• European bourses are kicking off the week on the front-foot as global equities see tailwinds from Wall Street’s bounce on Friday
• Stateside, US equity futures track sentiment higher – with the NQ the current outperformer vs the ES, YM, and RTY
• In FX, DXY pivots 104.00, Yen benefits from all round fix buying, Aussie lags on Aud/Nzd headwinds, and the Yuan is underpinned
• Debt futures unwind more recovery gains with EGBs leading the way; T-note futures print fresh lows as US enters the fray
• US is pushing to discuss a price cap on Russian oil during the G7 summit, also looking to ban imports of Russian gold
• Looking ahead, highlights include US Durable Goods, EIA Update on delayed Weekly DoE Report, ECB Sintra Forum, G7 Summit, Speeches from ECB’s Lagarde & Schnabel, Supply from US

27th June 2022

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GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

• NATO summit this week (Jun 29-30th) is unlikely to see a breakthrough to Turkey's opposition regarding Sweden and Finland's NATO bids, according to Reuters sources.

DEFENCE/MILITARY

• Ukrainian President Zelensky said they will get back all their cities and noted Ukraine was hit by 45 missiles in the past day, according to Reuters.
• Ukrainian military intelligence said Russia launched strikes from Belarusian airspace for the first time, according to Washington Post.
• Russian Defence Ministry said Russia carried out a large missile strike on Ukrainian army training centres in the Chernihiv, Zhytomyr and Lviv regions, while the capital of Kyiv was targetted by Russia for the first time in weeks, according to Reuters and Sky News.
• US is planning to announce as soon as this week that it has purchased advanced surface-to-air missile defence systems for Ukraine, according to a source cited by CNN's Bertrand.

ENERGY/ECONOMIC SANCTIONS & UPDATES

• UK, US, Japan and Canada are to lead the G7 push to ban imports of Russian gold, according to Reuters.
• US is pushing to discuss a price cap on Russian oil during the G7 summit, according to Politico. Furthermore, US Treasury will issue a determination to prohibit imports of new Russian gold into the US, while a senior US official said they will likely announce a ban of imports of new Russian gold on Tuesday, according to Reuters.
• The G7 is not going to agree on an oil price cap at its meeting, but it will agree "this is a direction it wants to push forward", and will seek further talks with non-G7 nations to see if it can be put into practice, according to Bloomberg's Blas.
• German government source also noted that G7 leaders are having very constructive discussions on a Russian oil price cap to curve revenue and said that North Korea, Afghanistan, Iran, Syria and Libya are also on the G7 agenda, according to Reuters.
• France said it does not oppose the US proposal for a Russian oil price cap and said they need a maximum price on oil, while discussions need to be held with all producers. France also supports a ban on Russian gold and said the discussions need to take place between the 27 EU members, according to Reuters.
• Russia defaulted on foreign debt for the first time since 1918 after the grace period on two Eurobond coupons expired on Sunday, while the Russian Finance Minister called the default label a farce, according to Bloomberg.

OTHER

• Iran’s Foreign Minister said they agreed to resume talks on reviving the 2015 nuclear deal following a meeting with EU’s Borrell and noted that they had a positive meeting.
• Qatar will be hosting indirect talks between Washington and Tehran for the revival of the nuclear deal, according to an advisor cited by ISNA
• Iran tested its Zuljanah satellite launcher for the second time on Sunday which was said to be for research purposes, according to Fars.
• Israeli negotiators met with the US mediator in an effort to resolve the maritime border dispute with Lebanon, according to Reuters.
• North Korea on Saturday condemned "aggression moves" by the US and South Korea and vowed to take revenge as it marked the 72nd anniversary of the outbreak of the Korean War, according to CNN

GLOBAL NEWS

• US aims to raise USD 200bln in funding over 5 years to close the infrastructure gap for developing countries and said G7’s ‘Partnership for Global Infrastructure and Investment’ is aimed at countering China’s Belt and Road Initiative, while US and G7 partners will seek hundreds of billions of dollars in additional funds from multilateral development banks and others. Furthermore, US President Biden said they collectively aim to mobilise almost USD 600bln by 2027 and EU’s von der Leyen said “Team Europe” is mobilising USD 300bln through to 2027 to fund infrastructure in developing countries, according to Reuters.
• Bank for International Settlements said timely and decisive action by central banks is needed to restore low and stable inflation, while it added that the risk of stagflation looms over the global economy as the threat of a new inflation era coincides with weaker growth, according to Reuters.

