• APAC stocks gained across the board amid a broadly constructive global risk tone (US markets closed yesterday)
• European equity futures are indicative of a higher open with Eurostoxx 50 +0.6% after the cash market closed higher by 0.9% yesterday
• DXY trades a touch softer, EUR/USD sits on a 1.05 handle, AUD leads G10 FX
• Crude futures continued to nurse some of Friday's heavy losses, helped by the risk tone and a softer dollar.
• Looking ahead, highlights include Canadian Retail Sales, New Zealand Trade Balance, Speeches from ECB’s Rehn, Fed’s Barkin & Mester.

US TRADE

• US equity index futures traded higher on Monday with price action steady amid thinned liquidity conditions as US cash markets were closed for the Juneteenth holiday.

NOTABLE HEADLINES

• Fed's Bullard (2022 voter) said he expects the economic expansion to continue this year and that the Fed must meet market expectations for rate hikes, while he added that effects of Fed guidance on the economy and CPI are taking hold. Bullard also stated that high inflation has come up like a storm and the economy is slowing to the trend rate of growth, as well as noted that the current balance sheet reduction is a good place to begin with and they may not need to go as far on QT as it might seem, according to Reuters.
• US Treasury Secretary Yellen said 2017 tax cuts were not successful in boosting private investment and the goal should be equitable and sustainable growth. Yellen also said that once some countries implement a global corporate minimum tax, other countries will follow suit or lose revenues, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

• EU Ambassador to Moscow is to be summoned to the Russian Foreign Ministry on Tuesday regarding the Kaliningrad transit ban, according to Reuters.
• EU member states are set to formally grant Ukraine candidate status later this week following a meeting on Monday where none of the EU ambassadors opposed the decision, according to Bloomberg
• US Treasury Secretary Yellen said they continue to have productive conversations on restricting energy revenues to Russia without spillovers to the global economy and that a Russian oil price cap is an important way to prevent spillover effects to low-income countries, according to Reuters.
• Canadian Finance Minister Freeland said she cannot think of a more appropriate source of funding to rebuild Ukraine than confiscated Russian assets and that the Russian economy is only now beginning to feel the impact of restrictions on exports to Russia, according to Reuters.

OTHER

• Turkish Presidential spokesman said talks with Finland and Sweden on NATO bids will continue and the Madrid summit is not a deadline, according to Reuters.
• IAEA report stated that they verified Iran was ready to feed uranium into a cascade of advanced IR-6 centrifuges at Fordow that has not been used for enrichment before and Iran informed the IAEA that passivation of the cascade, which is a process that is carried out before enrichment, began on Sunday, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks gained across amid a broad constructive global risk tone despite a lack of fresh macro drivers and the recent holiday closure in the US, with Bitcoin and Chinese commodity prices also stabilising after the recent tumultuous price action.
• ASX 200 was led higher by the energy sector and after RBA's Lowe effectively ruled out a 75bps hike next month.
• Nikkei 225 outperformed and reclaimed the 26,000 level amid a predominantly weaker currency.
• Hang Seng and Shanghai Comp. were positive with sentiment in Hong Kong underpinned by news the SAR is to propose a quarantine-free business travel corridor with mainland China, while mainland bourses lagged with the US ban on imports from Xinjiang taking effect from today.
• US equity futures gained alongside Asian stocks and with other risk assets composed; ES +1.6%.
• European equity futures are indicative of a higher open with Eurostoxx 50 +0.6% after the cash market closed higher by 0.9% yesterday.

FX

• DXY marginally extended on the prior day’s losses with demand hampered by the heightened risk appetite; maintains 104 status.
• EUR/USD was slightly firmer after bouncing off support at 1.0500 and the recent plethora of ECB rhetoric.
• GBP/USD traded higher after BoE's Mann talked up rate hikes yesterday to counter the weaker GBP. Note, the UK also braces for the start of a series of crippling train strikes which begin today.
• USD/JPY was choppy around the 135.00 level although the Japanese currency mostly weakened against other peers which spurred a continuation of the familiar jawboning from Finance Minister Suzuki.
• Antipodeans were firmer amid the positive risk tone and reprieve in commodities but with gains capped as RBA Governor Lowe effectively ruled out a 75bps hike next month and after New Zealand Westpac Consumer Confidence printed its lowest on record.
• Israel PM Bennett and Foreign Minister Lapid agreed on dissolving the Knesset and going for an early election, while the vote will take place next week and Lapid will become PM once the vote passes, according to Walla News.

