• APAC stocks were mixed with the region cautious after the weak handover from the US where risk appetite was clouded amid debt ceiling concerns.
• The meeting between Biden and congressional leaders achieved no major breakthroughs although was said to be productive and has set the stage to carry on further conversations.
• European equity futures are indicative of a flat open with the Euro Stoxx 50 unchanged after the cash market closed flat yesterday.
• DXY is steady above 102.50 with FX markets broadly contained, NZD marginally outperforms, whilst JPY lags.
• Looking ahead, highlights include EZ HICP (Final), US Building Permits/Housing Starts, Speeches from Fed's Bostic, BoE's Bailey, ECB's de Cos, Elderson, Panetta & de Guindos, Supply from UK, Germany & US

US TRADE

EQUITIES

• US stocks finished mostly lower in what was a risk-off session amid mixed data releases from the US and ongoing debt ceiling concerns as President Biden and congressional leaders held a meeting which was said to be good and productive with the stage set to carry on further discussions between the Biden administration and House Speaker McCarthy's team, although McCarthy noted that he was not more optimistic regarding getting a deal by the end of the week.
• SPX -0.64% at 4,109, NDX +0.09% at 13,426, DJIA -1.01% at 33,012, RUT -1.44% at 1,736.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Goolsbee (voter) said he has not decided anything for the June rate meeting and it would be a mistake to commit to a rate move when more data is coming. Goolsbee said they have seen some froth taken off labour markets and are starting to see some slowing in activity but he is not sure if they have put enough restraint on the economy yet, according to Reuters.
• Fed's Logan (voter) said central banks should review post-GFC stress episodes and that they may need to travel more slowly when conditions are uncertain. Logan stated gradual policy adjustments can be helpful in mitigating financial stability risks and that the speed of increases and length of time at peak rate can influence the impact on stability, according to Reuters.
• Fed's Williams (voter) said the economy is facing unacceptably high inflation but stated the economy is starting to get back to more normal patterns with demand and supply moving back into balance. Furthermore, Williams said that inflation is moving gradually in the right direction and he expects the economy to continue to grow this year.
• Fed's Bostic (non-voter) reiterated there is still a way to go to defeat inflation and said the pressure on the Fed will be enormous if unemployment starts to rise and inflation remains sticky. Bostic added that the Fed will have to stay 'super strong' in its inflation commitment and he doesn't share the market view on how fast inflation will fall.
• US Treasury Secretary Yellen plans to meet with bank CEOs on Thursday afternoon in Washington as part of an annual meeting held by the Bank Policy Institute, while talks will likely focus on the debt ceiling and the banking crisis, according to CNN citing sources.
• Western Alliance (WAL) said Q2 deposit growth is USD 2bln+ as of May 12th, while Republic First Bancorp (FRBK) said has adequate capital and does not need to enter into transaction proposed by Norcross-Braca Group, according to Reuters. It was also reported that New York Community Bancorp (NYCB) announced the FDIC agreed to sell 39mln shares of the Co. in an underwritten public offering.

DEBT CEILING

• US President Biden said they had a good, productive meeting on the debt ceiling and there is still more work to do, while he made it clear to House Speaker McCarthy that they will talk regularly over the next several days. Biden is confident they will continue to make progress on avoiding a default and said that defaulting on debt is not an option, while he also noted it is disappointing Republicans refuse to consider raising revenue, according to Reuters.
• White House said President Biden directed staff to meet daily on outstanding issues and said he would like to check in with leaders later this week by phone and meet with them upon return from overseas. Biden also emphasised that while more work remains on a range of difficult issues, he is optimistic that there is a path to a budget agreement, according to Reuters.
• White House said President Biden will travel to Japan on Wednesday for the G7 and it was later reported that President Biden will no longer visit Australia or Papua New Guinea and will return to the US on Sunday to focus on the debt ceiling talks, according to NBC.
• US House Speaker McCarthy said they have set the stage to carry on conversations in debt talks and that President Biden agreed to appoint a couple of people from the administration to negotiate directly with his team. McCarthy also said there is a lot of work to do in a short amount of time and that they are still very far apart but added it is possible to get a deal by the end of the week and it is not that difficult to reach an agreement. However, McCarthy later said he is not more optimistic about getting a deal by the end of the week.
• US Senate Majority Leader Schumer said the debt meeting was good and productive, while he added that they all agreed a default is a horrible option, according to Reuters.
• US Senate Republican Leader McConnell earlier told Senate Republicans there had not been much progress on debt ceilings talks with POTUS and other leaders.
• Over 140 leaders of the biggest US companies including Goldman Sachs (GS), Pfizer (PFE) and KKR (KKR), have urged the White House and congressional leaders to raise the debt ceiling and avoid a “potentially devastating scenario”, according to FT.

