• European bourses/US futures are firmer with fresh drivers limited and the focus firmly on Fed speak
• Debt ceiling reports indicate steady progress is being made, a view echoed by White House officials; Biden to leave G7 dinner early
• USD retreats from multi-weak peaks amid a Yuan revival to the benefit of G10s pre-Powell
• EGBs have seen two-way action but are holding off early German PPI-induced lows, USTs comparably more contained
• Commodities are benefitting from the USD’s downside with Crude towards Thursday’s best while XAU remains shy of USD 2k/oz
• Looking ahead, highlights include Speeches from ECB's Lagarde & Schnabel, Fed's Powell, Williams & Bowman. Moody's on Italy and S&P on S. Africa

EUROPEAN TRADE

EQUITIES

• European bourses are in the green, Euro Stoxx 50 +0.8%, and are set to see the week out with upside of a similar magnitude.
• Thus far, fresh macro drivers have been limited the focus firmly on the Central Bank docket which features Lagarde & Schnabel from the ECB.
• Stateside, futures are flat/slightly firmer following as the debt ceiling sees tentative progress and participants switch their near-term focus to Fed speak/next week's data; firstly, Fed's Powell, Williams & Bowman are due today.
• Deere & Co (DE) Q1 2023 (USD): EPS 9.65 (exp. 8.59), Revenue 17.39bln (exp. 14.83bln). +2.5% in pre-market trade
• Samsung Electronics (005930 KS) will not be swapping out default search engine on its smartphones from Google (GOOGL) to Microsoft's (MSFT) Bing, via WSJ citing sources.
• Click here and here for a recap of the main European updates.
• Click here for more detail.

FX

• Buck backs off from fresh multi-week peaks awaiting potentially pivotal remarks from Fed Chair Powell, DXY back under 103.500 towards 103.21 trough after forming a virtual 103.620-630 double top.
• Yen claws back losses vs Dollar from 138.72 to 137.98 amidst reports of pre-weekend long liquidation.
• Yuan regains poise from deeper sub-7.0000 lows as Chinese state banks step in to curb the slide.
• Kiwi bounces firmly on 0.6200 handle after NZ trade balances swings from deficit into surplus.
• Aussie, Euro and Sterling all take advantage of Greenback retreat within 0.6617-63, 1.0761-1.0804 and 1.2393-1.2435 respective ranges.
• PBoC set USD/CNY mid-point at 7.0356 vs exp. 7.0392 (prev. 6.9967)
• Click here for more detail.
• Click here for the notable FX expiries for today's NY cut.

FIXED INCOME

• Bonds fade from best levels in dead cat fashion awaiting final Central Bank speakers of the week headlined by Fed Chair Powell and ECB President Lagarde.
• Bunds back below par between 134.33-133.76 parameters, Gilts slipping to new intraday lows towards 98.50 vs 99.21 at best and T-note rooted towards base of 113-30/114-05 range.
• Permanent TSB (SAB SM) says it has not seen a slowdown in demand for mortgages due to higher rates, not seeing stress in mortgage book. Note, this headline is potentially a factor behind the recent increase in benchmark pressure, which is seemingly being led by Gilts
• Click here for more detail.

COMMODITIES

• Crude is firmer on the session and back towards yesterday's best levels in what has been a choppy session for the complex despite a lack of specific drivers ahead of a busy US agenda and with attention on the G7.
• Currently, WTI and Brent are posting upside of over USD 0.50/bbl in circa. USD 1.00/bbl parameters.
• As the USD comes under pressure, metals are experiencing relatively broad based upside; specifically, spot gold is bid but remains shy of the week's USD 2022/oz best with LME Copper similarly sub-8.3k.
• Saudi's Energy Minister said coordination with OPEC+ countries is a cornerstone of the efforts to enhance the stability of oil markets and maintain their balance, according to the state news agency.
• Click here for more detail.

NOTABLE HEADLINES

• UK plans GBP 1bln of semiconductor investment in a new strategy that aims to strengthen the domestic industry and chip supply chains, according to the government.
• ECB is reportedly to increase scrutiny of bank liquidity and could lift requirements, via Bloomberg; could communicate such requirements later this year. Scrutiny into liquidity following on from US bank and Credit Suisse (CSGN SW) failures.
• ECB's Lagarde says we are heading towards more delicate policy decisions going forward; will be courageous to take the decisions needed to bring inflation back to the target.

DATA RECAP

• UK GfK Consumer Confidence (May) -27 vs. Exp. -27 (Prev. -30)
• German Producer Prices MM (Apr) 0.3% vs. Exp. -0.5% (Prev. -2.6%, Rev. -1.4%); YY (Apr) 4.1% vs. Exp. 4.0% (Prev. 7.5%, Rev. 6.7%)

NOTABLE US HEADLINES

• Fed Discount Window loans were at USD 9.05bln in the week ended May 17th which was down from the USD 9.32bln level during the prior week, while BTFP lending was USD 87bln vs prev. USD 83.1bln W/W and the Fed's Other Credit was at USD 208.5bln vs prev. USD 212.5bln W/W.
• White House officials said US President Biden held a call with the debt ceiling negotiation team and his negotiating team said that steady progress is being made in talks, while President Biden is confident that Congress will take action to avoid a US default, according to Reuters.
• US debt-ceiling negotiations are reportedly moving slowly and quite deliberately, sources tell Punchbowl. "It’s still possible the two sides reach a deal by Sunday or Monday, but legislative text is unlikely to be ready by then.". A White House official said “steady progress is being made.”; Biden administration is aiming for a debt-hike extension into 2025 during talks with House GOP negotiators, according to multiple sources involved in the discussions.
• Spokesperson says US President Biden is planning to leave G7 leaders dinner early.
• Click here for the US Early Morning Note.

