• European bourses continue the positive Wall St/APAC action, with action slightly limited by Ascension Day
• Stateside, futures edge into the green but are largely continuing sideways action ahead of WMT and substantive debt updates
• DXY picks up to the detriment of peers as the Yuan falls further and AUD lags on jobs data
• EGBs descend further with yield levels in focus while USTs are more contained pre-data/Fed speak
• Commodities are generally dented by the firmer USD with specifics light
• Looking ahead, highlights include US IJC, Philadelphia Fed, Existing Home Sales, Speeches from Fed's Jefferson, Barr & Logan, BoE's Tenreyro. Earnings from Walmart. Europe Ascension Day Holiday (Limited Closures).

EUROPEAN TRADE

EQUITIES

• European bourses are firmer across the board, Euro Stoxx 50 +1.1%, following Wednesday's firmer Wall St. action and a relatively solid APAC lead; within Europe specifically, action is slightly limited by partial Ascension Day closures.
• Sectors are mostly positive with Autos/Parts outperforming amid Volkswagen strength while Real Estate & Basic Resources lag.
• Stateside, futures post upside of circa. 0.2%; though, ultimately, the sideways action continues as we await WMT and more substantive debt updates.
• Click here and here for a recap of the main European updates.
• Click here for more detail.

FX

• DXY inches further above 103.000 to 103.170 as Yuan extends to the downside through key chart levels (50% Fibs).
• Aussie also undermined by weaker than forecast jobs data as AUD/USD retreats towards sub-0.6650 midweek lows.
• Euro relying on option expiries to hold above 1.08000 and Yen on psychological support to keep afloat of 138.00.
• Pound on backfoot after just below 1.2500 as BoE members deliver QE testimony in Parliament.
• Kiwi retains 0.6200+ status after improved NZ budget balances and economic forecasts.
• PBoC set USD/CNY mid-point at 6.9967 vs exp. 6.9985 (prev. 6.9748)
• Click here for more detail.
• Click here for the notable FX expiries for today's NY cut.

FIXED INCOME

• Debt descending further on Ascension Day as props in futures and resistance in yields are breached.
• Bunds down to 134.58 from 135.44 and 10 year cash probing 2.40%, Gilts near base of 99.65-100.11 range and T-note closer to 114-13 than 114-24 ahead of US data, Fed speakers and 10 year TIPS auction.
• Click here for more detail.

COMMODITIES

• WTI and Brent front-month futures are softer intraday following some overnight consolidation after yesterday’s risk-led rally.
• Spot gold bears the brunt of a firmer Dollar and broader risk appetite.
• Base metals are trading off a similar theme, with modest pressure emanating from the firmer Dollar.
• Qatar Energy set July Al-Shaheen crude term price at a premium of USD 1.03/bbl above Dubai quotes, according to traders.
• Russia's Kremlin confirms the extension of the Black Sea grain deal by two months.
• Click here for more detail.

NOTABLE HEADLINES

• 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.
• Germany is reportedly proposing forcing EU firms to include "no Russia clauses" when some high-tech goods are sold to certain nations, via Politico citing a paper.
• ECB's de Guindos says there is still scope to keep raising interest rates, though most of tightening has already been done.
• ECB's Muller says it is premature to expect the ECB to cut rates in early 2024
• BoE Governor Bailey says he does not envisage BoE balance sheet returning to where it was before the financial crisis; Deputy Governor Ramsden says QT has some effect on the economy, but fairly small; reiterates QT will be gradual and predictable, there's potential for QT sales number to go up, but does not see it going down. Broadbent says they received reports that GBP 100bln p.a. of QT may disrupt market liquidity, thus BoE decided on GBP 80bln p.a.

NOTABLE US HEADLINES

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

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.

CRYPTO

• Bitcoin is incrementally firmer though ranges are very slim with specifics limited ahead of a busy US session; currently, BTC is just shy of USD 27.5k.

APAC TRADE

• 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.

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%); Imports YY (Apr) -2.3% vs. Exp. -0.3% (Prev. 7.3%)
• Australian Employment (Apr) -4.3k vs. Exp. 25.0k (Prev. 53.0k); 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)