• European bourses, Euro Stoxx 50 -0.3%, are modestly softer after another subdued but limited APAC handover amid ongoing regional closures.
• US futures remain in tight pre-FOMC ranges, with participants also awaiting ISM Services and ADP.
• WTI and Brent are bid amid the EU's 6th round of Russian sanctions, a complete ban on Russian oil.
• However, sources indicate that Hungary and Slovakia will receive an extended phase-out period.
• DXY is anchored pre-Fed while crude-sensitive FX picks up and AUD benefits on data/RBA calls
• EGBs are pressured but well off lows while USTs have lifted to near Unch. territory in a consolidation from the morning's pressure
• Looking ahead, highlights include US Composite/Services PMI (Final), US ADP, ISM Services, FOMC Policy Announcement & Fed Chair Powell Conference, OPEC JTC & US Quarterly Refunding. Holidays in China & Japan

As of 11:20BST/06:20ET

LOOKING AHEAD

• US Composite/Services PMI (Final), US ADP, ISM Services, FOMC Policy Announcement & Fed Chair Powell Conference, OPEC JTC, Germany & US Quarterly Refunding. Holidays in China & Japan
• Click here for the Week Ahead preview

GEOPOLITICS

RUSSIA-UKRAINE

DEFENCE/MILITARY

• Belarus has announced the commencement of emergency military exercises on Wednesday, via journalist Elster; Belarus claims they do not pose a threat to its neighbours.
• Evacuations from Mariupol will resume this Wednesday, according to a Twitter source citing the Kyiv Independent.
• 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.

ENERGY/ECONOMIC SANCTIONS & UPDATES

• EU Commission President von der Leyen says there will be a complete import ban on all Russian oil; seaborne, pipeline, crude and refined. Plans to ban Russia's Sberbank from Swift. Will be a complete import ban on all Russian oil; seaborne, pipeline, crude and refined; halt crude purchases within six months; halt refined fuel purchases by end-2022. Does not mention any exemptions from Russian oil embargo plans.
• Subsequently, Hungary and Slovakia will receive a 'nod' to get the oil embargo through the finish line via a special regime until 2023 for the nations, via Bloomberg sources. (Subsequently echoed by CNBC and Reuters sources).
• EU is reportedly proposing sanctions on the main Belarus potash Co. Belaruskali OAO, via Bloomberg
• 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.

EUROPEAN TRADE

EQUITIES

• European bourses, Euro Stoxx 50 -0.3%, are modestly softer after another subdued but limited APAC handover amid ongoing regional closures.
• US futures remain in tight pre-FOMC ranges, with participants also awaiting ISM Services and ADP.
• In Europe, sectors are mostly lower with the exception
• US President Biden's administration is reportedly moving towards the imposition of human-rights related sanctions on Hikvision, according to FT sources; final decision has not been taken.

Click here for more detail.

FX

• DXY anchored around 103.500 awaiting FOMC and Fed chair Powell for further guidance.
• Aussie gets retail therapy and hawkish RBA rate calls to consolidate gains made in wake of 25 bp hike; AUD/USD pivots 0.7100 and AUD/NZD 1.1050.
• Kiwi elevated following NZ labour data showing record low unemployment and strength in wages, NZD/USD tightens grip of 0.6400 handle and closer to half round number above.
• Loonie on a firmer footing ahead of Canadian trade as oil prices bounce, USD/CAD towards base of a broad 1.2850-00 range.
• Indian Rupee rallies after RBI lifts benchmark rate and reserve ratio at off-cycle policy meeting, former up 40 bp to 4.40% and latter +50 bp to 4.50%.
• Euro, Yen and Franc remain in close proximity of round and psychological numbers, circa 1.0500, 130.00 and 0.9800 respectively.
• RBI raises its key repo rate by 40bps to 4.4% in an off-cycle meeting; Also raises the cash reserve ratio by 50bps to 4.5%. Will retain accommodative policy stands but will remain focused on the withdrawal of accommodation.

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Notable FX Expiries, NY Cut: Click here for more detail.

FIXED INCOME

• Bonds attempt to nurse some losses before FOMC and a busy agenda in the run up, including ADP, Quarterly Refunding details and the services ISM.
• Bunds back from a 152.44 low to 153.00+, Gilts edging towards 118.00 from 117.55 and 10 year T-note fractionally above par within a 118-17+/06 range.
• German Green issuance well received as cover climbs from prior sale and retention dips, albeit with the average yield sharply higher.

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COMMODITIES

• WTI and Brent are bolstered amid the EU unveiling the sixth round of Russian sanctions, seeing a complete import ban on all Russian oil, benchmarks firmer by circa. USD 3.5/bbl
• However, sources indicate that Hungary and Slovakia will receive an extend phase-our period in order to appease their known opposition.
• 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.
• India is looking for Russian oil at under USD 70/bbl on a delivered basis in order to compensate for additional components incl. securing financing, via Bloomberg sources; adding, that India has purchased over 40mln/bbl of Russian crude since late-Feb.
• OPEC+ sees the 2022 surplus at 1.9mln, +600k BPD from the prior forecasts, according to the JTC report.
• Several OPEC+ officials expected the current oil pact to continue, according to Argus Media.
• Spot gold and silver are modestly firmer but within earlier parameters pre-risk events.

Click here for more detail.

NOTABLE EUROPEAN DATA

• UK BRC Shop Price Index YY (Apr) 2.7% (Prev. 2.1%)
• German Trade Balance, EUR, SA (Mar) 3.2B vs. Exp. 9.8B (Prev. 11.5B)
• EU S&P Global Composite Final PMI (Apr) 55.8 vs. Exp. 55.8 (Prev. 55.8); Services Final PMI (Apr) 57.7 vs. Exp. 57.7 (Prev. 57.7)
• EU Retail Sales MM (Mar) -0.4% vs. Exp. -0.1% (Prev. 0.3%, Rev. 0.4%); YY (Mar) 0.8% vs. Exp. 1.4% (Prev. 5.0%, Rev. 5.2%)

NOTABLE EUROPEAN HEADLINES

• ECB's Muller says he sees interest rates increasing as soon as July, via ERR.
• SNB's Maechler says even if market interest rates rise we remain in an accommodative financial environment.
• 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%.
• iPaper's Waugh notes of rumours surrounding a potential UK cabinet reshuffle to try control the narrative ahead of the Queen's speech next week.

NOTABLE US HEADLINES

• Click here for the US Early Morning note.
• Click here for the newsquawk FOMC preview.

CRYPTO

• Bitcoin is bid this morning, in contrast to the recent contained sessions, posting upside in excess of 3.0% on the session; albeit, yet to mount a test of the USD 40k mark.

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.

NOTABLE APAC HEADLINES

• Beijing closed more than 40 metro stations due to the COVID outbreak, according to Reuters.
• Beijing says it is still discovering sporadic COVID community infections; will extend restrictions which were put in place in the holiday period until further notice. Beijing officials will require close contacts to quarantine in central facilities for 10-days, followed by 7-days in home quarantine, via CCTV. Additionally, Shanghai sees a "stable and improving epidemic situation" with daily tally falling below 5,000 with two-thirds of the city's population outside quarantine, according to Global Times.
• 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%)