• European indices are mixed [Euro Stoxx 50 -0.1%] in-spite of strong earnings from heavy weight names such as SAP, Credit Suisse and Novartis
• UK PM May is preparing to challenge the opposition Labour Party to support the Brexit bill before European Parliamentary elections if cross-party discussions fail
• In FX, AUD underperforms as the weaker than expected inflation data raises the likelihood of a RBA rate cut
• Looking ahead, highlights include BoC Rate Decision & Press Conference, Supply from the US
• Earnings: Boeing, Caterpillar, Microsoft, Facebook, Tesla, AT&T

ASIA-PAC

Asian equity markets traded mixed after the region failed to sustain the tailwinds from Wall St where strong blue-chip earnings propelled the S&P 500 and Nasdaq to fresh record closes. ASX 200 (+0.9%) resumed this week’s outperformance as soft CPI data brought forward various expectations for a rate cut to as early as next month, while gains in the Nikkei 225 (-0.3%) were later pared on detrimental currency moves. Elsewhere, Hang Seng (-0.5%) and Shanghai Comp. (U/C) also failed to sustain opening gains as White House confirmation that US-China trade talks will resume next week and the PBoC announcement of CNY 267bln in targeted MLF, was overshadowed after the PBoC dismissed rumours related to a potential targeted RRR cut for rural banks and refrained from Reverse Repo operations. Finally, 10yr JGBs saw mild gains as sentiment in the region soured and after similar upside in T-notes amid bull-steepening in the US, while the BoJ were also active in the market today for a respectable JPY 950bln of JGBs and focus now shifts towards the conclusion of the central bank’s 2-day policy meeting tomorrow.

PBoC skipped open market operations but announced CNY 267.4bln 1yr targeted MLF at 3.15% (Prev. 3.15%). (Newswires)

PBoC set CNY mid-point at 6.7205 (Prev. 6.7082)

White House said US Treasury Secretary Mnuchin and Trade representative Lighthizer will travel to Beijing for trade discussions beginning on April 30th, while China's Vice Premier will lead a delegation to Washington for talks on beginning May 8th. Furthermore, the White House noted that next week's discussions will cover issues such as IP, forced tech transfers, non-tariff barriers, agriculture, services, purchases and enforcement. (Newswires)

Australian CPI (Q1) Q/Q 0.0% vs. Exp. 0.2% (Prev. 0.5%). (Newswires)

Australian CPI (Q1) Y/Y 1.3% vs. Exp. 1.5% (Prev. 1.8%)

Australian RBA Trimmed Mean CPI (Q1) Q/Q 0.3% vs. Exp. 0.4% (Prev. 0.4%)

Australian RBA Trimmed Mean CPI (Q1) Y/Y 1.6% vs. Exp. 1.7% (Prev. 1.8%) 

US

US Treasury Secretary Mnuchin sent a letter to House Way and Means chair Neal which stated the Treasury Department will decide by May 6th whether to release Trump's tax returns which effectively ignored yesterday's deadline. (Newswires)

US Security Official says they will not have Huawei in their most sensitive networks. (Newswires) 

UK/EU

UK PM May is preparing to challenge the opposition Labour Party to support the Brexit bill before European Parliament elections if cross-party discussions fail, while she is considering introducing the bill that would make the withdrawal agreement effective within weeks and could decouple the withdrawal agreement from the plan regarding the future relationship as well as bypass the meaningful vote. (The Times) This comes in the context of reports suggesting that Labour has accused PM May of failing to offer any substantive changes to her Brexit deal in cross-party talks. (Guardian)

UK cabinet ministers are reportedly urging PM May to end cross-party talks with Labour and force a 4th Commons showdown on the Brexit deal next week. (The Sun)

1922 committee meeting of backbench MPs ended yesterday with no conclusion sought and was said to be a preliminary discussion, according to Sky News's Beth Rigby. (Twitter)

UK PM May gave Huawei the greenlight to help build Britain's new 5G network. UK are reportedly to block Huawei from all core sections of the 5G network, however, and any access to sections of it will be restricted, according to a UK Security Souce (Newswires)

Italy's coalition government has found a compromise related to the Rome-debt relief, according to sources. (Newswires)

