• APAC stocks were mostly negative following the losses on Wall St amid regional bank jitters which resulted in the regional banking ETF closing down by over 6%.
• White House said they have the tools necessary to keep the banking system safe and the FDIC will continue to monitor the banking situation.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.5% after the cash market closed lower by 1.5% yesterday.
• DXY remains subdued on a 101 handle, EUR/USD maintains 1.10 status, GBP/USD is unable to reclaim 1.25, NZD outperforms.
• Looking ahead, highlights include EZ Unemployment, US ADP & ISM Services, FOMC Policy Announcement & Press Conference, US Quarterly Refunding & Press Conference, Supply from UK & Germany.
• Earnings from Airbus, BNP Paribas, Stellantis, Lufthansa, Deutsche Post, Haleon, Flutter & Qualcomm.

US TRADE

EQUITIES

• US stocks declined on the eve of the FOMC amid heavy losses in the regional banking sector which resulted in the regional banking ETF closing down by over 6%, while participants also digested the latest JOLTS data which was cooler than expected and alongside the renewed banking jitters, spurred a flight to safety.
• SPX -1.16% at 4,119, NDX -0.89% at 13,113, DJIA -1.08% at 33,684, RUT -2.10% at 1,732.
• Click here for a detailed summary.

NOTABLE HEADLINES

• White House said they have the tools necessary to keep the banking system safe and the FDIC will continue to monitor the banking situation.
• White House Economist Boushey said the economy has been strong and doesn't want to push it off the course it has been on, while she added that Fed rate hikes are having a negative effect on the banking sector and that Republicans should not be playing games with the US economy through debt ceiling debate.
• White House said US President Biden will discuss initiating a separate budget process during the meeting with Congress leaders and given the short time frame, Congress should suspend the debt limit without conditions.
• US Senate Majority Leader Schumer said Democrats will wait until the May 9th meeting before deciding whether to move forward on a clean debt ceiling bill and wants a full two-year debt ceiling extension rather than a shorter-term bill.
• US Senate Republican Leader McConnell said US President Biden has a choice between accepting the House bill or negotiating a deal with House Speaker McCarthy, while he added there is no debt ceiling solution in the Senate.
• US House Democrat Leader Jefferies said House Democrats filed a “special rule” that could eventually be used to “allow Floor considerations of a bipartisan measure to avoid a dangerous default”, according to Punchbowl. Furthermore, it was noted that this won’t be in play for several weeks but is a backup plan by Democrats.
• US Senate Banking Committee is to hold a hearing on recent bank failures on Thursday and will conduct a hearing on May 16th to examine the failures of SVB and Signature Bank, while its hearing on May 18th is on the state of the banking and credit union industries with witnesses to include Fed's Vice of Supervision Barr and the FDIC Chairman.
• USTR Tai and Canada's Trade Minister discussed Canada's proposed digital services tax, while Tai expressed her hope that the US and Canada could work together on this issue which could unfairly impact US businesses.

APAC TRADE

EQUITIES

• APAC stocks were mostly negative following the losses on Wall St where the major indices declined ahead of the FOMC rate announcement amid regional bank jitters and with sentiment overnight also hampered by the key market closures in Japan and mainland China.
• ASX 200 was led lower by underperformance in energy after oil prices dropped more than 5% yesterday and with the mood not helped by mixed data releases including weak AIG Manufacturing and Construction figures.
• KOSPI declined as the broad risk aversion overshadowed the jump in sales by South Korea’s top automakers.
• Hang Seng was pressured by weakness in the energy and tech sectors, with participants bracing for the expected rate hike stateside and a similar move by the HKMA in lockstep with the Fed.
• US equity futures traded sideways as all focus turns to today's FOMC announcement; ES +0.2%.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.5% after the cash market closed lower by 1.5% yesterday.

