• Asian stocks were mostly higher as the region partially upheld the firm handover from Wall St; S&P 500 +1.36%
• Chinese state-controlled companies reportedly cancelled some shipments from US farm exporters, according to WSJ
• US President Trump's administration selected Moderna (MRNA), AstraZeneca (AZN), Johnson & Johnson (JNJ), Merck (MRK) and Pfizer (PFE) as COVID-19 vaccine candidate finalists
• German Chancellor Merkel's ruling coalition reached a deal on the German stimulus package with an agreed size of EUR 130bln
• The DXY nursed losses and attempted to snap its 7-day losing streak, EUR/USD maintained 1.12+ status, GBP/USD sits just below 1.2550
• Looking ahead, highlights include EZ & UK Construction PMI, EZ Retail Sales, ECB rate decision & press conference, US IJC, supply from France & Spain 

CORONAVIRUS UPDATE

US CDC reported 24,955 new coronavirus cases to take total to 1.827mln and the death toll increased by 1045 to a total. 106,202 (Newswires)

US Treasury reportedly delivered 159mln COVID economic impact payments worth USD 267bln, with payments now made to all eligible Americans for which the IRS has information for. (Newswires)

US President Trump's administration selected Moderna (MRNA), AstraZeneca (AZN), Johnson & Johnson (JNJ), Merck (MRK) and Pfizer (PFE) as vaccine candidate finalists. In related news, a University of Minnesota study found that Hydroxychloroquine is no better than a placebo in preventing infection of the coronavirus, while there were comments from the WHO chief scientist that suggested there is no evidence of any drug reducing the mortality of patients with COVID-19. (Newswires)

ASIA

Asian stocks were mostly higher as the region partially upheld the firm handover from Wall St where sentiment was underpinned by recovery hopes and encouraging data after ISM Non-Manufacturing PMI topped estimates and ADP employment numbers showed a much narrower than feared drop ahead of Friday’s NFP release. ASX 200 (+0.9%) was lifted by broad sector gains aside from commodity related stocks, in particular gold miners after the precious metal briefly slipped below the USD 1700/oz focal point, while Nikkei 225 (+0.1%) was underpinned by the favourable currency moves but with gains momentarily reversed amid fears of a second virus wave in Tokyo after a jump in cases recently prompted an alert and with officials said to consider flagging the city as an area where coronavirus is increasing. Hang Seng (Unch.) and Shanghai Comp. (-0.2%) were mixed with mainland China the laggard following another substantial liquidity drain and as trade tensions remained in the spotlight with the US to designate additional Chinese media outlets as foreign missions and announced a ban on Chinese airline flights to the US in response to China refusing to allow US airlines to resume passenger service, although Beijing has since changed its tune regarding this. Furthermore, it was also reported that Chinese state-controlled companies cancelled some shipments from US farm exporters including livestock feed, corn, pork, cotton and have postponed some meat imports. Finally, 10yr JGBs declined at the open after the sell-off seen in USTs and which saw the benchmark 20yr JGB yield at its highest level in more than a year, while prices were also pressured after all metrics of the 30yr JGB auction pointed to a weaker result. 

PBoC injected CNY 70bln via 7-day reverse repos for a net daily drain of CNY 170bln. (Newswires) PBoC set USD/CNY mid-point at 7.1012 vs. Exp. 7.1027 (Prev. 7.1074)

US Commerce Department said new economic restrictions on 33 Chinese companies will take effect on June 5th, while it was also reported the US is to designate additional Chinese media outlets as foreign missions as soon as today. (Newswires)

US Department of Transport ordered to ban Chinese passenger airlines from flights to the US from June 16th in response to China refusing to allow US airlines to resume passenger service. However, China’s civil aviation regulator later said foreign airlines currently unable to operate routes to China can pick one city to operate international flights beginning June 8th. (Newswires)

Chinese state-controlled companies reportedly cancelled some shipments from US farm exporters including a handful of shipments of livestock feed, corn, pork, cotton and some meat imports were pushed back according to reports citing maritime officials, while a Chinese shipping executive said China state importers have cancelled between 15,000 and 20,000 metric tons of US pork shipments which is about 10 days’ worth of orders. (WSJ)

Global Times opinion piece stated that it is just a matter of time before China surpasses the US in terms of comprehensive national strength and that no matter what card the US plays, it cannot change the general trend of China. (Twitter)

UK/EU

UK PM Johnson also said the Sino-UK agreement risks being very badly eroded by Chinese actions in Hong Kong and that the UK needs to have a clear-eyed relationship with China. (Newswires)

