• European bourses are softer with the complex drifting post-open amid a lack of catalysts/drivers
• Stateside, action is in-fitting as we look to next week’s Tier 1 US events with the BoC looming in the interim
• DXY has drifted back to 104.00 as JPY benefits from lower US yields, AUD underpinned and CAD bid
• Core benchmarks have recouped from an initial reversal to/through prior closes; green Bobl and Gilt sales strong
• Crude benchmarks are firmer and back towards post-inventory levels as the USD dips and despite overnight trade data from China
• US Secretary of State Blinken is set to travel to China for talks in the coming weeks
• Looking ahead, highlights include BoC Policy Announcement

EUROPEAN TRADE

EQUITIES

• European bourses are softer, Euro Stoxx 50 -0.3%, with the complex drifting after the cash open amid a relative lack of fresh catalysts/drivers.
• Though, attention remains on the soft Chinese trade figures and German industrial output, on the latter ING writes that unless there is a significant pickup Germany could continue into a Q2 recession.
• Sectors are similarly softer though Retail names outperform amid strength in Inditex post earnings while Danske Bank is the Stoxx 600 outperformer after providing FY26 targets and a dividend update.
• Stateside, futures are slightly softer in-fitting with the above in similarly limited trade with the region entirely focused on next week's CPI/FOMC; though, today's BoC might provide an interim focal point, ES -0.1%.
• US lawmakers are reportedly attempting to curb Mastercard (MA) and Visa (V) fees, via WSJ.
• Click here and here for a recap of the main European updates.
• Click here for more detail.

FX

• DXY drifts on the 104.000 handle in the absence of primary US data and Fed commentary during pre-FOMC purdah.
• Yen relishes softer Treasury yields as USD/JPY retreats further from recent peaks towards 139.00 and decent option expiries.
• Yuan continues to wilt as weak Chinese trade/export metrics compound growth concerns, USD/CNY and USD/CNH top 7.1300 and 7.1400 respectively.
• Aussie underpinned near 0.6700 vs Greenback as RBA officials underline hawkish guidance, but AUD/USD is capped by tech resistance and hefty expiry interest.
• Loonie perky pre-BoC around 1.3400 handle against Buck as market pricing sits tight between pause and 25 bp hike.
• TRY depreciation is a strong signal of a move away from state controls in favour of a free market and declines in the CBRT's reserves have stopped after signs of FX policy change, according to traders cited by Reuters.
• PBoC set USD/CNY mid-point at 7.1196 vs exp. 7.1194 (prev. 7.1075)
• Click here for notable OpEx for the NY Cut.
• Click here for more detail.

FIXED INCOME

• Bonds regroup after reversal from highs through or towards prior closing levels.
• Bunds, Gilts and T-notes back above parity within 134.67-07, 96.87-51 and 114-02+/113-26 respective ranges awaiting US and Canadian trade data pre-BoC.
• Demand for German Green Bobl exceptionally strong (record high), while 2025 UK Gilt sale reasonably well covered.
• Orders for the new 4yr BTP Valore retail bond reach EUR 11bln since the beginning of the offer period.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are firmer and back towards post-inventory levels as the USD dips and despite overnight trade data.
• Currently, WTI Jul'23 and Brent Aug'23 post upside of around USD 0.50/bbl; newsflow has been limited and focused on geopols and while IEA's Birol spoke he added little aside from looking for a tight H2.
• US Energy Inventory Data (bbls): Crude -1.7mln (exp. +1.0mln), Gasoline +2.4mln (exp. +0.9mln), Distillate +4.5mln (exp. +1.3mln), Cushing +1.5mln.
• Base metals are modestly firmer and largely shrugged off Chinese trade as the import metrics seemingly indicate the overall reopening-recovery narrative remains in play.
• Spot gold is little changed as the USD pulls back to near-U/C with the yellow metal holding above the USD 1956/oz 10-DMA but unable to make much headway from session high circa. USD 10/oz above.
• Discussions on the Black Sea grain deal to occur in Geneva on Friday, via Ria citing sources.
• Indian Steel Minster says they are looking aggressively to diversify coking coal imports, requirement for this product is going to increase.
• Click here for more detail.

CRYPTO

• Binance commented on the US SEC filing a motion to freeze assets in which it stated that user assets remain safe and its platform continues normal deposit and withdrawal operations, while it added that the filing of the preliminary injunction is unwarranted and it looks forward to defending against it in court, according to Reuters.
• Coinbase (COIN) says the incident with delayed ETH transactions has been resolved.

