• Asian indices were mixed as the auto-driven positivity from Wall St. was countered by the blacklisting of Huawei and disappointing regional earnings
• UK PM May is to face the 1922 committee today, with the committee to hold a meeting immediately after; cross-party talks with Labour remain on the verge of collapsing
• Looking ahead, highlights include US Building Permits, Housing Starts, Initial Jobless Claims & Philadelphia Fed Business Index, Canadian Manufacturing Sales, ECB’s Praet, de Guindos & Coeure, Fed’s Kashkari & Brainard, BoC’s Poloz & Wilkins
• Earnings: Applied Materials, Baidu, NVIDIA, Walmart, Generali

ASIA-PAC

Asian equity markets were mixed as blue-chip earnings and the US blacklisting of Huawei as well as 70 of its affiliates overshadowed the positive lead from Wall St, where sentiment was underpinned by reports that President Trump plans to delay the decision on tariffs for auto imports by up to 6-months. ASX 200 (+0.3%) and Nikkei 225 (-0.7%) were mixed in which the commodity-related sectors led the intraday recovery in Australia and as a higher Unemployment Rate stoked calls for an RBA rate cut, while Tokyo trade was pressured by disappointing earnings including Japan’s megabanks Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group. Hang Seng (+0.1%) and Shanghai Comp. (+0.3%) were initially subdued with underperformance seen in tech and telecoms following US President Trump’s national emergency declaration on foreign companies posing threats to US telecommunications, although strength in property names after firmer Chinese House Price data helped reverse the losses. 10yr JGBs were initially supported as they tracked recent upside in T-notes and amid weakness in Tokyo stocks, although gains were capped after the 5-year JGB auction results were relatively inline with the previous albeit with a weaker b/c.

US President Trump signed an executive order declaring national emergency to address threats to telecommunication networks from some foreign firms as expected, while the US Commerce Department placed Huawei and 70 affiliates on its trade blacklist which means licences will be required in order for US companies to sell products to Huawei. (Newswires)

US delegation could head to China for trade talks as early as next week. (Axios) However, in the piece, Axios quoted comments from a Senior US Official on Tuesday that a trade deal with China is not close.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.8688 (Prev. 6.8649)

Chinese House Prices (Apr) Y/Y 10.7% (Prev. 10.6%). (Newswires)

UK/EU

UK PM May is to be warned that she faces the prospect of confidence vote on June 12th if she does not agree to step down before summer, according to reports in the Telegraph. In related news, UK PM May will tell the executive of the 1922 Committee she needs several more weeks to pass key Brexit legislation in meeting tomorrow, according to FT's political correspondent Laura Hughes. (Telegraph/FT)

UK Labour spokesperson said the Labour will vote against the Withdrawal Bill and not abstain if it does not meet their conditions. Furthermore, ITV Political Editor Peston tweeted Labour MP Emily Thornberry said her party will vote against WAB and signalled cross-party talks may collapse as soon as tomorrow, while Conservative MPs Vaizey and Bridgen agree PM May will be out next month. (Newswires/Twitter)

ECB's Praet said persistency of uncertainties is undermining confidence and creating major risks to global economies. (Newswires)

FX

DXY remained subdued around the 97.50 level following the prior day’s losses which was largely due to the fallout from a stronger EUR/USD on the reports of President Trump’s auto tariff delay. GBP/USD languished firmly below the 1.2900 handle and at 3-month lows ahead of PM May’s day of reckoning with the 1922 Committee in which some expect her to be gone by next month, while some also anticipate cross-party talks could collapse as early as today. USD/JPY was choppy around 109.50 with price action contained by several nearby large option expiries for today’s New York cut, while antipodeans softened and AUD/USD briefly declined to its lowest level since the start of January after mixed jobs data in which Employment Change topped estimates but was solely fuelled by Part-Time jobs, and the Unemployment Rate increased to 5.2% from a prior revised 5.1% which added to the case for future RBA rate cuts. Furthermore, several large banking names including Citi, Westpac and Morgan Stanley all expect RBA rate cuts in August and November, while SocGen recommended to fade rallies in AUD/USD with a target of 0.6800.

Australian Employment Change (Apr) 28.4k vs. Exp. 14.0k (Prev. 25.7k). (Newswires) Australian Full Time Employment Change (Apr) -6.3k (Prev. 48.3k) Australian Unemployment Rate (Apr) 5.2% vs. Exp. 5.1% (Prev. 5.0%)

Australian Participation Rate (Apr) 65.8% vs. Exp. 65.7% (Prev. 65.7%)

COMMODITIES

Commodities were mixed in which oil prices held on to the gains during the US session where sentiment was lifted by news of Trump plans to delay the auto tariff decision by 6-months. This lifted WTI crude futures above the USD 62.00/bbl level, while a surprise build in DoE crude inventories did little to dent the gains as they were less than the prior day’s API build. Elsewhere, gold prices were steady despite the softer greenback although the precious metals remained in close proximity for another attempt on the psychological USD 1300/oz level, while copper was indecisive amid the varied overnight risk tone.

GEOPOLITICS

US has ordered the suspension of all commercial and cargo flights to and from Venezuela. (Newswires)

US President Trump is reportedly seeking a diplomatic way to resolve tensions with Iran according to reports, while Washington Post stated Trump is not convinced the time is right to attack Iran. (Newswires/Washington Post)

Iran Foreign Minister Zarif said the country remains committed to the Iran nuclear deal and exercise maximum restraint despite US withdrawal from the deal, while he believes US escalation is unacceptable. However, there were earlier comments by Iran’s Revolutionary Guard Commander who said we are on the cusp of a full-scale confrontation with the enemy and that the Islamic Republic is at its most decisive moment in history due to enemy pressure. (Newswires)

UAE said it is committed to peace as well as de-escalation and wants to emphasise caution. Furthermore, it added there are serious problems including Iran's behaviour although it has not concluded investigation on oil tanker attacks. (Newswires) 

US

Trade sentiment was again the driving factor for Treasury price moves on Wednesday. In early trade, however, the T-Note was again taking its cue from EGB's, where the Bund/BTP spread widened as participants digested comments from the Italian Deputy PM Salvini, who stated that EU deficit rules can be breached if measures would support growth (Setting up another conflict with both his coalition partners, as well as the EU). But since US traders got to their desks, the T-Note essentially became more horizontal (continuing to rise until news broke that Trump had pushed-back the decision on imposing auto tariffs on imports of EU vehicles, but then seeing modest negative ticks). At settlement, major curve spreads were a touch wider/unchanged. US T-notes (M9) futures settled 11 ticks higher at 124-21+.

Fed's Barkin (Non-Voter, Hawk) said it makes sense for the Fed to remain patient on rates and that inflation weakness is likely transitory. Barkin added there is not a strong case to move rates higher with inflation under control, nor is there a strong case to move rates lower when growth remains healthy. (Newswires)

China sold USD 20.5bln of US government bonds during March which was the largest amount sold in over 2 years. (FT)

Mexico Deputy Foreign Minister Seade said they are nearing a deal with US to lift steel tariffs. (Newswires)