US equity futures initially lifted by Apple earnings (outperformance in the Nasdaq 100) before gains were trimmed amid latest Trump/Mueller developments

DXY took a breather from yesterday’s advances but remained above the 92.00 level. EUR/USD and GBP/USD just about held on to the 1.2000 and 1.3600 handles respectively

Looking ahead, highlights include EZ mfg PMIs, UK construction PMI, EZ GDP, US ADP, FOMC, DoEs, US refunding and a slew of speakers

HIGHLIGHTS FROM YESTERDAY/LATE MONDAY FOR EU PARTICIPANTS

Italian President Mattarella has ruled out new elections in June, following the news on Monday that Italy’s 5 Star Movement leader Di Maio called for early elections. (Messaggero)

UK Markit/CIPS Manufacturing PMI (Apr) 53.9 vs. Exp. 54.8 (Prev. 55.1, Rev. 54.9) (Newswires)

UK PM May is reported to be mulling a deal with Brussels that Brexiteers fear could result to ‘EU Mark II’ and make the UK take rules from EU. May has informed ministers that the UK could “potentially” accept an association agreement with the EU, which critics say would make Britain a “rule taker” from Europe (Telegraph) Similar reports suggest that the UK are set to unveil a new proposal to the EU and attempt to overcome the Irish border issue as negotiations resume once again this week.

US President Trump effectively extended tariff relief for EU and other allies for a month to June 1st and is said to finalize agreement to exempt South Korea on steel. The reports stated that US delayed the deadline for decision for EU, Canada and Mexico, while US reached agreements in principle regarding tariffs with Argentina, Australia and Brazil. (WSJ)

Australian RBA Cash Rate (May) 1.50% vs. Exp. 1.50% (Prev. 1.50%). (Newswires) RBA reiterates that steady policy is consistent with growth and inflation targets, while it also repeated that low rates supports the domestic economy and that a stronger AUD would slow economic pick-up. Furthermore, RBA stated that Inflation and wage growth likely to stay low for a while but added that it expects stronger exports.

Israel PM Netanyahu said Iran has been hiding nuclear weapons activity and that Israel can provide “new and conclusive proof” of this, while Netanyahu was also said to seek a vote to enable the Defence Minister to decide on war in extreme circumstances. (Newswires) Iran denied these allegations while the Iranian Foreign Minister tweeted that allegations are old and have already been dealt with by the IAEA. Furthermore, Israeli PM Netanyahu says no one is seeking a war with Iran (Twitter/CNN)

US ISM Manufacturing PMI (Apr) 57.3 vs. Exp. 58.4 (Prev. 59.3) (Newswires)

US ISM Manufacturing Prices Paid (Apr) 79.3 vs. Exp. 78.3 (Prev. 78.1)

US ISM Manufacturing New Orders Index (Apr) 61.2 (Prev. 61.9)

US ISM Manufacturing Employment Index (Apr) 54.2 vs. Exp. 57.0 (Prev. 57.3)

US Construction Spending MM (Mar) -1.7% vs. Exp. 0.5% (Prev. 0.1%, Rev. 1.0%)

ASIA

Asia equity markets eventually saw a broad risk-averse tone despite initially trading mixed throughout most the session following a similar close on Wall St. where stocks rebounded from the initial data-triggered selling pressure and the Nasdaq outperformed in anticipation of Apple earnings. The tech giant eventually reported a beat on EPS, announced a USD 100bln share repurchase authorization and raised dividends by 16%, although it slightly missed on revenue and iPhone sales; shares were higher by around 5% after-market which fuelled further upside in Nasdaq 100 futures to above 6700. US equity futures have since pulled-back from highs amid a bout of selling following reports that Special Counsel Mueller suggested the possibility of a subpoena if President Trump refuses to speak to investigators, although the pressure was suppressed shortly after it was determined this was from a meeting with Trump lawyers back in March. ASX 200 (+0.6%) and Nikkei 225 (-0.2%) traded mixed as earnings dictated price action. Shanghai Comp. (-0.1%) and Hang Seng (-0.6%) traded subdued despite initial gains in mainland on return from the extended weekend as it took its first opportunity to react to better than expected Chinese Official Manufacturing and Non-Manufacturing PMI data. However, the picture then gradually deteriorated following the Caixin Manufacturing PMI which also topped estimates but showed Export Orders shrank for the first time since November 2016. Finally, 10yr JGBs were uneventful amid similar price action in T-notes and as stocks took much of the focus, while the results of an enhanced-liquidity for 2yr-20yr also failed to spur demand.

Chinese Caixin Manufacturing PMI (Apr) 51.1 vs. Exp. 50.9 (Prev. 51.0). (Newswires)

PBoC injected CNY 200bln via 7-day reverse repos for a net neutral position due to maturing repos. (Newswires)
PBoC set CNY mid-point at 6.3670 (Prev. 6.3393); weakest fix since January 25th.

