• European bourses are mixed, Euro Stoxx 50 -0.1%, with benchmarks well off lows in a choppy and yield-driven morning; US futures are in-fitting with NQ lagging amid the rate environment
• CAC 40 +0.7% is the notable outperformer amid the first round of the French election where incumbent-Macron came out on top; albeit, polls between him and Le Pen for the run-off are tight
• DXY is off best levels ahead of Fed speak today and CPI Tuesday, JPY remains pressured while EUR is relieved to see Macron ahead
• Crude benchmarks are pressured amid the escalating Shanghai COVID situation offsetting any fresh geopolitical premia
• Russian President Putin is believed to have set himself four weeks to achieve some sort of a victory, ahead of the May 9th Victory Day holiday
• Looking ahead, highlights include Fed’s Williams, Bostic and Evans.

As of 11:20BST/06:20ET

LOOKING AHEAD

• Speeches from Fed’s Williams, Bostic and Evans.
• Click here for the Week Ahead preview.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

• Ukrainian President Zelensky said they should not lose the possibility of a diplomatic solution to the war, while Zelensky separately commented that he is not confident that Ukraine forces will receive what they need from the US to succeed in the war against Russia, according to a CBS ’60 Minutes’ interview.
• Ukraine conducted a prisoner exchange with Russia on Saturday which was the third such swap since the start of the war. It was also reported that there were nine trains available for use for evacuation from the Luhansk region on Sunday, according to the regional governor, who added that more evacuations of people from settlements are needed, according to Reuters.
• Austrian Chancellor Nehammer will travel to Russia on Monday to meet with Russian President Putin following the Austrian Chancellor’s visit to Ukraine over the weekend where he met with Ukrainian President Zelensky, according to Reuters; to speak at 17:00BST following talks. Russian Kremlin adds that Austria requested a closed format and no statement is planned.
• Ukrainian minister Stefanishyna expects Ukraine to be given EU candidate country status in June and said that Ukraine is “ready to move fast” with its application to join the EU, according to REPUBLICWORLD.COM.
• Ukraine Deputy PM says nine humanitarian corridors have been agreed, including Mariupol, via AJA Breaking.

DEFENCE/MILITARY

• Russian President Putin is believed to have set himself four weeks to achieve some sort of a victory in Ukraine before the big Russian “Victory Day” holiday on May 9th, according to The Times on Friday. There were also reports in Axios that the May 9th Russian holiday will be a pivotal and dangerous deadline.
• Russian Ministry of Defence alleged that Kyiv is preparing a mass murder of civilians in Luhansk with support from the West, according to Sputnik.
• Russian Republic of Chechnya head Kadyrov said there will be an offensive not only on Mariupol but on other Ukrainian cities including Kyiv, according to Reuters.
• Ukrainian President Zelensky discussed with German Chancellor Scholz anti-Russian sanctions, as well as defence and financial support for Ukraine. German Chancellor Scholz called for Russia to immediately pull its troops back and said that European borders must remain untouched, while he added that those who committed war crimes must be held responsible and that it is right Germany supplies Ukraine with defence weapons which it will continue doing so, according to Reuters.
• White House National Security Adviser Sullivan said Russia’s systematic targeting of civilians in Ukraine constitutes war crimes and that Russia’s new commander in charge of the Ukrainian invasion, General Dvornikov, will author crimes and brutality against Ukrainian civilians. Sullivan added that they will get Ukraine the weapons it needs and are in talks with European allies about reducing dependence on Russian oil, according to Reuters.
• UK PM Johnson said during a surprise visit to Kyiv that they will intensify sanctions against Russia week by week, while the UK will send 120 armoured vehicles and anti-ship missile systems to Ukraine and will guarantee USD 500mln in World Bank lending to Ukraine, according to Reuters and AFP.
• UK military intelligence said Russian armed forces are seeking to bolster troops with personnel discharged from service since 2012 in response to mounting losses and that efforts to generate more fighting power include trying to recruit from the unrecognised Transnistria region of Moldova. UK military intelligence also noted that Russia’s departure from northern Ukraine left evidence of disproportionate targeting of non-combatants and that Russian forces continue to attack infrastructure targets with a high risk of collateral harm to civilians, according to Reuters.
• European Commission President von der Leyen said the EC wants to pledge EUR 1bln to support Ukraine, according to Reuters.
• EU Foreign Policy Chief Borrell said the EU will soon convene a military committee to discuss the supply of weapons to Ukraine and that they will discuss further steps with EU ministers at the Foreign Affairs Council on Monday.
• Slovakia’s Interior Minister said Slovakia is negotiating with Ukraine on the possible sale of self-propelled howitzers Zuzana and could also send MiG-19 fighter jets to Ukraine although this option is not yet in play, according to Interfax.

