MNI EUROPEAN OPEN: UK Election Delivers Labour Big Majority

US TSYS: Tsys Futures Edge Higher Ahead Of NFP

• Treasury futures opened at lows of the day and have edged higher throughout the session, with TU now trading at 102-04⅜ vs 102-03⅛ lows, while TY is now trading at 109-31 vs a low of 109-28. The moves higher has been attributed to a haven bid as cryptos sell-off, BTC is off about 7%.
• Cash treasury curve is slightly steeper today, although trading at sessions best, the 2y is 1bp lower at 4.693%, the 10y is 0.2bps lower at 4.357% while the 2s10s is +1.263 at -34.080.
• US OIS is now pricing a 65% of a cut in September down from 71% earlier today.
• In the US Presidential race, Biden mentioned "he is not going anywhere", Trump has called for another debate. According to PredictIt, Kamala Harris is is the favored Presidential Nominee for the Democrats at 44% vs 40% for Biden, while the Republicans are the favored party to win at 58% down 1pt over the day.
• looking ahead to US Payrolls due out later today - Nonfarm payrolls are expected to moderate in June after a surprisingly strong May. However, with heightened uncertainty around what’s the genuine pace of employment growth, there could be greater focus on the unemployment rate to assess labor market imbalances - See MNIs Payroll Preview here.
• Later today we have Non-Farms with consensus at 190k down from 272k prior, with expectations the unemployment rate will hold at 4%, while the Fed's Williams to speak.

JGBS: Subdued Session Ahead On US Payrolls

JGB futures are holding stronger, +8 compared to settlement levels.

• Outside of the previously outlined Household Spending data, there hasn't been much in the way of domestic drivers to flag.
• The local calendar will see Leading & Coincident Indices soon.
• Cash US tsys are dealing 1bp richer to 1bp cheaper, with a steepening bias, ahead of tonight’s Non-Farm Payrolls release. Nonfarm payrolls are expected to moderate in June after a surprisingly strong May. However, with heightened uncertainty around what is the genuine pace of employment growth, there could be a greater focus on the unemployment rate to assess labour market imbalances (See MNIs Payroll Preview here)
• Cash JGBs are dealing little changed across benchmarks out to the 30-year. The 40-year yield is 1.6bps higher. The benchmark 10-year yield is 0.2bps lower at 1.079% versus the cycle high around 1.10%.
• Swap rates are slightly lower across maturities, with swap spreads somewhat mixed.
• The local calendar will see Labor & Real Cash Earnings, BoP Current Account Balance and Bank Lending data on Monday, ahead of Money Stock data and 5-year supply on Tuesday.

AUSSIE BONDS: Flat, Typical Pre-US Payrolls Friday

ACGBs (YM flat & XM +1.0) are dealing flat but ranges have been narrow in a typical pre-US Payrolls Friday. The local calendar has been empty so far, with Foreign Reserves data due soon.

• Cash US tsys are dealing flat to 1bp richer, with a steepening bias, ahead of tonight’s Non-Farm Payrolls release. (See MNIs Payroll Preview here)
• Cash ACGBs are flat to 1bp richer, with the AU-US 10-year yield differential at +5bps.
• Swap rates are flat to 1bp lower, with the 3s10s curve flatter.
• Bill strip pricing is flat.
• RBA-dated OIS pricing is little changed across meetings. Terminal rate expectations sit at 4.49%.
• The latest round of ACGB May-28 supply extended the recent trend of firm pricing at ACGB auctions, with the cover ratio rising to 4.0778x.
• QTC priced an A$1.5bn increase of QTC 5.25% 21 Jul-36 bond. The transaction has a re-offer spread of 100bps over the 10-year futures contract, equating to 90.5ps over the ACGB 3.75% 21 April 2037.
• Next week, the local calendar will see Home Loans data on Monday and Consumer and Business Confidence on Tuesday.
• 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: Slightly Richer Ahead Of US Payrolls, RBNZ Policy Decision On Wednesday

NZGBs closed 1-4bps richer, with a flattening bias, ahead of the release of US Non-Farm Payrolls later today. Cash US tsys are dealing flat to 1bp richer, with a steepening bias, after yesterday’s 4^th of July holiday.

