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Daily Pivots: (S1) 0.9978; (P) 1.0031; (R1) 1.0061; More...

Intraday bias in USD/CHF remains on the downside for the moment. Current fall from 1.0237 is in progress for 0.9879 key support next. Decisive break there will carry larger bearish implications. On the upside, break of 1.0098 is needed to indicate completion of such decline. Otherwise, outlook will stay mildly bearish in case of recovery.

In the bigger picture, USD/CHF is losing upside momentum ahead of 1.0342 key resistance (2016 high). There is no clear sign of reversal yet. But even in case of another rise, we'd be cautious on strong resistance from 1.0342 to limit upside. On the downside, break of 0.9879 support will suggest that larger rise from 0.9186 (2018 low) has completed. Deeper fall will be seen to 0.9716 support for confirmation.

Daily Pivots: (S1) 107.82; (P) 108.73; (R1) 109.20; More...

Intraday bias in USD/JPY remains on the downside at this point. Current fall from 112.40 should target 61.8% retracement of 104.69 to 112.40 at 107.63. Sustained break there will pave the way back to 104.62/9 key support zone. On the upside, break of 109.15 support turned resistance is needed to be the first sign of short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, decline from 118.65 (Dec 2016) is still in progress, with the pair staying indicate long term falling channel. Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51. For now, we'd expect strong support above 98.97 (2016 low) to contain downside to bring rebound.

Daily Pivots: (S1) 1.3486; (P) 1.3525; (R1) 1.3558; More...

Intraday bias in USD/CAD is neutral for consolidation below 1.3564 temporary top first. But further rise is expected as long as 1.3429 support holds. On the upside, break of 1.3564 will resume whole rise from 1.3068 and target a test on 1.3664 high next.

In the bigger picture, USD/CAD is staying well inside medium term rising channel (support at 1.3335). Thus, the up trend from 1.2061 (2017 low) should be in progress. On the upside, decisive break of 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 will pave the way to 78.6% retracement at 1.4127 next. This will remain the favored case as long as 1.3068 support holds. However, sustained break of the channel support will be the first sign of medium term reversal. Firm break of 1.3068 would confirm.

• Rates: US 10-yr yield heads to 2% support
  Core bonds rallied on Friday with US Treasuries hugely outperforming German Bunds. The market implied probability of two Fed rate cuts this year exceeds 75%, with investors anticipating the Fed to step in to cushion the US economy from the fall-out from an escalating trade war. Mexico and India are the next victims on the US’ radar.
• Currencies: EUR/USD gains modestly as dollar is losing massive interest rate support
  Last week the dollar drifted lower as it suffered a massive loss of interest rate support. Still, the decline developed orderly. Today, the early month key eco data and further developments in the global trade war will guide USD trading. EUR/USD rebounded off the 1.1110 range bottom, but for now the technical picture hasn’t changed yet.

The Sunrise Headlines

• US stocks extended losses on Friday and delivered the worst May return in 7 years. The Nasdaq (-1.51%) underperformed. Asian equities are mostly coloured in red. Japan underperforms as the yen jumps
• US President Trump unexpectedly announced plans to impose a 5% tariff on all Mexican imports starting June 10. He did so to force Mexico stepping up efforts to stop illegal migration to the US.
• Trump also slapped India with tariffs after ending the country’s status as a developing nation. That status allowed India to export a wide range of goods to the US on a duty-free basis.
• China will create a “non-reliable entity list” of foreign companies that damage the “legitimate rights and interest” of its enterprises. The move comes with China’s retaliation to increased US levies kicking in last Saturday.
• Oil prices declined more than 12% in merely one week as a dramatic escalation of trade tensions fuels fears for a significant economic slowdown. Brent crude slipped from its April highs of $74/b to $61 currently.
• Germany’s ruling coalition is shaken to its foundations after the head of the SPD Andrea Nahles resigned this weekend in the wake of poor election results (EU, Bremen). Questions rise whether the SPD will exit the government or not.
• Today’s economic calendar contains the US manufacturing ISM. US President Trump meets with UK PM May in London. Fed’s Barkin and Bullard are scheduled to speak.

