• APAC stocks traded mixed as the region picked up the pieces from the prior day's heavy selling but with the recovery limited.
• Fed Chair Powell said the Fed can maintain the current rate for as long as needed if higher inflation persists.
• European equity futures indicate a positive open with the Euro Stoxx 50 future +0.2% after the cash market closed down 1.4% on Tuesday.
• DXY retains a firm footing on a 106 handle, support in EUR/USD held at 1.06, USD/JPY remains on a 154 handle.
• Israeli war cabinet meeting ended without making a final decision on the response to Iran, according to ABC citing a source.
• Looking ahead, highlights include UK CPI, PPI, EZ CPI (F), Fed Beige Book, Comments from ECB’s Lagarde, Cipollone & Schnabel, BoE’s Bailey, Greene & Haskel, Fed’s Bowman & Mester, Supply from UK, Germany & US.

US TRADE

EQUITIES

• US stocks were choppy and finished mixed following hawkish Fed comments and mixed earnings reports, while the major indices attempted to find some ground after recent selling and with a lack of response (so far) from Israel. The attention was on two key Fed speeches in which Fed Chair Powell and Vice Chair Jefferson omitted comments regarding rate cuts and suggested holding rates at their current levels for longer if needed, which weighed on Treasuries and facilitated further upside in yields.
• SPX -0.21% at 5,051, NDX +0.04% at 17,713, DJIA +0.17% at 37,798, RUT -0.42% at 1,967.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed Chair Powell said the performance of the US has been quite strong and recent data shows a lack of further progress on inflation this year, while he added the Fed can maintain the current rate for as long as needed if higher inflation persists, as well as noted that restrictive policy needs further time to work and it will likely take longer for confidence on inflation.
• Fed's Barkin (voter) said CPI data has not "been supportive" of a soft landing and it is smart for the Fed to take its time on the decision to cut rates, while he added the economy is not overheating, but if so, the Fed can deal with it.
• Fed's Williams (voter) said inflation across categories has fallen over one-and-a-half years and US potential growth is around 2%.

APAC TRADE

EQUITIES

• APAC stocks traded mixed as the region picked up the pieces from the prior day's heavy selling but with the recovery limited after the choppy performance stateside amid Fed commentary and geopolitical concerns.
• ASX 200 eked mild gains albeit with upside capped by a lacklustre mining sector after Rio Tinto's quarterly production update which showed a decline in iron output and shipments from a year ago.
• Nikkei 225 was choppy after somewhat mixed trade data and recent speculation of FX intervention.
• Hang Seng and Shanghai Comp. were varied with the mainland underpinned by supportive measures with China's Financial Regulator vowing to allocate more credit resources to support manufacturing industry development and will continuously increase the proportion of medium to long-term loans for the sector, while financial institutions in Shanghai are to provide CNY 2tln in funding to support innovative technology companies over the next three years under an initiative backed by the PBoC.
• US equity futures (ES +0.2%) were mildly higher although remained within yesterday's relatively tight parameters.
• European equity futures indicate a positive open with the Euro Stoxx 50 future +0.2% after the cash market closed down 1.4% on Tuesday; note, the index has moved lower in recent trade following earnings from ASML.

FX

• DXY slightly softened and reversed the prior day's mild gains which were spurred by the latest Fed rhetoric.
• EUR/USD partially recouped some of its lost ground following a rebound off support at the 1.0600 level.
• GBP/USD lacked direction after recent mixed employment and earnings metrics, while inflation data looms.
• USD/JPY traded sideways after yesterday's sharp drop and reversal which had raised suspicion of intervention.
• Antipodeans edged higher with the help of a firmer CNY reference rate setting, while NZD/USD saw a bout of volatility after an initial erroneous print of New Zealand CPI data.
• PBoC set USD/CNY mid-point at 7.1025 vs exp. 7.2404 (prev. 7.1028)

FIXED INCOME

• 10-year UST futures were lacklustre after retreating yesterday as Fed officials signalled the potential for maintaining rates at their current level for longer after the recent hot inflation prints.
• Bund futures were off yesterday's lows but with the recovery limited ahead of German supply.
• 10-year JGB futures remained subdued and failed to benefit from the BoJ's presence in the market for over JPY 1.4tln of JGBs.

COMMODITIES

• Crude futures were mildly pressured amid headwinds following bearish private sector crude inventory data.
• US Energy Inventory Data (bbls): Crude +4.1mln (exp. +1.4mln), Cushing -0.2mln, Gasoline -2.5mln (exp. -0.9mln), Distillate -0.4mln (exp. -0.3mln).
• White House senior adviser Podesta commented about potential SPR oil releases and said the US wants to ensure affordable gasoline.
• TC Energy (TRP) responded to an incident in Yellowhead County involving NGTL which affected a section of the pipeline that was shut down, while there are no reported injuries.
• Spot gold traded sideways following the prior day's indecisive performance.
• Copper futures were rangebound with prices contained amid mixed sentiment in Asia.

CRYPTO

• Bitcoin traded indecisively in which prices oscillated back and forth of the USD 64,000 level.

NOTABLE ASIA-PAC HEADLINES

• PBoC said the China and US financial working teams held a meeting and both sides conducted professional, pragmatic, candid and constructive communication on monetary policy and financial stability, as well as financial regulatory cooperation. China's Finance Ministry said China expressed concern over US economic and trade restrictions against China and made further responses on the issue of production capacity at the economic work group meeting.

