• European bourses & US futures are firmer but with magnitudes modest amid limited specific newsflow
• DXY dips below 102.50 with its initial upside diminishing as peers are generally firmer ex-JPY while core debt drifts
• 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.
• SEK and TRY depreciate after soft inflation & inconclusive Turkish election results, with Erdogan in contention to prevail
• Crude steadies after paring overnight declines while base metals recoup from last week’s pressure with XAU near its 10-DMA
• Looking ahead, highlights include BoE's Pill, ECB's Nagel, Fed's Bostic, Barkin & Cook, Supply via UK Syndication.

EUROPEAN TRADE

EQUITIES

• European bourses are firmer, Euro Stoxx 50 +0.3%, but with magnitudes modest amid limited specific newsflow.
• Sectors are predominantly in the green though Chemicals & Real Estate lag while for bourses the IBEX 35 -0.2% is the clear laggard given pressure in BBVA -4.6% after inconclusive Turkish election results.
• Stateside, futures are firmer with the ES +0.2% sitting just above the 4150 mark with Fed speak due today before the week's US data/retail earnings and debt ceiling negotiations.
• Click here and here for a recap of the main European updates, including:
• Click here for more detail.

FX

• DXY drifts after running into resistance just above a Fib, at 102.750 and then losing this upside to sub-102.50 with peers broadly firmer.
• Aussie regroups as risk appetite recovers, base metals bounce and NAB delivers hawkish RBA call, AUD/USD eyes 0.6700 from just shy of 0.6650.
• Yen retreats between 135.61-136.32 parameters as BoJ Governor Ueda reaffirms the need to keep an ultra-accommodative stance at the G7.
• Euro and Sterling rangy vs Dollar within 1.0846-80 and 1.2446-98 respective bands after more weak Eurozone data and ahead of a BoE speech.
• Swedish Crown underperforms after sub-forecast inflation metrics and Turkish Lira in limbo after inconclusive first-round election result leaves current President Erdogan in contention to prevail.
• PBoC set USD/CNY mid-point at 6.9654 vs exp. 6.9658 (prev. 6.9481)
• Click here for more detail.
• Click here for the notable FX expiries for today's NY cut.

FIXED INCOME

• Debt is off worst levels, but still under pressure after extending intraday boundaries on both sides.
• Bunds, Gilts and T-note within 136.06-135.61, 100.82-43 and 115-15/08+ respective ranges.
• Hawkish Central Bank vibes overshadow weak data awaiting Empire State survey, NY Fed credit and debit report, Fed speakers and BoE's Pill.
• Click here for more detail.

COMMODITIES

• WTI and Brent are modestly firmer having pared back initial APAC downside given the session's relatively-flimsy risk tone.
• Currently, the benchmarks are towards the top end of circa. USD 1/bbl parameters with WTI and Brent topping out at USD 70.42/bbl and USD 74/51/bbl respectively.
• G7 and the EU will reportedly agree to ban the restart of Russian gas pipelines, according to FT; on this, desks write that it can be seen as more of a symbolic move as it won't change flows.
• 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 edges higher and eyes its 10 DMA (USD 2,025.34/oz) after briefly dipping under its 21 DMA overnight at USD 2,008.06/oz, but remains within Friday's parameters thus far, while base metals are bid after last week's pressure.
• Click here for more detail.

NOTABLE HEADLINES

• 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.
• EU Commission increases 2023/24 EZ Inflation and GDP forecasts; click here for more detail.
• 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.

TURKISH ELECTION

• 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.

DATA RECAP

• Swedish CPIF YY (Apr) 7.6% vs. Exp. 7.9% (Prev. 8.0%); MM (Apr) 0.2% vs. Exp. 0.5% (Prev. 0.4%)
• Swedish CPIF Ex Energy YY (Apr) 8.4% vs. Exp. 8.7% (Prev. 8.9%); MM (Apr) 0.4% vs. Exp. 0.7% (Prev. 0.6%)
• German Wholesale Price Index YY (Apr) -0.5% (Prev. 2.0%); MM (Apr) -0.4% (Prev. 0.2%)
• EU Industrial Production MM (Mar) -4.1% vs. Exp. -2.5% (Prev. 1.5%); YY (Mar) -1.4% vs. Exp. 0.9% (Prev. 2.0%)

NOTABLE US 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.
• Click here for the US Early Morning Note.

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.
• Ukrainian official said the Chinese envoy is to visit Kiev on Tuesday and Wednesday, according to Sky News Arabia.
• Russian Kremlin says President Putin will hold a meeting of the security council on Monday, the meeting has been moved from the usual Friday slot.
• 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.

CRYPTO

• US crypto enforcement tsar Choi vowed to crack down on digital platforms, according to FT.

APAC TRADE

• 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.

NOTABLE ASIA-PAC HEADLINES

• PBoC announced CNY 125bln (vs CNY 100bln maturing) in 1-year MLF with the rate kept at 2.75%.
• PBoC Monetary Policy Implementation Report (Q1): Inflation may rebound gradually in H2 2023. Prudent monetary policy will be precise and forceful; will keep policy reasonably ample. Click here for more detail.
• PBoC says should not exaggerate temporary fall in CPI; GDP growth-inflation gap is due to delays in demand.
• 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%); MM (Apr) 0.2% (Rev. 0.1%)
• Australian Building Approvals MM (Apr) -0.1% vs Exp. -0.1% (Prev. 3.9%)