• APAC stocks were pressured on spillover selling after the worst day on Wall St in almost two years; S&P 500 -4%
• Shanghai Vice Mayor said Shanghai will expand work resumption in areas with no COVID risk in early June.
• European equity futures are indicative of a weaker open with Eurostoxx 50 -0.6% after the cash market closed lower by 1.4% yesterday.
• DXY remains on a 103 handle, EUR/USD hovers around the 1.05 mark and AUD Leads G10 FX post-jobs data.
• Looking ahead, highlights include US IJC, Philadelphia Fed, New Zealand Trade Balance, ECB Minutes, SARB Policy Announcement, Speeches from Fed's Kashkari & ECB's de Guindos, Supply from Spain & France

US TRADE

• US stocks suffered heavy losses in which the major indices closed with losses of at least 3.5% and the VIX rose above 30 while the Nasdaq underperformed as Tech and Consumer Discretionary took a beating after Target (TGT) earnings.
• SPX -4.03% at 3,924, NDX -5.06% at 11,928, DJIA -3.57% at 31,490, RUT -3.53% at 1,775.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed's Harker (2023 voter) expects 50 bps rate hikes in June and July, he then anticipates a sequence of 'measured' rate hikes afterwards until they are confident inflation is moving toward 2%, according to Reuters.
• Fed Vice-Chair of Supervision nominee Barr said inflation is running far too high and he would be strongly committed to bringing down inflation to the Fed's goal, as well as ensuring the financial system is robust and resilient.
• US companies have reportedly boosted capital spending to address supply bottlenecks with investment by S&P companies higher by 20%, according to FT.

GEOPOLITICS

RUSSIA-UKRAINE

• US reopened the Kyiv embassy on Wednesday evening after a three-month closure, according to Reuters.
• Senior US defence official said Russia is reducing the scale of its Ukrainian war objectives, according to ABC News.
• Russian Trade and Industry Minister said cryptocurrencies could be legalised in Russia as a means of payment, according to Reuters.

OTHER

• Turkish President Erdogan's Advisor held calls with Swedish and Finnish counterparts regarding NATO membership and said NATO membership progress is only possible if Turkey's expectations are met, according to Reuters.
• US National Security Adviser Sullivan said US intelligence shows there could be a North Korean nuclear or missile test leading up to or after US President Biden's trip and they discussed the possibility of North Korea tests with China, according to Reuters.
• North Korean nuclear test preparations are complete, according to Yonhap citing South Korean lawmakers briefed by the spy agency.
• White House said US President Biden will not visit Korea's demilitarised zone, according to Washington Post.

APAC TRADE

EQUITIES

• APAC stocks were pressured on spillover selling after the worst day on Wall St in almost two years.
• ASX 200 was led lower by consumer staples following the retailer woes stateside and mixed Australian jobs data.
• Nikkei 225 suffered firm losses amid reports the ruling coalition is considering increasing the corporate tax rate and after several data releases in which Machinery Orders topped estimates but Exports missed as China-bound exports declined by the fastest pace since March 2020.
• Hang Seng and Shanghai Comp initially weakened with the Hong Kong benchmark dragged lower by heavy losses in tech after Tencent’s profit declined by more than 50% and with the mainland pressured as Beijing conducts a fresh round of mass COVID testing, although the mainland bourse recovered most of its losses after Shanghai announced a further gradual easing of restrictions.
• US equity futures were rangebound but off their lows after the E-mini S&P found support near the 3,900 level; ES +0.1%
• European equity futures are indicative of a weaker open with Eurostoxx 50 -0.6% after the cash market closed lower by 1.4% yesterday.

FX

• DXY retreated from the prior day’s highs after stalling near 104.00 which provided relief for its major counterparts.
• EUR/USD took advantage of the greenback's retreat and gradually reclaimed the 1.0500 handle.
• GBP/USD nursed losses but with the rebound mild and unable to reclaim 1.24 status.
• USD/JPY reversed some of the prior day’s haven-driven pressure as participants digested mixed data releases.
• Antipodeans gained after AUD managed to shrug off the early wobble from the headline jobs data miss which still showed a substantial increase in full-time jobs and the lowest unemployment rate in almost 50 years, while NZD was helped by the improved budget and operating balance forecasts.

