• APAC stocks were indecisive as risk appetite waned despite the positive handover from Wall St; SPX +0.95%, NDX +1.48%
• FOMC Minutes stated that most Fed officials backed 50bps hikes at the next couple of meetings; no mention of 75bps
• European equity futures are indicative of a softer open with Eurostoxx 50 -0.2% after the cash market closed higher by 0.8% yesterday
• DXY sits on a 102 handle ahead of the European open, EUR/USD is sub 1.07, AUD lags
• Looking ahead, highlights include US GDP (2nd), US IJC, Canadian Retail Sales, CBRT and CBR rate decisions, UK Chancellor Sunak, Fed's Brainard, supply from Italy and the US, Earnings from Alibaba, Baidu. Market holidays in Denmark, Sweden, Norway

US TRADE

• US stocks were bid from the open and offset the overnight weakness, while momentum accelerated in the wake of the FOMC minutes which saw no mention of a 75bps move or recession.
• SPX +0.95% at 3,979, NDX +1.48% at 11,943, DJIA +0.60% at 32,120, RUT +1.70% at 1,798.
• Click here for a detailed summary.

FOMC MINUTES

• FOMC Minutes stated that most Fed officials backed 50bps hikes at the next couple of meetings and all participants at the May policy meeting agreed a half-percentage-point interest rate hike was appropriate. Fed officials also noted restrictive policy may become appropriate and many saw the Fed well-positioned later this year after tightening, while most judged such hikes are appropriate at the next couple of meetings regarding 50bps and there was no mention of 75bps.

NOTABLE US HEADLINES

• Fed Vice Chair Brainard (voter) said the Fed is taking strong actions to reduce inflation and that high inflation is the most pressing challenge, according to Reuters.
• Fed's Brainard's written testimony stated that no decision has been made about a US central bank digital currency and clear regulatory guard rails are needed for the digital financial system. Brainard stated new forms of digital money such as stablecoins could lead to meaningful counterparty risk and that private monies could threaten consumer protection and financial stability. Furthermore, she said it is important to strike the correct balance between privacy and crime prevention, as well as noted that there are risks of acting and risks of not acting, but added that a US central bank digital currency is one way to ensure the dollar continues to be used globally, according to Reuters.
• Fed's George (2022 voter) is to retire in January 2023 and a search for Kansas City Fed President successor begins, according to Reuters.
• US House Majority Leader Hoyer said the House is to consider a 'red flag' gun bill in June, according to Bloomberg.

GEOPOLITICS

RUSSIA-UKRAINE

TALKS/NEGOTIATIONS

• Ukrainian President Zelensky severely criticised suggestions that Kyiv give up territory and make concessions to end the war with Russia, which he likened the idea to attempts to appease Nazi Germany in 1938, according to The Telegraph.
• Russia is said to be opening two sea corridors from Ukraine ports, according to Interfax.
• UN senior official to visit Russia in the days ahead to discuss fertiliser exports, according to Russia's UN envoy.

ENERGY/SANCTIONS/ECONOMIC

• EU senior official said Hungarian PM Orban passed on a “wish list” of demands he wants met to support EU oil sanctions on Russia that include money, unblocking the Recovery and Resilience Facility, swap line with the ECB, as well as an end to Rule of Law Article 7 and "conditionality mechanism", according to Eurasia Group.
• EU Diplomats are considering a solution to Hungary’s Russian oil embargo veto, whereby the embargo would be split and initially focus on seabound oil before then turning to pipeline oil, via Politico; amid reports that efforts to financially compensate Hungary are stalling, due to rule of law and RePowerEU issues.
• Russia gave the green light for gas shipments to Gazprom Germany from Yamal LNG for 90 days, according to Interfax.
• Russian bondholders said a debt default could already be here and some investors said a small interest payment is overdue, which could trigger credit-default swap contracts, according to WSJ.

