• APAC stocks traded mixed after the indecisive performance stateside where stocks whipsawed, while regional bourses also reflected on softer-than-expected Chinese inflation.
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.2% after the cash market closed down 0.4% yesterday.
• DXY lingers around 101.50 with price action in FX markets broadly contained, Cable maintains 1.26 status ahead of the BoE.
• Fed officials were leaning towards taking a "summer vacation" from rate hikes and the April CPI report makes it easier, according to WSJ's Timiraos.
• Looking ahead, highlights include US IJC & PPI, BoE Policy Announcement & Press Conference, OPEC MOMR, Speeches from US Treasury Secretary Yellen, Fed's Waller, ECB's Schnabel & de Guindos, Supply from Italy & US.

US TRADE

EQUITIES

• US stocks were choppy and Treasuries rallied in reaction to the US CPI data which lacked any upside surprises as most components of the release matched forecasts and headline Y/Y inflation printed softer-than-expected. This spurred a more dovish Fed pricing with nearly 80bps of cuts seen by year-end and the major indices finished mostly higher, although the mood in stocks was less than clear-cut with early pressure on news that a UAE sovereign fund was short-selling US stocks on growth concerns.
• SPX +0.45% at 4,138, NDX +1.11% at 13,348, DJIA -0.09% at 33,531, RUT +0.56% at 1,760.
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NOTABLE HEADLINES

• Fed's Barkin (non-voter) said inflation remains stubbornly and unacceptably high, while he added the Fed’s message after its meeting last week was “explicitly not a pause” on rates “or even necessarily a peak”, but instead provided the optionality to do more if needed and option to wait if waiting is appropriate”, according to AP.
• Fed officials were leaning towards taking a "summer vacation" from rate hikes and the April CPI report makes it easier as it showed price pressures are not worsening and may soon be slowing, according to WSJ's Timiraos.
• US House panel will hold a hearing on failed banks and mortgage markets on May 17th.
• FDIC's Board will meet today to consider a proposal to impose special assessments on banking organisations to recover the losses arising from protecting uninsured depositors of the former SVB and Signature Bank.
• Blackstone (BX) is in talks with US regional banks on lending partnerships, according to FT.

APAC TRADE

EQUITIES

• APAC stocks traded mixed after the indecisive performance stateside where stock markets whipsawed and treasuries rallied in the absence of any hawkish surprises from the US CPI report, while the regional bourses also reflected on softer-than-expected Chinese inflation data.
• ASX 200 was marginally lower as weakness in utilities and the commodity-related sectors overshadowed the outperformance in tech and after consumer inflation expectations ticked higher.
• Nikkei 225 was indecisive with the biggest movers in the index largely influenced by earnings releases, while the BoJ’s Summary of Opinions from the April meeting did little to shift the dial.
• Hang Seng and Shanghai Comp. were choppy after the latest Chinese inflation supported the idea of a slow economic rebound as consumer prices grew at the slowest pace of increase since February 2021 and with factory gate prices at a deeper deflation.
• US equity futures traded sideways with the mood now tranquil after yesterday's post-CPI volatility.
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.2% after the cash market closed down 0.4% yesterday.

FX

• DXY was rangebound after ultimately softening yesterday in the absence of any upward surprises to the US CPI data which spurred some dovish Fed pricing. Nonetheless, there were some mixed comments with Fed’s Barkin stating that inflation remains stubbornly and unacceptably high, while WSJ's Timiraos noted Fed officials were leaning towards taking a "summer vacation" from rate hikes and the April inflation report makes this easier.
• EUR/USD marginally softened after stalling on its approach towards the 1.1000 handle.
• GBP/USD lacked direction ahead of the BoE rate decision and after bearish commentary by Deutsche Bank.
• USD/JPY briefly dipped beneath 134.00 after the Japanese currency’s recent outperformance owing to the volatility in stocks and a narrowing of yield differentials.
• Antipodeans were contained by the cautious mood and soft Chinese inflation data.
• PBoC set USD/CNY mid-point at 6.9101 vs exp. 6.9102 (prev. 6.9255)
• SNB Chairman Jordan said inflation is above the price stability range and current monetary policy is still not restrictive enough, while they cannot rule out hiking rates further and are willing to use FX sales as a policy tool if needed.

