• European bourses are firmer across the board, Euro Stoxx 50 +0.1%, though trade has been very contained/steady with the UK away.
• Stateside, the narrative is much the same with futures flat ahead of key Fed-related events and the focus thus far on BRK.B and debt ceiling.
• Biden to meet McCarthy & others on Tuesday re. debt limit, via FT; said he would not rule out invoking the 14th amendment
• DXY is softer and edging towards 101.00 with Antipodeans outperforming and G10s generally faring well
• Core debt continues to slip irrespective of weaker German and EZ data, USTs directionally in-fitting
• Crude climbs in a continuation of its recent recovery while metals trade is generally thin given the LMEs absence.
• Looking ahead, highlights include Fed Senior Loan Officer Survey, semi-annual FSR, NY SCE. Speeches from ECB’s Lane & Fed's Kashkari. Earnings from PayPal. Holiday in the UK (Desk open as normal).

EUROPEAN TRADE

EQUITIES

• European bourses are firmer across the board, Euro Stoxx 50 +0.1%, though trade has been very contained/steady with the UK away.
• Stateside, the narrative is much the same with US futures essentially flat ahead of numerous Fed survey's and FOMC speak; weekend newsflow was limited and focused on BRK.B and the debt ceiling.
• Back to Europe, sectors are mixed and lacking in breadth with outperformance in Energy given broader benchmark action while individual movers are sparse.
• Berkshire Hathaway (BRK.B) - Q1 earnings were USD 8.065bln (+12.6% Y/Y). Insurance underwriting profit was USD 911mln (vs 167mln Y/Y), investment income from insurance +68% to USD 1.969bln. Berkshire increased its stock buybacks by USD 4.4bln. It is reducing its investments in stocks such as Chevron (CVX). Buffett said he expects earnings to decrease this year at most of Berkshire's businesses due to an economic downturn. +1.3% in the pre-market.
• Click here for more detail.

FX

• DXY dangles above 101.000 awaiting more US debt ceiling developments, employment trends and Fed surveys; in 101.04-101.33 bounds.
• Aussie and Kiwi outperform as AUD/USD probes 100 DMA at 0.6789 and NZD/USD rebounds firmly through 0.6300.
• Franc claws back post-Swiss CPI losses and reclaims 0.8900+ status, Euro firm on 1.1000 handle irrespective of bleak EZ Sentix index and Pound retains strength around 1.2650 in UK Coronation holiday trade.
• PBoC set USD/CNY mid-point at 6.9158 vs exp. 6.9159 (prev. 6.9114)
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• Click here for the notable FX expiries for today's NY cut.

FIXED INCOME

• Bunds hit Fib resistance and retreat sharply between 136.21-135.46 parameters, regardless of weaker than expected German industrial output and Eurozone Sentix index.
• BTPs top out after opening mark-up and uptick within a 115-19-114.48 range and take note of Italian Treasury announcement of new 4 year retail supply for early June.
• T-note hugs base of 115-16+/115-27 + band ahead of US employment Trends, Fed Senior Loan Office Survey and NY Fed Consumer Expectations.
• Italian Treasury to sell a 4yr BTP bond as part of a new "bond type group" which will be for retail investors only, to be offered across 5th-9th June and have step-up coupons and a loyalty premium.
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COMMODITIES

• Crude benchmarks are firmer on the session, in a continuation of the attempted recovery which began towards the latter half of last week and despite the broader tentative tone; crude benchmarks are posting gains of over USD 1/bbl at USD 72.70/bbl and USD 76.50/bbl for WTI Jun and May Jul respectively.
• Spot gold is essentially unchanged on the session with sub-10/oz parameters and still comfortably above the USD 2k/oz mark while base metals are modestly firmer on the session as the USD pulls back towards a 101.00 base in thin trade owing to the absence of LME participants given the UK Bank Holiday.
• More broadly, the Barrick Gold CEO Bristow in an FT interview said the Co. expects gold and copper prices to increase, to the benefit of mining stocks.
• Iraq set June Basrah medium crude OSP to Asia at minus USD 0.15/bbl vs Oman/Dubai and OSP to Europe at minus USD 4.60/bbl vs dated Brent, while it set OSP to North and South America at a discount of USD 1.00/bbl vs ASCI.
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NOTABLE HEADLINES

