• European bourses are mixed, Euro Stoxx 50 -0.8%, with sentiment cautious after a mixed APAC handover and in wake of hot EZ CPI before Powell's meeting with Biden.
• Stateside, futures are pressured succumbing to the broader risk moves after initial cautious/contained trade.
• EZ Flash CPI for May surpassed expectations printing at 8.1% YY, denting Bunds and dragging peers lower in sympathy; yields extending and steepening
• DXY at the top-end of sessions range with antipodeans caught between mixed data while Yuan lifts post-PMIs
• Crude benchmarks are bid after the EU agreed to a watered-down Russian sanctions package; Council meeting is ongoing, set to conclude today
• Looking ahead, highlights include US Consumer Confidence; Fed's Powell meeting US President Biden, SNB's Zurbruegg.

As of 11:15BST/06:15ET

LOOKING AHEAD

• US Consumer Confidence; Fed's Powell meeting US President Biden, SNB's Zurbruegg.
• Click here for the Week Ahead preview

MEMORIAL DAY NOTABLE UPDATES

• Beijing eased some COVID restrictions, whilst Shanghai moves closer to reopening; subsequently, Shanghai City says it is necessary to hasten work resumption without relaxing efforts to normalise epidemic prevention measures; adds it will fully implement economic policies and make efforts to accelerate the recovery.
• ECB's Lane said the central ECB is committed to preventing financial fragmentation, via Cinco Dias; adds that monetary policy normalisation will be slow, natural approach is 25bp increment moves.
• Chinese State Planner NDRC announces it is to increase the retail price of gasoline and diesel by CNY 400/tonne and CNY 300/tonne respectively as of May 31st.
• China and US are working to finalise first face-to-face meetings between defence ministers at a June conference, WSJ reports.
• Fed's Waller (hawkish) supports 50bps hikes for "several meetings", not taking 50bps off the table until inflation comes down "closer" to 2% target; policy should above neutral by year-end to reduce demand; if inflation is stubbornly high, prepared to do more. Reduction of balance sheet is equivalent to a couple of 25bps rate hikes.
• German CPI Prelim YY (May) 7.9% vs. Exp. 7.6% (Prev. 7.4%); MM (May) 0.9% vs. Exp. 0.5% (Prev. 0.8%)
• German HICP Prelim YY (May) 8.7% vs. Exp. 8.0% (Prev. 7.8%); MM (May) 1.1% vs. Exp. 0.5% (Prev. 0.7%)

GEOPOLITICS

RUSSIA-UKRAINE

• EU Council President Michel said the EU agreed to ban seaborne exports of Russian oil to the EU which covers more than two-thirds of Russian oil imports and said the EU agreed to 'de-Swifting' the largest Russian bank Sberbank. EU also agreed to banning three more Russian state-owned broadcasters and sanctioning individuals responsible for war crimes in Ukraine, while an EU diplomat said the EU agreed to ban 90% of Russian oil imports by year-end, according to Reuters.
• Ukrainian President Zelensky said Russia stole half a million tons of grain and its blockade of Ukraine's ports prevents the country from exporting about 22mln tons of grain, creating a threat of famine in countries dependent on the grain, according to Kyiv Independent.
• Estonia's PM Kallas says gas needs to be in the seventh sanctions package, but does not believe it will be; gas will not be discussed at today's EU Council meeting. Echoed by other officials.

OTHER

• Georgian breakaway region of South Ossetia suspended a previously announced referendum on whether to join Russia which had been set for July 17th, according to Reuters.
• Tunisia’s President called for the suspension of the country’s membership in the Venice Commission and expel its representatives in the country following a report that criticised conducting a referendum on a new constitution, according to Reuters.
• UN nuclear watchdog said Iran’s stockpile of enriched uranium is more than 18 times larger than the agreed limit in the 2015 nuclear deal, according to AFP News.
• Twitter sources reported a missile attack on the Ain al Asad Airbase in Iraq which hosts US and other international forces.
• Russian Foreign Minister Lavrov is to visit Turkey, with a military delegation, on June 8th, according to the Turkish Foreign Ministry.