FIXED INCOME

• 10yr UST futures faded some of yesterday’s bull flattening with yields kept afloat overnight and following the US 20yr bond auction which was up to scratch compared to the averages although not as strong as the previous.
• Bunds retreated overnight with prices hampered after hitting resistance near 153.00.
• 10yr JGBs were kept afloat amid mixed data releases from Japan and with the BoJ in the market for more than JPY 1tln of JGBs on top of its fixed-rate buying operations for an unlimited amount of JGBs.

COMMODITIES

• Crude futures nursed some of the prior day's losses amid optimism regarding the easing COVID situation in Shanghai.
• Qatar Energy was reportedly selling July Al-Shaheen crude at premiums of USD 5.80-6.40/bbl above Dubai quotes which is the highest in 2 months, according to Reuters sources.
• Spot gold traded sideways and failed to benefit despite the overnight pullback in the dollar.
• Copper rebounded overnight with price action helped by the further gradual reopening efforts in Shanghai.

CRYPTO

• Bitcoin clawed back some of the previous day's losses and reclaimed the 29,000 level.

NOTABLE HEADLINES

• Shanghai Vice Mayor said Shanghai port throughput recovered to around 90% of the levels a year ago and that Shanghai will expand work resumption in areas with no COVID risk in early June. Furthermore, Shanghai is to gradually restore inter-district public transport from May 22nd and will require residents to show negative PCR tests taken within 48 hours before using public transport, while an economy official said Shanghai will reduce rents for small and medium-sized enterprises by more than CNY 10bln and the city extended CNY 72.3bln of loans to over 10,000 firms since March, according to Reuters.
• US Senators Menendez and Risch led 50 members of the US Senate in a letter to President Biden calling for Taiwan's inclusion in the proposed Indo-Pacific Economic Framework and said including Taiwan in the IPEF would be an invaluable signal of the rock-solid commitment to Taiwan and its prosperity and freedom, according to Bloomberg's Ognanovich.
• Japanese MOF official said China's COVID curbs are among the factors that caused a decline in China-bound exports from Japan which fell by the fastest pace since March 2020, while Japan's April imports reached the largest amount on record, according to Reuters.
• Japan's ruling coalition is reportedly considering increasing the corporate tax rate, according to Jiji.
• New Zealand sees 2021/22 OBEGAL at NZD -18.98bln (prev. forecast -20.44bln), 2021/22 net debt at 36.9% of GDP (prev. forecast 37.6%) and Cash Balance at NZD -31.78bln (prev. forecast -34.10bln), while Finance Minister Robertson said the economy is expected to be robust in the near term and they see a return to OBEGAL surplus in 2024/25, according to Reuters.

DATA RECAP

• Japanese Machinery Orders MM (Mar) 7.1% vs. Exp. 3.7% (Prev. -9.8%)
• Japanese Machinery Orders YY (Mar) 7.6% vs. Exp. 3.7% (Prev. 4.3%)
• Japanese Trade Balance Total Yen (Apr) -839.2B vs. Exp. -1150.0B (Prev. -414.1B)
• Japanese Exports YY (Apr) 12.5% vs. Exp. 13.8% (Prev. 14.7%)
• Japanese Imports YY (Apr) 28.2% vs. Exp. 35.0% (Prev. 31.2%)
• Australian Employment (Apr) 4.0k vs. Exp. 30.0k (Prev. 17.9k)
• Australian Full-Time Employment (Apr) 92.4k (Prev. 20.5k)
• Australian Unemployment Rate (Apr) 3.9% vs. Exp. 3.9% (Prev. 4.0%)

UK/EU

NOTABLE HEADLINES

• UK Chancellor Sunak pledged targeted tax cuts for UK businesses in the autumn Budget during the CBI conference, according to FT.
• EU is reportedly considering a targeted trade war on troublesome Brexiteer MPs and Tory ministers to force UK PM Johnson to do a U-turn on the Northern Ireland protocol, according to The Telegraph.