• European Indices [Euro Stoxx 50 +0.3%] are positive, but have traded choppily for much of the session ahead of FOMC and as markets await further US-China updates
• On the Brexit front, the 1922 Committee are due to meet at 16:00BST, with speculation that if over half of the committee are in favour then Graham Brady will instruct PM May to leave
• Looking ahead, highlights include Canadian Retail Sales, DoEs, FOMC minutes, Fed’s Williams, Bostic, and BoE’s Haldane

ASIA-PAC

Asian equity markets were indecisive as the momentum from Wall St, where all majors gained as Huawei's reprieve inspired the trade sensitive sectors, somewhat dissipated as markets await the next developments in the US-China trade saga and upcoming FOMC minutes. ASX 200 (+0.2%) and Nikkei 225 (U/C) were mixed for most the session with Australia subdued by weakness in mining related stocks as well as financials, while the Japanese benchmark was kept afloat by recent currency weakness and after varied data releases including better than expected Machine Orders. Hang Seng (+0.2%) and Shanghai Comp. (-0.5%) diverged with the mainland cautious amid ongoing trade uncertainty and with Hangzhou Hikvision heavily pressured after reports that the Trump administration is considering restrictions on the Co. This has also weighed on other tech names, although losses in the broader market were stemmed after a liquidity injection by the PBoC and with the central bank seeking to further reduce borrowing costs for small businesses. Finally, 10yr JGBs initially softened amid gains in Japanese stocks and with participants sidelined ahead of a 20yr auction later, although prices then recovered on strong auction results in which the b/c rose to its highest on record.

US President Trump administration is said to consider placing limits on Hangzhou Hikvision Digital Technology, while reports later suggested the US is contemplating blacklisting as many as 5 Chinese surveillance firms. (Newswires/NYT)

China Ambassador to US Cui Tiankai said he thinks accusations against Huawei are groundless and that China remains ready to resume trade talks with US colleagues. Cui also stated that US has changed its mind in trade talks more than once and China is still committed, while he added that China is ready to address trade imbalance with US and buy more US goods and services. (Newswires)

China Global Times Editor tweeted that Washington is resorting to dirty tricks with Huawei and the US will suffer comprehensive losses for it, while he also suggested the US is now picking on Chinese drone maker DJI and that these moves make Chinese wonder if US is in a rush to reach a trade deal so the conclusion of the Chinese is to drag it out. Subsequently added, The US will not be able to press China to submit, but it will force them to re-prioritize economic development (Twitter)

China's Foreign Ministry spokesman Liu states that China remains open towards a trade consultation. (Newswires)

PBoC is to streamline lending rate system to further lower borrowing costs for small and micro companies. (China Daily)

PBoC injected CNY 20bln via 7-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.8992 (Prev. 6.8990)

Japanese Trade Balance Total Yen (Apr) 60.4B vs. Exp. 203.2B (Prev. 527.8B). (Newswires) Japanese Exports (Apr) Y/Y -2.4% vs. Exp. -1.8% (Prev. -2.4%) Japanese Imports (Apr) Y/Y 6.4% vs. Exp. 4.8% (Prev. 1.2%) 

Japanese Machinery Orders (Mar) M/M 3.8% vs. Exp. -0.7% (Prev. 1.8%). (Newswires) Japanese Machinery Orders (Mar) Y/Y -0.7% vs. Exp. -3.4% (Prev. -5.5%)

US

US President Trump urged Congress to pass USMCA deal before taking up the infrastructure bill in a letter to Democratic congressional leaders, while Trump President Trump outlined infrastructure priorities in which he said the package should include energy permitting reforms and energy-related infrastructure investments. (Newswires)

US Trade Representative Lighthizer will meet with EU and Japanese trade officials on Thursday to address non-market-oriented policies of other countries. (Newswires)

Fed's Bullard (Voter, Dove) said tariffs will have to stay 6-months to impact fed policy and that farming communities are very worried about the trade war. Fed’s Bullard also reiterated that US rates are at a good place right now and if anything, they are a bit restrictive, while he added the Fed may have overdone it with the December hike. Subsequently, stated that US inflation in 2019 may fall short of target and a rate cut may become "more attractive" if inflation keeps disappointing, Fed has likely chosen appropriate stopping point for normalisation. Adds that any Monetary Policy adjustment would be in response to incoming data, not as a part of ongoing normalisation. Adds that the the US yiled curve is ‘a little bit worrisome’, and that China selling US treasuries is not as big of a threat as it is made out to be. (Newswires)

UK/EU

UK PM May spokesperson says the vote on customs policy will happen ASAP if and when WAB passes first legislative hurdle, and that based on outcome of votes, they will seek changes to political declaration at the EU Council in June. (Newswires)

UK Environment Secretary Gove says the Withdrawal Agreement Bill will be published later today., Mail's Cole. (Twitter) Note: following on from this comment there were conflicting reports from political journalists over whether the WAB would be published today.

