• European bourses are rangebound and relatively directionless, Euro Stoxx 50 U/C, taking impetus from a mixed  APAC session which failed to sustain US upside.
• DXY supported, but off best, as GBP slips on marginally sub-forecast CPI while EUR fails to derive support from ECB officials repeating summer guidance
• Gilts the noted outperformer post-CPI, lifting Bunds and USTs with them initially, though the latter two have failed to sustain such impetus
• Crude benchmarks are modestly firmer after a lower settlement, with focus on the narrowing spread; while gold is bid but capped by USD
• US assessed that North Korea could be preparing to conduct an ICBM test within the next few days as US  President Biden travels to Asia, according to CNN
• Looking ahead, highlights include US Building Permits/Housing Starts, Canadian CPI, Speech from Fed's Harker, Supply from the US, and Earnings from Cisco.

As of 11:20BST/06:20ET

LOOKING AHEAD

• US Building Permits/Housing Starts, Canadian CPI, Speech from Fed's Harker, Supply from the US, Earnings from Cisco & Target.
• Click here for the Week Ahead preview

GEOPOLITICS

RUSSIA-UKRAINE

• European Commission will unveil a EUR 210bln plan on Wednesday regarding how Europe can end its reliance on Russian fossil fuels by 2027, according to Reuters.
• Russian Finance Minister Siluanov says the nation is not going to call itself in default as has money to pay; will service external debt in RUB if the US block other options.
• Russian Kremlin says there is no movement in peace talks with Ukraine; Ukraine is showing total lack of will to continue.

OTHER

• US assessed that North Korea could be preparing to conduct an ICBM test within the next few days as US President Biden travels to Asia, according to CNN.
• South Korea's Deputy National Security Advisor says a N. Korea ICBM test is imminent, but they are unlikely to do so this weekend; summit between Yoon and Biden will focus on developing a strategic alliance; South Korea and the US aim to normalise joint military drills this year.

EUROPEAN TRADE

CENTRAL BANKS

• ECB's Rehn says June forecasts are seen near the adverse scenario from March, first rate increase will likely take place in the summer. Many colleagues back stance for quick moves.
• ECB's de Cos says the end of APP should be finalised early in Q3, first hike shortly afterwards. Further rises could be made in subsequent quarters of medium-term outlook remains around target; the build-up of price pressures in EZ in recent months raises the likelihood of second-round effects, which have not strongly materialised.

EQUITIES

• European bourses are rangebound and relatively directionless, Euro Stoxx 50 U/C, taking impetus from a mixed APAC session which failed to sustain US upside.
• Stateside, futures are modestly softer and a firmer Wall St. close; ES -0.2%. Limited Fed speak due and near-term focus on retail earnings.
• Tencent (0700 HK) Q1 2022 (CNY): adj. net profit 25.5bln (exp. 26.4bln), Revenue 135.5bln (exp. 141bln)
• Lowe's Companies Inc (LOW) Q1 2023 (USD): EPS 3.61 (exp. 3.22/3.23 GAAP), Revenue 23.70bln (exp. 23.76bln). SSS: Lowe's Companies: -4.0% (exp. -2.5%); Lowe's Companies (US): -3.8% (exp. -3.7%). -0.2% in the pre-market

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FX

• Sterling slides to the bottom of the major ranks as fractionally sub-forecast UK CPI dampens BoE rate hike expectations; Cable reverses from just over 1.2500 to sub-1.2400, EUR/GBP nearer 0.8500 after dip below 0.8400 only yesterday.
• Hawkish Fed chair Powell helps Buck bounce ahead of US housing data, DXY towards the upper end of 103.770-180 range.
• Aussie hampered by softer than expected wage metrics that might convince the RBA to refrain from 40bp hike in June, AUD/USD heavy on the 0.7000 handle.
• Yen relatively resilient in wake of Japanese GDP showing less contraction in Q1 than feared, USD/JPY closer to 129.00 than 129.50.
• Euro loses momentum irrespective of comments from ECB’s Rehn echoing Summer rate hike guidance as final Eurozone HICP is tweaked down, EUR/USD fades from 1.0550+ to test support around 1.0500.
• Loonie treads cautiously before Canadian inflation metrics as oil prices come off the boil, USD/CAD back above 1.2800 within 1.2795-1.2852 range.

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

FIXED INCOME

• Gilts sharply outperform as UK CPI falls just shy pf consensus and dampens BoE tightening expectations.
• 10 year UK bond rebounds towards 119.50 from sub-119.00 lows, while Bunds lag below 152.50 and T-note under 119-00.
• Record high cover for 2052 German auction and low retention sets high bar for upcoming 20 year US offering.

