NAB Business Confidence* (May) 6 (Prev. 10)
• Australian NAB Business Conditions* (May) 16 (Prev. 20, Rev. 19)

EU/UK

NOTABLE HEADLINES

• UK introduced the Northern Ireland Protocol bill (overriding parts of the Brexit deal), according to Reuters.
• Irish Foreign Minister Coveney said UK protocol legislation is effectively a breach of international law but added the EU is looking to negotiate with the UK government and looking to compromise.
• The EU is set to launch three separate lawsuits against the British government after it published its plans to override the protocol, according to the Telegraph. One option would reportedly see the EU end financial equivalence for the City of London.
• US urged the UK and EU to return to talks to resolve differences over the Northern Ireland Protocol and said it remains a priority to protect gains of the Good Friday Agreement.
• White House said proposed changes to Ireland Protocol won't be an impediment to potential US-UK trade deal or trade dialogue talks in Boston, according to Reuters.
• UK PM Johnson is not looking to lower household taxes until inflation is brought under control, as such action is unlikely before next year, according to the Telegraph.
• ECB officials are reportedly increasingly determined not to divulge plans to fight bond-market stress and are reluctant to reveal plans to tackle fragmentation, while they are convinced there are few benefits in pre-emptively revealing a specific crisis tool, according to Bloomberg sources.
• German Finance Minister Lindner said he is worried about the economic situation and that stagflation is a conceivable scenario, while he added that Euro's weakness is a driver of EZ inflation, according to Reuters.