• European equities are entirely in the green; US equity futures trade modestly on either side of the unchanged mark.
• Dollar is slightly softer, EUR incrementally firmer post-EZ PMI; USD/JPY hits multi-decade highs once again.
• USTs initially remained in overnight ranges but succumbed to modest selling pressure following EZ PMIs.
• Crude is marginally firmer, underpinned by EZ PMIs; XAU continues to decline and base metals slip.
• Apple (AAPL) iPhone sales in China -19% in Q1 and down 24% Y/Y in the first six weeks of the year, according to Bloomberg citing Counterpoint Research.
• Looking ahead, US PMIs, US Richmond Fed Index, Comments from BoE’s Pill & ECB’s Nagel, Supply from the US, Earnings from Spotify, General Motors, Philip Morris, PepsiCo, RTX, Fiserv, UPS, Visa, Lockheed Martin & Tesla

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (+0.6%) began the session on a strong footing, and has remained at elevated (albeit contained) levels throughout the European morning. There was little reaction to the EZ Flash PMI data.
• European sectors hold a positive tilt; Tech takes the top spot, benefiting from US tech gains in the prior session, and post-earning strength in SAP (+3.9%). Basic Resources is found at the foot of the pile, amid broader weakness in metals prices.
• US Equity Futures (ES +0.1%, NQ +0.2%, RTY U/C) are tentative ahead of a busy earnings slate and the key US PMI data.
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FX

• DXY softer having briefly dipped under 106 amid gains in the EUR. Ultimately though, the index is in consolidation mode ahead of GDP and PCE metrics later this week and FOMC on May 1st. For now, the next downside target comes via last week's low at 105.74.
• EUR is boosted by PMI metrics which saw strong services and composite PMIs overshadow a soft outturn for the manufacturing sector. EUR/USD as high as 1.0695 with the 1.07 level not breached since 12th April; 1.0729 was the high that day.
• GBP: After a soft session yesterday which dragged the pair to a low of 1.23, Cable is on the front foot thanks to a strong showing for services PMI. 1.2388 is the high watermark thus far.
• JPY is steady vs. the USD but made another multi-decade high at 154.85. The closer the pair moves to 155, the louder the calls for intervention will get. For now, jawboning is providing minimal help for JPY.
• Antipodeans are varied the USD with slight outperformance in Aussie after AUD/NZD extended above 1.0900. AUD/USD saw little follow-through from PMI data overnight with the pair lingering around yesterday's best levels after printing a YTD low on Friday.
• PBoC set USD/CNY mid-point at 7.1059 vs exp. 7.2437 (prev. 7.1043).
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FIXED INCOME

• USTs initially remained in overnight ranges, though succumbed to selling pressure, sparked by EZ-PMIs, which dragged EGBs lower. USTs matched yesterday's 107.31 high earlier in the session before pulling back to circa 107.25, and further downside could bring Monday's 107.17 low into view.
• Bunds looked as if they wanted to venture higher in early trade in an extension of yesterday's gains and with de Guindos labelling June as a done deal. However, EZ-wide and regional PMIs acted as a drag thereafter with a strong showing for the services sector, helping composite metrics to beat expectations. 131.47 was the peak before prices made a low at 130.98.
• Gilts started the session on the back foot thanks to an unwind of yesterday's Ramsden-induced gains and higher-than-expected public borrowing figures which saw the UK DMO revise higher its 2024/25 Gilt issuance remit. Gilts down as low as 96.90 with yesterday's trough at 96.71.
• UK DMO revises higher its 2024/25 Gilt issuance remit to GBP 277.7bln (prev. GBP 265.3bln)
• Italy sell EUR 2.5bln vs exp. EUR 2-2.5bln 3.20% 2026 BTP Short Term and EUR 2.5bln vs exp. EUR 2-2.5bln 1.50% 2029 & 1.80% 2036 BTPei:
• Germany sells EUR vs exp. EUR 5bln 2.90% 2026 Schatz: b/c 2.7x (prev. 2.31x) & avg. yield 2.91% (prev. 2.84%) and retention 18.6% (prev. 17.7%)
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COMMODITIES

• Upside across the crude complex underpinned by the Flash PMIs from Europe which (although manufacturing fell short of expectations) pointed to a services-led recovery; however, prices have pulled back from best levels in recent trade. Brent June meanwhile trades in a USD 86.97-97.95/bbl range.
• Softer trade across precious metals despite the softer Dollar as the geopolitical unwind from yesterday continues, with relatively broad-based losses seen across spot gold, silver and palladium; XAU fell under USD 2,300/oz to find current intraday support around USD 2,291/oz.
• Base metals are lower across the board with sizeable intraday losses despite the softer Dollar and risk-on tone across the rest of the market. There has been no obvious catalyst for this pullback but some desks cite Asian investors being cautious of the recent rally driven, in part, by speculative trading.
• Anglo American (AAL LN) Q1 Copper Production 198k tonnes (exp. 191.3k tonnes)
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NOTABLE EUROPEAN HEADLINES