EUROPEAN TRADE

EQUITIES

• European bourses are kicking off the week on the front-foot as global equities see tailwinds from Wall Street’s bounce on Friday.
• Sectors in Europe are mostly positive – but Utilities and Insurance are subdued, with the overall picture being a cyclical one.
• Stateside, US equity futures track sentiment higher – with the NQ the current outperformer vs the ES, YM, and RTY.
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FX

• Greenback continues to gravitate as risk sentiment improves, but could get a month end boost given models indicating broad rebalancing requirement - DXY pivots 104.000 within 104.120-103.790 range just shy of last week's low.
• Yen benefits from all round fix buying ahead of final trading day of June and Q2 on Thursday - Usd/Jpy not far from 134.50 at one stage overnight alongside declined in Yen crosses.
• Pound perks up as IMM spec accounts trim short positions again and Euro tests technical resistance ahead of 1.0600 vs Buck amidst firmer rebound in EGB yields - Cable probes 1.2300 at best, Eur/Usd touches 21 DMA at 1.0591.
• Aussie lags on Aud/Nzd headwinds, but Loonie pares losses in tandem with oil - Aud/Usd sub-0.6950, cross under 1.1000, Nzd/Usd hovering over 0.6300 and Usd/Cad back below 1.2900.
• Yuan underpinned by net PBoC liquidity injection and easing of Covid restrictions in China - Usd/Cnh and Usd/Cny both beneath 6.6900.
• Lira knee jerks higher after Turkey cuts credit to firms with more than Try 15 mn FX cash assets - Usd/Try down to 16.1040 or so before rebound towards 16.8900.
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FIXED INCOME

• Debt futures unwind more recovery gains with EGBs leading the way.
• Bunds retreat towards 146.50 vs 149.00 at one stage last Friday.
• Gilts closer to 113.00 than 114.00 and 10 year T-note near the base of 116-31/117-13 overnight range.
• US durable goods data ahead and a double dose of issuance comprising Usd 46 bn 2 year and Usd 47 bn 5 year auctions.
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COMMODITIES

• WTI and Brent futures consolidate with modest intraday losses as G7 leaders meet to decide on a Russian oil price cap ahead of Iranian nuclear talks and on the week of the OPEC+ meeting.
• French CGT unions will participate in strikes at LNG terminals and gas storage facilities this week; strike in the energy sector on June 28th.
• Spot gold piggy-backs off the softer Dollar – with the yellow metal currently eyeing its 21 DMA (1,841.60/oz) and 200 DMA (1,845.20/oz) to the upside
• Base metals are largely rebounding following the recent rout – also aided by the Buck.
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NOTABLE EUROPEAN HEADLINES

• ECB says as of the July meeting, the policy decisions will be released at 14:15CET and presser at 14:45CET, according to Reuters.

NOTABLE US HEADLINES

• Fed’s Daly (2024 voter) said on Friday that it looks like they will need a 75bps rate hike in July but could be 50bps if data comes in better than expected although she would not be surprised if they get a couple of unwelcome readings on inflation, according to Reuters.

CRYPTO

• Bitcoin posts modest gains and remains above USD 21,000.

APAC TRADE

EQUITIES

• APAC stocks were higher across the board as the region took impetus from last Friday's firm gains on Wall St heading closer into month-end.
• ASX 200 enjoyed broad gains across its sectors although gold miners lagged as Evolution Mining shares dropped by more than 20% due to a cut in its FY output guidance.
• Nikkei 225 was lifted after the BoJ’s Summary of Opinions reiterated that they must maintain easy policy and with Tepco among the biggest gainers on tight electricity supply amid the hot weather.
• Hang Seng and Shanghai Comp. conformed to the upbeat mood as Hong Kong benefitted from a rampant tech sector and with the mainland encouraged by further easing of restrictions in Shanghai and Beijing, while the PBoC also upped its liquidity efforts with a CNY 100bln injection.

NOTABLE APAC HEADLINES

• Beijing will permit schools to resume in-class teaching as soon as Monday, ending one of the last major curbs in the capital, according to Bloomberg.
• Shanghai is to gradually resume dining-in at restaurants from June 29th, according to an official cited by Reuters.
• PBoC injected CNY 100bln via 7-day reverse repos with the rate at 2.10% for a CNY 90bln net injection, according to Reuters.
• China requested that banks make preparations for longer trading hours for the CNY, with trading in the onshore CNY potentially to extend until 03:00 local time the following day (20:00BST/15:00CDT), according to Bloomberg.
• BoJ Summary of Opinions from the June meeting stated the BoJ must maintain easy policy and keep a close eye out on the market and FX impact on the economy and prices. It also noted the number of goods seeing prices rise is increasing due to higher raw material costs and a weak yen but it is appropriate to keep easy policy as inflation is not driven by a positive economic cycle. Furthermore, it said maintaining ultra-easy policy is effective in sustaining a rise in wages and that a sharp fall in Yen would hurt the economy and heighten uncertainty.
• Japanese government issued power shortage warnings for Tuesday, for a second straight day, according to Reuters.
• Japan has proposed removing reference to the goal of 50% zero-emission vehicles by 2030; wants less concrete target, according to a draft cited by Reuters.
• BoJ's holding of JGBs has reportedly topped 50% of its total, according to Nikkei.

DATA RECAP

• Chinese Industrial Profits YY (May) -6.5% (-8.5%)
• Chinese Industrial Profits YTD YY (May) 1.0% (3.5%)