EUROPEAN TRADE

CENTRAL BANKS

• ECB's Visco says rate hikes will need to be gradual given uncertainties, recent widening in the IT/GE spread shows the need to strengthen public finances and lower debt. Need to ensure that normalisation does not lead to unwarranted fragmentation in the Eurozone.
• ECB's Villeroy says the May inflation numbers confirm expectations for an increase and need for progressive monetary normalisation. Speaking in relation to the French inflation data.

EQUITIES

• European bourses are mixed, Euro Stoxx 50 -0.8%, with sentiment cautious after a mixed APAC handover and in wake of hot EZ CPI before Powell's meeting with Biden.
• Note, the FTSE 100 and AEX are bucking the trend given their exposure to Unilever after Trian Fund Management confirmed a 1.5% stake.
• US futures are pressured, ES -0.6%, succumbing to the broader risk moves after relatively steady initial trade as sentiment remains cautious with multiple factors in play.
• IATA Chief says that demand is very strong and traffic will likely return to 2019 levels nearer to 2023 than 2024. Question does remain regarding the impact of inflation on disposable incomes and travel demand. Higher oil prices will result in higher ticket prices; rule of thumb is a 10% change in ticket prices can impact demand by 1%.
• Click here for more detail.

FX

• Buck bounces into month end as US Treasury yields rebound amidst rally in crude prices and hawkish Fed commentary, DXY towards top of firmer 101.800-410 range.
• Kiwi undermined by downbeat NBNZ business survey findings and recession warning from RBNZ; NZD/USD hovering just above 0.6500 and AUD/NZD back over 1.1000.
• Euro fades from Fib resistance irrespective of Eurozone inflation exceeding consensus, EUR/USD down through 1.0750 vs circa 1.0787 at best on Monday.
• Yen hampered by mixed Japanese data and UST retreat, but back above 128.00 and retracement level (128.27 Fib retracement).
• Aussie limits losses alongside recovering Yuan after better than feared Chinese PMIs and economic stability policies from the Cabinet, AUD/USD stays within sight of 0.7200, USD/CNH reverses from 6.6900+ and USD/CNY from just shy of 6.6750.
• Petro currencies cushioned by oil gains after EU embargo on some Russian exports; USD/CAD beneath 1.2700, EUR/NOK probes 10.1000 with added impetus as Norges Bank plans to trim daily FX purchases in June.
• Norges Bank is to purchase FX equivalent to NOK 1.5bln/day in June (NOK 2.0bln/day in May).
• Click here for more detail.

Noted FX Expiries, NY Cut:

• EUR/USD: 1.0590-00 (8.31BN), 1.0625-30 (1.57BN), 1.0645-50 (1.3BN), 1.0725-30 (490M), 1.0740-50 (650M), 1.0760 (854M), 1.0775-80 (590M), 1.0800 (1.12BN), 1.0880 (1.12BN)
• GBP/USD: 1.2450 (878M), 1.2500 (258M), 1.2520-25 (615M), 1.2545-50 (3.82BN), 1.2645 (2.29BLN), 1.2680 (835M), 1.2710 (303M)
• Click here for more detail.

FIXED INCOME

• Bonds succumb to more downside pressure as oil soars, inflation data exceeds consensus and Central Bank hawks get more aggressive.
• Bunds only just hold above 152.00, Gilts lose 117.00+ status and 10 year T-note retreats through 120-00 ahead of cash re-open from 3-day holiday weekend.
• Bobl supply snapped up at final sale of current 5 year batch and end of month Italian offerings relatively well received, albeit at much higher gross yields.
• BoJ maintains bond-buying operations for June at May levels.
• Click here for more detail.

COMMODITIES

• WTI and Brent are bid as China's COVID situation remains fluid, but with incremental improvements, alongside EU leaders reaching a watered-down Russian sanctions package.
• Currently, the benchmarks are holding comfortably above USD 119/bbl and in proximity to the top-end of the sessions range.
• Reminder, given the US market holiday there was no settlement on Monday.
• IEA's Birol says oil market could get tight in the summer and sees bottlenecks with diesel, gasoline, and kerosene, especially in Europe.
• Spot gold is modestly pressured but yet to stray much from the USD 1850/oz mark while base metals are mixed as sentiment slips.
• Click here for more detail.

