• European Indices [Euro Stoxx 50 +0.5%] have stayed positive after opening in positive territory, diverging from the subdued Asia-Pac session
• China’s MOFCOM says tariffs will not solve trade imbalances, and they will not accept a trade deal which hurts their pride/sovereignty
• Looking ahead, highlights include US GDP (2nd Estimate), Core PCE, Advanced Goods Balance, Pending Sales Change & Initial Jobless Claims, Canadian Average Weekly Earnings, Fed's Clarida, BoC's Wilkins
• Market Holiday: Swiss, Swedish & Norwegian holiday for Ascension Day

ASIA-PAC

Asian equity markets mostly tracked the declines of their counterparts on Wall St where all majors extended on losses amid little in the way of catalysts to inspire a rebound and as participants looked ahead to upcoming US GDP and PCE inflation. Furthermore, trade uncertainty lingered, and technical selling was at play in which the DJIA briefly slipped below the 25K level and the S&P 500 tested its 200DMA to the downside. As such, ASX 200 (-0.7%) and Nikkei 225 (-0.3%) were subdued following the weak lead from their global peers with only the telecoms sector bucking the trend in Australia, while sentiment in Tokyo continued to be hampered as USD/JPY remained at a sub-110.00 level. Hang Seng (-0.4%) and Shanghai Comp. (-0.3%) were negative amid no signs of trade tensions abating as China’s Global Times Editor suggested US is shifting from protecting its interest to destroying China in its crackdown on Huawei. Finally, 10yr JGBs were lower as they tracked the pullback in T-notes but with downside stemmed by support around the 153.00 level and after improved results at the 2yr auction.

BoJ Board Member Sakurai notes that JGB yields are falling but still within the BoJ's acceptable range, and does not see immediate need to take steps to address the bond yield declines, the BoJ can watch more data, it does not need to ease now. (Newswires)

PBoC Official states that a relatively slower level of monetary growth can achieve the needs of keeping economic operations within a reasonable range. (Newswires)

China's MOFCOM says tariffs will not solve trade imbalances, will not accept a deal which hurts their sovereignty or pride, Monetary Policy still has ample room for manoeuvre. (Newswires)

PBoC injected CNY 30bln via 7-day reverse repos. (Newswires) PBoC set CNY mid-point at 6.8990 (Prev. 6.8988)

US

Canada PM Trudeau said a draft ratification of the USMCA has been formally presented to Canadian parliament, while there were also reports that Canadian PM Trudeau will conduct a joint press conference with US Vice President Pence on today at 1345EDT. (Newswires)

UK/EU

BoE’s Ramsden (Dove) is a little more pessimistic about GDP growth than the latest BoE forecasts. (Newswires)

- Expects growth to pick up if Brexit goes smoothly, making further monetary tightening appropriate

- Sees more downside risks to productivity, and on the demand side, where he is less optimistic that investment will recover as much as it does in the central forecast

- These risks broadly offset each other in terms of the balance of demand and supply, meaning that Ramsden's guess for inflation, and the outlook for policy, is in line with the central view

Italy's 5-Star Movement state they are ready for the League Party to select a new Economy Minister., La Stampa. Separately, Italian Deputy PM Salvini and Economy Minister Tria discussed investments and tax cuts., League. (Stampa/Newswires)

GEOPOLITICAL

Israel is heading for a 2nd election this year after Israel PM Netanyahu failed to build a coalition and lawmakers voted for bill to dissolve the Knesset, while the election date has been set for September 17th. (Newswires)

EQUITIES

Major European Indices [Euro Stoxx 50 +0.5%] opened, and have remained, positive; diverting from the poor performance seen overnight in Asia-Pac indices which were largely subdued in sympathy with Wall St. As such, sectors are predominantly in the green with some outperformance in Energy names, although the sector has been weighed on by the recent sell off in oil prices, with Brent currently in negative territory. While the defensive utilities and healthcare sectors are underperforming given the broad risk-on sentiment this morning. In spite of the positivity across bourses, notable individual movers are sparse. Axel Springer (+21.3%) have moved substantially higher following reports that KKR are to make a bid to take the Co. private, with the Co. having been valued at EUR 4.9bln. Separately, Daily Mail & General Trust (+9.6%) have printed higher this morning post results, where they stated FY outlook is currently in-line with guidance. Also, post-earnings, but at the bottom of the Stoxx 600 are Johnson Matthey (-4.1%). Finally, Wirecard (1.3%) are at the top of the DAX (+0.6%) after announcing a strategic partnership with XBN relating to international e-commerce.

