• European bourse began in the red, but have since moved modestly into the green; US futures remain softer pre-NFP
• JPY continues its comeback as spreads tighten to the detriment of the USD, index tethered to 103.00
• Fixed income has resumed its downward trajectory despite initial two-way action, benchmarks currently at lows
• Crude is firmer and benefitting from the USD downside and the week’s OPEC/Saudi remarks
• Looking ahead, highlights include the US NFP Report, Speeches from ECB's Lagarde, Nagel & BoE's Mann.

EUROPEAN TRADE

EQUITIES

• European bourses began the session in the red given the APAC/Wall St. handover; since, sentiment has improved incrementally though action is very contained overall pre-NFP.
• Sectors are mixed with cyclicals seeing upside after pressure earlier in the week while defensive sectors are currently lagging.
• Stateside, futures are moving in-tandem with European peers though magnitudes slightly more contained and the benchmarks currently reside just below the unchanged mark.
• Shell (SHEL LN) Q2 Update Note: Post-tax impairments of up to USD 3bln are expected for Q2’23, primarily driven by a 1% increase in the discount rate used for impairment testing. Integrated Gas: Trading & Optimisation: expected to be significantly lower compared to a strong Q1’23 due to seasonality and fewer optimisation opportunities.
• Continental (CON GY) plans to phase out business activates at Gifhorn plant by end of 2027; reason for the move is sharp rise in cost pressure in automotive industry.
• Click here for more detail.
• Click here and here for a recap of the main European equity updates.

FX

• Yen continues impressive comeback as UST/JGB spreads tighten and JPY crosses retreat further amidst ongoing repositioning, USD/JPY probes 143.00 from just above 144.00.
• DXY tethered to 103.000 in advance of NFP.
• Kiwi and Aussie recover losses as risk sentiment settles after Thursday's acute aversion, NZD/USD up near 0.6200 again and AUD/USD eyeing 0.6650.
• Euro flanked by option expiries at 1.0900 and 1.0850 in EUR/USD.
• Loonie labours ahead of Canadian LFS with USD/CAD elevated within 1.3359-87 range.
• PBoC set USD/CNY mid-point at 7.2054 vs exp. 7.2423 (prev. 7.2098)
• Click here for more detail.
• Click here for the notable option expiries.

FIXED INCOME

• Bonds huff and puff before resuming down the path of least resistance awaiting NA jobs data.
• Bunds probe Thursday's Eurex low within 131.41-130.89 range, Gilts recoil from 92.95 to 92.39 and T-note towards the bottom end of 110-15+/24 overnight bounds.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are modestly firmer and benefitting from the JPY-induced USD downside with fresh specifics light but the complex seemingly still deriving support from the week's developments; incl. OPEC summit and Saudi OSPs
• Spot gold has been meandering higher given the softer USD and softer risk tone, though this has dissipated somewhat, pre-NFP.
• Some key purchasers of Saudi Arabia's crude in Asia and Europe are seeking lower volumes for next month after the kingdom hiked official prices and extended output cuts, according to Bloomberg.
• Click here for more detail.

NOTABLE US HEADLINES

• US Secretary Yellen says a shift towards market reforms would be in the interest of China; US is not seeking the wholesale separation of economies, looking to diversify; particularly troubled by China's punitive actions against US firms. US is concerned by China's new export controls on critical minerals, impact is still being evaluated.
• Click here for the US Early Morning Note.

EUROPEAN DATA RECAP

• German Industrial Output MM (May) -0.2% vs Exp. 0.0% (Prev. 0.3%)
• Norwegian GDP Month Mainland (May) 0.5% vs. Exp. 0.1% (Prev. -0.4%)
• Swedish GDP MM (May) 0.1% (Prev. 0.0%, Rev. -0.2%)
• Italian Retail Sales NSA Y (May) 3.0% (Prev. 3.2%); MM (May) 0.7% (Prev. 0.2%)

NOTABLE EUROPEAN HEADLINES

• ECB's de Guindos says transmission of our unprecedented policy hikes thus far to tighter financing conditions is well advanced, now beginning to see an impact on areas of the real economy. Services inflation and labour costs need to be monitored. While underlying price pressures remain strong, most indicators have begun to show some signs of softening. What happens to rates in September is an open question.. Need to focus more on broader macro conditions rather than relative contribution of wages and profits to inflation.

CRYPTO

• Bitcoin is under pressure after recent upside and briefly dipped below the USD 30k handle despite mentioned USD pressure.

GEOPOLITICS

• Japanese Economic Minister Goto said they are aware that New Zealand received Ukraine's request to join the CPTPP, while he added that they must carefully assess whether Ukraine fully meets the high level of CPTPP agreement in terms of market access and rules, according to Reuters.
• Philippines official says "There is an alarming increase in Chinese ships in the disputed waters in the South China Sea", according to Al Arabiya.
• Austrian, Germany and Swiss Defence Ministers have signed an MOU re. their participation in the European Sky Shields initiative, via Swiss Federal Council.
• German Foreign Minister says we oppose sending cluster munitions to Ukraine, according to Al Arabiya.

APAC TRADE

• APAC stocks were mostly lower amid spillover selling from global peers including in the US.
• ASX 200 suffered its largest intraday drop since March with real estate and tech front running the declines across all sectors as Australian bond yields climbed.
• Nikkei 225 slumped at the open following disappointing Household Spending data which showed a surprise monthly contraction although the index bounced off its lows and recouped around half of the earlier losses.
• KOSPI was dragged lower by weakness in index-heavyweight Samsung Electronics after its preliminary Q2 earnings in which operating profit topped forecasts but slumped by 96% Y/Y.
• Hang Seng and Shanghai Comp conformed to the downbeat mood as growth concerns and trade frictions lingered and with little hope of any breakthrough during US Treasury Secretary Yellen’s trip to China.

NOTABLE ASIA-PAC HEADLINES

• China's Finance Ministry said it hopes the US will take concrete actions to create a favourable environment for the healthy development of economic and trade ties between China and the US, according to Reuters.
• China Customs banned the imports of food from 10 prefectures in Japan and noted the IAEA report on Japan releasing water from the Fukushima plant did not fully reflect the views of all experts involved in the assessment process, while it added that the Japanese side still has many problems in the legitimacy of sea discharge.
• BoJ announcement on the conduct of funds-supplying operations to purchase Japanese government securities with repurchase agreements, details here.

DATA RECAP

• Japanese All Household Spending MM (May) -1.1% vs. Exp. 0.5% (Prev. -1.3%); YY (May) -4.0% vs. Exp. -2.4% (Prev. -4.4%)
• Japanese Overall Labour Cash Earnings (May) 2.5% vs. Exp. 0.7% (Prev. 1.0%, Rev. 0.8%)
• Chinese FX Reserves (Monthly) (Jun) 3.193Trl vs. Exp. 3.178Trl (Prev. 3.177Trl)