• Major bourses in Europe are mostly higher but off best levels; US equity futures trade sideways
• The DXY has extends losses below 90.00, EUR/USD maintains 1.22 and Cable reclaimed 1.42 after PMIs
• US Republicans and Democrats have privately admitted there hasn’t been much progress so far on the infrastructure bill
• Israel and Hamas have agreed to a cease-fire on the Gaza Strip, commencing today
• Germany and France have backed US' proposal of a global tax on multinational corporations of at least 15%
• Looking ahead, highlights include US Flash PMIs, Canadian Retail Sales, EZ Consumer confidence, Baker Hughes Rig Count, ECB’s Lagarde and de Guindos, Fed’s Kaplan, Bostic, Barking, and Daly, S&P on South Africa

CORONAVIRUS UPDATE

US is said to be considering prioritizing COVID-19 shipments to countries in its hemisphere and Pfizer is exporting millions of US-produced vaccine doses to Latin America, according to sources. (Newswires)

Germany Health Minister Spahn says the country has broken the third wave. (Newswires)

Japan is to expand the state of emergency to include Okinawa from May 23rd-June 20th. (Newswires/Nikkei)

South Korea approved the Moderna (MRNA) COVID-19 vaccine, while it was also reported to maintain social distancing rules for another 3 weeks. (Newswires)

ASIA

Asian equity markets were mixed after failing to sustain the early momentum from the constructive mood on Wall Street, where all major indices finished higher amid a tech-led rebound and as concerns regarding future Fed taper discussions abated. ASX 200 (+0.2%) was initially lifted by outperformance in tech but then faltered due to weakness in the commodity-related sectors, in particular energy names, amid prospects of a return of Iranian oil supply following yesterday's comments from Iranian President Rouhani who suggested an agreement was reached in Vienna for world powers to lift all major sanctions although they are still discussing the final details. Nikkei 225 (+0.8%) took impetus from its US counterparts but with gains capped after soft CPI data and mixed COVID-related headlines including reports that Japan is said to be mulling extending the virus state of emergency in Tokyo and Osaka. Furthermore, Japan approved the Moderna and AstraZeneca COVID-19 vaccines today but may wait before administering the AstraZeneca vaccines due to blood clot concerns. Hang Seng (Unch.) and Shanghai Comp. (-0.6%) gave back early gains with underperformance in the mainland amid China’s ongoing frictions including with the EU after the latter voted to freeze its investment deal with China until Beijing lifts sanctions on EU officials, while MSCI also stated that it is to delete four more securities from the MSCI China All Shares Indexes at the close on June 9th if it doesn't receive OFAC guidance. Finally, 10yr JGBs eventually eked marginal gains as the risk momentum in Asia petered out although gains were limited with price action confined to within this week’s tight range of around 11 ticks and following mixed results at 20yr JGB auction.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires)PBoC set USD/CNY mid-point at 6.4300 vs exp. 6.4282 (prev. 6.4464)

Chinese Foreign Ministry says that European side has made the wrong decision on unilateral sessions in violation of international norms and laws when it come to freezing the ratification of the EU-Chinese deal. (Newswires)

• Japanese National CPI (Apr) Y/Y -0.4% vs. Exp. -0.5% (Prev. -0.2%)
• Japanese National CPI Ex. Fresh Food (Apr) Y/Y -0.1% vs. Exp. -0.2% (Prev. -0.1%)
• Japanese National CPI Ex. Fresh Food & Energy (Apr) Y/Y -0.2% vs. Exp. -0.1% (Prev. 0.3%)

Japanese CPI data showed cellphone fees declined 26.5% Y/Y in April, while Chief Cabinet Secretary Kato stated that without the effect of cheaper cellphone charges, consumer prices are moving stably. (Newswires)

South Korean May 1st-20th Trade Balance was at a deficit of USD 350mln, Exports rose 53.3% Y/Y and Imports rose 36.0% Y/Y. (Newswires)

US

US Senate Democrats are readying their options to move ahead with a fast-track reconciliation package if no agreement on the infrastructure bill is reached, Punchbowl reports; both sides privately admit there hasn’t been much progress so far. Democratic insiders downplayed the idea that Thursday’s meeting meant party leaders and the White House were giving up on the bipartisan talks. Part of the talks were regarding whether Democrats can again use the FY20 budget resolution to craft a reconciliation package, a potentially huge change in the Senate's legislating procedures. (Punchbowl)

US President Biden directed US agencies to analyse and mitigate climate change risks to individuals, industry and government, while the Executive Order calls for a comprehensive climate risk strategy across the government within 120 days. Furthermore, the White House stated that the order will strengthen the US financial system and ensure rules are in place to mitigate climate risks, while it added that the order allows the Labor Department to reverse former President Trump's curbs on sustainable investing by pension funds and requires consideration of new rules for large federal suppliers to disclose climates risks, as well as greenhouse gas emissions. (Newswires)