FIXED INCOME

• 10yr UST futures held on to most of the spoils from their post-CPI rally after the softer inflation readings spurred bull steepening and with the upside also facilitated by the volatility in stocks.
• Bund futures took a breather after recent advances and just eased back below the 136.00 level.
• 10yr JGB futures were kept afloat after a lack of major surprises from the BoJ Summary of Opinions and after a stronger 30yr auction.

COMMODITIES

• Crude futures were marginally higher but with gains capped amid headwinds from the cautious risk tone and after China inflation data pointed to an uneven economic recovery.
• Kuwait set June KEC crude OSP for Asia at Oman/Dubai + USD 1.70/bbl, according to Reuters.
• Iraq and Iran signed a memorandum of understanding to invest in joint oil fields and to cooperate on extracting and refining crude oil, according to the Iraqi PM's office.
• Norway announced a new oil and gas licensing round in mature areas and offers 92 new blocks in the Norwegian and the Barents seas.
• Spot gold lacked direction overnight alongside an uneventful greenback.
• Copper futures mirrored the cautious mood in stocks amid soft Chinese inflation.

CRYPTO

• Bitcoin traded rangebound and eventually trickled below USD 27,500.

NOTABLE ASIA-PAC HEADLINES

• China reportedly told the US that there is little chance of their defence chiefs meeting, according to FT.
• Chinese Foreign Minister Qin is to meet with his French counterpart and said that China wants to mutually open up markets with France and create a more resilient supply chain, while he added that China's determination to promote high-quality development and a high level of opening up is unswerving.
• BoJ Summary of Opinions from the April meeting stated that they must continue with the current easy policy given uncertainty over the global outlook and must support the wage hike momentum through monetary easing. It was also stated that the achievement of the price target appears to have come in sight but they must maintain easy policy for the time being given downside and upside risks. Furthermore, they must ensure that the tweak to interest rate forward guidance is not interpreted as a sign the BoJ would allow future rate hikes and should not target a specific monetary policy change when guiding the policy review to ensure it would be neutral and convincing.

DATA RECAP

• Chinese CPI YY (Apr) 0.1% vs. Exp. 0.4% (Prev. 0.7%)
• Chinese PPI YY (Apr) -3.6% vs. Exp. -3.2% (Prev. -2.5%)
• Australian Melbourne Institute Inflation Expectations (May) 5.0% (Prev. 4.6%)

GEOPOLITICS

• Russian Kremlin spokesman said the military operation against Ukraine is very difficult but certain goals have been achieved, while Russia is acting slowly in Ukraine because it is carrying out a special military operation, not a war, according to TASS.
• Chinese Foreign Minister Qin said China is committed to promoting a political solution to the Ukraine crisis, while it maintains communication with all parties and will continue to play a constructive role in that regard, according to Reuters.
• Turkey's Finance Minister said he thinks the Ukraine Black Sea grain deal could be extended for at least two more months.

UK/EU

• NIESR sees UK GDP growth of 0.3% in 2023 and 0.6% in 2024 vs prev. forecast of 0.2% and 1.0%, respectively, while it sees UK CPI averaging 7.4% in 2023 and 3.9% in 2024 vs prev. forecast of 8.3% and 4.2%, respectively.
• ECB's Villeroy said they have travelled most of the way on rate hikes and what lies ahead is "more marginal", while he added that inflation in France is too high but is moving past the peak and the most impact on inflation is to come from past hikes.

DATA RECAP

• UK RICS Housing Survey* (Apr) -39 vs. Exp. -40.0 (Prev. -43.0)