• European indices have continued to drift lower following on from the predominantly downbeat Asian session
• On the data front EZ GDP came in above expectations, with State German CPI’s all increasing vs. their priors ahead of the German prelim figure at 13:00BST
• Looking ahead, highlights include German CPI (Prelim), Canadian GDP, US Chicago PMI & Consumer Confidence, BoC’s Poloz & Wilkins
• Earnings: Apple, Amgen, Arconic, Pfizer, McDonalds

ASIA-PAC

Asian equity markets traded mostly lower following weaker than expected Chinese PMI data and as the region digested a heavy slate of earnings. ASX 200 (-0.5%) was negative in which commodity names led the declines seen across a broad range of sectors due to its high exposure to China and the disappointing factory activity, while KOSPI (-0.6%) suffered amid losses in index heavyweight Samsung Electronics after the Co.’s final Q1 results showed operating profit fell around 60% Y/Y. Elsewhere, Hang Seng (-0.7%) and Shanghai Comp. (+0.5%) diverged with Hong Kong dampened after Chinese Official Manufacturing, Non-Manufacturing and Caixin Manufacturing PMIs all fell short of estimates which overshadowed the earnings releases including the profit growth amongst the Big 4 banks, while the mainland remained afloat on month-end and pre-holiday position squaring as well as the increased hopes for more accommodative policy in the aftermath of the weak Chinese data.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7286 (Prev. 6.7310)

Chinese Manufacturing PMI (Apr) 50.1 vs. Exp. 50.5 (Prev. 50.5). (Newswires) Chinese Non-Manufacturing PMI (Apr) 54.3 vs. Exp. 55.0 (Prev. 54.8) Chinese Composite PMI (Apr) 53.4 (Prev. 54.0) Chinese Caixin Manufacturing PMI (Apr) 50.2 vs. Exp. 51.0 (Prev. 50.8)

US

US Senator Shelby said there are some problems regarding President Trump's Fed nominee Stephen Moore. (Newswires)

GEOPOLITICAL

North Korea's Vice Foreign Minister says that their resolve for denuclearisation is unresolved, adds that denuclearisation will be possible only if the US changes their current calculations. If the US fails to present new positions the US will then see unwanted consequences., KCNA.

UK/EU

UK PM May is said to be facing a grassroots vote demanding her resignation with Conservative party local chairman and activists calling for an extraordinary meeting with PM to demand her resignation. (The Sun) May’s office thereafter downplayed the significance of the meeting, suggesting that it would not be legally-binding and the outcome of the meeting wouldn’t necessarily be passed. Furthermore, there will have to be a 28-day wait until such a meeting is held. (Newswires)

PM May’s official spokesman insisted that she believes it is still possible to avoid holding EU elections on May 23rd, as the Commons is yet to ratify her Brexit deal. Insiders report that Conservative campaign leaders have pencilled in May 7th for the official launch of their European Parliament campaign. (Times)

The tone of Monday's Brexit talks was reportedly better and there are grounds to continue cross-party talks. (Huffington Post) However, UK Foreign Secretary Hunt has stated that cross part talks risk alienating conservative MP’s, resulting in a scenario where you lose more Tories than you gain in Labour MP’s. And that he does not expect cross party talks to lead to a ‘rose garden moment’. (Telegraph)

UK Labour and Tory cross-party talks were positive and productive, according to PM May's de facto Deputy Lidington. (Newswires)

UK GfK Consumer Confidence* (Apr) -13 vs. Exp. -12.0 (Prev. -13.0). (Newswires) UK Lloyds Business Barometer (Apr) 14 (Prev. 10)

EU GDP Flash Prelim YY (Q1) 1.2% vs. Exp. 1.1% (Prev. 1.1%)

- EU GDP Flash Prelim QQ (Q1) 0.4% vs. Exp. 0.3% (Prev. 0.2%)

- EU Unemployment Rate (Mar) 7.7% vs. Exp. 7.8% (Prev. 7.8%)

German Saxony State CPI YY (Apr) 1.9% (Prev. 1.4%)

- German Saxony State CPI MM (Apr) 0.9% (Prev. 0.5%)

- German North Rhine-Westphalia State CPI YY* (Apr) 2.1% (Prev. 1.5%)

- German North Rhine-Westphalia State CPI MM* (Apr) 1% (Prev. 0.4%)

French GDP Preliminary QQ (Q1) 0.3% vs. Exp. 0.3% (Prev. 0.3%)

- French CPI (EU Norm) Prelim YY (Apr) 1.4% vs. Exp. 1.4% (Prev. 1.3%)

Italian CPI (EU Norm) Prelim YY (Apr) 1.2% vs. Exp. 1.2% (Prev. 1.1%)

- Italian CPI (EU Norm) Prelim MM (Apr) 0.6% vs. Exp. 0.8% (Prev. 2.3%)

EQUITIES

Major European bourses have drifted marginally lower since the EU open [Eurostoxx 50 -0.3%], following a mostly downbeat Asia-Pac lead and as the region digested a slew of pre-market earnings.  Sectors are mixed with Telecom names lagging after France’s Orange (-3.5%) missed revenue forecasts and tumbled to the foot of the CAC 40. On the flip side, the energy sector is faring well amidst price action in the oil complex which aided BP (+0.4%), Shell (+0.2%) and Total (+0.1%) climb back into positive territory. Back to earnings, Standard Chartered (+5.7%) extended on opening gains after optimistic earnings coupled with a USD 1.0bln share buyback programme which is expected to reduce its CET1 ratio by around 35bps in Q2. Elsewhere, DSV (+6.8%), Beiersdorf (+2.3%), MTU Aero Engines (+2.2%), and Caixabank (-3.9%) are amongst the movers post-earnings. Finally, Danske Bank (-8.2%) shares fell to the foot of the Stoxx 600 after FT reported that Brussels vows to pursue a probe into the bank’s money laundering scandal.

