• Asian indices are moderately higher following on from yesterday’s holiday lull, with Chinese indices supported by a substantial PBoC liquidity injection
• In FX, DXY extended on gains as its major counterparts EUR/USD and GBP/USD languished following a pullback below 1.1200 and 1.2700 respectively
• Looking ahead, highlights include German GFK Sentiment and import prices, EZ Consumer Confidence (final), US Consumer Confidence, supply from Italy, Germany and the US

ASIA-PAC

Asian equity markets were mostly higher but with gains capped as trade slowly picked up from the holiday lull in the US and UK. ASX 200 (+0.5%) was positive with the gains led by the tech sector and as miners cheered the recent upside in commodities including Chinese benchmark iron ore prices which hit record highs. Nikkei 225 (+0.4%) was underpinned by corporate news flow with Tokyo Electron lifted from a JPY 150bln buyback, while Nissan and Mitsubishi Motors gained following the recent merger proposal between alliance partner Renault and Fiat. Hang Seng (+0.4%) and Shanghai Comp. (+0.9%) gained following a substantial liquidity injection of CNY 150bln by the PBoC which placed the ongoing trade uncertainty on the back seat. 10yr JGBs were steady as they mirrored the sideways trade in T-note futures although saw mild support following the results from the 40yr JGB auction where the b/c was firmer than previous and as 40yr yields hit their lowest levels since September 2016.

PBoC injected CNY 150bln via 7-day reverse repos for a net daily injection of CNY 70bln. (Newswires) PBoC set CNY mid-point at 6.8973 (Prev. 6.8924)

Chinese President Xi said China will increase access to further sectors. There were separate comments from a securities regulator official that China is looking to widen access for foreign investors to the futures market. (Newswires)

UK/EU

ECB's Hansson said ECB should be less generous in pricing the TLTROs and that a less generous loan should signal policy normalisation, while he added that tiering ECB rates would risk overcomplicating ECB policy. (Newswires)

Austrian Chancellor Kurz was ousted after losing a no confidence vote. (Newswires)

UK Foreign Secretary Hunt states that any PM who attempts to take Britain out of the EU without a deal will trigger a general election, which leads to the risk of Conservative Party ‘extinction’. Brexit Party leader Farage warning that the new Tory leader must take Britain out of the EU by October, or the Brexit Party will ‘fight every seat’ at the next general election. (Telegraph/Times)

Agustín Carstens, the former finance minister and head of Mexico’s central bank has ruled himself out of the running to become the next BoE Governor. (Guardian)

FX

Price action was relatively rangebound amid a lack of key data releases and recent holiday closures, although the DXY extended on the prior day’s gains as its major counterparts EUR/USD and GBP/USD languished following a pullback below 1.1200 and 1.2700 respectively. EUR was pressured at the start of the week amid widening Bund/BTP yield differentials after reports the EC might open up proceedings on Italy over high debt, while GBP remained uninspired after the long weekend and Brexit Party’s strong showing at the European Parliamentary elections. USD/JPY traded indecisively and antipodeans were steady as they patiently await the RBNZ Financial Stability Report and Governor Orr comments in tomorrow’s session, as well as Australia Capex data on Thursday and a widely anticipated RBA rate cut next week.

COMMODITIES

Commodities were mixed with oil prices steady as they held on to the prior day’s gains in which WTI reclaimed the USD 59.00/bbl level and after Brent crude surged 2% on Monday to above USD 70.00/bbl, while there was also reports Russia’s Energy Minister Novak hopes OPEC+ agreement will be formalized next month. Gold was slightly pressured by a firmer greenback and copper prices saw marginal gains amid the positive tone in China, as well as strength in Chinese benchmark iron prices which surged to a record high due to ongoing supply concerns and with stockpiles around 2-year lows.

Russian Energy Minister Novak hopes OPEC and partners will be able to formalise the OPEC+ agreement by June with the adoption of a new charter. (Newswires)

Shanghai Futures Exchange Chairman said they are preparing to launch alumina and gold futures this year. (Newswires)

GEOPOLITICS

US President Trump is said to have asked Japanese PM Abe for help arranging a summit with Iran. (Newswires)

Israel conducted a rocket strike against Syria in retaliation to anti-aircraft fire at an Israeli jet. (Newswires)

Venezuela President Maduro said more than 88 tons of gold is frozen in London and that 10 boats that were bringing in gasoline were sabotaged. (Newswires) 

US

US Markets were closed for Memorial Day.