• APAC stocks saw a mixed session following a similar lead from Wall Street in the run-up to key risk events
• G10 FX pairs were mostly flat, whilst equity, bond, and crude futures traded horizontally in a pre-CPI lull
• European equity futures are indicative of a slightly softer open with the Eurostoxx 50 future -0.2% after cash markets closed +0.6% on Tuesday.
• ECB's Villeroy said we now face the risk of entrenched inflation, price growth has become more widespread, and potentially more persistent
• Looking ahead, highlights include US CPI, BoC Rate Decision, FOMC Minutes, speeches from ECB's Lagarde and de Guindos, BoE's Bailey, Fed's Barkin, supply from the UK, Germany, and the US

US TRADE

EQUITIES

• US stocks were choppy and ultimately closed mixed with trepidation ahead of Wednesday's CPI and FOMC minutes.
• SPX flat at 4,109, NDX -0.67% at 12,964, DJIA +0.29% at 33,685, RUT +0.80% at 1,786.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Goolsbee (voter) said the right monetary policy approach calls for "prudence and patience"; needs to assess the potential impact of financial stress on the real economy, and Fed needs to watch for tighter credit conditions and account for headwinds when setting monetary policy. He said given uncertainty over financial headwinds, "we need to be cautious", and the Fed needs to be careful about raising rates too aggressively. He said markets and financial issues should not drive Fed actions, and supervisory and regulatory tools, not rate cuts, are the principal defence against financial stress. He said current monetary policy and tighter credit conditions can work in tandem to help cool inflation, while the Fed must recognize that the combination of tighter credit and monetary policy can hit sectors and regions differently than if monetary policy was acting on its own. He noted said inflation data continues to come in extremely strong, and the foremost question is how credit conditions evolve, whilst the jobs market feels like it is cooling a bit. (Newswires)
• Fed's Harker (2023 voter, Neutral) said we have to be a little careful not to overdo it. Bank stress has calmed down but is not over. He does not think there should be a blanket increase in FDIC insurance caps and believes the primary tool for financial stability is not monetary policy, with a high bar for using it for financial stability. He believes this is not the time to change the Fed's 2% inflation target, and his view has always been to get rates above 5% and keep them there. If inflation does not move, he thinks more action will be needed. He finds it disappointing that recent readings show disinflation proceeding slowly, and the Fed will determine what, if any, additional action is needed by looking at the data, but already sees promising signs of the Fed's actions. (Newswires)
• Fed's Kashkari (2023 voter, hawkish) said he is less optimistic than the bond market on the speed of the fall in inflation, he sees inflation at the middle of 3% by year-end and closer to 2% next year. He said he is not ready to declare an all-clear after SVB failure, but there are hopeful signs. He stated that the 2% inflation target should not be changed. He does not see a buildup of the kind of risks that took down SVB building up in the banking sector as a whole. (Newswires)
• US Treasury Secretary Yellen said she has not seen evidence suggesting a contraction in credit, although that is a possibility; not anticipating a downturn in the economy although that remains a risk, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks saw a mixed session following a similar lead from Wall Street in the run-up to the risk-packed session.
• ASX 200 was once again propped up by mining names, with industrial metals underpinned by the recent Dollar decline.
• Nikkei 225 extended further above 28k, with the index buoyed by recent bullish comments from Warren Buffett on Japanese stocks ahead of a three-hour CNBC interview from Tokyo.
• Hang Seng and Shanghai Comp were mixed with the former underperforming amid losses in large-cap stocks (JD.com, Alibaba, Tencent) following weakness from Stateside peers.
• US equity futures resumed flat and have traded horizontally since.
• European equity futures traded sideways and are indicative of a slightly softer open with the Eurostoxx 50 future -0.2% after cash markets closed +0.6% on Tuesday.

FX

• DXY traded within a tight range (between 102.03-16) as traders brace for the US inflation release.
• G10s were mostly flat with a mild upward bias against the Dollar throughout the session.
• JPY underperformed against the USD, EUR, and GBP ahead of the US CPI, although USD/JPY found some overnight resistance around 134.00.
• AUD narrowly outperformed after China confirmed it is willing to work with the Australian government to resolve tariff disputes over both wine and barley exports.
• PBoC set USD/CNY mid-point at 6.8854 vs exp. 68843. (prev. 6.8882).