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COMMODITIES

• WTI and Brent are modestly supported after yesterday's lower settlement; currently, firmer by just over USD 1.00/bbl.
• Focus has been on the narrowing WTI/Brent spread, particularly going into US driving season; see link below for ING's views.
• US Energy Inventory Data (bbls): Crude -2.4mln (exp. +1.4mln), Cushing -3.1mln, Gasoline -5.1mln (exp. -1.3mln), Distillates +1.1mln (exp. unchanged).
• Spot gold and silver are modestly firmer but capped by a firmer USD, yellow metal just shy of USD 1820/oz.

Click here for more detail.

NOTABLE US HEADLINES

• Fed's Evans (2023 voter) said the Fed should hike rates to a 2.25%-2.50% neutral range expeditiously and he favours front-loaded interest rate hikes. Evans added they may need to take policy somewhat above neutral to achieve the 2% price target and if inflation doesn't respond to tighter policy to the degree needed, they will continue working on it. Furthermore, he expects they will be talking about transitioning to 25bps hikes by the July or September meeting and expects they would have completed any 50bps increases by December and would have put in place a few 25bp hikes, according to Reuters.
• Click here for the US Early Morning note.

NOTABLE EUROPEAN HEADLINES

• UK Chancellor Sunak is reportedly mulling bringing forward the 1p income tax cut to the basic rate by one year, according to iNews citing Treasury insiders. Other reports suggest that Sunak is putting plans together to raise the warm home discount by hundreds of GBP in July ahead of lowering taxes in autumn to assist with the cost of living crisis, according to The Times.
• EU is to offer the UK new concessions on the Northern Ireland protocol but has threatened a trade war if UK PM Johnson refuses to agree to a compromise, according to The Telegraph.

NOTABLE DATA

• UK CPI YY (Apr) 9.0% vs. Exp. 9.1% (Prev. 7.0%); MM (Apr) 2.5% vs. Exp. 2.6% (Prev. 1.1%)
• UK Core CPI YY (Apr) 6.2% vs. Exp. 6.2% (Prev. 5.7%); MM (Apr) 0.7% vs. Exp. 0.8% (Prev. 0.9%)
• EU HICP Final YY (Apr) 7.4% vs. Exp. 7.5% (Prev. 7.5%); Food & Energy Final YY (Apr) 3.9% vs. Exp. 3.9% (Prev. 3.9%)

CRYPTO

• Bitcoin is relatively contained, though has failed to recapture and remain above the USD 30k mark.

APAC TRADE

EQUITIES

• APAC stocks traded mixed as the regional bourses only partially sustained the momentum from global peers.
• ASX 200 was led higher by outperformance in the mining and materials related sectors, while softer than expected wage price data reduced the prospects of a more aggressive RBA rate hike next month.
• Nikkei 225 briefly reclaimed the 27,000 level but retreated off its highs as participants digested GDP data which printed in negative territory, albeit at a narrower than feared contraction.
• Hang Seng and Shanghai Comp were subdued with large-cap tech stocks pressured in Hong Kong including JD.com despite beating earnings expectations and with Tencent bracing for the expected slowest revenue growth since its listing, while the mainland was hampered by the mixed COVID-19 situation as Shanghai registered a 4th consecutive day of zero transmissions outside of quarantine, although Beijing was said to lockdown some areas in its Fengtai district for 7 days.

NOTABLE APAC HEADLINES

• Shanghai authorities issued a new white list containing 864 financial institutions permitted to resume work, according to sources cited by Reuters.
• China, on May 20th, is to remove some COVID test requirements on travellers to China from the US, according to embassy.
• China's Foreign Ministry says the BRICS foreign ministers are to meet on May 19th.
• Goldman Sachs downgrades its 2022 China GDP growth forecast to 4.0% from 4.5%.

NOTABLE DATA

• Chinese China House Prices YY* (Apr) 0.7% (Prev. 1.5%)
• Japanese GDP QQ (Q1) -0.2% vs. Exp. -0.4% (Prev. 1.1%, Rev. 0.9%); Annualised (Q1) -1.0% vs. Exp. -1.8% (Prev. 4.6%, Rev. 3.8%)
• Australian Wage Price Index QQ (Q1) 0.7% vs. Exp. 0.8% (Prev. 0.7%); YY (Q1) 2.4% vs. Exp. 2.5% (Prev. 2.3%)