• APAC stocks traded mixed as risk sentiment only mildly improved from the lacklustre performance stateside.
• European equity futures are indicative of a firmer open with Eurostoxx 50 +0.6% after the cash market closed lower by 0.7% yesterday.
• DXY hovers around the 102 mark, EUR/USD holds on to 1.07 status and JPY lags in G10 FX.
• Looking ahead, highlights include German Retail Sales, EZ, UK & US Final PMIs, US ISM Manufacturing PMI, Construction Spending, ADP, BoC Policy Announcement Speeches from Fed's Williams, & Bullard, ECB's Lagarde, Lane, Panetta & Knot.

US TRADE

• US stocks were subdued as US players returned from the long weekend to a slew of macro pressures that dictated sector performance.
• SPX -0.63% at 4,132, NDX -0.31% at 12,642, DJIA -0.67% at 32,990, RUT -1.26% at 1,864.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed Discount Rate Minutes stated that Directors at 11 Fed banks backed a 50bps discount rate hike to 1% and one supported leaving the Discount Rate unchanged, according to Reuters.
• Fed's Bostic (2024 voter) said there could be a significant reduction in inflation this year and that his suggestion for a pause in September should not be interpreted as a "Fed put" or belief that the Fed would rescue markets, according to an interview in MarketWatch.
• US Treasury Secretary Yellen said US President Biden's top concern is inflation and shares the Fed's priority of slowing inflation, while she added she was wrong about the path inflation would take and doesn't expect the same pace of job gains going forward, according to Reuters.
• White House Economic Adviser Deese said President Biden's meeting with Fed Chair Powell and Treasury Secretary Yellen was very constructive in which Biden underscored to Powell he will provide the Fed the space it needs to tackle inflation, while Biden has not decided on student loan relief.
• US Senate Minority Leader McConnell said it may take a recession to crush inflation, according to Reuters.
• US DoJ asked the appeals court to overturn the order that ended the mask mandate on airplanes and buses, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

TALKS/NEGOTIATIONS

• US State Department said the US remains concerned over the Russian attempt to institutionalise control over sovereign Ukraine territory, in particular, Kherson, while the White House said that the US won't send long-range rockets for use beyond Ukraine.
• UN said it had "constructive discussions" in Moscow on facilitating Russian grain and fertiliser exports, according to Reuters.

MILITARY/DEFENSIVE/NATO

• US President Biden said the US is to provide Ukraine with advanced rocket systems and said the US is not seeking a war between NATO and Russia, while he added the US will not try to bring about Russian President Putin's ouster in Moscow. Biden also stated that the US will not be directly engaged in the conflict so long as the US or its allies are not attacked and that the US is not encouraging Ukraine to strike beyond its borders, according to NYT.
• US senior administration official said the new US weapons package to Ukraine includes the High Mobility Artillery Rocket System (HIMARS), while the official said Ukraine will not use HIMARS on targets in Russia and the US will not encourage Ukraine to make territorial concessions, according to Reuters.
• Russian nuclear forces are conducting drills in the Ivanovo province, according to IFAX citing the Russian Defence Ministry.

ENERGY/SANCTIONS/ECONOMIC

• UK is set to announce a ban on UK insurers covering ships carrying Russian oil to join the EU sixth sanctions round, while G7 (ex-Japan) are working towards an insurance ban in six months, according to FT citing government sources.
• Gazprom does not expect to cut off any more EU gas buyers and EU buyers have now either paid or been cut off, according to Bloomberg citing sources
• RWE (RWE GY) said it transferred euros to an account at Gazprombank under the new payment scheme for Russian gas, while Shell (SHEL LN) said it has not agreed to new payment terms set out by Gazprom including the creation of a "K" Rouble account, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded mixed as risk sentiment only mildly improved from the lacklustre performance stateside as the region digested another slew of data releases including the continued contraction in Chinese Caixin Manufacturing PMI.
• ASX 200 was kept afloat by strength in industrials, telecoms and the top-weighted financials sector, while better-than-expected Q1 GDP data provides some mild encouragement.
• Nikkei 225 was underpinned by further currency depreciation and with BoJ Deputy Governor Wakatabe reiterating the BoJ's dovish tone.
• Hang Seng and Shanghai Comp were indecisive after Chinese Caixin Manufacturing PMI remained in contraction territory and amid mixed COVID-related developments with Shanghai reopening from the lockdown whilst Beijing's Fengtai district tightened curbs and required all residents to work remotely.
• US equity futures traded marginally higher but with gains capped amid the cautious overnight mood; ES +0.4%
• European equity futures are indicative of a firmer open with Eurostoxx 50 +0.6% after the cash market closed lower by 0.7% yesterday.

