• APAC stocks were mostly lower following the holiday lull stateside and as participants digested the latest Chinese Caixin Services PMI data.
• DXY eked mild gains and retained the 103.00 status with price action rangebound after the Independence Day celebrations in the US.
• Crude futures faded some of the prior day's gains amid the mostly risk-averse mood in Asia, while the focus turns to the OPEC International Seminar.
• Chinese President Xi personally warned Russian President Putin against using a nuclear weapon in Ukraine, according to FT citing Western and Chinese officials.
• Looking ahead, highlights include EZ/UK Services Final PMI, US Durable Goods & Factory Orders, FOMC Minutes, OPEC International Seminar, Speeches from Saudi and UAE Energy Ministers, and Supply from UK & Germany.

US TRADE

EQUITIES

• US markets were closed for Independence Day.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower following the holiday lull stateside and as participants digested the latest Chinese Caixin Services PMI data, while geopolitical concerns also lingered after Ukraine and Russia accused each other of planning an overnight attack on the Zaporizhzhia nuclear plant.
• ASX 200 was marginally lower amid underperformance in the largest-weighted financials sector and after mostly softer data releases from Australia.
• Nikkei 225 slumped at the open but recouped some of the losses after it held above the 33,000 level.
• Hang Seng and Shanghai Comp were subdued by ongoing trade-related frictions with warnings of more retaliatory measures against Western tech export controls, while the latest Chinese Caixin Services PMI missed forecasts and printed its slowest pace of increase since January.
• US equity futures were uneventful ahead of the return of US participants and incoming FOMC Minutes.
• European equity futures are indicative of a slightly lower open with the Euro Stoxx 50 -0.2% after the cash market closed down by 0.2% yesterday.

FX

• DXY eked mild gains and retained the 103.00 status with price action rangebound after the Independence Day celebrations in the US and heading into the FOMC Minutes release.
• EUR/USD remained subdued and extended on yesterday's lows after recently slipping beneath 1.0900.
• GBP/USD reverted to the 1.2700 focal point after gradually fading most of the prior day's early advances.
• USD/JPY was kept afloat but with gains capped amid the mostly negative mood in Asia and as Japan’s currency continues to linger near speculated intervention-triggering levels.
• Antipodeans were mixed with AUD/USD marginally softer in the aftermath of the Chinese PMI data.
• PBoC set USD/CNY mid-point at 7.1968 vs exp. 7.2180 (prev. 7.2046).

FIXED INCOME

• 10yr UST futures were indecisive and oscillated around the 112.00 level following the absence of cash market trade in the US and with participants set to digest the FOMC Minutes on the day of their return from the holiday closure.
• Bund futures remained afloat following yesterday’s intraday recovery from beneath the 133.00 level.
• 10yr JGB futures lacked direction but with the downside cushioned amid the BoJ’s presence in the market for over JPY 1.2tln of JGBs under its scheduled purchases.

COMMODITIES

• Crude futures faded some of the prior day's gains amid the mostly risk-averse mood in Asia, while focus turns to the OPEC International Seminar and speeches from key officials including the Saudi Energy Minister.
• Saudi Foreign Ministry said Saudi Arabia and Kuwait have full sovereign rights to exploit natural wealth in the divided region and called for Iran to start negotiations with them to demarcate the eastern border of the divided area.
• Spot gold remained flat following the holiday and as the FOMC Minutes loom.
• Copper futures were mildly pressured after softer-than-expected Chinese Caixin Services PMI which printed its weakest since January and added to the slow Chinese economic recovery narrative.

CRYPTO

• Bitcoin was marginally higher but with price action contained by the mostly lacklustre risk tone.

NOTABLE ASIA-PAC HEADLINES

• China's Global Times noted that China's metal export curbs are a warning to the US and its allies. It was separately reported that China's former vice commerce minister said China's export control measures of chipmaking materials are just a start and China has more sanction tools and measures, while countermeasures will further escalate if high-tech restrictions targeting China continue to escalate, according to China Daily.
• Dutch Foreign Ministry said it is still unclear what the impact of the new Chinese export restrictions will be and that it is primarily up to the EU to respond to China’s trade policies, according to Reuters.
• Japan's Labour Confederation Rengo said the average 2023 wage hike is 3.58% which is the biggest since 1993, according to Reuters.

DATA RECAP

• Chinese Caixin Services PMI (Jun) 53.9 vs. Exp. 56.2 (Prev. 57.1)
• Chinese Caixin Composite PMI (Jun) 52.5 (Prev. 55.6)
• Australian Services PMI (Jun F) 50.3 (Prev. 50.7)
• Australian Composite PMI (Jun F) 50.1 (Prev. 50.5)
• Australian AIG Manufacturing Index (Jun) -19.8 (Prev. -5.1)
• Australian AIG Construction Index (Jun) 10.6 (Prev. -6.6)

GEOPOLITICS

• Chinese President Xi personally warned Russian President Putin against using a nuclear weapon in Ukraine, according to FT citing Western and Chinese officials.
• Ukrainian President Zelensky said he warned French President Macron about dangerous provocations by Russia at the Zaporizhzhia Nuclear Plant, according to Reuters.
• Ukraine’s military said Russia placed objects resembling explosives on the 3rd and 4th power units of the Zaporizhzhia Nuclear Power Plant and accused Russia of preparing a terrorist attack overnight which would not damage the power units but could create the impression that Ukraine is shelling the nuclear plant. It was also reported that Russian agencies quoted an adviser to the head of Rosenergoatom who alleged Ukraine will attempt to attack the Zaporizhzhia station overnight using long-range precision equipment and attack drones, according to Reuters.
• UK armed forces chief rejected suggestions that Ukraine’s counter-offensive was proceeding slowly and stated that Russia had lost half of its combat capability in Ukraine, according to FT.
• US President Biden spoke with German Chancellor Scholz on Tuesday regarding preparations for the NATO summit, according to Reuters.
• Russia and Syria are to hold military drills in Syria from July 5th which will last 6 days, according to RIA.
• China's Defence Ministry said it resolutely opposes US arms sales to Taiwan and has lodged stern representations to the US, according to Reuters.
• South Korea retrieved North Korean spy satellite wreckage and said the spy satellite was not worthy of military use, according to Yonhap citing the military.

EU/UK

NOTABLE HEADLINES

• BoE is considering a clampdown on foreign bank branches and is looking at plans to force more international banks to set up subsidiaries in the UK, according to FT.