• China's Ministry of Commerce confirmed US-China trade talks with Vice Premier He Lifeng to visit Switzerland from May 9th-12th and will visit France from May 12th-16th for economic and financial dialogue.
• PBoC Governor Pan announced to cut RRR by 50bps effective May 15th and to cut the policy interest rate by 10bps effective on May 8th with the 7-day reverse repo rate lowered to 1.40% and interest rates on Standing Lending Facility across all tenors lowered by 10bps. Pan stated that the policy rate cut will lead to a Loan Prime Rate cut of 10bps and the RRR cut will release about CNY 1tln in liquidity.
• An Indian missile attack on Pakistan-controlled territory has killed at least 26 civilians and left 46 injured; a Pakistan military spokesman noted there were exchanges of fire with Indian troops at multiple places along the ceasefire line in Kashmir and announced that five Indian aircraft were shot down.
• US President Trump said they will have a very big announcement before the Middle East trip which will be a really positive announcement on Thursday, Friday or Monday before they leave.
• APAC stocks traded mostly higher as participants digested the PBoC's announcement to loosen monetary policy and reports of upcoming US-China talks this week but with the gains capped amid geopolitical escalation between India and Pakistan.
• European equity futures indicate a slightly positive cash market open with Euro Stoxx 50 futures up 0.1% after the cash market finished with losses of 0.4% on Tuesday.
• Looking ahead, highlights include German Industrial Orders, French Trade Balance, EZ Retail Sales, Fed, NBP, CNB & BCB Policy Announcements, Fed Chair Powell's Presser, Supply from France, UK & US, Earnings from AppLovin, Carvana, Arm, DoorDash, AMC, Uber, Disney, Barrick Gold, Bunge, BMW, Fresenius, Siemens Healthineers, Novo Nordisk, Pandora & Nexi.
• Click for the Newsquawk Week Ahead.

US TRADE

EQUITIES

• US stocks declined amid cautiousness related to the ongoing trade uncertainty and heading into the FOMC on Wednesday with most sectors pressured aside from Utilities and Energy which were the only ones in the green as the former was buoyed by Constellation Energy (CEG) earnings and the latter by firmer oil prices. Furthermore, the upside in the energy complex was partially aided by the geopolitical developments amid Israel expanding its operations in Gaza and conflicting reports regarding the Houthis as a spokesman for the group denied that it will stop attacking Red Sea ships and stated that President Trump's statement that Houthis don't want to fight and the US will stop bombing is false, while it was also later reported that India fired missiles targeting terrorist infrastructure in Pakistan and that Pakistan was responding to India's attacks.
• SPX -0.77% at 5,607, NDX -0.88% at 19,791, DJI -0.95% at 40,829, RUT -1.05% at 1,983.
• Click here for a detailed summary.

TARIFFS/TRADE

• China's Ministry of Commerce confirmed US-China trade talks with Vice Premier He Lifeng to visit Switzerland from May 9th-12th and will visit France from May 12th-16th for economic and financial dialogue.
• US President Trump said China wants to negotiate and will meet at the right time, while he added they're losing nothing by not trading with China. Furthermore, he said China's doing no business right now and its economy is suffering from a lack of US trade.
• US President Trump said they will possibly start to renegotiate the USMCA and will be friends with Canada, as well as commenting that the US-Canada border is an artificial line. Furthermore, Trump said the US won't do much business with Canada and responded "No, it is what it is" when asked if Canadian PM Carney could say anything to get the removal of tariffs. Trump later commented that Canada and Mexico just need to pay a little more money and noted that they are looking at a lot of countries for trade deals.
• Canadian PM Carney said discussions with US President Trump were very constructive and they agreed to have discussions in the coming weeks and a meeting at the G7, while Carney said they had a wide-ranging discussion and it was clear with Trump that Canada will never be for sale. Carney thinks they established a good basis and they discussed all major issues including autos but there were no decisions on tariffs. Furthermore, Carney stated they made progress and had very comprehensive, tangible exchanges but commented that progress would not necessarily be evident during negotiations although he feels better about relations in many respects.
• Senior Canadian government official said Canadian PM Carney's lunch with US President Trump was constructive and that Trump can't have a Canada deal without tariffs being lifted, while the official stated they discussed the border and fentanyl. Furthermore, the official said Carney told Trump why none of the tariffs made sense but did not make the point in a confrontational way.
• US Treasury Secretary Bessent and Trade Representative Greer are to meet with China's lead representatives on economic matters later this week in Switzerland, while Bessent confirmed he is meeting the Chinese team on Saturday in Switzerland and said they agreed to talk on Saturday and will agree on Sunday what they are going to talk about. Bessent said his sense is this will be about de-escalation and said they have got to de-escalate before they can move forward, as well as noted that the US doesn’t want to decouple from China over textiles and similar goods but does want to decouple over strategic industries. Furthermore, he said trade frictions can go down, Americans can get fairer deals, and everything is on the table.
• UK is reportedly closing in on a US trade pact with lower tariff quotas for cars and steel, according to FT citing officials in London and Washington. The deal, which is set to be signed this week, is due to include quotas that spare some UK exports from the full brunt of the additional 25% tariffs that Trump levied on steel and car imports in February and March. Furthermore, it was noted that UK trade negotiators returned to Washington this week for the final stages of negotiations, which one senior UK official said were continuing “at speed” but cautioned that disagreements remained over pharmaceuticals.
• Mexico's agricultural minister said he met with US counterpart Rollins and reached agreements that will be beneficial to both countries.

