• European bourses have been choppy but generally directionless and rangebound while US futures see a marginal negative bias
• DXY is oscillating the 90.00 mark with little conviction in moves either way and peers essentially unchanged across the board and similar action seen across debt thus far
• The call between China's Vice Premier Liu He and USTR Tai was said to be candid and constructive, while both sides agreed to maintain communication
• US President Biden's administration and other Democrats close to the infrastructure discussions are reportedly willing to allow discussions to extend past the Memorial Day deadline
• Looking ahead, highlights include the US Durable Goods and IJC, BoE's Vlieghe, ECB's Schnabel, and supply from the US

CORONAVIRUS UPDATE

China’s Embassy in the US said it supports a comprehensive study of all early cases of COVID-19, while China added that the origin probe should be global and transparent. (Newswires)

The US FDA said it is authorizing the emergency use of Sotrovimab which is produced by GlaxoSmithKline (GSK LN) and Vir Biotechnology for the treatment of COVID-19, while the FDA added that it is reasonable to believe it may be effective for treating mild-to-moderate COVID in adults and paediatric patients. Furthermore, GSK later stated that discussions with global regulators regarding authorisations in additional countries continue to advance and that Sotrovimab will be available for appropriate patients in the US in approaching weeks. (Newswires)

Ocugen (OCGN) said it is on track to submit EUA applications to US FDA for its COVID-19 vaccine candidate Covaxin and believes FDA's new guidance confirms that the Co. continues to satisfy all criteria for EUA submission. (Newswires)

Australia's Victoria state acting Premier confirmed the state will go into a 7-day lockdown from 23:59 local time today. (Newswires)

ASIA

Asia-Pac bourses were choppy as markets continued to waver heading into month-end and after the mildly positive bias from the US wore thin overnight, which saw US equity futures also pare back their marginal gains. ASX 200 (+0.4%) swung between gains and losses with strength in the broader commodity-related sectors offset by underperformance in gold miners after the precious metal recently retreated below the USD 1900/oz level, while the confirmation of a 7-day snap lockdown for Victoria state, which impacts Australia’s second most populated city of Melbourne, added to the sombre mood. Nikkei 225 (-0.3%) was constrained by an indecisive currency, lingering COVID concerns, and with telecom stocks cautious on reports that the government is mulling eliminating 2-year internet contracts. The KOSPI (-0.1%) meanwhile languished despite the upgrades to growth forecasts at the BoK policy meeting where the central maintained its base rate at 0.50%, before Governor Lee eventually flagged the potential for a rate hike this year - contingent on the pace of growth. Hang Seng (-0.2%) and Shanghai Comp. (+0.4%) were mixed with Tencent among the laggards in Hong Kong after it was told by regulators to put its finance-related business into a new financial holding company where they can be better supervised. However, a resumption of the strength in biopharmaceuticals and improved earnings from Xiaomi has stemmed the downside for the broader market, with the mainland also kept afloat after China pledged to boost support for smaller business and following recent constructive dialogue between the US and China’s top trade envoys whereby the sides agreed that bilateral trade was important and to maintain communication. Finally, 10yr JGBs are flat with price action indecisive after the recent whipsawing in T-notes and mixed results at the 40yr JGB auction which showed the b/c remained inline with the previous 40yr offering in March.

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 6.4030 vs exp. 6.4036 (prev. 6.4099). The PBoC has increased some commercial banks cross-border financial leverage ratio to 2 vs prev. 0.8, granting qualified banks 10bln Yuan of initial financing quota, according to sources. (Newswires)

• Chinese Industrial Profits (Apr) Y/Y 57.0% (Prev. 92.3%)
• Chinese Industrial Profits YTD (Apr) Y/Y 106.0% (Prev. 137.3%)

China's Vice Premier Liu He spoke with USTR Tai which was said to be a candid and constructive discussion, while they agreed to maintain communication and that bilateral trade was important. There were also comments from USTR Tai who said the US still faces very large challenges with China across the board and that the Phase 1 trade deal is very important but only one part of the overall relations with Beijing. Furthermore, USTR Tai was said to have raised issues of concern, while she discussed the Biden administration's guiding principles of worker-centred trade policy and ongoing review of US-China trade ties. (Newswires)

The phone call between US and Chinese trade officials could be viewed as a positive, according to analysts cited by the Global Times, "the two countries are likely to reach consensus at least on incremental removal of tariffs". (Global Times)

Bank of Korea maintained the 7-Day Repo Rate unchanged at 0,50%, as expected, via unanimous decision and it raised GDP growth forecast for 2021 to 4.0% from 3.0% and raised 2022 growth forecast to 3.0% from 2.5%, while it increased 2021 CPI estimate to 1.8% from 1.3% and maintained 2022 CPI estimate at 1.4%. BoK Governor Lee stated that exports and investments are to lead the economic recovery and that private consumption is improving. Furthermore, he said they will maintain an accommodative stance for a while and the economic recovery has strengthened, but later added that they are preparing for an orderly normalization of monetary policy and whether or not a rate hike occurs this year will depend on pace of growth, while he also suggested that normalization shouldn't happen too quickly but shouldn't be too late either. (Newswires)

