• APAC stocks traded mixed following the subdued performance last Friday on Wall St, while participants in the region brace for this week’s key economic releases.
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.1% after the cash market closed up 0.2% on Friday.
• DXY sits near Friday's highs, JPY lags the majors, antipodeans outperform, EUR/USD remains on a 1.08 handle.
• US President Biden said that debt ceiling talks are moving along and they will know more in the next couple of days about progress in discussions.
• Turkish President Erdogan’s share of votes is below the 50% threshold needed to win in the first round of the Presidential Election with 49.2%
• Looking ahead, highlights include EZ Industrial Production, Speeches from BoE's Pill, Fed's Bostic, Barkin & Cook, Supply from UK Syndication, Earnings from Siemens Energy & Porsche.

US TRADE

EQUITIES

• US stocks finished lower on Friday due to inflation and consumer concerns post-Michigan survey which disappointed and showed a rise in longer-term inflation expectations to fresh cycle peaks, while sentiment was dampened by debt limit agitation after the meeting between President Biden and congressional leaders was delayed to the upcoming week.
• SPX -0.16% at 4,124, NDX -0.37% at 13,340, DJIA -0.03% at 33,300, RUT -0.22% at 1,740.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed’s Jefferson (voter) said current inflation is still high and little progress on core inflation is bad news, as well as noted that the full impact of the Fed’s rapid rate hikes is likely still ahead and that Fed policy is on track for what is needed to lower inflation and achieve full employment. Furthermore, Jefferson said disinflation has been slower and more uneven than they would like, while he added that uncertainty around the effect of bank stress and credit shock could be larger than he expects, according to Reuters.
• Fed’s Bullard (non-voter) said market-based inflation expectations are back down to levels consistent with the Fed’s 2% inflation target and policy is now at the low end of sufficiently restrictive, while he also stated that sufficiently restrictive rates can move in response to incoming economic data, according to Reuters.
• US President Biden said on Saturday that debt ceiling talks are moving along and they will know more in the next couple of days about progress in debt ceiling talks, according to Reuters. It was also reported that Deputy Treasury Secretary Adeyemo said the ongoing debt-ceiling negotiations are constructive between all parties, according to CNN.
• White House and Republicans are starting to shape a possible debt ceiling deal with people familiar with the matter noting that the issues on the table had narrowed, although sources said any debt limit agreement is unlikely to be concluded before President Biden attends the G7 summit on May 19th-21st but could take place after that, according to FT.
• US Treasury Secretary Yellen said the current banking environment and pressures on earnings of some US regional banks may lead to some concentration in the sector and regulators will likely be open to mergers among midsize banks.
• US regulators approved the sale of a majority stake in TIAA’s banking arm to a consortium of private equity firms on Friday, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded mixed following the subdued performance last Friday on Wall St where risk sentiment was hampered by a disappointing University of Michigan Survey and US debt ceiling concerns, while participants in the region brace for this week’s key economic releases including the latest Chinese activity data due tomorrow.
• ASX 200 was rangebound amid losses in the top-weighted financial sector and weakness in tech although the downside in the index was cushioned by resilience in mining stocks and several M&A-related headlines.
• Nikkei 225 outperformed with many of the biggest gainers in the index driven by earnings results.
• Hang Seng and Shanghai Comp. were mixed with Hong Kong choppy and the mainland pressured after reports that G7 Leaders will discuss shared principles on China’s economic coercion and with the US to look at how outbound investment assessment can complement export controls to prevent the transfer of sensitive technologies to China.
• US equity futures traded rangebound amid the ongoing US debt ceiling uncertainty and indecision in Asia.
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.1% after the cash market closed up 0.2% on Friday.