German Ifo Business Climate New (Apr) 99.2 vs. Exp. 99.9 (Prev. 99.6. Rev. 99.7)

- German Ifo Current Conditions New (Apr) 103.3 vs. Exp. 103.6 (Prev. 103.8 Revised 103.9)

- German Ifo Expectations New (Apr) 95.2 vs. Exp. 96.1 (Prev. 95.6)

EQUITIES

Major European indices are mixed [Euro Stoxx 50 -0.1%] as sentiment continues to deteriorate from the Asia session which failed to sustain the momentum in US equities where the S&P and Nasdaq reached record closes. Sectors are similarly mixed, with Energy names underperforming in line with the oil complex’s positive momentum dissipating after the larger than expected API build. Also performing poorly is the auto sector, following Nissan cutting their FY guidance; which has weighed particularly heavily on Renault (-3.8%), with other auto names such as BMW (-0.8%) and Volkswagen (-1.0%) down in sympathy. Conversely, the Technology sector is significantly outperforming its peers led by the strong performance in sector heavyweight SAP (+6.8%) who represents 26% of the sector after the Co. reported strong earnings and raised 2019 operating profit guidance; subsequently, Co. shares have this morning printed a record high of EUR 109.3. Other notable movers this morning include Credit Suisse (+3.0%) and Novartis (+2.7%) following earnings with the SMI (+0.4%) outperforming on the back of this. In addition, Novartis strong performance, following the Co. raising guidance in-spite of the Q1 sales miss, has caused the Healthcare sector to perform strongly. Finally, in a turnaround from recent performance Wirecard (+7.1%) are the outperforming DAX constituent (+0.1%), after reports that the Co. and Softbank have signed an agreement for Softbank to purchase a 5.6% stake in the Co. for around USD 1bln.

Nissan (7201 JP) cuts FY 2018/19 net to JPY 319bln vs. Prev. JPY 410bln, revenue JPY 11.57trl vs. Prev. JPY 11.6trl and operating profit JPY 318bln vs. Prev. JPY 450bln; cites Q4 adverse operating environment

Thermo Fisher Scientific Inc (TMO) Q1 EPS USD 2.81 vs. exp. USD 2.73, revenue USD 6.12bln vs. exp. USD 6.02bln; raise FY revenue and earnings guidance

GEOPOLITICS

US launched air strikes targeting 32 oil tankers attempting to enter government-held territory in Syria, according to reports citing Syrian military. (Al Arabiya)

North Korea leader Kim is visiting Russia today to meet with Russian President Putin, while a Russian government official said President Putin will suggest restarting six-party talks to North Korea leader Kim. (Newswires)

FX

AUD/NZD - The Aussie has sharply extended losses in wake of weaker than expected Q1 CPI metrics overnight that have raised RBA rate cut expectations for the next policy meeting in May to circa 60% and heightened the probability of another 25 bp ease before year end. Aud/Usd collapsed from around 0.7102 to 0.7028 in response before finding some underlying bids ahead of big barriers at the psychological 0.7000 level and a couple of downside chart supports in very close proximity, like 0.7005 (50% Fib) and 0.7003 (March 7 low). Note also, more exporter bids are anticipated around the next big figure following similar interest at 0.7050 that were filled on the way down amidst all round selling from high frequency and leverage accounts along with macro funds when 0.7070 gave way. Similarly, Aud/Nzd saw leverage and momentum longs bail on a break through 1.0650 as the cross hit a low of 1.0618 from 1.0671 at one stage, while the Kiwi also fell in sympathy vs its US counterpart to 0.6614 from 0.6657 and Nzd/Usd is now hovering near 0.6625 ahead of NZ trade data on Thursday.

CAD - The other non-US Dollar is also languishing and retreating further from recent highs as a downturn in crude prices adds to defensive positioning in the lead up to today’s BoC meeting and MPR that is expected to be cautious if not dovish, with downgrades to Canadian growth and inflation projections. The Loonie is currently near the bottom of 1.3461-18 parameters and not far from last month’s low of 1.3468, as Usd/Cad options predict a 67 pip break-event for the BoC.

