• APAC stocks were mostly higher but with gains capped following disappointing Chinese Caixin Services PMI.
• European equity futures indicate a slightly lower open with Euro Stoxx 50 future down 0.1% after the cash market finished flat on Monday.
• DXY failed to hold above the 100 mark, EUR/USD sits on a 1.13 handle, USD/JPY was unable to maintain its footing above 144.
• Crude futures have clawed back nearly all the losses seen in reaction to the weekend's OPEC+ output hike.
• Looking ahead, highlights include EZ PMI (Final), US International Trade, Canadian Exports/Imports, NZ HLFS Unemployment Rate, EIA STEO, BoE's Breeden, Supply from Germany & US.
• Earnings from AMD, Supermicro, Rivian, Tempus AI, Celsius, Datadog, Constellation Energy, Fresenius Medical Care, Zalando, Continental, UniCredit, Intesa Sanpaolo & Ferrari.

US TRADE

EQUITIES

• US stocks finished lower in which the S&P 500 and DJIA snapped a 9-day win streak to end the session in the red with early headwinds after US President Trump announced tariffs on the non-US film industry which hit names like NFLX, DIS, and AMZN. However, stocks gradually rebounded in the wake of the ISM Services PMI report which beat all analysts' expectations on the headline and it was also clarified that no final decision has been made on tariffs on foreign movies with Trump to meet with executives in the industry to discuss it.
• SPX -0.63% at 5,651, NDX -0.67% at 19,968, DJI -0.24% at 41,219, RUT -0.82% at 2,004.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said he will announce pharmaceutical tariffs over the next two weeks, while he signed an order to reduce regulatory barriers to domestic pharmaceutical manufacturing and will have an announcement next week related to the cost of medicines.
• US President Trump said he will meet with some film industry officials and wants to make sure the industry is happy with the tariff idea, while he stated that China wants to make a deal "very badly" and he bets that Canadian PM Carney wants to make a deal during his visit on Tuesday.
• US Commerce Secretary Lutnick said the first trade deal has got to be with a top 10 economy, while he commented the USMCA pact is okay for now and responded it is really complex when asked if a deal with Canada is possible, according to a Fox Business interview.
• US Agricultural Secretary Rollins is to visit Japan, India and Vietnam and will discuss tariffs during Asia tour.

NOTABLE HEADLINES

• US House Speaker Johnson said House Republicans remained on pace to pass the Trump agenda by Memorial Day or shortly thereafter and stated the Trump agenda is not facing a setback in the US House.
• US Defense Secretary Hegseth ordered a reduction in 4-star positions in the military, according to a US official.

APAC TRADE

EQUITIES

• APAC stocks were mostly higher as Chinese participants returned from the Labor Day holiday but with the gains capped following disappointing Chinese Caixin Services PMI data and as markets in Japan and South Korea remained closed.
• ASX 200 traded little changed as strength in the commodity-related sectors were predominantly offset by underperformance in financials and defensives, while the larger-than-expected contraction in building approvals clouded over risk appetite.
• Hang Seng and Shanghai Comp gained on return from the extended weekend and took their opportunity to react to the recent China tariff rhetoric from US President Trump who said that he is willing to lower tariffs on China at some point, while the miss on Caixin Services PMI data did little to derail the positive sentiment in China.
• US equity futures (ES -0.2%, NQ -0.4%) mildly retreated after yesterday's choppy performance in which Wall St snapped a 9-day win streak.
• European equity futures indicate a slightly lower open with Euro Stoxx 50 future down 0.1% after the cash market finished flat on Monday.

