MNI EUROPEAN OPEN: French Left Wing Win Surprises

US TSYS: Tsys Futures Off Earlier Lows

• Treasury futures have opened lower this morning, some profit taking has occurred along side weakness in the 10y French bond futures after a messy outcome from the second round of voting, OATU4 is trading -0.29 ticks, which equates to about 3.05bps move higher in yields. Tsys futures have since pared some earlier losses to now be trading; TU is - 01⅜ at 102-09¼, while TY is - 05 at 110-14+.
• Volumes are above averages, TU 36k, FV 105k, TY 128k
• Tsys flows: Block Seller belly FV, UXY, WN Fly - DV01 626k. FV/TY Block Steepener DV01 190k
• The Cash treasury curve have widen today, with yields about 1.5bps higher. The 2y is +1.5bps at 4.618%, 7yr +1.6bps at 4.245%, while the 10y +1.4bps at 4.292%.
• Looking ahead, NY Fed 1-Yr Inflation Expectations & Consumer Credit.

JGBS: Cash Bonds Slightly Weaker, Subdued Session, 5Y Supply Tomorrow

JGB futures are holding weaker, -17 compared to the settlement levels.

• Outside of the previously outlined Cash Earnings, Trade Balance and Bank Lending data, there hasn't been much in the way of domestic drivers to flag.
• Cash US tsys are 1bp cheaper in today's Asia-Pac session after Friday’s strong post-Payrolls rally. Today’s move may reflect some profit-taking along with a reaction to yesterday’s French election result and news on the PBoC bond purchases. China government bonds are dealing 2-4bps cheaper.
• The PBoC will carry out temporary bond repurchase or reverse repurchase operations depending on the market situation during working days between 16:00 and 16:20.
• Cash JGBs are flat to 1bp cheaper, with the 5-7-year zone underperforming.
• The swaps curve has bear-steepened, with rates 1-2bps higher. Swap spreads are wider.
• Tomorrow, the local calendar will see M2& M3 Money Stock data alongside 5-year supply.

AUSSIE BONDS: Subdued Start To The Week, Consumer & Business Confidence Tomorrow

ACGBs (YM +4.0 & XM +3.5) are richer but slightly weaker than session highs.

• Outside of the previously outlined Home Loans data, there hasn't been much in the way of domestic drivers to flag.
• Cash US tsys are 1-2bps cheaper in today's Asia-Pac session after Friday’s strong post-Payrolls rally. Today’s move may reflect some profit-taking along with a reaction to yesterday’s French election result and news on PBoC bond purchases. China government bonds are dealing 2-4bps cheaper.
• The PBoC will carry out temporary bond repurchase or reverse repurchase operations depending on the market situation during working days between 16:00 and 16:20.
• Cash ACGBs are 3bps richer, with the AU-US 10-year yield differential at +8bps.
• Swap rates are 3-4bps lower.
• The bills strip has bull-flattened, with pricing flat to +4.
• RBA-dated OIS pricing is 1-3bps softer across meetings. Terminal rate expectations decline by 1bps to 4.48%.
• Tomorrow, the local calendar will see Consumer and Business Confidence data.
• The AOFM plans to sell A$700mn of the 3.75% 21 May 2034 bond on Wednesday and A$800mn of the 2.75% 21 November 2029 bond on Friday.

NZGBS: Richer But Off Best Levels, US Tsys Slightly Weaker

NZGB benchmark yields closed slightly higher than the session’s lowest levels, 3-5bps lower on the day.

• Cash US tsys are 1-2bps cheaper in today's Asia-Pac session after Friday’s strong post-Payrolls rally. It may reflect some profit-taking along with a reaction to yesterday’s French election result and news on PBoC bond purchases.
• The PBoC will carry out temporary bond repurchase or reverse repurchase operations depending on the market situation during working days between 16:00 and 16:20.
• The local calendar is light until the RBNZ’s Policy Decision on Wednesday. Economists surveyed by Bloomberg unanimously expect a no-change decision. Most economists don’t expect the RBNZ to make any major changes to its hawkish commentary, despite signs of downside risks to growth.
• Net migration is also on Wednesday, with its release before the RBNZ decision.
• A majority of Shadow Board members recommended the RBNZ keep the OCR at 5.5% this week according to NZIER.
• RBNZ dated OIS pricing is slightly mixed across meetings today. A cumulative 35bps of easing is priced by year-end.
• Swap rates closed 3-5bps lower, with the 2s10s curve flatter.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.0% Apr-29 bond, NZ$225mn of the 4.25% May-34 bond and NZ$50mn of the 2.75% Apr-37 bond.

