Today is quad-witching opex Friday, and according to JPM, some $1.3 trillion in S&P future will expire. Traditionally quad days are associated with a rise in volatility and a surge in volumes although in light of recent vol trends and overnight markets, today may be the most boring quad-witching in recent history: global stocks have again rebounded from yesterday’s tech-driven losses as European shares rose 0.6%, wiping out the week’s losses.

USD/JPY climbed to two-week high, pushing the Nikkei higher as the BOJ maintained its stimulus and raised its assessment of private consumption without making a reference to tapering plans, all as expected. Asian stocks were mixed with the Shanghai Composite slightly softer despite the PBOC injecting a monster net 250 billion yuan with reverse repos to alleviate seasonal liquidity squeeze, and bringing the net weekly liquidity injection to CNY 410 billion, the highest in 5 months, while weakening the CNY fixing most since May. WTI crude is up fractionally near $44.66; Dalian iron ore rises one percent. Oil rose with metals. Treasuries held losses as traders focused on Yellen hawkish tone.

The MSCI All Country World Index was up 0.2%, and after the latest global rebound, the value of global stocks is almost equal to that of the world’s GDP, the highest such ratio since th great financial crisis, BBG reported.

The key overnight event was the Bank of Japan which concluded the latest round of central bank meetings and maintained its extraordinary stimulus intact. Governor Kuroda calmed market speculation that an exit- plan communication was under way as he noted that the BOJ is only halfway to its inflation target. The yen dropped versus all of its Group-of-10 peers and was down by 0.3 percent to 111.3 per dollar as of 6:00 a.m. EDT.  The euro rose 0.3 percent to $1.1175.

The dollar stood little changed on a weekly basis as demand for its major peers waned given policy makers outside the U.S. showed no intention of altering their monetary stance

European stocks advanced in a broad rally following two days of declines. Investors bought automakers after solid car sales data, while food and beverage makers led the advance which swept across all European industry group, with Nestle S.A. the biggest gainer after it revealed plans to shake up U.S. operations. U.K. retailer Tesco Plc registered its best quarter in seven years. The Stoxx Europe 600 Index rose 0.6 percent as of 9:58 a.m. in London, paring its weekly decline to 0.6 percent. France’s CAC 40 rose 1 percent, the most among European peers, outperforming ahead of the weekend’s election.

As Bloomberg notes, the latest positive change in mood comes at the end of a difficult week for stocks, with the benchmark European index recovering from the lowest close in almost two months. The markets appear to be shacking off bearish sentiment brought about by the Fed’s third interest rate increase since December. In France, newly elected Emmanuel Macron looks set for an historic majority in the National Assembly on Sunday.

In rates, 10Y yields rose one basis point to 2.17% after rising four basis points in the previous session. The rate dropped on Wednesday to 2.13%, the lowest level since November. U.K. benchmark yield advanced three basis points after the BOE surprised the market with an unexpectedly hawkish vote split in yesterday’s MPC decision. The German 2Y yield jumped to the highest level since November, although it still remains deeply in negative territory.

West Texas crude futures rose 0.6 percent to $44.71 a barrel. Oil is down about 2.4 percent for the week. Gold rose 0.1 percent to $1,254.80. The metal is heading for a second weekly loss, falling 0.9 percent. Copper rose 0.1 percent to $5,669 per ton.

Housing starts and Michigan consumer sentiment reports are scheduled to come out in the U.S. on Friday.

Bulletin Headline Summary from RanSquawk

• European equities enter the North American open in positive territory on quadruple witching day with tech names providing support
• A quiet morning in FX land, where we see meandering across the board. There was some early focus on the JPY pairs after the BoJ meeting stuck to the script, but through 111.00, the spot rate is starting to struggle
• Looking ahead, highlights include US housing starts, Uni. Of Michigan and building permits

Market Snapshot

• S&P 500 futures up 0.1% to 2,437.25
• STOXX Europe 600 up 0.6% to 388.26
• MXAP down 0.05% to 153.94
• MXAPJ unchanged at 501.51
• Nikkei up 0.6% to 19,943.26
• Topix up 0.5% to 1,596.04
• Hang Seng Index up 0.2% to 25,626.49
• Shanghai Composite down 0.3% to 3,123.17
• Sensex up 0.1% to 31,119.92
• Australia S&P/ASX 200 up 0.2% to 5,774.03
• Kospi up 0.01% to 2,361.83
• German 10Y yield rose 2.6 bps to 0.308%
• Euro up 0.2% to 1.1171 per US$
• Brent Futures up 0.9% to $47.33/bbl
• Italian 10Y yield rose 2.7 bps to 1.676%
• Spanish 10Y yield rose 4.8 bps to 1.464%
• Brent Futures up 0.9% to $47.33/bbl
• Gold spot up 0.1% to $1,255.04
• U.S. Dollar Index down 0.1% to 97.37

