• Haven currencies benefited from the risk averse tone overnight, with USD/JPY tracking below 112.00
• Firmer than expected Chinese Mfg. PMI fails to lift sentiment in Asia, while Japanese inflation remains subdued.
• Looking ahead, highlights include UK GDP, US PCE and Baker Hughes rig count.

ASIA

Asia stocks traded in a sea of red amid month-, quarter- and half-year end flows, as well as a negative lead from US where tech underperformed. ASX 200 (-1.4%) and Nikkei 225 (-1.2%) were broadly pressured from the open with the latter suffering from a firmer JPY, while Japanese CPI and Unemployment data also left much to be desired. Elsewhere, Shanghai Comp. (-0.2%) and Hang Seng (-0.8%) brushed aside the better than expected Chinese Official Manufacturing PMI and adhered to the downbeat tone after the PBoC continued to refrain from liquidity operations. Finally, 10yr JGBs traded lower despite the risk averse tone, as Japanese yields tracked their global counterparts higher in the wake of the recent hawkish tone from European central bankers. Furthermore, the BoJ were also in the market today, although its Rinban announcement was for a relatively reserved JPY 475bln of JGBs.

Chinese Manufacturing PMI (Jun) 51.7 vs. Exp. 51.0 (Prev. 51.2). (Newswires)

Chinese Non-Manufacturing PMI (Jun) 54.9 (Prev. 54.5)

PBoC skipped open market operations for a 6th consecutive session. (Newswires)

PBoC set CNY mid-point at 6.7744 (Prev. 6.7940)

Japanese National CPI (May) Y/Y 0.4% vs. Exp. 0.5% (Prev. 0.4%). (Newswires)

Japanese Industrial Production (May P) Y/Y 6.8% vs. Exp. 6.9% (Prev. 5.7%)

Japanese Unemployment Rate (May) 3.1% vs. Exp. 2.8% (Prev. 2.8%)

EUROPE

N/A

UK

UK Gfk Consumer Confidence (Jun) -10 vs. Exp. -7 (Prev. -5). (Newswires)

UK Lloyds Business Barometer (Jun) 30 (Prev. 27)

US and UK are expected to start trade discussions on 24th July, according to reports citing UK Trade Secretary Liam Fox. (Newswires)

MPs have voted in the Commons to pass the Queen's Speech, supporting the Conservatives' programme for government gaining a slender majority with 323 votes to 309. (FT)

FX

In FX markets, a risk-averse sentiment spurred flows into safe-haven JPY which dragged USD/JPY below the 112.00 level and saw similar pressure in JPY-crosses. Elsewhere, the USD-index remained despondent from this week’s losses, which its major counterparts continued to benefit from as GBP/USD edged further above 1.3000 and AUD/USD briefly rose above 0.7700 to post its highest in 3 months, while CNH was a notable gainer after the PBoC set the strongest reference rate since November.

COMMODITIES

Copper dismissed the risk averse tone in the region and gained mildly overnight, amid better than expected Chinese PMI data and after advances in iron ore prices which are up over 14% on the week and in bull market territory. Gold (+0.1%) inched up on the back of a weaker greenback and greater safe-haven flows amid the risk off tone in markets, while WTI crude futures reclaimed the USD 45/bbl level to trade near 2-week highs.

Goldman Sachs forecasts iron ore prices averaging USD 47/ton next year and stated that the price is heading lower on rising supply. (Newswires)

US

Treasury yields followed their European counterparts higher before the US day got fully underway, with bonds said to have sold off on the hawkish themes we have become familiar with this week. The major curves were steeper slightly (2s5s +1bps, 2s10s +2.1bps, 2s30s +1.8bps, 5s10s +1bps, 5s30s +0.80bps).

Fed's Bullard (Non-Voter, Dove) reiterated that the current Fed Funds Rate is appropriate and says the Fed must create policy space in good times in case it needs to do more QE in the future. (Newswire)