UK/EU

UK PM May is expected to back EU ‘customs partnership’, according to press reports. (FT) However, there were separate reports that UK PM May was warned by 60 Conservative MPs a post-Brexit customs partnership with the EU will result to a collapse of the government. (Telegraph)

UK Brexit Secretary Davis said draft withdrawal text should be available by October, while Davis added that transition period is not up for further negotiation and that future trade agreement must be ‘nailed down’ before transition starts. (Newswires)

UK BRC Shop Price Index (Apr) Y/Y -1.0% (Prev. -1.0%). (Newswires)

FX

The DXY took a breather from yesterday’s advances but remained above the 92.00 level. This provided mild respite for its major counterparts with EUR/USD and GBP/USD just about holding on to the 1.2000 and 1.3600 handles respectively, while the PBoC also adjusted its CNY reference rate to the weakest since January in response to the recent USD advances. Elsewhere, USD/JPY slightly pulled back ahead of the 110.00 level and on the suggested Trump subpoena reports, NZD was choppy around 0.7000 following mixed jobs data, while CAD outperformed in the wake of firmer than expected GDP data and hawkish rhetoric from BoC Governor Poloz.

New Zealand Employment Change (Q1) Q/Q 0.6% vs. Exp. 0.6% (Prev. 0.5%). (Newswires)
New Zealand Employment Change (Q1) Y/Y 3.1% vs. Exp. 3.3% (Prev. 3.7%)
New Zealand Unemployment Rate (Q1) 4.4% vs. Exp. 4.4% (Prev. 4.5%)

BoC’s Poloz reiterated higher rates are warranted over time but some accommodation will still be required, while he also repeated the BoC will proceed cautiously and be guided by incoming data. Furthermore, Poloz added that concern is that interest rates are really low and can’t be described as neutral, while he also stated expect sentiment to improve if NAFTA gets resolved but need to wait and see data before changing inflation outlook. (Newswires)

COMMODITIES 

Commodities found reprieve overnight and nursed some of the prior day’s losses across the complex which were attributed to the advances seen in the greenback. As such, WTI crude futures were mildly higher overnight and back above the USD 67/bbl with a larger than expected build in API crude inventories largely ignored amid fatigue following the prior day’s descent. Elsewhere, short covering was observed in gold as the USD pared some gains and amid an eventual broad-risk averse tone in the region, while copper was also higher with prices supported after its largest consumer China returned from the extended weekend.

US API weekly Crude Stocks (27 Apr) +3.427M vs. Exp. +0.700M (Prev. 1.099M). (Newswires)

US

As US traders returned to their desk following a relatively rangebound overnight session, Treasuries sold-off just before the cash-equity open, as the Greenback strengthened. The yield curve bear-steepened on Tuesday with the 30yr yields higher by c.4bps whilst the 2yr higher by c.2.5bps at settlement. Most of the action was seen in the long-end of the curve, however, despite the bear-steepening, 2s30s and 5s30s modestly narrowed by around 1bps. US 10yr T-Notes futures settle 8 ticks lower at 119-12.

US Special Counsel Mueller suggested the possibility of a subpoena to Trump’s lawyers during a meeting in March if US President Trump declines to speak with investigators in Russia investigation. (Washington Post)

US Trade Representative Lighthizer said he has no idea when we will have a NAFTA deal but added that he would like one within two weeks after the May meeting, while he also noted the tariff issues goes hand in hand with NAFTA negotiations. Lighthizer also said trade deficits do matter and that the US is making progress with EU on metal duties. (Newswires)

White House Trade Advisor Navarro said tariff relief will not be extended again for Canada and Mexico, while he also said all countries which were exempted from steel and aluminium tariffs would still face restrictions including import quotas. (Newswires)

Mexico’s Economy Minister Guajardo said that Mexico will apply reciprocal measures to any metal tariffs from the US and that the country will make sure it is not used as a back door to any nations who want to skirt US tariffs, while Canada’s Foreign Minister Freeland said US metal tariffs will hurt US jobs as well as Canada’s and reiterated that NAFTA and tariffs are separate issues, while she also noted good progress on auto content rules. (Newswires)

Apple (AAPL) reported an EPS of USD 2.73, higher than the expected USD 2.69, revenue was a touch light coming in at 61.14bln against expected USD 61.2bln. However shares surged after market following the announcement of USD 100bln share repurchase programme and a dividend increase of 16%. In terms of unit sales, iPhone sales were a slight miss at 52.2mln, against the expected 53mln whilst iPads and Macs modestly exceeded expectations. Apple traded higher after market by as much as 5%.