Overnight Top News from Bloomberg

• Mueller said to probe Jared Kushner’s business dealings: Washington Post.
• Trump Faces Yet Another Senate Probe as Judiciary Panel Gears Up
• Trump Said to Announce Ban on Doing Business With Cuban Military
• Eurogroup reaches agreement to approve 8.5 billion euro payout to Greece
• EU, U.K. Brexit negotiations to start on Monday
• BOJ keeps policy unchanged; says consumption has ’increased resilience’
• China’s holdings of U.S. Treasuries rise to six-month high in April
• Info Daily: China must monitor Fed’s balance sheet unwind plan
• Bain, INCJ Said to Offer $19 Billion for Toshiba Chip Unit
• BlackRock, Elliott and Pimco Want These Changes to Finance Rules
• GE’s $31 Billion Hangover: Immelt Leaves Behind Big Unfunded Tab
• U.K. Crohn’s Patients to Get Routine Access to J&J’s Stelara
• European Car Sales Rebounded in May as Economy Buoyed Buyers
• Global Fund Managers Voice Support for China’s MSCI Entry
• Booz Allen Falls 13.8% After Disclosing DOJ Accounting Probe
• Caterpillar Says Three VPs to Retire Amid Rejig
• U.S. Navy Can’t Find Why F-18 Pilots Running Short of Oxygen
• Optical Stocks Fall After Finisar’s 1Q Rev. View Misses Estimate
• N.Y. Subpoenas Fiat Over Possible Use of Diesel Cheating Devices
• Elliott Backs New BHP Chair Ken Mackenzie, Renews Change Call
• Microsoft Must Face Claims Porn Potters Were Traumatized

Asian equity markets were mostly higher after the region shrugged off the negative Wall Street price action, where tech resumed its sell-off and participants pondered over the recent Fed rate hike as well as ongoing political woes. ASX 200 (+0.1%) and Nikkei 225 (+0.8%) gained from the open, with exporter names in the latter underpinned by a weaker currency. Shanghai Comp. (-0.3%) and Hang Seng (+0.3%) were mixed with the mainland underperforming as a firm liquidity operation by the PBoC, was overshadowed by credit bubble concerns. 10yr JGBs were relatively flat with some marginal upside seen throughout the session, while today’s BoJ policy decision also provided no fresh insights with the bank sticking to its policy framework. PBoC injected CNY 30bIn in 7-day reverse repos, CNY 160bIn in 14-day reverse repos and CNY 100bIn in 28-day reverse repos, for a net weekly injection of CNY 410bIn vs. Prey. net drain of CNY 10bIn last week

BoJ kept rates unchanged at -0.1% as expected and maintained QQE with Yield Curve Control as expected via 7¬2 votes. BoJ maintained annual pace of JGB holdings at JPY 80tIn and to target 10yr yields at around 0%, while it also kept its economic assessment unchanged in which it stated that the economy turned to moderate expansion.

Top Asian News

• BOJ Maintains Stimulus as Pressure Rises to Talk About Exit
• Vanke Said in Talks to Join Chinese Consortium in GLP Bidding
• CIMB Hires Credit Suisse’s Jefferi as Investment Bank Deputy CEO
• Indonesian Yields Approach Four-Year Low as Carry Draws Demand
• Buffett’s Favorite Chart Says ‘Have No Fear’ to India Stock Bull
• China’s Steel Mills Still Seen Struggling Even as Margins Climb

European markets have seemingly shrugged off a hawkish, busy week, trading in the green throughout morning trade. Individual stock news has contributed to the bullish open, with positive pre-market figures for Tesco, alongside May’s EU new car registrations bolstering the automobile names. The Tech and Energy sectors outperform, with the former supported by the late buying seen in the US tech names yesterday and the latter has been supported by some oil buying from the USD 44/bbl level. Materials trade in the red following continued selling as a result of yesterday’s reports stating that South African Miners will need to be 30% back owned. Fixed income markets have grinded lower as a result of the risk on sentiment, with some European unification evident, as Greece is said to have reached a bailout deal with creditors with the full disbursement expected at the beginning of July. The biggest mover in the bond markets has been Greek paper, with the 2y trading at its lowest yield level since October 15, further the Greece/Germany lOy spread heading for 532bps then 519bps again

Top European News

• Greece Wins 8.5 Billion Euro Payout as Debt Clarity Deferred
• Tesco Targets Cheaper, Healthier Food to Get Back in the Game
• Brexit Talks To Be Pragmatic, Show Sincere Cooperation: Hammond
• EU May Tweak Resolution Rule Based on Banco Popular: Dombrovskis

