• European bourses & US futures are softer as the region struggles for a foothold after mixed APAC trade and ahead of Fed/debt ceiling events
• USD picks up against peers ex-JPY as yields ease from best while AUD retreats after Chinese imports declined unexpectedly
• Yellen reiterates the Treasury could run out of cash as soon as June 1st, with the Bipartisan centre expecting the x-date between early-June to August
• Fixed benchmarks have been choppy but are firmer overall with Bunds bolstered on strong supply and USTs near highs
• Commodities are, broadly speaking, pressured as the USD picks up and after Chinese trade data
• Looking ahead, highlights include ECB's Lane & Schnabel, Fed's Williams & Jefferson, Biden meeting Congressional Leaders. Supply from the US, Earnings from Airbnb & Occidental Petroleum.

EUROPEAN TRADE

EQUITIES

• European bourses are softer across the board, Euro Stoxx 50 -0.7%, as the region struggles to find a foothold in relatively quiet trade after a mixed APAC handover.
• Sectors are similarly softer with Real Estate lagging after soft Halifax data and SBB headwinds; individual movers dictated by earnings updates for Fresenius, Daimler Trucks & more.
• ES -0.4% dips with the region again lacking firm direction ahead of Fed speak and Biden's debt ceiling meeting; NQ and RTY roughly in-fitting.
• Click here for more detail.

FX

• Buck finds its feet vs most majors bar the Yen as Treasury yields ease off Monday's peaks and BoJ Governor Ueda notes higher Japanese inflation expectations.
• DXY forms a firmer base around 101.500 and USD/JPY pivots 135.00 where 1bln option expiries roll off at the NY cut.
• Aussie retreats as Chinese imports unexpectedly tumble and AUD/USD eyes support into 0.6750 from Monday's high just over 0.6800.
• Euro loses 1.1000+ status vs Dollar and Fib support against Pound as Cable retains underlying bid mostly above 1.2600.
• PBoC set USD/CNY mid-point at 6.9255 vs exp. 6.9251 (prev. 6.9158)
• Turkey raises the wages of some civil servants by 45%, according to Turkish President Erdogan.
• Click here for more detail.
• Click here for the notable FX expiries for today's NY cut.

FIXED INCOME

• Choppy trade in bonds, but Bunds piggy-back bounce in Bobls after super-strong 5 year German auction, both holding near intraday highs within 118.34-06 and 135.90-33 ranges.
• Gilts lag in catch-up trade after long UK weekend between 100.85-43 parameters.
• US Treasuries regroup after Monday's slump amidst a decline in NFIB business optimism and awaiting Fed commentary ahead of latest debt ceiling talks, T-note near 115-15+ peak vs 115-06+ trough.
• Click here for more detail.

COMMODITIES

• WTI and Brent are back on a modest downward trajectory after recent positive sessions and yesterday's Alberta-driven upside; currently, the benchmarks are circa. USD 0.80/bbl lower.
• Newsflow has been focused on UAE remarks and Aramco's update after Chinese trade data was mixed with an unexpected contraction in imports potentially a signal towards weaker demand and a headwind for the complex.
• Saudi Aramco Q1 - Saw lower crude oil prices. Major investments advance strategic downstream expansion in key global markets. Global downstream strategy is gaining momentum. 99.7% supply reliability. Believe oil and gas will remain critical components of the energy mix for the foreseeable future. Moving forward with the capacity expansion and long-term outlook remains unchanged.. "Based on the government budget figures the Saudi Government 2023 budgeted revenues are likely based on Brent of ~USD 81/bbl", according to Al Rajhi Bank cited by Energy Intel's Bakr.
• Spot gold remains underpinned around the USD 2025/oz mark and surrounded by resistance/support marks in relatively close proximity. Base metals are broadly softer, given the mentioned Chinese trade data.
• Click here for more detail.

NOTABLE HEADLINES

• ECB's Kazaks says rate hiking may not be finished in July, via Bloomberg; bets on Spring 2024 ECB cuts are significantly premature. Doing too little remains the greater danger. Not impossible for the ECB to hike/pause in the scenario the Fed is cutting.
• ECB's Kazimir says based on current data, will need to keep raising rates for longer than anticipated; September projections are the earliest time to gauge the effectiveness of measures and see if inflation is heading to target.
• Norges Bank Governor Bache says does not need additional policy tools, FX interventions to influence NOK are costly and not very efficient.
• German Chancellor Schloz says the EU must reduce risks in China relations without cutting ties saying this is not decoupling, but smart de-risking is the way forward with China.
• UK Barclaycard April consumer spending rose 4.3% Y/Y but was impacted by inflation squeeze on disposable incomes and higher food prices, according to Reuters.

