• European bourses are mixed, Euro Stoxx 50 -0.6%, following a similar APAC session with impetus from Shanghai's reopening offset by activity data and geopolitics
• Stateside, futures are lower across the board, ES -0.4%, with the NQ marginally lagging as yields lift; Fed's Williams due later before Powell on Tuesday
• Sweden & Finland are moving forward with NATO bids, with Russia pushing back against this; no progress expected today on the EU's 6th sanctions package
• EUR lifted amid commentary from Villeroy on the currency, with the DXY outpacing peers but lower overall amid the Single Currencies weight
• EGBs slip on Villeroy, periphery hit further with the China data weighing while USTs are contained and the curve marginally flatter
• WTI and Brent are pressured and torn between the aforementioned China factors amid geopolitical risk/news; Wheat bolstered by India's export ban
• Looking ahead, highlights include NY Fed Manufacturing, Speeches from Fed’s Williams, BoE's Bailey, Ramsden, Haskel & Saunders

As of 11:10BST/06:10ET

LOOKING AHEAD

• NY Fed Manufacturing, Speeches from Fed’s Williams, BoE's Bailey, Ramsden, Haskel & Saunders
• Click here for the Week Ahead preview

GEOPOLITICS

RUSSIA-UKRAINE

MILITARY/DEFENSIVE

• Ukrainian President Zelensky said the situation in the Donbass region remains very difficult and that Russian forces are still attempting to show they have achieved some sort of victory, according to Reuters.
• Russian Foreign Minister Lavrov claimed the West announced “a total hybrid war” against Russia, while he added it was difficult to predict how long this total war with the West would last, according to Reuters.
• UK MoD said Russian President Putin is likely to have lost a third of his invasion force in Ukraine and that Russia’s offensive in eastern Ukraine had lost momentum and was significantly behind schedule. UK MoD also said the Russian-imposed administration in Kherson announced they will ask Russia to include the Kherson region in the Russian Federation, while the UK MoD added that Russia will almost certainly manipulate the results to show a clear majority in favour of leaving Ukraine if it conducts an accession referendum in Kherson, according to Reuters.
• Ukraine's Kharkiv region governor says Ukrainian troops which are defending Kharkiv have reached the state border with Russia.

ASSISTANCE/NATO

• Ukrainian Foreign Minister Kuleba said he met with US Secretary of State Blinken in Berlin and said that more weapons and other aid are on their way to Ukraine, according to Reuters.
• NATO Secretary General Stoltenberg said Russia’s war in Ukraine is not going as planned and Russia is pulling back from Kharkiv, while he added Ukraine can win this war and that military support for Ukraine should be stepped up. Stoltenberg also said he is confident that allies will look at a NATO membership application from Sweden and Finland in a constructive way and that he is confident they will be able to find an agreement on the membership issue regarding Turkey’s concerns, according to Reuters.
• German Foreign Minister Baerbock said that they must not let down in their military support for Ukraine and stated that NATO’s doors are wide open for Finland and Sweden, while she added Germany will use a fast-track procedure to ratify Finland and Sweden’s NATO membership, according to Reuters.
• Turkish President Erdogan’s top adviser Kalin said Turkey proposed sea evacuations of wounded soldiers from the steel plant in Mariupol. Kalin also said that Turkey is not closing its door to NATO membership bids by Finland or Sweden and said it seeks negotiations with Sweden and others on security concerns, while it added that Sweden and Finland must stop PKK activities and presence on their soil, according to Reuters.
• Finnish President Niinisto said his most recent discussion with Russian President Putin on NATO was calm and cool in which Putin said that he thinks it is a mistake but refrained from making any threats, according to CNN.
• Swedish PM Andersson said they will seek parliamentary support on Monday for their bid to join NATO and there is a good chance that the issue of Turkey’s reservations regarding Swedish membership in NATO, according to Reuters.
• Czech Foreign Minister said they fully support Finland’s and Sweden’s plans to join NATO and said the main priority is to defend the eastern flank of NATO, while the Slovakian Foreign Minister is confident that all 30 member states will back Finland and Sweden joining NATO, according to Reuters.
• Russian Deputy Foreign Minister Grushko said the response to Finland and Sweden joining NATO will depend on what infrastructure NATO would deploy in those countries, while he added that Russia has no hostile intention towards the two countries and that Moscow will take adequate response measures if NATO deploys nuclear forces closer to Russia’s borders, according to RIA.
• US Senate Republican leader McConnell said he expects the procedural vote for the USD 40bln Ukraine aid bill on Monday which would set up the final vote on Wednesday, according to Reuters.