FX

USD - The Dollar is softer across the board after Monday’s soft PCE inflation data and with rebalancing models for the last trading day of April flagging sells signals to varying degrees. Hence, the DXY has slipped back from 98.000+ levels again, and this time the index is probing somewhat deeper blow chart supports that were tested towards the end of last week, but not breached. If 97.544 (50% Fib) and 97.500 fail to hold, 97.460 is next on the radar before a stronger downside target and low from last week looms at 97.258.

GBP - The Pound is the best G10 performer and biggest beneficiary of month end Greenback weakness with one bank signalling especially strong Cable buying to balance portfolios. Subsequently, the pair has extended recovery gains from the low 1.2900 area to circa 1.2986 and through several DMAs including the 10, 100 and 200 levels (at 1.2940 and 1.2961 coincidentally).

EUR/JPY - Vying for 2nd place in the major ranks and both impacted by data, albeit diversely, as the single currency draws encouragement from firmer than forecast Eurozone GDP and inflation to reclaim the 1.1200 handle. However, the Jpy has now overcome strong resistance at 111.37 to peer above 111.30 in wake of disappointing Chinese PMIs overnight that spurred some risk-aversion and demand for the safe-haven Yen.

NZD/CHF/CAD - The next best G10s or gainers due to the more pronounced Usd downturn, with the Kiwi hovering near the top of a 0.6681-56 range and Franc back over 1.0200 within 1.0199-75 trading parameters, while the Loonie is pivoting 1.3350 ahead of Canadian data in the form of monthly GDP and PPI. Note also, BoC Governor Poloz and Wilkins are slated to speak later, and then NZ Q1 jobs and labour costs for Q1 are on tap before attention turns to Wednesday’s FOMC.

AUD - The Aussie is lagging on the aforementioned PMI misses from China and in particular the official and Caixin manufacturing reads that only just avoided stagnation. Aud/Usd is straddling 0.7050, as the Aud/Nzd cross slips a bit further below recent peaks of 1.0600+ towards 1.0565.

EM - The Try has been volatile again with further weakness vs the Usd in the run up and during the early part of the CBRT’s inflation presentation, but a partial recovery within a 5.9335-9835 band ultimately as Governor Cetinkaya clarified last week’s post-policy meet statement and guidance to maintain that tightening is still an option if upside inflation risks materialise.

FIXED INCOME

It’s been gradual or measured, but Bunds continue to take the lead and trade lower as Eurozone growth and inflation updates top expectations, including Italian GDP that returned from recession in Q1. The 10 year German benchmark has just declined to 164.96 and through a few more technical supports for a 59 tick loss on the day, with Gilts dragged down in sympathy to 127.19 (-48 ticks) and even hitherto resilient/detached US Treasuries unable to fully withstand the increasing bearish pressure and whittling gains to just a couple of ticks at best

COMMODITIES

Energy markets are trending higher, albeit remain relatively choppy in early EU trade following comments from Saudi Energy Minister Al-Falih who (in-fitting with reports) said that the Kingdom is ready to meet shortfalls caused by the expiry of Iranian oil waivers on May 2nd.  However, with the upcoming JMMC meeting on May 19th (ahead of the OPEC+ meeting on June 26th) the Saudi Energy Minister also noted that a majority of the cartel’s oil ministers are tilting towards extending the global output deal. Analysts at BNP highlight that there is a “good chance” that OPEC countries and allies will decide to extent the supply curb deal in June, although some changes may be made to the current deal. The energy minister also noted that the nation’s oil output will be significantly lower than 10mln BPD (last recorded around 9.8mln BPD) until May-end, whilst exports will be below 7mln BPD (currently just under 7mln BPD). Meanwhile, IFX reported that Russia’s April oil output stood at 11.23mln BPD, slightly lower than March’s 11.3mln. This, coupled with a receding Dollar aided WTI and Brent futures to climb comfortably above USD 64.00/bbl and USD 72.50/bbl respectively. Elsewhere, precious metals are also benefitting from the weaker Greenback with spot Gold meandering just below its 100 and 200 DMAs at 1293.11 and 1297.40 respectively. Meanwhile, turning to base metals, downside seen from disappointing China Manufacturing data has been offset by the softer Dollar with copper now closer to intraday highs and just a whisker away from its 50 DMA at 2.9054.

Iran's President states that Iran will continue with oil exports in spite of US pressure. (Newswires)

Saudi Energy Minister Al-Falih says he is ready to meet consumer demand and replace Iranian oil, adding that Saudi will not voluntarily exceed oil production levels set in the global deal, which could be extended until the end of this year; almost every oil minister wants to extend the global oil output deal. (Newswires)

Saudi Arabian Energy Minister states that the nation's oil output will be significantly lower than 10mln bpd until the end of May with exports below 7mln bpd. (Newswires)

Russian oil output stood at 11.23mln BPD in April (vs. 11.3mln in March), according to IFX. (Newswires)