• APAC stocks mostly declined after Snap's profit warning soured risk sentiment and weighed on US tech names.
• US President Biden said there is no change to the policy of strategic ambiguity regarding Taiwan.
• European equity futures are indicative of a weaker open with Eurostoxx 50 -0.6% after the cash market closed higher by 1.4% yesterday.
• DXY is marginally firmer on a 102 handle, EUR/USD stopped just shy of 1.07 and antipodeans lag in G10 FX.
• Looking ahead, highlights include EZ, UK & US Flash PMIs, US ISM Semi-annual Economic Forecast, Speeches from Fed's Powell, ECB's Lagarde & Villeroy, Supply from UK (I/L) & US.

US TRADE

• US stocks gained as the US mulled removing some Trump-era tariffs on China and with M&A newsflow conducive to the risk tone, while Financials outperformed after an encouraging outlook provided by JPM and as firmer yields also helped the sector.
• SPX +1.86% at 3,974, NDX +1.68% at 12,034, DJIA +1.98% at 31,880, RUT +1.41% at 1,793.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed Chair Powell was sworn in for a second term, while Vice Chair Brainard and Governors Cook and Jefferson were also sworn in, according to Reuters.
• Fed's George (2022 voter) expects Fed's policy rate to be in the neighbourhood of 2% by August and noted that evidence inflation is clearly decelerating will inform judgements about further tightening. George added inflation is too high and too broad to dismiss, while returning it to the Fed's 2% target is the top priority, according to Reuters.
• Fed's Bostic (2024 voter) said it may be the case that the Fed needs to go "super hard" on rate hikes, but it is not the baseline and said the Fed is trying to strike a "perfect note" to avoid labour market damage but acknowledges the difficulty in doing so. Bostic said 25bps or 50bps is on the table in September if inflation is too high and reiterated he is comfortable with 50bps hikes at the next couple of meetings, while he is open to moving more aggressively if inflation is higher but also said it may make sense to pause in September depending on the economy, according to Reuters.
• Fed's Daly (2024 voter) said the US economy has a lot of momentum and inflation is too high, while she added the Fed is committed to controlling inflation and that they are putting interest rates up to where they won't stimulate or bridle the economy, according to Reuters.
• Snap (SNAP) said the macroeconomic environment has deteriorated further and faster than anticipated since its last guidance issuance and it now believes it will report revenue and adjusted EBITDA below the low end of its Q2 guidance range, according to the filing cited by Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS/ASSISTANCE

• Ukrainian President Zelenskiy said it is getting more and more difficult to arrange a presidential meeting with Russian President Putin day-by-day and noted that they are being quite successful in Kharkiv, while he added that Russian President Putin is the only Russian official he will meet and on only one issue which is to stop the war, according to Reuters.
• Russian Foreign Minister Lavrov said if the West wants to offer ideas of re-establishing relations, Moscow will think about whether it needs it, while he added that Russia's economic ties with China will strengthen faster now after the West 'takes a dictator's position', according to Reuters.
• US Defence Secretary said Denmark is to provide harpoon launcher and missiles to defend Ukraine's coast, while Italy, Greece and Poland are sending new artillery systems.

ENERGY/SANCTIONS/ECONOMIC

• German economy minister Habeck expects the EU to agree an embargo on Russian oil 'within days' and said that some states are contemplating no longer paying 'any price' for oil but will agree on an upper limit, according to German broadcaster ZDF.
• Dutch PM Rutte still thinks a sixth package of Russian sanctions can be agreed by the EU27 and thinks that everyone wants to get there, while he spoke with Turkish President Erdogan on Friday and thinks it is possible to resolve issues with Turkey on Finland and Sweden NATO membership but will take more talks, according to Reuters.

OTHER

• Turkish President Erdogan said Turkey is to launch new military operations along its southern borders to create 30km deep safe zones, according to Reuters.
• Turkish President Erdogan said he no longer recognises Greece's leader and will not meet with him at a planned summit later this year, according to FT.

APAC TRADE

EQUITIES

• APAC stocks mostly declined after Snap's profit warning soured risk sentiment and weighed on US tech names.
• ASX 200 was rangebound but kept afloat for most of the session by resilience in tech and mining stocks, while PMIs remained in expansion territory.
• Nikkei 225 fell below 27,000 although losses are stemmed by anticipation of incoming relief with Finance Minister Suzuki set to present an additional budget to parliament tomorrow.
• Hang Seng and Shanghai Comp were pressured after further bank downgrades to Chinese economic growth forecasts, while the recent announcement of targeted support measures by China and reports of the US mulling reducing China tariffs, did little to spur risk appetite.
• US equity futures were pressured with Nasdaq futures hit in the aftermath of Snap's profit warning; NQ -1.7%, ES -1%
• European equity futures are indicative of a weaker open with Eurostoxx 50 -0.6% after the cash market closed higher by 1.4% yesterday.

