• Middle east tensions see crude prices jump over 1% as several nations cut ties with Qatar.
• Subdued trade in Asia following Saturday’s terrorist attack in London.
• Looking ahead, highlights include UK Services PMI, US ISM Non-Manufacturing PMI and Factory Orders.

ASIA

Asia dismissed the positive Wall St. close on Friday, to trade with a cautious tone after Saturday’s terrorist attack in London and as the region reacted to the miss on US NFP data. ASX 200 (-0.7%) underperformed with financials heavily weighing on the index amid weakness across banks, while Nikkei 225 (+0.1%) recovered from opening losses after USD/JPY rebounded from its lows. Elsewhere, Shanghai Comp. (-0.5%) and Hang Seng (-0.3%) failed to benefit from an improvement in Caixin Services and Composite PMI figures, as the PBoC remained steadfast in its prudent and neutral policy stance. Finally, 10yr JGBs were mildly higher alongside the cautious tone in markets, although upside was capped following a lack of Rinban announcement from the BoJ, while the curve slightly flattened amid outperformance in the super long-end.

PBoC Deputy Governor Chen stated the PBoC will neither be tight or loose in terms of monetary policy and will remain neutral and prudent. (Newswires)

Chinese Caixin Services PMI (May) 52.8 (Prev. 51.5); 4-month high. (Newswires)

Chinese Caixin Composite PMI (May) 51.5 (Prev. 51.2)

PBoC injected CNY 40bln in 7-day reverse repos and CNY 30bln in 28-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.7935 (Prev. 6.8070)

EUROPE

S&P affirmed Ireland at A+; outlook stable. (Newswires)

UK

A group of 3 attackers drove a van into pedestrians on London bridge and then stabbed numerous people in nearby Borough Market, before being shot and killed by police. The terror attack which ISIS claimed responsibility for, resulted in 7 killed and at least 50 injured. (Newswires)

YouGov poll showed Conservatives at 42% vs. Labour at 38% and projects Conservatives winning 308 seats vs Labour at 261 seats (Prev. 313 vs. 257). (Newswires)

Survation poll showed Conservatives at 40% (-6pts) vs. Labour at 39% (+5pts). (Newswires)

Comres poll showed Conservatives at 47% vs. Labour at 35%. (Newswires)

ORB poll showed Conservatives at 45% vs. Labour at 36%. (Newswires)

ICM poll showed Conservatives at 45% vs. Labour at 34%. (Newswires)

UK manufacturers’ organisation EEF revised its forecast for factory production this year to 1.3% from 1.0% forecast 3-months ago after its members reported increased orders. (Newswires)

FX

FX markets traded relatively quiet during the session, with USD attempting to recover from Friday’s NFP miss. Nonetheless, most of the greenback’s major counterparts held on to last week’s gains with AUD further advancing after better than expected Business Inventories and Company Profits, as well as an improvement to Caixin Services and Composite PMIs. Elsewhere USD/JPY and JPY-crosses nursed some of their losses, while GBP/USD was only mildly pressured following the latest terror incident.

S&P affirmed South Africa at BB+; outlook negative. (Newswires)

COMMODITIES

WTI crude futures gained with price breaking above USD 48/bbl and tspanough Friday’s highs in a delayed reaction to reports that Saudi Arabia and other gulf nations severed ties with Qatar due to the latter’s alleged support for terrorism and Iran. Elsewhere, gold (+0.2%) mildly extended on the gains seen in the wake of Friday’s non-farm payrolls miss and subsequent USD weakness, while copper lack demand amid the cautious tone seen in Asia.

US Baker Hughes Total Rig Count (Jun) W/W 916 (Prev. 908)

US Baker Hughes Oil Rig Count (Jun) 733 (Prev. 722)

US Baker Hughes Gas Rig Count (Jun) W/W 182 (Prev. 185)

Saudi Energy Minister Al-Falih stated that larger production cuts will be considered in July. (Newswires)

Saudi Arabia, Baspanain, Egypt and UAE have all severed ties with Qatar and are reported to close sea, air and land crossings with Qatar. (Newswires)

US

USTs rallied after the release of Friday’s Employment Situation Report; 2s10s has flattened every day last week, and on Friday it narrowed by around 4 bps to below 90 bps; last week alone, 2s10s has narrowed by 8bps, and is now on a run of five straight weeks of narrowing. 2s30s, meanwhile, was around 5bps narrower – the fifth straight day of flattening. US 10-Year T-Note futures settled 0.14+ higher at 126.20+.

Fed's Harker (voter, soft-hawk) said he thinks two further rate hikes in 2017 is appropriate; Friday's 138K NFP is a “good number”. (Newswires)

US White House is said to have no plans to give Congress a detailed tax reform draft until the August recess, according to reports. (Newswires)

Russian President Putin denied knowing of any attempts to set-up back channel discussion with the Trump administration. (Newswires)