• Asian equity markets head into month-end mostly positive but with gains capped as participants digested the latest Chinese PMIs
• Manufacturing PMI topped estimates but showed slower growth in tandem with the softer Non-Manufacturing and Composite readings
• In FX, the DXY consolidated after reclaiming 92.00, EUR/USD hovers around 1.19 and GBP/USD remains on a 1.38 handle
• The JMMC meeting was postponed to Thursday and will now be conducted in between the OPEC and OPEC+ meetings
• Looking ahead, highlights include UK GDP (Q1), German Labour Market Report, EZ CPI, US ADP, Canadian GDP, Chicago PMI, BoE's Haldane, Fed's Bostic

CORONAVIRUS UPDATE

Johnson & Johnson (JNJ) COVID-19 vaccine sees robust immune response against variants, according to NIH. (Newswires)

Health Canada announced an update to the monograph or product label for AstraZeneca (AZN LN) and Covishield vaccines to add capillary leak syndrome as a potential side effect and warned that patients with history of the syndrome to not get the aforementioned vaccines. (Newswires)

Double vaccinated Britons will no longer have to isolate if they come into contact with a COVID patient from July 19th. (The Sun)

ASIA

Asian equity markets head into month-end mostly positive but with gains capped as the early momentum and attempt to improve upon the flat performance stateside, was tempered as participants digested a slew of data releases including the latest Chinese PMIs. Nonetheless, ASX 200 (+0.6%) was led higher by telecoms after Telstra announced the sale of a 49% stake in its towers business for AUD 2.8bln and with the index also propped up by strength in most commodity-related sectors aside from energy which suffers due to hefty losses in AGL Energy following its decision to demerge. Nikkei 225 (Unch.) failed to hold on to early gains with participants indecisive amid reports Japan is considering extending its quasi-virus emergency in Tokyo by 2-4 weeks and after disappointing Industrial Production data which showed the steepest contraction in a year, while the KOSPI (+0.5%) was also influenced by data with Industrial Production showing its largest growth in more than a decade despite actually missing forecasts. Hang Seng (-0.1%) and Shanghai Comp. (+0.2%) lacked firm direction following the Chinese PMI data in which the headline Manufacturing PMI topped estimates but showed slower growth in tandem with the softer Non-Manufacturing and Composite PMI readings. There were also reports that China’s leadership is straining to dial back its country’s chest-thumping “Wolf Warrior” approach to foreign policy on concerns it could undermine the country’s interests, while focus was also on IPO news with Didi pricing its US IPO at the top of the indicated USD 13-14/shr range ahead of today's debut. Finally, 10yr JGBs were subdued heading into month-end with price action hampered by the lack of BoJ presence in the market and after the central bank also reduced its purchase intentions across three tranches for the July-September quarter.

PBoC injected CNY 30bln via 7-day reverse repos with rates at 2.20% for a net CNY 20bln injection. (Newswires) PBoC set USD/CNY mid-point at 6.4601 vs. exp. 6.4578 (prev. 6.4567)

China NBS said output activities of some enterprises slowed due to the shortage of chips, coal and power supply and other factors, while a slight rise in new orders index reflected continued growth in market demand. (Newswires)

• Chinese NBS Manufacturing PMI (Jun) 50.9 vs. Exp. 50.8 (Prev. 51.0)
• Chinese NBS Non-Manufacturing PMI (Jun) 53.5 vs. Exp. 55.3 (Prev. 55.2)
• Chinese Composite PMI (Jun) 52.9 (Prev. 54.2)
• Japanese Industrial Production MM (May) -5.9% vs. Exp. -2.4% (Prev. 2.9%)
• Japanese Industrial Production YY (May P) 22.0% (Prev. 15.8%)

UK/EU

UK Chancellor Sunak is preparing GBP 15bln for green savings scheme for public, while the UK is to set out plans today for a more simple and nimble system for state subsidies which will be utilized to boost selected industries. (The Times/FT)

• UK BRC Shop Price Index YY (Jun) -0.7% (Prev. -0.6%)
• UK Lloyds Business Barometer (Jun) 33 (Prev. 33)

FX

In FX markets, the DXY consolidated after reclaiming 92.00 status with price action rangebound despite the better-than-expected consumer confidence data stateside and with the latest central bank rhetoric not doing much to spur the currency including comments from Fed’s Barkin that he would be ready to start tapering as long as "substantial further progress" towards employment has been made and reiterated he can argue that inflation has reached substantial progress, while Kashkari noted the economy is positioned for a very strong recovery and Waller stated he is very optimistic about the economic outlook but will not say when he expects a rate hike. EUR/USD traded flat after taking a backseat to yesterday’s USD strength, while GBP/USD nursed some losses amid reports that the EU will formally announce a three-month extension to the chilled meats grace period on Wednesday afternoon. USD/JPY was subdued near the 110.50 level amid the cautious gains in the region and antipodeans were also lacklustre following a slightly weaker CNY fix by the PBoC and slowdown in China factory activity, while CBA also suggested the various lockdowns in Australia have lowered the chances the RBA will reduce its QE purchases by 50% at next week's meeting.