DATA RECAP

• UK BRC Retail Sales Like-For-Like YY (Apr) 5.2% (Prev. 4.9%); Total Sales YY (Apr) 5.1% (Prev. 5.1%)
• French Trade Balance, EUR, SA (Mar) -8.023B vs. Exp. -9.3B (Prev. -9.904B, Rev. -9.302B)

NOTABLE US HEADLINES

• Fed Semi-Annual Financial Stability Report stated that recent turmoil in the banking industry has stabilised but could weigh on credit conditions going forward and said the banking sector overall remained resilient with substantial loss-absorbing capacity. It also stated that policy interventions by bank regulators limit the potential for further stress and domestic banks have ample liquidity overall, while funding strains were notable for some banks but overall funding risks across the banking system were low.
• US Treasury Secretary Yellen reiterated the projection that the Treasury will run out of cash and extraordinary measures to pay debts as soon as June 1st and warned if Congress doesn't raise the debt ceiling, US President Biden will have to make decisions on what to do with resources but there are no good options. Furthermore, Yellen noted that there is clearly a big gap between the President's position and that of Republicans regarding the debt ceiling, according to a CNBC interview.
• California's financial regulator released its report on the Silicon Valley Bank (SIVB) failure and stated that it failed to make SVB address management problems fast enough, while it increased scrutiny of banks with assets of more than USD 50bln, according to Reuters.
• US debt limit default "X-date" to be between early June and early August, depending on revenue strength, according to the Bipartisan policy centre. Reminder, Biden is meeting with Congressional Leaders at 21:00BST/16:00ET
• IMF Chief Economist Gourinchas says we are a bit concerned by recent banking sector turbulence.
• Click here for the US Early Morning Note.

GEOPOLITICS

• Head of Russian Wagner Group Prigozhin said that they have not received the promised ammunition after earlier stating that shipments were preliminarily sent, according to Reuters.
• US is to provide USD 1.2bln more in long-term military aid to Ukraine to further bolster its air defences, according to US officials cited by AP.
• UK Foreign Secretary Cleverly is visiting the US and will hold talks with US Secretary of State Blinken on Tuesday to discuss support for Ukraine, according to Sky News.
• US State Department said the US Ambassador to China told Chinese Foreign Minister Qin that there has been no change to US one-China policy, while US Secretary of State Blinken would like to visit China and intends to go when conditions allow.

CRYPTO

• Bitcoin is essentially unchanged within sub-USD 300 parameters and holding just above the USD 27.5k mark.

APAC TRADE

• APAC stocks were mixed following the indecisive performance from Wall St where the focus was on the Fed’s SLOOS which showed banks tightened credit terms and demand for loans declined, while the attention in the region shifted to earnings and data releases including mixed Chinese trade figures.
• ASX 200 was lower with early pressure seen across nearly all sectors and with the top-weighted financial industry choppy after earnings from Australia’s largest lender CBA which reported a slight increase in Q3 cash profit although NII was lower compared to the quarterly average in H1 and the Co. also noted that many customers are feeling the strain of higher interest rates and rising living costs.
• Nikkei 225 outperformed and reclaimed the 29,000 status, with the index unfazed by weak household spending data as participants digested earnings.
• Hang Seng and Shanghai Comp. were varied after the latest Chinese trade figures which showed stronger-than-expected export growth but imports disappointed with a surprise contraction.

NOTABLE ASIA-PAC HEADLINES

• EU Ambassador to China thinks the comment by EU's Borrell suggesting that EU navies patrol the Taiwan Strait has been grossly exaggerated, while he also commented regarding China's anti-espionage law and consultancy crackdown in which he stated that this is not good news and expressed doubts regarding the compatibility of this policy with the opening up of China's economy.
• Chinese embassy said China strongly condemns and firmly opposes Canada's decision to expel the Chinese diplomat and has lodged a protest with the Canadian government. China also claimed that Canada 'sabotaged' relations and vowed 'resolute countermeasures'. Subsequently, China said it will expel a Canadian diplomat as a countermeasure.
• BoJ Governor Ueda said their scheduled review won't have any pre-set idea in mind on specific monetary policy moves and said they will take necessary policy action at each meeting with an eye on financial and price developments even while conducting the review. Ueda also commented that if the price target is met in a sustainable manner, the BoJ will end YCC and then shrink its balance sheet, while he added they are seeing some bright signs including on inflation expectations which have heightened and remain at elevated levels.
• Australian Budget: Government forecasts 2022/23 budget surplus of AUD 4.2bln (exp. AUD 4bln), 2023/24 budget deficit at AUD 13.9bln (0.5% of GDP), 2024/25 budget AUD 35.1bln (1.3% of GDP). Click here for more detail.

DATA RECAP

• Chinese Trade Balance (USD)(Apr) 90.21B vs. Exp. 71.6B (Prev. 88.19B)
• Chinese Exports YY (USD)(Apr) 8.5% vs. Exp. 8.0% (Prev. 14.8%); Imports YY (USD)(Apr) -7.9% vs. Exp. 0.0% (Prev. -1.4%)
• Chinese Trade Balance (CNY)(Apr) 618.4B vs. Exp. 632.7B (Prev. 601.0B)
• Chinese Exports YY (CNY)(Apr) 16.8% vs. Exp. 10.5% (Prev. 23.4%); Imports YY (CNY)(Apr) -0.8% vs. Exp. 4.2% (Prev. 6.1%)
• Japanese All Household Spending MM (Mar) -0.8% vs. Exp. 1.5% (Prev. -2.4%); YY (Mar) -1.9% vs. Exp. 0.4% (Prev. 1.6%)
• Australian Retail Trade (Q1) -0.6% vs. Exp. -0.6% (Prev. -0.2%, Rev. -0.3%)