• European equities are entirely in the green; US futures are mixed
• Dollar is slightly firmer, Aussie underperforms following the RBA, USD/JPY now around 154.50
• Bonds are firmer and extending on the prior day’s gains; Gilts outperform on their return from holiday
• Crude is flat awaiting geopolitical updates, XAU softer and base metals are mixed
• Looking ahead, US RCM/TIPP Economic Optimism, CBR Policy Announcement, EIA STEO Comments from Fed’s Kashkari & BoC's Rogers, Supply from the US, Earnings from Disney, Occidental Petroleum Corp, Duke Energy, Arista & McKesson

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (+0.5%) are entirely in the green, in what has been a choppy session in Europe. The FTSE 100 (+1.1%) outperforms, in catchup action from Monday's closure.
• European sectors hold a strong positive tilt, with Financial Services at the top of the pile, benefitting from post-earning strength in UBS (+9.4%).
• US Equity Futures (ES +0.1%, NQ -0.1%, RTY +0.2%) are mixed, with initial strength fading in tandem with a broader equity pressure in Europe. Apple (+0.9%) gains in the pre-market following news that the Co. is looking to develop AI chips; NVDA (-1%) lags.
• Click here and here for the sessions European pre-market equity newsflow. Including earnings from BP, Infineon & more.
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FX

• DXY is incrementally firmer and in a tight range thus far as markets await fresh impetus following last Friday's post-FOMC NFP-induced slide. DXY sits in a 105.03-28 intraday parameter, with 21 DMA at 105.20.
• EUR is moving in tandem with the Dollar, and has seen no notable catalysts this morning with key releases for the bloc also light this week. EUR/USD sits in a 1.0755-76 range after briefly dipping under yesterday's low (1.0753).
• GBP is subdued ahead of Thursday's BoE confab with the MPC expected to keep the Base Rate at 5.25%. GBP/USD trades in a 1.2533-70 range and dipped under its 200 DMA (1.2544).
• Modestly softer session for the JPY with USD/JPY reclaiming 154.00 status overnight (currently 154.50), whilst Japanese Business Lobby Keidanren Chief Tokura said FX should reflect fundaments in mid and long-term. Elsewhere, BoJ Governor Ueda spoke to PM Kishida regarding FX, though with specifics light.
• Divergence across the Antipodeans following the RBA policy decision in which the central bank left rates unchanged at 4.35% as expected, whilst analysts framed the release as less-hawkish-than-feared. AUD/USD trades in a 0.6588-6643 range.
• PBoC set USD/CNY mid-point at 7.1002 vs exp. 7.2143 (prev. 7.0994).
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FIXED INCOME

• USTs are bid but holding a handful of ticks shy of Friday's 109-09+ payrolls peak & the 10yr yield is holding just above 4.45% by extension. Attention turns to the week's supply, with geopols also a key theme.
• Bunds have surpassed Friday's post-NFP 131.57 peak, printing a fresh high at 131.71. European specifics light with no reaction to the latest Construction PMIs as the broader market awaits a significant update to the Israel-Hamas situation around Rafah.
• Gilts gapped higher by 56 ticks after Monday's Bank Holiday, a move which accounts for that the geopol-related upside and a continuation of the post-payrolls dovish price action. Currently holding around 97.75 and higher by 79 ticks thus far.
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COMMODITIES

• Choppy session for the crude complex, as markets await updates from Israel/Rafah; most recently the operation has been said to be "limited". Brent Jul'24 trades between USD 83.30-83.82/bbl.
• Downbeat price action across precious metals despite a steady Dollar, with the complex failing to gain much impetus from a "limited" Israeli operation in Rafah. Spot gold trades in a USD 2,312.00-2,329.93/oz parameter.
• LME prices are mostly firmer as the exchange returns from the early May UK Bank Holiday. Elsewhere, JFE executives expects iron ore prices to remain at current levels in FY24/25 amid sluggish Chinese demand.
• US Senior Adviser for Energy and Investment Hochstein said the US has sufficient supply in Strategic Petroleum Reserve to address any supply concerns and the Biden administration is monitoring markets, according to Reuters.
• Russian Deputy PM Novak says possibility of raising production under the OPEC+ deal is being analysed, according to Interfax. There is no need to predict further OPEC+ steps, need to look at the market. Had agreed that oil output could be tweaked if needed.
• Commerzbank expects Palladium price to rise to USD 1100/troy oz (current 975.78) by end of the year; expects platinum to rise to USD 1100/troy oz (current 963) by end of year
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NOTABLE EUROPEAN HEADLINES

• Barclaycard said UK April consumer spending fell 4.0% Y/Y (prev. +3.5%) which is the lowest since February 2021.