US

US President Biden's administration and other Democrats close to the infrastructure discussions are reportedly willing to allow discussions to extend past the Memorial Day deadline by a week or two although not too long. In other news, it was also reported that President Biden’s budget is to seek a boost to the military's cyber force. (Politico)

UK/EU

UK officials are working on trade deals with Gulf states including Saudi Arabia and the UAE, according to Trade Secretary Truss. (Telegraph)

German GfK Consumer Sentiment (Jun) -7.0 vs. Exp. -5.2 (Prev. -8.8, Rev. -8.6)

EQUITIES

European cash bourses and futures have seen choppy and directionless but rangebound trade throughout the morning (Euro Stoxx 50 Unch), potentially due to month-end related flows in the absence of news flow and heading into the long weekend over in the UK and US. State-side futures see a marginally more pronounced downside bias vs Europe, but in the grand scheme, the contracts are within recent ranges with some mild underperformance in the tech-laden NQ. Back to Europe, cash markets are mixed with no real standout performers. Sectors are similarly mixed with Basic Resources the outperformer following its recent string of underperformance. Travel & Leisure again resides as the best performer on the back of its Leisure subsector – with Evolution Gaming (+4.7%) cheering the signing of an exclusive agreement with Scientific Games. The downside sees some of yesterday’s better performers including Food & Beverages and Healthcare, with Oil & Gas also reacting to recent losses crude prices and Shell’s (-1.4%) court order to cut carbon emissions by 45% by 2030 also adds to the glum mood in the sector. Thus, the FTSE 100 (+0.1%) fails to glean full benefit from the miners’ and banks’ rebound as losses in oil and healthcare counter the upside. Overall, no clear theme can be derived from the sectors. In terms of individual movers, Bayer (-4%) resides as the laggard in the DAX (-0.3%) after a US judge has rejected Bayer’s class action proposal to resolve future lawsuits alleging roundup causes cancer. Airbus (+6%) meanwhile flies highs amid a constructive production update, with the stock likely lifting Industrials amid potential tailwinds from the Travel & Leisure sector as airliners maintain an upbeat view of the upcoming summer period.

Airbus (AIR FP) - Continue to expect commercial aircraft to recover to pre-COVID levels between 2023 and 2025. Confirms an average A320 Family production rate of 45 aircraft per month in Q4 2021 and calls on suppliers to prepare for the future by securing a firm rate of 64 by Q2 2023; also, to prepare for a scenario of rate 70 by Q1 2024. (Newswires)

NVIDIA Corp (NVDA) Q1 22 (USD): Adj. EPS 3.66 (exp. 3.28), Revenue 5.66bln (exp. 5.41bln); Gaming rev. 2.76bln (exp. 2.47bln); Automotive rev. 0.15bln (exp. 0.15bln). -1.0% in after-market trade

Tesla (TSLA) - Co. is reportedly to pay in advance for chips in order to secure supply, according to sources; additionally, are considering purchasing a foundry though this idea is thought to be at a more preliminary stage. Separately, Co. is to enter the battery business for renewable energy power generation in Japan. (FT/Nikkei)

FX

USD - The Dollar has lost some of its midweek recovery momentum, broadly, if not right across the board, in similar vein to last week and the week before that when ‘hawkish’ Fed minutes and strong CPI prompted only brief periods of respite. However, the DXY is trying to stay within touching distance of the 90.000 handle that has become pivotal after a minor extension beyond the round number to top yesterday’s 90.113 recovery high, at 91.179 and retreat to 89.909. Moreover, the Buck may benefit from further month end rebalancing demand over today’s fixes, albeit only a weak buy signal vs major counterparts bar the Yen, according to Citibank’s model, and especially the 4 pm London round as today is spot May 31. Nevertheless, there is also data to consider, including the latest jobless claims tallies, often erratic durable goods and 2nd look at Q1 GDP before pending home sales and the 7 year note offering that normally goes down well with foreign buyers and could impact US Treasury yields alongside the Greenback either directly or indirectly. For the record, Fed’s Kaplan is also due to speak on business TV, but he has been very vocal of late and his hawkish leanings and desire to talk taper soon are well known.

NZD/AUD - No extension through Wednesday’s 0.7300+ post-RBNZ peak vs its US peer, but equally only a relatively shallow Kiwi pull-back overnight when Governor added another caveat to policy guidance to keep the option of further easing in the locker, if the situation warrants. In fact, Nzd/Usd has already regrouped to hover in the high 0.7200 echelons and Aud/Nzd has reversed a tad closer to 1.0600 as the Aussie lags mostly under 0.7750 against its US rival irrespective of very encouraging Q1 Capex data (came in over 3 times consensus). Note also, Aud/Usd has not inversely tracked Usd/Cny or Usd/Cnh following the latest PBoC midpoint fix that edged nearer 6.4000, or subsequent steeper inclines to fresh 3 year pinnacles for both the onshore and offshore Yuan, and perhaps lockdown for 7 days in the state of Victoria is keeping the pair capped.

