• APAC stocks traded mixed following the choppy performance on Wall Street.
• Ukrainian gas transit system operator chief said Russian occupying forces started taking transit gas and sending it to pro-Russian separatist regions.
• European equity futures are indicative of a higher open with Eurostoxx 50 +0.9% after the cash market closed with gains of 0.8% yesterday.
• DXY trades a touch softer after stalling ahead of 104.00, antipodeans lead in the G10 FX space.
• Looking ahead, highlights include US CPI, Speeches from Fed's Bostic, ECB's Lagarde, Schnabel, Elderson, de Cos, Centeno, Vasle & Muller, Supply from UK, Germany & US, Earnings from Ubisoft, Siemens Energy, Poste Italiane, E.ON, Continental, ITV, Compass & Beyond Meat.

US TRADE

• US stocks finished mixed on what was another choppy session after lows were made at noon in NY for the major indices before trimming losses.
• SPX +0.26% at 4,001, NDX +1.30% at 12,345, DJIA -0.26% at 32,160, R2K -0.02% at 1,761.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed's Mester (2022, 2024 voter) said they do not rule out a 75bps hike forever and the pace they are going right now seems about right but may need to go further if inflation doesn't ease. Mester expects a quarter or two of negative growth, while she added they do not want to rule anything out on hikes for H2 and that it all depends on the inflation path. Mester also said they will need to see a 'compelling' slowdown of inflation before slowing Fed rate increases and noted inflation risks skewed to the upside which is an argument for doing more 'upfront', according to Bloomberg and Reuters.
• Fed's Waller (voter) said the Fed was not alone in making the wrong call on inflation, while he added inflation is too high and it is his job to get it down. Waller also stated that if they get some help from supply chain resolution, that's fantastic, but he will not count on it.
• Fed's Bostic (2024 voter) reiterated he supports 50bps hikes at the next two or three meetings and that everything is on the table, while he also stated that Fed policy tightening should be strong and steady, according to Yahoo Finance.
• US Senate confirmed Lisa Cook's nomination as a Fed Governor with VP Harris casting the tie-breaker vote, according to NY Times.
• US Treasury Secretary Yellen said the Fed is addressing inflation in a "forceful way", while she added the inflation outlook is uncertain and lockdowns in China are increasing supply chain pressures, according to Reuters.
• US President Biden will speak on price increases on Wednesday at 14:15EDT/19:15BST.

GEOPOLITICS

RUSSIA-UKRAINE

DEFENCE/MILITARY/ASSISTANCE

• US senior official said Russia's invasion of Ukraine's Donbass and south is about two weeks behind schedule, according to a report in the Evening Standard.
• US House voted 368-57 to pass the USD 40bln Ukraine aid bill to send it to the Senate although the Senate may not vote on the plan until next week, according to Fox's Pergram.

ENERGY/SANCTIONS

• Ukrainian gas transit system operator chief said Russian occupying forces started taking transit gas and sending it to pro-Russian separatist regions, according to Reuters.
• Ukraine's Naftogaz said Europe will not be impacted by a force majeure if Russia switches gas transit to a different route, but could fall by a third if Russia does not, according to Reuters.
• Gazprom said it received a notification from Ukraine that it will stop gas transit to Europe via Sokhranivka from 07:00 local time on May 11th and that Ukraine proposed to switch all gas transit to Sudzha, but added that it was "technologically impossible" to shift all volumes to the Sudzha interconnection point, while Gazprom said it saw no proof of a force majeure and no obstacles to continuing gas transit as before, according to Reuters.
• EU Officials are reportedly considering offering Hungary financial compensation, in exchange for joining the EU plan to ban Russian oil imports, according to Politico; however, some nations are reluctant to do this, reportedly concerned over financing the compensation.
• EU Commission will, on Wednesday, outline its plan to assist Ukraine in avoiding the Russian Black Sea blockade of its ports, according to Politico; in order to boost crop exports.

OTHER

• South Korea President Yoon said the security situation is tense amid talk of a potential North Korean nuclear test, while Defence Minister Lee called for a stern response if North Korea provokes, according to Yonhap.

APAC TRADE

EQUITIES

• APAC stocks traded mixed following the choppy performance on Wall Street.
• ASX 200 was subdued and briefly fell below the 7,000 level with sentiment dampened by weak Consumer Confidence data.
• Nikkei 225 swung between gains and losses with the biggest movers driven by recent earnings releases.
• Hang Seng and Shanghai Comp were both initially lacklustre as property developer Sunac faces its grace period deadline for a dollar bond interest payment and with participants digesting the latest firmer than expected CPI and PPI data from China, although Chinese markets then strengthened amid speculation of policy easing in Q2 and positive signs from the COVID situation in Shanghai.
• US equity futures were kept afloat overnight led by continued outperformance in Nasdaq futures.
• European equity futures are indicative of a marginally higher open with Eurostoxx 50 +0.9% after the cash market closed with gains of 0.8% yesterday.

