• European indices on the front foot [Euro Stoxx 50 -0.3%], but bonds backpedaling pre-NFP
• USD remains firm with the DXY just below the 98.0 level ahead of NFP
• Looking ahead, highlights include US Jobs Reports, US ISM Non-Manufacturing, Fed's Evans, Clarida, Williams & Bowman
• Earnings: Berkshire Hathaway, American Tower

ASIA-PAC

Asian equity markets were mixed with the region cautious ahead of the looming US NFP data and after losses on Wall St where the fallout from the FOMC disappointment persisted and the energy sector underperformed on weaker oil prices. ASX 200 (U/C) swung between gains and losses with notable weakness seen in energy names after WTI crude declined by more than 3% and with financials subdued after Macquarie’s full-year results which improved from the prior year although it flagged a decline for FY20. KOSPI (-0.7%) and Hang Seng (+0.4%%) were negative with South Korea heavily focused on earnings and with risk appetite in Hong Kong sapped by poor GDP data which showed its economy grew at the slowest pace in nearly a decade. However, the Hang Seng is well off intraday lows as trade related news provided a glimmer of optimism with Chinese Foreign Minister Wang to travel to the US on Tuesday and is expected to close the trade deal next week, while US Commerce Secretary Ross suggested they are in the end-game of trade negotiations. As a reminder, mainland China and Japan remained closed for holidays.

US

US President Trump suggested no more costly and time-consuming investigations, while he called on parties to work together on immigration, infrastructure and much lower drug prices. (Twitter)

UK/EU

Latest UK local council elections results show Labour Party councillors dropped by 53 councillors to 601 and Conservative party councillors dropped by 117 to 512 in England. (BBC) Instead, voters turned to alternative parties which saw a significant swell in support for the Liberal Democrats, the Greens and independent candidates. (Sky News)

UK PM May spokesman states that the PM expects Brexit talks to resume with Labour after the weekend. (Newswires)

BoE's Broadbent says one quarter point rise in interest rates would not be particularly dramatic, reaffirms guidance around a limited and gradual tightening. (Newswires)

ECB's Weidmann says that inspite of Q1 there is still no overall improvement in the economy, Germany likely posted solid Q1 growth but this was assisted by one-off factors; adds that 0.5% growth in Germany this year is plausible. (Newswires)

EU's Juncker said ECB's Weidmann is a suitable candidate for the ECB president position. (Handelsblatt)

EU leaders are scheduling a meeting on the 28th May following the EU parliament elections., according to Officials. (Newswires)

UK Markit/CIPS Services PMI (Apr) 50.4 vs. Exp. 50.5 (Prev. 48.9). (Newswires)

EU HICP-X F&E Flash YY (Apr) 1.3% vs. Exp. 1.1% (Prev. 1.0%)

- EU HICP-X F, E, A & T Flash YY (Apr) 1.2% vs. Exp. 1.00% (Prev. 0.80%)

- EU HICP Flash YY (Apr) 1.7% vs. Exp. 1.6% (Prev. 1.4%)

EQUITIES

Major European indices have been gradually grinding higher throughout the session [Euro Stoxx 50 +0.3%], diverging from the cautious trade seen overnight where sentiment was somewhat deterred by the upcoming US jobs report and mixed US-China trade reports. There is no real standout European bourse this morning with gains relatively broad based; although, the SMI (+0.2%) while positive is underperforming its peers, with the index weighed on by Swiss Re (-2.6%) after the Co. posted a miss on Q1 net. In a similar fashion sectors are predominantly in the green with the exception of the Technology sector which is weighed on by heavyweight Sap (-0.4%) in the red following on from reports yesterday that up to 50k companies which are using the Co’s software are at risk of a security breach; the Co. state that guidance on resolving these issues was published in both 2009 and 2013. Other notable movers this morning include banking giant HSBC (+2.4%) who are firmer post-earnings where they beat on both Q1 revenue and pre-tax profit. Separately, but also boosted by earnings are Adidas (+6.1%) with the Co. also topping the Dax (+0.3%) after confirming FY guidance and reporting strong net income & operating figures. Elsewhere, and at the other end of the Stoxx 600 are Intu Properties (-6.4%), after stating that they see FY19 LFL retail income falling by 4-6% and forecast the remainder of the year as being challenging.

Berkshire Hathaway (BRK.B) has invested in Amazon (AMZN) for the first time, Warren Buffet stated in an interview that he himself had not made the decision but one of his deputies made the decision to purchase the stake. (FT)

Boeing (BA) have limited the role of their pilots in their 737 MAX flight-control system development, as according to sources. (WSJ)

FX

USD - The Greenback remains on a firmer footing ahead of the monthly BLS jobs report, and the index has just notched a new post-FOMC peak at 97.971 amidst expectations that payrolls will post another solid gain, with average earnings forecast to tick up in m/m and y/y terms. The DXY has eclipsed Fib resistance at 97.881 in the process and is now eyeing another retracement level just above 98.000 at 98.059.