Currencies: EUR/USD Gains Modestly As Dollar Is Losing Massive Interest Rate Support

USD losing interest rate support

A flaring up in global trade tensions finally turned out in the disadvantage of the dollar end of last week. The US threat to impose tariffs on imports from Mexico sparked fears that the escalation in the trade war might weigh further on growth, inside and outside the US. Sentiment turned further risk off, but the dollar suffered as markets anticipated aggressive Fed rate cuts. EMU and US eco data were rather soft, but of second tier importance for FX trading. USD/JPY tumbled to close at 108.29. EUR/USD hovered in the 1.11 big figure but closed at 1.1169 (from 1.1136).

This morning, most Asian equites are declining further (Korea and India are the exception) but the decline remains orderly. The (trade-weighted) dollar (97.65 area) stabilizes after Friday’s sell-off. USD/CNY is holding stable in the 6.90 area. The yen outperforms slightly (USD/JPY 108.20 area). The euro also lightly outperforms the dollar (EUR/USD 1.1175).

Today’s final EMU manufacturing PMI are expected to confirm a sluggish performance in the sector. The US Manufacturing ISM is expected to stabilize around 53 after a sharp decline last month. A poor figure might reinforce market expectations on further Fed rate cuts. Markets will also keep a close eye on global trade topics, in particular on comments from president Trump as he visits to the UK. He might put further pressure on the US-EU (political and trade) relations.

Over the previous two weeks, EUR/USD tested the 1.1110 support area but no sustained break occurred. A broader USD up-move was capped as investors anticipate more Fed rate cuts as trade tensions might hurt both global and US growth. That said, Friday’s rebound in EUR/USD was modest given the sharp narrowing in the US-EU (GE) spread. So, the jury is still out whether current developments will be a game-changer for the euro. At least the EUR/USD downside looks better protected. Some further gains in the 1.1110/1.1324 range are possible with intermate resistance at 1.1265.

Sterling remained in the defensive on Friday as a global risk-off and uncertainty on Brexit weighed. EUR/GBP temporarily jumped to the 0.8870/75 area, but finally the pair returned to well-known territory in the 0.8840 area. Today, the UK manufacturing PMI is expected to ease to 52.2 and markets will look out for headlines from the Trump visit. The US president advocating a hard Brexit probably won’t help sterling

EUR/USD gains modestly as US-EMU (GE) interest rate spread narrows sharply

Daily Pivots: (S1) 0.6911; (P) 0.6928; (R1) 0.6955; More...

AUD/USD's corrective recovery from 0.6864 extends slightly higher today but outlook remains unchanged. Intraday bias remains neutral first. Upside of recovery should be limited by 0.6988 support turned resistance to bring fall resumption. On the downside, break of 0.6864 resume the fall from 0.7295 to 161.8% projection of 0.7295 to 0.7003 from 0.7205 at 0.6733, which is close to 0.6722 low.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Dollar opened the week mildly lower but appears to have found some footing in early European session. Trump is fighting trade wars on two fronts, at least. On the one hand, China has cleared stated its position for not backing down on some core issues, with a white paper released on Sunday. So, there is little chance for a breakthrough in US-China trade negotiation for the near term. And it's even doubtful on whether Trump and Xi will meet at the G20 summit in Japan later in the month.

On the other hand, Mexican officials will be in Washington this week. Comments so far suggested that Mexico is open to work with the US on measures to curb immigration flow through the country to US. However, the main problem is that Trump will only drop the tariffs threats if Mexico could meet his demands, which are so far quite arbitrary. And, as Trump tweeted, "Mexico is sending a big delegation to talk about the Border. Problem is, they've been "talking" for 25 years. We want action, not talk." So it's unsure how Mexico's good faith would be responded to.

