• APAC stocks were mostly lower in the absence of a lead from Wall St and as markets digested the PBoC’s cuts to its benchmark lending rates.
• As expected, China lowered its 1-year LPR after similar cuts to short-term funding rates but disappointed those anticipating a deeper 15bps cut for the 5-year LPR.
• European equity futures are indicative of a flat open with the Euro Stoxx 50 unchanged after the cash market closed down 0.7% yesterday.
• DXY is marginally firmer above 102.50, EUR/USD and USD/JPY sit on 1.09 and 142 handles respectively, AUD lags post-RBA minutes.
• Looking ahead, highlights include US Building Permits & Housing Starts, Speeches from Fed's Williams, Barr & Bullard, ECB's de Guindos & Rehn, Supply from UK & Germany.

US TRADE

EQUITIES

• US markets were closed for Juneteenth.

NOTABLE HEADLINES

• NHC said Tropical Storm Bret is expected to strengthen and interests in the Lesser Antilles should monitor the system, while it added that Bret could become a hurricane in a couple of days and is about 1,210 miles east of the southern Windward Islands.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower with risk appetite subdued in the absence of a lead from Wall St due to the Juneteenth holiday and as markets digested the PBoC’s cuts to its benchmark lending rates.
• ASX 200 was led higher by gains in the commodity-related sectors and following the RBA Minutes from the June meeting which noted that the arguments were “finely balanced” between a 25bps hike or keeping rates steady at the last meeting, while money markets are currently leaning towards rates being kept unchanged for next month.
• Nikkei 225 was negative although the losses were stemmed and the index held above the 33,000 level with several major Japanese trading houses dominating the list of best performers after Berkshire Hathaway lifted its stake in five of them.
• Hang Seng and Shanghai Comp. declined despite the PBoC’s liquidity boost and 10bp cuts to its benchmark Loan Prime Rates. This was widely expected for the 1-year LPR after similar cuts to short-term funding rates but disappointed those anticipating a deeper 15bps cut for the 5-year LPR which is viewed as the reference for mortgages and in turn, weighed on HK-listed mainland developers.
• US equity futures marginally weakened amid the subdued mood in Asia and with US participants yet to return from the weekend.
• European equity futures are indicative of a flat open with the Euro Stoxx 50 unchanged after the cash market closed down 0.7% yesterday.

FX

• DXY traded rangebound but held on to the prior day’s mild gains owing to the lacklustre mood in its transatlantic counterparts and weakness in some Asia-Pac currencies.
• EUR/USD was choppy after the latest bout of ECB rhetoric continued to point to a hike next month and a question mark for September.
• GBP/USD moved off the prior day’s lows but failed to reclaim the 1.2800 status despite yesterday’s upside in UK yields.
• USD/JPY initially extended above the 142.00 level before reversing course amid the lack of fresh catalysts in Japan.
• Antipodeans were lower with AUD/USD pressured by the RBA Minutes which noted a finely balanced argument between a hike or a hold and that lags in the transmission of monetary policy meant risk that past tightening could lead to a sharper economic slowdown.
• PBoC set USD/CNY mid-point at 7.1596 vs exp. 7.1630 (prev. 7.1201)

FIXED INCOME

• 10yr UST futures were contained following the absence of cash trade on Monday and a lack of fresh catalysts stateside, while the attention turns to the Fed speakers scheduled later ahead of Fed Chair Powell’s testimony in Congress tomorrow.
• Bund futures nursed some of Monday’s losses but with the rebound contained after the recent slew of ECB rhetoric.
• 10yr JGB futures were firmer but with gains capped amid light newsflow from Japan and with the BoJ refraining from additional purchases.

COMMODITIES

• Crude futures were subdued amid the dampened risk tone and China's underwhelming 5-year LPR cut.
• Seaborne shipments of June-loading Russian Urals oil to China fell 50% for June 1st-19th M/M.
• Qatar is set to strike a second big LNG supply deal with China, according to FT.
• Spot gold was indecisive with prices stuck in a thin range alongside the uneventful greenback.
• Copper futures were pressured amid the mostly downbeat mood and ongoing China growth concerns.

CRYPTO

• Bitcoin is slightly higher and briefly climbed above the USD 27,000 level before paring some of its gains.

NOTABLE ASIA-PAC HEADLINES

• Chinese Loan Prime Rate 1Y (Jun) 3.55% vs. Exp. 3.55% (Prev. 3.65%)
• Chinese Loan Prime Rate 5Y (Jun) 4.20% vs. Exp. 4.15% (Prev. 4.30%)
• PBoC injected CNY 182bln via 7-day reverse repos with the rate at 1.90% for a CNY 180bln net injection.
• US President Biden said US-China relations are on the right trail, according to Reuters.
• US Secretary of State Blinken said he is deeply concerned about the three Americans wrongfully detained in China, according to CBS.
• Chinese Premier Li held talks with the German business sector on Monday in which the meeting discussed the economic situation in China and globally, technology development trends, and views on so-called “de-risking”, according to Global Times.
• Japan's Foreign Ministry called on China to take seriously WTO findings that China's anti-dumping measures on Japan's stainless steel are inconsistent with the WTO agreement, according to Reuters.
• RBA Minutes from the June meeting stated that the Board considered a rate rise of 25bps or holding steady and reconsidering at a later meeting, while arguments were finely balanced but the Board decided the case for an immediate hike was stronger. RBA noted the increase would provide greater confidence that inflation would return to target over the period ahead, while it stated the balance of risks on inflation shifted to the upside compared with a month earlier and lags in the transmission of monetary policy meant there is a risk that past tightening could lead to a sharper economic slowdown.

GEOPOLITICS

• Beijing plans a new training facility in Cuba which raises the prospect of Chinese troops on America's doorstep, according to WSJ.
• Ukraine's Deputy Defence Minister said the biggest blow in Ukraine's offensive is yet to come, while he added that it is difficult to advance and Ukraine must prepare for a tough duel, according to Reuters.
• Kyiv is in talks with Western arms manufacturers to boost output and set up production in Ukraine, according to Reuters.
• EU is readying a EUR 50bln Ukraine package, according to Bloomberg,
• EU report on Ukraine's membership bid said Kyiv has met 2 out of the 7 conditions to start formal accession talks, according to Reuters citing sources.
• US President Biden said the threat of Russian President Putin using tactical nuclear weapons is 'real', according to Reuters.

EU/UK

NOTABLE HEADLINES

• ECB’s de Guindos said there is no doubt that inflation will ease but also noted the slowdown in core inflation may be limited, according to Bloomberg.
• ECB's Stournaras said a further decrease in inflation is expected and they cannot exclude a further hike but cannot say now and decisions are data-driven. Furthermore, Stournaras responded that it might be six months or a year and it depends on the data when asked about keeping rates at the terminal and said they are definitely close to the end of rate hikes.
• EU is to focus on export controls and critical technology in its security plan, according to Bloomberg.
• EU countries failed to agree on a deal on power market reforms and talks will continue after Monday.