FX

• DXY rebounded from near the 102.00 mark after the prior day’s losses which were mostly due to the strength in the dollar’s transatlantic counterparts after the hawkish central bank rhetoric from across the pond.
• EUR/USD retraced some of the prior day’s gains after stalling ahead of the 1.0700 handle but with losses stemmed after Lagarde's recent comments.
• GBP/USD marginally pulled back but remained firmer on the week with BoE Governor Bailey prepared to increase rates again if needed.
• USD/JPY was choppy amid the lacklustre risk appetite and after a failed attempt to reclaim the 128.00 handle.
• Antipodeans softened due to their high-beta statuses and with NZD not helped by weak retail sales data.

FIXED INCOME

• 10yr UST futures traded marginally higher amid the soured risk appetite but with gains capped by relatively stable yields.
• Bunds were little changed near the prior day’s lows around the 153.00 level following comments from ECB’s Lagarde.
• 10yr JGBs eked marginal gains with prices unhindered by the mixed results at the enhanced liquidity auction for longer-dated JGBs.

COMMODITIES

• Crude futures were subdued amid the downbeat mood and after recent mixed headlines including reports the US is prepared to authorise a release from the Northeast Home Heating Oil reserve if conditions deteriorate after recent worrisome declines in diesel inventories.
• Saudi Aramco CEO said the world is operating with less than 2% of spare oil capacity and a return of jet fuel demand to its pre-COVID level will leave the world with almost no spare capacity, while he added they cannot speed up bringing new oil capacity on-stream and are sticking to their 2027 target.
• White House is considering environmental waivers for all blends of US gasoline to lower pump prices, according to Reuters sources.
• Exxon (XOM) Baton Rouge (540k BPD) refinery lost steam power and closed most units which may remain shut through June 1st due to the steam outage, according to Reuters sources.
• Iranian Tanker Silvia I is reportedly in Venezuelan waters carrying heavy crude for State-Run Amuay refinery, according to a document and vessel tracking data cited by Reuters.
• Spot gold lacked direction with price action contained ahead of the FOMC Minutes and as the DXY nursed losses.
• Copper was lacklustre amid the soured risk appetite and weakness in its largest purchaser China.

CRYPTO

• Bitcoin marginally rebounded from the prior day's slump but remained firmly beneath the 30,000 level.

NOTABLE HEADLINES

• Shanghai will allow supermarkets, convenience stores and drugstores to resume operations with a maximum occupancy of 50% before May 31st and 75% after June 1st, according to Global Times.
• Hong Kong Chief Executive Carrie Lam said they are unlikely to lift the quarantine in her term, according to Bloomberg.
• US President Biden said there is no change to the policy of strategic ambiguity regarding Taiwan, while Defense Secretary Austin earlier commented that he thinks US President Biden was clear that US policy has not changed on Taiwan, according to Reuters.
• USTR Tai said the US is engaging with China on Phase 1 commitments of trade, while she added they must be strategic on tariffs and that President Biden's team believes trade needs new ideas, according to Reuters.
• US officials are still divided over what to do about the China trade legacy left by former President Trump with Treasury Secretary Yellen and others arguing the full suite of tariffs served little purpose and could be partly lifted while other senior admin officials oppose this, according to NYT.
• China's push to loosen USD dominance is said to take on new urgency amid Western sanctions on Russia and some Chinese advisers are urging the government to overhaul the exchange rate regime to turn the Yuan into an anchor currency, according to SCMP.

DATA RECAP

• Japanese Manufacturing PMI (May P) 53.1 (Prev. 53.5)
• Japanese Services PMI (May P) 51.7 (Prev. 50.7)
• Australian Manufacturing PMI Flash (May) 55.3 (Prev. 58.8)
• Australian Services PMI Flash (May) 53.0 (Prev. 56.1)
• New Zealand Retail Sales QQ (Q1) -0.5% (Prev. 8.6%)
• New Zealand Retail Sales YY (Q1) 2.3% (Prev. 4.4%)

UK/EU

NOTABLE HEADLINES

• UK Chancellor Sunak ordered officials to draw up a plan for a windfall tax on electricity generators' profits, according to FT.
• ECB's Nagel said it seems clear that the wage moderation seen for 10 years in Germany is over and they think they will see high numbers from German wage negotiations.