UK senior backbenchers in 1922 Committee Executive will make a fresh attempt to force a confidence vote on UK PM May with other reports suggest Conservative MPs are calling for MV4 to be scrapped. (Sun) Note, UK PM May will be meeting with the 1922 Committee today. Subsequently reported that, if over half of the UK 1922 Committee have written to Chairman Brady in favor of a no-confidence vote in PM May, he will instruct her to leave, according to Sky New's Beth Rigby citing sources, (Twitter) However, Walker, the 1922’s Vice Chair states that it would be extradordinary to ask the PM to resign., BBC’s Smith. (Twitter)

UK CPI YY (Apr) 2.1% vs. Exp. 2.2% (Prev. 1.9%)

- UK Core CPI YY (Apr) 1.8% vs. Exp. 1.9% (Prev. 1.8%)

- UK CPI MM (Apr) 0.6% vs. Exp. 0.7% (Prev. 0.2%)

- UK RPI YY (Apr) 3.0% vs. Exp. 2.8% (Prev. 2.4%)

- UK RPI MM (Apr) 1.1% vs. Exp. 0.8%

German monetary hawks are reportedly pushing for ECB's Weidmann to be the successor to ECB President Draghi. (FT)

Italian Statistics Agency lowers domestic 2019 GDP forecast to 0.3% (Prev. Nov forecast 1.3%); 2019 growth will see no contributions from trade flows. (Newswires)

Italy's Confindustria says the Govt. must avoid EU infringement "at any cost" on public deficit and debt, need to negotiate with the EU a gradual, structural budget adjustment in the next 3 years. (Newswires)

GEOPOLITICAL

US state Department said it is seeing signs Syria could be renewing its use of chemical weapons including alleged chlorine attack on May 19th, while it added that US and its allies will respond quickly and appropriately if Syria government uses chemical weapons. (Newswires)

Saudi Arabia Cabinet said the country will do what it can to avoid any war following the condemnation of Iranian actions in the region, while it affirmed commitment to achieving balance in oil market and working towards its stability. (Newswires)

EQUITIES

Choppy trade for European indices [Eurostoxx 50 +0.3%] following on from an indecisive Asia-Pac session as the region awaits further impetus in regard to trade talks ahead of tonight’s FOMC Minutes. European equities are now mostly higher as equities gained traction ahead of US’ market entrance. UK’s FTSE 100 (+0.5%) outperforms its peers as exporters are bolstered by the Brexit-dented Pound. Sectors are posting broad-based gains, whilst energy stocks bear the brunt of the falling prices in the complex. In terms of individual movers, Royal Mail (+6.2%) spiked higher on the back of optimistic earnings coupled with a dividend cut to fund a turnaround, whilst Spanish listed DIA (+5.4%) continues to benefit from Santander’s care package, which was announced yesterday. Meanwhile, Babcock (-8.4%) shares plummeted after the Co. noted that the upcoming FY earnings are to be impacted by a number of significant factors. Looking at analysis from Nomura Quant, the report notes that CTAs have dissolved long positions in a majority of regions and are now roughly neutral in the FTSE 100, Nikkei 225, Hang Seng and TAIEX, with bearish positions limited to the KOSPI and TOPIX, albeit bullish stances are ongoing for the DAX and NIFTY 50. Apart for the DAX, CTAs have a low equity exposure, “so the risk of a drop in share prices from systematic cutting of existing long positions looks limited” says Nomura.

Qualcomm (QCOM) – Federal Judge has ruled that the Co’s practices violated antitrust laws, with the judge siding with the FTC. (WSJ) For reference, the Co. are down by around 12% in premarket trade.