ENERGY/SANCTIONS/ECONOMIC

• G7 Foreign Ministers condemned in the strongest possible terms Russia’s unjustifiable, unprovoked and illegal aggression against Ukraine. G7 will continue to provide military and defence assistance to Ukraine as long as necessary, while they reaffirmed their determination to increase economic and political pressure on Russia and will broaden sanction measures to include sectors that Russia has a particular dependence on. Furthermore, the G7 will expedite efforts to reduce and end reliance on Russian energy supplies as quickly as possible, expressed concern regarding recent attempts to destabilise the Transnistrian region and emphasised support for Moldova, according to Reuters.
• US Secretary of State Blinken said the US is continuing its sanctions, export controls and diplomatic pressure on Russia for as long as necessary, while he added the US is reopening its Embassy and Kyiv and will resume operations very soon, while he had a chance to speak in Berlin with Turkish Foreign Minister Cavusoglu and didn’t want to characterise specifics of the conversation but noted he heard almost across the board support for Finland and Sweden joining NATO, according to Reuters.
• EU is drafting a plan for gas importers to avoid breaching sanctions when purchasing fuel from Russia and still effectively satisfy Russian President Putin’s demand for payment in roubles, according to Bloomberg.
• Lithuanian Foreign Minister says everyone expected that giving Hungary and Slovakia until December 2024 to come off Russian oil would be sufficient, cannot explain why it is not, via WSJ's Norman.
• Russia’s Gazprom said it continues to ship gas to Europe via Ukraine with Sunday volume at 62.7mln cubic metres, according to Reuters.
• Russia is to lower its oil export duty to USD 44.8/t from June 1st, according to reports via Bloomberg.
• Ukraine's gas system operator said the volume of Russian gas nominations at the Sudzha transit point totals 46.80MCM for May 16th vs prev. 64.64MCM the day before, according to Reuters.
• UniCredit and Citigroup are examining asset swaps with Russian financial institutions as western banks exiting the country seek to avoid significant writedowns on their operations, according to a report in FT citing people with knowledge of their plans.
• Russian gas nominations for Slovakia have increased, via Reuters citing operator data; elsewhere, Gazprom continues shipping gas to Europe via Ukraine, Monday's volume 46.8MCM.

OTHER

• Russian Deputy Foreign Minister Ryabkov says the text of the Iranian nuclear deal resumption is almost ready, issue is the political decision, via AJ Breaking.
• Iran notes that Nuclear talks are a few steps ahead following the visit of the EU envoy.

EUROPEAN TRADE

CENTRAL BANKS

• ECB's Villeroy expects a decisive June meeting and an active summer meeting, pace of further steps will account for actual activity/inflation data with some optionality and gradualism; but, should at least move towards the neutral rate. Will carefully monitor developments in the effective FX rate, as a significant driver of imported inflation; EUR that is too weak would go against the objective of price stability.
• ECB’s de Cos said the central bank will likely decide at the next meeting to end its stimulus program in July and raise rates very soon after that, while he added that they are not seeing second-round effects and are monitoring it, according to Reuters.

EQUITIES

• European bourses are mixed, Euro Stoxx 50 -0.6%, following a similar APAC session with impetus from Shanghai's reopening offset by activity data and geopolitics.
• Stateside, futures are lower across the board, ES -0.4%, with the NQ marginally lagging as yields lift; Fed's Williams due later before Powell on Tuesday.
• US players are focused on whether the end-week bounce is a turnaround from technical bear-market levels or not.
• China's market regulator says Tesla (TSLA) has recalled 107.3k Model 3 & Y vehicles, which were made in China.
• JetBlue (JBLU) is to launch a tender offer for Spirit Airlines (SAVE); JetBlue is to offer USD 30/shr, but prepared to pay USD 33/shr if Spirit provides JetBlue with requested data, WSJ sources say.
• Elon Musk tweeted that Twitter’s (TWTR) legal team called to complain that he violated their NDA by revealing the bot check sample size and he also tweeted there is some chance that over 90% of Twitter’s daily active users might be bots.

