• APAC stocks were cautious amid holiday closures and as markets braced for the incoming FOMC announcement.
• European equity futures are indicative of a marginally positive open with Eurostoxx 50 +0.1% after the cash market closed higher by 0.8% yesterday.
• DXY is contained around the 103.50 mark with FX markets largely uneventful overnight. 
• US Secretary of State Blinken is to outline his China policy on Thursday at 11:00EDT/16:00BST.
• Looking ahead, highlights include EZ & US Composite/Services PMI (Final), EZ Retail Sales, US ADP, ISM Services, FOMC Policy Announcement & Fed Chair Powell Conference, OPEC JTC, Germany & US Quarterly Refunding.  Holidays in China & Japan.
• Earnings from Volkswagen, Siemens Healthineers, Ferrari, Moncler, EDF, Telecom Italia, Hugo Boss, Swatch.

US TRADE

• US stocks were choppy throughout the session although the major indices finished marginally higher and the Russell 2000 outperformed with gains led by value stocks.
• SPX +0.5% at 4,175, NDX +0.1% at 13,090, DJIA +0.2% at 33,129, RUT +1.0% at 1,896
• Click here for a detailed summary.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATION/TALKS

• French President Macron told Russian President Putin that he wants to discuss with international organisations the lifting of the Russian embargo on Ukraine and food exports in the Black Sea, while Macron told Putin that a ceasefire was needed in Ukraine, according to Reuters.

DEFENCE/MILITARY/ASSISTANCE

• UK MoD tweeted that Russia has deployed 22 battalion tactical groups near Izium in its attempt to advance along the northern axis of the Donbas. It added that Russia highly likely intends to proceed beyond Izium to capture the cities of Kramatorsk and Severodonetsk, while capturing these locations would consolidate its control of the north-eastern Donbas and provide a staging point for efforts to cut-off Ukrainian forces in the region.
• Evacuations from Mariupol will resume this Wednesday, according to a Twitter source citing the Kyiv Independent.

ENERGY/SANCTIONS/DIPLOMATIC

• EU Commission's sixth Russian sanctions package proposal was understood to have gone to member states, according to WSJ's Norman.
• Some Chinese independent refiners began purchasing Russian oil at steep discounts, according to FT.

OTHER

• North Korea fired an unidentified projectile towards the East Sea. There were also comments from Japan's Coast Guard that the projectile could be a ballistic missile and had already fallen, according to Reuters and Yonhap.

APAC TRADE

EQUITIES

• APAC stocks were cautious amid holiday closures and as markets braced for the incoming FOMC.
• ASX 200 was rangebound as strength in financials was offset by tech and consumer sector losses.
• Hang Seng underperformed amid a tech rout and after a wider than expected contraction in Hong Kong’s advanced Q1 GDP, while China’s COVID-19 woes persisted with Beijing tightening its restrictions.
• US equity futures remained afloat with price action sideways ahead of the anticipated 50bps Fed hike.
• European equity futures are indicative of a marginally positive open with Eurostoxx 50 +0.1% after the cash market closed higher by 0.8% yesterday.

FX

• DXY traded rangebound near 103.50 amid a lack of drivers and with the focus on today’s FOMC meeting where a 50bps hike is expected and balance sheet reduction plans are set to be unveiled.
• EUR/USD was little changed at the 1.0500 handle and with the single currency only briefly supported by comments from ECB's Schnabel who noted the possibility of a rate hike in July.
• GBP/USD remained lacklustre after a failure to hold above 1.2500 while it was also reported that 6 out of 9 of The Times shadow MPC members were calling for a 50bps hike by the BoE this Thursday.
• USD/JPY was rangebound amid the cautious risk tone and with Japanese participants away till Friday.
• Antipodeans initially gained with AUD/USD supported following the stronger than expected Retail Sales data and with Goldman Sachs forecasting the RBA to deliver 50bps hikes in both June and July. However, gains were faded with NZD now softer vs. the USD.

FIXED INCOME

• 10yr UST futures remained subdued after yesterday’s choppy price action and eventual pullback as the yield curve flattened heading into today’s FOMC meeting.
• Bunds languished beneath 153.00 after the prior day’s initial momentum faded and with prices not helped by comments from ECB’s Schnabel who suggested the possibility of a July rate hike.

COMMODITIES

• Crude futures recouped some of the prior day's losses which were spurred by China's ongoing COVID-19 concerns and tighter restrictions in Beijing, with support coming from bullish private sector inventories.
• US Energy Inventory Data (bbls): Crude -3.5mln (exp. -0.8mln), Gasoline -4.5mln (exp. -0.6mln), Distillate -4.5mln (exp. -1.3mln), Cushing +1.0mln.
• Yamal-Europe pipeline gas flows at Mallnow have stopped, according to Gascade data.
• Spot gold traded flat amid a steady greenback as markets await the Fed rate decision.
• Copper was kept afloat but with price action rangebound.

CRYPTO

• Bitcoin notched mild gains and climbed back above the 38,000 level.

NOTABLE HEADLINES

• Beijing closed more than 40 metro stations due to the COVID outbreak, according to Reuters.
• US Secretary of State Blinken is to outline his China policy on Thursday at 11:00EDT/16:00BST.
• RBNZ Financial Stability Report stated the financial system is resilient to heightened challenges and is well placed to support the economy, but also noted that near-term risks to the financial system have increased. RBNZ stated house prices have been declining since November although remain elevated above sustainable levels and a larger correction in house prices remains a possibility, while it added that many businesses will be tested as the broad COVID-19 fiscal support ends, according to Reuters.

DATA RECAP

• Australian Retail Sales MM Final * (Mar) 1.6% vs. Exp. 0.6% (Prev. 1.8%)
• New Zealand HLFS Job Growth QQ* (Q1) 0.1% vs. Exp. 0.1% (Prev. 0.1%)
• New Zealand HLFS Unemployment Rate* (Q1) 3.2% vs. Exp. 3.2% (Prev. 3.2%)

UK/EU

NOTABLE HEADLINES

• ECB's Schnabel said an interest hike in July is possible and that they have to stop high inflation from getting anchored in expectations, while she added asset buying should conclude probably at the end of June and before rate hikes, according to a Handelsblatt interview.
• The Times' shadow MPC favours a 50bps increase to the Bank Rate with 6/9 members voting for an increase to 1.25% from 0.75%.

DATA RECAP

• UK BRC Shop Price Index YY (Apr) 2.7% (Prev. 2.1%)