• Asian shares mostly higher as stocks take a breather following Tuesday’s decline
• FX price action relatively uneventful but USD/JPY reclaims 110.00
• Looking ahead, highlights include US existing home sales and a panel discussion with Fed’s Powell, ECB’s Draghi, BoJ’s Kuroda & RBA’s Lowe

ASIA

Asia stocks traded mixed as the region attempted to compose itself from the prior day’s sell-off and after some late reprieve on Wall St. where the majors still finished negative but well off worst levels, aside from the DJIA which underperformed as industrials and materials suffered the brunt of the heightened trade tensions. ASX 200 (+1.0%) was the biggest gainer and reached its highest intraday level in a decade with upside led by its largest weighted financials sector, while Nikkei 225 (+0.6%) traded indecisive and at the whim of a choppy currency. Hang Seng (+0.3%) swung between gains and losses, while Shanghai Comp. (-0.6%) remained downbeat on the tariff-threat overhang. Finally, 10yr JGBs are marginally lower with demand sapped by the improved picture in the region, although downside was also limited amid the indecision throughout most of the session in Japan and with the BoJ present in the market for JPY 690bln of JGBs in the belly to super-long end.

PBoC injected CNY 70bln via 7-day and CNY 30bln via 14-day reverse repos for a net daily injection of CNY 40bln. (Newswires)
PBoC set CNY mid-point at 6.4586 (Prev. 6.4235)

BoJ Minutes from April 26th-27th meeting stated members viewed the BoJ would continue with QQE with Yield Curve Control and that many members said it is necessary to maintain current easy policy. The minutes also stated that Japan's economy was expanding moderately and that exports have been on an increasing trend on the back of the firm growth in overseas economies. (Newswires)

BREXIT

UK PM May told rebel Tory MPs she will not back down on the meaningful vote scheduled today and warned that they would be handing a victory to Brussels if the government is defeated on the vote. (Telegraph) The Chief Whip expects the government to have enough votes to win the “meaningful vote” vote so the government is unlikely to offer concessions to rebels. (ITV)

EU leaders are set to warn UK PM May regarding discussions and step up preparations for a no deal scenario, according to reports in Independent citing leaked documents. (Independent)

EU Brexit Negotiator Michel Barnier said serious divergences remain in Brexit talks regarding Ireland but does note some good advances have been made on Brexit divorce issues (VAT, customs, certificates for goods, data protection). (Newswires)

EU

ECB’s Lane (Dovish) said the ECB needs sizable inflation shock to reverse the decision to end QE and noted main tools for policy adjustments are rates and forward guidance. (Newswires)

FX

Price action across FX markets was relatively uneventful with USD holding on to the majority of the prior day’s safe-haven flows and with DXY remaining above the 95.00 level. This kept most its major counterparts subdued with EUR/USD below 1.1600 while GBP/USD was rangebound at a 1.3100 handle ahead of today’s key ‘meaningful vote’ showdown in the Commons, in which Conservative Party rebels threaten to go against UK PM May and vote for the amendment that would give parliament the authority to direct negotiations with the EU if a final Brexit deal is not accepted. Elsewhere, AUD/USD was firmer as it attempted to reclaim the 0.7400 level to the upside and USD/JPY was choppy amid a lack of drivers as well as an uneventful BoJ minutes from the April meeting, which saw a muted reaction considering there was a more recent meeting last week.

Turkey’s President Erdogan said he will bring down interest rates and that there is no other way. (Newswires)

COMMODITIES

Commodities were range-bound with mild gains seen in WTI crude futures to reclaim the USD 65/bbl level following a larger than expected drawdown in crude oil inventories. In terms of OPEC chatter, Saudi is said to be briefing peers on a 300k-600k bpd increase which was less than an initially touted 1.5mln bpd increase, while Iran and Iraq oil ministers continued suggest their unwillingness. Gold was also little changed overnight with prices contained by a firmer greenback and improved risk sentiment, while copper languished as trade tensions continued to weigh on its largest consumer China.

US API Weekly Crude Stocks (15 Jun) -3.016M vs. Exp. -1.900M (Prev. +0.800M). (Newswires)

Iran Oil Minister Zanganeh said he does not think an agreement will be reached at this OPEC meeting. Zanganeh also said he will not attend the OPEC+ meeting on Saturday and will depart from Vienna on Friday, while he added that Iran has no problems with current oil prices. (Newswires)

Iraq Oil Minister Al-Luaibi said Iraq has not considered an oil production increase yet and that he hopes to reach a deal at Friday's OPEC meeting, while he added the oil market has not reached the desired level of stabilisation. (Newswires)

Saudi Arabia is said to be briefing OPEC delegates on a 300k-600k bpd production increase. (FT)

OPEC+ Committee is said to see May cuts compliance at 147% (Prev. 152% compliance in April). (Newswires)

US

Treasuries held in positive territory on Tuesday as firm demand for safe haven debt/assets amidst trade tensions intensifying between the US and China, with other countries such as Russia also jumping in and turning against the US. Note the long bond seems to be holding just above 3%, while the 10s yields fell below 2.90%, falling to lows near 2.86% in Tuesday trade. Most of the action was concentrated in the belly of the curve where 5yr and 10yr yields were lower by c.3bps, at settlement; 2s5s, 2s10s and 2s30s all narrowed by c.2bps. US 10YR T-notes futures (Sep 2018) 8 ticks higher at 119-27.

US Commerce Department issued preliminary duties on China common alloy aluminium sheet imports, while the US Commerce Department also imposed duties on polyester staple fibre imports from South Korea and Taiwan. (Newswires)

US President Trump said it is possible the US could do a one-to-one NAFTA deal with Mexico and a separate one with Canada. (Newswires)

Canada's Foreign Minister Freeland said they have no choice but to retaliate against US tariffs and reiterated Canada will not escalate or back-down in trade disputes. Freeland also commented that a 'win win win' deal remains possible for NAFTA and that all sides will work hard over the summer, while she also commented that the government is discussing possible US auto tariffs with EU, Japan and Mexico. (Newswires)

Russia's economy minister Oreshkin said Russia may impose tariffs on US imports of US road-building equipment but will not impose tariffs on medicine imports from the US. (Newswires)