In the currency markets, at the time of writing, Yen is the weakest one for today, followed by Sterling. Swiss Franc is the strongest one, followed by Australian Dollar. Much volatility is envisaged ahead with heavy weight data from US, RBA and ECB, as well as import data from UK, Eurozone, Canada and Australia.

In Asia, Nikkei closed down -0.92%. Hong Kong HSI is down -0.11%. China Shanghai SSE is down -0.36%. Singapore Strait Times is up 0.02%. Japan 10-year JGB yield is up 0.0073 at -0.0089.

China reiterated known pre-conditions for resuming trade talks with US

China's highly anticipated white paper, released on Sunday, on trade relationship with US was quite anti-climatic. The overall paper, and the press conference were basically old wine in old bottles. But the message was clear that China is preparing itself for prolonged trade war with US.

In short, China blamed the US for starting trade conflicts. And, it criticized the US for going back on what's agreed three times. And it hold US totally responsible for the collapse of trade negotiation.

China also reiterated pre-conditions on resuming trade negotiations. First, both sides have to respect "each other's social system, economic system, development path and rights". Secondly the negotiations has to be based on integrity. Thirdly, China will not step back on its principles, including sovereignty.

The implications are quite clear that China will not do anything to change its own development path along socialist market economy (or some would call that state capitalism). That is, China will not retreat from subsidizing State-Owned Enterprises. Secondly, the implementation of the agreement should be under full control of the sovereign entity. That is, for example, China will decide what new laws to pass to curb IP theft, or it will fulfil the commitment with administrative measures. China will object to US instructions on what are to be done exactly.

China Caixin PMI manufacturing unchanged at 50.2, some resilience with weakened confidence

China Caixin manufacturing PMI was unchanged at 50.2 in May, above expectation of 50.0. Production was broadly stable in May. Total new work and export sales both increase slightly. And, there was renewed rise in purchasing activity.

Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:"Overall, China's economy showed steady growth and resilience in May. The manufacturing sector saw demand rise from both overseas and domestic markets, and prices were stable. However, business confidence weakened, and manufacturers' inventory levels remained low. The trade tensions between the U.S. and China are having an impact on confidence and the best way to respond to this is to boost the confidence of enterprises, residents and capital markets by carrying out favorable reforms and to undertake timely adjustments to regulations and controls."

Mexico doesn't want war of tariffs and of taxes with US

Mexico's Economy Minister Graciela Marquez is going to meet US Commerce Secretary Wilbur Ross in Washington on Monday to discuss Trump's tariff threats. Foreign Minister Marcelo Ebrard will also be in Washington on Wednesday for the issue.

Mexican President Andres Manuel Lopez Obrador expected "good results" from the meetings. And he said on Saturday that "the main thing is to inform about what we're already doing on the migration issue, and if it's necessary to reinforce these measures without violating human rights, we could be prepared to reach that deal."

Lopez Obrador also insisted that Mexico would not pursue trade war with the US. And, "we're doing all we can to reach a deal through dialogue… we're not going to get into a trade war, a war of tariffs and of taxes."

Conte to issue ultimatum, Tria doesn't want clash with EU, EU Moscovici wants dialogue

Italian Prime Minister Giuseppe Conte is said to issue an ultimatum to the government today for speeding up government actions on budget, or face his resignation. He would insist that he has no intention of being subjected to any European Union disciplinary procedure over public debt.

Over the weekend, Economy Minister Giovanni Tria blamed the economic downturn for rising debt. However, he also emphasized "Italy does not want to clash with the European Commission, and I hope the opposite is also true, that is to say that no one in Brussels intends to engage in a fight with us." He reiterated the pledge to keep budget deficit below government forecast of 2.4% of GDP. And he added "our position is reasonable and I think we will eventually reach a compromise with the Commission."