NOTABLE HEADLINES

• US President Trump said they will have a very big announcement before the Middle East trip which will be a really positive announcement on Thursday, Friday or Monday before they leave. Furthermore, Trump said the announcement will be 'as big as it gets' but later stated the announcement over the next few days is not necessarily on trade.

APAC TRADE

EQUITIES

• APAC stocks traded mostly higher as participants digested the PBoC's announcement to loosen monetary policy and reports of upcoming US-China talks this week but with the gains capped amid geopolitical escalation between India and Pakistan.
• ASX 200 eked mild gains as outperformance in the commodity-related sectors was partially offset by losses in healthcare and tech, while the top-weighted financials industry was kept afloat post-NAB earnings.
• Nikkei 225 was underpinned at the open as Japanese markets reopened from the four-day weekend although momentum waned shortly after in the absence of any major pertinent catalysts for Japan.
• Hang Seng and Shanghai Comp were underpinned following reports that the US and China will meet for talks on Saturday involving US Treasury Secretary Bessent, USTR Greer and Chinese Vice Premier He Lifeng, while there was also encouragement from the briefing by Chinese officials where PBoC Governor Pan announced to cut RRR by 50bps and the policy interest rate by 10bps.
• US equity futures gained amid hopes for a de-escalation of US-China trade frictions although further upside was limited with the FOMC on the horizon.
• European equity futures indicate a slightly positive cash market open with Euro Stoxx 50 futures up 0.1% after the cash market finished with losses of 0.4% on Tuesday.

FX

• DXY was rangebound heading into today's FOMC but got some slight reprieve from the recent selling pressure, while the greenback only marginally benefitted from reports that the US and China are to launch trade talks later this week.
• EUR/USD slightly pulled back amid optimism related to US-China trade talks although the single currency retained a comfortable footing at the 1.1300 handle with Germany a key focus after CDU Leader Merz was elected Chancellor in the second-round parliamentary vote.
• GBP/USD trickled further beneath resistance at the 1.3400 level but held on to most of the prior day's gains amid reports that the UK is closing in on US trade pact with lower tariff quotas for cars and steel, while the UK reached a free trade agreement with India and agreed with the EU to hold annual summits.
• USD/JPY reclaimed the 143.00 handle to the upside with the pair boosted as the US and China are set to launch trade talks in Switzerland this weekend.
• Antipodeans were contained following the PBoC's rate cut announcement and with little reaction seen to the somewhat mixed Employment data and softer-than-expected Labour Cost Index from New Zealand.
• PBoC set USD/CNY mid-point at 7.2005 vs exp. 7.2114 (Prev. 7.2008).

FIXED INCOME

• 10yr UST futures lacked direction as the upward momentum from a relatively strong 10yr auction stateside was nullified following news that the US and China are set to begin trade talks in the weekend, while participants now await the looming FOMC announcement.
• Bund futures were rangebound with prices capped by resistance around the 131.00 level following yesterday's choppy performance amid the events in Germany where Merz was confirmed as Chancellor in a second vote after initially failing in the first attempt.
• 10yr JGB futures traded indecisively on return from a four-day weekend and in the absence of any tier-1 data releases from Japan.

COMMODITIES

• Crude futures remained underpinned following recent geopolitical developments including Israel's plans for an expansion of its Gaza offensive and after India conducted a missile strike on 'terrorist infrastructure' in Pakistan, while the latest private sector inventory data showed a larger-than-expected draw in headline crude and gasoline stockpiles.
• US Private inventory data (bbls): Crude -4.5mln (exp. -2.5mln), Distillate +2.2mln (exp. -2.7mln), Gasoline -2.0mln (exp. -1.5mln), Cushing -0.9mln.
• EIA STEO sees world oil demand for 2025 at 103.7mln BPD (prev. 103.6mln BPD in the prior forecast) and for 2026 at 104.6mln BPD (prev. 104.7mln BPD).
• Venezuela restarted a key gasoline production unit at its second-largest refinery after being shut down for a year.
• Kremlin spokesman said Europe is shooting itself in the foot and is acting against its own interests in response to a report that the EU's plans to stop imports of Russia's energy by 2027.
• Spot gold reverted to beneath the USD 3,400/oz level with pressure seen shortly after futures trading resumed as markets were jolted by reports that US and Chinese officials are to conduct talks later this week in Switzerland.
• Copper futures swung between gains and losses and ultimately declined despite the PBoC's RRR and policy rate cut announcements.