• ECB's de Guindos said a June rate cut looks like a set deal, if there are no surprises; end of inflation fight is in sight; largest remaining threat stems from services inflation. There's a clear slowdown in wage dynamics. Inclined to be very cautious what happens after June. Need to take into account what's happening in the US. What the Fed decides is crucial for the global economy. Beed to take impact of FX movements into account. Indicators point toward modest H2 Euro-area recovery.
• BoE's Haskel said UK food price inflation is "unusually high"; UK labour market is is "extremely tight", via Bloomberg. Inflation will stay high unless the job market weakens.
• Kantar UK Supermarket update (Apr): Grocery price inflation has fallen to 3.2% over the four weeks to 14 April, marking the fourteenth monthly drop in a row

PMI DATA RECAP

• French HCOB Services Flash PMI (Apr) 50.5 vs. Exp. 49.0 (Prev. 48.3); HCOB Manufacturing Flash PMI (Apr) 44.9 vs. Exp. 47.0 (Prev. 46.2); HCOB Composite Flash PMI (Apr) 49.9 vs. Exp. 48.8 (Prev. 48.3); "Overall, our HCOB nowcast model for the second quarter points to a recovery of the French economy, driven by the services sector".
• German HCOB Manufacturing Flash PMI (Apr) 42.2 vs. Exp. 42.9 (Prev. 41.9); HCOB Services Flash PMI (Apr) 53.3 vs. Exp. 50.5 (Prev. 50.1); HCOB Composite Flash PMI (Apr) 50.5 vs. Exp. 48.6 (Prev. 47.7); "Factoring in the PMI numbers into our GDP Nowcast, we estimate that GDP may expand by 0.2%".
• EU HCOB Services Flash PMI (Apr) 52.9 vs. Exp. 51.8 (Prev. 51.5); HCOB Manufacturing Flash PMI (Apr) 45.6 vs. Exp. 46.6 (Prev. 46.1); HCOB Composite Flash PMI (Apr) 51.4 vs. Exp. 50.8 (Prev. 50.3); "Considering various factors including the HCOB PMIs, our GDP forecast suggests a 0.3% expansion in the second quarter".
• UK Flash Services PMI (Apr) 54.9 vs. Exp. 53.0 (Prev. 53.1); Flash Manufacturing PMI (Apr) 48.7 vs. Exp. 50.4 (Prev. 50.3); Flash Composite PMI (Apr) 54.0 vs. Exp. 52.7 (Prev. 52.8)

OTHER DATA RECAP

• UK PSNB Ex Banks GBP* (Mar) 11.939B GB vs. Exp. 10.2B GB (Prev. 8.401B GB, Rev. 9.524B GB); PSNB, GBP (Mar) 11.015B GB (Prev. 7.477B GB, Rev. 8.600B GB); PSNCR, GBP (Mar) 20.739B GB (Prev. 3.024B GB, Rev. 3.236B GB)

NOTABLE US HEADLINES

• Apple (AAPL) iPhone sales in China -19% in Q1 and down 24% Y/Y in the first six weeks of the year, according to Bloomberg citing Counterpoint Research.

EARNINGS

• Nucor Corp (NUE) Q1 2024 (USD): EPS 3.46 (exp. 3.66), Revenue 8.14bln (exp. 8.26bln). Expects earnings to decrease in Q2 vs Q1 due to decreased earnings in the steel mills segment. Average scrap and scrap substitute cost per gross ton USD 421 (exp. 399.58). Sales tons to outside customers 6.22mln (exp. 6.41mln).
• SAP (SAP GY) Q1 24 (EUR): Adj. EPS 0.81 (exp. 0.89), adj. revenue 8.04bln (exp. 8.03bln). Adj. cloud and software revenue EUR 6.96bln (exp. 6.93bln). Adj. cloud revenue EUR 3.93bln (exp. 3.94bln). Adj. cloud revenue in constant currencies +25% (exp. +24.5%). Adj. operating profit EUR 1.53bln (exp. 1.7bln). GUIDANCE: Cloud revenue view between 17.0-17.3bln (prev. 13.66bln in 2023). Cloud and software revenue view at EUR 29.0-29.5bln (prev. 26.92bln in 2023) Adj. Operating profit view EUR 7.6-7.9bln (prev. 6.51bln in 2023). Raises 2023 dividend 7% to EUR 2.20/shr vs 2022 dividend. (Newswires) SAP ADR (SAP) rose 2.1% in the US after-hours. Index Weightings: DAX 40 (10.9% - largest), Euro Stoxx 50 (5% - third largest), Stoxx 600 (1.3%).
• Renault (RNO FP) Q1 (EUR): Revenue 11.71bln (exp. 11.7bln). Sales +2.6% Y/Y. Strong order book in Europe, reflecting a very good start to the year. Co. is progressing well toward its target of cost reduction to lower EV costs by 40%. The EV market is a bit slower than had expected a few years ago. Talks with Geely and Aramco on the ICE powertrain JV are at an advanced stage.
• Novartis (NOVN SW) Q1 (USD): Revenue 11.8bln (exp. 11.5bln). Core EPS 1.80 (exp. 1.73); Raises FY24 Net Sales and Core Operating Income guidance. Strong sales momentum in Entresto (+36% cc), Cosentyx (+25% cc), Kesimpta (+66% cc), Kisqali (+54% cc), Pluvicto (+47% cc) and Leqvio (+139% cc). Free cash flow 2.0bln (-24%) - declined due to a prior-year one-timer and timing of payments. Novartis proposes Dr. Giovanni Caforio as Chair of the Board of Directors at AGM 2025. Index Weightings: SMI (15.9% - second largest), Stoxx 600 (2%). Net Sales are expected to grow high-single to low double-digit digits. Core operating income is expected to grow low double-digit to mid-teens.