FX

• DXY took a breather from its advances and stalled just shy of the 104.00 handle but with the pullback limited ahead of US CPI data and after the abundance of central bank rhetoric including from Fed’s Mester who left prospects of a future 75bps hike on the table.
• EUR/USD languished near the prior day’s lows but with further downside stemmed after the recent hawkish leaning ECB comments.
• GBP/USD was marginally firmer after rebounding from near 1.2300 although gains are limited by lingering Brexit-related frictions, while NIESR reduced its UK GDP growth forecast for 2022 to 3.5% from 4.8% and sees the UK entering a technical recession in H2.
• USD/JPY traded flat amid the somewhat tentative mood in the region and after its whipsawing yesterday through 130.00.
• Antipodeans gained alongside firmer than expected Chinese inflation data and after New Zealand brought forward its border reopening.

FIXED INCOME

• 10yr UST futures were steady following the prior day’s gains as the 10yr yield sat below 3.0% and with price action in Asia sideways ahead of the key US inflation data.
• Bunds were off this week’s best levels after recently hitting resistance near 153.00 and with the latest comments from ECB officials geared towards addressing inflation.
• 10yr JGBs lacked firm direction with the BoJ only in the market for its daily fixed-rate operations and treasury discount bills.

COMMODITIES

• Crude futures gained with WTI back above USD 100/bbl after reports of no community transmission in half of Shanghai's districts.
• US Energy Inventory Data (bbls): Crude +1.6mln (exp. -0.5mln), Gasoline +0.8mln (exp. -1.6mln), Distillates +0.7mln (exp. -1.3mln), Cushing +0.1mln.
• EIA STEO sees US crude output to rise by 720k BPD to 11.91mln BPD in 2022 (prev. rise of 820k BPD in April) and to rise 940k BPD in 2023 to 12.85mln BPD in 2023 (unchanged M/M).
• UAE and Saudi energy ministers hit back at the ‘NOPEC’ bill and noted that it could send oil prices surging with the UAE energy minister stating it could see oil prices shoot up by as much as 300%, according to CNBC.
• Libyan PM Bashagha announces the success of efforts to reopen the ports and oil fields in Libya, according to Sky News Arabia.
• Brazilian truck drivers are considering a strike from May 21st to stop a 9% rise in diesel prices by Petrobras, according to Estadão.
• Spot gold traded rangebound amid a relatively uneventful dollar ahead of the US inflation data.
• Copper was higher as the risk sentiment improved and amid outperformance in China.

CRYPTO

• Bitcoin was marginally higher overnight and just about reclaimed the 31,000 level.

NOTABLE HEADLINES

• Shanghai's local government said there was basically no COVID community spread in 8 of 16 districts, according to Bloomberg.
• US President Biden said discussions are being held on whether to drop the Trump administration's China tariffs, but no decision has been made yet, according to Reuters.
• New Zealand PM Ardern confirmed New Zealand will fully reopen borders on July 31st which is two months earlier than initially planned, according to NZ Herald.
• South Korea will present an additional budget plan to parliament on Friday, while it was separately reported that President Yoon’s administration is to propose around KRW 35tln extra budget as it seeks to provide relief for pandemic-hit merchants, according to Yonhap.
• South Korea May 1st-10th Exports rose 28.7% Y/Y (prev. 3.0%), Imports rose 34.7% Y/Y (prev. 12.8%) and Trade Balance was at a provisional deficit of USD 3.72bln, according to Reuters.

DATA RECAP

• Chinese CPI YY (Apr) 2.1% vs. Exp. 1.8% (Prev. 1.5%)
• Chinese CPI MM (Apr) 0.4% vs. Exp. 0.2% (Prev. 0.0%)
• Chinese PPI YY (Apr) 8% vs. Exp. 7.7% (Prev. 8.3%)
• Australian Westpac Consumer Confidence Index (May) 90.4 (Prev. 95.8)
• Australian Westpac Consumer Confidence MM (May) -5.6% (Prev. -0.9%)

UK/EU

NOTABLE HEADLINES

• National Institute of Economic and Social Research forecasts UK GDP to contract by 0.2% in Q3 and by 0.4% in Q4, while it lowered its UK 2022 GDP growth forecast to 3.5% from 4.8%, according to Reuters.
• ECB's Villeroy said there is no doubt the ECB will act to ensure price stability and said that governments must tackle debt as rates rise, while he added the ECB must normalise as core inflation is strengthened, according to Bloomberg.