ENERGY/ECONOMIC SANCTIONS & UPDATES

• EU member states remain at loggerheads regarding a Russian energy ban with the Hungarian government noting that targeting Russia’s oil and gas exports is a red line, while it was also reported that discussion of a Russian oil ban will only be raised informally for broad discussion during the EU foreign ministers meeting on Monday, according to FT.
• One proposal under consideration, at today's discussion of EU foreign ministers, is some form of tariff on Russian oil, according to Politico citing diplomats; but, sharp divisions remain on the issue.
• Irish Foreign Minister Coveney says the European Commission is working on an oil embargo on Russia, as a part of the potential next sanctions package.
• Hungary says it will not be backing down at today's EU meeting on its refusal to impose sanctions on Russian energy imports, according to Sky News Arabia.
• EU is banning tyre imports from Russia, according to Nokian Tyres.
• EU added Sberbank chief Gref and other oligarchs to its sanctions list on Friday, while Russian President Putin's daughters have also been added to the sanctions list, according to Reuters.
• BaFin ordered VTB Bank Europe not to take instructions from its Moscow-based parent and said VTB Bank no longer has control of its European arm, while savers with VTB Europe continue to have access to their funds, according to Reuters.
• Huawei is reportedly suspending all orders in Russia due to fear of secondary sanctions by the US, according to Game News 24.
• Eastward gas flows via the Yamal-Europe pipeline have increased, via Reuters citing Gascade data.

SOVEREIGN/FUND/OTHER

• Russian Finance Minister said Russia has been fulfilling its foreign debt obligations, according to Sputnik.
• Russia will boost its government reserve fund by RUB 273.4bln or around USD 3.4bln to “ensure the stability of the economy in the face of external sanctions”, according to a Bloomberg report citing the Kremlin.
• World Bank forecasts Ukraine GDP output to shrink by 45.1% this year amid high uncertainty regarding the duration and destruction of the war, while it sees Russia’s economy to contract 11.2% this year, according to Reuters.
• CDS panel has ruled that Russian Railways are in default and as such, contracts for Russian Railways will be triggered and paid out after missing a coupon payment in March, via Bloomberg.

OTHER

• Iranian President Raisi said Iran will not back down one iota from asserting its nuclear rights which should be respected by all parties in Vienna talks and stated that Iran’s nuclear program is solely for peaceful purposes, according to Times of Israel.
• Majority of Iranian parliamentarians in a letter to Iranian President Raisi, demanded legal assurances by Washington with Congress approval that the US will not exit the nuclear deal if it is revived, while they suggested that the trigger mechanism should be arranged to prevent the US from exiting the deal again. Furthermore, they said that Iran should be permitted to export oil to any country and receive money through the banking system, according to Reuters.
• Iranian Foreign Minister said there is no final text of the agreement in Vienna and we will not back down from our red lines, via Al Jazerra; adding, that what remains between Iran and the US is more than one issue.
• Finland’s Centre Party, which is part of the five-party ruling coalition, rallied around a potential NATO membership bid in what is another sign the country is nearing an application to join the alliance, according to Bloomberg.
• China delivered HQ-22 surface-to-air missile systems to Russian ally Serbia in a semi-secret operation during the weekend which was being referred to as a veiled operation, according to the Independent.
• In an apparent show of force to deter potential provocations by North Korea, USS Abraham Lincoln is set to enter the international waters of the East Sea later this week, according to Yonhap sources.

EUROPEAN TRADE

EQUITIES

• European bourses are mixed, Euro Stoxx 50 -0.1%, with benchmarks well off lows in a choppy and yield-driven morning
• The CAC 40 +0.7% is the notable outperformer amid the first round of the French election where incumbent-Macron came out on top; albeit, polls between him and Le Pen for the run-off are tight
• Stateside, US futures are subdued and given the rate environment the NQ -0.7% lags its peers, ES -0.3%
• Click here for more detail.

FX

• Buck off best levels ahead of Fed speakers later today and US CPI data on Tuesday, as DXY slips back below 100.000.
• Yen continues to underperform as BoJ reiterates easy policy stance and only expresses concern about its rate of decline not level, USD/JPY up to fresh 2022 high near 125.50.
• Euro relieved to see French President Macron emerged ahead of Le Pen after round one, EUR/USD reclaims 1.0900+ status.
• Aussie undermined by risk aversion and more resilient Kiwi pre-RBNZ, Loonie contains oil related losses ahead of BoC on Wednesday; AUD/USD sub-0.7450, AUD/NZD under 1.0900 and USD/CAD pivoting 1.2600 as 200 DMA caps upside again.
• Nokkie hit by Brent decline and sub-forecast Norwegian inflation data, EUR/NOK near top of 9.5630-9.4695 range.
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Notable FX Expiries, NY Cut:

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FIXED INCOME

• Yet another dead cat bounce for bonds as the bear run continues, with T-notes down to 119-17 and the 10 year yield topping 2.75% in advance of more Fed rhetoric.
• Bunds probe Fib resistance at 76bp to open scope for a higher retracement level at 81bp ahead of the ECB on Thursday.
• Gilts labour just above 119.00 before UK jobs and earnings tomorrow and inflation on Wednesday.
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COMMODITIES

