• European bourses & US futures are subdued as pressure intensified in European trade without fresh catalyst; TSLA -7.5% pre-market.
• The DXY is subdued and drifting further from 102.00 to the mixed but contained fortune of peers; NZD lags after CPI miss.
• Core fixed income pares initial recovery momentum approaching a packed US agenda.
• Commodities underpressure given the broader tone despite the softer USD, as crude drops further to fresh multi-week lows.
• Fed's Williams (voter) said US inflation is still too high and the Fed will act to lower price pressures.
• Looking ahead, highlights include US IJC, Existing Home Sales, EZ Consumer Confidence (Flash), ECB Minutes, Speeches from Fed's Williams, Waller, Mester, Bowman & Bostic, ECB's Lagarde & Schnabel. Earnings from Phillip Morris, AT&T, and American Express.

EUROPEAN TRADE

EQUITIES

• European bourses are lower across the board, Euro Stoxx 50 -0.3%, as pressure emerged without a clear catalyst after a relatively contained open.
• Sectors are largely in the red, with Autos underperforming amid downside in Renault post-earnings and with attention on Tesla; elsewhere, Nokia slumps and L'Oreal trims upside after their latest updates.
• Stateside, futures are pressured to a larger extent than their European peers with downside occurring in tandem with the above move and exacerbated by marked pressure in Tesla, NQ -1.1%
• TSMC (2330 TT/TSM) Q1 (TWD): Net Profit 206.9bln (exp. 192.8bln), Sales 508.6bln (exp. 517.9bln), Gross Profit 286.5bln (prev. 273.2bln). EPS 7.98 (exp. 7.41), Gross Margin 56.3% (exp. 54.5%). Q2 Guidance (USD): Revenue 15.2-16.0bn (exp. 17.3bln), Gross Margin 52-54% (exp. 52.5%), Operating Margin 39.5-41.5% (exp. 40%). TSM +0.4% in pre-market trade
• Tesla (TSLA) - Q1 2023 (USD): Adj. EPS 0.85 (exp. 0.85), Revenue 23.33bln (exp. 23.29bln). Still sees FY production 1.80mln vehicles (exp. 1.84mln). Tesla did not release its automotive margins, but continues to believe that its operating margin will remain among the highest in the industry. CEO Musk has taken a view that pushing for higher volumes and a larger fleet is the right choice here vs lower volume and higher margins. -7.5% in pre-market trade
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FX

• Kiwi deflated as NZ CPI metrics miss consensus, NZD/USD sub-0.6200 and AUD/NZD eyeing 1.0900.
• DXY drifting within 102.040-101.780 range after failing to close above the 21 DMA again.
• Aussie and Euro underpinned by option expiries between 0.6700-0.6695 and at 1.0925 vs the Buck.
• Franc firm and retesting 0.9850 vs Greenback as Treasury yields ease; Yen, Pound and Loonie rangy.
• PBoC set USD/CNY mid-point at 6.8987 vs exp. 6.8979 (prev. 6.8732)
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FIXED INCOME

• Core benchmarks have pared back initial recovery momentum and are now in close proximity to the neutral mark on the session, though currently retain an incremental positive bias.
• Given the above, bonds are yet to mark new troughs though the waning momentum is notable but worth caveating with the particularly hefty upcoming US agenda.
• Specifically, the action has seen Bunds, Gilts and USTs move closer to their 133.42, 99.94 and 114-07 intraday lows vs initial recovery highs; stateside yields are lower, with curve action again most pronounced at the short-end.
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COMMODITIES

• Crude benchmarks remain under pressure, with specific fundamentals limited and the complex printing new multi-week lows. Though, the magnitude of today's action has thus far been much less pronounced than the losses seen earlier in the week.
• Specifically, WTI and Brent June futures are under USD 78/bbl (vs high 79.07/bbl) and USD 82/bbl (vs high 82.92/bbl) respective highs.
• Spot gold has attempted to reclaim the USD 2k/oz mark but is yet to convincingly surmount the figure despite the softer USD and equity landscape, base metals are lower in fitting with the mentioned tone though the downside is perhaps capped as the Dollar dips.
• Pakistan's first order for Russian discount oil has been placed, via Pakistan's petroleum minister; intends to import 100k BPD of Russian oil.
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NOTABLE HEADLINES

• ECB's Knot (Hawk) says the ECB may need to raise interest rates again in June and July – on top of the expected 25bps hike in May, via Irish Times. Is "not uncomfortable" with current market pricing which showed another 75bp of tightening. Does not know where sufficiently restrictive is, but we are clearly not at it. Suggested fiscal policy is currently doing too much, and needs to be withdrawn before it becomes an inflation driver.