FX

• DXY initially strengthened and briefly returned to above the 100.00 level in a continuation of yesterday's rebound which was facilitated by the better-than-expected ISM Services data. Nonetheless, the early upward momentum in the dollar during Asia-Pac trade petered out shortly after amid light fresh catalysts heading into the FOMC on Wednesday and despite further intervention by the HKMA to weaken the HKD against the greenback after it touched the strong end of the trading range.
• EUR/USD price action is choppy in which the single currency traded both sides of the 1.1300 level as a counterparty to the recent dollar swings, while there were comments from ECB's Stournaras who said he does not see inflation if the EU tariff reaction is selective and that it seems the ECB will continue with rate cuts.
• GBP/USD was contained near the 1.3300 level after Monday's bank holiday closure for the world's largest FX trading hub and with participants awaiting a widely expected BoE rate cut later in the week.
• USD/JPY traded indecisively and failed to sustain a brief return to the 144.00 level with recent price action largely driven by the dollar amid the continued absence of Japanese participants
• Antipodeans lacked direction and were largely unfazed by disappointing Australian and Chinese data releases.
• PBoC set USD/CNY mid-point at 7.2008 vs exp. 7.2518 (Prev. 7.2014).

FIXED INCOME

• 10yr UST futures lacked demand after retreating yesterday on the firmer-than-expected ISM Services data in the US, while prices were also not helped by recent and upcoming supply, as well as the continued absence of overnight cash treasuries trade due to the long weekend in Japan.
• Bund futures remained subdued after the prior day's whipsawing and with little fresh catalysts heading into a EUR 4.5bln Bobl issuance.

COMMODITIES

• Crude futures have clawed back nearly all of the losses seen in reaction to the weekend's OPEC+ output hike with the rebound facilitated as Chinese participants returned to the market, while domestic trips made during the Labor Day holidays in China rose by 6.4% Y/Y to 314mln.
• Spot gold rallied alongside silver prices with the upside momentum spurred as Shanghai commodities trade got underway.
• Copper futures edged higher as its largest buyer returned from a five-day weekend but with gains capped by the somewhat lacklustre mood for the rest of the region.
• Peru's President said mining activity is to be suspended for 30 days in an area affected by violence and announced a curfew in the Pataz district, where miners were kidnapped and killed.

CRYPTO

• Bitcoin marginally declined after stalling in an early approach towards the USD 95,000 level.

NOTABLE ASIA-PAC HEADLINES

• China said 314mln domestic trips were made during the May holiday which was up 6.4% Y/Y and travel expenditure of domestic tourists rose 8% Y/Y to 180.3bln, according to CCTV.
• US House intensified its legislative push against Beijing on Monday in which it advanced a slate of China-related bills targeting industrial espionage, export controls, national security threats and alleged human rights abuses.
• Fast fashion platforms Shein and Temu boosted digital advertising in Europe with the most growth seen in France and the UK, while they see increased app downloads in France and the UK as US tariffs hit and Shein also boosted advertising in Brazil where it manufactures goods for Latin America.
• HKMA intervened in which it bought USD 7.8bln against the HKD at 7.7500 after the HKD hit the strong end of the trading range.

DATA RECAP

• Chinese Caixin Services PMI (Apr) 50.7 vs. Exp. 51.7 (Prev. 51.9)
• Chinese Caixin Composite PMI (Apr) 51.1 (Prev. 51.8)
• Australian Building Approvals (Mar) -8.8% vs. Exp. -0.6% (Prev. -0.3%, Rev. -0.2%)

GEOPOLITICS

MIDDLE EAST

• Israeli air force conducted strikes on Yemen in retaliation for the Houthi ballistic missile attack on Ben Gurion airport.
• Palestinian media reported that the Israeli army blew up residential buildings east of Gaza City.

RUSSIA-UKRAINE

• Ukraine attack damaged a power substation in Russia's Kursk region, according to the regional governor.
• Russian defence units destroyed five Ukrainian drones flying towards Moscow and Russia's aviation watchdog announced flights were halted at Moscow's major airports following reports of drones, but later announced that airports reopened.
• UK PM Starmer spoke to French President Macron on Monday evening and discussed the need for Russia to commit to a 30-day ceasefire to ensure meaningful peace talks, while the leaders looked ahead to the UK-France summit taking place later this year.

EU/UK

NOTABLE HEADLINES

• EU is set to make it easier for UK professionals to work in the bloc, according to FT.
• ECB's Stournaras said he does not see inflation if the EU tariff reaction is selective and it seems the ECB will continue with rate cuts.