• European equities (Eurostoxx 55 -0.9%) trade on the backfoot as markets digest the reaction to yesterday's peace talks. 
• Regional CPIs from Germany have seen notable jumps from priors on a M/M and Y/Y basis ahead of the mainland metric at 13:00BST/08:00EDT.
• The DXY has slipped below the 98.00 mark, EUR/USD has gained a firmer footing above 1.11, JPY leads in G10 FX.
• US equity futures are indicative of a softer open with the ES -0.4% after the S&P closed higher by 1.2% yesterday.
• Looking ahead, highlights include German CPI Prelim., US ADP & GDP (Final/Q4), Speeches from Fed's Barkin, Bostic & George.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

• Ukrainian President Zelenskiy said they are not reducing defensive efforts as the Russian army still has significant potential to carry out attacks, according to Reuters.
• Ukraine Deputy PM says three humanitarian corridors have been agreed for evacuations on Wednesday; said Ukraine had requested 97 corridors to be opened in the worst-hit areas. Ukraine Forces warn of danger of Russian ammunition exploding at Chernobyl.
• Ukraine Presidential Adviser says on negotiations, Ukraine has improved its position in all respects.
• Russian Kremlin says Ukraine has begun to put demands down on paper and be more specific which is a positive thing. Not seen anything really promising that looks like a breakthrough, there is a lot of work ahead.

DEFENCE/MILITARY

• Governor of Donestsk region says situation is difficult, shelling is continuing in nearly all cities around the demarcation line.

ENERGY/ECONOMIC SANCTIONS & UPDATES

• Germany declares "Early Warning" stage of gas supply emergency to prepare for possible escalation by Russia; Economy Minister says no current gas supply shortages, gas supplies are safeguarded at the moment. Will not accept any gas contract breaches by Russia. German gas storage is at around 25% capacity - says key question is how full gas capacities will be in the Autumn. EU countries must deal with gas supply issues together.
• US State Department warned that Moscow may detain Americans in Russia, while it issued a Level 4 travel advisory for Ukraine and stated 'do not travel' to Ukraine, according to AFP.
• Russian grain exporters reportedly may request payment in Roubles, according to Kommersant.
• Russian Kremlin says that the idea from lawmakers of asking other nations to pay for a wide range of Russian exports in RUB should be worked on. Will not immediately demand a switch to gas payments in RUB. Changes will be gradual.

OTHER

• Saudi-led coalition announced it is halting military operations in Yemen for the month of Ramadan to help negotiations succeed, with operations halted from this Wednesday, according to the Saudi state news agency.
• China confirms China-EU summit to take place virtually on April 1st; President Xi and Premier Li will attend

EUROPEAN TRADE

EQUITIES

• APAC stocks traded mostly positive following the strong handover from the US. Nikkei 225 was pressured by weaker than expected Retail Sales and as the Yen nursed losses. Hang Seng and Shanghai Comp. were underpinned after continued PBoC liquidity efforts and a deluge of earnings.
• European equities (Eurostoxx 50 -0.8%) are mostly lower as optimism from Ukraine/Russia updates yesterday fades and inflation concerns were further bolstered by regional German CPIs. FTSE 100 (+0.1%) remains afloat following gains in Energy and Basic Resources names.
• Click here for more detail.

FX

• Yen repatriation offsets BoJ yield intervention to keep recovery intact - Usd/Jpy extends sharp retreat to circa 121.31 from 125.10 on Monday.
• Euro inflated by significantly stronger than expected preliminary CPI prints and further EGB/UST yield convergence - Eur/Usd takes out recent peak and probes Fib retracement in decent option expiry zone before fading around 1.1160.
• Kiwi rebounds on strong building approvals and improvements in NBNZ survey readings - Nzd/Usd firmly above 0.6950 and Aud/Nzd back under 1.0800.
• Dollar drifts ahead of ADP and more Fed commentary, with DXY under 98.000.
• Click here for more detail.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1000 (2.44BN), 1.1050-60 (1.8BN), 1.1100 (2.17BN), 1.1150-55 (1.36BN), 1.1195-00 (1.64BN)
• USD/JPY: 122.00-05 (690M), 122.50 (250M), 122.90-00 (1.0BN)
• Click here for more detail.

FIXED INCOME

• Hot inflation readings undermine EZ bonds and prompt more convergence vs Treasuries and Gilts
• BoJ steps up defence of YCC via scheduled and unplanned JGB purchases.
• UST curve tips after mixed 7 year auction ahead of ADP as a proxy for NFP.
• Click here for more detail.