GEOPOLITICS

MIDDLE EAST

• Israeli occupation forces reportedly stormed the city of Jericho in the eastern West Bank, while it was also reported that Israeli gunboats targeted the seashores in the city of Khan Younis in the southern Gaza Strip. In relevant news, sirens sounded in the town of Metulla and the Kiryat Shmona area in northern Israel on suspicion of rocket fire, according to Al Jazeera.
• Hezbollah fired dozens of rockets into northern Israel on Monday which drew retaliatory strikes, while it said its attack was in response to recent Israeli strikes on towns and villages in southern Lebanon, according to Associated Press.
• Israeli raids were reported on the town of Yaroun in southern Lebanon, according to Al Jazeera.
• Hamas said it condemns the statements of US Secretary of State Blinken and his attempt to hold the group responsible for obstructing reaching an agreement, according to Sky News Arabia. Hamas said Blinken's statements contradict the fact that the movement has provided flexibility more than once to facilitate an agreement, while it added that the movement's demands are a permanent ceasefire, the withdrawal of the occupation and the return of the displaced to their homes in all areas of the Gaza Strip.
• US defence official said the Al-Asad airbase in Iraq came under attack from an Iranian proxy group today which is the second attack on a US base in two days, according to Fox.

OTHER

• UK PM Sunak is to unveil an extra GBP 500mln of military funding to Ukraine and announce the largest supply of munitions to Kyiv on Tuesday as he travels to Poland and Germany, according to FT.
• North Korean state media reported that leader Kim guided the first nuclear counterstrike drills, while it stated that the drills are a clear warning sign to enemies.

CRYPTO

• Bitcoin is modestly softer and holds around the USD 66k mark.

APAC TRADE

• APAC stocks traded with a mild positive bias after the tech-led rebound stateside.
• ASX 200 was led by strength in real estate and tech, while the latest flash PMIs from Australia were varied.
• Nikkei 225 traded indecisively and on both sides of 37,500 after briefly wiping out all of its opening gains.
• Hang Seng and Shanghai Comp. were mixed with outperformance in Hong Kong due to tech strength, while the mainland lagged amid the PBoC's continued tepid liquidity operations and with the US drafting sanctions that threaten to cut some Chinese banks off from the global financial system for aiding the Russian war effort.

NOTABLE ASIA-PAC HEADLINES

• US is reportedly drafting sanctions that threaten to cut some Chinese banks off from the global financial system as it hopes to stop Beijing's commercial support of Russia's military production, according to WSJ.
• BoJ Governor Ueda reiterated that monetary policy will be data dependent and will depend on the economy and inflation, while he said they don't have any pre-set idea on the timing and pace of future rate hikes and if trend inflation accelerates in line with their forecast, they will adjust the degree of monetary support through an interest rate hike. Ueda also stated if their price forecast changes, that will also be a reason to change policy but noted it is hard to say beforehand how long the BoJ should wait in gathering enough data to change policy and would like to leave some scope for adjustment by not pre-committing to a certain policy too much.
• Japanese Finance Minister Suzuki said the government is ready to respond appropriately to excessive FX moves and is closely watching FX moves with a high sense of urgency, while they won't rule out any option and will deal appropriately with excessive FX moves. Suzuki also said he closely communicated with the US and South Korea on forex in Washington and won't deny that last week's discussions in Washington have laid the groundwork for Japan to take appropriate FX action.
• Senior Japanese ruling party official said recent JPY falls are excessive and out of line with fundamentals; said Japanese authorities could intervene to prop up the JPY at any time
• Japan Business Lobby Keidanren Chair Tokura said he think Government will make appropriate decision on intervention, via Kyodo

APAC DATA RECAP

• Japanese Manufacturing PMI Flash (Apr) 49.9 (Prev. 48.2); Services PMI Flash (Apr) 54.6 (Prev. 54.1); Composite Flash (Apr) 52.6 (Prev. 51.7)
• Australian Manufacturing PMI Flash (Apr) 49.9 (Prev. 47.3); Services PMI Flash (Apr) 54.2 (Prev. 54.4); Composite PMI Flash (Apr) 53.6 (Prev. 53.3)