• Asia-Pac equities initially traded mixed, but sentiment improved; Mainland China was closed whilst Hong Kong outperformed.
• Russian Chief Negotiator said Russia's position on Crimea and Donbas remains unchanged and talks will resume on Monday.
• European equity futures are indicative of a slightly firmer open with the Euro Stoxx 50 future +0.2% after the cash market closed higher by 0.4% on Friday.
• DXY remains above 98.50, EUR/USD was flat on either side of 1.1050, Antipodeans narrowly outperform in the G10 FX space.
• Looking ahead, highlights include EZ Sentix, US Factory Orders, BoE’s Cunliffe, Mann.

US TRADE

• US stocks finished higher on Friday with trade choppy as a new quarter commenced but eyes remained on the inverted yield curve.
• SPX +0.32% at 4,544, NDX +0.15% at 14,861, DJIA +0.40% at 34,818, R2K +0.87% at 2,089.

Click here for a detailed summary.

NOTABLE US HEADLINES

• Tesla (TSLA): Q1 deliveries 310.4k (prev. 308.6k Q/Q; exp. 309-315k).

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

• Russian Chief Negotiator said Russia's position on Crimea and Donbas remains unchanged, a draft peace agreement is not ready and talks will resume on Monday, via Reuters.
• Russian Foreign Ministry spokesperson said Kyiv is attempting to disrupt peace talks.
• SGH Macro Advisors, in a note dated April 1st, suggested it is their understand that Russian Foreign Minister Lavrov conveyed to his Chinese counterpart that “there is still a long way to be walked” to sign a peace treaty between Russia and Ukraine under conditions that are “mutually acceptable”, although a great progress has been made. Lavrov added that Russia does not rule out settlement in Roubles for other commodities if hostility continues from the West. Commodities such as oil, wheat, fertilizer, lumber, and uranium could be affected.
• Russia has requested a US Security Council Meeting to discuss "provocation of Ukrainian radicals", according to Reuters citing Ria.
• Russia's Kremlin repeated that the special military operation in Ukraine will achieve all of its aims, via Reuters.
• US Secretary of State Blinken will travel to Belgium on April 5-7th for a NATO meeting, according to the State Department.

DEFENCE/MILITARY

• Russia has revised its Ukraine war strategy to focus on trying to take control of the Donbas and other regions in eastern Ukraine with a target date of early May, according to several US officials cited by CNN.
• Poland’s Ruling Party leader said Poland would be open to deploying US nuclear weapons in Poland, according to the Jerusalem Post.
• There have been reports via Western media of continued civilian killings by Russia in several cities, particularly in Bucha.
• NATO Secretary General Stoltenberg said what we see in Ukraine is not a real withdrawal by Russian troops, via Reuters.
• Ukraine's 368.5k BPD Kremenchuk oil refinery was completely destroyed during a Russian attack, according to the regional governor.
• UK said a fire has destroyed several oil tanks in the Russian city of Belgorod, close to the border with Ukraine, via Reuters.
• Explosions were heard in Ukraine's city of Odessa, according to a Reuters witness and in the city of Kherson, according to a local media.
• White House said the US is providing Ukraine with supplies in case Russia deploys chemical weapons.

ENERGY/ECONOMIC SANCTIONS

• Russian government spokesperson Peskov said Russia could demand RUB payments for other goods. He added that payment for gas supplies in Russian Roubles will be made from the end of the second half of April, or even early May, according to Reuters.
• EU ambassadors are expected to discuss fresh Russian sanctions on Wednesday, according to FT sources.
• UK PM Johnson said UK is stepping up military support for Ukraine and sanctions on Russia, according to Reuters.
• German Chancellor Scholz said the West will agree on further Russian sanctions in the coming days, according to Reuters.
• EU must discuss import ban on Russian gas deliveries, according to the German Defence Ministry cited by Reuters.
• US Department of Commerce on Friday added 120 Russian and Belarusian entities, largely comprised of companies linked to the military, via Reuters.
• Latvia, Estonia and Lithuania stopped imports of Russian gas from April 1st, according to the FT.
• Shell (SHEL LN) cannot use Gazprom's Rouble payment method due to sanctions, according to Reuters.

OTHER

• A Chinese diplomat, following talks with EU, said China cannot change the EU and the EU cannot change China. China said it is not deliberately circumventing Russian sanctions, via Reuters.
• North Korea continues to develop chemical and biological weapons which together with its nuclear and ballistic missile capabilities pose a serious threat to South Korea and other US allies, according to Yonhap citing US officials on Friday.
• A two-month truce has been announced by the warring sides in Yemen, according to The Guardian.