FX

• DXY hovers around the 102.00 mark after going as high as 102.17 yesterday.
• EUR/USD was lacklustre amid the firmer greenback and after mixed ECB rhetoric including from ECB’s Visco who noted rate hikes will need to be gradual given uncertainties.
• GBP/USD slipped back below 1.2600 with price action subdued amid a lack of fresh catalysts and with the UK heading into a 4-day weekend.
• USD/JPY reclaimed the 129.00 handle on widening yield differentials and dovish BoJ rhetoric.
• Antipodeans were indecisive despite stronger than expected Australian GDP data, with pressure seen amid softer commodity prices and a weaker CNY.

FIXED INCOME

• 10yr UST futures were subdued after the recent upside in yields and as the Fed officially begins its quantitative tightening today.
• Bunds remained firmly beneath 152.00 as record-high eurozone inflation adds to the pressure for the ECB to act.
• 10yr JGBs eked marginal gains after the BoJ maintained its bond purchase intentions for June and Deputy Governor Wakatabe stuck to the dovish script.

COMMODITIES

• Crude futures were contained after yesterday's pullback and with pressure from reports about a potential Russian exclusion from the OPEC output deal.
• Some OPEC members are exploring the idea of suspending Russia’s participation in an oil production deal as Western sanctions and a partial European ban begin to undercut Moscow’s ability to pump more, while exempting Russia from its oil-production targets could potentially pave the way for Saudi Arabia, UAE and other OPEC producers to pump significantly more crude, according to WSJ.
• Russian Foreign Minister Lavrov met with his Saudi counterpart on Tuesday in which they both praised the level of cooperation in OPEC+, while they noted stabilising effect that tight Russia-Saudi coordination has on the global hydrocarbon market, according to Reuters.
• UAE is considering a plan to increase its oil capacity by an additional 1mln bpd to a total 6mln bpd by 2030, according to Energy Intel.
• Libya's Agoco has lost 220k BPD of oil output due to Tobruk disruption, according to Bloomberg.
• Spot gold languished at the prior day's lows amid a firmer greenback.
• Copper declined amid the mixed risk tone and with Chinese Caixin Manufacturing PMI at a contraction.
• Police clashed with communities blocking MMG's Las Bambas copper mine in Peru.

CRYPTO

• Bitcoin was lacklustre overnight and declined beneath the 31,500 level.

NOTABLE HEADLINES

• BoJ Deputy Governor Wakatabe said the BoJ must maintain powerful monetary easing and sustain an environment where wages can rise, while he added that the BoJ shouldn't rule out additional easing steps if risks to the economy materialise. Wakatabe also noted that most goods prices aren't increasing with recent inflation driven mostly by energy and some food price increases, as well as noted that consumer inflation has not yet achieved the BoJ's price goal in a sustained and stable manner, according to Reuters.
• US President Biden and New Zealand PM Arden discussed stepping up engagement with Pacific island states, according to Reuters citing a US official.

DATA RECAP

• Chinese Caixin Manufacturing PMI Final (May) 48.1 vs. Exp. 48.0 (Prev. 46.0)
• Australian Real GDP QQ SA (Q1) 0.8% vs. Exp. 0.5% (Prev. 3.4%)
• Australian Real GDP YY SA (Q1) 3.3% vs. Exp. 2.9% (Prev. 4.2%)

UK/EU

NOTABLE HEADLINES

• UK government is drawing up plans that will task the BoE with stepping in and handling the implosion of a stablecoin in preparation for future crises in the crypto markets, according to The Times.
• EU Commission President von der Leyen will, on Wednesday, approve Poland’s national recovery plan; however, Politico reports that commissioners, including Timmermans and Vestager, will raise objections to this as Poland has not taken the necessary steps for Commission approval.

DATA RECAP

• UK BRC Shop Price Index YY (May) 2.8% (Prev. 2.7%)