• APAC stocks traded mixed after the weak lead from the US where risk sentiment was subdued by banking-related headwinds.
• US federal and state officials are reportedly assessing possible market manipulation regarding banking shares.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.5% after the cash market closed down 0.5% yesterday.
• Sources revealed ECB policymakers agreed to a smaller rate increase in return for guidance for more hikes ahead and an APP wind-down.
• DXY is on the backfoot, support at 1.10 held in EUR/USD, Cable sits on a 1.26 handle, antipodeans outperform. 
• Highlights include Swiss CPI, EZ Retail Sales, US & Canadian Labour Market Reports, ECB SPF, Speeches from Fed's Cook, Bullard & ECB's Elderson, Earnings from Intesa Sanpaolo, Adidas, InterContinental Hotels & Cigna.

US TRADE

EQUITIES

• US stocks finished lower with price action choppy amid more regional bank selling and mixed data releases including a surge in US Labour Costs, while participants also digested a mixed ECB meeting. Financials led the declines on Wall St after news that PacWest (PACW) was exploring strategic options and with Western Alliance (WAL) reportedly to follow suit, which the Co. later denied, while the failure of the First Horizon/TD Bank merger also pressured the sector.
• SPX -0.72% at 4061, NDX -0.37% at 12,982, DJIA -0.86% at 33,128, RUT -1.18% at 1,719.
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NOTABLE HEADLINES

• Fed Discount Window borrowing at USD 5.3bln on May 3rd (prev. 73.9bln on April 26th), BTFP at USD 75.8bln (prev. 81.3bln), Other Credit at USD 228.2bln (prev. 170.4bln), while First Republic (FRC) Discount Window and BTFP borrowing shifted to 'Other Credit', according to Reuters.
• FDIC is poised to release a plan next week to refill the insurance fund in which big banks will pay more to refill the insurance fund and smaller banks with less than USD 10bln in assets will avoid a fee.
• US federal and state officials are reportedly assessing possible market manipulation regarding banking shares, while it was stated that many US regional banks have sound fundamentals, stable deposits and remain well capitalized, according to Reuters citing sources. Furthermore, US SEC Chair Gensler said the SEC is focused on identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or markets.
• American Bankers Association urged the SEC to investigate short-selling activity that does not reflect firms' financial status, as well as take measures to reduce avenues of abusive trading practices and restore investor confidence
• White House OMB Director Young is hopeful about finding a path to avoid a debt default and said they will have to work through how long the debt limit is extended for, while she also commented that prioritising payments is a default by another name and that nothing is off the table in terms of the potential length of debt ceiling extension.
• Apple Inc (AAPL) Q2 2023 (USD): EPS 1.52 (exp. 1.43), Revenue 94.84bln (exp. 92.96bln), Products revenue 73.93bln (exp. 71.91bln), iPhone revenue 51.33bln (exp. 48.97bln), iPad revenue 6.67bln (exp. 6.69bln), Mac revenue 7.17bln (exp. 7.74bln), Co. authorised an additional USD 90bln for share repurchases. Co. shares were higher by 2.5% after-hours.

APAC TRADE

EQUITIES

• APAC stocks traded mixed after the weak lead from the US where risk sentiment was subdued by banking-related headwinds and amid holiday-thinned conditions in Asia due to closures in Japan and South Korea.
• ASX 200 was choppy amid indecision in the top-weighted financial industry after ANZ Bank’s earnings which showed H1 cash profit rose to a record although the Co. warned of increased difficulties in H2, while the RBA’s quarterly Statement on Monetary Policy stuck to the hawkish script.
• Hang Seng and Shanghai Comp. diverged with the Hong Kong benchmark led higher by strength in tech and property stocks, while the mainland is pressured after Chinese Caixin Services and Composite PMI data which showed the pace of China’s services activity slowed by more than expected but remained at a firm expansion.
• US equity futures were kept afloat post-Apple earnings albeit with gains capped ahead of the NFP data; ES +0.4%.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.5% after the cash market closed down 0.5% yesterday.