A bipartisan group of US lawmakers are introducing a bill today that would give states more control over which court hears antitrust lawsuits brought against companies, Axios reports. (Axios)

UK/EU

German Finance Minister Scholz says the proposal for a 15% global corporate tax rate is big progress. (Newswires)

• EU Markit Manufacturing Flash PMI (May) 62.8 vs. Exp. 62.5 (Prev. 62.9)
• EU Markit Services Flash PMI (May) 55.1 vs. Exp. 52.3 (Prev. 50.5)
• EU Markit Comp Flash PMI (May) 56.9 vs. Exp. 55.1 (Prev. 53.8)
• UK Flash Services PMI (May) 61.8 vs. Exp. 62.0 (Prev. 61.0)
• UK Flash Manufacturing PMI (May) 66.1 vs. Exp. 60.5 (Prev. 60.9)
• UK Flash Composite PMI (May) 62.0 vs. Exp. 62.0 (Prev. 60.7)
• UK Retail Sales MM* (Apr) 9.2% vs. Exp. 4.5% (Prev. 5.4%, Rev. 5.1%)
• UK Retail Sales Ex-Fuel MM* (Apr) 9.0% vs. Exp. 4.2% (Prev. 4.9%, Rev. 4.6%)

GEOPOLITICAL

Israel and Hamas began a truce overnight and a Hamas official later stated that the battle ends today but they still have their hands on the trigger, while they demand that Israel end the violations in Jerusalem including evictions and to address damages from the bombardment of Gaza. (Newswires)

US President Biden earlier stated that Israeli PM Netanyahu confirmed the ceasefire with Gaza and Biden also assured Netanyahu that the US will replenish Israel's iron dome defense system. Furthermore, US Secretary State of Blinken will meet with Israeli, Palestinian and regional counterparts as he travels to the region in the coming days. (Newswires)

EQUITIES

Major bourses in Europe are mostly modestly higher but off best levels (Euro Stoxx 50 +0.4%) following a lukewarm cash open and as Flash PMIs painted a mixed picture. Key themes for the releases were price pressures emanating from demand outpacing supply, with the latter also hindered by shortages. US equity futures meanwhile consolidate with broad-based gains in early European hours following yesterday’s rebound. Back to Europe, the non-Euro bourses lag peers, with the FTSE 100 (Unch) the underperformer as a decline in yields, lower oil, a pull-back in base metals and a firmer Sterling prove to be headwinds for the index, although strong retail sales and PMIs have cushioned the downside. Sectors in Europe are mostly in the green aside from financials amid the lower yield environment, whilst Autos reside as the current winner with BMW (+0.8%) providing positive vibes for the sector after guiding a positive impact of around EUR 1bln as it expects the European Commission to significantly reduce its antitrust allegations against the Co. All-in-all it is difficult to discern a particular theme from a sectoral standpoint. In terms of some individual movers, Richemont (+4.7%) is firmer post earnings after topping forecasts and declaring a dividend. Meanwhile, Lufthansa (-6%) is the Stoxx 600 laggard after its second-largest shareholder KB Holding (12% stake), is reportedly looking to offload over half of its stake at a discount.

Tesla (TSLA) CEO Musk said the automaker was close to establishing a Tesla presence in Russia. (Newswires) Tesla has again increased prices for Model 3 and Model Y. (Elektrek)

FX

USD - The Buck remains fundamentally, technically and even psychologically weak as the DXY languishes below 90.000, but the index is trying resist another bout of selling pressure that could yet culminate in further depreciation given bearish external factors. The DXY just slipped to a marginal new cycle low at 89.646 vs 89.686 on Wednesday and 89.689 the day before having weathered an earlier attack when the Pound got a belated boost via significantly stronger than expected UK retail sales data and the Euro from really flash French PMIs, though both short-lived at the time. Meanwhile, another lacklustre session for APAC bourses overnight has left the likes of the Yen and Franc with an underlying safe-haven bid to the detriment of the Greenback against the backdrop of firmer bonds and flatter curves ahead of the US Markit PMIs, existing home sales and yet more Fed speak from hawk Kaplan no less than 4 times, plus Barkin and Daly.

AUD/NZD/CAD - Not quite all change again, but another swing in the pendulum as the Aussie, Kiwi and Loonie hand back gains vs their US counterpart following firm rebounds yesterday. Aud/Usd is pivoting 0.7750 again with the latest downturn in base metal and other commodity prices overshadowing a decent retail sales beat, while Nzd/Usd has retreated through 0.7200 regardless of a pick-up in NZ credit card spending and Usd/Cad is hovering above 1.2050 in advance of Canadian retail sales.