FOREX EUR Recoups Most Early Losses, Broader USD Indices Close To Unchanged

Broader USD indices sit little changed in the first part of Monday dealings. The BBDXY last around 1260.2.

• Early focus was on EUR/USD weakness, following the surprise French legislative election results, with the left New Popular Front (NFP) unexpectedly winning the most seats but not enough to have a majority. A hung parliament is now likely. The pair fell close to 1.0800, but has largely unwound these losses, last near 1.0830, which is close to end Friday levels of 1.0840.
• USD sentiment has been softer during parts of today, but there has been no follow through. USD/JPY got to lows of 160.26, but sits back at 160.55/60 in latest dealings, only down marginally for the session.
• Earlier data showed weaker than expected headline labour earnings data in Japan, with real earnings remaining comfortably negative. Still, the detail, and same sample based data pointed to more positive trends (see this link).
• US yields are higher but away from best levels, last a little up over 1bps for the Tsy benchmarks. This leaves the bulk of Friday's yield losses intact. US-JP yield differentials continue to track lower.
• In the equity space, most regional markets are lower, while US futures are a little over 0.10% off at this stage.
• AUD/USD and NZD/USD both sit a tough higher, with both pairs supported on dips. AUD/USD last near 0.6750/55, NZD near 0.6150.
• Looking ahead, US May consumer credit and June NY Fed inflation expectations and German May trade data are due. Also BoE’s Haskel speaks.

ASIA STOCKS: China & HK Equities Head Lower Ahead Of Third Plenum

Chinese and Hong Kong equity markets are lower today with the Hang Seng China Enterprises Index nearing a technical correction after falling as much as 1.6%. The CSI 300 Index has declined for the fifth straight day, continuing its longest losing streak since early 2012. Investors are cautious ahead of a key meeting of China's top leaders and are not expecting any major stimulus announcements. Geopolitical uncertainties and a patchy economic recovery are further dampening sentiment, with major indices such as the MSCI China Index and Hang Seng Tech Index already in correction territory.

• Hong Kong equities are lower today, the HSTech Index is down 0.25%, Property indices are struggling this morning with the Mainland Property Index off 1.37% today, while the HS Property Index is down 1.34%, the wider HSI is off 1.16%.
• China equity markets are faring slightly better than Hong Kong equities. The CSI 300 is currently down 0.40%, while small-cap indices the CSI 1000 is down 1.30% the CSI 2000 is down 1.80% while the growth focus ChiNext is down 0.56%.
• China's central bank did not buy gold for a second consecutive month in June, maintaining reserves at 72.8 million troy ounces, following an 18-month buying spree that contributed to record-high gold prices. Analysts expect purchases to resume as China diversifies its reserves amid geopolitical and financial risks, despite recent declines in gold prices from its May peak.
• Country Garden delivered 154,500 units from January to June 2023, according to a statement on its website. Chairwoman Yang Huiyan emphasized that the company's primary focus for the second half of the year will remain on ensuring the delivery of homes. Hong Kong developers New World and Far East Consortium are selling apartments in The Pavilia Forest I at the lowest price in eight years for the Kai Tak district, at an average of $2,200 sq foot. This pricing represents nearly a 30% discount compared to other projects in the area. The developers face challenges in quickly selling units amid high inventory and competition, as high borrowing costs have deterred homebuyers despite the removal of extra taxes earlier this year.
• Looking ahead we have China CPI & PPI are expected on Wednesday.

ASIA PAC STOCKS: Asian Equities Mixed, Japan's Real Wages Continue Decline

Asian equities are mixed today, following weaker US employment figures. Investors are also focused on upcoming central bank decisions and key economic data from the US and China later this week. Tech stocks are the top performing sector, especially TSMC which is trading up 3%. The data calendar is light on in the region today, with market largely focus on the French elections.

