• Asian equities began the week somewhat choppy with participants tentative ahead of the Trump-Xi G20 meeting
• Conservative Party is reportedly making plans that would permit the next PM to hold off from putting their Brexit plans to Parliament until Autumn
• US President Trump said he has no pre-conditions for talks with Iran. However, the US will be moving ahead with sanctions on the nation
• Turkish opposition candidate Imamoglu beat former PM and Erdogan ally Yildirim in the rerun of the Istanbul mayoral election
• Looking ahead, highlights include German IFO, NZ Trade, ECB’s Lautenschlager, Fed’s Harker

ASIA

Asian equity markets began the week somewhat choppy with participants tentative ahead of the Trump-Xi meeting at the G20 this week and following the mild pullback last Friday on Wall St where all majors ended slightly lower on the day, but still notched gains of more than 2% for the week. ASX 200 (-0.1%) was led lower by underperformance in Consumer Staples and as comments from RBA Governor Lowe appeared to question the impact easing could have on the economy, while a non-committal tone was seen in the Nikkei 225 (+0.1%) amid a mixed currency. Hang Seng (+0.3%) and Shanghai Comp. (-0.1%) were indecisive after the PBoC refrained from open market operations and as global markets await the latest developments in the trade war saga including the Trump-Xi showdown this week, while the US recently added 5 Chinese entities to its blacklist barring them from buying US parts without government approval. Finally, 10yr JGBs were subdued with after recent similar moves in T-notes and as yields bounced back from multi-year lows, while demand was also dampened after stocks in Tokyo pared opening weakness and amid the absence of the BoJ in the market.  

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.8503 (Prev. 6.8472)

China Vice Commerce Minister Wang Shouwen said China and US trade teams are having discussions, while he added that both sides should make compromises and hopes G20 sends a clear signal on fighting against trade protectionism. (Newswires)

China Assistant Foreign Minister Zhang Jun said the world economy faces increasing risks and the international community recognizes harm from protectionism, while he added that G20 should ensure unity and cooperation but also stated that China will safeguard its fundamental interests and will not allow anyone to interfere with its internal affairs no matter what forum. (Newswires)

China Global Times Editor said China is concerned about fairness of the trade deal and the most important part is the US side must remove all newly imposed tariffs since the trade war or else China won't accept a deal. (Twitter)

UK/EU

Conservative Party is reportedly making plans that would permit the next PM to hold off from putting their Brexit plans to Parliament until Autumn which could limit the time to reach a deal to just over 3 weeks before October 31st. (Independent)

Conservative leadership hopeful Hunt has accused Boris Johnson of being a coward for avoiding public scrutiny as pressure mounts on the Tory frontrunner to address the row with his girlfriend that led to police being called. (Times)

EY ITEM Club forecasts 2019 UK GDP growth at 1.3% Y/Y, sees consumer spending growth at 1.6% which is the slowest since 2013. (Newswires)

Fitch affirmed Spain at A-; Outlook Stable. (Newswires)

FX

DXY sits above 96.00 following last week’s FOMC-induced losses and another bout of weak PMI data. This benefitted its major counterparts with EUR/USD at its strongest levels in 3 months and closer to 1.1400 where there is around EUR 1.5bln of option expiries at 1.1395-1.1400 for today’s New York cut, while GBP/USD was steady circa 1.2750. Price action in USD/JPY and JPY-crosses largely reflected their individual base currencies, and antipodeans were firmer overnight with AUD/USD underpinned after comments from RBA Governor Lowe who suggested it was legitimate to question how effective monetary easing would be globally. NZD/USD was marginally higher and attempted to reclaim 0.6600 ahead of this week’s RBNZ meeting where markets are pointing to a less than a 29% chance of a cut although August is seen as priced in, while TRY was another notable gainer after the Turkey opposition candidate Imamoglu beat former PM and Erdogan ally Yildirim in the rerun of the Istanbul mayoral election which President Erdogan congratulated him on.