FIXED INCOME

• 10yr UST futures traded sideways following the prior day’s selling, which kicked in more forcefully following commentary from Fed's Williams.
• Bund futures were also flat and found mild resistance near 136.00 after tumbling around a point yesterday.
• 10yr JGB futures were softer after the decline seen in global counterparts, with the corresponding yield slowly edging back towards the BoJ's 50bps ceiling.

COMMODITIES

• Crude futures consolidated overnight but held onto the prior day’s gains.
• EIA STEO (APRIL): 2023 world oil demand growth forecast was cut by 40k BPD to a 1.44mln BPD Y/Y increase, 2024 forecast was raised by 60k BPD to a 1.85mln BPD Y/Y increase. 2023 US oil demand growth forecast unchanged at a 100k BPD rise to 20.4mln BPD; 2024 forecast cut to a 300k BPD rise to 20.7mln BPD (prev. 400k BPD rise). Reduced forecast of OPEC production by 0.5mln BPD for the rest of 2023. STEO Expect global oil markets will be in relative balance over the coming year. OPEC production is to fall by 500k BPD in 2023, then increase by 1mln BPD in 2024 after the output agreement expires in 2023. STEO Forecasts WTI crude oil spot prices of USD 79.24/bbl in 2023, and 75.21/bbl in 2024.
• US Energy Inventory Data (bbls): Crude +0.38mln (exp. -0.60mln), Gasoline +0.5mln (exp. -1.6mln), Distillate -2.0mln (exp. -0.8mln), Cushing -1.4mln.
• Spot gold and spot silver gained momentum despite little action in bonds and FX, whilst newsflow was also light.
• Copper futures were mixed in tight ranges amid the overall cautious tone ahead of key economic data.

CRYPTO

• Bitcoin traded indecisively on either side of 30k.

NOTABLE ASIA-PAC HEADLINES

• China is reportedly negotiating a compromise plan with other major creditors that could help break a logjam in multibillion-dollar debt-relief talks for struggling developing nations, according to WSJ citing sources.
• IMF Financial Stability Report said changes to the BOJ's Yield Curve Control (YCC) may affect international financial markets through three channels of exchange rates, term premiums on sovereign bonds, and global risk premiums, according to Reuters.

DATA RECAP

• New Zealand Elec Card Retail Sale YY (Mar) 15.5% (Prev. 11.7%)
• New Zealand Elec Card Retail Sale MM (Mar) 0.7% (Rev. -0.1%)
• South Korean Unemployment Rate (Mar) 2.7% (Prev. 2.6%)

GEOPOLITICAL

• US House is set to vote next week on a bill to address potential Huawei and ZTE threats, according to Reuters.
• Taiwan's defence ministry said in the past 24 hours spotted 35 Chinese aircraft and 8 Chinese ships around Taiwan, according to Reuters.
• North Korea remains unresponsive to regular contact via the inter-Korean liaison line for a sixth day, according to Yonhap.
• US National Security Adviser Sullivan spoke with Saudi Crown Prince MBS on Tuesday, and they discussed global and regional matters and ongoing diplomacy related to ending the war in Yemen, according to Reuters.
• China has confirmed it is willing to work with the Australian government to resolve tariff disputes over both wine and barley exports, according to AFR.
• China's Foreign Ministry held a Sino-Dutch consultation on arms control and non-proliferation in Beijing on Tuesday, according to a ministry statement.

EU/UK

• ECB's Villeroy said we now face the risk of entrenched inflation, price growth has become more widespread, and potentially more persistent. He added the ECB's policy response is now moving from a “sprint” to a “long-distance race”, and the ECB is fully committed to reining inflation, according to Reuters.
• Bank of France sees Q1 GDP rising 0.2% (prev. 0.1%) as activity in three main sectors (industrial, services, construction) picked up steam, according to Reuters.
• US President Biden and UK PM Sunak to meet at 11:15BST/06:15EDT; Biden is to deliver remarks at 13:00BST/08:00EDT, according to The White House.
• Swiss Lower House voted to retrospectively reject the CHF 109bln Credit Suisse (CSGN SW) rescue package, according to Reuters.