FX

• DXY softened and gave back some of the prior day’s mild gains after the mixed data releases stateside and with participants tentative ahead of the looming US jobs data.
• EUR/USD nursed post-ECB losses after finding support near 1.1000, while sources revealed ECB policymakers agreed to a smaller rate increase in return for guidance for more hikes ahead and an APP wind-down.
• GBP/USD broke through resistance and reclaimed 1.2600 status to print its highest since June 2022, while there remains a long wait for any indication in the litmus test from the local council elections in England.
• USD/JPY were subdued after briefly slipping beneath 134.00 as Japanese participants remained absent.
• Antipodeans steadily outperformed after the RBA’s SoMP reiterated the central bank’s hawkish tone.
• PBoC set USD/CNY mid-point at 6.9114 vs exp. 6.9128 (prev. 6.9054)
• BoC Governor Macklem said there is a risk inflation will get stuck materially above the 2% target and that the BoC is prepared to raise rates further.

FIXED INCOME

• 10yr UST futures were subdued after reversing most of the prior day’s advances following mixed data releases and as market focus now shifts to the incoming US jobs report.
• Bund futures pulled back from post-ECB highs after failing to sustain the 137.00 level.

COMMODITIES

• Crude futures edged marginally higher in some mild reprieve from the acute selling earlier in the week, albeit with the recovery limited by ongoing banking sector woes and after Saudi mostly cut its OSPs.
• Spot gold traded flat with participants indecisive ahead of the upcoming US jobs data.
• Copper futures were rangebound with price action contained by the mixed risk appetite.

CRYPTO

• Bitcoin extended on gains and broke above the USD 29,000 level amid recent banking sector woes.

NOTABLE ASIA-PAC HEADLINES

• A bipartisan group of US senators introduced legislation that would allow US President Biden to sign a tax agreement with Taiwan and which addresses an issue viewed as a barrier for further investment, according to Bloomberg.
• RBA Statement on Monetary Policy reiterated to do what is necessary to return inflation to the target and that some further tightening may be required to reach the target in a reasonable timeframe. RBA added that the longer inflation remains above target, the greater the risk of a price-wage spiral, as well as noted that goods disinflation is limited so far and energy price inflation is to stay high this year, while rent growth is to pick up and materially added to inflation out to mid-2025.

DATA RECAP

• Chinese Caixin Services PMI (Apr) 56.4 vs. Exp. 57.3 (Prev. 57.8)
• Chinese Caixin Composite PMI (Apr) 53.6 (Prev. 54.5)

GEOPOLITICS

• Chinese Foreign Minister Qin, on meeting with Russian Foreign Lavrov, said China will persist in promoting peace talks and is willing to maintain communication and coordination with Russia to make tangible contributions to a political settlement of the Ukraine crisis, according to Reuters.
• White House said the US still does not have conclusive evidence of the alleged drone attack on the Kremlin, while it separately commented that it is not clear right now that China can put forth a peace plan that Ukrainian President Zelenskiy will support, according to MSNBC.
• White House National Security Adviser Sullivan said we will take the necessary action to ensure Iran does not acquire a nuclear weapon and said the US still wants a diplomatic solution to Iran's nuclear program. Sullivan also commented that he will be in Saudi Arabia this weekend to meet with Saudi leaders and that the US is still working towards the goal of a deal normalising relations between Israel and Saudi Arabia.
• Senior GOP lawmaker McCaul said the US and Japan should conduct war game simulations for a Chinese nuclear threat to ensure they are prepared to respond, according to Nikkei.
• Turkish Defence Minister said technical personnel from Turkey, Russia, Ukraine, and the UN will meet in Istanbul on Friday for grain deal talks.

UK/EU

• Sky News noted it is early days regarding the UK local council election results but suggested there are currently encouraging signs in the data for the opposition Labour Party, whilst Conservative MP Mercer said his party is having a "really terrible night".
• ECB policymakers reached a deal on a smaller rate increase in return for guidance for more hikes ahead and APP wind-down, while some policymakers expect two-to-three rate hikes ahead. Furthermore, ECB’s Holzmann, who didn't have voting rights at the meeting, was the only holdout and policymakers see no need to sell APP bonds, according to Reuters sources. It was separately reported that ECB hawks gave up on a 50bps hike without much of a fight, according to Bloomberg sources.