RBA Governor Lowe said risks to global economy are tilted to the downside and that it is legitimate to question how effective monetary easing would be globally, while he also suggested that if everyone is easing, the impact on exchange rates is offset. Lowe added that more infrastructure investment would benefit the Australian economy and that government can borrow at historic lows but it must be projects that can make a return, while other Twitter sources reported that Lowe suggested it is unclear what further impact easing could have on the economy. (Newswires/Twitter)

Turkish opposition candidate Imamoglu beat former PM and Erdogan ally Yildirim in the rerun of the Istanbul mayoral election. (Newswires) 

COMMODITIES

WTI crude prices extended on recent gains after having notched its best weekly performance since Dec’16 due to the weaker USD and ongoing geopolitical tensions concerning Iran. Furthermore, the Baker Hughes rig count also showed a decline in total US rigs despite oil drillers increasing rigs for the 1st time in 3 weeks and prices now eye a retest of resistance ahead of USD 58.00/bbl. Gold was marginally higher due to a softer greenback and as USD 1400/oz acts as base for prices, copper traded sideways amid the tentative risk tone and early weakness in Dalian iron ore prices which slumped around 3% shortly after the open. 

Baker Hughes (June 21): oil rigs +1 at 789, gas rigs -4 at 177, total US rigs -2 at 967. (Newswires)

At least 8 people were killed after an oil pipeline exploded in the southeast of Nigeria. (Newswires)

India's Oil Minister spoke to Saudi Energy Minister Al-Falih and expressed concern on rising prices after the tanker attacks in the Strait of Hormuz and wants Saudi Arabia to play an active role in OPEC+ to keep oil prices at a reasonable level. (Newswires)

GEOPOLITICS

US President Trump said he has no pre-conditions for talks with Iranand that he would be willing to meet with the Ayatollah or President but added that ballistic missiles would have to be considered in a deal. However, US President Trump also said that they are moving ahead with additional sanctions on Iran aimed at preventing it from getting a nuclear weapon and that military action is still on the table, while other reports also noted the White House is pressing for additional options including in cyberspace and other additional clandestine plans to counter Iranian aggression in the Persian Gulf. (Newswires/NYTimes)

US President Trump administration’s Middle East peace plan reportedly proposes USD 50bln investment in Palestinian territories, Egypt, Jordan and Lebanon. In related news, US President Trump spoke with the Saudi Crown Prince bin Salman on Middle East stability as well as the oil market. (Newswires)

Iran said it believes EU lacks the will to salvage the multinational 2015 nuclear deal, while its Deputy Foreign Minister said the decision to decrease its commitment to nuclear deal is a national decision and irreversible as long as its demands are not met. (Newswires)

Saudi Arabia’s Abha civilian airport located in the south of the country was attacked by Yemen's Houthi rebels which killed one person and wounded seven others, while the Arab Coalition stated that the attack by the Iranian-backed terrorist Houthi militia and the targeting of civilians is a brutal terrorist act. (Newswires0

North Korea confirmed that its leader Kim received a letter from US President Trump in which the contents of the letter were described as excellent. (Newswires)

US

Treasuries gave back some of the geopolitically induced gains seen on Thursday, with yields settling 5-7bps higher across the curve; this added some daylight between the 10-year yield and the 2% handle (which was breached on Thursday for the first time since Nov’2016). However, geopolitical analysts have warned that the tensions are far from over, and even though Trump has reached out to Iranian leaders for unconditional talks, military options remain. This week’s sales of 2s, 5s and 7s will be eyed, with desks suggesting that the dovish Fed pricing could support the complex, like we saw in the 3s/10s/30s auctions recently, especially so amid the geopolitical background. US T-notes (U9) settled 17+ lower at 127-16+.

Fed's Brainard (voter, dove) said risk management argues for a lower rate path when risks shift to the downside and that she has seen downside risks in recent weeks. Brainard also said that inflation indicators have been disappointing making it important to sustain momentum, while she added that US economy remains solid and that rates will likely remain low in the future. (Newswires)

Fed stress test results on Friday showed all banks exceeded minimum capital requirements and at strong levels that would allow them to remain above minimum required level after being tested against a severe hypothetical recession scenario. (Newswires)

Outgoing CEA Chair Hassett said the market is now expecting what US President Trump has been expecting for months; that global economy is much softer than what we thought 8-9 months ago. (Newswires)