• Asian stocks initially struggled for direction before seeing a mild uplift after EU leaders reached an agreement on migration
• EUR/USD reclaimed the 1.1600 handle with most other majors benefitting from subsequent USD softness
• Looking ahead, highlights include German jobs, UK GDP (Q1), EZ CPI, US PCE, Canadian GDP, Chicago PMI, EU summit

ASIA

Asian stocks initially struggled for direction and traded mixed for most the session with the ASX 200 (+0.1%) and Nikkei 225 (+0.1%) contained on month-, quarter- and half-year end rebalancing, while better than expected Industrial Production and a 25-year low Unemployment Rate in Japan failed to underpin the local benchmark. However, it was not all doom and gloom for stocks as a late breakthrough at the EU summit later provided the region with a mild uplift. Elsewhere, Hang Seng (+1.2%) and Shanghai Comp. (+1.2%) rallied amid outperformance in tech and plans to ease foreign investment restrictions which overshadowed the switch to a weekly net liquidity drain by the PBoC, although the 3 big telecom names were mixed after their spin-off JV China Tower received approval for a Hong Kong IPO which is set to be the largest globally since Alibaba. Finally, 10yr JGBs were slightly softer amid modest gains in Japanese stocks and after the BoJ cut its purchase amounts in the 5yr-10yr maturities, although the reaction to the Rinban was muted in comparison to previous similar reductions. 

US Ambassador to China Branstad said the Trump administration is unconvinced China is willing to make enough progress on trade issues soon enough while he added there is scepticism regarding promises China has made and the US wants to see openings carried out. (Newswires)

China has reduced the amount of industrial sectors restricted from foreign investment, as Beijing increases its appeal to international businesses ahead of a looming trade war with the US. (FT)
 

PBoC injected CNY 80bln via 7-day reverse repos, for a weekly drain of CNY 370bln vs. CNY 140bln injection W/W. (Newswires)

PBoC set CNY mid-point at 6.6166 (Prev. 6.5960)

UK

UK PM May said she wants a deal on Brexit that will work for both UK and EU, while she also wants Brexit negotiations to accelerate after the white paper on future ties is published. Furthermore, PM May is also seeking for strong and deep security partnership with EU to continue post-Brexit. (Telegraph/Times)

UK GfK Consumer Confidence (Jun) -9 vs. Exp. -7 (Prev. -7). (Newswires)
UK Lloyds Business Barometer (Jun) 29 (Prev. 35)
UK CBI 3-month Growth Indicator (Jun) 6 (Prev 10)

EU

EU leaders reached an agreement on migration at the EU summit which include Mediterranean centres for migrants to be kept in on a voluntary basis and in which refugees will be shared among EU members on a voluntary basis. Furthermore, the leaders agreed they must ensure effective control of external borders and prevent uncontrolled migration that was seen in 2015, while EU leaders also agreed to extend economic sanctions against Russia for another 6 months. Additionally, EU leaders also signalled intentions to respond to potential tariffs on cars, should trade tensions escalate. (Newswires) Note: EU leaders had initially failed to formally approve a final EU summit joint conclusions statement after Italy blocked all agreements until demands regarding migration were included in the final conclusions which had prompted the EU to cancel the press conference. 

US President Trump said EU came to him to negotiate on trade. (Newswires)

FX

FX markets initially provided very little excitement as the DXY traded sideways above the 95.00 level and with its counterparts across the pond languishing near prior lows. However, the announcement that EU leaders reached an agreement on migration which had earlier been delayed by Italian demands, then lifted EUR/USD to reclaim the 1.1600 handle which its major peers were quick to latch on to at the detriment of the greenback. This saw GBP/USD reclaim the 1.3100 handle, while AUD/USD also pared the softness seen in the wake of another PBoC devaluation which had earlier pressured CNH to its weakest since November.

COMMODITIES

Commodities traded mixed with WTI crude futures paring some of its gains following its 2-week surge that saw prices briefly break above USD 74/bbl during the prior US session, although the overnight pullback was relatively mild and support was seen at the USD 73/bbl level. Elsewhere, gold was underpinned after the greenback weakened following the breakthrough at the EU summit, while copper also gained amid outperformance in its largest consumer China.

CME raised crude oil NYMEX maintenance margins by 7.3% to USD 2950/contract for August and raises Brent futures maintenance margins by 4.4% to USD 2975/contract for July. (Newswires)
 

US

US Treasuries fell on Thursday with the 10y yield rising circa 2bps after being in a narrow range for much of the session. The 7y note auction went off without a hitch with the yield stopping on the screws and the line covered 2.53x, in line with the 6-auction average. IFR noted much of the activity was seen as quarter-end and month-end portfolio rebalancing with the geopolitical and trade news relatively quiet. US 10YR T-notes futures (Sep 2018) settle 6+ ticks lower at 120-06.

Fed’s Bostic (Voter, Dove) said he is comfortable with slowing the pace of rate hikes and that economic expansion has been steady with few surprises. Bostic also commented the fed is worried about overheating and he is concerned about an unpleasant economic snapback. (Newswires)

Fed's Bullard (Non-voter, Dove) said risk of inversion should result in the Fed to slow down rate hikes until it is obvious that inflation pressures or long-term yields are increasing, while he also commented that it does not look like there is much inflation risk today. (Newswires)

Fed's Kashkari (Non-voter, Dove) said Fed could be one or two hikes from the neutral rate and that he favours pausing when that level is reached. (Newswires)

The White House denied reports Thursday that President Donald Trump is looking for a replacement for chief of staff John Kelly. (CNN)

US Fed approved 34 of 35 capital plans in the second part of the bank stress tests, with Deutsche Bank's (DBK GY) US operations failing due to material weakness in data capabilities and controls. (Newswires)
Bank of America (BAC) to repurchase up to USD 20.6bln in shares and boost dividend by 25% to USD 0.15/Shr.
Citi (C) to repurchase up to USD 17.6bln of shares and boost dividend by 41% to USD USD 0.45/Shr.
JPMorgan (JPM) is to repurchase USD 20.7bln of shares and boost dividend by 43% to USD 0.80/Shr.
Wells Fargo (WFC) is to repurchase up to USD 24.5bln shares and boost dividend by 10% to USD 0.43/Shr.