• APAC stocks saw a mixed performance as more markets reopened and trade picked up from the holiday lull.
• European equity futures are indicative of a weaker open with Eurostoxx 50 -0.7% on return from the holiday weekend.
• Ukraine's armed forces command said Russia's main military focus is on taking full control of the Donetsk and Luhansk regions.
• Fed's Bullard refused to rule out a 75bps hike, says Fed needs to raise rates to around 3.5% in 2022.
• DXY pierced 101 to the upside, JPY is the clear laggard in the G10 space, AUD is firmer post-RBA minutes.
• Looking ahead, highlights include US Building Permits & Housing Starts, IMF World Economic Outlook, Speech from Fed's Evans, Supply from Germany, Earnings from L'Oreal, Halliburton, Johnson & Johnson, Netflix & IBM.

US TRADE

US stocks returned from the long weekend in a choppy environment with low volumes amid EU, UK and HK market closures with the major indices finishing somewhat mixed on the session with a slight negative bias.

• SPX +0.00% at 4,392, NDX +0.13% at 13,910, DJIA -0.11% at 34,411, R2K -0.84% at 1,989.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed's Bullard (2022 voter) said inflation is far too high for comfort and Fed has a good plan in place, while he added that market pricing based on anticipated Fed tightening is helping keep inflation under control and is hopeful the balance sheet runoff is to begin at the coming meeting. Bullard added they want to get to neutral rates expeditiously and should try to get above neutral as early as Q3, while the base case is not for more than 50bps at any meeting and they do not want to disrupt markets although need to move quickly and noted that he will not rule out a 75bps increase but it is not the base case. Furthermore, he would be open to a 'reverse twist' but is happy for now to go ahead with a passive runoff for the Fed's balance sheet and said they could reduce the balance sheet faster as a plan B if inflation doesn't decline as hoped, according to Reuters.
• US CDC lifted its COVID "do not travel" recommendations on roughly 90 countries, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

DEFENCE/MILITARY

• Ukraine's Security Council Secretary said Russian forces on Monday tried to break through defences almost all along Donetsk, Luhansk and Kharkiv fronts, while they believe Ukraine forces in Donetsk and Luhansk can withstand this new Russian assault, according to Reuters.
• Ukraine's armed forces command said they see signs that Russia is beginning its new offensive in Eastern Ukraine with Russia's main military focus is on taking full control of the Donetsk and Luhansk regions, according to Reuters.
• Russian Defence Ministry said Russia carried out an airstrike at a logistics centre of the Ukrainian army near Lviv and destroyed foreign-made weapons stored there, according to Tass.
• Russia's Belgorod provincial Governor said a village near the Ukrainian border was struck by Ukraine, according to RIA. However, Sputnik noted that no casualties were reported.

SANCTIONS/ENERGY/OTHER

• White House said US President Biden will hold a call with allies and partners on Tuesday to discuss continued support for Ukraine and efforts to hold Russia accountable, according to Reuters.
• US Treasury Secretary Yellen will urge IMF and World Bank members to raise economic pressure on Russia while mitigating spillover effects, according to Reuters.
• US Deputy Treasury Secretary Adeyemo said the next phase of sanctions on Russia will be to disrupt Russia's military industrial complex and supply chains, while he added that China has in the past continued to follow Western sanctions on Russia, according to Reuters.
  • US said it is to send diplomats back to Ukraine as soon as possible, according to Reuters.

OTHER

• US President Biden’s administration decided to implement a self-imposed ban on the testing of anti-satellite weapons, in part to highlight a Russian test in November that created a dangerous field of space debris, according to NBC citing sources.
• Israel Military noted sirens in Israeli towns outside of Gaza and warned of possible incoming rockets, while an explosion was heard close to the Israel-Gaza border possibly from a rocket interception, according to Israel's Kan Radio. It was later reported that Israel Defense Forces conducted strikes on Gaza following earlier rocket fire, according to Aurora Intel.
• South Korean official said Russian and Chinese military aircrafts entered South Korea's air defence identification zone without prior notice last month ahead of North Korea's long-range missile launch, according to Yonhap. It was also reported that South Korea expects North Korea to test-fire a guided weapon 'soon', according to DONG-A.