NOTABLE EUROPEAN HEADLINES

• ECB's Schnabel says, on rates, "We have more ground to cover. It will depend on the incoming data by how much more rates will have to increase.". When questioned on market expectations for two 25bp hikes: "A peak in underlying inflation would not be sufficient to declare victory: we need to see convincing evidence that inflation returns to our 2% target in a sustained and timely manner. We are not at that point yet."
• ECB's de Guindos says "To complete the crisis management toolkit for large banks in the EU, we also need to make progress in other areas, such as liquidity in resolution and a backstop to the Single Resolution Fund.".
• ECB's Knot says prolonged monetary tightening could still result in stress for financial markets, inflation expectations in financial markets seem optimistic, not convinced that current tightening is sufficient.
• UK PM Sunak seeks to forge an economic alliance with US President Biden and aims to extract concessions from the US on green technologies, according to FT.

DATA RECAP

• Swiss Unemployment Rate Adj. (May) 2.0% vs. Exp. 1.9% (Prev. 1.9%)
• German Industrial Output MM (Apr) 0.3% vs. Exp. 0.6% (Prev. -3.4%, Rev. -2.1%)
• UK Halifax House Prices YY (May) -1.00% vs. Exp. -0.95% (Prev. 0.10%); MM (May) 0.0% vs. Exp. 0.0% (Prev. -0.3%, Rev. -0.4%)
• French Trade Balance, EUR, SA (Apr) -9.71B (Prev. -8.023B, Rev. -8.393B)
• Italian Retail Sales NSA YY (Apr) 3.2% (Prev. 5.8%); MM (Apr) 0.20% (Prev. 0.00%)

NOTABLE US HEADLINES

• OECD Projections (June): Economic Outlook projects a moderation of global GDP growth from 3.3% in 2022 to 2.7% in 2023, followed by a pick-up to 2.9% in 2024. Click here for more.
• Click here for the US Early Morning Note.

GEOPOLITICS

• US Secretary of State Blinken and Saudi Crown Prince MBS had an open and candid discussion covering a full range of bilateral issues, while there was a good degree of convergence in the meeting but also differences. Furthermore, they discussed the potential for normalisation of relations between Saudi Arabia and Israel, as well as agreed to continue dialogue on normalisation, while Blinken raised human rights issues with MBS both generally and related to specific cases, according to a US official.
• US Secretary of State Blinken is set to travel to China for talks in the coming weeks in a visit intended to be a major step in thawing relations between the two countries, according to Reuters citing a US official.
• EU nations are approaching a deal on the 11th sanctions package against Russia. Representatives in Brussels are aiming to get the package over the line at their meeting today. EU diplomats suggest that several questions are still open, according to Politico.
• Number of IAEA inspectors at the Zaporizhzhia nuclear plant to increase several times, via Tass citing Russia's Rosenergoatom.

APAC TRADE

• APAC stocks mostly gained following the positive handover from Wall St where the S&P 500 posted its highest close YTD and the Russell 2000 rallied amid strength in regional banks, although advances were capped as the attention in Asia turned to softer-than-expected Chinese trade data.
• ASX 200 was just about kept afloat but with the upside limited by the weaker-than-expected Australian GDP and hawkish adjustments to peak rate forecasts.
• Nikkei 225 wiped out its initial gains in an early 700-point swing and briefly dipped beneath the 32,000 level where it found some support.
• Hang Seng and Shanghai Comp. were positive after reports that China asked the largest banks to cut deposit rates to boost the economy and with Hong Kong led by tech strength, while price action was less decisive in the mainland after the latest Chinese trade data mostly disappointed including the wider-than-expected contraction in dollar-denominated exports.

NOTABLE ASIA-PAC HEADLINES

• China May retail passenger vehicle sales +30% YY, PCA prelim. data.

DATA RECAP

• Chinese Trade Balance (USD)(May) 65.81B vs. Exp. 92.00B (Prev. 90.21B)
• Chinese Exports (USD)(May) -7.5% vs. Exp. -0.4% (Prev. 8.5%); Imports (USD)(May) -4.5% vs. Exp. -8.0% (Prev. -7.9%)
• Chinese Trade Balance (CNY)(May) 452.3B vs. Exp. 643.3B (Prev. 618.4B)
• Chinese Exports YY (CNY)(May) -0.8% vs. Exp. 9.9% (Prev. 16.8%); Imports YY (CNY)(May) 2.3% vs. Exp. 4.2% (Prev. -0.8%)
• China end-May (USD): FX Reserves 3.177tln (prev. 3.205tln); Gold Reserves 132.2bln (prev. 132.35bln)
• Australian Real GDP QQ SA (Q1) 0.2% vs. Exp. 0.3% (Prev. 0.5%); YY SA (Q1) 2.3% vs. Exp. 2.4% (Prev. 2.7%)