NOTABLE EUROPEAN HEADLINES

• Senior Tory MPs said UK PM Johnson is likely to face a no-confidence vote as leader of the Conservative Party if they lose two parliamentary by-elections next month, according to FT.
• Pressure is increasing for the ECB to hike rates after German CPI rose to its highest in half a century, according to The Times.

DATA RECAP

• EU HICP Flash YY (May) 8.1% vs. Exp. 7.7% (Prev. 7.4%). Click here for analysis/reaction.
• EU HICP-X F&E Flash YY (May) 4.4% vs. Exp. 3.8% (Prev. 3.9%); X Food, Energy, Alcohol & Tobacco Flash YY (May) 3.8% vs. Exp. 3.5% (Prev. 3.5%)
• UK Lloyds Business Barometer (May) 38 (Prev. 33)
• German Unemployment Change SA (May) -4k vs. Exp. -16.0k (Prev. -13.0k)

NOTABLE US HEADLINES

• Click here for the US Early Morning note.

CRYPTO

• Bitcoin remains on a firmer footing but is yet to move too far from Monday's USD 31.4k peak, in a session which saw it reclaim USD 30k and post gains in excess of USD 2k overall.

APAC TRADE

EQUITIES

• APAC stocks were mixed as most indices lacked firm direction amid month-end and mixed data.
• ASX 200 was subdued by tech underperformance and after a deluge of data releases.
• Nikkei 225 traded rangebound with the index restricted after Industrial Production data missed forecasts.
• Hang Seng and Shanghai Comp were initially indecisive following the Chinese PMI data which printed above estimates but remained at a contraction, although risk appetite gradually picked amid further support measures and improved COVID situation in China.

NOTABLE APAC HEADLINES

• China's Cabinet issued a series of policies to stabilise the economy, according to a Cabinet document cited by Reuters. China is to accelerate the issuance of local government special bonds and add new types of infrastructure and energy projects to the project pool eligible for fundraising, while it is to step up VAT credit rebates, boost fiscal spending and will guide actual lending rates lower.
• China reported 97 new COVID-19 cases on May 30th which was the first time infections were below 100 since March 2nd, according to Bloomberg.
• Shanghai official said the city is moving into a normalised epidemic control phase and looks to resume normal life. The official added that malls and shops will be able to reopen with capacity capped at 75% although the reopening of high-density venues such as gyms will be slower, while all workers in low-risk areas should be able to return to work from June 1st, according to Reuters.
• Hong Kong Chief Executive Lam said they will likely begin the third stage of easing COVID-19 restrictions in late June, according to Bloomberg.
• RBNZ Deputy Governor Hawkesby said the central bank needs to keep decreasing stimulus and tighten conditions beyond the neutral of 2.0%.
• China's Finance Ministry has issued a notice on cutting the purchase tax for some vehicles; will apply from June 1st - December 31st; will halve purchase tax for cars priced no higher than CNY 300k with 2 litre or smaller engines.

NOTABLE APAC DATA

• Chinese NBS Manufacturing PMI (May) 49.6 vs Exp. 48.9 (Prev. 47.4); Non-Manufacturing PMI (May) 47.8 vs Exp. 45.0 (Prev. 41.9)
• Chinese NBS Composite PMI (May) 48.4 (Prev. 42.7)
• Japanese Industrial O/P Prelim. MM SA (Apr) -1.3% vs. Exp. -0.2% (Prev. 0.3%)
• Japanese Retail Sales YY (Apr) 2.9% vs. Exp. 2.6% (Prev. 0.9%, Rev. 0.7%)
• Japanese Unemployment Rate (Apr) 2.5% vs. Exp. 2.6% (Prev. 2.6%)
• Australian Building Approvals (Apr) -2.4% vs. Exp. 2.0% (Prev. -18.5%, Rev. -19.2%)
• Australian Net Exports Contribution (Q1) -1.7% vs. Exp. -1.4% (Prev. -0.2%)
• Australian Business Inventories (Q1) 3.2% vs. Exp. 1.0% (Prev. 1.1%, Rev. 1.5%)
• Australian Gross Company Profits (Q1) 10.2% vs. Exp. 4.0% (Prev. 2.0%, Rev. 4.6%)
• New Zealand NBNZ Business Outlook (May) -55.6% (Prev. -42.0%); Own Activity (May) -4.7% (Prev. 8.0%)