• APAC stocks were pressured after the losses on Wall St where the major indices whipsawed in the aftermath of the firmer than expected US CPI data.
• European equity futures are indicative of a softer open with Eurostoxx 50 -2.3% after the cash market closed with gains of 2.6% yesterday.
• DXY traded indecisively around 104.00, antipodeans lag, USD/JPY is back below 130.00.
• The crypto collapse persisted with Bitcoin breaching the 27,000 level to the downside.
• Looking ahead, highlights include UK GDP, Swedish CPIF, US IJC & PPI, Banxico, IEA OMR & OPEC OMR, Supply from US & Italy.

US TRADE

• US stocks were lower as riskier sectors led the declines that accumulated into the close, while it was a very choppy session in the aftermath of the firmer than expected US CPI data with the tape action seemingly a primary factor of technicals (positioning/flow/light liquidity) than a barometer for fundamentals.
• SPX -1.65% at 3,935, NDX -3.06% at 11,968, DJIA -1.02% at 31,834, RUT -2.48% at 1,718.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed's Bullard (2022 voter, hawk) said the Fed has teed up 50bps hikes for future meetings and feels the goal should be about 3.5% on Fed Funds rate by year-end, while he added that 75bps is not his base case and April inflation data was "hot" but not far from what was expected, according to Reuters.
• Fed's Bostic (2024 voter) said the Fed understands inflation is too high and will act to bring it down, while he added that price pressures will ease if supply-demand gaps narrow and he will support moving rates more if inflation persists.
• Dallas Fed named Lorie Logan as its new president, according to Bloomberg.
• Fed nominee Jefferson secured enough votes in the Senate for confirmation.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukraine Deputy PM said Ukraine has proposed to Russia that wounded defenders in the Azovstal plant be swapped for Russian prisoners of war but no agreement has been reached and talks continue, while they are working on different options to end the siege.
• UK MoD tweeted that UK Defence Minister Wallace held bilateral talks with US Defense Secretary Austin at the Pentagon and discussed the next steps to help Ukraine defend itself against Russian military aggression, while they also discussed AUKUS and NATO.
• Japan and EU statement said that they demand Russia to immediately stop its aggression in Ukraine and they pledge continued broad support to Ukraine. Furthermore, they are concerned about the situation in the South and East China Seas, while they strongly condemn North Korean missile testing.

OTHER

• North Korea said it detected an outbreak of the stealth Omicron virus and its leader Kim ordered a nationwide lockdown, while South Korea is reportedly willing to provide humanitarian assistance to North Korea, according to Reuters and Newsis.

APAC TRADE

EQUITIES

• APAC stocks were pressured after the losses on Wall St where the major indices whipsawed in the aftermath of the firmer than expected CPI data and the DJIA posted a fifth consecutive losing streak.
• ASX 200 was lower amid heavy losses in tech and with financials subdued after flat earnings from Australia’s largest lender CBA.
• Nikkei 225 weakened with attention on earnings updates and with SoftBank amongst the worst performers ahead of its results later with the Co. anticipated to have suffered a record quarterly loss.
• Hang Seng and Shanghai Comp were subdued with early pressure from default concerns after developer Sunac China missed its grace period deadline and warned there was no assurance that the group will be able to meet financial obligations, although the mainland bourse recovered its earlier losses after further policy support pledges by Chinese authorities.
• US equity futures were uneventful overnight and languished near the prior session's lows.
• European equity futures are indicative of a softer open with Eurostoxx 50 -2.3% after the cash market closed with gains of 2.6% yesterday.

FX

• DXY traded indecisively around 104.00 after the recent choppy price action following the firmer than expected US CPI data.
• EUR/USD was lacklustre but with downside stemmed by recent hawkish leaning ECB rhetoric in which Lagarde hinted at a July hike.
• GBP/USD remained pressured as the EU threatens retaliation and is ready to suspend the trade deal if the UK revokes the NI protocol.
• USD/JPY was marginally lower after falling beneath the 130.00 level although losses are contained after the BoJ’s Summary of Opinions kept to a dovish message and noted the expected increase in inflation was driven by temporary factors.
• Antipodeans were pressured amid the downbeat risk tone and despite a jump in New Zealand 1yr inflation expectations.
• CNY continued its weakening trend, while the HKMA intervened in FX to defend the peg for the first time since 2019.

