MNI US Open: NATO Meets, Focus is on Russia & China

NEWS:

JAPAN (MNI): BOJ Sees Gradual Spending Rise, Small Upside Risk
Bank of Japan officials foresee a gradual recovery in private consumption with limited upside risk from increased vaccination rates but they are finding it difficult to predict the pace of the pickup in pent-up demand and its impact on consumer prices, MNI understands. Bank officials expect higher raw material and energy costs as well as supply restrictions to also boost consumer prices although they rule out sharp hikes.

UK (The Times): Easing Of Covid Lockdown Delayed By Four Weeks
The Times reports that "Boris Johnson will appeal to the nation to be patient tomorrow as he announces that the June 21 easing of lockdown restrictions will be delayed by up to four weeks:https://www.thetimes.co.uk/article/june-21-easing-.... The prime minister will use a press conference in Downing Street tomorrow evening to set out the delay as the government attempts to hit its target of offering all adults at least one dose of a vaccination by the end of next month".

NATO (MNI): Leaders Due To Begin Arriving At Brussels Summit-Focus On China, Russia
Leaders are due to begin arriving at today's NATO summit in Brussels, Belgium from 1030CET (0430ET, 0930BST). Several major topics set to be discussed and meetings due to take place. Leaders to discuss Russia at a time when NATO Sec-Gen Jens Stoltenberg has stated that "The relationship between NATO and Russia is at a low point, the lowest point since the end of the Cold War,". Bloomberg reporting that NATO leaders will declare China's foreign policy ambitions as a 'strategic challenge' to the alliance, although this is as-yet unconfirmed.

UK/CHINA (MNI): PM: 'Nobody Needs Cold War w/China, But People See Challenges'
Comments from UK Prime Minister Boris Johnson hitting the wires and social media as the NATO summit in Brussels gets underway. Says that US President Joe Biden will 'deliver some difficult messages to [Russian President Vladimir] Putin in the coming days.' Says that he is 'still optimistic that things can change with Russia' but that so far efforts at improving relations had been 'frustrating' from the UK's view. Outlines that 'nobody needs a new Cold War with China', however adds 'but people see challenges, things we have to manage together, but they also see opportunities'

ECB (MNI): Lagarde Says It's Too Early To Debate The End Of PEPP Purchases
Politico runs an interview with ECB President Christine Lagarde:https://www.politico.eu/article/christine-lagarde-..., who notes that it is still too early to discuss the end of PEPP purchases.

ECB (MNI): Both Holzmann and Simkus say too early to talk about PEPP programme
Both the governors of the Austrian and Lithuanian Central Banks today have said it is too early to talk about an end to the PEPP programme, with Holzmann adding that the ECB are not in a 'dangerous zone' on inflation.

DATA

EZ Industrial Output Sees Sharp Y/Y Bounce
Industrial production rose by a stellar 39.3% year-on-year across the euro area in April, recovering sharply from the numbers posted 12 months ago in the immediate aftermath of lockdowns across large parts of the Continent. On a monthly basis, production rose 0.8%, Eurostat said, building on an upwardly revised 0.4% gains in March. Annual gains were seen in all Eurozone countries, with Italy leading the pack, higher by 79.5%.

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.

FIXED INCOME: Already looking ahead to the Fed

After an Asian session with little liquidity (with much of the region on holiday), cash yields are a bit higher this morning, although futures are only marginally changed.

• Today has a pretty light calendar with the market already starting to look ahead to Wednesday's FOMC meeting.
• ECB's Schabel and BOE's Bailey are both due to speak later (on climate and at a Corporate Treasury event respectively). This morning, Lagarde gave an interview to Politico, although there was little new compared to her comments at the press conference last week.
• The main news of the morning has been the confirmation that NGEU funding will begin tomorrow via syndication with a 10-year bond on offer.
• Later today we should also get confirmation that the next stage of the UK's lockdown easing plan has been delayed by four weeks from 21 June to Monday 19 July. The details will be watched to see if there are any compromises, such as lifting numbers allowed at weddings or sporting events.
• TY1 futures are unch today at 132-27 with 10y UST yields up 0.8bp at 1.461% and 2y yields up 0.2bp at 0.150%.
• Bund futures are up 0.02 today at 172.90 with 10y Bund yields up 0.3bp at -0.271% and Schatz yields unch at -0.687%.
• Gilt futures are down -0.03 today at 128.12 with 10y yields up 0.6bp at 0.713% and 2y yields up 0.6bp at 0.054%.

EQUITIES: Hitting Fresh Highs

• Asian markets (several were closed for holidays) closed higher, with Japan's NIKKEI up 213.07 pts or +0.74% at 29161.8 and the TOPIX up 5.73 pts or +0.29% at 1959.75.
• European equities are hitting fresh highs, with the German Dax up 44.87 pts or +0.29% at 15742.12, FTSE 100 up 23.09 pts or +0.32% at 7157.75, CAC 40 up 21.16 pts or +0.32% at 6622.29 and Euro Stoxx 50 up 12.65 pts or +0.31% at 4140.35.
• U.S. futures have gained slightly, with the Dow Jones mini up 15 pts or +0.04% at 34482, S&P 500 mini up 3.5 pts or +0.08% at 4249.75, NASDAQ mini up 34 pts or +0.24% at 14031.

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