• APAC stocks were mostly negative following last Friday's losses on Wall St, while risk appetite was also contained as markets digested US-China talks.
• The meeting between US Secretary of State Blinken and Chinese Foreign Minister Qin was said to be candid, substantive and constructive although it lacked any breakthroughs.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 -0.7% after the cash market closed up 0.7% on Friday.
• DXY is contained, EUR/USD and Cable sit on 1.09 and 1.28 handles respectively, JPY leads the majors, antipodeans lag.
• Looking ahead, highlights include ECB SOMA, Speeches from ECB’s Lane, Schnabel & de Guindos. US markets are closed. 

US TRADE

EQUITIES

• US stocks finished lower on Friday in what was a choppy session amid quad witching and options expiry anxiety, while there was a cyclical/value bias with growth underperforming which was likely an element of central bank policy with the Fed skewing hawkishly after the latest dot plot.
• SPX -0.37% at 4410, NDX -0.67% at 15,084, DJIA -0.32% at 34,299, RUT -0.73% at 1,875.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed’s Goolsbee (voter) said on Friday that the Fed is on a reconnaissance mission and to scope it out, while he added there is conflicting data on whether they are too hot or have done enough and he doesn’t take much confidence from the May CPI data. Goolsbee also commented that the Fed is trying to get inflation down without starting a big recession and will need to play it by ear with the forecast pretty benign, according to an interview with NPR.
• SVB Financial Group entered into a definitive agreement to sell SVB Securities to the management team group led by Jeff Leerink and backed by Baupost Group, while SVB Securities will be rebranded as Leerink Partners following the buyout, according to Reuters.
• A magnitude 6.6 earthquake was reported in the Gulf of California region although the US Tsunami Warning System noted that there was no tsunami danger for the US West Coast, British Columbia, or Alaska, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks were mostly negative following last Friday's losses on Wall St, while risk appetite was also contained as markets digested US-China talks and with US markets closed on Monday for Juneteenth.
• ASX 200 bucked the trend with the index buoyed as strength in the defensive, financial and tech sectors made up for the losses in mining-related stocks.
• Nikkei 225 was subdued and eventually slipped below earlier support around the 33,500 level.
• Hang Seng and Shanghai Comp. were lower amid ongoing China growth concerns with the likes of Goldman Sachs, Nomura and UBS all cutting their Chinese GDP forecasts, while participants also digested the meeting between US Secretary of State Blinken and Chinese Foreign Minister Qin in Beijing which was said to be candid, substantive and constructive although lacked any breakthroughs aside from agreeing to schedule a reciprocal visit at a suitable time.
• US equity futures were uneventful after Friday's retreat and approaching holiday lull.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 -0.7% after the cash market closed up 0.7% on Friday.

FX

• DXY was rangebound amid the US holiday weekend and ahead of Fed Chair Powell’s testimony in Congress from mid-week, while comments late on Friday from Fed’s Goolsbee did little to shift the dial in which he stated that the Fed is on a reconnaissance mission and will scope it out, as well as noted conflicting data on whether they have done enough.
• EUR/USD was little changed on a 1.09 handle following the absence of any fresh catalysts from the bloc over the weekend.
• GBP/USD lacked direction ahead of the BoE rate decision on Thursday and after UK Chancellor Hunt ruled out providing direct fiscal support for households as mortgage rates surge.
• USD/JPY marginally pulled back from last week’s peak after stalling near the 142.00 handle.
• Antipodeans were pressured owing to the risk aversion and deteriorating outlook on China.
• PBoC set USD/CNY mid-point at 7.1201 vs exp. 7.1186 (prev. 7.1289)
• US Treasury's Semi-Annual Currency Report on Friday refrained from designating any countries as currency manipulators, while China, South Korea, Germany, Malaysia, Singapore, Switzerland and Taiwan remained on the currency "monitoring list".

FIXED INCOME

• 10yr UST futures traded rangebound owing to the closure of US cash trade on Monday and with participants awaiting Fed Chair Powell’s testimony at the Semiannual Monetary Policy Report to Congress from Wednesday.
• Bund futures were steady with prices kept afloat after Friday’s intraday rebound and with the jury out regarding ECB rates for September after a telegraphed hike for next month.
• 10yr JGB futures kept afloat but with price action restricted due to the absence of any data releases from Japan and lack of additional BoJ purchases today.

COMMODITIES

• Crude futures were pressured amid the risk aversion and a pullback in WTI from resistance at USD 72/bbl.
• Kuwait issued a decree forming a new Cabinet headed by its emir Sheikh Ahmed Nawaf Al-Ahmad Al-Sabah and businessman Saad Al Barrak was named as the new Oil Minister, according to state news agency KUNA.
• Kuwait Oil Company CEO said Kuwait’s output capacity is above 2.8mln bpd now and will reach 3mln bpd in 2025, while he added the Kuwait Oil Company is spending KWD 13bln on oil projects during the next 5 years and both the Kuwait Oil Company and Kuwait Gulf Oil Company are committed to reaching 4mln bpd capacity in 2035.
• Iraq launched a sixth round of gas exploration licensing in several provinces, according to Reuters.
• Spot gold traded flat alongside an uneventful dollar and with US participants away on Monday.
• Copper futures trickled lower with demand dampened by the cautious mood and China growth concerns.

