• Asian equities traded broadly softer with underperformance in the ASX amid OPEC-inspired softness in energy names
• GBP/USD trades softer as the Labour Party continues to gain ground on the Conservatives ahead of next month’s election
• Looking ahead, highlights include US Durable Goods, University of Michigan and ECB’s Coeure

ASIA

Asia equity markets traded cautious as the region failed to take the impetus from another record setting day on Wall St, with oil names dampened following the weakness across the energy complex. This saw commodity-related sectors in ASX 200 (-0.7%) underperform as they felt the brunt of the 5% declines in crude prices due to disappointment from the OPEC output extension deal. A firmer JPY kept the Nikkei 225 (-0.3%) subdued, while Hang Seng (Unch.) and Shanghai Comp. (+0.2%) traded choppy amid a reserved liquidity operation by the PBoC and continued pessimistic comments from Moody’s following the recent sovereign rating downgrade. 10yr JGBs traded higher amid a downbeat risk tone, while the BoJ were also present in the market under its bond buying operation for JPY 750bln of JGBs in the belly to super-long end.

Moody's stated that China growth will slow, while it added that China may lose A1 rating if there are signs debt keeps increasing and debt surpasses expectations. (Newswires)

PBoC injected CNY 20bln via 7-day reverse repos and CNY 20bln in 14-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.8698 (Prev. 6.8695)

Japanese National CPI (Apr) Y/Y 0.4% vs. Exp. 0.4% (Prev. 0.2%). (Newswires)

- National CPI Ex-Food (Apr) Y/Y 0.3% vs. Exp. 0.4% (Prev. 0.2%)

Japanese Tokyo CPI (May) Y/Y 0.2% vs. Exp. 0.0% (Prev. -0.1%)

- Tokyo CPI Ex-Food (May) Y/Y 0.1% vs. Exp. 0.0% (Prev. -0.1%)

EUROPE/UK

YouGov/Times poll showed UK Conservative party at 43% vs. Labour at 38% (Prev. 44% vs. 35%), while Kantar poll showed UK Conservative party at 42% vs. Labour at 34% (Prev. 47% vs. 29%). (Newswires)

The latest OpinionWay poll shows that Emmanuel Macron’s En Marche! Party is set to win an absolute majority in next month’s Parliamentary elections with 310-330 seats (289 required for a majority). (OpinionWay)

EU is to offer post-Brexit rights to UK nationals living in Europe when it conducts talks next month, according to a draft document. (Newswires)

FX

GBP/USD resumed its slide after yesterday’s failed attempt on the 1.3000 handle and the weaker than expected Q1 GDP update, while polls continued to suggest a tighter race for PM May’s Conservative party vs. Labour. This saw GBP/USD decline below 1.2900, while EUR/USD relinquished 1.1200, which in turn further underpinned the greenback. Elsewhere, commodity-linked currencies unsurprisingly languished alongside oil prices, in the wake of the OPEC disappointment.

COMMODITIES

Oil prices extended on yesterday’s 5% losses, with WTI crude futures firmly below USD 49/bbl on disappointment after OPEC extended the output cut deal by 9 months as expected, but refrained from deeper cuts. Furthermore, there was no option for a 3-month extension of the deal and no extra countries added to the deal, while Libya and Nigerian production still had no upper bound. Gold (+0.1%) saw mild support with the safe-haven asset underpinned amid a cautious risk tone, which also kept copper subdued.

OPEC and Non-OPEC agreed to extend oil production cuts for 9 months. OPEC delegate stated that OPEC does not plan on adding a 3-month option to the 9-month extension and a delegate also said the extension of the production cuts deal comes with same conditions for Iran, Libya and Nigeria. (Newswires)

Saudi oil minister Al-Falih later stated that the oil output deal can be extended at the next OPEC/non-OPEC meeting in November, while the Nigerian oil minister said OPEC consensus is that oil price should be USD 50-60/bbl. (Newswires)

US

Treasuries traded higher but in a relatively tight range amid light buying and touted short covering. The 7y auction went off without a hitch as the yield stopped on the WI and the cover was in line with the 5-auction average. Jun’17 10y T-note futures settled at 126.05+, up 3+ ticks.

Fed's Bullard (Non-Voter, Dove) stated that prices have begun to deviate noticeably from 2% inflation path and that lagging price level is worrisome. (Newswires)

Fed's Williams (Non-Voter, Hawk) repeated that his view for 3 hikes this year is appropriate and stated that the US economy is performing somewhat hot. Williams also commented that the Fed should release balance sheet details in the approaching months and begin trimming this year, while he further added that balance sheet reductions should be gradual and on auto-pilot. (Newswires)

US President Trump's Son in Law and Senior Advisory Jared Kushner is under FBI scrutiny in Russia investigation, according to officials. (Newswires)