DATA RECAP

• Japanese Trade Balance Total (JPY)(Mar) 366.5B vs. Exp. 299.9B (Prev. -379.4B, Rev. -377.8B)
• Japanese Exports YY (Mar) 7.3% vs. Exp. 7.0% (Prev. 7.8%)
• Japanese Imports YY (Mar) -4.9% vs. Exp. -4.7% (Prev. 0.5%)
• Singapore Non-Oil Exports MM (Mar) -8.4% vs. Exp. 4.5% (Prev. -4.8%)
• Singapore Non-Oil Exports YY (Mar) -20.7% vs. Exp. -7.0% (Prev. -0.1%)
• New Zealand CPI QQ (Q1) 0.6% vs Exp. 0.6% (Prev. 0.5%)
• New Zealand CPI YY (Q1) 4.0% vs Exp. 4.0% (Prev. 4.7%)
• RBNZ Sectoral Factor Model Inflation Index (Q1) 4.3% (Prev. 4.5%)

GEOPOLITICS

MIDDLE EAST

• Israeli war cabinet meeting ended without making a final decision on the response to Iran, according to ABC citing a source. Kan News had earlier reported that they decided in Israel how the reaction against Iran would be carried out and the agreement came against the background of significant differences of opinion as some ministers demanded to wait for agreements with countries in the region.
• IDF has decided how it will counter-strike Iran and its proxies but has not yet settled on the timing, according to The Jerusalem Post on Tuesday citing sources.
• Ministers' demand that Israel PM Netanyahu attack sensitive installations in Iran was refused and the debate about the date of the attack continued, while the longer the attack is delayed, it may not come into effect, according to Kan citing sources.
• Israeli lawmaker said when Israel responds to the unprecedented weekend Iranian drone and missile salvoes, its aim will be to send a message of deterrence to Tehran while drawing a line under this round of hostilities, according to Reuters.
• Israel’s thinking is that there is no harm in keeping Iran guessing by delaying a potential response, according to an Israeli source cited by The Times of Israel who said "let them be anxious" and that the response could be "within Iran or outside Iran", while the majority position in the cabinet is that Israel should respond forcefully to Iran’s unprecedented strike.
• Ministers reportedly asked Israeli PM Netanyahu to slow down in responding to Iran and wait for the formation of an alliance in the region against it. Furthermore, there is great international pressure being exerted on Israel to prevent it from responding to Iran and an initiative is being put forward to impose more sanctions on Iran as an alternative to the Israeli response, according to Israeli Broadcasting Corporation sources cited by Al Jazeera.
• Iranian ground forces commander said any action by the Zionist entity against us will be met with greater force than last Saturday's operation, according to Al Jazeera.
• US Secretary of State Blinken told a group of American Jewish leaders that further escalation with Iran is not in the interests of either the US or Israel, according to Axios citing sources at the meeting. The US assessment is that Iran would respond to any significant, overt Israeli strike on Iranian soil with a new round of missile and drone attacks, while the US thinks it will be very hard to replicate the huge success they had on Saturday with defeating the attack if Iran launches hundreds of missiles and drones again which the Israelis know, according to a US official.
• US State Department said the US has still not been briefed in detail on plans for an evacuation from Rafah or humanitarian considerations of a potential Israeli operation.
• US intends to restrict the movement of Iranian Foreign Minister Abdollahian and his delegation while they are in New York for the UN Security Council meeting scheduled for Thursday, according to CNN citing a source.
• White House's Sullivan said the US will impose new sanctions targeting Iran in the coming days which will include Iran's missile and drone program, as well as entities supporting the IRGC and its defence ministry, while the US anticipates its allies and partners will soon be following with their own sanctions.
• Several Iran-related bills passed the committee stage of the US Senate Tuesday that enhance sanctions on Iran’s leaders and require the President to sanction ships, ports, and refineries carrying or processing Iranian oil, according to Iran International via X.
• EU's Borrell said some EU members proposed expanding restrictive measures against Iran.

OTHER

• US State Department said Secretary of State Blinken will raise US concerns regarding China's support in Russia building up its defence industrial base to fight the war in Ukraine, during a visit to China in the coming weeks.
• US Defense Secretary Austin spoke with Chinese Defence Minister Dong for the first time in the latest effort to stabilise ties. China's Defence Minister said China and the US should explore ways to get along with each other and the Taiwan issue is 'core of China's core interests' and must never be hurt, while he added the US side should recognise China's firm position, as well as respect China's territorial sovereignty and maritime rights and interests in the South China Sea.

EU/UK

NOTABLE HEADLINES

• BoE Governor Bailey said they have full employment in the UK, while he added that Europe and the US have different inflation dynamics and that there are 'very encouraging signs' on the world economy. Furthermore, Bailey sees strong evidence the process of disinflation is working its way through.
• UK Chancellor Hunt raised the possibility of further tax cuts before the next general election as he counts on recent national insurance cuts and prospects of lower interest rates to improve the ruling Conservative party's fortunes, according to FT.
• UK Chancellor Hunt said the period of high inflation is "well and truly behind us" and the UK has very strong growth prospects, according to Bloomberg TV.
• Fitch said UK 'AAA' covered bond ratings are resilient despite a sluggish economic outlook.
• ECB's Villeroy said he expects a June rate cut to be followed by others with "pragmatic and agile gradualism", while they will monitor possible consequences of Middle East developments.