• European bourses are firmer as sentiment picked up heading into the cash open amid encouraging Chinese COVID headlines
• China is to cut quarantine time for international travellers; Shanghai Disneyland (DIS) will reopen on June 30th
• US equity futures saw a leg higher in tandem with global counterparts, with the RTY narrowly outperforming
• Bond reversal continues amidst buoyant risk sentiment, hawkish ECB commentary and supply
• Looking ahead, US Consumer Confidence, G7 Summit, Speeches from ECB’s Lagarde, ECB’s Panetta & Fed’s Daly, Supply from the US

28th June 2022

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GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

• Russian Deputy Chair of the Security Council Medvedev said Russia will strengthen its border if Finland and Sweden join NATO. Medvedev also warned that any attempts to infringe upon Crimea by a NATO country is a declaration of war which could lead to World War 3, while he added that if Sweden and Finland join NATO, they face the prospect of having Iskander missile systems at their threshold, according to Reuters.
• Swedish Foreign Minister said that talks with Turkey over NATO membership have made progress and a breakthrough could come today or at a later date.

DEFENCE/MILITARY

• Russian hacker group KillNet said cyber attacks on Lithuania to continue on Tuesday in retaliation for ban of sanctioned goods transit to Kaliningrad.
• Russia's Kremlin said the special military operation in Ukraine is going to plan and will achieve all of its aims.

ENERGY/ECONOMIC SANCTIONS & UPDATES

• G7 leaders agreed to study potential price caps for Russian oil and gas, according to G7 officials cited by Reuters.
• EU official said the G7 declaration is set to include a move to ban imports of Russian gold, according to Reuters.

OTHER

EUROPEAN TRADE

EQUITIES

• European bourses are firmer as sentiment picked up heading into the cash open amid encouraging Chinese COVID headlines.
• Sectors are mostly in the green with no clear theme. Base metals and Energy reside as the current winners and commodities feel a boost from China’s COVID updates.
• Stateside, US equity futures saw a leg higher in tandem with global counterparts, with the RTY narrowly outperforming.
• Twitter (TWTR) in recent weeks provided Tesla (TSLA) CEO Musk with historical tweet data and access to its so-called fire hose of tweets, according to WSJ sources.
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FX

• DXY regroups on spot month end as yields rally and rebalancing factors offer support - index within 103.750-104.020 range vs Monday's 103.660 low.
• Euro continues to encounter resistance above 1.0600 via 55 DMA (1.0614 today); Yen undermined by latest bond retreat and renewed risk appetite - Usd/Jpy eyes 136.00 from low 135.00 area and close to 134.50 yesterday.
• Aussie breaches technical and psychological resistance with encouragement from China lifting or easing more Covid restrictions - Aud/Usd through 10 DMA at 0.6954.
• Loonie and Norwegian Krona boosted by firm rebound in oil as France fans supply concerns due to limited Saudi and UAE production capacity - Usd/Cad sub-1.2850 and Eur/Nok under 10.3500.
• Yuan receives another PBoC liquidity boost to compliment positive developments on the pandemic front, but Rand hampered by latest power cut warning issued by SA’s Eskom
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FIXED INCOME

• Bond reversal continues amidst buoyant risk sentiment, hawkish ECB commentary and supply.
• Bunds lose two more big figures between 146.80 peak and 144.85 trough, Gilts down to 112.06 from 112.86 at best and 10 year T-note retreats within 117-01/116-14 range
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COMMODITIES

• WTI and Brent futures were bolstered in early European hours amid encouragement seen from China's loosening of COVID restrictions.
• Spot gold is uneventful, around USD 1,825/oz in what has been a sideways session for the bullion since the reopening overnight.
• Base metals are posting broad gains across the complex - with LME copper back above USD 8,500/t amid China-related optimism.
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ECB

• ECB's Lagarde said inflation in the euro area is undesirably high and it is projected to stay that way for some time to comeFragmentation tool, via the ECB.
• ECB's Kazaks said 25bps in July and 50bps in September is the base case, via Bloomberg TV. Kazaks said it is worth looking at a 50bps hike in July and front-loading hikes might be reasonable. Fragmentation risks should not stand in the way of monetary policy normalisation. If necessary, the ECB will come up with tools to address fragmentation.
• ECB's Wunsch said he is comfortable with a 50bps hike in September; adds that 200bps of hikes are needed relatively fast, and anti-fragmentation tool should have no limits if market moves are unwarranted, via Reuters.
• Bank of Italy said Governor Visco's resignation is not on the table, according to a spokesperson cited by Reuters.

NOTABLE EUROPEAN HEADLINES

• UK lawmakers voted 295-221 to support the Northern Ireland Protocol bill in the first of many parliamentary tests it will face during the months ahead, according to Reuters.
• Scotland's First Minister Sturgeon will set out a plan today for holding a second Scottish Independence Referendum, according to BBC News.

CRYPTO

• Bitcoin has been trading sideways around the USD 21k mark.

APAC TRADE

EQUITIES

• APAC stocks were mixed with the region partially shrugging off the lacklustre handover from the US.
• ASX 200 was kept afloat with energy leading the gains amongst the commodity-related sectors.
• Nikkei 225 swung between gains and losses with upside capped by resistance above the 27K level.
• Hang Seng and Shanghai Comp. were pressured amid weakness in tech and lingering default concerns as Sunac plans discussions on extending a CNY bond and with Evergrande facing a wind-up petition.

NOTABLE APAC HEADLINES

• China is to cut quarantine time for international travellers, according to state media cited by Reuters.
• Shanghai Disneyland (DIS) will reopen on June 30th, according to Reuters.
• PBoC injected CNY 110bln via 7-day reverse repos with the rate at 2.10% for a CNY 100bln net daily injection.
• China's state planner official said China faces new challenges in stabilising jobs and prices due to COVID and risks from the Ukraine crisis, while the NDRC added they will not resort to flood-like stimulus but will roll out tools in its policy reserve in a timely way to cope with challenges, according to Reuters.
• China's state planner NDRC says China is to cut gasoline and diesel retail prices by CNY 320/tonne and CNY 310/tonne respectively from June 29th.
• BoJ may have been saddled with as much as JPY 600bln in unrealised losses on its JGB holdings earlier this month, as a widening gap between domestic and overseas monetary policy pushed yields higher and prices lower, according to Nikkei.