• UK PM Sunak agreed with Canadian PM Trudeau to use momentum from the Trans-Pacific Partnership to further bilateral trade talks and they discussed how their countries could deepen collaboration on defence and security technology including cyber security, according to Reuters.
• Chinese President Xi sent a congratulatory message to King Charles and said that China and the UK should jointly promote cooperation, while he added that China is willing to expand cooperation and cultural exchanges with the UK.
• ECB’s Knot said that they are starting to see that policy is working but more will be needed to contain inflation and it is still not certain how high European rates will have to go, according to Reuters.
• Fitch affirmed the European Stability Mechanism at AAA; Outlook Stable and affirmed Switzerland at AAA; Outlook Stable, while it affirmed Slovenia at A; Outlook Stable.

DATA RECAP

• German Industrial Output MM (Mar) -3.4% vs. Exp. -1.3% (Prev. 2.0%, Rev. 2.1%)
• EU Sentix Index (May) -13.1 vs. Exp. -8.0 (Prev. -8.7); Expectations in particular slump to -19.0 points, the lowest level since December 2022. For the US, the decline in expectations is striking. Here, the overall index reaches -17.5 points, the lowest level since November 2022. There is not much left of the laborious economic recovery of 2023.

NOTABLE US HEADLINES

• Fed's Goolsbee (voter) said on Friday that it is way too premature to expect a rate hike in June and they have to keep an eye on credit conditions, which is doing the work of monetary policy. Goolsbee added the economy was looking quite hot before the banking stress and noted that credit conditions like the ones seen now have been correlated with downturns, while he added that the fate of banks will matter a lot and that the bank situation has to give you some pause.
• US President Biden is to meet with House Speaker McCarthy and other top congressional leaders on Tuesday regarding the debt limit crisis, according to FT.
• US President Biden said on Friday that will not rule out invoking the 14th amendment to avoid a US default but is not ready to do so just yet, according to Reuters.
• White House is reportedly weighing a short-term extension of the debt ceiling into the fall but is seen as a last resort option, according to CNBC.
• US Treasury Secretary Yellen said they need to raise the debt ceiling to avoid economic calamity and said that this would be the first time in America that they would fail to make payments that are due. Yellen said the US will likely see financial market consequences if Congress does not act and warned of a constitutional crisis over the debt limit impasse.
• US Deputy Treasury Secretary Adeyemo said the banking system stabilised after the government took action and warned that a default on debt would have a terrible impact on interest rates, according to Reuters.
• US leading think-tank Hoover Institute warned that the global surge in interest rates has left many US banks nursing huge losses on some of their investments, according to The Mail on Sunday.
• PacWest Bancorp (PACW) cut dividend to USD 0.01 from USD 0.25 citing current uncertainty, recent volatility in the banking sector and potential changes in regulatory capital requirements.. +38% in the pre-market
• US President Biden plans to write rules that requires airlines to compensate passengers for significant delays and cancellations.
• Click here for the US Early Morning Note.

GEOPOLITICS

• Russia began evacuating hundreds of civilians from occupied areas in south-eastern Ukraine including families with children from a town housing workers for the Zaporizhzhia nuclear power plant which has raised fresh concerns about its safety, according to FT. In relevant news, a Twitter source noted air defence activity in Dnipropetrovsk and Zaporizhzhia oblast, while missiles were launched from bombers flying over the Black Sea towards Odesa oblast, while Ukraine media confirmed a missile attack on Odesa and Kyiv's Mayor said drone wreckage hit Kyiv's Sviatoshyn district.
• Russian President Putin has not yet responded to the proposals by UN Secretary-General Guterres on the Black Sea grain deal, according to a Kremlin spokesman cited by TASS.
• Russia’s Wagner Group Chief Prigozhin said he was promised as much ammunition and weapons needed to continue fighting in the Ukrainian city of Bakhmut, according to Reuters.
• Russian Foreign Ministry accused the US and the West of supporting terrorism carried out by Ukraine after a car bomb attack which injured a Russian nationalist writer and killed his driver, according to Reuters.
• Brussels is planning sanctions on Chinese companies aiding Russia's war machine, according to FT.
• Chinese Foreign Minister Qin met with the US ambassador to Beijing and said it is imperative to stabilise Sino-US relations, avoid a downward spiral and prevent accidents between China and the US. Qin added the US side should correct its understanding of China and return to rationality and the US must especially correctly handle the Taiwan issue, as well as stop continuing to hollow out the One-China principle, according to state media.
• US State Department spokesperson said the US does not believe Syria merits readmission into the Arab League at this point in time and the US is sceptical of Syrian President Assad’s willingness to solve the crisis but is aligned with Arab partners on ultimate goals, while the US understands partners intend to use direct engagement with Syria's Assad to further push a solution to the Syrian crisis.
• Qatar Foreign Ministry spokesman said Qatar’s position over normalising relations with the Syrian regime has not changed and it hopes that the Syrian regime would be motivated to fix the roots of the crisis that led to a boycott, according to Reuters.
• Armenia and Azerbaijan are to resume peace talks in Brussels, according to FT.

