• APAC stocks were mixed after the lack of macro drivers over the weekend and as participants brace for this week’s key events
• European equity futures are indicative of a contained open with Euro Stoxx 50 future -0.1% after the cash market closed higher by 0.5% on Friday
• DXY was uneventful on a 101 handle, EUR/USD eyes 1.10 to the upside, AUD the marginal laggard across the majors
• Russian Security Council Deputy Chairman Medvedev warned that Moscow will terminate the grain deal if the G7 moved to ban exports to Russia
• Highlights include German Ifo, Speeches from ECB’s Panetta & de Guindos, Supply from EZ, Earnings from Coca-Cola.

US TRADE

EQUITIES

• US stocks traded sideways on Friday and the VIX remained at lows for the year despite a very strong US S&P Global PMI print in which manufacturing activity returned to expansionary territory for the first time in six months, while both services and manufacturing rose above all analyst forecasts and was accompanied with hawkish pricing commentary.
• SPX +0.09% at 4,133, NDX +0.11% at 13,000, DJIA +0.07% at 33,809, RUT +0.10% at 1,791.
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NOTABLE HEADLINES

• Fed's Cook (voter) said on Friday that monetary policy is moving into a more uncertain phase and banking sector headwinds could weigh on the rate rise outlook, while she added that March PCE inflation is likely to moderate to 4% and inflation pressures have been abating but core prices remain sticky, according to Reuters.
• US House Speaker McCarthy said he is confident he has the votes to pass his debt limit bill in the House during the week ahead, according to a Fox News interview.
• US regulators proposed new rules on Friday to speed up the assessment of financial stability risks and make it easier to designate non-banking institutions as systemically important which would subject them to Fed supervision, according to Reuters.
• US banks are said to be increasingly concerned regarding falling commercial property valuations and the risk they pose to lenders’ balance sheets, according to FT citing senior executives.

APAC TRADE

EQUITIES

• APAC stocks were mixed after the lack of macro drivers over the weekend and as participants brace for this week’s key events including big US tech earnings and the first BoJ meeting under Governor Ueda’s leadership.
• ASX 200 was lacklustre as gains in tech and defensives were offset by underperformance in the mining-related industries with notable losses in Fortescue Metals and South32 after weaker quarterly output updates.
• Nikkei 225 eked slight gains after source reports that the BoJ is likely to maintain ultra-loose monetary policy and dovish guidance, while it was also reported the BoJ is considering a comprehensive review of the impact of the monetary easing taken over the longer term and are planning to examine a quarter century of deflation.
• Hang Seng and Shanghai Comp were subdued despite the PBoC’s liquidity efforts and the announcement of policies to support trade by China’s Vice Commerce Minister who also noted that uncertainty in external demand remains the biggest restraint for China’s trade, while frictions lingered with the US reported to have urged South Korea not to fill China’s shortfalls if Beijing bans Micron chips.
• US equity futures (ES -0.4%) declined with price action contained amid the cautious mood in Asian stocks.
• European equity futures are indicative of a contained open with Euro Stoxx 50 future -0.1% after the cash market closed higher by 0.5% on Friday.

FX

• DXY was uneventful amid the quiet mood across the FX space in the absence of any major catalyst and with the Fed in a blackout period although Fed’s Cook commented prior to entering silent mode that monetary policy is moving into a more uncertain phase and banking sector headwinds could weigh on the rate rise outlook.
• EUR/USD traded rangebound with the single currency situated near last week’s best levels and within relatively close proximity for another attempt at the 1.1000 resistance level.
• GBP/USD took a breather after Friday’s swings, while there were comments from BoE’s Ramsden that they must stop the risk of high inflation becoming embedded and that high inflation is a bigger risk than over-tightening.
• USD/JPY edged higher after support held near the 134.00 level and with comments from BoJ Governor Ueda supporting the consensus for the central bank to maintain ultra-easy policy settings later this week.
• Antipodeans were subdued owing to the lacklustre risk appetite and quiet data calendar.
• PBoC set USD/CNY mid-point at 6.8835 vs exp. 6.8826 (prev. 6.8752)

FIXED INCOME

• 10yr UST futures traded steadily and only partially nursed some of the losses on Friday after a pullback from resistance at the 115.00 level and with headwinds from the stronger-than-expected US PMI data releases.
• Bund futures were also in recovery mode after slipping beneath 134.00 but with the rebound capped by quiet newsflow and as the attention turns to the latest incoming German Ifo data.
• 10yr JGB futures lacked demand after the recent losses in peers and with the BoJ abstaining from additional purchases but with the downside cushioned after recent source reports and the latest comments from BoJ Governor Ueda suggested an unlikelihood of a policy tweak this week.

COMMODITIES

• Crude futures were on the back foot amid the lack of catalysts and uninspiring risk sentiment.
• Spot gold was flat amid the uneventful dollar and after last week's slip below the key USD 2,000/oz level.
• Copper futures traded sideways with prices stuck beneath the USD 4/lb level after last week's downtrend.
• Central banks reportedly loaded up on gold amid geopolitical tensions whereby reserve managers’ purchases rose 152% last year, while an annual poll of 83 central banks found that more than two-thirds thought their peers would increase gold holdings this year, according to FT.

