• APAC stocks traded mixed and only partially sustained the momentum from Wall St, while markets also digested weaker-than-expected Chinese activity data.
• US President Biden has scheduled a debt limit meeting with US House Speaker McCarthy on Tuesday at 15:00EDT/20:00BST.
• European equity futures are indicative of an uneventful open with the Euro Stoxx 50 unchanged after the cash market closed flat yesterday.
• DXY is steady below 102.50, EUR/USD and Cable sit on 1.08 and 1.25 handles respectively, antipodeans modestly diverge. 
• Looking ahead, highlights include UK Unemployment, EZ Employment/GDP Flash Estimate, German ZEW, US Retail Sales, Industrial Production, Speeches from ECB's Lagarde, Fed's Williams, Mester, Bostic, Barr & Logan

US TRADE

EQUITIES

• US stocks gained as a short squeeze in US regional banks led the advances despite a lack of fresh catalysts for the sector, while the upside in stocks supported broader risk assets such as oil and activity currencies. However, the gains in the major indices were limited by a disappointing NY Fed Manufacturing survey and debt ceiling concerns.
• SPX +0.30% at 4136, NDX +0.55% at 13,414, DJIA +0.14% at 33,349, RUT +1.19% at 1,762.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (non-voter) said he sees no barrier to higher rates if inflation persists and policymakers should be sensitive to financial stability risks but it should not take precedence over its fight against inflation, according to FT. Barkin also commented that he is very comfortable with a data-dependent approach, but not yet convinced inflation is on a steady path downward, according to Reuters.
• Fed's Bostic (non-voter) said he does not see inflation coming down quickly and the Fed won't be looking at cuts until well into 2024, while they may have to go up on rates. Bostic said he doesn't rule out anything as far as rate hikes and they have got to keep a possible rate hike on the table for sure, while he added that if he were voting now for June it would be a vote to hold and said there is still a lot of data before June, according to Bloomberg.
• Fed Vice-Chair of Supervision Barr (voter) said the bank stress shows the need for vigilance but noted that the US banking system remains sound and resilient, and depositors should be confident all deposits in the banking system are safe, according to Reuters.
• US President Biden has scheduled a debt limit meeting with US House Speaker McCarthy for Tuesday and will be meeting with congressional leaders on Tuesday, while a senior official said President Biden and House Speaker McCarthy's debt ceiling meeting is planned for 15:00EDT/20:00BST.
• US Treasury Secretary Yellen reiterated the US could default as early as June 1st without a debt ceiling hike, while she added the actual date for default could be a number of days or weeks later than estimated and they have already seen the Treasury's borrowing costs increase substantially for securities maturing in early June, according to Reuters.
• US Senate Majority Leader Schumer said that their side is working very hard to avoid a default and debt limit talks are ongoing, according to Reuters.
• US House Speaker McCarthy said he is not confident of getting a deal this week based upon what they are offering right now and talks are nowhere near to getting a debt ceiling deal by the weekend. McCarthy also said he knows they are not in a good place on raising the debt ceiling, while Punchbowl News reported that McCarthy wants bilateral talks between him and President Biden and suggested talks are not working.
• Congressional Republican leadership reportedly rejected a list of proposals sent by the White House to reduce the deficit by closing tax loopholes, according to Washington Post citing sources.
• FDIC Chair Gruenberg said the banking industry was quite resilient during recent stress and early reports show aggregate bank net income is roughly unchanged in Q1 2023, ex. recent acquisitions.
• US SEC Chair Gensler said the SEC isn't currently weighing a stock short-selling ban.
• Big Short investor Michael Burry was betting on regional banks during the first quarter and acquired shares of several distressed banks including First Republic before it was bought by JPMorgan (JPM).

APAC TRADE

EQUITIES

• APAC stocks traded mixed and only partially sustained the momentum from Wall St where stocks were led higher amid a short squeeze in US regional banks albeit with the upside capped by a disappointing NY Fed Manufacturing survey and debt ceiling concerns, while markets digested weaker-than-expected Chinese activity data.
• ASX 200 was lower as weakness in the tech and consumer sectors overshadowed the resilience in the commodity-related industries and with risk appetite also dampened by a deterioration in consumer confidence.
• Nikkei 225 strengthened as earnings results continued to take centre stage in Tokyo including Japan’s megabanks and after the TOPIX climbed to a fresh 33-year high.
• Hang Seng and Shanghai Comp. were varied with Hong Kong underpinned by strength in tech after it was reported that ‘Big Short’ investor Michael Burry boosted his bullish bets on e-commerce giants JD.com and Alibaba, while the mainland was choppy after disappointing activity data from China in which Industrial Production, Retail Sales and Fixed Assets Urban Investment all missed analysts’ forecasts.
• US equity futures were lacklustre overnight amid cautiousness heading into debt ceiling talks; ES -0.2%.
• European equity futures are indicative of an uneventful open with the Euro Stoxx 50 unchanged after the cash market closed flat yesterday.