DATA RECAP

• German HCOB Construction PMI (Apr) 37.5 (Prev. 38.3); France HCOB Construction PMI (Apr) 41.5 (Prev. 41.0); Italian HCOB Construction PMI (Apr) 48.5 (Prev. 50.3); EU HCOB Construction PMI (Apr) 41.9 (Prev. 42.4)
• UK S&P Global PMI: Composite - Output (Apr) 54 (Prev. 52.6); Global Construction PMI (Apr) 53 vs. Exp. 50.0 (Prev. 50.2)
• UK BRC Retail Sales YY (Apr) -4.4% (Prev. 3.2%); Total Sales Y/Y -4.0% (Prev. 3.5%)
• UK Halifax House Prices MM (Apr) 0.1% (Prev. -1.0%, Rev. -0.9%); YY 1.1% (Prev. 0.30%, Rev. 0.4%)
• German Trade Balance, EUR, SA (Mar) 22.3B vs. Exp. 22.2B (Prev. 21.4B); Exports MM 0.9% vs. Exp. 0.4% (Prev. -2.0%); Imports MM 0.3% vs. Exp. -1.0% (Prev. 3.2%)
• German Industrial Orders MM (Mar) -0.4% vs. Exp. 0.4% (Prev. 0.2%, Rev. -0.8%)
• Swiss Unemployment Rate Adj. (Apr) 2.3% vs. Exp. 2.3% (Prev. 2.3%)
• French Trade Balance, EUR, SA (Mar) -5.473B (Prev. -5.244B, Rev. -5.614B); Non-Farm Payrolls QQ (Q1) 0.2%; Imports, EUR (Mar) 57.698B (Prev. 56.296B, Rev. 56.366B); Exports, EUR (Mar) 52.224B (Prev. 51.052B, Rev. 50.752B); Current Account (Mar) 1.3B (Prev. 0.9B, Rev. 0.3B)

EARNINGS

• Infineon (IFX GY) Q2 (EUR): Revenue 3.63bln (exp. 3.6bln), adj. EPS 0.42 (exp. 0.38), Gross Margin 38.6% (exp. 39.8%).
• BP (BP/ LN) Q1 (USD): Adj. Net 2.72bln (exp. 2.92bln). Revenue 49.96bln (exp. 52.44bln). Adj. EPS 0.16 (exp. 0.17). Dividend 0.0727 (exp. 0.0730)Announces USD 1.75bln share buyback for Q1. Continues to expect 2024 Capex around USD 16bln.
• Nintendo (7974 JT) 2023/24 (JPY): Net 490.6bln, +13.4%; Operating 528bln, +4.9%; Recurring 680bln, +13.2%. Sold 15.7mln Switch consoles in FY23/24 (exp. 15.5mln, prev. 17.9mln FY22/23). To make an announcement on a Switch successor in FY24; will not be announcing anything re. successor hardware at Nintendo Direct in June.

NOTABLE US HEADLINES

• Tornado warning was issued for Barsndall, Oklahoma and surrounding areas.
• China Auto Industry CPCA says Tesla (TSLA) sold 62,167 (prev. 89,064 M/M) China-made vehicles in April.
• Apple (AAPL) The iPhone maker is developing AI chips for data centres, known as Project ACDC, according to the WSJ, and it is expected to unveil them at its June's developer conference. The move could bolster Apple's position in the AI race, WSJ said, as it aims to apply its talent to server technologies.

GEOPOLITICS

MIDDLE EAST - EUROPEAN MORNING

• "Israeli source to CNN: The operation in Rafah is limited and aims to pressure Hamas to conclude an acceptable deal", according to Al Arabiya.