• New Zealand NBNZ Business Confidence (Jun) -0.6% (Prev. 1.8%)
• New Zealand NBNZ Activity Outlook (Jun) 31.6% (Prev. 27.1%)

COMMODITIES

WTI crude futures traded on both sides of the 73.50/bbl level after the latest private sector inventory report showed a larger-than-expected build to headline crude inventories although the upside in the energy complex was somewhat offset by the surprise build in gasoline stockpiles. Furthermore, the OPEC+ JTC ended without any policy recommendation nor was there any discussions regarding hiking output, while the JMMC meeting was postponed to Thursday and will now be conducted in between the OPEC and OPEC+ meetings. Elsewhere, gold prices were kept rangebound heading into month-end as the greenback consolidated and copper eked mild gains amid the mild positive bias across overnight bourses following the slightly better than expected Chinese Manufacturing PMI data.

US Private Energy Inventory (bbls): Crude -8.2mln (exp. -4.7mln), Cushing -1.3mln, Gasoline +2.4mln (exp. -0.9mln), Distillate +0.43mln (exp. +0.5mln). (Newswires)

OPEC+ JTC maintained 2021 global oil demand growth forecast at 6mln BPD and the OPEC+ JTC meeting ended with no policy recommendation nor was there any discussion of an output hike, while the JMMC meeting has been moved to Thursday from Wednesday, according to delegates. Furthermore, oil journalist Reza Zandi tweeted that an informed source intimated that the JTC meeting didn’t appear to have arrived at any clear direction although some members are engaged in lobbying for some increase of production by OPEC+ as of August. (Newswires/Twitter)

CME raised Henry Hub Natural Gas maintenance margins by 9.8% to USD 2,250 for August 2021. (Newswires)

Goldman Sachs expects base-case increase to OPEC+ output by 500k bpd and forecasts oil demand to rise by additional 2.2mln bpd by year-end resulting to a 5mln bpd shortfall. Goldman Sachs added that while a new infection wave could slow market rebalancing, it expects OPEC+ to continue tactical production hikes and estimates that the current global oil deficit is at 2.3mln bpd. (Newswires)

US

Treasuries were little changed in a catalyst-lite session, with month-end flows offsetting weakness from the Salesforce M&A bond. By settlement, 2s -0.6bps at 0.250%, 3s +0.0bps at 0.460%, 5s -0.5bps at 0.889%, 7s -0.1bps at 1.243%, 10s +0.0bps at 1.478%, 20s -0.3bps at 2.028%, 30s -0.3bps at 2.095%; TYU1 volumes very weak again. 5yr TIPS +1.2bps at -1.610%, 10yr TIPS -3.5bps at -0.857%, 30yr TIPS -4.9bps at -0.174%. SOFR and EFFR both unchanged at 5bps and 10bps, respectively. Selling momentum picked up after Salesforce (CRM) announced a multi-tranche M&A bond, alongside Brazil also stepping into the dollar market today. As participants made room for the supply, T-Notes saw some pressure in otherwise thin, summer trade. But, the lows were set for the day in the September contract at 132-00+ ahead of the cash equity open. Prices then pared losses gradually into the US session as attention returned to month-end flows (exp. +0.08yr in USTs), where a solid Consumer Confidence report failed to ignite any meaningful selling pressures, despite another hike in consumer inflation expectations (rose to 6.7% from 6.5%) - T-Notes hugged resistance at 132-08 up to the settlement. Looking ahead, once we hit July 1st on Thursday, attention will move away from month-end and towards the data points (ISM/ADP/Jobless Claims) ahead of Friday's NFP report, while next week's Treasury auctions (3s, 10s, and 30s) will be on the radar. T-note (u1) futures settle unchanged at 132-08+.

Fed's Waller (voter) said he did not shift his 'dot' regarding rate hike view and he has a very optimistic economic outlook but will not say when he expects a rate hike. Waller stated that inflation expectations seem anchored and that this year has been a surprise as the economy has progressed better than expected, while he added the pandemic is over and they are now dealing with the aftermath. Waller suggested there is a lot to decide regarding a potential taper and there is wide range of views on timing, pace and sequence, while he is in favour of tapering MBS before treasuries and would like to see tapering before hiking rates. Furthermore, he suggested that if the thought is that rates may need to be increased by end-2022 or early-2023, then tapering must be conducted before then. (Newswires)