CRYPTO

• Binance temporarily halted BTC withdrawals as the Bitcoin network experienced a congestion issue but then resumed withdrawals, according to CoinDesk. Binance later closed BTC withdrawals again due to the large volume of pending transactions, while it also announced it was replacing BTC withdrawal transactions with a higher fee so that they can get picked up by mining pools.

APAC TRADE

• APAC stocks mostly gained as the region took impetus from Friday's rally on Wall St and strong US jobs data.
• ASX 200 was led higher by the commodity-related sectors and with sentiment underpinned after Australian Treasurer Chalmers confirmed an energy rebate of up to AUD 500 for millions of Australians in Tuesday’s budget.
• Nikkei 225 declined beneath the 29,000 level on return from Golden Week with banking shares suffering after the recent headwinds for their regional US counterparts.
• Hang Seng and Shanghai Comp. were positive as gains in energy and auto stocks offset the losses in the property industry, while China pledged to prioritise the real economy, adhere to the principle of seeking progress while maintaining stability, as well as strengthen the breakthrough of core technology and boost support of strategic resources.

NOTABLE ASIA-PAC HEADLINES

• China’s forex reserves USD 3.205tln at end-April vs prev. USD 3.184tln at end-March, while China’s gold reserves rose to 132.35bln at end-April vs prev. USD 131.665bln at end-March.
• China held security and trade talks with the Taliban as Beijing looks to boost its investment in Afghanistan and bring it into the Belt and Road project, according to FT.
• Western companies have reportedly warned of a hit from China’s slow recovery with US and European groups saying they overestimated how quickly China would bounce back from COVID-19 lockdowns, according to FT.
• US sanctions are reportedly driving Chinese firms to advance AI without the latest chips, according to WSJ.
• BoJ March meeting minutes stated that several members said they must be vigilant to the risk that inflation may accelerate more than expected and members agreed there was very high uncertainty surrounding Japan's economy. The minutes also stated that a few members said there were some positive signs towards achieving the BoJ's price target, while several members said cost-push price pressure might last longer than expected if global commodity prices rise more than projected.
• Japanese PM Kishida said dialogue between Japan and South Korea is progressing in various areas including finance and culture, while Japan’s government is currently taking steps to reinclude South Korea in the export white list. Furthermore, Kishida expressed support to host South Korea for restarting trilateral talks with China and believes it is his responsibility to cooperate with South Korea, according to Reuters.
• South Korean President Yoon said he agreed with Japanese PM Kishida to develop bilateral ties to a higher level and both leaders welcome efforts to normalise ties on security, as well as strengthen cooperation on semiconductor and other key materials sectors. Furthermore, they agreed that North Korea’s missile programme is a severe threat to world peace and stability, agreed on the strategic importance of the Indo-Pacific region and to boost coordination on Indo-Pacific strategies, while Yoon said South Korea is open to Japan joining the South Korea-US military nuclear planning in the future, according to Reuters.

DATA RECAP

• Australian Building Approvals (Mar) -0.1% (Prev. 4.0%, Rev. 3.9%)
• Australian NAB Business Confidence (Apr) 0 (Prev. -1); Conditions (Apr) 14 (Prev. 16)