• Major European indices are largely directionless [Euro Stoxx 50 +0.1%], following on from the cautious trade seen overnight
• EU Council President Tusk announced that a flexible Brexit extension to October 31st has been agreed upon
• On the trade front, China’s Commerce Ministry states that negotiators on both sides have been discussing the remaining issues following the conclusion of talks in the US
• Looking ahead, highlights include US Initial Jobless Claims & PPI, ECB's de Galhua, Fed's Clarida, Bullard, Williams, Kashkari & Bowman, supply from US

ASIA-PAC

Asian equity markets were cautious as the region mulled over the prior day’s central bank activity from both sides of the Atlantic. ASX 200 (-0.4%) and Nikkei 225 (+0.1%) were subdued with Australia dampened by election risk after PM Morrison called for the election to be held on May 18th and with the ruling Coalition facing an uphill battle as it trails the opposition Labor Party by 52%-48% according to the latest polls, while risk appetite in Tokyo was hampered by recent currency flows in which USD/JPY briefly slipped below 111.00. Hang Seng (-0.9%) fell below the psychological 30k level and Shanghai Comp. (-1.6%) underperformed following somewhat inconclusive inflation data from China and as money market rates increased amid continued PBoC inaction. Comments from US Treasury Secretary Mnuchin also failed to inspire even though he noted that talks with China were very productive and that an enforcement mechanism had been agreed, as he also suggested there were still important issues to address. Finally, 10yr JGBs were subdued after a pullback from the 153.00 level and amid lacklustre trade in T-notes, while stronger demand at today’s enhanced liquidity auction for longer-dated bonds (20s, 30s, 40s) also did little to underpin demand for the 10yr.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7088 (Prev. 6.7110)

Chinese CPI (Mar) Y/Y 2.3% vs. Exp. 2.4% (Prev. 1.5%). (Newswires) Chinese PPI (Mar) Y/Y 0.4% vs. Exp. 0.4% (Prev. 0.1%)

US

China's Commerce Ministry states that lead negotiators on both sides have talked on the remaining issues after the conclusion of recent talks in the US, state that both teams will maintain close communication. (Newswires)

US President Trump tweeted that it was too bad the EU is being so tough on the UK and Brexit, while he added that EU is likewise a brutal trading partner with the US which will change and suggested that sometimes in life you have to let people breathe before it comes back to bite you. (Twitter)

UK/EU

EU's Tusk announced that EU27 and UK have agreed to a flexible Brexit extension to October 31st which will give the UK an additional 6 months to find the best solution, while he added the extension is a little short of what he expected but still enough time to find the best solution and for the UK to not waste this time. There were also comments from Dutch PM Rutte that it is unlikely for Brexit to occur before June 30th and that it will be increasingly difficult to grant a further extension after October 31st. Furthermore, the deal will be subject to a review on June 21st to ensure the UK’s behaviour is in-fitting with the terms of the deal after it elects MEPs. (Newswires)

UK PM May said she agreed to an extension to end-October at the latest and that she wants to leave the EU with a deal ASAP. May also noted the UK will not need to participate in EU elections if a deal can be ratified before May 22nd and that she will make a statement to Parliament today. Elsewhere, there were separate reports that UK PM May will seek to stay on as PM if Brexit deal is not passed by end-Jun. (Newswires/Guardian)

Brexiteer Minister says that the UK PM will have one last go at getting her deal through after Easter, otherwise "she goes", as according to Sky's Cohen. (Twitter)

UK Foreign Secretary Hunt said no-one knows if talks with Labour will solve impasse and that no-one in Tories wants to fight EU elections, while he also commented that a customs union will not work for a large economy like the UK. (Newswires) Following this, UK Attorney General Cox states that he will listen to any suggestions made in the talks with Labour; which includes any suggestions regarding a second referendum. (Newswires)

UK RICS Housing Survey Mar -24 vs. Exp. -30.0 (Prev. -28.0, Rev. -27). (Newswires)

