• European bourses mostly softer in catch-up trade from the long weekend, US futures similar with attention on the Fed, debt ceiling & earnings
• AUD outperforms after a RBA hike and hawkish guidance, DXY picking up above 102.00 after pivoting the figure while EUR & GBP fade
• EGBs softer in corrective post-ISM trade though off lows as the ECB BLS sparked a dovish reaction
• Subsequently, the EZ Flash HICP measure saw little sustained reaction with market pricing now implying an 80% chance of 25bp in May
• Crude benchmarks choppy with underlying pressure given the above market skew, metals mixed
• US Treasury Secretary Yellen said the debt ceiling could become binding as soon as June 1st; Biden has called a congressional leaders meeting for May 9th
• Looking ahead, highlights include US Factory Orders, JOLTS, New Zealand Unemployment. Earnings from AMD & Pfizer.

EUROPEAN TRADE

EQUITIES

• European stocks mostly decline after a long weekend, Euro Stoxx 50 -0.2%, with traders keeping an eye on various upcoming risk events; US equity futures hold a downward bias, ES -0.1%.
• In earnings, HSBC +4.5% beat expectations while BP -4.5% missed on revenue and guided towards lower Q2 refining margins.
• Stateside, futures are modestly softer but have picked up off lows as the European session progresses with the focus remaining firmly on the Fed, debt ceiling and earnings.
• Click here and here for the European earnings/updates, highlights include: BP, HSBC, ams Osram & more.
• Click here for more detail.

FX

• Aussie outperforms as RBA hikes and delivers hawkish guidance against expectations for another pause, AUD/USD probes 0.6700 and the top end of 1.5 bn expiry options, AUD/NZD back above 1.0800 even though NZD/USD hovers just shy of 0.6200 ahead of jobs data.
• DXY pivots 102.000 awaiting US factory orders and JOLTS job openings.
• Euro fades from 1.1000+ vs Buck amidst decent expiries and as the ECB lending survey reveals substantially tighter credit conditions.
• Pound fails to retain 1.2500 handle against Dollar despite an upwardly revised final UK manufacturing PMI.
• Click here for more detail.
• Click here for the notable FX expiries for today's NY cut.

FIXED INCOME

• US Treasuries bounce from post-manufacturing ISM lows as attention turns to factory orders and JOLTs, T-note nearer upper end of 114-28+/114-15 band after decent block purchase at 114-24
• Bunds and Gilts remain weak in corrective trade after the long weekend, but off worst levels between 134.35-135.34 and 100.37-101.18 respective ranges
• EZ debt takes note of ECB BLS showing tighter credit standards, but UK bonds largely shrug off the upgrade to final manufacturing PMI.
• For reference, the morning's ECB Bank Lending Survey saw a modest dovish adjustment to market pricing while the subsequent Flash HICP figures sparked little sustained reaction
• Click here for more detail.

COMMODITIES

• WTI and Brent futures see choppy trade amid a cautious market environment, whilst BP anticipates elevated oil prices due to OPEC+ production restrictions, strengthening Chinese demand, and tight supply/demand balances.
• Metals trade mixed, with spot gold lower in a tight range, and base metals initially gaining but now showing mixed performance as the DXY gains ground.
• Click here for more detail.

NOTABLE HEADLINES

• ECB bank lending survey - Q1 2023; net 27% of EZ banks reported tightening of lending standards for companies, 38% reported fall in demand for credit from companies. Banks indicated that their credit standards for loans or credit lines to enterprises tightened further substantially in the first quarter of 2023. Firms’ net demand for loans fell strongly in the first quarter of 2023. The decline in net demand was stronger than expected by banks in the previous quarter and the strongest since the global financial crisis.. Click here for more detail & newsquawk analysis.
• UK Foreign Secretary Cleverly says a meeting with China's Vice President Han Zheng is likely.