EUR - The single currency is holding rather precariously on to the 1.1200 handle after another dip below stopped just short of Wednesday’s 1.1192 base, with the latest German Ifo survey missing on all counts and softer than the previous month. Moreover, the institute noted that the April readings point to more slowing in the economy and industrial sector underperformance, chiming with underwhelming preliminary PMIs, and could translate to lower 2019 GDP growth overall compared to the 0.8% forecast that has only recently been revised down. However, Eur/Usd has recovered to retest a key Fib at 1.1216 within a 1.1195-1.1231 range.

CHF/SEK - Relative G10 outperformers as the Franc rebounds through 1.0200 vs the Greenback and from 1.1450+ against the Euro, while the Swedish Krona is back above 10.5000 vs the single currency and braced for the Riksbank to reaffirm tightening guidance for H2 this year tomorrow. Conversely, Eur/Nok remains elevated over 9.6000 on the aforementioned retreat in oil.

DXY - The Usd continues to proffer at the expense of others, in part if not the most part, but the index has not managed to build on Tuesday’s new 97.783 ytd peak as the JPY and GBP also display a degree of resilience and contain downside forays ahead of 112.00 and 1.2900 respectively. Cable has bounced off Fib support at 1.2911, albeit mildly amidst ongoing Brexit uncertainty, while Usd/Jpy is still encountering supply and the Yen retains underlying safe-haven support in the run up to the BoJ and US GDP data the day after. Note, detailed previews of all this week’s Central Bank policy convenes are available via the Research Suite and/or in the form of primers on the headline feed into each meeting.

EM - Although the Buck has stopped climbing or at least paused for breath, Lira depreciation continues towards 5.8800 amidst persistent domestic and international issues blighting the Try. Indeed, even an improvement in Turkish manufacturing sentiment has failed to offer any real respite as the CBRT policy meeting looms and the Bank looks relatively incapable of resolving the prescient problems beyond hiking rates are turning extremely hawkish.

FIXED INCOME

Bunds have shrugged off a rather sluggish 10 year German tap to register fresh Eurex intraday highs at 165.36 after breaching chart resistance around 165.27 more convincingly vs the knee-jerk rise to 165.29 post-Ifo, and Gilts have followed suit, to 127.20 even though UK data revealed much worse than expected Government finances and the DMO upped its issuance remit accordingly. Instead, core debt remains relatively firmly in bear-steepening reversal or unwinding mode, and tracking the recovery and realignment across the UST curve following Tuesday’s corrective post-Easter trade. The turnaround has also been facilitated by a downturn in oil prices, but official EIA stocks may change the narrative if not as high as API and 5 year supply could also impact sentiment in bonds.

COMMODITIES

Brent (-0.2%) and WTI (-0.4%) prices have broken the Iran waiver induced positivity following last nights API’s, where crude stocks printed a significantly larger build than was expected; 6.9mln vs. Exp. 1.3mln; ahead of today’s EIA release which may result in some additional downward pressure on oil prices if a similar figure is reported. Newsflow for the complex has been relatively light, although Saudi Energy Minister Al Falih has reiterated that they remain focused on balancing the global oil market and global inventories will guide their actions. Adds that there will be little variance in May production levels from the previous months, as they will not pre-emptively increase production even though they expect increased demand following the conclusion of Iranian oil waivers.

Gold (+0.1%) is little changed as the dollar remains firm with yellow metal remaining above the USD 1270/oz level and towards the top of the day’s relatively narrow range. Elsewhere, Copper has traded lacklustre in line with the general market sentiment and due to the underperformance seen in China for much of the overnight session; with China the largest buyer of the red metal.

Saudi Energy Minister says they don't react to prices in the short term, and remain focused on balancing global oil markets, doesn't see a need to do anything immediately. Won't get surprised like they did in Q4 last year. Global inventories guide his actions. There will be little variance in May production vs. the prior months; expect an uptick in demand but won't increase production pre-emptively. (Newswires)

US API weekly crude stocks (15 Apr) 6.9M vs. Exp. 1.3M (Prev. -3.1M). (Newswires)

US President Trump is said to consider waiving US ship mandate related to transportation of natural gas. (Newswires)