FX

GBP - Sterling’s slump continues, with Cable breaching another technically significant level at 1.2670 after a 360°-plus turnaround from 1.2800+ knee-jerk highs on Tuesday when UK PM May unveiled her new Brexit blueprint with the carrots of a 2nd referendum and temporary EU customs union, while Eur/Gbp has now surpassed strong chart resistance ahead of 0.8800 in the form of the 200 DMA (0.8793) on the way to a 0.8815 high and the cross is on course to extend a run of consecutive rallies to 13 sessions. The marked turnaround in sentiment comes amidst widespread uproar over the latest WA proposal and even more rebellion against the PM, especially from the 1922 faction that is set to meet at 4 pm and could launch a confidence vote as soon as today. Back to the pilloried Pound, 1.2650 could offer symbolic support vs the Dollar ahead of a Fib at 1.2638, if option expiry interest between 1.2665-70 in 500 mn fails to stem the tide, while 0.8840 may cap losses against the single currency. Note, UK inflation data has been largely ignored, but for the record CPI was slightly softer than forecast and PPI input prices well below consensus.

DXY - The index remains toppy above 98.000 after several attempts and failures to clear chart hurdles ahead of the 2019 highs, with the Greenback sitting tight and rangebound vs G10 counterparts in advance of the FOMC minutes, bar Sterling as noted above.

AUD/CAD/NZD - The non-US Dollars have clawed back some of their recent losses with the Aussie back within touching distance of 0.6900, Kiwi pivoting 0.6500 and Loonie straddling 1.3400. All eyes on the aforementioned account of the Fed’s recent policy meet, but Canadian retail sales data could provide the Cad with some independent impetus beforehand.

CHF/EUR/JPY - All treading water vs the Usd as the Franc hovers just above 1.0100 and Euro trades mostly above 1.1150 following yesterday’s brief probe below, but the topside capped ahead of decent expiries at 1.1180 (1.5 bn). Meanwhile, the Yen is meandering between 110.37-62 after reported offers from Japanese corporates and asset managers, and with Fib resistance noted at 110.71 also keeping the headline pair contained.

EM - The Rand is on the rebound regardless of softer than anticipated SA inflation data, with Usd/Zar near the bottom end of a 14.4400-3500 range ahead of Thursday’s SARB policy meeting amidst perceptions that the tone will remain hawkish even though there are grounds for a reassessment of projections signalling a hike by the end of 2019. Conversely, the Lira is still struggling and testing support at 6.1000 vs the Buck amidst reports that Russia and Turkey are ready to fulfil S-400 order commitments irrespective of US protestations.

Australian Construction Work Done (Q1) -1.9% vs. Exp. 0.1% (Prev. -3.1%). (Newswires)

Riksbank Financial Stability Report states High indebtedness remains the greatest risk – structural reforms required on the housing market, Vulnerabilities in the banking system require measures. (Newswires) Subsequently, Riksbank’s Jansson says a weak SEK is not currently a risk to financial stability. (Newswires)

FIXED INCOME

A relatively firm bounce across EU cash bourses amidst conflicting US-China and Brexit-related reports may have quelled demand for core debt, but the German bond will have taken on board a somewhat lukewarm reception to the latest 10 year offering as well. Indeed, Bunds are back below or around parity vs +23 ticks at best and Gilts have pared gains to sub-1/2 point from +63 ticks having faded just above 129.00 on a lack of follow-through buying and further bullish momentum, with perhaps some acknowledgment of comments from the 1922 Vice chair suggesting less haste in terms of trying to oust UK PM May than earlier indications implied. Meanwhile, US Treasuries appear rather detached and sticking within narrow overnight session trading parameters pre-FOMC minutes and more Fed speakers in the run up.

COMMODITIES

WTI and Brent futures are on the backfoot after the API reported a surprise build in US crude inventories (+2.4mln vs. Exp. -0.6mln), marking a 5th consecutive week of builds reported by the institute. Brent futures current reside below the USD 71.50/bbl level whilst WTI futures fluctuates on either side of USD 62.50 with PVM highlighting “critical” support levels at 62.54 and 62.31 which, if breached, could cause a decline in prices towards the 61.63/22 area, according to the analysts. Participants will be looking ahead to the more widely looked at EIA crude inventory report with headline crude stocks expected to decline by just over 2.5mln barrel. Elsewhere, precious metals are relatively tentative and awaiting any US/China update ahead of the FOMC Minutes release later today (preview available in the Research Suite). Meanwhile, copper prices are sliding as the Buck gains more ground against a backdrop of a trade war between the world’s two largest economies. Despite this, mining giant Antofagasta expects the copper market to tighten this year and note a positive outlook for the red metal in 2019 and beyond. Spot copper declined through USD 2.7/lb to touch levels last seen in late January.

OPEC exports are declining to their lowest levels in 4 years in May amid lower Iranian and Venezuelan shipments. (Seeking Alpha)

Russia says clean oil supply was resumed to Belarus today, while clean oil will reach Slovakia and Hungary within a week. (Newswires)