• Non-Farm Payrolls are expected to moderate in June after a surprisingly strong May. However, with heightened uncertainty around what is the genuine pace of employment growth, there could be a greater focus on the unemployment rate to assess labour market imbalances - See MNIs Payroll Preview here.
• The NZ Treasury sold $18.2bn worth of bonds this year as of July 4, according to Bloomberg calculations using official data. Issuance was up 68% compared to the same period last year.
• Swap rates are 1-4bps lower.
• RBNZ dated OIS pricing is flat to 1bp firmer across meetings. A cumulative 36bps of easing is priced by year-end.
• Next week, the local calendar is light until the RBNZ’s Policy Decision on Wednesday. A no-change decision is unanimously expected by economists surveyed by Bloomberg. 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.

FOREX: GBP Steady After Strong Labour Victory, USD/JPY Weaker, NFP Coming Up

The USD is tracking lower against all of the G10 currencies, although JPY has seen the strongest gains so far today. The BBDXY index sits back near 1261, off a little over 0.1%. This is fresh lows in the index back to the first half of June.

• GBP/USD has drifted a little higher, last near 1.2770. The election has been won by the Labour party, as many polls suggested. The margin for Labour looks to be around 170 seats, towards the upper end of expectations.
• USD/JPY has been tracking lower for most the session. The pair last around 160.65, up 0.40% in yen terms for the session. There doesn't appear a direct catalyst for this move. Broader USD sentiment is softer, after JPY, CHF is the best performer, up nearly 0.20%. Headlines crossed around extended Bitcoin losses, which may be weighing on broader risk appetite. China equities have also extended their losing streak.
• Earlier data showed weaker household spending for May, dipping close to 2% in y/y terms. Still, other data showed real income growth at multi year y/y highs. Comments from FinMin Suzuki also crossed the wires. The FinMin stated he will watch equity and FX trends with a sense of urgency (per BBG).
• Despite the negative equity trend in some markets, AUD/USD is right around recent highs in the 0.6735/40 region, up a further 0.15%. An iron ore pull back hasn't hurt sentiment so far today.
• The AUD/NZD cross is above 1.1000 as NZD continues to lag A4 gains. NZD/USD is slightly higher, but only as far as 0.6120.
• Looking ahead, UK markets will digest the strong Labour party victory. Before US markets return with the NFP report in focus.

ASIA STOCKS: HK & China Equities Lower On Lack Of Policy Support

China and Hong Kong equities are lower today with Chinese stocks on course to wipe out this year’s gains as investor sentiment weakens ahead of a key policy meeting. The CSI 300 Index dropped as much as 1.3% on Friday, with information technology and consumer discretionary sectors performing the worst. This marks the seventh straight week of losses for the index, the longest downturn since early 2012, with turnover on the mainland at its lowest in nearly a year. the main factors include for soft equities are a weak domestic economy especially the property sector, low expectations for economic support, concerns over European political changes, and potential anti-China actions if Trump is re-elected. Additionally, Chinese EV makers and auto names are lower due to the EU's imposition of provisional tariffs on EVs imported from China.

• Hong Kong equities are lower today, the HSTech Index is down 1.81% and on track to finish the week little changed. Property indices surged higher earlier in the week, although have ended the week on the back foot, with the Mainland Property Index off 1.65% today, while the HS Property Index is down 0.65%, the wider HSI is off 1%.
• China equity markets are also lower today, and are on track to finish the week down 2-4%. The CSI 300 is currently down 1.10%, while small-cap indices the CSI 1000 and CSI 2000 are faring a touch better and trade unchanged for the day although about 3% lower for the week, while the growth focus ChiNext is down 0.25% today and 3.50% lower for the week.
• The European Union is imposing higher customs duties on electric vehicles imported from China, citing unfair government subsidies that allow Chinese carmakers to undercut European rivals, with provisional rates set until a final decision in November. This move aims to protect the European auto industry and jobs while balancing trade practices, amidst concerns of potential retaliation from China and ongoing negotiations for a solution
• The upcoming Third Plenum is expected to focus on reinforcing President Xi Jinping’s long-term goals such as technology self-sufficiency, urbanization, rural reform, and fiscal/tax revamps, rather than introducing major policy changes, amid low investor expectations and ongoing economic challenges, this meeting will run from July 15-18th.
• Looking ahead to next week China CPI & PPI are expected on Wednesday.