CRYPTO

• Bitcoin was ultimately little changed after trading on both sides of the USD 97,000 level.
• US Senate Democrats are unveiling a sweeping new proposal to ban presidents, lawmakers and their families from issuing, endorsing or sponsoring crypto assets, according to Axios.

NOTABLE ASIA-PAC HEADLINES

• PBoC Governor Pan announced to cut RRR by 50bps effective May 15th and to cut the policy interest rate by 10bps effective on May 8th with the 7-day reverse repo rate lowered to 1.40% (from 1.50%) and interest rates on Standing Lending Facility across all tenors lowered by 10bps. Pan stated that the policy rate cut will lead to a Loan Prime Rate cut of 10bps and the RRR cut will release about CNY 1tln in liquidity. Pan also noted that they will cut the personal housing provision fund rate by 25bps and will set up CNY 500bln in re-lending loans for elderly care and service consumption. Furthermore, the total quota of two monetary policy tools to support capital markets will be raised to CNY 800bln and they will lower interest rates on structural policy tools by 25bps with re-lending rates lowered by 25bps effective today, while Pan also stated that China will use multiple policy tools to make dynamic adjustments and will guide commercial banks to lower deposit rates.
• China’s financial regulator said they will expand the pilot scheme to allow insurance companies to invest in stock markets and will take further steps to stabilise the property market, while they will guide financial institutions to maintain steady financing support for the property market, guide banks to provide financing support for foreign trade companies affected by US tariffs and will approve CNY 60bln in long-term insurance funds into the stock market.
• China’s securities regulator said US tariff policy has brought great pressure to China’s capital markets but added that they will consolidate good momentum in capital markets and that China will roll out reform measures for tech boards. Furthermore, they will forcefully promote long-term capital into the stock market and said ample preparations have been made for dealing with external shocks.
• RBNZ Financial Stability Report stated that risks to the financial system have increased over the past six months and while the global economic environment has become more volatile, New Zealand's financial institutions are in a strong position to support the economy. RBNZ also stated that banks have strong capital and liquidity buffers in place to maintain credit flows even if conditions deteriorate further.

DATA RECAP

• New Zealand HLFS Job Growth QQ (Q1) 0.1% vs. Exp. 0.1% (Prev. -0.1%)
• New Zealand HLFS Unemployment Rate (Q1) 5.1% vs. Exp. 5.3% (Prev. 5.1%)
• New Zealand Labour Cost Index QQ (Q1) 0.4% vs. Exp. 0.5% (Prev. 0.6%)
• New Zealand Labour Cost Index YY (Q1) 2.5% vs. Exp. 2.7% (Prev. 2.9%)

GEOPOLITICS

MIDDLE EAST

• US President Trump said Houthis decided that they don't want to do this anymore and that he told the military to stop attacks against Houthis, while he added that he is not planning to stop in Israel during his Middle East trip and they are talking to Israeli PM Netanyahu about a lot of things right now. Trump said it is crunch time for Iran and he hopes Iran does what is right, as well as stated that Iran will not have nuclear weapons.
• A defence official confirmed to CNN that the US military had been instructed to stand down on the strikes against the Houthis, while the apparent ceasefire is the result of talks between the US and the Houthis mediated by Oman that began last week and which was led by Steve Witkoff.
• Houthi spokesman denied the group will stop attacking Red Sea ships and said US President Trump’s statement is false.
• Houthi official said the US's halt of 'aggression' against Yemen will be evaluated first and that US President Trump’s announcement shows the separation of US support to Israel PM Netanyahu's 'failure'. However, it was also reported that a senior Houthi official said they will continue to support Gaza and attacks will continue, while he called on Israelis to 'remain in shelters' because their government will not be able to protect them, according to Al Masirah TV.

RUSSIA-UKRAINE

• Explosions were heard in Kyiv after Ukraine's air force warned of a missile attack, while Ukraine's military reported apartments are on fire after a Russian drone attack.

INDIA-PAKISTAN

• An Indian missile attack on Pakistani-controlled territory has killed at least 26 civilians and left 46 injured, Pakistan officials have said, via Sky News.
• India launched 'Operation Sindoor' in which it hit terrorist infrastructure in Pakistan and Pakistan-occupied Jammu and Kashmir, while the Indian army announced that Pakistan violated the ceasefire agreement again in the Poonch-Rajouri area and it was responding appropriately in a calibrated manner. Furthermore, a Palestinian military spokesman noted there were exchanges of fire with Indian troops at multiple places along the ceasefire line in Kashmir and announced that five Indian aircraft were shot down.
• Pakistan's Army Chief said they will respond to India at the time, place and in a way of Pakistan's choice, via Sky News Arabia.

OTHER

• US ordered its intelligence agencies to step up spying on Greenland, according to WSJ.
• White House seeks to hasten nuclear deployment, according to Axios.