• Japanese stocks are lower today, with the Topix falling 0.29% while the Nikkei 225 edged up by 0.2% despite a decline in real wages for the 26th consecutive month due to a weaker yen and higher import costs. The drop was influenced by softer US employment figures and profit-taking by ETF managers to secure dividends. Hitachi contributed significantly to the decline, decreasing by 2.3%. Additionally, Nippon Paint and Rakuten Group saw notable declines due to anticipated outflows following the Topix index rebalance. Investors are cautious ahead of key economic data and central bank decisions later this week.
• South Korean equities initially opened higher this morning, however have pared gains. Hopes of a US rate cut has supported markets, tech and autos have been the top performing names while Financials have underperformed. The Kospi is unchanged, while the Kosdaq is up 1.10%.
• Taiwanese equities are higher today, most of the index moves can be attributed to the 3% rise in TSMC. Focus will turn to Trade Balance data due out tomorrow afternoon. The Taiex is currently trading up 1.68%.
• Australian equities are lower this today, the decline is primarily driven by weakness in iron ore miners such as BHP and Rio Tinto, as well as financial shares. A significant slump in iron ore prices has added to the pressure, setting the market further behind global peers ahead of crucial US inflation data later this week. Despite a strong lead from Wall Street, Australian equities continue to underperform due to concerns over Chinese demand and signs of oversupply in the iron ore market. The ASX200 is down 0.70%.
• Elsewhere, New Zealand equities are 0.76% lower, Indonesian equities are unchanged Singapore equities are 0.22% lower, Malaysian equities are down 0.35%, while Philippines equities are up 0.65%.

OIL: Crude Off Intraday Lows, Hurricane Beryl Threat To Texan Refining

Oil prices are down today but off the intraday lows as Hurricane Beryl approaches Texas. WTI is down 0.3% to $82.94/bbl after breaking below $83 earlier today and falling to $82.71. It reached $83.32 early in the session. Brent is 0.1% lower at $86.43 off the low of $86.27 which followed a high of $86.92. The USD index is flat.

• Tropical Storm Beryl has been reclassified as a hurricane again and is forecast to make the Texan coast today, possibly impacting coastal refining and shipping facilities, which would reduce crude demand. Exxon Mobil only sees a small impact on its output from Beryl. Shell’s Perdido platform was in the path of the storm and was shutdown and evacuated by July 4. Shell has 20.9kbd in US offshore waters.
• In the north, fires threaten Alberta’s oil fields again.
• Market indicators continue to signal bullish sentiment with money market net longs up for the fourth consecutive week and the Brent prompt spread in backwardation, according to Bloomberg. Risks from nature and signs of robust US demand from last week’s EIA inventory report have boosted confidence.
• The market will be focusing on this week’s monthly reports from OPEC (Wednesday), EIA (Tuesday) and IEA (Thursday) as well as US June CPI (Thursday).
• Later there are US May consumer credit and June NY Fed inflation expectations and German May trade data. BoE’s Haskel speaks.

GOLD: Sharply Higher Following US Payrolls Data

Gold is 0.4% lower in the Asia-Pac session, after closing 1.5% higher at $2392.16 on Friday following weaker-than-expected US labour market data. Friday’s move took the gain last week to 2.7%.

• US Treasury yields declined following weaker-than-expected labour market data led by the front end. The 10-year yield fell 8bps to 4.28%, ending the week at the yield lows. The 2-year finished 10bps richer at 4.60%, the lowest since late March.
• US Treasury yields briefly gapped higher in response to mildly higher than expected June jobs gain of +206k vs. +190k est but quickly reversed course, extending session lows after prior jobs data was down-revised. Two-month -111k, split evenly over May and April. Private sees surprises lower though, 136k (cons 160k) and a -86k two-month revision skewed slightly to April.
• Lower rates are typically positive for gold, which doesn’t pay interest.
• From a technical perspective, gold continues to trade inside a range for now. A clear break of initial firm resistance at $2,387.8, the Jun 7 high, would be a bullish development. Key resistance is at $2,450.1, the May 20 high.
• Silver was also up by ~3% on Friday, leaving the precious metal 7.7% higher on the week.