APAC TRADE

EQUITIES

• APAC stocks saw a mixed performance as more markets reopened and trade picked up from the holiday lull.
• ASX 200 gained on return from the extended weekend, led by strength in commodity-related sectors and top-weighted financials.
• Nikkei 225 briefly reclaimed the 27k level as continued currency depreciation underscored the Fed and BoJ policy divergence.
• Hang Seng was pressured as it took its first opportunity to react to the PBoC’s underwhelming policy decisions and with tech hit after Shanghai's market regulator summoned 12 e-commerce platforms including Meituan on price gouging during COVID outbreaks.
• Shanghai Comp was choppy as participants mulled over the latest virus-related developments including an increase in Shanghai deaths and the lockdown of five districts in the steel producing hub of Tangshan, although policy support pledges from the PBoC and NDRC ultimately provided a cushion.
• US equity futures notched marginal gains alongside the mostly constructive mood during Asia trade.
• European equity futures are indicative of a weaker open with Eurostoxx 50 -0.7% on return from the holiday weekend.

FX

• DXY remained firm and tested the 101.00 level to print its highest in two years after building upon yesterday’s yield-driven gains.
• EUR/USD fell beneath the 1.0800 handle due to the firmer greenback and after Europe-wide holiday closures.
• GBP/USD was indecisive and traded both sides of the 1.3000 level with pertinent newsflow light.
• USD/JPY continued its ascent and rose above 128.00 to print a fresh near-20yr high despite further jawboning by Japan's Finance Minister Suzuki who suggested the demerits from JPY weakening were greater than merits under the current circumstances.
• Antipodeans were kept afloat after the recent upside in oil prices and with the RBA Minutes providing brief support as it stated that a further increase in inflation was expected and that developments have brought forward the likely timing of a first rate hike.

FIXED INCOME

• 10yr UST futures were marginally higher as yields took a breather from yesterday’s advances despite the latest hawkish rhetoric from Fed’s Bullard who refused to rule out a 75bps increase but noted it was not the base case.
• Bunds resumed their weakening trend on reopen from the extended weekend and briefly declined beneath 154.50.
• 10yr JGBs kept afloat amid firmer demand in the enhanced liquidity auction for longer-dated bonds and with anticipation the BoJ may need to intervene again soon as the 10yr JGB yield sits close to the central bank’s cap.

COMMODITIES

• Crude futures initially extended on recent advances as Libya output/export disruptions add to the supply concerns.
• US total shale regions oil production for May seen +133k BPD at 8.649mln BPD (prev. +129k BPD in April), according to the EIA.
• Spot gold was little changed with the precious metal contained by the mighty dollar.
• Copper was rangebound and held on to yesterday's gains as protests threaten output at Peru's Las Bambas copper mine.
• MMG said protesters at the Las Bambas copper mine alleged a failure to comply with social investment commitments, while it rejected the allegations and noted that Las Bambas will be unable to continue copper output as of April 20th.

CRYPTO

• Bitcoin prices were rangebound overnight with momentum stalling after hitting resistance near the 41,000 level.

NOTABLE APAC HEADLINES

• PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.10% for a CNY 10bln net neutral daily drain.
• PBoC set USD/CNY mid-point at 6.3720 vs exp. 6.3744 (prev. 6.3763)
• Shanghai reported 3,084 (prev. 2,417) new symptomatic cases, 17,332 (prev. 19,831) new local asymptomatic cases and 7 (prev. 3) deaths for April 18th, according to CCTV. China's steelmaking region of Tangshan locked down five districts due to COVID.
• China's NDRC said the economy will be back to normal after COVID-19 is controlled and it called for implementation of supportive policies in catering and retail, while it is to roll out measures in a timely way to keep economic operations within a reasonable range. Furthermore, it is to expand consumption in key sectors and continue to support NEV consumption, as well as step up support for market entities affected by COVID-19 outbreaks and will enhance tools to boost market confidence, according to Reuters.
• RBA Minutes from the April meeting stated that inflation picked up and a further increase was expected with the measure of underlying inflation in the March quarter expected to be above 3%. RBA stated that wage growth also picked up but in aggregate terms, had been below a level likely to be consistent with inflation being sustainably at the target and said the strength of the Australian economy was evident in labour market, while it added that these developments brought forward the likely timing of the first rate increase.
• Japanese Finance Minister Suzuki said JPY weakening brings more demerits than merits under the current circumstances, while he reiterated that FX market stability is important and will continue monitoring FX with a sense of vigilance, according to Reuters.