• European bourses began the session lackluster before seeing a marginal pick up amid broader risk-on moves as Ukraine's Zelensky spoke.
• However, this upside was fleeting with bourses and US futures now softer, ES -0.30%, amid reports of EU sanctions touching on energy (via coal)
• DXY remains bid but capped just above 99.00 while AUD outperforms amid RBA implying meetings are live
• Bunds have retreated markedly from initial best levels and after Monday’s upside, OATs underperform as polls imply a tighter Macron-Le Pen race
• WTI and Brent reside towards the top-end of another relatively modest range at this point in the session, awaiting further Ukraine-Russia updates.
• Looking ahead, highlights include US Composite/Services Final PMIs, US ISM Services PMI, Fed's Williams, Brainard, Kashkari & George.

As of 11:10BST/06:10ET

LOOKING AHEAD

• US Composite/Services Final PMIs, US ISM Services PMI, Fed's Williams, Brainard, Kashkari & George.
• Click here for the Week Ahead preview.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

• Ukrainian President Zelensky said he will address the UN Security Council on Tuesday.
• Ukraine President Zelensky has endorsed a delegation to partake in negotiations with Russia re. coordinating/preparing a draft treaty on Ukraine security guarantees, via Ifx.
• Ukraine President says the possibility of holding discussions with Russia is 'very challenging', but he has no other option, via Reuters citing Ukrainian TV.

DEFENCE/MILITARY

• The US successfully tested a hypersonic missile in mid-March but kept it quiet for two weeks to avoid further tensions with Russia ahead of President Biden's trip to Europe, according to CNN sources.
  • Russia's deputy envoy to UN Polyanskiy said AUKUS Provokes new round of arms race, Russia urges US to abandon plans to deploy ground-based missiles in APR, "rejects" possibility of using nuclear weapons in Ukraine, via Sputnik.

ENERGY/ECONOMIC SANCTIONS & UPDATES

• US Treasury will not allow any Dollar-debt payments to be made from Russian government accounts at US financial institutions, according to a spokesperson.
• EU's Dombrovskis said oil and coal sanctions are also an option for new EU measures against Russia, via Reuters.
• Big EU sanctions package against Russia is coming; first tranche will touch on energy (EU coal ban from Russia), if approved, via WSJ's Norman. New bans on export of machinery worth EUR 10bln to Russia, new oligarch hits and family members of Russians, cap on potash imports and finally the transport road freight and vessel restrictions. Will need backing of EU27, which WSJ reporter says may not be easy.

OTHER

• North Korea said that South Korea is not their principal enemy, but if South Korea chooses confrontation, then nuclear forces will carry out their mission, via KCNA.

EUROPEAN TRADE

EQUITIES

• European bourses began the session lacklustre before seeing a marginal pick up amid broader risk-on moves as Ukraine's Zelensky spoke.
• However, this upside was fleeting and bourses are now softer, Euro Stoxx 50 -0.5%; note, the pullback began before, but has been exacerbated by, the latest sanctions updates.
• Sectors, has Energy Names outperforming amid benchmark action while Basic Resources lag awaiting the touted next set of EU sanctions.
• Stateside, US futures have moved directionally in tandem with EZ peers but magnitudes were more contained initially, but have slipped further amid the latest sanctions reports.
• Click here for more detail.

FX

• Aussie rules as RBA removes patience from policy guidance to imply upcoming meetings are live for rate hikes; AUD/USD approaches 0.7650 after round number and Fib resistance (circa 0.7609) breaks.
• Kiwi tags along after BNZ raised its May call for the RBNZ to a 50 bp tightening move from 25 bp previously, NZD/USD probes 0.7000 as AUD/NZD runs into headwinds above 1.0900.
• Dollar underpinned by bear-steepening US Treasury backdrop, but DXY unable to extend much beyond 99.000.
• Swedish Crown bid as another Riksbank member registers concern over inflation and contends that it’s time to re-evaluate policy at the next meeting, EUR/SEK edges close to 10.3000.
• Loonie and Nokkie firm as WTI and Brent crude continue to rebound amidst ongoing geopolitical supply risk; USD/CAD near 1.2450 and EUR/NOK around 9.5300 at one stage
• Japanese Finance Minister Suzuki said they are closely watching FX impact on Japan's economy and must look out for any sharp FX moves.
• Japanese Vice Finance Minister declined to comment on FX intervention, closely watching FX with a sense of urgency.
• Click here for more detail.

Notable FX Expiries, NY Cut:

• Click here for more detail.