Click here for more detail.

FX

• Euro firmer following verbal intervention from ECB’s Villeroy and spike in EGB yields EUR/USD rebounds from sub-1.0400 to 1.0435 at best.
• Dollar up elsewhere as DXY pivots 104.500, but Yen resilient on risk grounds as Chinese data misses consensus by some distance; USD/JPY capped into 129.50.
• Franc falls across the board after IMM specs raise short bets and Swiss sight deposits show SNB remaining on the sidelines; USD/CHF above 1.0050 at one stage.
• However, HKMA continues to defend HKD peg amidst CNY, CNH weakness in wake of disappointing Chinese industrial production and retail sales releases.
• Norwegian Crown undermined by pullback in Brent and narrower trade surplus, EUR/NOK over 10.2100.
• SA Rand soft as Gold retreats to test support around and under Usd 1800/oz.
• Loonie slips with WTI ahead of Canadian housing starts, manufacturing sales and wholesale trade, Sterling dips before BoE testimony; USD/CAD 1.2900+, Cable sub-1.2250.

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

FIXED INCOME

• EGBs rattled by ECB rhetoric inferring key policy meetings kicking off in June and extending through summer.
• Bunds down towards 153.00 and 10 year yield back up around 1%, Gilts almost 1/2 point adrift and T-note erasing gains from 12/32+ above par at best.
• Eurozone periphery underperforming with added risk-off angst following much weaker than expected Chinese data.

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COMMODITIES

• WTI and Brent are pressured, but well off lows, and torn between China's lockdown easing and poor activity data amid numerous other catalysts
• Specifically, the benchmarks are around USD 110/bbl and USD 111/bbl respectively,
• Saudi Aramco Q1 net income rose 82% Y/Y to INR 39.5bln for its highest quarterly profit since listing, according to Sky News.
• Saudi Energy Minister says they are going to get to 13.2-13.4mln BPD, subject to what is done in the divided zone, by end-2026/start-2027; can maintain production when there, if the market demands this.
• OPEC+ to continue with monthly output increases, according to Bahrain's oil minister via Reuters.
• Iraqi state-run North Oil Company said Kurdish armed forces took control of some oil wells in northern Kirkuk, according to Reuters.
• Iraq oil minister says they aim to increase oil production to 6mln BPD by end-2027, OPEC is targeting a energy market balance not a price; adding, current production capacity is 4.9mln BPD, will reach 5mln BPD before the end of 2022.
• China is to increase fuel prices from Tuesday, according to China's NDRC; gasoline by CNY 285/t and diesel by CNY 270/t.
• Oman's OQ has invited banks to pitch for roles within a potential IPO of its gas pipeline network, according to Reuters sources.
• India prohibited wheat exports which the world was relying on to ease the supply constraints caused by the war in Ukraine, while it stated that the food security of the nation is under threat, according to Bloomberg; newsflow which lifted CBOT wheat by circa. 5%.
• Spot gold is steady around USD 1800/oz after initial choppiness which saw a USD 1787/oz low print, occurring alongside a jump in yields.

Click here for more detail.

NOTABLE US HEADLINES

• US President Biden tweeted that they are on track to reduce the deficit by USD 1.5tln this year which would be the largest ever one-year reduction.
• Goldman Sachs lowered its US GDP growth forecast for 2022 to 1.6% from 2.2%.
• Click here for the US Early Morning note.