GEOPOLITICS

• Ukrainian President Zelensky is to travel to Japan to attend the G7 Summit in person, according to Bloomberg.
• US senior administration official said all G7 members are preparing to implement new Russian sanctions and export controls with the sanctions aimed at closing evasion loopholes and will target war inputs, energy reliance and access to financial systems. US is to target Russia with roughly 300 sanctions on individuals, entities, vessels and aircraft across Europe, the Middle East, and Asia. US sanctions will also target financial facilitators, Russia's future energy and extraction capabilities, as well as others supporting Russia's war, while G7 countries remain committed to upholding the price cap on Russian oil, according to Reuters.
• US President Biden's administration signalled to European allies in recent weeks that the US would allow them to export F-16 fighter jets to Ukraine, while Ukraine was said to have used a Patriot to shoot down at least one Russian fighter jet in recent weeks, according to CNN's Bertrand.
• EU''s President of the European Council Michel said they will restrict the sale of Russian diamonds and call on China to pressure Russia to stop military aggression, while he said stable and constructive cooperation with China is in their interests and that they need to engage with China on global challenges.

CRYPTO

• Bitcoin is modestly firmer and despite eclipsing the USD 27k mark as the USD comes under Yuan-driven pressure this morning, BTC thus far has been unable to hold onto the level and is now holding just below it.

APAC TRADE

• APAC stocks were mostly higher following the tech-led gains on Wall St where the Nasdaq outperformed and the S&P 500 printed a 9-month high on debt ceiling optimism and firm data, although Chinese markets lagged amid disappointment from Alibaba’s revenue miss.
• ASX 200 was lifted with the tech sector front-running the gains as it took inspiration from its US counterpart and with the top-weighted financial industry trailing closely behind.
• Nikkei 225 surged at the open to print its highest since August 1990 although pared some of the gains after losing steam on its approach to the 31,000 level and as participants digested the latest CPI figures which were mostly in line with expectations but showed a faster pace of acceleration.
• Hang Seng and Shanghai Comp. were mixed with the Hong Kong benchmark pressured as tech giants suffered following Alibaba’s earnings which beat on the bottom line but missed on revenue, while frictions lingered after the US and Taiwan reached an initial agreement on a '21st Century' trade pact and with China concerned about recent signs of negative China-related developments at the G7.

NOTABLE ASIA-PAC HEADLINES

• Chinese President Xi said China proposed to establish meeting and dialogue mechanisms in cooperation between China and Central Asian countries in which the mechanisms will cover agriculture, transportation, emergency management, education and political party affairs, while Xi added that China will roll out more trade facilitation measures and upgrade bilateral investment agreements with Central Asian countries.
• China's Commerce Minister is to meet with US Commerce Secretary Raimondo and US Trade Representative Tai next week, according to Politico.
• China's Taiwan Affairs Office said it will allow travel agencies to resume group tours for Taiwan residents to the mainland from today, according to Reuters.
• USTR office said US and Taiwan reached an initial agreement on a '21st Century' trade pact which covers customs and trade facilitation, good regulatory practices, services regulations, anti-corruption measures and SMEs. USTR added that further US-Taiwan negotiations will commence on additional trade areas including agriculture, digital trade, labour, environment and SOEs, according to Reuters.
• China’s Major state-owned banks are reportedly seen swapping Yuan for Dollars in the onshore FX forwards market, according to currency traders cited by Reuters; One source said state banks have started heavily trading buy/sell 1yr tenor since Thursday. Subsequently, China is to curb speculations on Yuan rates when necessary, according to PBoC.
• BoJ's Ueda says the domestic economy is picking up, driver of the economic recovery is likely to shift from pent up demand to rising income/expenditure. Adds, it is appropriate to take time to decide on adjustments to monetary easing toward a future exit. "While there is an opposite risk that inflation will remain above 2 percent if a change in policy falls behind the curve, the cost of waiting for underlying inflation to rise until it can be judged that 2 percent inflation has fully taken hold is not as large as the cost of making hasty policy changes. In this sense, it is appropriate to take time to decide on adjustments to monetary easing toward a future exit.". Click here for more detail.

DATA RECAP

• Japanese National CPI YY (Apr) 3.5% vs. Exp. 3.5% (Prev. 3.2%); Ex. Fresh Food YY (Apr) 3.4% vs. Exp. 3.4% (Prev. 3.1%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Apr) 4.1% vs. Exp. 4.2% (Prev. 3.8%)
• New Zealand Trade Balance (Apr) 427M (Prev. -1273.0M, Rev. -1586M)
• New Zealand Exports (Apr) 6.80B (Prev. 6.51B, Rev. 6.28B); Imports (Apr) 6.38B (Prev. 7.78B, Rev. 7.87B)