CRYPTO

• Bitcoin eked a slight gain overnight with price action rangebound beneath the USD 26,500 level.
• US SEC secured emergency relief to protect Binance.US customers’ assets with an order that ensures Binance.US customers can continue to withdraw their assets. Binance said it maintains that the SEC’s request for emergency relief was entirely unwarranted and it is pleased that the disagreement was resolved on mutually acceptable terms, while it added that user funds have been and always will be safe and secure on all Binance-affiliated platforms, according to Reuters. There were also separate reports that the Binance CEO said they issued a cease-and-desist order to the scammer entity Binance Nigeria Limited.

NOTABLE ASIA-PAC HEADLINES

• US President Biden said he is hoping to meet with Chinese President Xi in the next several months.
• US Secretary of State Blinken held candid, substantive and constructive talks with Chinese Foreign Minister Qin in Beijing and emphasised the importance of diplomacy and maintaining open channels of communication to reduce the risk of misperception and miscalculation. Blinken raised issues of concern and opportunities to explore cooperation on shared transnational issues with China where interests align, while Blinken invited Qin to visit Washington to continue the discussions and they agreed to schedule a reciprocal visit at a suitable time, according to a State Department spokesperson cited Reuters.
• US State Department senior officials said US Secretary of State Blinken’s meeting with his Chinese counterpart was direct and it was clear there are profound differences between the two countries, while both officials were well-prepared and it was a “real conversation”. Furthermore, Blinken made it clear that the US does not want to decouple from China and the two sides expressed a desire to stabilise the relationship and prevent competition from veering into conflict, as well as agreed to work together to increase commercial flights between the US and China, according to Reuters.
• Chinese Foreign Minister Qin said during the meeting with US Secretary of State Blinken that China is committed to building a stable, predictable and constructive relationship with the US, while Qin made clear the concerns on China’s core interests with the Taiwan issue the most important issue and risk in Sino-US relations, according to state media.
• China warned of flood risks across large parts of the country and asked local authorities to closely watch for flood threats amid expectations of heavy rains in the days ahead, according to The Star.
• Goldman Sachs cut its China GDP growth target for 2023 to 5.4% from 6.0% and cut the 2024 target to 4.5% from 4.6%, while it said that China's ongoing stimulus is incapable of generating a strong growth impulse. It was separately reported that Nomura reduced its Chinese 2023 GDP growth forecast to 5.1% from 5.5% and UBS also lowered its China 2023 growth forecast to 5.2% from 5.7%.
• China expects to release measures to promote high-quality development of the new energy vehicle industry in the approaching days, according to China Securities Journal.
• HKEX (388 HK) launched a HKD-RMB counter model and dual counter market-making programme in its securities market in which 9 exchange partners joined the programme as market makers, while a total of 24 Hong Kong-listed Co.s will trade and transact as dual counter securities offering both HKD and RMB counters, according to Reuters.

GEOPOLITICS

• US President Biden said it is totally irresponsible of Russia to deploy tactical nuclear weapons to Belarus and noted that Ukraine has to meet the same standards to be a part of NATO as all other nations, according to Reuters.
• Russian President Putin told the delegation of African leaders in St Petersburg that Russia welcomes the leaders’ balanced stance on the conflict regarding Ukraine and that Russia is open to dialogue with all those that want peace based on principles of justice and consideration of the legitimate interests of the parties, according to Reuters.
• Russia’s defence ministry said Russia repelled eight Ukrainian attacks on the Donetsk front and that the most active Ukrainian attacks are on the Zaporizhzhia front, according to TASS. In relevant news, Ukrainian forces took control of the Piatykhatky settlement on the Zaporizhzhia front, while the Governor of Russia’s Bryansk region said air defences repelled an attack by Ukrainian drones on an oil pumping station on the Druzhba oil pipeline, according to Reuters.
• UN said Russia has so far declined the request to access areas under its temporary military control following the Ukrainian dam burst, while the UN said aid cannot be denied to people who need it and it urged Russia to act in accordance with obligations under international humanitarian law.
• North Korea said its failed satellite launch was the gravest mistake and it ordered workers to analyse the failed military satellite launch and prepare for another in the near future. Furthermore, North Korea will consistently adhere to the orientation of developing nuclear weapons and the line of bolstering up the nuclear force set by the party, as well as strengthen solidarity with countries that oppose the US strategy of world supremacy, according to KCNA.
• Saudi Arabia’s Foreign Minister arrived in Tehran on Saturday amid a rapprochement between the two Middle Eastern nations, according to Iranian state television.

EU/UK

NOTABLE HEADLINES

• UK Chancellor Hunt ruled out providing direct fiscal support for households as mortgage rates soar, according to FT.
• UK Chancellor Hunt told ministers to speed up the adoption of AI to boost the economy with the UK aiming to ease the pressure on public services by focusing on opportunities provided by new tech, according to FT.
• ECB President Lagarde said on Friday that it is very likely that the ECB will continue to hike rates in July and will then follow a data-dependent approach after July, while she added inflation is projected to remain too high for too long.
• Fitch affirmed Luxembourg at AAA; Outlook Stable and affirmed Cyprus at BBB; Outlook Stable, while it affirmed Norway at AAA; Outlook Stable.

DATA RECAP

• UK Rightmove House Prices MM (Jun) 0.0% (Prev. 1.8%)
• UK Rightmove House Prices YY (Jun) 1.1% (Prev. 1.5%)