FX

• DXY remained subdued beneath 102.00 after the prior day’s losses owing to the softer-than-expected JOLTS data and renewed financial contagion fears, while the focus shifts to the FOMC announcement where the Fed is expected to increase rates by 25bps to between 5.00%-5.25% which markets see as the final hike in the cycle.
• EUR/USD was firmer in an extension of the advances at the recently reclaimed 1.1000 handle.
• GBP/USD nursed some of the prior day’s losses albeit with the recovery confined beneath 1.2500.
• USD/JPY declined with Tokyo markets already closed for the week and after the Japanese currency benefitted due to its haven status and the recent narrowing of US-Japan yield differentials.
• Antipodeans were kept afloat with outperformance in NZD/USD spurred by strong employment data.

FIXED INCOME

• 10yr UST futures were steady as they took a breather after yesterday's data jolt with markets now in waiting mode ahead of the Fed and amid the absence of cash US treasuries trade in Asia due to the Tokyo holiday.
• Bund futures plateaued and held on to the bulk of recent spoils with the Fed and ECB meetings drawing closer.

COMMODITIES

• Crude futures languished at a 5-week low after shedding over-5% yesterday owing to the risk-off environment, renewed regional bank concerns, continued angst around Fed hikes and rising Iranian oil production, while mixed private sector inventory data did little to spur a rebound despite the larger-than-expected draw in headline crude.
• US Energy Inventory Data (bbls): Crude -3.9mln (exp. -1.1mln), Cushing +0.7mln, Gasoline +0.4mln (exp. -1.2mln), Distillate -1.0mln (exp. -1.1mln)
• Spot gold traded rangebound but held on to recent haven gains above USD 2,000/oz.
• Copper futures remained subdued after the prior day's selling pressure and risk aversion.
• Chile's state-owned copper miner Codelco reported Q1 pre-tax profit USD 418mln and output 326k tonnes.

CRYPTO

• Bitcoin marginally softened amid the cautious mood and tested USD 28,500 to the downside.

NOTABLE ASIA-PAC HEADLINES

• BoK Governor Rhee said it is premature to talk about a policy pivot, while he noted that it is time to wait and see as core inflation remains high and they are careful because of large FX volatility, according to a CNBC interview.
• RBNZ Financial Stability Report said New Zealand's financial system is well placed to handle the higher interest rate environment and international financial disruptions, while it added that global inflation is persisting at levels well above central banks’ policy targets.

DATA RECAP

• Australian AIG Manufacturing Index (Apr) -20.2 (Prev. 5.6)
• Australian AIG Construction Index (Apr) -12.4 (Prev. -5.8)
• Australian Retail Sales MM (Mar F) 0.4% vs. Exp. 0.3% (Prev. 0.2%)
• New Zealand HLFS Job Growth QQ (Q1) 0.8% vs. Exp. 0.4% (Prev. 0.2%)
• New Zealand HLFS Unemployment Rate* (Q1) 3.4% vs. Exp. 3.5% (Prev. 3.4%)
• New Zealand HLFS Participation Rate* (Q1) 72.0% vs. Exp. 71.7% (Prev. 71.7%)
• New Zealand Labour Cost Index QQ (Q1) 0.9% vs. Exp. 1.0% (Prev. 1.1%)
• New Zealand Labour Cost Index YY (Q1) 4.5% vs. Exp. 4.6% (Prev. 4.3%)

GEOPOLITICS

• Governor of Russia's Bryansk region said a train derailed after an explosive device was detonated.
• Explosions were reported in Ukraine's capital Kyiv and surrounding regions, according to TASS.
• Iran reported an explosion at an IRGC site in Damghan with the cause under investigation, according to Tasnim.
• Top US diplomat for East Asia Kritenbrink said the visit by Philippines President Marcos to the US highlights how enduring the alliance is and the importance of peace and stability in the Indo-Pacific. Kritenbrink said he remains deeply concerned about China's continued intimidation and harassment, while he added the US stands with the Philippines in the face of China Coast Guard's infringement and harassment of the Philippines' freedom of navigation in the South China Sea.

EU/UK

• UK financial regulator proposes sweeping changes to stock market listing rules after the City of London missed out on a string of high-profile companies in favour of New York, according to FT