EU's Dombrovskis said EU is discussing trade issues with US and is hopeful the sides avoid an escalation of trade tensions, while Dombrovskis also noted they have seen some slowdown in the bloc's economies and that the Italian slowdown is partly due to government decisions. (Newswires)

ECB policymakers are in agreements that the Eurozone economy has held up in line with their March forecasts, despite recent disappointing economic metrics, according to sources. (Newswires)

ECB Survey of Professional Forecasters (SPF)

CPI - 2019: 1.4% (Prev. 1.5%); 2020:1.5 % (Prev. 1.6%); 2021: 1.6% (Prev. 1.7%)

GDP – 2019: 1.2% (Prev. 1.5%); 2020: 1.4% (Prev. 1.5%); 2021: 1.4% (Prev. 1.4%)

German CPI Final YY* Mar 1.3% vs. Exp. 1.3% (Prev. 1.3%)

- German CPI Final MM* Mar 0.4% vs. Exp. 0.4% (Prev. 0.4%)

- French CPI (EU Norm) Final MM Mar 0.9% vs. Exp. 0.9% (Prev. 0.9%)

- French CPI (EU Norm) Final YY Mar 1.3% vs. Exp. 1.3% (Prev. 1.3%)

Swedish CPIF YY Mar 1.8% vs. Exp. 1.8% (Prev. 1.9%)

GEOPOLITICS

North Korea Leader Kim said the country needs to deliver a serious blow to those imposing sanctions, while there were also reports that Kim may conduct talks with Russian President Putin in Russia soon. (Yonhap/Asahi)

6.1 magnitude earthquake strikes east of Honshu in Japan. (Newswires)

EQUITIES

European equities trade with no firm direction [Eurostoxx 50 +0.1%] following on from a cautious Asia-Pac trade in the aftermath of the prior day’s central bank activity. France’s CAC 40 (+0.6%) is the marked outperformer as the index is bolstered by Sodexo (+5.0%) and LVMH (+4.6%) amid optimistic earnings. Sector-wise, consumer discretionary names lead the gains as the upbeat numbers from LVMH lifted fellow luxury names in sympathy with Swatch (+3.0%), Richemont (+1.7%), Kering (+1.8%) and EssilorLuxoticca (+2.0%) all benefiting from the tailwind. Meanwhile, utilities lag after reports that Ofgem are introducing new tougher entry tests from June 2019 for suppliers entering the market.In terms of individual movers, Prysmian (-8.6%) rests at the foot of the Stoxx 600 after the Co. said it could see a potential impact of EUR 60-80mln from issues regarding Western Link high voltage cable and damage claims. In terms of bank commentary, analysts at Citi now forecast 2% gains in global equities over the rest of the year, adding that their bear market checklist suggests buying into the next dip. However, Citi notes that the main risk to their forecast remains a full-blown global recession.

FX

CAD/AUD/NZD - Fall-out from the latest Fed minutes, which were less dovish than some anticipated, has been more pronounced across the commodity bloc where the high beta currencies are particularly sensitive/prone to swings in risk sentiment and underlying prices. The Loonie has lost most ground vs its US counterpart within a 1.3313-57 range as crude prices retreat from fresh 2019 peaks, closely followed by the Aussie and then the Kiwi that have both topped out after extending gains overnight and are retesting support/bids around 0.7150 and 0.6750 respectively.

JPY/GBP - Also losing out to a broadly firmer Usd post-FOMC minutes, as the DXY nudges back up towards the 97.000 axis, with Usd/Jpy also bouncing off the 200 DMA (110.90) and a little beyond the top end of hefty option expiries (1.7 bn) straddling the 111.00 level from 110.85 to 111.05 that could yet keep the topside in check ahead of 111.20. Meanwhile, Cable remains top heavy around or just above 1.3100 where short term chart resistance resides, and Eur/Gbp is still supported circa 0.8600 even though the EU has afforded Britain a longer A 50 extension and thereby prevented a Friday or May 22nd no deal Brexit. Note also, 1.4 bn expiries between 0.8600-10 may underpin the cross over the NY cut.