European Commissioner for Economic and Financial Affairs Pierre Moscovici said on Sunday that he'd still prefer dialogue with to sanctions on Italy regarding it's budget. And, "for the past five years I have not punished anyone." However, he emphasized "If they do not respect the rules at all, it will be necessary for the European Commission and the European states to take their responsibilities". The Commission will make proposals this week on resolving the dispute with Italy over its budget deficit.

Japan PMI manufacturing finalized at 49.8, potential banana skins lie ahead

Japan PMI manufacturing was finalized at 49.8 in May, revised up from 49.6, down from 50.2 in April. Markit noted that domestic and external demand conditions deteriorate. Firms slow the rate of hiring amid production cutbacks. And, output expectations turn negative for first time since November 2012.

Joe Hayes, Economist at IHS Markit: "There were no signs a let-up in the recent manufacturing downturn during May, as output and new orders both slipped for fifth successive months. Weak demand from Japan's key trade partner, China, as well as signs of an increasingly sluggish domestic economy, have impacted sales volumes.... Given the importance of capital goods to Japan's foreign trade, it would suggest further difficulties lie ahead for Japanese exporters.

"With the upcoming sales tax hike and upper house elections in July, there lies ahead potential banana skins for Japanese firms to avoid. Re-escalated trade tensions between China and the US merely add to existing concerns for manufacturers. Subsequently, businesses cast a downbeat assessment for the year ahead for the first time in six-and-a-half years."

Also from Japan, capital spending rose 6.1% in Q1, beat expectation of 2.6%.

Australia AiG PMI dropped to -2.1, wage index at lowest since Mar 2017

Australia AiG Performance of Manufacturing Index dropped -2.1 pts to 52.7 in May, suggesting a slower rate of growth. Looking at the details, production dropped sharply by -6.9 to 51.2. New orders dropped -3.3 to 52.3. exports dropped -3.6 to just 40.3. Employment index staged a strong rebound and rose 4.1 to 55.6. But average wages dropped -2.2 to 55.5. Input prices rose 3.6 to 68.3 but selling prices dropped -2.8 to 52.1.

In particular, on wages, 55.5 is the lowest monthly results since March 2017 and is well below historical average of 59.2. This index has been trending lower since its recent peak in September 2018. It indicates that fewer manufacturing businesses are now implementing wage rises, compared to the recent peak in Q3 of 2018.

Also from Australia, TD Securities inflation rose 0.0% mom in May. Company operating profit rose 1.7% qoq in Q1.

Important week ahead for Aussie and Dollar

This is a rather important week for both Australia and US. RBA is widely expected to cut interest rate on Tuesday, after Governor Philip Lowe hinted on that in May. Markets are generally expecting more rate cuts this week, ranging from a total of two to three. So, the question for the RBA meeting is whether Lowe would drop further indications for more easing. Also, Australia will release retail sales, GDP and trade balance.

For the US, markets have been adding bets on a Fed cut this year. Fed fund futures are pricing 78% of a cut by September meeting. Inflation is sluggish without a doubt, as with core PCE at 1.6% yoy in April. The question is whether growth and employment outlook would deteriorate to an extent that prompt Fed for, at least, an insurance cut. In particular, PMI manufacturing and services dropped notably in May, and that could be reflected in ISM indices too. And of course, non-farm payroll report will be closely watched too.

Elsewhere, ECB will meet this week and the main focus will be on any details regarding the TLTRO III. Eurozone will also release CPI flash, unemployment rate and GDP revision too. UK will release PMIs. Canada will also release employment data.