ASIA PAC STOCKS: Equities Mixed Ahead Of US Data, Samsung's Earnings Beat Estimates

Asian equities were mixed, with gains in Taiwan and South Korea offset by a selloff in Japanese, Australia and China equities, leading the MSCI Asia Pacific Index to fall 0.2%. Japan's Topix Index ended a five-day winning streak due to a stronger yen, while Hong Kong and Singapore shares also traded lower. South Korean equities were higher after the current account balance swung to a surplus, while Samsung rallied after beating earnings estimates. Investor attention is now on the US nonfarm payrolls data, which could influence the Federal Reserve's rate decisions. Additionally, weaker-than-expected Japanese household spending raises doubts about a potential July rate hike by the BoJ

• Japanese equities initially opened higher with markets hitting new highs, although we have since traded off to trade lower in the region. The strengthening yen has negatively impacted export names. Japanese Finance Minister Suzuki has been out earlier mentioning he will be watching financial moves closing, and referenced stocks for the first time in recent memory. The Topix is trading 0.44% lower, while the Nikkei is down 0.15%
• South Korean stock market has rallied again today, after Samsung reported earnings which beat estimates, while the May current account balance swung to $8.92b surplus. The Kospi is up 1.30%, while the Kosdaq is up 0.90%
• Taiwanese equities are a touch higher today while TSMC trades unchanged. There have been little in the way of headlines in the region today, with focus turning to CPI which is due out a bit later.
• Australian equities are slightly lower today dragged down by weakness in mining and financials stocks. The ASX200 is currently on track for a 0.70% weekly gain. Investors focus will now turn to the US jobs data due Friday for clues on Federal Reserve rate cuts.
• Elsewhere, New Zealand equities are 0.15% higher, Indonesian equities continue their move higher and now trade up 2.10% for the week, Philippines are trading 0.45% higher while Indian equities are 0.30% lower, Singapore equities are 0.70% lower and Malaysian equities are 0.14% lower.

OIL: Tracking Higher For The 4th Straight Week

Oil front month benchmarks have edged away from recent highs. Brent was last near $87.10/bbl, down around 0.30%, but still higher for the week. WTI was near $83.70/bbl, off around 0.20% and likewise is firmer for the week, up +2.65% at this stage. This would leave both benchmarks higher for the fourth straight week.

• Bulls still appear to ascendency from an oil market standpoint. The drop in US stockpiles earlier this week may be a sign of improving demand, with the US summer driving season in full swing. Hurricane Beryl doesn't appear as if it will impact supplies, but it is creating worries over the hurricane season.
• Broader macro trends have also favored oil, with the USD losing ground this week, while US yields have also pulled lower.
• Asian demand remains a worry though, after Aramco cut its selling prices to the region for the second straight month (see this link).
• Middle East tensions are another focus point. Israel/Hamas negotiations continue, with some signs of progress (see this BBG link).
• Levels wise for Brent, late April highs near $89/bbl may be an upside focus point. On the downside, the 20-day EMA is trend higher and last near $85.13.

GOLD: Steady Ahead Of US Payrolls

Gold is 0.2% higher in the Asia-Pac session, after closing little changed at $23567.69 on Thursday. US markets were closed for the 4^th of July holiday.

• Nevertheless, bullion is headed for consecutive weekly gains on firming expectations that the Federal Reserve will cut rates before year-end.
• US Nonfarm payrolls data due later today should help build a clearer picture of the US labour market and the policy outlook for the Federal Reserve.
• Nonfarm payrolls are expected to moderate in June after a surprisingly strong May. However, with heightened uncertainty around what is the genuine pace of employment growth - See MNIs Payroll Preview here
• Swaps traders are pricing around a 70% chance of a rate cut in September.
• Lower rates are typically positive for gold, which doesn’t pay interest.
• According to MNI’s technicals team, gold is in consolidation mode, with initial firm resistance at $2,387.8, the Jun 7 high.