DATA RECAP

• EU Eurostat Trade NSA, Eur (Feb) 4.6B EU (Prev. -30.6B EU)
• German Producer Prices YY (Mar) 7.5% vs. Exp. 9.8% (Prev. 15.8%); MM (Mar) -2.6% vs. Exp. -0.5% (Prev. -0.3%)

NOTABLE US HEADLINES

• Fed's Goolsbee (voter) said the Fed is still figuring out the credit impact from the recent bank strains and he is still waiting to see if the fallout from recent bank failures could cause the economy to slow more than expected. Goolsbee added his message is to be prudent and patient, while he noted the things to watch during the next two weeks until the Fed's next meeting are prices and credit, according to Reuters citing a Marketplace interview.
• Fed's Williams (voter) said US inflation is still too high and the Fed will act to lower price pressures, as well as noted that tighter credit conditions will weigh on growth and it will take time to gauge the impact of tighter banking conditions. Williams also commented that it is likely to take two years to get back to the 2% inflation target and it will take time for Fed actions to lower inflation, while he sees inflation to ease to 3.25% this year and noted inflation is moderating but demand still outstrips supply.
• China's MOFCOM says they have exchanged views with the US on economic and trade relations.
• US Treasury Secretary Yellen says the US seeks a constructive and fair relationship with China; US will not compromise on national security.
• JPMorgan expects US debt ceiling to become an issue as early as May, and sees a non-trivial risk of technical default on US Treasuries.
• Click here for the US Early Morning Note.

GEOPOLITICS

• China Hainan Maritime Bureau said it will ban passage during military drills in nearby waters in South China Sea amid military drills from Friday to Sunday, according to Kyodo.
• Iran says its navy has forced a US submarine to surface as it enters the Gulf, via State TV.

CRYPTO

• Bitcoin continues to slip and has drifted to a fresh USD 28.56k WTD trough vs Monday's USD 30.5k best, action which has come alongside the broader dip in sentiment with specific fundamentals somewhat limited.

APAC TRADE

• APAC stocks traded rangebound with the region indecisive following the flat handover from the US where earnings were under the spotlight and early headwinds were seen after firmer-than-expected UK CPI data.
• ASX 200 was indecisive as participants digested output updates and with the mining sector subdued despite the fresh record Q1 iron ore shipments by Rio Tinto, while Australian Treasurer Chalmers announced recommendations from the independent RBA review which included establishing separate boards for governance and monetary policy with fewer meetings and press conferences to be conducted after policy decisions.
• Nikkei 225 gradually pared opening losses following mixed trade data including better-than-expected exports growth and after a recent report that the BoJ is said to be wary of tweaking yield control this month.
• Hang Seng and Shanghai Comp were mixed following the lack of surprises by the PBoC which maintained its benchmark lending rates for the 8th consecutive month and as frictions lingered after the US Commerce Department imposed a USD 300mln civil penalty on Seagate for supplying hard disk drives to Huawei in violation of export controls.

NOTABLE ASIA-PAC HEADLINES

• PBoC 1-Year Loan Prime Rate (Apr) 3.65% vs Exp. 3.65% (Prev. 3.65%); 5-Year Loan Prime Rate (Apr) 4.30% vs Exp. 4.30% (Prev. 4.30%)
• PBoC official expects consumer inflation to pick up later this year; the impact on the Yuan from volatility in major currencies is limited, expects it to be basically stable with two-way swings.
• US Trade Representative Tai said they have seen supply chain fragility and that US trade restrictions on China are narrowly targeted, while she added the US doesn't intend to decouple and intends a level trade playing field with China.
• US Commerce Department imposed a USD 300mln civil penalty on Seagate (STX) and said the Co. sold 7.4mln hard disk drives to Huawei between August 2020-September 2021 in violation of export controls, according to Reuters.
• RBA independent review recommended that the RBA should have dual objectives of price stability and full employment, while it should retain a flexible inflation target of 2%-3% and aim at the mid-point. It was also recommended that the government form a monetary policy board of experts which would comprise of the RBA Governor, Deputy Governor, Treasury Secretary and 6 external members with the Governor as Chair in which the policy board would conduct 8 meetings a year with a press conference after each meeting, while the government should establish a governance board with an external chair and legislate changes to commence from July 2024. Furthermore, the RBA should retain independence and the power of government to override decisions should be repealed.
• BoJ is reportedly open to tweaking Yield Curve Control (YCC) this year if wage momentum holds, according to Reuters sources; may engage is more lively debate in the June and July meetings; no current consensus on how soon to phase YCC out, July wage tally key.

DATA RECAP

• Japanese Trade Balance Total Yen (Mar) -754.5B vs. Exp. -1294.8B (Prev. -897.7B, Rev. -898.1B)
• Japanese Exports YY (Mar) 4.3% vs. Exp. 2.6% (Prev. 6.5%); Imports YY (Mar) 7.3% vs. Exp. 11.4% (Prev. 8.3%)
• Australian NAB Business Confidence (Q1) -4 (Prev. -1)
• New Zealand CPI QQ (Q1) 1.2% vs. Exp. 1.7% (Prev. 1.4%); YY (Q1) 6.7% vs. Exp. 7.1% (Prev. 7.2%)
• RBNZ Sectoral Factor Model Inflation Index (Q1) 5.7% (Prev. 5.8%)