• WTI and Brent are pressured with focus on the COVID situation in China, specifically Shanghai City
• Currently, the benchmarks lie near session troughs of USD 95.20/bbl and USD 99.79/bbl respectively, as Brent lost the USD 100/bbl handle after slipping from earlier highs of USD 103.30/bbl.
• White House Press Secretary said she is unaware of the US considering an easing of oil sanctions on Venezuela, while the White House said it is continuing to consider a gas tax holiday, according to Reuters.
• Kuwait raised May crude prices to Asia to record levels, according to Reuters citing the pricing document.
• Spot gold is bid and derived impetus from a break of USD 1950/oz, lifting to session highs of USD 1959.40/oz; though, still around USD 5/oz shy of late-March highs.
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FRENCH ELECTION

• French President Macron (27.6%) and far-right Le Pen (23.4%) are set for a run-off in the presidential election on April 24th and all major candidates aside from far-right candidate Zemmour have called for a vote against Le Pen. Furthermore, an IFOP poll showed that Macron would win the second round with 51% of the vote, while Ipsos and Opinionway polls showed Macron would win with 54% vs Le Pen at 46% in the second round, according to Reuters.
• French Election Poll, second round (i.e. run-off): Macron 55% (prev. 54%) vs Le Pen 45% (prev. 46%), Opinionway-Kea partners poll

NOTABLE EUROPEAN HEADLINES

• UK Chancellor Sunak tweeted that he wrote to PM Johnson asking to refer his ministerial declarations to an independent advisor on ministers’ interests, while Sunak said he has always followed the rules and hopes such a review would provide further clarity. There were also prior reports that UK Chancellor Sunak considered resigning last week due to criticism regarding his wife’s tax status, according to the Sunday Times.
• A think tank warned that underlying UK wage growth was lower than headline figures, according to the FT.

NOTABLE DATA

• UK GDP Estimate MM (Feb) 0.1% vs. Exp. 0.3% (Prev. 0.8%); YY (Feb) 9.5% vs. Exp. 9.5% (Prev. 10.0%)
• UK GDP Est 3M/3M (Feb) 1.0% vs. Exp. 0.9% (Prev. 1.1%)

NOTABLE US HEADLINES

• Fed’s Mester (2022, 2024 voter) said it will take some time to reduce inflation and that inflation will likely remain above 2% in 2023, but the trajectory will be lower. Mester added that she is optimistic the Fed can remove emergency levels of accommodation and reduce excess demand without triggering a recession, while she noted there is an increased risk of a recession, but the modal forecast is for the expansion to continue, according to a CBS interview.

CRYPTO

• Bitcoin remains under pressure and in proximity to the overnight sub-USD 42k low
• Elon Musk tweeted that the Twitter Blue subscription price should probably be about USD 2/month and suggested "maybe even an option to pay in Doge?".

APAC TRADE

EQUITIES

• APAC stocks were mostly cautious amid the higher yield environment and COVID-19 woes in China.
• ASX 200 attempted to buck the trend helped by strength in gold-related stocks and the top-weighted financial sector, while M&A newsflow and campaigning ahead of the May 21st election provided mild tailwinds.
• Nikkei 225 was subdued after failing to retain the 27,000 status despite the recent currency weakening.
• Hang Seng and Shanghai Comp underperformed with Hong Kong pressured by weakness in tech and with the mainland suffering from COVID-19 concerns after a fresh record number of daily infections in Shanghai.

NOTABLE APAC HEADLINES

• PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.10% for a net neutral daily position.
• PBoC set USD/CNY mid-point at 6.3645 vs exp. 6.3647 (prev. 6.3563)
• Senior official in Beijing said overall monetary policy in April will be slightly looser than in the previous three months, according to SGH Macro Advisors.
• China has reportedly accelerated its nuclear arsenal build-up due to a change in its assessment of the threat posed by the US, according to WSJ citing people with knowledge of the Chinese leadership’s thinking.
• Shanghai reported 914 new symptomatic and 25,173 new asymptomatic cases for a new record of daily infections on April 10th, according to Reuters. It was separately reported that Shanghai and Guangzhou plan more mass COVID-19 testing, according to Bloomberg.
• Jinshan, Shanghai is publishing a list of residential units which are allowed to ease lockdown restrictions, via Reuters.
• Australian PM Morrison called the federal election to be conducted on May 21st and warned voters not to risk a change to an “uncertain” future under the opposition, according to the Guardian.
• BoJ's Osaka branch manager says it is important for FX rates to move stably and reflect fundamentals.

NOTABLE APAC DATA

• Chinese CPI MM (Mar) 0.0% vs. Exp. -0.1% (Prev. 0.6%); YY (Mar) 1.5% vs. Exp. 1.2% (Prev. 0.9%)
• Chinese PPI YY (Mar) 8.3% vs. Exp. 7.9% (Prev. 8.8%)