• ​​​​Asian shares pressured after China retaliates to US tariffs; HK and China markets closed
• Oil lower as Russian Energy Minister Novak proposes extension of the OPEC+ deal
• Looking ahead, highlights include ECB President Draghi speaking at the Sintra Monetary Policy conference

ASIA

Asia stocks mostly backpedalled at the start of the week as the region digested the tit-for-tat trade spat between US and China, in which the US confirmed tariffs on USD 50bln of Chinese goods and China responded with reciprocal tariffs of the same value against the US. ASX 200 (+0.3%) and Nikkei 225 (-0.8%) both opened negative with Australia initially led lower by commodity-related sectors although strength in financials and healthcare later reversed the downside in the index, while sentiment in Japan was dampened by a firmer JPY and amid a fatal earthquake in Osaka. KOSPI (-1.3%) underperformed as a fallout from the US-China tariff dispute due to fears South Korea could feel the brunt of the trade war between its 2 largest trading partners, and with index-heavyweight Samsung Electronics pressured after it was ordered to pay USD 400mln for patent infringement related to semiconductor technology. Finally, markets in mainland China, Hong Kong, Taiwan and Indonesia were all closed for holiday, while 10yr JGBs were uneventful despite the risk averse tone as prices took a breather from last week’s upside and following a lack of a Rinban announcement by the BoJ.

China announced on Friday to impose USD 50bln of retaliatory tariffs on US 659 agricultural and autos goods from 6th July in response to US tariffs. Mofcom also stated they will impose 25% tariffs on chemicals, medical equipment, energy products and chemicals, while China will also impose tariffs on US crude oil, natgas and some refined products at a later date. (Newswires)

Japanese Trade Balance Total (JPY) (May) -578.3B vs. Exp. -205.2B (Prev. 626.0B, Rev. 624.6B). (Newswires)
Japanese Exports YY (May) 8.1% vs. Exp. 7.5% (Prev. 7.8%); 4-month high.
Japanese Imports YY (May) 14.0% vs. Exp. 8.2% (Prev. 5.9%)

UK/EU

British Chambers of Commerce said the UK economy looks set for its weakest growth since 2009 amid uncertainties related to Brexit, higher energy prices and trade war concerns. (Newswires)

High import tariffs and high regulatory barriers caused by Brexit could cost the UK up to GBP 27bln, leaving households up to GBP 1000 worse off a year and supermarket business profits wiped out according to an analysis to be published next week and seen by the BBC. (BBC)
 

Conservative rebels have admitted they could collapse the government if they vote against Theresa May’s final Brexit deal. (BBC)

Irish PM Varadkar said he is not convinced there have been sufficient progress in Brexit talks yet. (Newswires)

UK Rightmove House Prices (Jun) M/M 0.4% (Prev. 0.8%). (Newswires)
UK Rightmove House Prices (Jun) Y/Y 1.7% (Prev. 1.1%)

Germany CSU party is expected to decide today whether to oppose Chancellor Merkel and implement plan which seeks to limit immigration, while reports also noted that German Chancellor Merkel is seeking crisis talks as she hopes to avert a split of the coalition government. Furthermore, there were later comments from CSU party leader Seehofer that the government situation is serious but manageable. (FT/Newswires) Reports also stated that CSU party leader Seehofer will give Merkel two weeks to gain support from EU partners on a migration agreement, or he will carry out the order himself. (Sky News/Guardian)

Greek PM Tsipras survived a no-confidence vote on Saturday with the motion defeated through voting of 153 vs.127. (Newswires)

Fitch affirmed Denmark at AAA; Outlook Stable and affirmed Ireland at A+; Outlook Stable. (Newswires)

Moody’s affirmed Norway at AAA; Outlook Stable. (Newswires)

FX

In FX markets, USD was slightly firmer overnight as safe-haven currencies were supported from the risk averse tone and with the DXY holding on to the momentum from last week’s more hawkish Fed undertone and divergence with the ECB on rates. This weighed on its major counterparts with EUR/USD at a sub-1.1600 handle and with GBP/USD firmly below 1.3300, while commodity-linked currencies were also lacklustre amid a continued slip in oil prices and with NZD dampened by a softer growth outlook. Conversely, CHF and JPY fared better with JPY-crosses the biggest movers overnight due to the currency’s safe-haven status and after Japanese Exports data topped estimates.

New Zealand GDP growth outlook is seen softer in the near term according to NZIER consensus report, which also expects growth to peak at 3.2% for the year to March 2020 before easing to 2.9% by 2021. (Newswires)

COMMODITIES

Commodities were lacklustre overnight in which WTI extended on Friday’s slump with another near-2% drop which prices slipped below USD 64.00/bbl. The pressure on oil comes ahead of Friday’s OPEC meeting and with producers at loggerheads regarding a touted 1.5mln bpd output increase favoured by Saudi and Russia, which Iran, Iraq and Venezuela are planning to veto. Elsewhere, gold is relatively flat as attempts to nurse Friday’s losses of around USD 20/oz was thwarted by a firm greenback, and copper remained subdued amid the risk averse tone as well as the absence of its largest consumer China.

Russian Energy Minister Novak said Russia and Saudi Arabia agreed OPEC+ should be institutionalised and extended to 2019 and beyond. In addition, reports also noted that Novak also stated OPEC and non-OPEC countries will discuss raising the oil output by 1.5mln bpd in Q3 only. However, Iran stated that 3 OPEC members (Iraq, Iran & Venezuela) will veto a proposed production increase. (Newswires)

Libya’s NOC said a fire at two storage tanks in Libya’s Ras Lanuf reduced storage capacity to 550k barrels from 950k barrels. (Newswires)

Venezuela’s PDVSA Isla refinery in Curacao is closed due to lack of crude, according to sources. (Newswires)

US Baker Hughes Total Rig Count (15 Jun) 1059 (Prev. 1062). (Newswires)
US Baker Hughes Oil Rig Count (15 Jun) 863 (Prev. 862)
US Baker Hughes Gas Rig Count (15 Jun) 194 (Prev. 198)

US

Fed's Kaplan (Non-Voter, Neutral) said Fed should be moving gradually on hikes and that he doesn't want to prejudge if the Fed should pause at neutral or not, while he also stated that near-term outlook is strong and that the base case is for three hikes in 2018. (Newswires)

US Treasury Secretary Mnuchin is said to have warned President Trump of dire economic consequences and possible market collapse if China tariffs were imposed. (Fox)

Source: RANsquawk