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Market movers today

• US markets are closed today due to Independence Day yesterday.
• It is a quiet day in terms of economic data releases. Final PMI services are due out across the global markets (but not the US, which are due tomorrow).
• OPEC+ is scheduled to meet again virtually on Monday at 3 p.m. Vienna time to see if the parties can find an agreement to increase production.

The 60 second overview

US labour market: The US labour market generated more than expected jobs in June, as jobs reached 850.000. However, the job generation remains "weak" compared to how high labour demand, which is probably due to the temporary high unemployment benefits and lingering concern about the COVID-19 virus. Yet, jobs growth is increasing and is expected to increase even further into the fall as jobless benefits are lowered latest in early September. US equity markets responded positively to the news, while yields declined. For more on the outlook for asset classes amid a peak in the manufacturing cycle, see Strategy - Peak performance in assets and the end of reflation, 2 July.

OPEC+ crisis: Tensions between UAE and Saudi Arabia intensified over the weekend, with UAE refusing to agree to a deal supported by all other members. UAE wants better terms allowing higher production, while Saudi Arabia is refusing to give in to the demands. If no deal is reached, oil production will likely not increase in August and the remainder of 2021, risking to put further upward pressure on oil price. The oil price passed the USD75 per barrel level on Friday.

Chinese economy: The service PMI index for the Chinese economy fell back sharply in June according to figures released this morning. The index retretated to 50.3 compared with 55.1 last month and 54.9 expected. Asian equity markets did not appear overly concerned about the drop as equity indices are mixed this morning.

Equities: Global equities finished higher as the job report left little impact on market narrative. This meant growth again outperforming value, with tech and consumer discretionary the leaders, pushed higher by solid gains from big tech. Risk appetite there as well, with all sectors but the deep value-plays, financials and energy. Implied volatility ticked down to year-lows (VIX around 15). Big preference for large caps with S&P500 and Nasdaq gaining 0.8%, Dow 0.5% but Russell 2000 heavily underperforming down -1%. Mixed movements in Asia this morning with value-intense Japan underperforming while US markets will be closed for holiday.

FI: US government bond yields continue to decline and the 10Y US government bond yield is testing the 1.4%-level despite the decent US labour market report released on Friday and the recent rise in oil prices.

FX: EUR/USD was largely unchanged as payrolls were good but not exceptionally so, Friday. USD/JPY has climbed to in to the 110's on the back of a strong dollar and rising oil prices.

Credit: CDS indices continued to perform on Friday where iTraxx Xover tightened almost 3bp (closing in 227bp) and Main ½bp (to 45½bp). HY bonds were under slight pressure and widened 2bp while IG was unchanged

General Trend

• Quiet session for Crude Oil amid focus on OPEC+.
• Chinese markets are mixed after underperformance on Fri.
• PBOC continues to drain liquidity.
• Hang Seng has pared the opening decline [TECH index declines over 1.5% on regulatory news related to Didi].
• Shanghai Composite traded modestly higher during the morning session [IT index rose over 1%; Financials lagged].
• Nikkei 225 has remained lower during the session [TOPIX Information & Communication index lags, Softbank Group tracks decline in HK-listed TECH names; Banks and Iron & Steel indices also drop; Transports rise].
• S&P ASX 200 has moved higher after opening flat [Energy index outperforms; Financials decline ahead of RBA].
• Australian M&A in focus ahead of RBA decision.
• US starts an investigation into a large ransomware attack impacting 200+ companies, suspected to come from Russia.

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened 0.0%.
• (AU) AUSTRALIA MAY BUILDING APPROVALS M/M: -7.1% V -5.0%E; Private Sector Houses Approvals M/M: -10.3% v 5.9% prior (biggest decline since 2000).
• TAH.AU To demerge Lotteries business and Keno business at a A$225-275M separation cost, will create 2 listed ASX companies.
• SYD.AU Receives unsolicited, nonbinding and conditional proposals valuing the company at A$8.25/shr in cash.
• (AU) Australia Jun Final PMI Services: 56.8 v 56.0 prelim (confirms 10th month of expansion).
• SGP.AU Confirms it is currently in exclusive negotiations in relation to Halcyon Group's land lease communities business; no agreement has been reached at this time.
• (AU) Australia said to be reviewing GST (Goods and Services Tax) on low-value imports.
• (NZ) Reserve Bank of New Zealand (RBNZ) buys NZ$110M in government bonds in QE auction v NZ$110M sought.
• (AU) Australia Jun ANZ Job Advertisements M/M: 3.0% v 6.8% prior.