FX

• DXY was uneventful with price action contained after yesterday’s selling pressure and amid debt limit concerns with House Speaker McCarthy pessimistic about achieving a deal ahead of today’s meeting with President Biden.
• EUR/USD kept afloat on a 1.08 handle but with gains limited in the absence of any major fresh catalysts from the bloc.
• GBP/USD traded sideways and took a breather after having recently reclaimed the 1.2500 status.
• USD/JPY lingers around 136.00 but with the decline only minimal given recent dovish BoJ affirmations.
• Antipodeans were mixed with headwinds to AUD/USD from the disappointing Chinese activity data, while the RBA Minutes provided little in the way of fresh insight and noted that further increases in interest rates may still be required but would depend on how the economy and inflation evolve.
• PBoC set USD/CNY mid-point at 6.9506 vs exp. 6.9500 (prev. 6.9654)

FIXED INCOME

• 10yr UST futures nursed losses after having been pressured by heavy corporate supply and stagflationary data from the US.
• Bund futures traded marginally higher to test the 136.00 level and the nearby prior day's resistance.
• 10yr JGB futures eked slight gains but with price action rangebound amid the lack of data releases from Japan and after the BoJ refrained from additional purchases but instead offered to supply dollar funds against pooled collateral.

COMMODITIES

• Crude futures notched marginal gains after reports that the US plans to buy 3mln barrels of oil for the SPR although gains were capped by the modest purchase amount and disappointing Chinese data.
• US plans to buy 3mln barrels of oil for the Strategic Petroleum Reserve, while the DoE said the SPR purchase is part of the Biden administration's three-part replenishment plan, according to Bloomberg and Reuters.
• EIA sees shale regions oil output for June up about 42k BPD at 9.332mln BPD (prev. 53k BPD rise in May).
• Spot gold traded sideways with price action contained alongside the rangebound dollar.
• Copper futures trickled lower in the aftermath of the weaker-than-expected Chinese activity data.

CRYPTO

• Bitcoin was choppy amid the cautious mood and briefly dipped tested USD 27,000 to the downside.

NOTABLE ASIA-PAC HEADLINES

• China NBS said the national economy sustained recovery momentum in April and that low price levels are temporary which will likely continue for some time, while it noted that low core CPI is due to service demand still being in recovery but added that consumer prices could gradually rebound in H2 as the economy recovers.
• US senior administration official said the US expects a general agreement by the G7 on principles that define relationships with China and US expects leaders will make it clear they are unified behind a common approach grounded with common values on China. Furthermore, the official said there is a consensus among G7 countries on the need to ensure the security of technology and each G7 member will manage their own relationship with China but all are aligned around principles that guide relationships, according to Reuters.
• Russia's PM is to lead a delegation to a business forum in China, according to the FT.
• RBA May meeting minutes stated that the board considered pausing or hiking 25bps at the meeting and further increases in interest rates may still be required but would depend on how the economy and inflation evolve. RBA also stated that the central forecast is that inflation is not expected to reach the top of the target band until mid-2025 and it noted that risks include persistent services inflation and higher rent growth than anticipated.

DATA RECAP

• Chinese Industrial Production YY (Apr) 5.6% vs. Exp. 10.9% (Prev. 3.9%)
• Chinese Retail Sales YY (Apr) 18.4% vs. Exp. 21.0% (Prev. 10.6%)
• Chinese Urban Investment YTD YY (Apr) 4.7% vs. Exp. 5.5% (Prev. 5.1%)
• Australian Westpac Consumer Confidence Index (May) 79.0 (Prev. 85.8)
• Australian Westpac Consumer Sentiment MM (May) -7.9% (Prev. 9.4%)

GEOPOLITICS

• Ukrainian presidential office head said air defence systems were repelling attacks early on Tuesday and Twitter sources noted explosions in Ukraine's capital of Kyiv. Furthermore, Kyiv officials later said that the Russian attack was complex and exceptional in its density, but noted the vast majority of targets were shot down.
• French President Macron said France is open to training Ukrainian fighter jet pilots in France and training can start right away, while he has not discussed delivering warplanes but has discussed missiles and training, according to a TF1 Television interview.
• White House said the US continues to see indications Russia and Iran are expanding their unprecedented defence partnership and Iran is providing Russia with one-way attack drones including more than 400 since August, while Russia has been offering Iran unprecedented defence cooperation including on missiles, electronics, and air defence. White House said Iran and Russia are working on the selling of advanced weapons, especially more advanced drones and said the military partnership poses a threat to Iran's neighbours and Ukraine. It was later reported that the US is to announce tougher sanctions over Iranian drone sales to Russia, according to FT.
• US senior administration official said US President Biden's Asia trip will show the US can both support Ukraine and maintain an unprecedented level of Indo-Pacific engagement, while Biden's talks with Japan and South Korea on the G7 sidelines are expected to cover economic security, expansion of military exercises and North Korea, according to Reuters.

UK/EU

• BoE Chief Economist Pill said trying to keep spending power risks inflation persistence and said the labour-profit share of UK national income has not shifted much, while he added the BoE is concerned the UK economy has too much momentum and he would like to think they have done enough but need to monitor risks.
• ECB sanctioned Goldman Sachs Bank Europe for misreporting capital needs and breaching credit risk reporting rules with a EUR 6.63mln penalty imposed.