FX

• DXY was rangebound above 102.50 and sat near Friday’s highs with participants tentative at the start of the week ahead of the anticipated debt ceiling talks on Tuesday.
• EUR/USD attempted to nurse some of last week’s losses but with the recovery limited by ECB commentary; remains on a 1.08 handle.
• GBP/USD was lacklustre amid a lack of catalysts and after recent in-line-to-soft GDP data from the UK.
• USD/JPY gained and breached 136 to the upside, owing to recent moves in US yields and after BoJ Governor Ueda’s dovish reiterations.
• Antipodeans found some reprieve from recent selling pressure with NAB forecasting an RBA Cash Rate peak of at least 4.10% and doesn't rule out rates rising to 4.35% if the data is stronger for longer.
• TRY slightly softened as the Turkish Presidential Election heads to a run-off in two weeks, while the THB was marginally firmer after early election results showed Thailand’s opposition parties surged in a rebuke to the military government although it is uncertain if they will be able to form a government due to the military-stacked parliament where the junta-appointed 250-member Senate have a say on voting for the PM.
• PBoC set USD/CNY mid-point at 6.9654 vs exp. 6.9658 (prev. 6.9481)

FIXED INCOME

• 10yr UST futures languished at last week’s lows with inflation concerns stoked by the rise in the University of Michigan longer-term inflation expectations and after the CFTC data showed funds increased their net short positions in 2-year and 5-year US treasuries to fresh record levels.
• Bund futures remained subdued in which prices just about dipped beneath the 136.00 level.
• 10yr JGB futures tracked the recent declines in global peers with prices not helped by weaker results at the 5yr auction and after the BoJ refrained from additional purchases.

COMMODITIES

• Crude futures extended on recent declines owing to the flimsy risk appetite and with further selling pressure seen as WTI and Brent crude prices breached through the USD 70/bbl and USD 74/bbl levels, respectively.
• G7 and the EU will reportedly agree to ban the restart of Russian gas pipelines, according to FT.
• Gazprom continued shipping gas to Europe via Ukraine with the volume on Saturday seen at 40.4mln cubic metres and the volume on Sunday seen at 40.3mln cubic metres, according to Reuters.
• Spot gold traded rangebound alongside the uneventful performance of the greenback.
• Copper futures were subdued amid the cautious risk tone and ahead of tomorrow's Chinese activity data.

CRYPTO

• Bitcoin notched mild gains overnight and climbed back above the USD 27,000 level.
• US crypto enforcement tsar Choi vowed to crack down on digital platforms, according to FT.

NOTABLE ASIA-PAC HEADLINES

• PBoC announced CNY 125bln (vs CNY 100bln maturing) in 1-year MLF with the rate kept at 2.75%.
• US official said the G7 Leaders’ statement is to discuss shared principles on China’s economic coercion and the US will look at how outbound investment assessment can complement export controls to prevent the transfer of sensitive technologies to China, while the statement will also discuss tools used to counter economic security threats including those posed by China, according to Reuters.
• China jailed US citizen John Shing-Wan Leung for life on espionage charges, according to AFP.
• BoJ Governor Ueda said he told G7 counterparts that Japan’s economy is picking up and its core CPI is likely to slow the pace of increase towards the middle of the current fiscal year, while he said the BoJ is continuing with easy monetary policy to sustainably and stably achieve the price target, according to Reuters.
• Japanese PM Kishida is to order the government and BoJ to assess the wage outlook to determine if recent wage hikes would be sustainable, according to Nikkei.
• Thailand’s pro-democracy opposition took an early lead in polling results in which the Pheu Thai party had about 23% of votes and was closely followed by the Move Forward party with about 22.5% of votes in what was seen as a rebuke against the military-aligned government with the United Thai Nation party and ruling Palang Pracharath party seen trailing at 8% and 10% of votes, respectively, according to FT. It was later reported that the Thailand Election Commission announced that with 99% of votes counted, Move Forward have 151 seats and Pheu Thai have 141 seats.
• Indian PM Modi’s BJP lost control of the state assembly in the crucial election in the southern state of Karnataka which was closely watched ahead of the national poll that takes place in under a year, according to FT.