Japan

• Nikkei 225 opened -0.3%.
• (JP) Japan PM Suga confirms LDP failed to win a majority in Tokyo elections, will analyze results and prepare for next time.
• (JP) Japan Jun Final PMI Services: 48.0 v 47.2 prelim (confirms 17th month of contraction).
• (JP) Bank of Japan (BOJ) Gov Kuroda: Reiterates will closely monitor the impact of COVID and will not hesitate to take additional easing measures if necessary, expect short and long term policy interest rates to remain at their present or lower levels - branch managers meeting.
• 6502.JP Tokyo Exchange President: Toshiba incident has not caused a downgrade of Japan corp governance by foreign investors.

Korea

• Kospi opened +0.1%.
• (KR) US and South Korea agree to hold Joint military drills during August – Press.
• (KR) North Korea leader Kim made an appearance this weekend, looking significantly skinnier; unclear what exactly is going on – press.
• (KR) Bank of Korea (BOK) Sells KRW110B v KRW300B indicated in 6-month Monetary Stabilization Bonds (MSB): Avg yield 0.70% v 0.51% prior.

China/Hong Kong

• Hang Seng opened -0.8%; Shanghai Composite opened -0.1%.
• (CN) CHINA JUN CAIXIN PMI SERVICES: 50.3 V 54.9E (14th consecutive expansion and lowest since Apr 2020); PMI Composite: 50.6 v 53.8 prior (14th consecutive expansion, lowest since Apr 2020).
• (CN) Tangshan (largest steel-making city in China) said to have started to implement production cut equal to 30%; the production cut is expected to remain until the end of 2021 - financial press.
• DIDI China Cyberspace Administration reportedly ordered smartphone app stores to remove the Didi app citing concerns on Didi's illegal collection of personal user data – press.
• DIDI Notes China taking the app down may have a negative impact on Rev in China.
• (CN) According to data from the China Ministry of Finance, cities, and provinces has sold ~CNY1.9T in "refinancing bonds" from Jan-Jun, which indicates they have doubled bond sales to roll over maturities – press.
• (CN) China President Xi to address the summit of CPC and certain other parties on July 6th – Xinhua.
• (CN) China PBOC Open Market Operation (OMO): Injects CNY10B in 7-day reverse repos v CNY10B in 7-day reverse repos prior; Net drain CNY20B v Net drain CNY20B prior.
• (CN) China PBOC sets Yuan reference rate: 6.4695 v 6.4712 prior.
• (CN) China begins internet security probes into 3 different companies; Begins cybersecurity review into cargo and hiring platforms.

North America

• US market closed Monday in observance of the 4th of July.
• (US) US White House to begin assistance to the ~200 companies hit by cyberattacks and ransomware attacks.
• (US) Follow Up on Friday Ransomware attack: Hackers are demanding $70M to release data - press.

Europe

• MRW.UK Confirms to be acquired by Fortress Investment consortium (backed by Softbank) in a £9.5B deal.
• (CN) China President Xi, German Chancellor Merkel, and French President Macron are expected to hold a video call this week; unclear on agenda - press.
• (UK) Housing Min Jenrick: referring to covid, "the data we are seeing is very positive"; Will move to a period of no legal restrictions; mask-wearing will be a personal choice.
• (EU) ECB chief Lagarde: Recovery is still fragile, we agreed to maintain (PEPP) until at least March 2022, and in any case, until we judge that the coronavirus crisis phase is overpressed.

Levels as of 01:00ET

• Hang Seng -0.2%; Shanghai Composite +0.2%; Kospi +0.5%; Nikkei225 -0.5%; ASX 200 +0.1%.
• Equity Futures: S&P500 -0.1%; Nasdaq100 -0.1%, Dax -0.1%; FTSE100 0.0%.
• EUR 1.1869-1.1851; JPY 111.19-110.97; AUD 0.7530-0.7509; NZD 0.7035-0.7509.
• Commodity Futures: Gold +0.3% at $1,788/oz; Crude Oil -0.1% at $75.09/brl; Copper +1.0% at $4.28/lb.