CHF/EUR/GBP/JPY/AUD - All weaker, albeit marginally vs the Usd, with the Franc straddling 1.0200 after a further deterioration in Swiss consumer sentiment and in line/steady y/y CPI, but still well shy of the SNB’s 2% target. Meanwhile, the single currency is grinding down further having relinquished the 1.1200 handle on Thursday with Fibs marking out support and resistance at 1.1147 and 1.1186 respectively, and hefty option expiry interest also likely to influence trade/direction ahead of NFP if not the NY cut. Note, firmer than forecast Eurozone inflation has been largely shrugged off given national numbers indicating an upside bias vs consensus. Similarly, Cable failed to glean and positive momentum from confirmation that the UK services sector joined its construction counterpart back into expansion from contraction, with the pair having dipped below the 1.3000 level to circa 1.2990 (just shy of the 100DMA at 1.2983) while Usd/Jpy is pivoting 111.50 and the 30 DMA (111.47) in advance of the aforementioned US labour data and a 111.70 Fib. Last, but by no means least, the Aussie is trying to keep sight of the psychological 0.7000 mark following extended losses to a fractional 2019 low (0.6985) where decent expiry interest (877 mn) resides, but still wary about a potential RBA rate cut next week.

CAD/NZD - Marginal G10 outperformers, or at least holding their own as the Loonie meanders between 1.3458-75 and Kiwi hovers above 0.6600, albeit also conscious that the RBNZ could ease policy at the May meet.

EM - The Lira remains in the spotlight and under pressure in wake of weaker than anticipated Turkish CPI on perceived less hawkish CBRT policy implications, with Usd/Try at the upper end of 5.5800-9595 trading parameters.

Australian Building Approvals (Mar) M/M -15.5% vs. Exp. -14.0% (Prev. 19.1%). (Newswires) Australian Building Approvals (Mar) Y/Y -27.3% vs. Exp. -25.1% (Prev. -12.5%)

FIXED INCOME

Bunds and Gilts have regrouped after succumbing to more selling pressure and extending respective intraday lows to 164.84 and 126.95, -40 and -32 ticks on the day. Coincidentally, the deeper Eurex trough aligned exactly with this week’s previous base (April 30), while the Liffe nadir was just a tick short of 126.94, also posted on Tuesday, and the lack of follow-through to the downside and/or stop tripping appears to have encouraged jobbers and enticed buyers. Meanwhile, US Treasuries are nestling near the bottom of relative narrow overnight session ranges into NFP, non-manufacturing PMI and ISM releases and a whole host of Fed speakers following Wednesday’s somewhat surprise more hawkish/less dovish FOMC, and Powell in particular.

COMMODITIES

Brent (-0.5%) and WTI (-0.2%) prices are subdued this morning, as the general uptick in risk appetite this morning has not been able to outweigh the bearish pressure from the stronger dollar. WTI prices are still relatively secure above the USD 61/bbl level, currently trading around the USD 61.40 figure; however, the session lows for Brent did briefly breach the USD 70/bbl level. UBS note that of central concern for oil on the upside are the recent reports that US-China trade talks may have reached an impasse, ahead of next week’s negotiations in Washington. News flow this morning includes sources commenting that Saudi Arabia’s production may increase in June but will still be below the 10.3mln BPD quota under the OPEC+ agreement. For reference, surveys indicate that Saudi Arabia’s output as of April 30th is 9.85mln BPD.

Gold (U/C) is relatively lacklustre this morning with the yellow metal torn between the firmer dollar, mixed US-China trade reports and the general improvement in risk sentiment; as such the metal is left pivoting the USD 1270/oz level. Elsewhere, copper is still suffering from the absence of China, although industrial metals in general have strengthened somewhat with some attributing this to recent comments from Tesla, stating that they foresee shortages of minerals which are used in electric vehicles.

US is considering sanctioning businesses involved in Iran petrochemical trade and is stepping up efforts to sever Iran's non-USD trade, while it is also looking at sanctioning banks doing business with Iran. In other news, Iran Oil Minister Zanganeh said they will not remain silent if other OPEC members threaten its interests and commented that an OPEC collapse is likely. (Newswires/WSJ)

Venezuela opposition lawmaker Lopez says it is clear there are more military movements to come. (Newswires)

LA County Fire Department says it is responding to a fire at the Phillips 66 Carson California refinery. (Newswires)

Hungary, Poland and the Czech Republic are to provide around 8mln bbls of crude from their strategic stockpiles amid the Druzhba pipeline shutdown, according to sources. (Newswires)

Saudi Arabia's oil production may increase in June, but is set to remain within the OPEC+ quota., according to sources. (Newswires)