• APAC stocks were higher as the region took its cue from the momentum on Wall Street, although some of the gains were capped as participants digested soft data releases.
• US House Speaker McCarthy said he is optimistic about the ability to work together and said a debt ceiling deal by Sunday is doable.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.7% after the cash market closed up 0.2% yesterday.
• DXY sits just below 103, EUR/USD bounced off its 6-week low, AUD pressured by disappointing jobs data.
• Looking ahead, highlights include US IJC, Philadelphia Fed, Existing Home Sales, Speeches from Fed's Jefferson, Barr & Logan, ECB's Lagarde & de Guindos, BoE's Bailey, Pill, Broadbent, Ramsden & Tenreyro, Supply from Spain, Earnings from BT, IDS & Walmart, Ascension Day Holiday (Limited Closures).

US TRADE

EQUITIES

• US stocks rallied with risk appetite underpinned amid optimism around debt ceiling negotiations and after more promising consumer earnings reports, while regional banks were underpinned after a reassuring update from Western Alliance (WAL) which reported growth in its deposits.
• SPX +1.19% at 4,159, NDX +1.22% at 13,589, DJI +1.24% at 33,420, RUT +2.21% at 1,774.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US House Speaker McCarthy said he is optimistic about the ability to work together and said a debt ceiling deal by Sunday is doable.
• Some Senate Democrats are circulating a letter urging President Biden to prepare to invoke the 14th Amendment to lift the debt ceiling and avert a default on his own, without an act of Congress, according to NBC.
• US Deputy Treasury Secretary Adeyemo met with CEOs and executives convened by the Bank Policy Institute to discuss President Biden's economic priorities and Adeyemo underscored the urgent need for Congress to raise or suspend the debt, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks were higher as the region took its cue from the momentum on Wall Street where stocks rallied amid optimism amongst regional banks and debt ceiling talks, although some of the gains were capped as participants digested soft data releases.
• ASX 200 was led by outperformance in tech and strength in the financial and commodity-related sectors but with advances contained after disappointing jobs data which showed a surprise contraction in Employment Change and an uptick in the Unemployment Rate.
• Nikkei 225 surged at the open amid reports of potential Japanese subsidies for chipmakers following PM Kishida’s meeting with foreign chip executives. However, the index then stalled just short of its best levels in over three decades and after weaker-than-expected trade data.
• Hang Seng and Shanghai Comp. were positive amid the broad risk appetite but with further upside somewhat limited by the disappointment from Tencent’s earnings which posted a 27% rise in net profit but missed against expectations, while it was also reported that Montana became the first US state to ban TikTok which will take effect from January next year.
• US equity futures were uneventful and took a breather following yesterday's rally.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.7% after the cash market closed up 0.2% yesterday.

FX

• DXY traded rangebound just below the 103 mark with price action quiet after the prior day’s gains which were facilitated by the upside in short-term US yields and amid some optimism regarding the debt ceiling talks.
• EUR/USD was contained but off a six-week low after making a trough at 1.0810 yesterday.
• GBP/USD lacked firm direction after yesterday’s fluctuations and failed incursion into the 1.2500 territory.
• USD/JPY held on to recent gains after the yen faced headwinds from yields and lack of haven demand.
• Antipodeans were mixed with AUD/USD pressured by disappointing jobs data, while NZD/USD was kept afloat after the mostly improved Budget Balance and economic forecasts.
• PBoC set USD/CNY mid-point at 6.9967 vs exp. 6.9985 (prev. 6.9748)

FIXED INCOME

• 10yr UST futures nursed losses after having bear-flattened as stocks surged on debt ceiling optimism.
• Bund futures remained lacklustre following yesterday's price fluctuations and hawkish ECB rhetoric.
• 10yr JGB futures were pressured after the subdued performance in global counterparts and despite the BoJ’s presence in the market for JPY 1.6tln of JGBs on top of its daily fixed-rate operations.

COMMODITIES

• Crude futures took a breather and slightly eased back following yesterday's risk-induced rally.
• Qatar Energy set July Al-Shaheen crude term price at a premium of USD 1.03/bbl above Dubai quotes, according to traders.
• Spot gold traded sideways beneath the USD 2,000/oz level amid a steady dollar and lack of haven demand.
• Copper futures held on to the prior day's spoils but with price action flat overnight despite the constructive risk tone.

CRYPTO

• Bitcoin traded rangebound after the recent choppy performance around the USD 27,000 level.

NOTABLE ASIA-PAC HEADLINES

• China's ambassador to Australia said China will resume imports of Australian timber from today and that it is in communication with Australia for a convenient time regarding a PM visit, according to Reuters.
• Montana's Governor signed the bill to ban TikTok which prohibits mobile application stores from offering TikTok within the state effective January 2024, while TikTok commented that the Montana law infringes on the First Amendment rights of the people of Montana, according to Reuters.
• New Zealand Budget forecasts 2023/24 GDP at 1.0% (prev. -0.3%) and sees the unemployment rate at 5.0% (prev. 5.5%), while the Treasury no longer expects the country to move into a recession, according to Reuters.

DATA RECAP

• Japanese Trade Balance (JPY)(Apr) -432.4B vs. Exp. -613.8B (Prev. -754.5B, Rev. -755.1B)
• Japanese Exports YY (Apr) 2.6% vs. Exp. 3.0% (Prev. 4.3%)
• Japanese Imports YY (Apr) -2.3% vs. Exp. -0.3% (Prev. 7.3%)
• Australian Employment (Apr) -4.3k vs. Exp. 25.0k (Prev. 53.0k)
• Australian Unemployment Rate (Apr) 3.7% vs. Exp. 3.5% (Prev. 3.5%)
• Australian Consumer Inflation Expectations (May) 5.2% (Prev. 4.6%)
• New Zealand Operating Balance Before Gains and Losses (NZD) -6.96B (Prev. -3.63B)
• New Zealand Net Debt Forecast (NZD) 38.5% (Prev. 39.2%)
• New Zealand Budget Balance (NZD) -22.43B (Prev. -25.36B)

GEOPOLITICS

• Air raid alerts were declared throughout Ukrainian territory. It was later reported that Kyiv's mayor Klitschko noted explosions in the city and that a fire broke out in the east of the city from falling debris, while he added that an air attack was continuing on Kyiv, according to Reuters.
• China's Foreign Ministry said China's special envoy of Eurasian affairs visited Ukraine on May 16th-17th and met with Ukrainian President Zelensky. China's Foreign Ministry said there is no panacea for resolving the crisis and all parties need to create conditions for peace to stop the war, while it added that China and Ukraine agreed should work together to continue mutual respect and sincere treatment, as well as keep mutually beneficial cooperation moving forward, according to Reuters.

UK/EU

• UK PM Sunak is to agree on a historic deal on security with Japan amid rising tensions with China and will sign the 'Hiroshima Accord' on Thursday ahead of the G7 meeting, according to The Telegraph. Furthermore, it was noted that the UK is to step up defence cooperation with Japan to uphold stability in Indo-Pacific with the Hiroshima Accord to include doubling the UK troop numbers in upcoming joint exercises and committing to deploy a carrier strike group to the Indo-Pacific in 2025, while the UK and Japan will launch a semiconductor partnership with commitments to pursue cooperation, skills exchange & bolstering supply chain resilience, according to a statement.
• UK PM Sunak considers following the US lead on Chinese investment curbs, according to the FT.