MIDDLE EAST

• Gaza crossings authority said the Israeli army stormed the Rafah crossing, according to Al Arabiya. However, Palestinian media said the Egyptian side informed the crossing's authority that Israeli vehicles are conducting a security operation in the vicinity of the Rafah crossing and will retreat tomorrow. It was later reported Israeli military took control of the Palestinian side of the Rafah border with Egypt, according to Bloomberg..
• US official said the US has concerns about Israel's unfolding Rafah strikes but it does not appear to represent a major military operation, according to Reuters.
• 100 congressional staff called on US President Biden and members of Congress to demand an immediate halt to the Israeli offensive before it is too late, according to Axios.
• Qatar Foreign Ministry said Hamas sent mediators its reply to the truce proposal on Monday and the reply could be described as "positive", while it was separately reported that the Qatari delegation arrives in Cairo on Tuesday to resume negotiations on a truce agreement in Gaza, according to Sky News Arabia.
• Jordanian Foreign Minister said Israeli PM Netanyahu is jeopardising the ceasefire deal by bombing Rafah, according to Reuters.

OTHER

• A US soldier was detained on charges of criminal misconduct in Russia's far eastern city of Vladivostok last week.
• China reportedly hacked the UK Ministry of Defence with MPs to be told on Tuesday of a large data breach targeting service personnel, according to Sky News.

CRYPTO

• Bitcoin firmer today and has reclaimed the USD 64k handle, with Ethereum now holding around USD 3.2k.

APAC TRADE

• APAC stocks were mixed as the region only partly sustained the momentum from Wall St where the major indices extended on post-NFP advances amid rate cut hopes, while key markets returned from the long weekend.
• ASX 200 traded higher with a further boost in late trade after the RBA proved to be less hawkish than many feared.
• Nikkei 225 gained on return from holiday as it took its first opportunity to react to last week's NFP report and renewed US rate cut hopes.
• Hang Seng & Shanghai Comp were subdued with the former set to snap its 10-day win streak and longest consecutive run of gains since 2018, while the mainland index took a breather after yesterday's catch-up rally amid a lack of fresh catalysts.

NOTABLE ASIA-PAC HEADLINES

• US will host China's special envoy for climate change Liu Zhenmin in Washington on May 8th-9th, according to the State Department.
• Japanese top FX diplomat Kanda said it is important for currencies to move in a stable manner reflecting fundamentals and the government must take appropriate steps if there's excessive volatility in the FX market, while he added it is usual that they don't comment whether currency intervention was carried out.
• RBA kept the Cash Rate Target unchanged at 4.35%, as expected, while it reiterated the Board remains resolute in its determination to return inflation to the target and it is not ruling anything in or out. RBA stated that returning inflation to the target within a reasonable timeframe remains the board’s highest priority, as well as noted that inflation remains high and is falling more gradually than expected. Furthermore, the RBA raised its inflation forecasts for 2024 but trimmed forecasts for GDP and unemployment, while its forecasts assume that rates will stay at 4.35% until mid-2025 which is nine months longer than previously assumed.
• RBA's Bullock says they must be vigilant on inflation risks, believe rates are at the correct level to get inflation back to target. Board discussed the option of hiking. Will tighten if necessary, do not think they necessarily have to tighten again. Should not read too much into the technical assumptions re. rate forecasts. Policy risks remain reasonably balanced.
• Nintendo (7974 JT) 2023/24 (JPY): Net 490.6bln, +13.4%; Operating 528bln, +4.9%; Recurring 680bln, +13.2%; is to make an announcement on a Switch successor in FY24. Will not be announcing anything re. successor hardware at Nintendo Direct in June
• Japanese Business Lobby Keidanren Chief Tokura says it is desirable for FX to reflect fundaments in mid and long-term; USD/JPY above 150 is "too much". Does not know if the authorities intervened in the FX market, but if they did, thinks timing was very good. Undesirable for FX to fluctuate through speculators.
• BoJ Governor Ueda had regular exchange of views with Japanese PM Kishida; discussed FX; confirmed with the PM that the BoJ will take into account impact of economy and prices which could be potentially big. Stands ready to keep close eye out on how JPY moves affect trend inflation; to closely monitor how a weak JPY will impact prices. Explained BoJ's stance of guiding policy from standpoint of sustainably reaching inflation goal.

APAC DATA RECAP

• Australian Retail Trade (Q1) -0.4% vs. Exp. -0.2% (Prev. 0.3%, Rev. 0.4%)