FX

DXY - The broad Dollar and the index trades relatively flat thus far, albeit still north of the 98.000 level, as participants await a barrage of tier 1 US data in the form of Q1 GDP (2nd estimate), Core PCE, advances goods trade balance and initial jobless claims. DXY fluctuated between a reasonable 98.08-24 band for now, ahead of some mild resistance around the 98.37-40 mark. US-China news-flow has consisted of MOFCOM reiterations wherein the Chinese noted that tariffs will not solve trade imbalance and will not accept a deal which hurts sovereignty and pride. Nonetheless, focus of today will remain on the aforementioned US data with expectations for the GDP figure to be revised marginally lower (3.1% vs. Prev. 3.2%) whilst the Core PCE Q1 prelim figure is expected to be unchanged at 1.3% (FOMC noted that the recent dip in PCE is transitory) and initial jobless claims are expected to tick slightly higher to 215k from 211k. Elsewhere, Citi’s month-end FX hedge rebalancing model indicates moderate buying of the USD at month end, with the signal (ex-USD/JPY) measuring just over +0.5 historical standard deviations across all crosses.

AUD,NZD,CAD - A firmer risk appetite or perhaps some consolidation from yesterday’s decline sees the risk currencies on a firmer footing this morning. AUD/USD has shrugged off the dismal Building Approval figures overnight ahead of the much anticipated RBA meeting next week. UBS believes the AUD is “too short for its own good” heading into the weekend, adding that “only a complete equity meltdown could drive the Aussie lower at this stage”. In terms of technicals, AUD/USD trades within a relatively tight 0.6917-36 range ahead of resistance at 0.6940. Meanwhile, the Kiwi is largely moving in tandem with its Aussie counterpart after showing little reaction to the NZ budget, in which it sees the 2018/19 cash balance at -2.785bln vs. the Prev. forecast of -4.993bln. NZD/USD also remains within a tight range with the antipodeans eyeing Chinese NBS Manufacturing PMI following the aforementioned US data. Elsewhere, the Loonie nurses some of yesterday’s post-BOC loses, with the aid of rising oil prices amid a much wider than expected build in crude stocks reported by APIs last night. In terms of technical, USD/CAD hovers around the 1.3500 mark having moved in a 1.3493-3520 range, with support flagged at 1.3490. Looking ahead for the CAD, current account data is due at 1330BST whilst BoC’s Wilkins is due to give a speech around 1930BST.

EUR,GBP - Little changed and trading mostly at the whim of the Greenback amid tentative newsflow. EUR/USD remains within a tight 20 pip range (1.1125-45) with support flagged at 1.1125 and 1.1105. In terms of upside, resistance levels are noted at 1.1155 ahead of 1.1170 (with 1bln in option expiries at strike 1.1175-85). Similarly, the Pound has done little on the day thus far and GBP/USD remains within a 1.2612-39 band with little new to report on the Brexit front. Meanwhile, EUR/GBP is currently flat on the day around within a 0.8810-25 with resistance around 0.8845-50.

CHF,JPY - Both safe haven currencies are marginally weaker vs. the Buck amid the rebound in risk sentiment in early EU trade. USD/JPY remains above 109.50, having tested the level overnight, with resistance flatted at 109.80-85, whilst USD/CHF eyes 1.01 to the upside as it flirts around the top of today 1.0072-94 range.