COMMODITIES

• WTI and Brent have continued to pare back some of the aggressive selling pressure seen during yesterday’s session.
• From a technical standpoint, May’22 WTI has made it back up to USD 107.30 vs. yesterday’s peak of USD 107.84, whilst June’22 Brent sits at 113.05 vs. yesterday’s peak of USD 114.83.
• US Energy Inventory Data (bbls): Crude -3.0mln (exp. -1.0mln), Gasoline -1.4mln (exp. -1.7mln), Distillate -0.2 (exp. -1.6mln), Cushing -1.1mln.
• US House Energy and Commerce Committee is to hold a hearing next week with six oil company executives regarding rising gas prices, according to Reuters.
• Germany declares "Early Warning" stage of gas supply emergency to prepare for possible escalation by Russia; says no current gas supply shortages.
• India is to increase natural gas prices for April-Sept to USD 6.10/mmbtu from USD 2.90mmbtu currently, according to Reuters sources.
• Spot gold traded sideways and only marginally benefitted from the weaker greenback.
• Click here for more detail.

NOTABLE EUROPEAN HEADLINES

• ECB's Lagarde says in the short-term will face higher inflation and slower growth. The longer the war goes on, the higher the economic costs will be. Incoming data supports inflation outlook and will conclude APP in Q3.
• ECB's Kazimir says that unless their is a dramatic escalation in the conflict in Ukraine, first rate increase might come towards the end of 2022.
• ECB's Muller says that APP could cease in Q3 and a rate hike could come after that.
• BoE Deputy Governor Broadbent says that it is doubtful whether the UK has experienced an external hit to real national income on this scale. In the near term in the difficult combination of even higher inflation but weaker domestic demand and output growth.

DATA RECAP

• UK BRC Shop Price Index YY (Mar) 2.1% (Prev. 1.8%)
• EU Consumer Confid. Final (Mar) -18.7 vs. Exp. -18.7 (Prev. -18.7)
• EU Cons Infl Expec (Mar) 59.8 (Prev. 37.7)
• EU Selling Price Expec (Mar) 58.1 (Prev. 49.8)
• Spanish HICP Flash YY (Mar) 9.8% vs. Exp. 8.1% (Prev. 7.6%)
• Regional CPIs from Germany have seen notable jumps from priors on a M/M and Y/Y basis ahead of the mainland metric at 13:00BST/08:00EDT.

NOTABLE US HEADLINES:

• Fed's Bostic (2024 voter) said the Ukraine war is impacting inflation and increases uncertainty which is a risk for demand. Bostic stated the Fed is withdrawing policy support to allow the economy to stand on its own but added it could harm the economy if the Fed moves too quickly, while he reiterated that he favours six hikes for 2022.

Click here for the US Early Morning Note

CRYPTO

• Bitcoin is modestly softer but holding on to USD 47k status.

APAC TRADE

EQUITIES

• APAC stocks traded mostly positive amid optimism from Russia-Ukraine talks in which negotiators discussed a ceasefire and with Russia to scale down military activity in Kyiv and Chernihiv, although the US was unconvinced.
• ASX 200 gained on continued tech strength and with consumer stocks helped on Budget support measures.
• Nikkei 225 fell beneath the 28,000 level after weaker than expected Retail Sales and as the Yen nursed losses.
• Hang Seng and Shanghai Comp. were underpinned after continued PBoC liquidity efforts and amid a deluge of earnings including from large banks in which Bank of China and China Construction Bank both topped estimates.

NOTABLE APAC HEADLINES

• PBoC injected CNY 150bln via 7-day reverse repos with the rate at 2.10% for a CNY 130bln net injection.
• PBoC set USD/CNY mid-point at 6.3566 vs exp. 6.3478 (prev. 6.3640)
• Chinese city of Xuzhou has declared a three-day lockdown from Wednesday
• BoJ Governor Kuroda said he discussed a post-COVID global economy, Russia and Ukraine with PM Kishida, as well as talked about the economy and financial markets in Japan and abroad with the PM. Kuroda told Kishida FX moves should reflect economic fundamentals but they did not discuss anything in particular on FX and don't think that a monetary adjustment would have a direct impact on currencies. Furthermore, Kuroda said the yen is weakening but is driven partly by buying the dollar for energy imports and with higher US rates also a factor.
• BoJ announced to buy JPY 600bln in 3yr-5yr JGBs, JPY 725bln in 5yr-10yr JGBs, JPY 150bln in 10yr-25yr JGBs, JPY 100bln in 25yr+ JGBs and JPY 60bln in inflation-indexed JGBs, while it also offered to buy an unlimited amount of 10yr JGBs at a fixed rate of 0.25%. The BoJ later announced an emergency operation to buy JPY 500bln in 5yr-10yr JGBs, JPY 100bln in 10yr-25yr JGBs and JPY 50bln in 25yr+ JGBs, according to Reuters.
• Japan former currency diplomat Shinohara says yen decline reflects economic fundamentals to some extent, moves not very fast; meaningless for Tokyo to conduct yen-buying intervention; intervention will not have lasting effect in reversing weak yen.

DATA RECAP

• Japanese Retail Sales YY (Feb) -0.8% vs. Exp. -0.3% (Prev. 1.6%, Rev. 1.1%)
• New Zealand Building Consents (Feb) 10.5% (Prev. -9.2%, Rev. -8.7%)
• New Zealand NBNZ Business Outlook* (Mar) -41.9% (Prev. -51.8%)
• New Zealand NBNZ Own Activity* (Mar) 3.3% (Prev. -2.2%)