MNI US MARKETS ANALYSIS - Oil at New Cycle Highs

US TSYS SUMMARY: Modest Weakness, With FOMC In Mind

Overnight trade has been light and perhaps a bit defensive Monday as we await data and the Fed meeting later in the week.

• Liquidity was thinned in Asia-Pac trading with several Asian markets closed for holiday (TYU1 <150k traded), and there were few if any catalysts for movement in the European session.
• Sep 10-Yr futures (TY) steady at at 132-27 (L: 132-25.5 / H: 132-29.5).
• Curve is mixed: the 2-Yr yield is up 0.4bps at 0.151%, 5-Yr is up 1.1bps at 0.75%, 10-Yr is up 0.8bps at 1.4602%, and 30-Yr is up 0.9bps at 2.1469%.
• The only item on the calendar is 3-/6-M bill auction at 1130ET (combined $111B).
• NY Fed to buy ~$12.425B of 0-2.25Y Tsys.
• MNI's FOMC preview will be published later today.

EGB/GILT SUMMARY: Soft Start

EGBs have broadly traded weaker this morning while equities inch higher.

• Gilts have had a mixed start having opened stronger, selling off and then recovering back towards the Friday close.
• German bonds have weakened with yields now close to unch on the day.
• OAT yields are 1bp higher on the day.
• BTPs have slightly underperformed with cash yields 1-2bp higher.
• Eurozone industrial production data for April came in stronger than expected (39.3% Y/Y vs 37.4% survey).
• Supply this morning came from Germany (Bubills, EUR3.569bn). France will come to market to sell BTFs this afternoon.
• UK PM Boris Johnson is expected to announce a delay to the June 21 reopening later today in a bid to tackle the Delta variant of the coronavirus.

FOREX: GBP Softer as UK Expected to Delay Re-Opening by Four Weeks

• Having initially held up well, GBP is the main laggard across G10 FX ahead of the NY crossover. Markets are responding to further reports that the UK's full economic re-opening is to be delayed by four weeks and pushed back to July 19th from the originally scheduled June 21st. GBP/USD inched to new monthly lows of 1.4071 in response, taking out support at 1.4074 in the process. Eyes turn to 1.4063 as the next level.
• China's CNH is an early underperformer, helping USD/CNH accelerate the recovery off recent lows. The initial move higher coincided with comments from NATO's Stoltenberg, who stated that China's military build-up poses challenges, and that NATO needs to respond together as an alliance to China's rise. USD/CNH rallied to touch new June highs of 6.4197, narrowing the gap with first resistance at the 6.4534 50-dma.
• Tier one data releases are few and far between Monday, with no material releases due across Europe and the US. The speakers slate could garner a little more interest, with comments due from ECB's Schnabel and BoE's Bailey later today.

FX OPTIONS: Expiries for Jun14 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.2150(E1.1bln). $1.2200(E1.3bln-EUR puts)
• USD/CHF: Chf0.8800($600mln-USD puts)
• AUD/USD: $0.7750-65(A$943mln), $0.7940(A$1.3bln-AUD puts)

Price Signal Summary - Gold Probes Support

• In the equity space, sentiment remains bullish. The E-mini S&P (U1) continues to grind higher, confirming once again that the path of least resistance remains up. The focus is on 4264.41, a Fibonacci projection. Further out, the recent break higher also exposes 4300.00. Initial firm support is at 4155.00, Jun 3 low. The broader medium-term trend support is at 4020.00, May 13 low.
• In the space, EURUSD appears vulnerable. The pair has traded either side of the 1.2111 50-day EMA and has briefly shown below the 1.2104 Jun 4 low. This zone represents a key short-term support and a clear break would signal scope for a deeper sell-off. GBPUSD attention is on the key support that lies 1.4006, May 13 low. The 50-day EMA is just above at 1.4037 and also represents a key support. The outlook is bullish while these levels hold. Recent USDJPY weakness resulted in a probe of support at 109.33, Jun 1 low. The pair has since entered a consolidation phase. A break lower would signal potential for a deeper decline and open 108.56, May 25 low. 110.33, Jun 4 high is the bull trigger.
• On the commodity front, Gold has probed support at $1856.2, Jun 4 low. A deeper sell-off would open $1841.6, the 50-day EMA. Trend conditions in oil remain bullish and price continues to trend higher. Brent (Q1) gains have seen the price top $73.00, a round number resistance. The focus is on $74.20, Apr 26, 2019 high (cont). WTI (N1) has also traded higher today as the uptrend extends. The focus is on $72.06, 3.00 projection of Mar 23 - 30 - Apr 5 price swing
• Within FI, Bunds (U1) maintain a bullish tone with the focus on 173.32 next, 76.4% of the Mar 25 - May 19 sell-off. Gilts (U1) cleared 127.74/82 last week, the highs between Apr 20 and May 26. This opens 128.50, 1.00 projection of the May 13 - 26 - Jun 3 price swing.

EQUITIES: Airlines Slip as UK Re-Opening Plans Knocked Back

• Stocks have started the week well, with mainland indices higher by 0.2-0.6% as US futures are similarly in the green. Similarly, US futures are in the green and are indicating a positive open on Wall Street later today.
• The e-mini S&P has hit a new alltime high overnight, with a print of 4256.75. The break higher also exposes 4300.00 next. Initial firm support is at 4155.00, Jun 3 low. The broader medium-term trend support is at 4020.00, May 13 low.
• Across Europe, the energy and tech sectors are outperforming, with strength in crude benchmarks helping buoy oil & gas names. Consumer staples and materials names are the laggards, but both still reside in positive territory.
• UK airlines are among the poorest performers following reports of a four-week delay to the UK's economic re-opening plans. The likes of IAG, Ryanair and easyJet are all lower by 1.5% or more.

COMMODITIES: WTI Moves Well Though $70/bbl; Gold Sinks

• WTI Crude up $0.7 or +0.99% at $71.63
• Natural Gas down $0 or -0.09% at $3.294
• Gold spot down $18.77 or -1% at $1859.17
• Copper down $1.85 or -0.41% at $451.8
• Silver down $0.15 or -0.54% at $27.77
• Platinum down $1.2 or -0.1% at $1149.84