• Asian equity markets were somewhat mixed as the region digested the fallout from the ECB and Trump’s decision to impose tariffs on China
• UK government presented an amendment that reportedly fell short of rebel demands with the new clause giving Parliament a more limited say
• Looking ahead, highlights include EZ CPI, Russian rate decision, US NY Fed mfg PMI, industrial production, Uni. of Michigan, Baker Hughes, quadruple witching

ASIA

Asian equity markets were somewhat mixed as the region digested the fallout from the ECB, while participants also mulled over Trump’s decision to impose tariffs on China. ASX 200 (+1.3%) and Nikkei 225 (+0.4%) traded higher with Australia the outperformer on broad gains across all sectors. Elsewhere, Hang Seng (-0.2%) and Shanghai Comp. (-0.9%) were lower despite the PBoC conducting a net weekly injection of CNY 240bln and Pledged Supplementary Lending operation, as Trump’s decision to impose tariffs on USD 50bln of Chinese goods overshadowed the central bank’s liquidity efforts. Finally, price action in 10yr JGBs was uneventful throughout the morning amid gains in Japanese stocks and with participants side-lined prior to the BoJ conclusion, although JGBs later saw mild support on following the BoJ announcement in which the central bank kept policy unchanged but downgraded its assessment on inflation.    

US President Trump has decided to impose tariffs on USD 50bln of Chinese imports. In related news, President Trump is preparing to release a refined tariff list which will target technologies China aims to be a leader in according to sources, while there were also reports that China is said to be prepared to retaliate against US tariffs. (WSJ/Twitter)

PBoC injected CNY 50bln via 7-day reverse repos, JPY 30bln via 14-day reverse repos and CNY 20bln via 28-day reverse repos, for a net weekly injection of CNY 270bln vs. last week's CNY 300bln net drain. PBoC also announced a CNY 60.5bln Pledged Supplementary Lending facility operation. (Newswires)
PBoC set CNY mid-point at 6.4306 (Prev. 6.3962)

Chinese China House Prices YY (May) 4.7% (Prev. 4.7%). (Newswires)

BoJ kept monetary policy unchanged as expected with NIRP held at -0.1% and 10yr JGB yield target at around 0%, while the decision was made by 8-1 vote with Kataoka the dovish dissenter again. Furthermore, the BoJ maintained its assessment of Japan's economy which it stated is expanding moderately, although the central bank cut its assessment on inflation and said that inflation expectations are proceeding sideways. (Newswires)

UK/EU

UK government presented an amendment that reportedly fell short of rebel demands with the new clause giving Parliament a more limited say, and which influential pro-EU MPs Soubry and Grieve suggested was "unacceptable". Reports added that the implication is the government may face another Brexit rebellion next week. (Daily Telegraph/Newswires) Furthermore, EU diplomats are reportedly not ruling out a Brexit delay by some months. (Handelsblatt)

ECB policymakers are said to be split over the wording of stimulus end and rate hike, as some wanted to keep the door more open for an extension of QE and others wanted to signal a possible rate hike in the middle of 2019, according to sources. (Newswires)

A senior Berlin correspondent says that Germany is very very close to snap elections, due to the power tussle over immigration between Merkel’s CDU and its Bavarian sister party CSU, according to a FT Frankfurt banking correspondent. (Twitter)
 

FX

In FX markets, the USD remained firm against all counterparts with the DXY within a whisker of the 95.00 level in the after this week’s heavy central bank action, in which the dovish taper by the ECB was at a sharp contrast to the more hawkish undertone by the FOMC. As such, EUR/USD trades with a 1.15 handle, while GBP/USD languished firmly below 1.3300 amid Brexit-bickering with the government’s compromise on the ‘meaningful vote’ rejected by influential pro-EU Tory MPs who deemed it as “unacceptable” and which reports suggest could lead to another Brexit rebellion next week. Elsewhere, antipodeans were lacklustre with all currencies swept by the rising greenback and JPY was indecisive amid the mixed risk tone but later saw some mild pressure after the BoJ downgraded its assessment on inflation.
 

COMMODITIES

Commodities were quiet overnight with WTI crude futures traded sideways near the USD 67.00/bbl level which it made several attempts to reclaim. Elsewhere, gold was uneventful and consolidated around USD 1300/oz as it took a breather from this week’s central bank induced price swings, although prices are still on course on for a 2nd consecutive weekly gain, while copper was lacklustre overnight amid the mixed risk tone and underperformance of its largest consumer China.
 

US

Treasury yields edged lower on Thursday, dancing to the tune of bunds, where yields fell in the wake of a dovish ECB rate decision, after the central bank signalled rates will remain on hold for a prolonged period of time, though QE is set to end in December. Money markets subsequently pushed-back its pricing in of an ECB hike to September 2019 from June 2019. But with that said, the Bund/Tsys spread did widen following decent retail sales data, and jobless claims. The Treasury curve itself saw bull-flattening, with 2s relatively unchanged, 10s backing away from 3.00%, and the 30-year sector falling by around 4bps to 3.06; however, spreads along the Treasury curve narrowed (5s30s -1bps, 2s30s -3bps, 2s10s -3bps, and 2s5s -2bps). US 10YR T-notes futures (Sep 2018) settle 7+ ticks higher at 119-24.

Canada's Foreign Minister Freeland said the three NAFTA members agreed to have made progress so far and urged the need to keep working hard to get a deal, while Freeland also stated 'we will not escalate and we will not back down' on US tariffs retaliation. In related news, Mexico is said to consider possible tariffs on US corn and soybean imports if trade dispute escalates. (Newswires)

White House Legislative Director Marc Short is said to leave the White House before fall. (NY Times)

China approved Qualcomm (QCOM) purchase of NXP (NXPI) for USD 44bln. (Newswires)