CENTRAL BANKS

• Fed's Williams (voter) expects a combination of rate hikes and balance sheet reduction to help ease inflation back to 4% this year and closer to 2% in 2024. Williams said balance sheet reduction could begin as soon as May. He added that there are no plans to use the balance sheet for Yield Curve Control, via Reuters. Williams also noted that the USD has proven itself as a safe haven. Williams also suggested that we have not yet seen global risk sentiment much impacted by the Ukraine war.
• Fed's Evans (2023 voter) said raising rates to just under 2.5% by March 2023 gives Fed 'optionality'. He said it is not a big risk if rate-hike path includes 'some' 50bps hikes to get to neutral sooner. He said the latest jobs report is not indicative of overheating and the monthly inflation reports should start to be lower in H2 22, but rhetoric won't change until 2023, via Reuters. Raising rates quickly 'puts a premium on communicating' how far rates may ultimately need to rise, via Reuters.
• Fed's Daly (2024 voter) said the case for 50bps rate hike in May has grown, according to the FT. She added she is more confident that adjusting early would be appropriate.
• ECB's Schnabel said the ECB plans to raise interest rates some time after winding down its bond purchase programme Q3 2022, via Reuters.

APAC TRADE

EQUITIES

• APAC stocks initially traded mixed but later turned mostly higher.
• ASX 200 saw early outperformance as mining names surged, with rising EV sales also boosting some Russia-related metals.
• Nikkei 225 traded flat with a downside bias throughout the session.
• Hang Seng outperformed and was bolstered at the open by Chinese dual-listed stocks, with the tech sector the main beneficiary of the weekend Audit news, whilst gains compounded after HK Chief Executive Lam said she will not seek a second term.
• China on Saturday proposed revising confidentiality rules involving offshore listings, removing a legal hurdle to cooperation on audit oversight while putting the onus on Chinese companies to protect state secrets, via Reuters.
• Mainland China was closed due to a domestic holiday.
• US equity futures kicked off trade relatively flat before drifting lower and holding a downside bias after the first set of APAC cash opens; ES Unch.
• European equity futures are indicative of a slightly firmer open with the Euro Stoxx 50 future +0.2% after the cash market closed higher by 0.4% on Friday.

FX

• DXY gained in early trade and remained north of 98.50 throughout the session following further weekend Fed commentary.
• EUR/USD was flat on either side of 1.1050.
• GBP/USD was similarly uneventful but retained a 1.3100 handle.
• JPY initially outpaced peers but gains later faded as the APAC mood recovered.
• Antipodeans rose to the top of the G10 bunch - aided by gains in some base metals.
• S&P said Turkey long-term LC rating lowered to 'B+' from 'BB-'; FC rating affirmed at 'B+'; outlook remains negative.
• BCB is to continue reducing EUR and USD dollars as reserves, but will keep on increasing CNY as reserves, according to Reuters.

FIXED INCOME

• 10yr UST was softer since the open whilst in terms of cash yields, the 2yr, 3yr, 5yr and 7yr remain above the 10yr and 30yr.
• Bunds futures also held a downside bias but to a lesser magnitude.
• 10yr JGBs were relatively tame during the APAC session.
• BoJ offered to buy JPY 150bln in JGBs up to 1yr, JPY 475bln in 1-3yr (Prev. 450bln), JPY 475bln in 3-5yr (prev. 600bln) and PY 125bln in 10-25yr (prev. 100bln)

COMMODITIES

• WTI and Brent futures saw mild early weakness and have traded sideways since.
• US DoE on Friday announced emergency notice of sale of crude oil to fulfil release from SPR to address the energy price hike.
• Reports on Saturday suggested Gazprom has stopped deliveries of Russian gas to Germany via the Yamal-Europe pipeline. It was then reported Gazprom has booked to pump gas through the Polish section of the Yamal-Europe pipeline on Sunday night to Monday, according to Interfax.
• "A UN-brokered two-month ceasefire in Yemen was broadly holding on its first full day with oil shipments reaching the port of Hodeida", according to The Guardian.
• The Russian Energy Ministry has delayed the publication of March oil output numbers amid technical issues, according to reports.
• Azerbaijan plans to supply 9.5bcm of gas to Italy, according to Interfax.
• ECB rejected the request from energy traders for financial support, according to Reuters.
• Spot gold traded rangebound and remains within recent parameters.
• Copper was marginally softer during APAC trade.
• Indian State has cancelled bids by Adani Enterprises to supply imported coal as prices that were quoted were too high, according to a government official cited by Reuters.

CRYPTO

• Bitcoin was volatile around 46,000 level and Ethereum meandered around 3,500.

NOTABLE APAC HEADLINES

• The Chinese army is sending over 2,000 medical personnel to Shanghai to aid with its COVID outbreak, according to CCTV.
• Hong Kong Chief Executive Lam will not seek re-election, according to NK01.
• South Korea's former PM Han Duck-Soo has been nominated as PM. He said the country needs to take more efforts to curb rising household debt, financial imbalances, and to maintain a trade surplus, according to Reuters.
• Pakistani PM Khan's cabinet has been dissolved and fresh elections will be held in 90 days, according to Reuters.
• Sri Lanka's government imposed a curfew amid the rising domestic unrest, via Reuters.

EUROPE-SPECIFIC HEADLINES

• Hungarian opposition leader has accepted defeat in elections, with PM Orban declaring victory.
• UK government is said to be mulling permanent replacements to programmes that helped banks lend to firms during the pandemic; the scheme is expected to focus on small and medium-sized firms. Sources added focus is on growth of UK business, via FT.