Daily Pivots: (S1) 1.1823; (P) 1.1849; (R1) 1.1890; More...

Intraday bias in EUR/USD remains neutral at this point. Further fall is expected as long as 1.1974 resistance holds. Break of 1.1806 will resume the decline from 1.2265, as the third leg of the consolidation pattern from 1.2348, to 1.1703 support. On the upside, break of 1.1973 resistance will turn bias back to the upside for 1.2265 resistance.

In the bigger picture, rise from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further rally could be seen to cluster resistance at 1.2555 next, (38.2% retracement of 1.6039 to 1.0339 at 1.2516). This will remain the favored case as long as 1.1602 support holds. Reaction from 1.2555 should reveal underlying long term momentum in the pair. However sustained break of 1.1602 will argue that the rise from 1.0635 is over, and turn medium term outlook bearish again.

Daily Pivots: (S1) 1.3762; (P) 1.3803; (R1) 1.3874; More....

Intraday bias in GBP/USD remains neutral for the moment. Another fall could still be seen with 1.4000 resistance intact. Break of 1.3730 support will resume the fall from 1.4248, as the third leg of the consolidation pattern from 1.4240, to 1.3668 support and possibly below. On the upside, break of 1.4000 will turn bias back to the upside for retesting 1.4240/8 resistance zone instead.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications and target 38.2% retracement of 2.1161 (2007 high) to 1.1409 (2020 low) at 1.5134. However, firm break of 1.3482 support will argue that the rise from 1.1409 has completed and bring deeper fall to 1.2675 support and below.

Daily Pivots: (S1) 0.9180; (P) 0.9227; (R1) 0.9255; More....

Intraday bias in USD/CHF remains neutral for the moment. Another rise could still be seen as long as 0.9141 support holds. Break of 0.9273 would pave the way to 0.9471 key resistance next. On the downside, however, break of 0.9141 support will argue that the rebound from 0.8925 has completed, and turn bias back to the downside for this low.

In the bigger picture, medium term outlook is currently neutral with focus on 0.9471 resistance. Sustained break there will indicate completion of whole decline from 1.0342 (2016 high). Medium term outlook will be turned bullish for a test on 1.0342 high. But, rejection by 0.9471 again will revive bearishness for another fall through 0.8756 low.

Daily Pivots: (S1) 110.77; (P) 111.21; (R1) 111.48; More...

Intraday bias in USD/JPY remains neutral for the moment. Another rise is in favor 110.41 support intact. On the upside, sustained break of 111.71 will carry larger implication. Next target is 61.8% projection of 102.58 to 110.95 from 107.47 at 112.64. However, break of 110.41 will indicate short term topping and bring pull back 55 day EMA (now at 109.71).

In the bigger picture, medium term outlook is staying neutral with 111.71 resistance intact. Though, as notable support was seen from 55 day EMA, rise from 102.58 is mildly in favor to extend higher. Decisive break of 111.71/112.22 resistance will suggest medium term bullish reversal. Rise from 101.18 could then target 118.65 resistance (Dec 2016) and above. However, sustained break of 55 day EMA would revive some medium term bearishness, and open up deep fall to 61.8% retracement of 102.58 to 110.95 at 105.77 and below.

Daily Pivots: (S1) 0.7470; (P) 0.7501; (R1) 0.7558; More...

Intraday bias in AUD/USD remains neutral for the moment. On the downside, break of 0.7443 will resume the whole corrective pattern from 0.8006. But we'd expect strong support from 100% projection of 0.8006 to 0.7530 from 0.7890 at 0.7414 to bring rebound. On the upside, break of 0.7615 resistance will indicate short term bottoming, on bearish divergence condition in 4 hour MACD. Intraday bias will be turned back to the upside for 0.7890/8006 resistance zone.