FIXED INCOME

• 10yr UST futures declined amid the positive risk appetite and with US yields higher on return from holiday.
• Bunds were lacklustre after the recent slew of ECB rhetoric affirmed the view of incoming rate hikes from July.
• 10yr JGBs were contained amid strength in Tokyo stocks and after mixed results at the 5yr JGB auction.

COMMODITIES

• Crude futures continued to nurse some of Friday's heavy losses, helped by the risk tone and a softer dollar.
• US Treasury Secretary Yellen said she does not see resuming the Keystone XL oil pipeline as a short-term measure that can address high oil prices, while she added it would take years to have an impact. Yellen also commented that evidence is mixed on the level of pass-through from a gasoline tax holiday to lower prices and said that an exception or ban on insurance for certain Russian oil shipments would effectively provide a price cap on oil, according to Reuters.
• Brazilian Economy Minister Guedes said Brazil is part of the western energy security, particularly for Europe, while he added that privatising and moving Petrobras to Novo Mercado would increase its market cap from BRL 450bln to BRL 750bln. Guedes added that they will conduct new measures again if the war in Ukraine is escalating, according to Reuters.
• PetroEcuador may have to stop exports if protests continue and it declared a force majeure to avoid contract penalties, according to Reuters.
• Denmark's energy agency declared an 'early warning' stage of gas supply preparedness, according to Reuters.
• Spot gold was flat as tailwinds from a softer greenback were offset by the lack of haven demand.
• Copper prices were steady after yesterday's intraday rebound and amid the constructive risk tone.
• Codelco's union presidents ratified the start of a national strike beginning on Wednesday, according to Reuters.

CRYPTO

• Bitcoin eked marginal gains with price action relatively stable around the 20,500 level.

NOTABLE APAC HEADLINES

• RBA Governor Lowe said Australians should be prepared for further interest rate increases and that level of rates is still very low for an economy with low unemployment and high inflation, while he wants to emphasise the RBA is not on a pre-set path on rates and said the pace and extent of rate hikes will be guided by incoming data. Lowe said that they discussed a 25bps or 50bps hike at the June meeting and expect to discuss a 25bps or 50bps hike at the July meeting, as well as noted the current market pricing on the rate hike trajectory this year is not particularly likely but added that the market has been more accurate lately, according to Reuters.
• RBA Minutes from the June 7th meeting stated that members agreed further steps would need to be taken to normalise monetary conditions in the months ahead and the board remains committed to doing what is necessary to ensure inflation in Australia returns to the target over time. Furthermore, inflation was expected to increase further before declining back towards the top of the 2%-3% range in 2023 and members observed it would be quite a rapid tightening in a historical context if the Cash Rate were to be increased by 25bps at each meeting during the rest of the year.

DATA RECAP

• New Zealand Westpac Consumer Confidence (Q2) 78.7 (Prev. 92.1)

EU/UK

NOTABLE HEADLINES

• ECB’s Lane said very high inflation means there is a risk inflation psychology could take hold and said the larger increment for rate increase in September does not represent a red alert assessment of inflation. Lane also commented that he doesn’t see a situation where they would need to revisit the plan for a July decision and there is no preview beyond September of what will be the appropriate pace of tightening, according to Reuters.
• ECB’s Villeroy said the new instrument should be available as much as necessary to make the no-limit commitment to protect the Euro very clear and the more credible such an instrument is, the less it may have to be used in practice. Villeroy added the new instrument will have rules but there will be elements of judgement also and said they would not necessarily need to hold purchases of government or private sector securities to maturity, according to Reuters.
• French President Macron will invite all parties able to form a group in the new parliament for talks on Tuesday and Wednesday, according to Reuters.