• The latest YouGov has projected the UK Conservative party to fall 16 seats short of an overall majority with 310 seats
• Asian equities traded relatively mixed as China returned to market and was greeted by encouraging PMI data
• Looking ahead, highlights include Eurozone CPI, Canadian GDP, Chicago PMI, ECB’s Coeure, Lautenschlager, Fed’s Kaplan

ASIA

Asia somewhat sspanugged off a negative lead from Wall St. where the S&P 500 snapped a 7-day win streak, with the region mixed as China returned from holiday to be greeted by encouraging PMI data. This aided a recovery in the ASX 200 (+0.3%) which was underpinned by IT and Financial sectors, while Nikkei 225 (-0.3%) lagged after Industrial Production figures missed estimates. Shanghai Comp. (+0.1%) initially outperformed as mainland participants returned to market and digested better than expected Official Chinese Manufacturing PMI as well as an improvement in Non-Manufacturing PMI data, although the support from the data gradually faded tspanoughout the day. 10yr JGBs are lower amid a mild improvement of the risk tone in the region, while the curve was slightly flatter on outperformance in the super-long end.

Chinese Official Manufacturing PMI (May) 51.2 vs. Exp. 51.0 (Prev. 51.2). (Newswires)

Chinese Non-Manufacturing PMI (May) 54.5 (Prev. 54.0)

PBoC injected CNY 180bln in 7-day reverse repos and CNY 30bln in 14-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.8633 (Prev. 6.8699)

EUROPE

The EU Commission is pressing for sovereign debt from across the Eurozone to be bundled into a new financial instrument and sold to investors, according to a draft document. (FT)

UK

UK BRC Shop Price Index (May) Y/Y -0.4% vs. Exp. -0.3% (Prev. -0.5%). (Newswires)

UK Gfk Consumer Confidence (May) -5 vs. Exp. -8 (Prev. -7)

UK Lloyds Business Barometer 27 (Prev. 47)

YouGov projected the UK Conservative party to fall 16 seats short of an overall majority with 310 seats, Labour at 257, SNP at 50, NI at 18 and Lib Dems at 10. However, the projections also showed a wide margin for error as it suggested the Conservative party could win a minimum of 274 seats and maximum of 345 seats. (Newswires/Twitter) Note, 326 seats are required for a majority

Moody's stated Brexit-related slowdown in UK has been more modest and it raised growth forecast to 1.5% from 1.0%. (Newswires)

FX

GBP/USD was pressured and briefly fell below 1.2800 after the YouGov poll. However, GBP/USD then recovered off its worst levels after further scrutiny of the polls revealed a wide margin for error. USD/JPY rebounded from its recent declines, while AUD and NZD also momentarily benefitted from better than expected Chinese PMI data, although the antipodeans failed to maintain the upside as the greenback nursed prior losses. CNY outperformed which saw USD/CNH test 6.8000 to the downside on return of Chinese participants and as money market rates surged in which the Overnight CNY HIBOR rose to its highest since early January at 21.0793%, with some analysts also attributing the moves to option-related selling in USD/CNH.

COMMODITIES

WTI crude futures pared the gains made earlier in the day, ahead of this week’s delayed API inventory release, while copper dismissed the return of its largest user to markets and remained subdued along with the commodities complex. Elsewhere, gold (-0.2%) slipped lower overnight, shifting away from one-month highs amid Fed rate high worries as upbeat US economic data releases such as Core PCE Price Index and Personal Spending bolster the case for hawkish Fed action next month.

US

The Treasuries curve was around 3bps flatter amid reports of month-end buying. Some were also reporting concerns that the softer PCE inflation data released today may keep the Fed from hiking for the second time this year when it meets in just under a fortnight. But with that said, the implied probability of a June hike is knocking around 89%, up from around 83% a week ago, and 68% a month ago. Indeed, analysts seemed less concerned by softer PCE, and some pointed out that most of the PCE weakness was in the sharp fall in cell phone services, a one-off factor. Jun’17 10y T-note futures settled at 126.14, up 8 ticks.

Fed Discount Rate Minutes stated that two banks supported discount rate hike as of 24th April. (Newswires)

Fed's Brainard (Voter, Soft Dove) says another rate hike likely appropriate soon and she expects to begin sspaninking balance sheet before too long. Brainard added that may want to delay hikes if inflation continues to slow. (Newswires)

According to reports, Former National Security Adviser Flynn will hand over documents to the Senate intelligence committee as part of the committees probe into Russia’s involvement in the 2016 election. (AP)