• APAC stocks followed suit to the subdued performance seen in global peers after the recent upside in yields and hawkish central bank rhetoric.
• European equity futures are indicative of a flat open with Eurostoxx 50 unchanged after the cash market closed lower by 1.0% yesterday.
• FX markets were contained overnight with DXY circa 102.50, USD/JPY hovers around 130.00.
• Saudi Arabia is reportedly ready to pump more oil if Russian output declines, according to the FT.
• Looking ahead, highlights include Swiss CPI, US Challenger, ADP, IJC & Factory Orders, JMMC & OPEC+ meetings, Speeches from Fed's Mester & NY Fed's Logan, Supply from Spain & France, UK Bank Holiday.

US TRADE

• US stocks were lower after the strong US data weighed on valuations amid a stronger dollar and yields.
• SPX -0.75% at 4,101, NDX -0.74% at 12,548, DJIA -0.54% at 32,813, RUT -0.49% at 1,854.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed's Beige Book noted that growth is slowing in some areas and price hikes are not as large but are still sizeable. All twelve Federal Reserve Districts reported continued economic growth since the prior Beige Book period, while a majority indicated slight or modest growth and four Districts indicated moderate growth.
• Fed's Bullard (2022 voter, hawk) said Fed forward guidance is already affecting the economy and the Fed must follow through to ratify its previous forward guidance. Bullard said it is not advisable to move too quickly in central banking and that they have already announced the Fed will raise rates by 50bps per meeting which is a good path, while he added they could be in for a very long haul if unable to control inflation, according to Reuters.
• Fed's Barkin (2024 voter) said a recession can't be found in the data or actions of business executives, while he added that a reduction in the balance sheet does a little more on top of rate hikes to tighten policy. Barkin also noted he is perfectly comfortable with the path of rate hikes for the next couple of meetings and said the stronger the economy and inflation, the better the case is to do more on rates, according to Fox Business.
• US President Biden said he will discuss how to bring down other costs for Americans but they cannot take immediate action to bring gas back to USD 3/gallon, according to Reuters.
• US Department of Education will discharge all remaining federal student loans used to attend now-closed Corinthian Colleges which will result in USD 5.8bln of full loan discharges for 560k borrowers, while it is investigating other cases that could lead to further loan discharges for students cheated by their colleges, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

MILITARY/DEFENSIVE/NATO

• US plans to sell four long-range, armed Gray Eagle drones to Ukraine which would put an advanced reusable US system capable of multiple deep strikes on the battlefield against Russia for the first time, according to Reuters sources.
• White House said offensive cyber activity against Russia does not violate the policy of avoiding direct military conflict with Russia, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks followed suit to the subdued performance seen in global peers after the recent upside in yields and hawkish central bank rhetoric.
• ASX 200 was dragged lower by underperformance in tech and weakness in financials, with sentiment also not helped by frictions with China.
• Nikkei 225 lacked firm direction with automakers indecisive following sharp declines in their US sales last month.
• Hang Seng and Shanghai Comp traded mixed ahead of the Dragon Boast Festival tomorrow and with Hong Kong suffering from notable losses in property names and tech, while losses in the mainland were pared amid COVID-related optimism and after the latest support efforts in which Beijing announced CNY 800bln of increased credit quotas for state-owned policy banks to fund the construction of infrastructure projects.
• US equity futures were rangebound and found some respite from the prior day's selling pressure; ES -0.1%
• European equity futures are indicative of a contained open with Eurostoxx 50 +0.1% after the cash market closed lower by 1.0% yesterday.

FX

• DXY was rangebound overnight but held on to the prior day’s spoils above the 102.00 level after benefitting from the recent upside in yields and firmer than expected US ISM Manufacturing PMI, while recent Fed rhetoric didn’t provide much of a surprise with Bullard, Barkin and Daly reinforcing the 50bps rate path.
• EUR/USD remained lacklustre after the recent gains in the buck overshadowed the strong EU PMI data and hawkish ECB comments.
• GBP/USD languished near this week’s lows and with price action likely hampered by the 4-day Platinum Jubilee weekend.
• USD/JPY was kept afloat above 130.00 after recent dollar advances and further dovish BoJ reiterations.
• Antipodeans were subdued amid the uninspiring risk tone and with oil prices pressured by reports that Saudi Arabia is ready to pump more oil if Russian output declines.

FIXED INCOME

• 10yr UST futures remained firmly below 119.00 after recent gains in yields and strong ISM data.
• Bunds languished near the prior day's lows after the latest bout of hawkish-leaning ECB rhetoric.
• 10yr JGBs lacked demand with price action kept rangebound amid the mixed 10yr JGB auction results.

COMMODITIES

• Crude futures were pressured alongside the risk tone and with downside exacerbated by reports that Saudi is ready to increase production if Russian output falls, while the focus for the complex turns to the OPEC+ meeting later today.
• Saudi Arabia is reportedly ready to pump more oil if Russian output declines, according to FT.
• US Private Energy Inventory Data (bbls): Crude -1.2mln (exp. -1.4mln), Gasoline -0.3mln (exp. +0.5mln), Distillate +0.9mln (exp. +1.0mln), Cushing +0.2mln.
• US Deputy Treasury Secretary Adeyemo said the administration is willing to continue releases from the Strategic Petroleum Reserve, according to Reuters.
• Spot gold was contained beneath resistance at USD 1850/oz amid a steady dollar.
• Copper traded sideways with price action contained by the uninspiring risk tone

CRYPTO

• Bitcoin was subdued overnight after having recently declined beneath the 30,000 level.

NOTABLE HEADLINES

• China's Ambassador to Australia said that Beijing is prepared to talk with Australia without preconditions but added that trade sanctions on Australia will not be removed until there is an improvement in the political relationship, according to AFR.
• China's Global Times tweeted that Chinese Coast Guard vessels patrolled the territorial waters off the Diaoyu Islands (Senkaku Islands) on Thursday, which is a disputed territory with Japan.
• Japan's Chief Cabinet Secretary Matsuno confirmed that the government wants to increase the average minimum wage to JPY 1000, according to Reuters.

DATA RECAP

• Australian Trade Balance (AUD)(Apr) 10.5B vs. Exp. 9.3B (Prev. 9.3B)
• Australian Goods/Services Exports (Apr) 1% (Prev. 0%)
• Australian Goods/Services Imports (Apr) -1% (Prev. -5%)

UK/EU

NOTABLE HEADLINES

• UK PM Johnson has reportedly delayed plans to conduct a Cabinet reshuffle as he battles increasing revolt from within the Tory party, according to The Telegraph.
• BoE Deputy Governor Cunliffe said rates may well have to rise further and they have to ensure that current inflation doesn't become the new normal, according to Reuters.
• ECB's Lane said it is robust to make the initial steps of normalisation and noted on fragmentation risk, that all of their instruments incorporate flexibility when warranted, while he doesn’t see any link between inflation differentials and prior macro imbalances, according to Reuters.