Here are some highlights for the week:

• Monday: China Caixin PMI manufacturing; Swiss CPI, PMI manufacturing; Eurozone PMI manufacturing final; UK PMI manufacturing; Canada PMI manufacturing, US PMI manufacturing final, ISM manufacturing, construction spending.
• Tuesday: New Zealand terms of trade; Japan monetary base; Australia retail sales, current account, RBA rate decision; UK construction PMI; Eurozone CPI flash, unemployment rate; US factory orders.
• Wednesday: Australia GDP, Eurozone PMI services final, PPI, retail sales; UK PMI services; US ADP employment, PMI services final, ISM non-manufacturing, Fed's Beige Book.
• Thursday: Australia trade balance; Germany factory orders; Eurozone GDP revision, ECB rate decisions; Canada Ivey PMI, trade balance; US Challenger job cuts, trade balance, jobless claims.
• Friday: Japan average cash earnings, household spending, leading indicators; Australia home loans; Swiss unemployment rate, foreign currency reserves; German industrial production, trade balance; Canada employment; US non-farm payrolls.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6911; (P) 0.6928; (R1) 0.6955; More...

AUD/USD's corrective recovery from 0.6864 extends slightly higher today but outlook remains unchanged. Intraday bias remains neutral first. Upside of recovery should be limited by 0.6988 support turned resistance to bring fall resumption. On the downside, break of 0.6864 resume the fall from 0.7295 to 161.8% projection of 0.7295 to 0.7003 from 0.7205 at 0.6733, which is close to 0.6722 low.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Economic Indicators Update

Gold prices were seen rising sharply on Friday. The precious metal closed the week with 1.61% while gaining 1.32% on the day. The rebound in the precious metal comes as investors shed risky assets and fled to safe haven assets. The Japanese yen also appreciated strongly on Friday indicating the investor concerns on the impact of the trade wars.

Can XAUUSD Maintain the Gains?

In the near term, we expect gold prices to pull back a little. The key level of interest is the 1290 – 1285 handle which has seen quite a bit consolidation. A retracement to this level to establish support will indicate further upside in gold. However, expect to see some volatility in gold prices as investors react to the developing narrative

Crude oil prices fell sharply on Friday, shedding over 9% for the week. The declines in price came amid concerns that the trade wars would lead to slower growth globally. The tariffs imposed on Mexico is also expected to impact some US oil refineries. Meanwhile, OPEC is due to meet later in June. However, the US crude oil production increase is expected to offset any production cuts from OPEC and Russia.

Will Oil Prices Fall Further?

Last Friday’s declines in crude oil prices could see some moderation in the near term. The immediate price level of interest is the 57.50 handle which briefly served as support. A return to this price point to establish resistance could mark further downside in oil prices. The lower support remains at the psychologically crucial $50.00 handle.

The common currency managed to post some modest gains by Friday’s close. The euro gained mostly as the USD retreated. Month-end flows also partly contributed to the declines in the USD. Economic data on the day saw the US personal income and spending rising 0.3% and 0.5% respectively. And despite a weaker than expected inflation growth in Germany, the common currency stood its ground.

Can the EURUSD Post Further Gains?

The common currency has managed to rebound off the recent lows. However, the initial test comes in at the 1.1200 level where resistance is most likely to be formed. If the EURUSD manages to break out above this level, we could expect to see further gains in store. However, with the ECB meeting on Thursday, price action in the EURUSD could remain flat.

General Trend:

• Uncertainty remains regarding which specific US companies could be potentially blacklisted by China
• Little news seen in China’s white paper on trade talks with the US
• Previously announced tariffs by the US and China took effect on June 1st (as expected)
• Brent Crude Futures extend declines
• Mexican Peso (MXN) remains weaker after recent tariff threat by Trump, but pares opening declines
• Japanese equities trade at Jan 2019 lows, automakers remain generally weaker on Mexico concerns
• Softbank Group declines over 4%, funding raising plan for second Vision Fund said to have issues
• Trade-sensitive IT index underperforms in Shanghai
• Chinese courier firms rise, China opens probe into FedEx
• Markets generally ignore China Caixin PMI Manufacturing beat (data flat m/m)
• Offshore Yuan(CNH) rises after stronger Yuan fixing
• Chinese property firm CIFI Holdings addresses press speculation about open market financing restrictions in China
• State brokerage firm in China suggested the RRR could be cut if the situation worsens
• Baoshang Bank expected to sell first NCDs since recent announcement regarding takeover by the Chinese government
• Aussie Q1 inventories unexpectedly rise, GDP data seen on Wed
• South Korea exports decline for 6th straight month in May, drop in chip exports worsens
• Big US brokerage firms comment on possibility of US Fed rate cuts amid trade concerns; EUR/USD extends gain from Friday’s session
• Yen and Swiss Franc rise on safe-haven demand; Gold also adds onto recent gains
• Asian currencies generally gain against the US dollar, some focus on Yuan gains and Fed policy outlook
• South Korea final Q1 GDP data due on Tuesday, no revision expected to Q1 contraction
• Japanese companies start to prepare for possible sales tax hike in Oct 2019

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.2%
• (AU) AUSTRALIA Q1 CORP OP PROFIT Q/Q: 1.7% V 2.8%E; INVENTORIES Q/Q: 0.7% V 0.0%E
• (AU) Australia May AIG Performance of Manufacturing Index: 52.7 v 54.8 prior
• BXB.AU Completes sale of IFCO RPC pooling business, intends to begin on-market buyback in early June 2019
• GCY.AU Trading halted; placed into voluntary administration, names FTI Consulting Administrator; CEO Richard Hay and CFO Mike Ball resigned
• (AU) US decided against tariffs on Australia imports last week amid opposition from US military officials - NYT
• LYC.AU Wesfarmers will not increase offer for Lynas, to drop bid altogether - Aussie press; Wesfarmers denies press speculation on Lynas deal
• (AU) Australia May ANZ Job Advertisements m/m: -8.4% v -0.1% prior

Japan

• Nikkei 225 opened -1.3%
• (JP) JAPAN Q1 CAPITAL SPENDING (CAPEX) Y/Y: 6.1% V 2.6%E; CAPITAL SPENDING EX-SOFTWARE: 6.9% V 2.3%E; Company profits: 10.3% v -7.0% prior; Company Sales: 3.0% v 3.7% prior
• (JP) Bank of Japan (BOJ) Gov Kuroda: Reiterates BOJ will continue easing to support economy; Inflation, wage growth have remained weak - speaking to parliament
• (JP) Japan will form multiple funds related to infrastructure exports - Nikkei
• (JP) Japan PM Abe to visit Iran June 12 to 14; will meet with President Rouhani and Leader Khamenei to mediate with US - Japan Press
• 9984.JP Said to be having trouble raising $100B for new tech fund, spokesperson denies report – press
• (JP) Japan May Final PMI Manufacturing: 49.8 v 49.6 prelim
• (JP) Former BOJ Chief Economist Momma: BOJ may take minor steps like tweaking forward guidance is economy slumps again; central bank efforts to keep interest rates artificially low for too long can hurt inflation expectations

Korea

• Kospi opened -0.5%
• (KR) South Korea May Trade Balance $2.3B v $2.5Be; Semiconductor exports Y/Y: -30.5% v -13.7% prior ; Exports to China Y/Y: -20.1% v -4.5% prior
• (KR) Bank of Korea (BOK) Gov Lee: Uncertainty over future of global linkages is growing - speaking at conference
• (KR) South Korea May PMI Manufacturing: 48.4 v 50.2 prior; New exports order 10th consecutive contraction (longest since 2015)
• (KR) North Korea close to completing underground missile facility in Hamhung, South Hamgyong Province; Hamhung plant is the leading solid propellant missile production base. - Korean press