CHF/EUR - The Franc and single currency are holding up relatively well against the recovering Greenback, with Usd/Chf slipping back from multi-week highs towards parity and Eur/Usd reversing all and a bit more of its post-dovish ECB declines to revisit technical resistance protecting 1.1300.

SEK/NOK - The Swedish Krona has picked up the inflation baton from its Scandi peer in wake of Swedish CPI metrics that saw headline y/y rate and core m/m rates eclipse consensus. Eur/Sek slipped below 10.4200 in response, but has rebounded since, while Eur/Nok is also consolidating off Wednesday’s post-Norwegian inflation lows around 9.5800.

EM - The Lira’s woes simply go on, and regardless of Turkish data that should be supportive, such as narrower current account and trade deficits or a rise in weekly reserves. Instead domestic and geopolitical angst continues to trouble Try investors and the reaction to yesterday’s economic plan remains underwhelming. Hence, Usd/Try remains near the upper end of a 5.7300-6770 range.

FIXED INCOME

Bunds have pared losses from a slightly deeper 165.65 Eurex intraday base alongside an even firmer rebound in Eurozone peripheral paper after multi-tranche Italian and Spanish auctions. However, Gilts are still closer to their Liffe lows that extended to 127.98 (-32 ticks) in wake of the 6 month Brextension and ahead of an official statement from UK PM May later, while US Treasuries are essentially flat amidst relatively tight overnight session parameters post-Fed minutes and pre-data including initial claims and PPI, plus the last leg of this week’s supply (Usd16 bn long bonds).

COMMODITIES

The oil complex remains lacklustre with upside in WTI (-0.7%) and Brent (-0.8%)futures capped by the wider-than-forecast builds in crude inventories this week. The IEA Oil Market Report provided little impetus for the benchmarks, despite leaving global oil demand growth estimates unchanged whilst its OPEC and EIA counterparts downgraded the measure.  However, the IEA and OPEC reports were relatively in-fitting in regard to OPEC output declining by over 500K BPD to just over 30mln BPD and both reports also highlighted that the slump in Venezuelan production led to the decline in global output. Elsewhere, gold (-0.3%) remains just above the USD 1300/oz level after giving up breaching its 50 DMA to the downside (1307) as the Greenback recoups some of the pre-FOMC losses. It’s also worth keeping in mind that South African production of the yellow metal declined 20.6% Y/Y in February (Prev. -22.5% Y/Y). Finally, copper (-0.5%) remains lacklustre amidst the overall risk tone around the market and as Chinese CPI provided little in the way of inspiration for the red metal.

IEA Monthly Oil Report: global demand growth estimates for 2018 and 2019 are again unchanged at 1.3 mln BPD and 1.4 mln BPD, respectively. (Newswires)

- Demand in China, India and the US is estimated to have grown by 1 mb/d in Jan-Feb 2019

- Global oil supply dropped 340k BPD in March, as OPEC+ cuts deepened and Venezuelan output fell sharply

- OPEC crude oil production tumbled 550k BPD in March, to 30.1 mln BPD, on further cuts from Saudi Arabia and steep losses in Venezuela. Saudi output dropped to its lowest in over two years, boosting compliance with supply cuts to 153%

IEA leaving their global demand growth estimates unchanged for 2018 & 2019 unchanged is in contrast to both the EIA and OPEC cutting their demand forecasts for 2019 by 50k BPD to 1.4mln BPD and to 1.21mln BPD vs. Prev. 1.24mln BPD respectively.

Libya National Oil Company said its Nageco unit was bombed outside of Tripoli. (Newswires)

Libya's GNA conducts airstrikes on LNA targets in Tarhuna and Khamies. (Newswires)

Iraq is working to hike production at its Baji refinery to 140K BPD (currently 45K BPD), according to an oil ministry official. (Newswires)