In the bigger picture, rise from 0.5506 medium term bottom could either be the start of a long term up trend, or a corrective rise. Reactions to 0.8135 key resistance will reveal which case it is. Rejection by 0.8135 key resistance, followed by firm break of 0.7413 resistance turned support, will favors the latter case. Deeper decline would be seen to 38.2% retracement of 0.5506 to 0.8006 at 0.7051 first.

Daily Pivots: (S1) 1.2275; (P) 1.2362; (R1) 1.2416; More...

Intraday bias in USD/CAD remains neutral at this point. On the upside, firm break of 1.2485 resistance will resume whole rise from 1.2005 for 1.2653 key structural resistance next. On the downside, break of 1.2251 support will argue that rebound from 1.2005 has completed after failing medium term channel resistance. Intraday bias will be back on the downside for retesting 1.2005.

In the bigger picture, fall from 1.4667 is seen as the third leg of the corrective pattern from 1.4689 (2016 high). It might have completed after hitting 1.2061 (2017 low) and 50% retracement of 0.9406 to 1.4689 at 1.2048. Sustained break of 38.2% retracement of 1.4667 to 1.2005 at 1.3022 will pave the way to 61.8% retracement at 1.3650. Overall, medium term outlook remains neutral at worst with 1.2048/61 support zone intact.

Important decisions will be made at this week’s RBA meeting. All monetary policy measures would remain unchanged. Yet, as indicated in June, policymakers would discuss on the format of QE purchases after completion of the current tranche in September, and the maturity of bonds in yield curve control. While the overall tone of the meeting would be optimistic about the economic outlook, the members would remain cautious about the uncertainty of the pandemic and subdued inflation.

Economic data have pointed to strong recovery. Dropping to 5.1% in May from 5.5% a month ago, the unemployment rate has returned to the pre-pandemic level. The number of jobs jumped +115.2K, beating consensus of +30K addition and decline of -30.7K in April. Both full time and part time jobs gained during the month. Consumer confidence remains strong. Retail sales rose to +0.4% m/m in May, better than preliminary reading of +0.1%. From a year ago, retail sales jumped +7.7%, following a record growth rate of +25% in April. However, some leading indicators suggested that activities have shown signs of moderation in June. The Markit manufacturing and services PMIs dropped to 58.6 and 56.8 in June, from May’s readings of 60.4 and 58, respectively. The slowdown was likely driven by the extension of the lockdown in Victoria. Yet, this should not temper consumer and business optimism.

At the June meeting, as well as the minutes released last week, policymakers will decide on some tweaks in the monetary policy measures. As suggesting in the minutes, the members discussed three possible options to deal with QE which would end in September: 1) repeating AUD 100B of purchases for another 6 months; 2) scaling back the amount purchased or spreading the purchases over a longer period; and 3) moving to an approach where the pace of the bond purchases is reviewed more frequently, based on the flow of data and the economic outlook. On yield curve control, they would consider whether to roll its yield target from the April 2024 to the November 2024 bond.

Among the 3 QE options, we expect the members to choose a flexible approach, likely shifting from tranches of AUD100B of purchases to a target rate of asset purchases. For instance, it could change to purchase of AUD5B/month with regular review. Strong economic developments over the past months suggest it might not be necessary to extend the target from April to November. Scrapping this would effectively shift the forward guidance on hikes from a time target (3-years) to a date target (2024). Yet, this should not alter the RBA’s guidance that there would not be a rate hike “until 2024 at the earliest”.

Daily Pivots: (S1) 153.21; (P) 153.46; (R1) 153.84; More...

Intraday bias in GBP/JPY remains neutral for the moment. On the downside, below 152.59 will likely extend the corrective pattern from 156.05 through 151.28 support. In this case, we'd expect strong support from 38.2% retracement of 136.96 to 156.05 at 148.75 to bring rebound. On the upside, above 155.13 will target a test on 156.05 high instead.

In the bigger picture, rise from 123.94 is seen as the third leg of the pattern from 122.75 (2016 low). Focus is now on 156.59 resistance (2018 high). Sustained break there should confirm long term bullish trend reversal. Next target is 61.8% retracement of 195.86 (2015 high) to 122.75 at 167.93. On the downside, break of 149.03 support is needed to be the first sign of completion of the rise from 123.94. Otherwise, outlook will remain bullish even in case of deep pull back.