• Asian equity markets traded mostly subdued, Australia was led higher by gold miners
• DXY was steady whilst the mostly risk-averse tone spurred flows into safe haven JPY
• Looking ahead, highlights include EZ, UK and US Services PMI, US ADP, Factory Orders & ISM Non-Manufacturing PMI, Riksbank Rate Decision, Riksbank’s Ingves, Hansson, Floden & Ohlsson, BoE’s Cunliffe, Haldane & Broadbent and ECB’s de Galhau, supply from Germany, earlier US Independence Day market closures

ASIA-PAC

Asian equity markets traded mostly subdued as the region digested another bout of substandard PMI data from China and following a lacklustre session on Wall St where trade was predominantly range-bound despite the late breakout which helped the S&P 500 notch a consecutive record closing high. ASX 200 (+0.5%) and Nikkei 225 (-0.7%) were mixed with Australia led higher by gold miners as the precious metal resumed its advances but with upside capped by financials amid concerns of tighter margins due to the lower rate environment and as energy names suffered the brunt of a near-5% drop in crude, while sentiment in Tokyo caved in from the weight of a firmer currency. Elsewhere, Hang Seng (-0.2%) and Shanghai Comp. (-0.8%) were downbeat with underperformance in the mainland after another PBoC liquidity drain and disappointing Chinese data in which Caixin Services PMI missed estimates to print a 4-month low and Composite PMI deteriorated to its weakest since October 2016. Finally, 10yr JGBs were higher as they tracked the gains in T-notes which saw the US 10yr Treasury yield drop to its lowest since 2016, with demand also underpinned by the downbeat risk sentiment and BoJ presence in the market.

PBoC skipped open market operations for a net daily drain of CNY 40bln. (Newswires) PBoC set CNY mid-point at 6.8640 (Prev. 6.8513)

Chinese Caixin Services PMI (Jun) 52.0 (Prev. 52.7); 4-month low. (Newswires) Chinese Caixin Composite PMI (Jun) 50.6 (Prev. 51.5); weakest since October 2016.

Senior US official reported told Commerce Department enforcement staff this week that Huawei should still be treated as blacklisted. (Newswires)

Japan is said to consider additional export restrictions on South Korea. (Newswires) 

UK/EU

UK PM candidate Boris Johnson is reportedly to review sin taxes such as on tobacco and alcohol which he said impacts the poor the hardest. (Sky News)

UK PM candidate Jeremy Hunt admitted that a no-deal Brexit could cause as much damage as the 2008 financial crisis, although still vowed to crash out of Europe if necessary. (Independent)

UK BRC Shop Price Index (Jun) Y/Y -0.1% (Prev. 0.8%). (Newswires)

German Defence Minister Ursula von der Leyen was proposed as President of the European Commission, while Belgian PM Charles Michel was named as President of the European Council and IMF's Lagarde was nominated as ECB President. Furthermore, EU Council President Tusk said it is our intention to have a socialist President of the EU Parliament for the first term and a centre-right for the second, while he also commented that Von Der Leyen is to pick Timmermans and Vestager as Deputy Heads of the Commission. (Newswires)

FX

In FX markets, the DXY was steady with only a minimal pullback seen from its post-G20 highs as it bides its time heading into the shortened trading day on Wall St. later and tomorrow’s Independence Day holiday, as well as the latest NFP jobs data near the end of the week. As such, EUR/USD and GBP/USD remained subdued beneath the 1.1300 and 1.2600 handles respectively with the latter dampened from recent comments by BoE Governor Carney who expects considerably weaker growth for Q2, while it was also reported that UK PM candidate Jeremy Hunt admitted a no-deal Brexit could cause as much damage as the 2008 financial crisis but still vowed to crash out of Europe if necessary. Elsewhere, the mostly risk-averse tone spurred flows into safe haven JPY and dragged USD/JPY towards the 107.50 level to the downside, while antipodeans were stable in which AUD/USD proceeded sideways as the disappointing Chinese PMI releases were counterbalanced by a record trade surplus and better than expected building approvals data.

Australian Trade Balance (AUD)(May) 5745.0M vs. Exp. 5250.0M (Prev. 4871.0M); record high. (Newswires) Australian Building Approvals (May) 0.7% vs. Exp. 0.0% (Prev. -4.7%) 

COMMODITIES

Commodities were mixed with WTI crude prices subdued below the USD 57.00/bbl level following a near-5% slump post-OPEC meeting despite the agreement to extend the output cut deal. This was the worst performance in oil since May 31st which analysts attributed as a “sell the fact” scenario following the widely anticipated extension agreement and prompted OPEC Secretary General Barkindo to label the price slump as an anomaly, while a larger than expected API draw also failed to provide any meaningful support. Elsewhere, gold prices were firmer on safe-haven demand and on a continued breakthrough from the USD 1400/oz level but stopped shy of its 6-year highs, while copper languished amid the risk averse tone and underperformance in its largest buyer China.

API Weekly Crude Inventories -5.0mln vs. Exp. -3.0mln (Prev. -7.6mln). (Newswires)

GEOPOLITICS

Foreign ministers from Germany, France, UK, and EU High Representative said they are extremely concerned by Iran exceeding uranium limits, while Iran Foreign Minister Zarif reiterated that Iran will stick to the nuclear pact as long as the Europeans stick to their economic commitments. (Newswires)

At least 40 were reportedly killed after Haftar forces conducted an airstrike at a migrant detention centre in Tripoli, Libya although other reports suggested that the number that died could be much higher. (Newswires)

US

The Treasury curve bull-steepened after the Trump focused on the Eurozone as its next adversary in the trade wars. Once again, the T-Note took cues from EGBs, which have seen yields fall to fresh lows, with traders chewing the fat over the weak economic backdrop, and the dovish comments from a noted hawk (ECB's Knot) on Monday. In afternoon trade, IMF’s Lagarde emerged as the front-runner for the ECB top job, which added a bid in the fixed income space, as the candidate is viewed as less hawkish than other names that were in the frame. A bout of risk-off in the afternoon also sent the T-Note to HOD, after geopolitical tensions (around the same time, it was announced that US VP Pence had cancelled an appearance, the Russian President met his defence minister, while there were also reports that the EU Security Committee was meeting, leading to speculation that we could be on the cusp of some sort of geopolitical escalation; however, a White House official deflated the panic, stating that there was no national security angle). The T-Note remained near highs at settlement. US T-note (U9) futures settled 14+ higher at 128-04+.

US President Trump says he intends to nominate Executive VP and Director of Research at the Federal Reserve Bank of St. Louis Christopher Waller and US Executive Director at the European Bank for Reconstruction and Development Judy Shelton to the Fed board. (Newswires)

US Supreme Court blocked the Trump administration from including citizenship question in the census. (Newswires)