FIXED INCOME

• 10yr UST futures were kept afloat after the prior day’s aggressive curve flattening amid front-loading of Fed hike pricing in the short-end and as longer yields declined, while a disappointing 10yr auction had little sustained impact.
• Bunds held on to gains amid the risk aversion but are off yesterday's highs after hitting resistance around 154.00
• 10yr JGBs kept afloat and largely shrugged off the mostly weaker results from the 30yr JGB auction.

COMMODITIES

• Crude futures were lower amid the risk-aversion and after Shanghai reporting reported virus cases outside of the quarantine zone.
• Iraq Crude Production (Apr.): +282k BPD M/M to 4.43mln BPD, 16k BPD above its OPEC+ quota.
• Spot gold was kept rangebound amid the indecisive mood in the greenback.
• Copper declined in tandem with the pressure across risk assets but with downside stemmed by resilience in China.

CRYPTO

• Bitcoin extended its declines as the crypto collapse persisted with BTC breaching the 27,000 level to the downside.
• European Commission is mulling limits on stablecoin issuances if they become too popular, according to CoinDesk.

NOTABLE HEADLINES

• PBoC Vice Governor Chen said the central bank will step up support for the real economy and that they have guided loan interest rates to decline, while Chen added the priority for the PBoC will be to support growth and will boost support for weak links and targeted areas, according to Reuters.
• China aims to implement existing policies to support the economy in H1 and also looks to incremental policies to support the economy, according to a senior party official cited by Reuters.
• Shanghai found two coronavirus cases outside of the quarantine lockdown zone, according to Bloomberg.
• Sunac China (1918 HK) missed payments due on October 2023 notes and said it missed payments on April 2023, October 2024 and April 2024 notes, while it added that there is no assurance group will be able to meet financial obligations when due or within the grace period citing liquidity constraints, according to Reuters.
• White House circulated a draft executive order that would empower the DoJ to stop transfers of Americans' personal data to foreign adversaries like China, according to Reuters sources. Furthermore, the order would reportedly target federal spending that supports the transfer of US health data to companies tied to foreign adversaries.
• HKMA intervened in the FX market in which it purchased HKD to defend the peg for the first time since 2019, according to Bloomberg.
• BoJ Summary of Opinions from the April meeting stated a weak JPY is positive for the economy when the output gap is still big and trend inflation is very low and noted they must be vigilant to the chance of unexpected tail risk triggered by the Ukraine crisis. It was also stated that Japan's inflation ex-energy remains very low and the situation is different from the US and Europe, while a rise above 2% inflation won't be sustainable and it is hard to achieve the 2% target as the expected rise in inflation is driven by temporary factors. Furthermore, the BoJ must continue to support the economy with powerful monetary easing and it is inappropriate to change monetary policy for the purpose of controlling FX rates and with Ukraine adding to the downside risks for the Japanese economy.
• RBNZ said longer-term inflation expectations remain anchored close to or within the 1%-3% target and that the 1yr inflation expectations rose to a 32-year high, according to Reuters.

DATA RECAP

• New Zealand 1-year Inflation Forecast (Q2) Q1 4.88% (Prev. 4.4%)
• New Zealand 2-year Inflation Forecast (Q2) Q1 3.29% (Prev. 3.27%)
• Australian Consumer Inflation Expectations (May) 5.0% (Prev. 5.2%)

UK/EU

NOTABLE HEADLINES

• UK Chancellor Sunak is preparing a new support package for UK households and is set to outline help this summer when a further rise in energy price caps are due to be unveiled. Furthermore, Sunak is keeping a windfall tax on the UK energy sector as an option to fund the package unless oil companies bring forward new investment plans, according to FT.
• UK could announce tax cuts before the summer recess in end-July as ministers would have enough data on the next Ofgem energy price cap increase by then and would act rather than wait till August, according to Sky News' Sam Coates
• UK Foreign Secretary Truss is set to warn today that the EU has 72 hours to move on its position on the Northern Ireland protocol or the UK government will scrap the protocol, according to The Telegraph.
• EU threatened to retaliate if the UK ditches the Northern Ireland protocol and said renegotiating the protocol is not an option. EU would respond to any unilateral move using legal and political tools available, while EU officials also said tariffs on UK goods are possible but the idea of a trade war with the UK is premature, according to FT.
• European Commission President von der Leyen said the Indo-Pacific is an area of tension and that the EU wants to take a more active role in the region, while she announced the launch of an EU-Japan digital partnership and said they will use their strategic relationship to strengthen and protect supply chains, according to Reuters.

DATA RECAP

• UK RICS Housing Survey* (Apr) 80 vs. Exp. 70.0 (Prev. 74.0)