CRYPTO

• Bitcoin notched mild gains but with prices capped beneath the 28,000 level after the rangebound performance over the weekend and amid the cautious mood across risk assets at the beginning of the week.

NOTABLE ASIA-PAC HEADLINES

• PBoC injected CNY 89bln via 7-day reverse repos on Sunday with the rate kept at 2.00% and it injected CNY 115bln via 7-day reverse repos with the rate kept at 2.00% on Monday.
• PBoC official said China’s yuan has a solid foundation to remain stable and the PBoC will improve the floating exchange rate system based on market demand and supply, according to Reuters.
• Chinese Vice Commerce Minister Wang said uncertainty in external demand remains the biggest restraint for China’s trade and said that China will actively satisfy funding demand from small and medium-sized exporters and importers, as well as support firms to explore diversified markets, according to Reuters.
• Chinese officials and analysts said deflation concerns are unnecessary despite the slower price growth since the start of the year and noted the economy is on a solid recovery track amid pro-growth policies, according to the State Council.
• US urges South Korea not to fill China shortfalls if Beijing bans Micron (MU) chips, according to FT.
• BoJ Governor Ueda said the BoJ must maintain monetary easing as trend inflation is still below 2% but added that if it can be foreseen that trend inflation will reach 2%, the BoJ must head towards policy normalisation. Ueda also said that how to revise YCC will depend on various factors such as economic conditions and the pace of inflation at the time and noted that he cannot say now how specifically the BoJ could tweak YCC.
• BoJ is considering conducting a comprehensive review of the impact of the monetary easing steps taken over the longer term with the central bank planning to examine a quarter century of deflation and could start discussions as early as this week’s policy meeting, according to a Sankei report which didn’t cite any sources.

GEOPOLITICAL

• EU is set to propose banning many goods from transiting through Russia which would be part of the EU’s eleventh sanctions package, according to Bloomberg.
• Russian Security Council Deputy Chairman Medvedev warned that Moscow will terminate the grain deal if the G7 moved to ban exports to Russia, according to Reuters.
• Russia-installed head of Crimea said air defences had been activated on Saturday although there were no reports of damages or casualties, according to Reuters.
• Germany expelled over 20 Russian diplomats, while Moscow called Berlin's actions "hostile" and will expel at least 20 German diplomats in a tit-for-tat response, according to Russian state news RIA-Novosti.
• Baltic states were angered by China’s ambassador to France who questioned the legitimacy of countries formerly in the Soviet Union and are planning to summon Chinese diplomats to complain about the remarks, according to FT.
• Chinese Vice Foreign Minister Sun lodged solemn representations with the South Korean ambassador to China about South Korean President Yoon’s ‘erroneous’ Taiwan remarks, according to the Chinese Foreign Ministry cited by Reuters.
• China reportedly lashed out against the US-Philippines alliance with the decision by the Philippines to grant the US access to four military bases near Taiwan said to anger Beijing, according to FT. However, it was separately reported that Chinese Foreign Minister Qin Gang said China is ready to work with the Philippines to implement a consensus between the two countries and the Philippines’ Foreign Minister commented that differences in the South China Sea are not the sum total of relations between the two countries, according to Reuters.
• US senior administration official said North Korea’s human rights situation is likely to come up at next week's US-South Korea summit and North Korea is now in many ways much more closely aligned with China than it was before.
• US said it is deeply concerned by Azerbaijan establishing a checkpoint on the only land route to the contested Nagorno-Karabakh region, according to Reuters.
• US Secretary of State Blinken said US personnel and their dependents were safely evacuated from the embassy in Sudan. Furthermore, UK PM Sunak said British armed forces completed a rapid evacuation of British diplomats and their families, while the German military also conducted an evacuation of German citizens from Sudan.

EU/UK

• BoE's Ramsden said on Friday that the BoE must stop the risk of high inflation becoming embedded in the economy and that high inflation is a bigger risk than over-tightening, while he also stated that there were still signs of stubbornly high inflation in the economy and the Bank must not get “knocked off course” in its 18-month battle to control prices by raising interest rates, according to The Times.
• UK PM Sunak will hold talks with major UK firms and investors on Monday under the new "Business Connect" forum as the government seeks to fill the void following the scandal and implosion of the CBI business lobby, according to Bloomberg and FT.
• UK government is set to introduce legislation in the approaching days to set up a new regulator to police the increasing dominance of the large technology platforms, according to FT.
• ECB's Wunsch said they are waiting for wage growth and core inflation to decline, along with headline inflation, before they can arrive at the point where they can pause on rates, according to FT.
• German Interior Minister said public workers agreed on a wage deal with employers, according to Reuters.
• S&P affirmed the UK at AA; Outlook Revised to Stable from Negative, while it affirmed Greece at BB+; Outlook Revised to Positive from Stable and affirmed Italy at BBB; Outlook Stable.

DATA RECAP

• UK Rightmove House Prices MM (Apr) 0.2% (Prev. 0.8%)
• UK Rightmove House Prices YY (Apr) 1.7% (Prev. 3.0%)