NOTABLE EUROPEAN HEADLINES

• UK PM Johnson is reportedly set to give the green light for a bill on the Northern Ireland protocol, according to the Guardian.
• UK PM Johnson said he hopes the EU changes its position on the Northern Ireland protocol and if not, he must act, while he sees a sensible landing spot for a protocol deal and will set out the next steps on the protocol in the coming days, according to Reuters.
• UK PM Johnson is expected to visit Northern Ireland on Monday for talks with party leaders in an effort to break the political deadlock at Stormont, according to Sky News.
• Irish Foreign Minister Coveney says the EU is prepared to move on reducing checks on goods coming into the region from Britain, via Politico.
• UK Cabinet ministers have turned on the BoE regarding rising inflation, whereby one minister warned that the Bank was failing to "get things right" and another suggested that it had failed a "big test", according to The Telegraph.
• Group of over 50 economists warned that the UK's post-Brexit plans to boost the competitiveness of its finance industry risk creating the sort of problems that resulted in the GFC, according to Reuters.
• European Commission Spring Economic Forecasts: cuts 2022 GDP forecast to 2.7% from the 4.0% projected in February. Click here for more detail.
• German North Rhine-Westphalia state election: CDU 35.7% (+2.7), SPD 26.7% (-4.5), Green 18.2% (+11.8). The worst ever result in this region for Chancellor Scholz's SPD party.

CRYPTO

• FTX founder Bankman-Fried said Bitcoin has no future as a payments network because of its inefficiency and high environmental costs, according to FT.

APAC TRADE

EQUITIES

• APAC stocks traded mixed after disappointing Chinese activity data clouded over the early momentum from Friday’s rally on Wall St.
• ASX 200 was higher as tech stocks were inspired by US counterparts and amid M&A related newsflow with Brambles enjoying a double-digit percentage gain after it confirmed it had talks with CVC regarding a potential takeover by the latter.
• Nikkei 225 kept afloat as earnings releases provided the catalysts for individual stocks but with gains capped by a choppy currency.
• Hang Seng and Shanghai Comp initially gained with property names underpinned after China permitted a further reduction in mortgage loan interest rates for first-time home purchases and with casino stocks also firmer in the hope of a tax reduction on gaming revenue. However, the mood was then spoiled by weak Chinese data and after the PBoC maintained its 1-year MLF rate.

NOTABLE APAC HEADLINES

• PBoC conducted a CNY 100bln in 1-year MLF with the rate kept unchanged at 2.85% and stated the MLF and Reverse Repo aim to keep liquidity reasonably ample, according to Bloomberg.
• Beijing extended work from home guidance in several districts and announced three additional rounds of mass COVID-19 testing in most districts including its largest district Chaoyang, according to Reuters.
• Shanghai will gradually start reopening businesses including shopping malls and hair salons in China's financial and manufacturing hub beginning on Monday following weeks of a strict lockdown, according to Reuters.
• Shanghai city official said 15 out of the 16 districts achieved zero-COVID outside quarantine areas and the city's epidemic is under control but added that risks of a rebound remain and they will need to continue to stick to controls. The official said the focus until May 21st will be to prevent risks of a rebound and many movement restrictions are to remain, while they will look to allow normal life to resume in Shanghai from June 1st and will begin to reopen supermarkets, convenience stores and pharmacies from today, according to Reuters.
• Chinese financial authorities permitted a further reduction in mortgage loan interest rates for some home buyers whereby commercial banks can lower the lower limit of interest rates on home loans by 20bps based on the corresponding tenor of benchmark Loan Prime Rates for purchases of first homes, according to Reuters.
• China's stats bureau spokesman said economic operations are expected to improve in May and that China is steadily pushing forward production resumption in COVID-hit areas, while they expect China's economic recovery and rebound in consumption to quicken but noted that exports face some pressure as the global economy slows, according to Reuters.
• Macau is reportedly considering a tax cut for casinos amid a decline in gaming revenue in which a cut could be as much as 5% off the current 40% levied on casino gaming revenue, according to Bloomberg.
• New Zealand PM Ardern tested positive for COVID-19, according to reports late on Friday.
• Japanese government is expected to put together its first additional budget for FY22/23 worth JPY 2.7tln which will be funded by deficit-covering bonds, according to a draft via Reuters.

NOTABLE HEADLINES

• Chinese Industrial Output YY (Apr) -2.9% vs. Exp. 0.4% (Prev. 5.0%)
• Chinese Retail Sales YY (Apr) -11.1% vs. Exp. -6.1% (Prev. -3.5%)
• Chinese Unemployment Rate (Apr) 6.1% (Prev. 5.8%)