• Asian equities traded with a mildly cautious tone amid reports of a terrorist incident in Manchester with macro newsflow otherwise light
• In FX, reports of the Manchester explosion triggered safe-haven flows into JPY with USD/JPY briefly falling below 111.00, while GBP/JPY was the notable underperformer
• Looking ahead, highlights include Eurozone PMIs, German IFO and a slew of central bank speakers

UK

UK Police confirmed at least 19 were killed and 59 injured at the Manchester Arena following an explosion which police are treating as a terrorist incident. (Newswires)

Note: The initial news of an explosion saw a muted reaction as there were conflicting reports regarding the cause of the blast and there were no immediate reports of any injuries or casualties. However, safe-haven flows were then gradually observed into JPY and US equity futures were mildly pressured amid the uncertainty, which was exacerbated after the police later confirmed that there were casualties.

ASIA

Asia equity markets traded with a mildly cautious tone amid terror fears following the explosion in Manchester, UK where 19 people were confirmed dead and over 50 others injured, which police are treating as a terrorist attack. This dampened the risk tone in ASX 200 (-0.2%) and Nikkei 225 (-0.1%), although markets in Australia attempted to recover as gains in commodities-related sectors provided support. Hang Seng (+0.1%) and Shanghai Comp. (-0.1%) were mixed with downside stemmed after the PBoC conducted a firm liquidity injection of CNY 140bln. Finally, 10yr JGBs were relatively flat with only mild upside observed despite the cautious risk tone observed in equities, while the enhanced liquidity auction also saw a muted reaction and failed to drive any significant demand.

PBoC injected CNY 80bln via 7-day reverse repos and CNY 60bln in 14-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.8661 (Prev. 8.8673)

EUROPE

ECB's Weidmann said normalization should come closer if recovery lifts wages and that Eurozone prices pressures are muted. (Newswires)

Greece's creditors failed to reach an agreement on Greek debt measures and held off releasing new funds to Greece for now after no deal on debt relief. Eurogroup's Dijsselbloem stated that Greece is committed to continue working on reforms towards a disbursement before summer and that they will try to reach a debt on Greek debt at next meeting in June, while he also commented that very little is required to be completed for next disbursement of funds to Greece. (Newswires)

FX

Reports of the Manchester explosion triggered safe-haven flows into JPY with USD/JPY briefly falling below 111.00, while GBP/JPY was the notable underperformer as GBP/USD retreated below 1.3000. Elsewhere, commodity linked currencies extended on gains against the greenback following the recent upside across the metals complex.

COMMODITIES

WTI crude futures traded range-bound with prices below the USD 51/bbl level, on a mild pull-back following the recent upside amid OPEC and non-OPEC output deal extension talks. Elsewhere, gold (+0.2%) prices were mildly higher due to a weaker USD and safe-haven flows in the wake of the Manchester Arena explosion, whilst copper prices failed to maintain traction as risk sentiment in the region turned cautious.

Saudi Energy Minister Al-Falih said he does not expect any objection within OPEC to extend the deal for 9-months and that the deal will be similar to previous one but with minor changes. Al-Falih added that the Iraqi PM gave the Iraq oil minister permission for an extension of the deal for 9 months. (Newswires)

Russian Energy Minister Novak stated that the baseline scenario for extension of oil output cut agreement is 9 months, while the Oman oil minister also commented that the country supports a 9-month extension of OPEC cuts deal. (Newswires)

US

Treasuries traded in a very narrow range amid a lack of tier-1 data releases or pertinent comments from Fed officials, as voting member Harker reiterated his view that the Fed should conduct 2 further rate hikes and begin to normalise the balance sheet by year end. The 10-year T-note settled down 1+ ticks at 126.04+.

Fed's Brainard (voter, dove) stated that labor market strength has outstripped what most researchers see as steady and added that they have observed a bit of stalling out on core inflation. (Newswires)

Fed's Kaplan (voter, soft-hawk) repeated that 3 hikes in 2017 is appropriate and that a reduction of the balance sheet should begin in 2017. (Newswires)

Fed's Evans (voter, soft-dove) says important to keep rates above effective lower bound and that central counterparties must have liquidity to succeed. (Newswires)

US President Trump’s budget proposal is said to seek USD 3.6tln in spending cuts over 10 years and plans to reduce the Strategic Petroleum Reserve by 50% to cut the federal deficit. Furthermore, the budget proposal forecasts 2017 US real GDP growth at 2.3% and 2018 growth at 2.4%. (Newswires)

Former FBI Director James Comey is delaying his appearance before the U.S. House Oversight Committee that had been planned today as he wishes to speak to Special Prosecutor Mueller first. (Newswires)