CAD/GBP/JPY/EUR/CHF - All narrowly mixed and rangebound vs the US dollar, in keeping with the index, as the Loonie meanders between 1.2142-02, Sterling regains poise after a dip below 1.4100, and the Yen attempts to fend off more of the aforementioned negative portfolio hedging flows and increasingly bearish technical price formation having failed to stay above 109.00 or chart supports close by (109.20 low vs 21 and 50 DMAs that come in at 109.05 and 109.10 respectively today). Elsewhere, the Euro is fading further from 1.2250+ highs and looking vulnerable again amidst more dovish ECB rhetoric, while the Franc has retreated towards 0.9000 following Swiss trade and jobs updates showing a narrower surplus and slowdown in payrolls growth.

SCANDI/EM - Sweden has dominated an otherwise sparse am agenda in terms of data and events, with a string of mostly positive releases, like a clean sweep of upbeat sentiment readings and a sharp rise in NIER 1 year inflation expectations to more than offset a smaller trade surplus that would have almost halved without a downward revision, but the Sek has not been able to take much advantage against the backdrop of fragile risk sentiment. Conversely, the Zar is continuing its marked rally to the extent that 13.7500 vs the Usd has now been breached with little regard to slightly softer than forecast SA PPI prints or latest power supply warnings from Eskom.

RBNZ Governor Orr reiterated that they are willing to cut interest rates if needed but also noted that projections see normalizing of monetary policy by this time next year, while he noted that house price growth will slow dramatically in H2 and that the labour market has been very resilient. Furthermore, he stated that confidence in the outlook is improving driven by the vaccine rollout and lower health risks but added that they will maintain or raise monetary stimulus if there is a negative shock in the future with the central bank keeping all alternatives open. (Newswires)

China's Sichuan energy regulator will be holding meetings with local power companies to gather information on crypto mining, according to an official. (Newswires)

Notable FX Expiry, NY Cut:

• USD/CAD: 1.2100 (787M), 1.2125 (797M), 1.2155 (442M), 1.2195-1.2205 (1.5BLN)

Australian Private Capital Expenditure 2020-2021 (Est. 6) 124.0B (Prev. 121.4B)

Australian Private Capital Expenditure 2021-2022 (Est. 2) 113.6B (Prev. 105.5B)

Australian Capital Expenditure (Q1) 6.3% vs. Exp. 2.0% (Prev. 3.0%)

FIXED

Bunds, Gilts and US Treasuries have all found a base, or at least a resting place awaiting the pm session and a pretty full-on slate. However, the 10 year bonds all conceded a bit more ground from recent highs first, as the former retreated to 170.13, UK peer to 127.46 and T-note slipped to 131-28+ (-16, -22 and -4/32+ from best intraday levels, and a bit more when compared to pinnacles reached yesterday). Perhaps the bulk of the month end buying has been done given long weekends in the UK and US that cover May 31, or this is merely consolidation ahead of several primary US macro releases, 7 year issuance and yet more Central Bank orators, while the German debt future may be making allowance for marginally firm Eurozone periphery trade after Wednesday’s particularly dovish words from ECB’s Panetta.

COMMODITIES

WTI and Brent front month futures have been pressured throughout APAC and early European hours with WTI July now trundling closer to USD 65.50/bbl (vs high 66.18/bbl) while its Brent counterpart eyes USD 68/bbl to the downside (vs high 68.72/bbl). News flow for the complex has remained on the lighter side, thus crude prices may take heed of the overall sentiment across markets as Iranian nuclear discussions continue in the background. Sources via Politico suggested that an Iranian nuclear deal is attainable but cautioned that critical questions remain only partially answered. Elsewhere, spot gold and silver remain within recent ranges and the precious metals continue to track the Dollar and yield developments – with the yellow metal in a tight band on either side of USD 1,9000/oz. Turning to base metals, Dalian and Singapore iron ore futures rebounded overnight after hitting six- and five-week lows respectively after China announced its crackdown on soaring prices. Copper meanwhile retains an underlying bid, with LME back above USD 10,000/t after BHP confirmed that Chile control central workers will begin their strike on Thursday and noted that it will take contingency measures, while other workers at the Spence and Escondida mines will continue working during the remote operation guild's strike.

Sources suggested that an Iranian nuclear deal is attainable but cautioned that critical questions remain only partially answered. (Politico)

US Homeland Security issues security directive for critical pipeline owners and operators; operators must now report confirmed and potential security incidents to DHS. (Newswires)

BHP (BHP AT) confirmed that Chile control central workers will begin their strike on Thursday and noted that it will take contingency measures, while other workers at the Spence and Escondida mines will continue working during the remote operation guild's strike. (Newswires)