EM - Lira remains the outperformer amongst its EM counterpart as the US-Turkey does not seem to be detreating as (fast as) expected, following a phone call between the two President yesterday in which they agreed to meet on the side-lines of the G20 summit in June. USD/TRY is not back below the 6.00 figure and closer to 5.95, ahead of President Erdogan’s presentation of his judicial reform strategy programme at the presidential palace at 1200BST following by a meeting of the National Security Council at 1300BST.

New Zealand released its budget in which its sees 2018/19 Cash Balance at -2.785B vs. Prev. forecast of -4.993B and sees 2018/19 GDP growth of 2.1% vs. Prev. 2.9% forecast in Half Year Economic and Fiscal Update. Furthermore, New Zealand Finance Minister Robertson said increased government spending will help domestic economy in the face of global slowdown, while he added that US-China trade dispute, Brexit uncertainty and slowing global growth pose continuing risks. (Newswires)

Major FX option expiries for today's NY cut:

- EUR/USD: 1.1100 (601M) , 1.1120 (232M), 1.1175-85 (1BLN), 1.1200-10 (1.1BLN) 

- USD/CHF: 0.9900 (300M), 1.0100 (1.4BLN)

- GBP/USD: 1.2600 (646M), 1.2650 (286M), 1.2700 (801M) 

- AUD/USD: 0.6885-0.6900 (900M), 0.7050-65 (1BLN)

- NZD/USD: 0.6670 (350M).

- AUD/NZD: 1.0585-90 (760M) 

- USD/JPY: 109.00 (1.4BLN), 109.50-55 (675M), 109.75 (1.3BLN)

FIXED INCOME

Core EU and UK debt has been consolidating throughout the morning, with the UK 10yr underperforming its mainland counterparts and hitting a day’s nadir of 129.21, with the 23rd May high next on the downside (129.13) to look out for in a technical sense. Bunds are also seeing similar price action, and a similar lack of news to trade upon, with 10-year futures now eyeing 167.52 after having hit lows of the day at 167.72 as yields ease off record lows of -20.5bps. In the periphery, BTPs are outperforming their core counterparts and trade in positive territory, with an extra leg up received by today’s BTP auction.

Moving stateside, debt futures are lower across the curve after a poor 7-yr auction that tailed by 1.8bps has catalysed some selling, with the longer end now underperforming. The 10yr 24th May low of 125-04+ has proven to be formidable support thus far, but may be tested should further downside be added by comments from voter Clarida later in the day after the 2nd reading of US GDP figures, which is forecast have a 10bps negative revision from 3.2%, alongside PCE Prices.

COMMODITIES  

WTI (+0.3%) and Brent (-0.8%) futures are mixed with the former relatively flat whilst the latter has failed to hold onto its post-API gains in which US crude stocks showed a wider-than-forecast drawdown (-5.27mln vs. Exp. -0.9mln). This mornings downside in Brent was exacerbated as 69.0/bbl was taken out to the downside, with Brent currently trading around 68.80/bbl. News-flow for the complex has been light, although amidst the little clarity in regard to the OPEC/OPEC+ meeting schedule, the Azeri Energy Minister noted that the meeting will likely take place in early July (touted dates include July 3rd/4th). As a reminder, the DoEs will be release later today at 1600BST amid US’ market absence on Monday. Elsewhere, gold prices (-0.2%) are marginally pressured amid the improvement in the risk tone. Meanwhile, copper prices remain near 4-month lows due to a weak performance in China. Further for the red metal, supply side disruptions are to keep an eye on after Chile's CODELCO mine workers voted in favour of a strike in the Chuquicamata mine which is the largest open-pit copper mine in the world.

Chile's CODELCO mine workers voted in favour of a strike in the Chuquicamata mine which is the largest open-pit copper mine in the world. (Newswires)

Russia's Transneft states that the total volume of contaminated oil which has been supplied by the Druzhba pipeline and UST-Luga port is 3mln Tonnes., according to Transneft's VP. (Newswires)

- Co. are to store the contaminated oil which is shipped back from Belarus at storage facilities in their Russian subsidiary; 1.328mln Tonnes of contaminated oil is to be shipped back

- Do not plan to ship contaminated oil back from Poland