UK government fears that a no-deal Brexit will jeopardise medicine supplies in the event a second wave of the pandemic hits Britain. Whitehall officials said the impact of COVID-19 on stockpiles is causing serious concern. (FT)

German Chancellor Merkel's ruling coalition reached a deal on the German stimulus package, while Merkel stated that the coalition agreed EUR 130bln stimulus package (Exp. EUR 50bln-100bln) and which includes lowering VAT rate to the end of the year to boost consumption. (Newswires)

German Chancellor Merkel and Chinese President Xi have reportedly agreed that the EU-China summit cannot take place as planned due to the coronavirus. (Xinhua)

FX

The DXY nursed losses and attempted to snap its 7-day losing streak that had been predominantly attributed to the heightened global risk appetite and ongoing disruption from protests. Nonetheless, the mood related to protests has cooled somewhat from the administration’s perspective with President Trump stating that he does not think they will need to send the military in response to protests. The mild rebound in the greenback has forced its major counterparts to retrace some gains with EUR/USD slipping back from the 1.1250 resistance area despite the German coalition breakthrough in which they agreed to a EUR 130bln stimulus package and lower VAT to boost consumption, while GBP/USD underperformed as it slipped below its 100DMA of 1.2564 before tripping stops at the prior session's lows circa 1.2550, with the pair not helped by recent comments by officials which reiterated a hardline Brexit stance. Elsewhere, USD/JPY struggled to sustain the incursion into the 109.00 territory whilst antipodeans were lacklustre with AUD/USD briefly giving back the 0.6900 handle amid the USD-rebound and with Australia on the verge of a recession.

Australian Retail Sales (Apr) M/M -17.7% vs. Exp. -17.9% (Prev. 8.5%). (Newswires) Australian Trade Balance (AUD)(Apr) 8.8B vs. Exp. 7.5B (Prev. 10.6B) Australian Exports (Apr) M/M -11% (Prev. 15%) Australian Imports (Apr) M/M -10% (Prev. -4%)

COMMODITIES

Commodities were lacklustre with crude prices subdued despite the recent bullish EIA inventory report and preliminary agreement between Russia and Saudi for a 1-month output cut extension, as plans for an OPEC+ meeting today are placed in doubts amid compliance issues, while source reports also recently stated that Saudi Arabia is set to wind down on voluntary over-compliance to bring 1mln BPD of production back online. Elsewhere, gold prices were lacklustre but just about holds on to the USD 1700/oz status and copper was lacklustre as US-Sino tensions resulted to underperformance in its largest buyer China.

OPEC+ JTC and JMMC Committee meetings are planned for around mid-June after full oil output data is ready, while there were conflicting views regarding the likelihood if an OPEC+ meeting will take place today. (Newswires/Twitter)

US

The Treasury curve sold off strongly on global risk appetite and dollar weakness, seeing yields break above key resistance levels on heavy volume. Equity futures continued to rise heading into APAC, seeing the 30-year yield break above 150bp for the first time since March, to which it hovered around through until the US session. The rate back up then gained traction following the stronger-than-expected ADP release and the pickup in the ISM non-mfg. only emboldened the steepener, seeing the 10-year rise above its key 75bp level, although just failing to break its April 9th high of 78.5bp. The long-end pressure was accompanied by a strong bid in value/cyclicals (DJIA/R2K), while the duration-sensitive/momentum stocks (NDX) underperformed, indicative of a “reflation trade”. Furthermore, the Treasury selling pressure was said to be exacerbated due to many legacy Treasury long positions unwinding as investors warm to a recovery. T-note futures (U0) settles 21+ ticks lower at 138-06.

US President Trump said the economy will be a little better with a little bit of time and that he wants a return to normal but added it is too early and confirmed social distancing is not over yet, while he criticized Amazon (AMZN) for destroying a lot of shopping centres. Furthermore, President Trump stated that he does not think they will need to send the military in response to protests, although there were earlier comments from the White House that President Trump will use the insurrection act if needed. (Newswires/Twitter)

US Senate approved the Small Business Loan extension bill through unanimous consent which was overwhelmingly approved by the House last week and which would give small businesses 24 weeks to use the emergency loans, as well as permits them to spend as low as 60% instead of 75% of the loan proceeds on payroll. (Newswires)

Federal Reserve expanded the number and type of entities eligible for its Municipal Liquidity Facility (MLF) in which Governors will now be able to designate two bond issuers in their state whose revenues come from Government activities, while activities could include the likes of public transit, airports and utilities. (Newswires)