• APAC stocks took impetus from the risk-on mood on Wall St where all major indices closed higher.
• European equity futures are indicative of a contained open with Eurostoxx 50 +0.1% after the cash market closed higher by 1.7% yesterday.
• DXY hovers around the 101.50 mark, EUR/USD has gained a firmer footing above 1.07, antipodeans lead.
• Crude futures plateaued at a two-month high after benefitting from the risk appetite.
• Looking ahead, highlights include US PCE Price Index, Personal Income & Consumption, Speech from ECB's Lane.

US TRADE

• US stocks were firmer with a strong risk-on tilt as exhibited by the tech and discretionary-led gains, while there was no clear catalyst, but rather a mix of factors revolving around month-end (Citi's model sees largest stock buying flows since Mar'20) and with retailers encouraged by earnings.
• SPX +1.99% at 4,058, NDX +2.79% at 12,277, DJIA +1.61% at 32,637, RUT +2.17% at 1,838
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed Vice Chair Brainard said it is very important for the US to remain dominant in international payments and if other countries issue digital currencies, it is important to think about what that would mean for the USD. Brainard also noted it is important the US is involved in setting the standard in cross border transactions and said the Fed report is clear that it would not move ahead on a digital currency without the support of congress, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

TALKS/NEGOTIATIONS/SANCTIONS

• Ukraine Foreign Minister said if Russia ever requests a ceasefire, they would think two or three times before deciding whether to accept it, according to Reuters.
• Russian President Putin told Italian PM Draghi that Russia is ready to contribute to solving the food crisis if sanctions against Russia are lifted and intends to keep supplying gas to Italy, according to TASS.
• Italian PM Draghi said he will hold a call with Ukraine President Zelenskiy about unblocking the Black Sea Ports for food exports and said that in the call with Russia President Putin he did not see any hope of peace for Ukraine.
• White House said there are no talks about relaxing sanctions on Russia for grain exports, according to Reuters.

MILITARY/DEFENSIVE/NATO

• Russian Foreign Minister warned the West that supplying weapons to Ukraine that can strike Russian territory would be a step towards unacceptable escalation, according to RIA.
• US and Ukraine discussed the danger of escalation as new arms extend Kyiv's reach and warned of the dangers of escalation if it strikes deep inside Russia, according to Reuters sources.

ENERGY/ECONOMIC

• Europe is facing difficulties finding alternatives to Russian gas in the Middle East and North Africa, as talks with big producers like Qatar, Algeria and Libya have become complicated, according to WSJ.

OTHER

• China and Russia vetoed the US push to impose more UN sanctions on North Korea, according to Reuters.
• Saudi Foreign Ministry official said there is no meeting between Saudi and Iranian Foreign Ministers scheduled for the foreseeable future, while the official added that Iran needs to build trust for future cooperation and there are issues that can be discussed to de-escalate tensions, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks took impetus from the risk-on mood on Wall St where all major indices were lifted amid month-end flows and encouraging retailer earnings.
• ASX 200 was led higher by outperformance in the commodity and resources industries, while consumer stocks were mixed after Retail Sales printed in line with expectations, albeit at a slowdown from the prior month.
• Nikkei 225 traded positively but with upside capped by a mixed currency and weakness in energy and power names after increases in international prices and with the government looking to address the tight energy market.
• Hang Seng and Shanghai Comp were firmer with notable outperformance in Hong Kong amid a euphoric tech sector after earnings from Alibaba and Baidu topped estimates which also inspired the NASDAQ Golden Dragon China Index during the prior US session, while advances in the mainland were moderated by the contraction in April Industrial Profits and after Premier Li’s unpublished comments from Wednesday’s emergency meeting came to light in which he warned of dire consequences for the economy.
• US equity futures were rangebound overnight but held on to most of their recent spoils and are on track to snap their weekly losing streak; ES -0.1%
• European equity futures are indicative of a contained open with Eurostoxx 50 +0.1% after the cash market closed higher by 1.7% yesterday.

FX

• DXY was pressured and declined to around 101.50 amid the risk-on mood and following weak data from the US including the downward revision for Q1 GDP to a deeper contraction and miss on Pending Home Sales.
• EUR/USD gained a firmer footing on the 1.0700 handle alongside the subdued dollar.
• GBP/USD remained elevated in the aftermath of Chancellor Sunak’s GBP 15bln emergency package announcement to ease the cost-of-living crisis which will partly be funded by a temporary energy profits levy.
• USD/JPY dipped below 127.00 amid a weaker dollar and despite mostly softer-than-expected Tokyo CPI.
• Antipodeans led the gains among the cyclical currencies owing to the constructive risk tone.

FIXED INCOME

• 10yr UST futures were quiet with prices off the prior day’s lows after rebounding from beneath 120.00 following a strong 7yr auction stateside.
• Bunds lacked direction and took a breather after yesterday’s round trip through 154.00.
• 10yr JGBs nursed some of the recent losses but with the rebound limited by the heightened risk appetite.

COMMODITIES

• Crude futures plateaued at a two-month high after benefitting from the risk appetite, weaker dollar and tight supply ahead of driving season.
• US Treasury is reportedly expected to renew Chevron’s (CVX) license to operate in Venezuela as soon as Friday, according to Reuters citing sources.
• Spot gold was kept afloat by the softer greenback although price action was muted by the lack of haven demand.
• Copper edged higher amid the constructive risk tone but with gains capped by resistance at USD 4.30/lb.

CRYPTO

• Bitcoin traded with mild losses overnight and briefly fell beneath the 30,000 level.

NOTABLE HEADLINES

• China’s State Council will seek specific implementation rules by May 31st regarding necessary measures at all levels of government and will dispatch inspection teams to all 31 provinces, municipalities and autonomous regions to oversee the rollout amid an urgent need for national economic mobilisation, according to SGH Macro Advisors.
• US is seeking to hold economic discussions with Taiwan in the latest test with China, while supply chains and agriculture are said to be among the topics, according to Bloomberg. Furthermore, reports noted that bilateral economic talks will be announced in the upcoming weeks.

DATA RECAP

• Chinese Industrial Profits YY (Apr) -8.5% (12.2%)
• Chinese Industrial Profits YTD YY (Apr) 3.5% (8.5%)
• Tokyo CPI YY (May) 2.4% vs. Exp. 2.5% (Prev. 2.5%)
• Tokyo CPI Ex. Fresh Food YY (May) 1.9% vs. Exp. 2.0% (Prev. 1.9%)
• Tokyo CPI Ex. Fresh Food & Energy YY (May) 0.9% vs. Exp. 0.9% (Prev. 0.9%)

UK/EU

NOTABLE HEADLINES

• Northern Ireland's Stormont assembly is to recall next week to attempt to find a breakthrough over post-Brexit trading arrangements, according to FT.