In currencies, the Bloomberg Dollar Spot Index fell 0.1 percent, after rising 0.5 percent on Thursday to snap three days of losses. The yen fell 0.4 percent to 111.34 per dollar, after dropping 1.2 percent in the previous session, the most since January.  The euro rose 0.3 percent to $1.1175. A quiet morning in FX land, where we see meandering across the board. There was some early focus on the JPY pairs after the BoJ meeting stuck to the script, but through 111.00, the spot rate is starting to struggle a little with sellers coming in ahead of pre 112.00 offers. EUR/USD has redressed some of the losses seen from the aftermath of the FOMC meeting this week, with ‘over-positioning’ taking its toll with 1.1300 a near term line in the sand. Demand into the lower half of the 1.1100’s has supported for now, with a tentative move on 1.1200 in the making. EUR/GBP is trying to base out also, but is struggling against buyers in Cable who take their lead of the hawkish reflections from the BoE vote split yesterday. 1.2800 looks to be well protected in the meantime, but expect pre 0.8800 to also garner some interest as range trading looks to be the order of the day for the most part.

In commodities, headlines have been thin on the ground this week, with traders taking their cue from the longer-term backdrop(s). This has been headlined by the ongoing drift lower in Oil prices, with recoveries mute as this broad-based selling interest is deterring bargain hunters for now. This looks to be the only major catalyst for a sustained move higher, but with WTI staying below USD45, a move towards USD40 is now widely anticipated. Metals prices have been mixed, but looking at Copper, we see upside levels also contained, with the foray through USD2.60 short lived. On the day, Zinc is outperforming and showing a 1.0%+ gain on the day. Gold prices look to have further to go on the downside if you believe the USD is set to recoup further ground. Technically, USD1225-30 is the next major support point to watch for.

Looking at the day ahead, we’ll receive the May housing starts and building permits data as well as the May labour market conditions index, before ending the week with the flash June University of Michigan consumer sentiment reading. We’ll also hear from the Fed’s Kaplan this evening while EU finance ministers are again due to meet in Luxembourg to discuss economic policy coordination and surveillance. It’s worth noting that on Sunday France will complete the election of its new National Assembly with a second round of voting where Macron is expected to achieve a comfortable legislative majority.

US Event Calendar

• 8:30am: Housing Starts, est. 1.22m, prior 1.17m; MoM, est. 4.1%, prior -2.6%
• 8:30am: Building Permits, est. 1.25m, prior 1.23m; MoM, est. 1.71%, prior -2.5%
• 10am: Labor Market Conditions Index Change, est. 3, prior 3.5
• 10am: U. of Mich. Expectations, est. 87.6, prior 87.7; 1 Yr Inflation, prior 2.6%; 5-10 Yr Inflation, prior 2.4%

DB’s Jim Reid concludes the overnight wrap

It was a twin move lower for markets yesterday as both bonds and equities sold off. With a more hawkish than expected Fed still very much the focus 10y Treasury yields closed last night up nearly 4bps at 2.165% after touching a low of 2.101% on Wednesday morning immediately following the soft inflation data. Yields are now back to within 4bps of where they were prior to that inflation data. Across the curve, after testing the recent lows in spread, the 2y10y spread was also 2bps higher yesterday at 81bps. It was a similar story in Europe with Bunds (+5.6bps) and OATs (+4.5bps) also making near complete u-turns with European supply congestion also playing a part.

Meanwhile it was a weak day for global equities but the S&P 500 (4th down day in 5) pared bigger losses near the open to only close -0.22%. The underperforming Nasdaq (-0.47%) did the same and has now retraced -2.47% in the last week. The Stoxx 600 (-0.39%) and DAX (-0.89%) also finished in the red not helped by a fairly soft day for commodities. WTI Oil (-0.60%) extended declines further below $45/bbl while a softer day for Gold (-0.55%), Copper (-0.67%) and Aluminium (-0.56%) all put pressure on commodity producers.

