• European bourses are subdued following the Snap-headwind, further hawkish ECB rhetoric and disappointing Flash PMIs; particularly for the UK, Euro Stoxx 50 -0.9%.
• US futures are similarly subdued and the Nasdaq, -1.7%, is taking the brunt of the pressure as tech names are hit across the board, ES -1.1%
• ECB’s Lagarde elaborated on Monday’s blog post, sparking a hawkish EUR and Bund reaction, pressuring the DXY to below 102.00
• Cable fell by a full below 1.2500 as UK Flash PMIs posted a notable miss, lifting Gilts in tandem and bringing the Bund back into positive territory
• USTs continue to outperform on broader risk sentiment, though have been influenced incrementally by Lagarde and PMIs, with the curve somewhat mixed thus far
• Crude is subdued amid broader risk, but off lows as the USD pullback while Gold fails to extend after breaching the 21-DMA
• Looking ahead, highlights include US Flash PMIs, US ISM Semi-annual Economic Forecast, Speeches from Fed's Powell, ECB's Lagarde, Supply from the US.

As of 11:25BST/06:25ET

LOOKING AHEAD

• US Flash PMIs, US ISM Semi-annual Economic Forecast, Speeches from Fed's Powell, ECB's Lagarde, Supply from the US.
• Click here for the Week Ahead preview

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS/ASSISTANCE

• 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.

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 he no longer recognises Greece's leader and will not meet with him at a planned summit later this year, according to FT.
• Chinese and Russian aircrafts have reportedly entered South Korean airspace; subsequently, Fox's Tomlinson reports that a pair of Russian and Chinese bombers fly lap around Japan today while Biden met Quad leaders, citing a report.

CENTRAL BANKS

• ECB's Lagarde believes the blog post on Monday was at a good time, adding we are clearly at a turning point, via Bloomberg TV; adds, we are not in a panic mode. Rates are likely to be positive at end-Q3; when out of negative rates, you can be at or slightly above zero. Does not comment on FX levels, when questioned about EUR/USD parity. Click here for more detail, analysis & reaction.
• ECB's Villeroy says he believes the ECB will be at a neutral rate at some point next year, via Bloomberg TV; 50bps hike does not belong to the Governing Council's consensus, does not yet know the terminal rate.
• NBH Virag says continuing to increase rates in 50bp increments is an options, increasing into double-digits is not justified.

EUROPEAN TRADE

EQUITIES

• European bourses are subdued following the Snap-headwind, further hawkish ECB rhetoric and disappointing Flash PMIs; particularly for the UK, Euro Stoxx 50 -0.7%.
• US futures are similarly subdued and the Nasdaq, -1.7%, is taking the brunt of the pressure as tech names are hit across the board, ES -1.1%
• 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.
• Samsung (005935 KS) is to reportedly invest USD 360bln on chips and biotech over a period of five years, according to Bloomberg.
• Tesla (TSLA) could take until later this week to restore full production in China after quarantining thousands of workers.
• Uber (UBER) has initiated a broad hiring freeze across the Co. as it faces increased pressure to become profitable, according to Business Insider sources
• Click here for more detail.

FX

• Yen outperforms on risk off and softer yield dynamics, USD/JPY at low end of wide range stretching from just above 128.00 to just over 127.00 and multiple chart supports under the latter.
• Franc and Euro underpinned as SNB and ECB pivot towards removal of rate accommodation, USD/CHF sub-0.9650, EUR/USD 1.0700-plus.
• Dollar suffers as a result of the above, but DXY contains losses under 102.000 as Pound plunges following disappointing UK preliminary PMIs; Cable recoils from the cusp of 1.2600 to touch 1.2475.
• Aussie, Loonie and Kiwi all suffer from aversion and latter also cautious ahead of RBNZ on Wednesday; AUD/USD loses grip of 0.7100 handle, NZD/USD under 0.6450 having got close to 0.6500 yesterday and USD/CAD probing 1.2800 vs virtual double bottom around 1.2765.
• Lira loses flight to stay above 16.0000 vs Buck as Turkish President Erdogan refuses to acknowledge Greek leader and sets out plans to strengthen nation’s southern border defences.
• Click here for more detail.

Noted FX Expiries, NY Cut:

• Click here for more detail.

FIXED INCOME

• Gilts fly after UK PMIs miss consensus and only trim some gains in response to much better than expected CBI distributive trades
• 10 year bond holds near the top of a 118.86-117.92 range
• Bunds bounce from sub-153.00 lows after more hawkish guidance from ECB President Lagarde, but Italian BTPs lag under 128.00 as books build for 15 year issuance
• US Treasuries bull-flatten ahead of 2 year note supply and Fed's Powell, T-note just shy of 120-00 within 120-02+/119-18 band
• Italy has commenced marketing a new syndicated 15yr BTP, guidance +11bp vs outstanding March 2037 bond, according to the lead manager via Reuters; subsequently, set at +8bp.
• Click here for more detail.

COMMODITIES

• WTI and Brent are subdued amid the broader risk environment with familiar factors still in play; however, the benchmarks are off lows amid USD downside.
• Meandering around USD 110/bbl (vs low 108.61/bbl) and USD 113/bbl (vs low USD 111.70/bbl) respectively.
• White House is considering environmental waivers for all blends of US gasoline to lower pump prices, according to Reuters sources.
• Spot gold is modestly firmer though it has failed to extend after briefly surpassing the 21-DMA at USD 1856/oz.
• Click here for more detail.

NOTABLE EUROPEAN 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.
• Germany's Chambers of Commerce DIHK cuts 2022 GDP growth forecast to 1.5% (vs prev. view of 3% made in Feb).

NOTABLE EUROPEAN DATA

• UK Flash Services PMI (May) 51.8 vs. Exp. 57.0 (Prev. 58.9); Composite PMI (May) 51.8 vs. Exp. 56.5 (Prev. 58.2)
• UK Flash Manufacturing PMI (May) 54.6 vs. Exp. 55.0 (Prev. 55.8)
• EU S&P Global Composite Flash PMI (May) 54.9 vs. Exp. 55.3 (Prev. 55.8)
• EU S&P Global Manufacturing Flash PMI (May) 54.4 vs. Exp. 54.9 (Prev. 55.5); Services Flash PMI (May) 56.3 vs. Exp. 57.5 (Prev. 57.7)
• German S&P Global Composite Flash PMI (May) 54.6 vs. Exp. 54.0 (Prev. 54.3)
• German S&P Global Manufacturing Flash PMI (May) 54.7 vs. Exp. 54.0 (Prev. 54.6); Services Flash PMI (May) 56.3 vs. Exp. 57.2 (Prev. 57.6)

NOTABLE US HEADLINES

• 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 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.
• Click here for the US Early Morning note.

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.

NOTABLE APAC 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.
• 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.

NOTABLE APAC DATA

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