DATA RECAP

• EU HICP Flash YY (Apr) 7.0% vs. Exp. 7.0% (Prev. 6.9%); X Food, Energy, Alcohol & Tobacco Flash MM (Apr) 1.00% (Prev. 1.30%)
• EU HICP-X Food, Energy, Alcohol & Tobacco Flash YY (Apr) 5.6% vs. Exp. 5.7% (Prev. 5.7%)
• EU S&P Global Manufacturing Final PMI (Apr) 45.8 vs. Exp. 45.5 (Prev. 45.5)
• EU Loans to Non-Financials (Mar) 5.2% (Prev. 5.7%); Households (Mar) 2.9% (Prev. 3.2%)
• German Retail Sales MM Real (Mar) -2.4% vs. Exp. 0.4% (Prev. -1.3%); YY Real (Mar) -8.6% (Prev. -7.1%)
• Swiss Consumer Confidence (Q2) -13 (Prev. -9.0)
• UK S&P Global/CIPS Manufacturing PMI Final (Apr) 47.8 vs. Exp. 46.6 (Prev. 46.6)
• UK BRC Shop Price Index YY (Apr) 8.8% (Prev. 8.9%)

NOTABLE US HEADLINES

• US President Biden is likely to nominate Fed Governor Jefferson to be Fed Vice Chair and World Bank official Kugler to be a Fed Governor, according to New York Times.
• US Treasury Secretary Yellen said the debt ceiling could become binding as soon as June 1st and the actual date for the exhaustion of extraordinary measures could be a number of weeks later than the latest estimates, while she added the Treasury is suspending the issuance of state and local government series securities to avoid breaching the debt limit.
• US President Biden invited all four Congressional leaders to a meeting at the White House on May 9th. Subsequently, US House Speaker McCarthy has accepted an invitation to meet with Biden May 9th, via CNN's Collins, "amid a new warning from the Treasury secretary that U.S. could default on its debt as early as June 1."
• US Senate Majority Leader Schumer and House Democrat leader Jeffries said they do not have the luxury of waiting to June 1st to come together and called for Congress to pass a clean bill to avoid a default, according to Reuters. It was later reported that Schumer set in motion the process for a vote on a clean two-year debt limit suspension and the move leaves an opening for deficit-reduction talks once the debt ceiling is enacted.
• US House Speaker McCarthy said House Republicans did their job and passed a responsible bill that raises the debt ceiling, avoids a default and tackles reckless spending, while he added the Senate and the President need to get to work, and soon. There were also comments from Republican Senator Thune that the new June 1st 'x-date' warning makes talks between US President Biden and Republicans more urgent.
• Click here for the US Early Morning Note.

GEOPOLITICS

• Japan scrambled a jet fighter following a suspected Chinese drone spotted between Yonaguni island and Taiwan on Tuesday, according to the Japanese Defence Ministry.
• Russian Defence Ministry says steps have been taken to speed up weapons production, via Tass.

CRYPTO

• Bitcoin is modestly firmer though is yet to convincingly extend above the USD 28k mark and as such remains well within the parameters of recent action.

APAC TRADE

• APAC stocks traded with a slight positive bias as many of the regional participants returned to the market from the long weekend albeit with gains capped ahead of this week's upcoming risk events.
• ASX 200 was pressured after the RBA surprised markets with a 25bps rate increase, while the central bank's language remained hawkish with the Board expecting some further tightening of monetary policy will be needed.
• Nikkei 225 was indecisive and pulled back after briefly touching its highest level since January last year.
• Hang Seng initially surged on reopening from the holiday weekend and was led higher by strength in tech and casino stocks with the latter buoyed after a jump in Macau gaming revenue, although the index later faded most of its gains while the mainland remained shut for golden week.

NOTABLE ASIA-PAC HEADLINES

• Japanese, South Korean and Chinese finance ministers and central bank governors said they recognise the importance of strengthening economic and trade relations, while they fully support the implementation of the Regional Comprehensive Economic Partnership agreement. However, they also noted that despite close economic relations, they have observed a recent slowdown in economic relations, according to Reuters.
• US President Biden and Philippines President Marcos affirmed the importance of maintaining peace and stability across the Taiwan Strait, while President Biden confirmed the US will send a presidential trade and investment mission to the Philippines, according to Reuters.
• RBA unexpectedly hiked the Cash Rate Target by 25bps to 3.85% (exp. pause), while it stated that the Board expects some further tightening of monetary policy will be needed and remains resolute in its determination to return inflation to target and will do what is necessary to achieve that. RBA stated that inflation in Australia has passed its peak, but at 7% is still too high and it will be some time yet before it is back in the target range. Furthermore, it stated some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but will depend upon how the economy and inflation evolve.

DATA RECAP

• South Korean CPI MM (Apr) 0.2% vs. Exp. 0.3% (Prev. 0.2%); YY (Apr) 3.7% vs. Exp. 3.8% (Prev. 4.2%)