GBP/JPY/CHF/EUR - Sterling has benefited from a 2nd wind regardless of mixed UK PMIs, or perhaps on reflection of the marked acceleration in manufacturing activity to retest resistance above 1.4200 and circa 0.8600 against the Dollar and Euro respectively. Similarly, the Yen is having another look at offers into an effective twin top vs its US rival (108.57 and 108.56 from this Wednesday and last Wednesday respectively) standing in the way of 108.50, but could be stymied by decent option expiry interest between 108.60-45 in 1.2 bn). Elsewhere, the Franc is nestling just shy of 0.8950 and fresh multi-month peaks in wake of a sharp rebound in Swiss ip, while the Euro is still striving to establish a solid platform on the 1.2200 handle following the aforementioned eye-catching French PMIs vs somewhat contrasting German prelim prints compared to consensus and all round beats in the pan Eurozone readings. However, Eur/Usd may also be capped or held back by option expiries into the NY cut given 1.3 bn rolling off at the 1.2200 strike.

SCANDI/EM - The Nok is rotating either side of 10.1500 vs the Eur in wake of the latest Norges Bank survey showing firmer wage and employment outlooks than in February, while the Sek straddles 10.1300 amidst ramblings from Riksbank’s Jansson effectively sticking to the policy guidance and economic assessment script, but adding an interesting personal view on the cross that he would like to see staying above 10.0000. Meanwhile, most EM currencies are holding up vs the Usd or trade mildly firmer, with ongoing post-SARB outperformance in the Zar as Gold stands strong and the focus turns to S&P’s SA ratings review.

• Australian Retail Sales (Apr P) M/M 1.1% vs. Exp. 0.5% (Prev. 1.3%)

FIXED INCOME

If the pretty marked recoil in Gilts is due to retail sales and/or the strength in manufacturing then it’s rather belated, so perhaps the narrow miss in terms of topping out just a tick under 128.00 has been more compelling for sellers looking to go short into upticks and intraday jobbers anticipating a pull-back. Meanwhile, a gradual attrition of gains in US Treasuries may also have sapped momentum or vice-versa, as the 10 year UK bond and its T-note equivalent probe new intraday lows of 127.58 and 132-13 respectively (-15 ticks and -2/32+ vs +26 ticks and +3/32 at best). Conversely, Bunds retain an underlying bid, albeit also some distance from the 169.19 Eurex peak and Eurozone peripheral bonds are outperforming awaiting latest remarks from ECB President Lagarde. Also ahead, US Markit PMIs, existing home sales and another blast from the Fed including hawk Kaplan several times.

COMMODITIES

WTI and Brent front-month futures were initially choppy within USD 1.5/bbl ranges following the prior day’s declines, induced by the simmering down in geopolitical tensions on a couple of fronts. Firstly, Iranian nuclear deal discussions are seemingly nearing an accord whereby the US has reportedly agreed to lift several sanctions against Iran, including restrictions on oil exports. Sources via EnergyIntel suggest that Iran is preparing to hike oil exports to maximum capacity in the upcoming months – in-fitting with reports over the week. According to reports citing the Iranian National Oil Co, the most optimistic scenario suggests that Iran could ramp up production to almost 4mln BPD in three months. Talks are to resume next week, with a possible official announcement also on the cards. “While any announcement confirming the lifting of sanctions would likely hit sentiment further, we believe that this will be short-lived, given that the supply and demand balance remains supportive,” ING said. OPEC+ members will also have to consider any deal when tweaking output quotas as Iran, Venezuela, and Libya is currently exempt from the output restrictions – with the group also poised to meet at the start of June. ING believes that the oil market can handle Iranian oil alongside OPEC+ supply, "We are assuming that Iranian supply returns to 3mln BPD by 4Q21". Sticking with geopolitics, Israel and Hamas have announced a ceasefire mediated by Egypt, whilst offshore platforms in the vicinity are restarting operations as a result. However, source reports earlier in the week suggested that there are concerns that another militant group might provoke the situation even after the two sides agree to a ceasefire in principle. WTI resides just under USD 63/bbl (vs low USD 61.56/bbl), and Brent trades sub-USD 66/bbl (vs low 64.57/bbl). Elsewhere, precious metals have been mirroring Dollar action and have remained within overnight ranges, with spot gold on either side of USD 1,875/oz and spot silver around USD 27.75/bbl. Over to base metals, Chinese iron and coke futures bore the brunt of the losses overnight in a continued move sparked by the Chinese Cabinet’s verbal intervention earlier this week. LME copper is also on the decline and has dipped back below USD 10,000/t as China’s crackdown on price manipulation seeps into LME.

Iran is preparing to hike oil exports to maximum capacity in the approaching months, according to EnergyIntel's Bakr citing two Iranian sources. (Twitter)

Chevron (CVX) notes that Noble Energy Mediterranean has been instructed to restart operations at the Tamar Platform in offshore Israel by the Israeli Ministry of Energy. (Newswires)

NHC said there is a 20% chance of a cyclone in the next 48 hours for the system over the western Gulf of Mexico. (Newswires)