APAC TRADE

EQUITIES

• APAC stocks were mixed with the region cautious after the weak handover from the US where risk appetite was clouded amid debt ceiling concerns, while the meeting between US President Biden and congressional leaders achieved no major breakthroughs although was said to be productive and has set the stage to carry on further conversations.
• ASX 200 was subdued amid losses across nearly all sectors and following mixed wage price index data.
• Nikkei 225 outperformed and climbed above the 30,000 level for the first time since September 2021 with sentiment also underpinned by stronger-than-expected Japanese GDP data.
• Hang Seng and Shanghai Comp. were lower with price action contained amid a lack of fresh macro catalysts to detract from the recent streak of disappointing data releases from China.
• US equity futures traded rangebound and found some slight reprieve from the recent selling; ES +0.2%.
• European equity futures are indicative of a flat open with the Euro Stoxx 50 unchanged after the cash market closed flat yesterday.

FX

• DXY kept to within a tight range and took a breather from the prior day’s mild gains following mixed data releases and several hawkish-leaning Fed comments, while US default concerns also lingered.
• EUR/USD attempted to nurse losses but with the rebound limited.
• GBP/USD languished beneath the 1.2500 handle after yesterday’s gyrations and mixed jobs data.
• USD/JPY remained underpinned owing to yield differentials and the appetite for risk in Tokyo.
• Antipodeans were somewhat varied with AUD/USD facing headwinds from mixed wage data and after USD/CNH breached the psychological 7.0000 level for the first time this year.
• PBoC set USD/CNY mid-point at 6.9748 vs exp. 6.9750 (prev. 6.9506).

FIXED INCOME

• 10yr UST futures mildly extended their rebound off the prior day’s lows but with upside capped by mixed data releases stateside and after several hawkish-leaning Fed commentary.
• Bund futures languished firmly beneath the 136.00 level after recent declines.
• 10yr JGB futures were underpinned and broke through resistance at 149.00 after a strong 20yr JGB auction.

COMMODITIES

• Crude futures were choppy amid mixed private sector inventory data and the flimsy risk appetite.
• US Energy Inventory Data (bbls): Crude +3.7mln (exp. -0.9mln), Gasoline -2.5mln (exp. -1.1mln), Distillate -0.9mln (exp. +0.1mln), Cushing +2.9mln.
• US President Biden’s administration granted a permit to allow the Mountain Valley pipeline to run through the Jefferson National Forest, according to NYT.
• Spot gold was stuck near the prior day's lows after slipping beneath the key USD 2,000/oz level.
• Copper futures eked mild gains in some slight reprieve from the recent selling pressure but with the upside limited by the cautious risk tone and the current streak of soft Chinese data.

CRYPTO

• Bitcoin traded rangebound but was kept afloat after prices found a floor at the USD 27,000 level.
• UK MPs have warned that trading in Bitcoin and other speculative crypto assets should be regulated to prevent consumers from being lulled into a false sense of security about the risks posed, according to The Times.

NOTABLE ASIA-PAC HEADLINES

• US President Biden vetoed the repeal of the suspension of tariffs on solar panels from four SE Asian nations.
• Chinese embassy spokesman said the visit to Taiwan by former UK PM Truss this week is a dangerous political show which will do nothing but harm to the UK, according to The Guardian.

DATA RECAP

• Chinese China House Prices YY* (Apr) -0.2% (Prev. -0.8%)
• Japanese GDP QQ (Q1) 0.4% vs. Exp. 0.1% (Prev. 0.0%)
• Japanese GDP QQ Annualised (Q1) 1.6% vs. Exp. 0.7% (Prev. 0.1%, Rev. -0.1%)
• Australian Wage Price Index QQ (Q1) 0.8% vs. Exp. 0.9% (Prev. 0.8%)
• Australian Wage Price Index YY (Q1) 3.7% vs. Exp. 3.6% (Prev. 3.3%)

GEOPOLITICS

• US Defense Secretary Austin said they will soon provide significant additional security assistance to Taiwan through the Presidential drawdown authority.

UK/EU

• The Royal United Services Institute think tank warned that UK PM Sunak will have to find USD 42bln in tax hikes and spending cuts to pay for his pledge to boost defence spending to 2.5% of GDP, according to The Mirror.
• The Resolution Foundation has warned that the BoE's decision to hike interest rates could limit Chancellor Hunt's room to lower taxes in the Autumn, according to The Times.