FIXED INCOME

• Bonds back in reverse gear after Monday's bounce, with Bunds around 100 ticks off their 159.42 overnight Eurex peak, Gilts 71 ticks below par circa 121.17 and the 10 year T-note closer to 121-22+ than 122-10.
• French OATs underperforming and testing 150.00 support in futures as polls predict a tight run-off between Macron and Le Pen for the Presidency.
• 2026 UK DMO issuance draws decent demand, but tail a tad longer and yield much higher.
• Click here for more detail.

COMMODITIES

• WTI and Brent reside towards the top-end of another relatively modest range at this point in the session, as fundamentals haven't significantly changed and we await Ukraine-Russia updates.
• Thus far, talks are ongoing, Ukraine acknowledges they are very difficult but there is no alternative and Russia continues to pushback on Bucha allegations.
• JP Morgan (JPM) is reportedly mulling its commodity exposure following the nickel episode, according to Bloomberg sources.
• Russia prevented the movement of a ship loaded with Ukrainian wheat after it was bought by Egypt, according to the Embassy of Ukraine in Cairo cited by Al Jazeera.
• Russian oil and gas condensate output is down 4% in early April, according to Interfax.
• Some Japanese aluminium buyers agreed a Q2 premium of USD 172/T, -2.8% QQ, according to Reuters sources.
• Spot gold/silver eased from best amid the initial risk-on action
• Click here for more detail.

CENTRAL BANKS

• The RBA maintained its Cash Rate Target at 0.10% as expected. The statement surprisingly dropped reference to the word "patient". The Board noted inflation has picked up and a further increase is expected. The statement made no explicit mention of rate increases.
• BoJ Governor Kuroda said recent forex moves are somewhat rapid. He added if the rise in long-term rates is rapid, BoJ will offer to buy unlimited amount of 10yr JGBs and it may not necessarily be a "last resort", via Reuters.
• A senior BoJ official said Japanese consumer inflation will likely hover around 2% for some time from April onward, via Reuters.
• A BoK official said upside risks to inflation path has risen since the Feb forecast; will continue to monitor commodities, via Reuters.
• BNZ now expects the RBNZ to hike the OCR by 50bps in May (prev. 25bps) "but, hesitantly, keep April at 25".
• ECB's Rehn says ECB decided to proceed with gradual monpol normalisation in March, but recent inflation rates may give rise to the need for measures to curb inflation more quickly.
• Riksbank's Floden says inflation will be significantly higher than in their latest forecast, will need to re-evaluate monetary policy at the next meeting; risks for persistently high inflation have increased. The domestic economy is in good shape, labour market is strong.

DATA RECAP

• EU S&P Global Composite Final PMI (Mar) 54.9 vs. Exp. 54.5 (Prev. 54.5); Services Final PMI (Mar) 55.6 vs. Exp. 54.8 (Prev. 54.8)
• UK Composite PMI Final (Mar) 60.9 vs. Exp. 59.7 (Prev. 59.7); Services PMI Final (Mar) 62.6 vs. Exp. 61.0 (Prev. 61.0)

NOTABLE US HEADLINES

• Tesla (TSLA) CEO Musk, after purchasing a large stake in Twitter (TWTR), asks via a Twitter Poll whether users would like an "edit" button [for Twitter posts].
• US President Biden is to propose adjustments to the Affordable Care Act to extend subsidies for families, according to WSJ; set to be announced today.
• Click here for the US Early Morning note.

CRYPTO

• Bitcoin is slightly firmer, residing near the top end of a slim USD 46,188-46,889 range.

APAC TRADE

EQUITIES

• APAC stocks traded mixed as the region also observed mass closures.
• Mainland China, Hong Kong, and Taiwan were all closed today due to domestic holidays.
• ASX 200 traded in the green in the run-up to the RBA release but trimmed those gains following the RBA's hawkish hold.
• Nikkei 225 reversed the gains seen at the open amid unfavourable currency dynamics after verbal jawboning from Japanese officials.
• KOSPI traded lacklustre as South Korean March CPI rose at its fastest pace since 2011.

NOTABLE APAC HEADLINES

• China's Shanghai city reported 13,086 new asymptomatic COVID cases for April 4th (vs 8,581 for April 3rd).
• Australia is to speed up the Australian Defence Force's missile strike capabilities.

DATA RECAP

• South Korea CPI Growth Y/Y (Mar) 4.1% vs. Exp. 3.8% (Prev. 3.7%); M/M (Mar) 0.7% vs. Exp. 0.4% (Prev. 0.6%)