• APAC stocks were mostly positive following the choppy price action on Wall St with lower oil prices and recession fears in focus; S&P 500 -0.17%. 
• European equity futures are indicative of a softer open with Eurostoxx 50 -0.5% after the cash market closed lower by 0.8% yesterday.
• DXY is a touch softer but maintains 104 status, EUR/USD encountered resistance around 1.06, JPY leads G10 FX. 
• Looking ahead, highlights include EZ, UK & US Flash PMIs, US IJC, Policy Announcements from Norges Bank, CBRT & Banxico, US Bank Stress Test Results, Fed’s Chair Powell Speaks at the House Finance Committee.

US TRADE

• US stocks were choppy as markets digested several factors including a tumble in yields and lower oil prices, while attention was also on Fed Chair Powell's testimony and a Fed research paper which noted the US economy is facing elevated risks of a recession over the next one to two years.
• SPX -0.17% at 3,758, NDX -0.16% at 11,527, DJIA -0.15% at 30,483, RUT -0.55% at 1,689.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed Chair Powell responded that he will never take anything off the table when asked about a 100bps rate hike, according to Reuters.
• Fed's Harker (2023 voter) reiterated he would like rates to end the year above 3% and it will take a while for supply chain issues to heal, while he added they should get north of 3% on rates and then either pause or don't pause depending on the data, according to Reuters.
• Fed's Evans (non-voter; departing) said a 100bps hike isn't necessary and a 75bps hike in July would be in line with continued concerns that inflation isn't slowing, while he thinks the Fed will be doing 25bps hikes by year-end, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

• US senior administration official said the G7 will build on the work of leaders to increase pressure on Russia and will address Russian President Putin's war on prices related to global energy security and food security, while the official added that NATO leaders will announce a new force posture commitments at next week's NATO summit and that the US remains confident Turkey's concerns will be addressed in relation to Sweden and Finland's NATO bids.

OTHER

• White House has been working on a road map for normalisation between Israel and Saudi Arabia ahead of US President Biden's visit to the Middle East next month, according to Axios citing sources.
• US senior official hinted that more Arab nations are looking to make gestures to improve relations with Israel when US President Biden visits the region next month, according to AFP.
• Turkey and Saudi Arabia agreed to boost ties in economy and defence and discussed improving ease of trade between countries, according to a statement.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive after risk appetite slightly improved from the uninspiring lead from Wall St where stocks were choppy as tailwinds from lower oil prices and softer yields were offset by recession fears.
• ASX 200 was led higher by strength in real estate and consumer stocks, while Manufacturing PMI data remained in a firm expansion.
• Nikkei 225 swung between gains and losses with the index hampered by currency inflows.
• Hang Seng and Shanghai Comp. were kept afloat with auto manufacturers lifted after China’s cabinet pledged to boost the auto industry, while markets also shrugged off initial cautiousness brought on by COVID concerns after Shenzhen required PCR tests for anyone entering a public venue.
• US equity futures were lacklustre overnight amid the lingering economic slowdown concerns; ES -0.2%.
• European equity futures are indicative of a softer open with Eurostoxx 50 -0.5% after the cash market closed lower by 0.8% yesterday.

FX

• DXY was subdued following yesterday's fall in yields and with recessionary fears stoked after Fed Chair Powell acknowledged a recession is certainly a possibility, while a Fed research paper noted the US economy is facing elevated risks of a recession over the next one to two years. DXY lingers in the low 104's ahead of the European open.
• EUR/USD traded rangebound after advances in the single currency were stalled by resistance at the 1.0600 level.
• GBP/USD lacked direction and continues to sit on a 1.22 handle.
• USD/JPY declined with losses exacerbated after Japan’s former FX chief spoke against YCC. The pair is back on a 135 handle after advancing as high as 136.71 yesterday.
• Antipodeans softened amid commodity pressure but with downside limited by the constructive mood.

FIXED INCOME

• 10yr USTs took a break from yesterday's rally that coincided with a tumble in oil and recession fears.
• Bunds plateaued above the 145.00 level as risk appetite somewhat improved overnight.
• 10yr JGBs tracked the recent gains in global peers with price action unfazed by the record net selling of Japanese bonds by foreign investors during the past week and the weaker results at the 20yr JGB auction.

COMMODITIES

• Crude futures remained pressured amid global growth slowdown concerns and after US President Biden called for a gas tax holiday which desks suggested is potentially indicative of further actions to come from the Biden admin.
• Private US Energy Inventory Data (bbls): Crude +5.7mln (exp. -0.6mln), Gasoline +1.2mln (exp. -0.5mln), Distillates -1.7mln (exp. +0.3mln), Cushing -0.4mln.
• US EIA said product releases scheduled this week will be delayed due to system issues, while it added the nat gas storage report will be released as scheduled on June 23rd but all other releases will be delayed, according to Reuters.
• US President Biden called on Congress to suspend the federal gasoline tax, as expected, while he wants companies to pass on the entire reduction to consumers and called on the industry to refine more oil into gasoline, according to Reuters.
• US Energy Secretary Granholm said the Defense Production Act could be used to bring more refining capacity, according to Reuters.
• Germany reportedly fears that a planned 'maintenance' shutdown of the Nordstream 1 pipeline could be used by Russia to shut off gas supplies completely to Germany which would threaten its efforts to build stores ahead of winter, according to FT.
• Canadian official said the Nordstream 1 turbine issue likely to be discussed at G7, but a solution may take more time and the Germans are "very concerned" about turbine impact on gas supplies, according to Reuters.
• Spot gold was rangebound and failed to benefit from the subdued greenback.
• Copper was pressured in tandem with a decline in Chinese commodity prices and lingering growth concerns.

CRYPTO

• Bitcoin traded higher and recovered after prices briefly slipped beneath the 20,000 level.

NOTABLE APAC HEADLINES

• China's Shenzhen is to require PCR tests for anyone entering a public venue, according to Bloomberg.
• US State Department warned about reconsidering travel to China due to COVID lockdown risks, according to Reuters.
• Former Japanese FX chief Nakao said continuing with YCC has many negative effects and that it is clear monetary policy is playing a role in the weak JPY, according to Bloomberg.

DATA RECAP

• Australian Manufacturing PMI (Jun P) 55.8 (Prev. 55.7)
• Australian Services PMI (Jun P) 52.6 (Prev. 53.2)
• Australian Composite PMI (Jun P) 52.6 (Prev. 52.9)
• Japanese Manufacturing PMI (Jun P) 52.7 (Prev. 53.3)
• Japanese Services PMI (June P) 54.2 (Prev. 52.6)
• Japanese Composite PMI (June P) 53.2 (Prev. 52.3)

EU/UK

NOTABLE HEADLINES

• French President Macron said he cannot ignore the divisions affecting France after Sunday's lower house election and said all party leaders he has spoken to in the last few days have expressed their will to avoid political deadlock, while he added a majority is possible and they want to make progress on the issue of a parliamentary majority over the next weeks, according to Reuters.
• Majority of economists expect the ECB to hike the deposit rate by 25bps in July and 50bps in September, while the Deposit Rate is seen at 0.75% at year-end (prev. 0.25%) and there is a median 34% (prev. 30%) chance of a recession in 12 months, according to a Reuters poll.