OTHER

• Turkey wants Sweden and Finland to end defence industry sanctions, while NATO expansion is to be stalled unless Turkey's concerns are met. Turkey does not see the NATO summit in Madrid as an expansion deadline, according to Reuters.
• UN Security Council is to vote in the coming days on the US-led push to sanction North Korea further, according to Reuters.
• China's UN mission said the US draft security council resolution on North Korea will not solve any problems and that the US knows the best way for de-escalation but resists it, according to Reuters.
• US military said US and Japanese fighter jets conducted joint drills over the Sea of Japan on Wednesday to deter and counter regional threats, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks were indecisive as risk appetite waned despite the positive handover from Wall St where the major indices extended on gains post-FOMC minutes after the risk event passed and contained no hawkish surprises.
• ASX 200 failed to hold on to opening gains as weakness in mining names, consumer stocks and defensives overshadowed the advances in tech and financials, while capex data was mixed with the headline private capital expenditure at a surprise contraction for Q1.
• Nikkei 225 faded early gains but downside was stemmed with Japan set to reopen to tourists on June 6th.
• Hang Seng and Shanghai Comp were mixed with early pressure after Premier Li warned the economy was worse in some aspects than in 2020 when the pandemic began, although he stated that China will unveil detailed implementation rules for a pro-growth policy package before the end of the month, while the PBoC issued a notice to promote credit lending to small firms and the MoF announced cash subsidies to Chinese airlines.
• US equity futures were lacklustre after the momentum following the FOMC minutes petered out; ES -0.3%
• European equity futures are indicative of a softer open with Eurostoxx 50 -0.2% after the cash market closed higher by 0.8% yesterday.

FX

• DXY has reclaimed 102.00 ahead of the European open but is still some way shy of yesterday's 102.45 peak.
• EUR/USD continued to nurse recent losses but unable to reclaim 1.07 for now. .
• GBP/USD was uneventful ahead of Chancellor Sunak’s package of measures to address the cost-of-living crisis.
• USD/JPY traded indecisively as price action mirrored the choppy mood in stocks.
• Antipodeans were contained alongside a weaker PBoC fix and disappointing Australian capex data.

FIXED INCOME

• 10yr UST futures lacked direction after the FOMC minutes provided very little in the way of new information.
• Bunds remained lacklustre after dipping back beneath 154.00 and following the recent slew of ECB rhetoric.
• 10yr JGBs marginally weakened towards 150.00 and failed to benefit despite the firmer 40yr auction results.

COMMODITIES

• Crude futures were rangebound amid the flimsy mood in stocks and lack of fresh energy-related catalysts.
• UK regulator is set to approve Shell's (SHEL LN) North Sea Jackdaw gas field that aims for production starting in H2 2025 and will represent 6.5% of UK gas output, according to Reuters sources.
• Spot gold remained stuck around the USD 1850/oz level after the lack of surprises from the FOMC minutes.
• Copper was lacklustre amid the choppy sentiment across risk assets.

CRYPTO

• Bitcoin traded with mild gains overnight although prices remained beneath the 30,000 level.
• Portuguese Parliament voted against two separate proposals from minority political parties to tax crypto assets, according to The Block.

NOTABLE HEADLINES

• PBoC issued a notice to promote credit lending to small firms and is to boost financial institutions' confidence to lend to small firms, according to Reuters.
• US bipartisan senators are urging President Biden to keep China tariffs in place, according to Bloomberg.
• US State Department said the US is concerned China is looking to reach agreements with Pacific Island nations in what may be a rushed, non-transparent process, according to Reuters.
• BoK raised its base rate by 25bps to 1.75%, as expected, via unanimous decision. BoK raised its 2022 inflation forecast to 4.5% from 3.1% and raised its 2023 forecast to 2.9% from 2.0%, while it sees GDP growth of 2.7% this year and 2.4% next year. BoK said consumer price inflation is to remain high in the 5% range for some time and sees it as warranted to conduct monetary policy with more focus on inflation, according to Reuters.

DATA RECAP

• Australian Capital Expenditure (Q1) -0.3% vs. Exp. 1.5% (Prev. 1.1%)
• Australian Private Capital Expenditure 2021-2022 (AUD)(Est. 6) 142.8B (Prev. 140.8B)
• Australian Private Capital Expenditure 2022-2023 (AUD)(Est. 2) 130.5B (Prev. 116.7B)

UK/EU

NOTABLE HEADLINES

• BoE's Tenreyro said central banks cannot anticipate shocks and the BoE should return inflation to the target on a 2- to 3-year horizon, while she added the BoE faces a very fine balance when setting policy in the future, according to Reuters.
• UK Chancellor Sunak is set to unveil a new cost of living support package which will see every household in the country receive additional money off their energy bills, according to the Telegraph. The package will be funded by a windfall tax on excess profits of oil and gas companies, according to the Times.
• UK car production declined 11.3% Y/Y to 60,554 units in April, according to the SMMT.