However the big story yesterday in markets was the BoE meeting. A slightly more hawkish than expected tone saw Gilt yields rise sharply with the 10y rising 10.6bps to 1.029% and more or less completely reversing Wednesday’s rally. Sterling also rallied as much as +0.81% from its lows although it finished the day little changed. As expected, the MPC voted in favour of holding current policy steady however by a more marginal 5-3 split. That meant that 2 members joined Kristin Forbes in voting for a hike – Michael Saunders and Ian McCafferty. DB’s Mark Wall had been of the view going into the meeting that the mix of data – including the aggravated household real income squeeze via the continuation of accelerating CPI inflation and slowing wage inflation – could see the BoE adopt less hawkish rhetoric, however the opposite happened. Instead the BoE was more hawkish than expected and the risks of a rate hike have increased. That said Mark does not think that this surprisingly hawkish outcome means a rate hike is more likely than not. Indeed he notes that how this 5-3 split resolves itself will depend on three things. First, economic momentum. Any sense of disappointment should entrench the majority. Second, the inflation overshoot. More relevant here is wages than sterling and pass-through. The government’s response to (public sector) pay could be particularly important for how this element of the BoE dilemma resolves. The third point is whether or not the replacements for Forbes and Hogg are hawks. Since this was Forbes’ last meeting the vote being carried forward is a less hawkish 5-2. This will make any upcoming BoE speeches important to keep an eye on.

Prior to the BoE we also got May retail sales data in the UK yesterday. Like Wednesday’s wages data the numbers were disappointing with sales including fuel falling more than expected (-1.2% mom vs. -0.8% expected) resulting in the annual rate dropping to just +0.9% yoy from +4.2%. There was similarly disappointing data for sales excluding fuel. Staying with the UK for a second, it’s worth highlighting that yesterday we got confirmation that Brexit talks will begin on Monday with David Davis and Michel Barnier due to open formal negotiations in Brussels. On top of that the UK government confirmed yesterday  that it will press ahead with the State Opening of Parliament next Wednesday. Sky News was reporting yesterday that a deal between the Conservatives and DUP was “95% done”.

Before we go any further we’ve got the final big central bank meeting of the week to recap this morning with the BoJ having just wrapped up. As expected the BoJ kept monetary policy on hold while also sticking to its pledge to keep 10y JGB yields around zero. The ¥80tn target on JGB purchases was also maintained. The Bank also used its policy statement to reiterate that Japan’s economy “has been turning toward a moderate expansion”. The Bank was also upbeat on consumption but there was no mention of any exit guidance, which will likely be the focus of Kuroda’s press conference due to start now.

The Nikkei and Topix are +0.53% and +0.52% respectively although those gains came prior to the meeting outcome and supported by a weaker Yen (-0.22%) while JGB yields are little moved (10y around 0.048%). Bourses elsewhere in Asia are mixed with the Hang Seng (+0.29%) and ASX (+0.33%) up but the Shanghai Comp (-0.17%) and Kospi (-0.05%) weaker.

Moving on. Away from the BoE the other notable update in Europe yesterday was the news that Greece and its creditors have reached a deal on the next stages of its bailout following a finance ministers meeting in Luxembourg last night. A Eurogroup statement after the meeting stated that the deal “paves the way for a successful completion of the second review of the ECM programme” and that a disbursement of €8.5bn is expected to be approved, helping to remove some of the concerns around a heavy debt repayment schedule next month. The deal is expected to include further deferral of EFSF interest and amortization by up to 15 years. The key sticking point over debt relief remains however and while the IMF has agreed to join in principle, a final decision on debt relief is not expected until next year. The IMF’s Lagarde confirmed last night that the deal “allows us to lock in the gains made by Greece in its reforms and it allows for more time for negotiations to be concluded on the required debt relief”.

Away from this, there was a fair bit of data released in the US yesterday and which in summary was mostly a mixed bag. Most of it was focused on the factory sector. Notable was the softer than expected industrial production reading for May (0.0% mom vs. +0.2% expected) following a +1.1% reading in April (revised up one-tenth). Capacity utilization also slipped one-tenth to 76.6% while manufacturing production was revealed as falling -0.4% mom (vs. +0.1% expected). June data was a bit more optimistic however. The empire manufacturing reading rose 20.8pts to 19.8 and well ahead of expectations (5.0 expected) – it was also the best reading since September 2014. Meanwhile the Philly Fed manufacturing index slipped 11.2pts but still came in at an elevated and better than expected 27.6 (vs. 24.9 expected). Away from this the NAHB housing market index for June declined 2pts to 67. Initial jobless claims fell a further 8k last week to 237k while finally the import price index reading for May fell -0.3% mom reflecting some of the weakness in energy prices.

Looking at the day ahead, this morning in Europe the main focus will be on the final May CPI readings for the Euro area. Q1 wages data in France will also be released. This afternoon in the US we’ll receive the May housing starts and building permits data as well as the May labour market conditions index, before ending the week with the flash June University of Michigan consumer sentiment reading. We’ll also hear from the Fed’s Kaplan this evening while EU finance ministers are again due to meet in Luxembourg to discuss economic policy coordination and surveillance. Before we wrap up it’s worth noting that on Sunday France will complete the election of its new National Assembly with a second round of voting where Macron is expected to achieve a comfortable legislative majority. We’ll have a full wrap-up of that in Monday’s EMR.