• Asian equities failed to benefit from the energy-inspired gains seen on Wall Street with the Nikkei 225 stopping just shy of 20,000
• USD/JPY and JPY-crosses traded choppy with the early upside reversed, as sentiment soured and spurred flows into safe-haven JPY
• Looking ahead, highlights include UK inflation, German ZEW, US Building Permits, Housing Starts, ECB’s Nowotny and Coeure

ASIA

Asian equity markets traded mixed after the region failed to sustain the impetus from the positive US lead, where broad-based sentiment was underpinned by a 2% jump in oil prices after Russia and Saudi Arabia agreed to extend output cuts. ASX 200 (+0.2%) and Nikkei 225 (+0.1%) were buoyed at the open following the Wall St gains in which the S&P 500 and Nasdaq posted fresh record highs. However, Nikkei 225 then stalled just shy of 20,000 as China markets entered the fray and dampened risk tone in the region, with Shanghai Comp. (-0.3%) and Hang Seng (-0.3%) reeling on continued regulatory concerns. 10yr JGBs were lower with demand dampened amid mild gains in Japanese stocks, while today’s 5yr JGB auction also failed to provide support as the results were mixed with accepted prices lower than prior.

China insurance regulator CIRC will conduct inspections to rectify market irregularities and protect consumer interests. (CEN)

PBOC injected CNY 150bln via 7-day reverse repos and CNY 40bln via 14-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.8790 (Prev. 6.8852)

EUROPE/UK

German Chancellor Merkel stated should not always rule out treaty change to strengthen the Eurozone. (Newswires)

FX

USD/JPY and JPY-crosses traded choppy with the early upside reversed, as sentiment soured and spurred flows into safe-haven JPY. Elsewhere, USD languished and remained below the 99.00 level, while AUD was muted following the RBA minutes release which failed to provide any surprises as the central bank reiterated that it judged rates as consistent with reaching sustainable growth and inflation targets.

RBA minutes from May 2nd meeting state central bank judged rates are consistent with reaching sustainable growth and inflation target. The minutes stated that development in labour and housing markets warrant careful monitoring and that GDP is still expected to pick up to be slightly above 3% by H1 2018 as drag from mining investment dissipates and resource exports recover. (Newswires)

COMMODITIES

Oil prices saw mild gains with WTI crude futures retesting the USD 49/bbl level to the upside during Asia trade, although upside was minimal as momentum from Saudi-Russia extension agreement waned. Gold (+0.4%) rose overnight as sentiment soured, which also saw copper pull back from yesterday’s advances.

US Total shale regions oil production for June is seen up 122,000 BPD at 5.401mln BPD vs. Prev. 109,000 BPD rise in May, according to the EIA. (Newswires)

US

Fixed Income markets saw a narrow range tspanoughout the trading session, as the majority of the move was seen in the European session, as mild risk on sentiment was evident following the performance in oil. The lack of direction was clear, with the 10y T-note settling at 125.14+, down half a tick.

US President Trump is said to have revealed highly classified intelligence to Russian Foreign Minister Lavrov last week which intelligence agency partners had not given authorization to share, according to reports in Washington Post. However, US Secretary of State Tillerson said Trump did not discuss sources, methods or military operations in meeting with Russia's Lavrov, while US National Security Adviser McMaster and Deputy National Security Adviser Powell also dismissed the story as false. (Newswires)