China/Hong Kong

• Hang Seng opened flat; Shanghai Composite opened +0.1%
• (CN) China raises tariffs 5-25% on $60B of US goods Saturday, preparing a blacklist of "unreliable" foreign companies
• (CN) China State Council Information Office releases white paper formalizes position on trade negotiations with US: "US government bears responsibility” for setbacks in trade talks; it imposed additional tariffs on Chinese goods that impede economic cooperation between the two countries and globally; China does not want but is not afraid of a trade war
• (CN) Data shows China exports to US are being routed through Vietnam, Taiwan, Mexico in efforts to circumvent tariffs – Nikkei
• (CN) China PBoC sets yuan reference rate: 6.8896 v 6.8992 prior
• (CN) China PBoC Open Market Operation (OMO): Injects CNY80B in 7-day reverse repos v skips prior; Net: CNY0B (nil) v CNY0B prior
• (CN) CHINA MAY CAIXIN PMI MANUFACTURING: 50.2 V 50.0E
• (CN) US customs agents formally begin collecting the higher 25% tariffs on $200B list of Chinese goods arriving at US seaports (Saturday)
• (HK) Macau May Gaming Rev (MOP) 25.9B v 23.6B prior; Y/Y: +1.8% v 2.1%e v -8.3% prior
• 1234.HK Guides 2019 winter Trade Fair order value +10-13% y/y, lower than expected, saw lower than avg selling prices; US/China trade war and slower retail sales is impacting confidence of distributors

Other Asia

• (IN) US Pres Trump: "It is appropriate to terminate India’s designation as a beneficiary developing country effective June 5, 2019.”
• (TW) Taiwan May PMI Manufacturing:48.4 v 48.2 prior (8th straight contraction)

North America

• SPR Boeing issues statement: 1 batch of 373 and 312 Slat track produced by Spirit Aerosystems with specific lot numbers was found to have potential non-conformance and potential to crack, FAA orders them to be replaced
• FDX China to open probe of FedEx over possible infringement of Huawei's legal rights over misrouted packages - Xinhua
• (US) JPM cuts 2019 US Treasury yield outlooks due to trade disputes
• (MX) Mexico President Lopez Obrador (AMLO): encouraged by US willingness to have dialogue over trade issues; expect good results from meeting on Wed (June 5)
• (MX) US President Trump: "Mexico is sending a big delegation to talk about the Border. Problem is, they’ve been “talking” for 25 years. We want action, not talk. They could solve the Border Crisis in one day if they so desired. Otherwise, our companies and jobs are coming back to the USA!" – tweet
• (MX) Follow Up President Trump: Mexico delegation to visit White House Wednesday, June 5th
• CY Confirms to be acquired by Infineon Technologies for $23.85/shr in ~€9.0B cash deal
• (US) Fed's Daly (dove, non-voter): We should think about more monetary policy tools; looking at policy framework more broadly; MMT doesn't hold up in principal, open to debate, it perhaps on some uses - speaking in Singapore
• Reminder: Trump is on his way to UK for his first state visit, before traveling to Ireland and France

Europe

• AIR.FR Written to airlines asking for support for the company in trade dispute with Boeing, warns that if there is a trade dispute between US/EU it will result in higher aircraft prices and passenger fares for both sides – press
• (DE) German SPD leader Nahles resigns; Germany's Scholz will not run for Social Democrat Chairman
• (GR) Greece provisional local election results show conservative opposition New Democracy party swept 12 of 13 regions ahead of snap election on July 7

Levels as of 01:20ET

• Hang Seng -0.4%; Shanghai Composite -0.2%; Kospi +1.1%; Nikkei225 -1.2%; ASX 200 -1.1%
• Equity Futures: S&P500 -0.5%; Nasdaq100 -0.8%, Dax -0.6%; FTSE100 -0.5%
• EUR 1.1163-1.1191; JPY 108.08-108.36; AUD 0.6927-0.6959; NZD 0.6528-0.6557
• Commodity Futures: Gold +0.5% at $1,317/oz; Crude Oil -1.0% at $52.97/brl; Copper +0.4% at $2.64/lb