DATA RECAP

• Japanese Corp Goods Price YY (Apr) 5.8% (Prev. 7.2%, Rev. 7.4%)
• Japanese Corp Goods Price MM (Apr) 0.2% (Rev. 0.1%)
• Australian Building Approvals MM (Apr) -0.1% vs Exp. -0.1% (Prev. 3.9%)

GEOPOLITICS

• Ukrainian President Zelensky visited Rome on Saturday to meet with Italian President Mattarella, Italian PM Meloni and the Pope where Matterella told Zelensky that Italy is by his side and Meloni said that they will support Ukraine for the entire time that it is necessary. Zelensky also visited Germany and met with Chancellor Scholz who said that Germany will support Ukraine for as long as it takes and ensured that aid to Ukraine will continue in the coming years, while Scholz gave Germany’s full support to Ukraine’s journey towards membership in the European Union. Furthermore, Germany announced to provide a new EUR 2.7bln military aid package to Ukraine and President Zelensky then travelled to France for talks with French President Macron.
• France is to send dozens of armoured vehicles and light tanks including AMX-10RC armoured fighting vehicles to Ukraine in the coming weeks, according to Reuters.
• Ukrainian President Zelensky said that they are ready to discuss proposals for peace but must be based on Ukraine’s peace plan and noted that Ukrainians believe in the success of the coming counteroffensive, while he also stated that they can make the defeat of Russia inevitable this year, according to Reuters.
• Ukraine said its troops are gradually advancing in two directions in the suburbs of Bakhmut and that the situation in the city centre is more complicated, while Russia said Ukraine made mass attempts to break through its defences in north and south Bakhmut which were repelled and that Russian forces conducted long-range strikes on the city Ternopil which targeted Ukrainian deployment site and depots, according to Reuters, RIA and Interfax.
• Ukrainian President Zelensky reportedly proposed in private to conduct attacks on Russian territory and possibly invade border cities to be in a better position to negotiate peace, according to US documents leaked online cited by Washington Post. However, Zelensky told reporters on Sunday that Ukraine had no plans to attack Russian territory and was only interested in regaining occupied land.
• G7 leaders plan to increase pressure on Russia with steps on sanctions evasion, energy production and exports aiding war efforts, while Ukrainian President Zelensky is expected to address G7 leaders virtually or in person, according to officials cited by Reuters.
• UK Chancellor Hunt said the impact of sanctions on the Russian economy has not been as effective as military support for Ukraine and that economic pressure on Russia is more of a ‘slow burn’ with the pressure to eventually bite, while he noted that G7 members talked about the need to stop the sanctions leakage, according to Reuters.
• Egypt brokered a ceasefire agreement between Israel and Palestinians on Saturday. However, it was reported the following day that Israel conducted an air strike on a militant post in Gaza after a rocket was fired at Israel due to a “technical error”, according to Hamas Aqsa Radio.
• South African Finance Minister said South Africa and the US resolved the row over allegations that South Africa supplied weapons to Russia, according to Bloomberg.

GLOBAL NEWS

• Turkish President Erdogan’s share of votes is below the 50% threshold needed to win in the first round of the Presidential Election with 49.2% although he was still ahead of main opposition candidate Kilicdaroglu who has 45.0% of the votes after 99% of votes were counted. It was also reported that Erdogan's AK Party received the most votes in the parliamentary election with over 35% of votes after more than 92% of votes were counted.
• Turkish President Erdogan said the preliminary results show his side is far ahead and both domestic and abroad vote counts will continue, while he added that the opposition are trying to fool people by saying they are ahead, while he added that if there is a run-off, he will respect that.
• Turkish presidential candidate Kilicdaroglu said President Erdogan did not get the result he wanted. Furthermore, Kilicdaroglu said he will accept a run-off and thinks he will win in the run-off, while the third Turkish Presidential candidate said he is not closer to supporting either side in the presidential run-off vote.

UK/EU

• UK will begin trade talks with Switzerland in an effort to boost services trade, according to Bloomberg.
• Bank of England is to water down rules for lenders to boost competitiveness, according to The Telegraph.
• ECB’s de Guindos said rate hikes are in their final stretch and warned that higher borrowing costs could put stress on banks’ asset quality and push up bad debt levels, according to Il Sole 24 Ore.
• ECB’s Kazimir said they may need to keep raising rates longer than previously thought to help tame inflationary pressures and he thinks there are more meetings ahead where they will decide on hiking rates.
• Italy is to overhaul plan for EUR 200bln in EU Covid recovery funds, according to FT
• Fitch affirmed Italy at BBB; Outlook Stable, affirmed Sweden at AAA; Outlook Stable and affirmed Denmark at AAA; Outlook Stable.