• Asian indices followed the negative tone on from their US counterparts as Wall St. extended on the prior day’s losses
• In FX the USD is firmer, with the DXY holding above the 98.00 level as counterparts, particularly EUR and GBP, remain subdued
• Looking ahead, highlights include US GDP (2nd Estimate), Core PCE, Advanced Goods Balance, Pending Sales Change & Initial Jobless Claims, Canadian Average Weekly Earnings, BoE's Ramsden, Fed's Clarida, BoC's Wilkins, supply from Italy
• Market Holiday: Swiss, Swedish & Norwegian holiday for Ascension Day

ASIA-PAC

Asian equity markets mostly tracked the declines of their counterparts on Wall St where all majors extended on losses amid little in the way of catalysts to inspire a rebound and as participants looked ahead to upcoming US GDP and PCE inflation. Furthermore, trade uncertainty lingered, and technical selling was at play in which the DJIA briefly slipped below the 25K level and the S&P 500 tested its 200DMA to the downside. As such, ASX 200 (-0.8%) and Nikkei 225 (-0.5%) were subdued following the weak lead from their global peers with only the telecoms sector bucking the trend in Australia, while sentiment in Tokyo continued to be hampered as USD/JPY remained at a sub-110.00 level. Hang Seng (-0.5%) and Shanghai Comp. (-0.8%) were negative amid no signs of trade tensions abating as China’s Global Times Editor suggested US is shifting from protecting its interest to destroying China in its crackdown on Huawei. Finally, 10yr JGBs were lower as they tracked the pullback in T-notes but with downside stemmed by support around the 153.00 level and after improved results at the 2yr auction.

PBoC injected CNY 30bln via 7-day reverse repos. (Newswires) PBoC set CNY mid-point at 6.8990 (Prev. 6.8988)

UK/EU

UK Foreign Secretary and PM candidate Jeremy Hunt said would rather delay Brexit past October 31st than risk a general election. (Newswires)

UK Chancellor Hammond is set to tell prospective Conservative leadership candidates that they cannot hope to rebuild the party simply by cutting taxes and slashing red tape. (Guardian)

Tory MP’s have reportedly suggested that Andrea Leadsom is likely pull out of the PM contest relatively early, to support a Brexiteer front runner, in return for support in her ambition to become Chancellor. (Times)

The Society of Motor Manufacturers & Traders said UK April car production fell 44.5% Y/Y to 70,971 units which was the largest decline since 2009, while it cited vast costs of Brexit shutdowns and global trade uncertainty for the slump. (Newswires)

FX

DXY was steady and held on to recent gains above 98.00 after USD caught a bid against its major counterparts with EUR/USD subdued following soft German unemployment data and with GBP/USD around its weakest levels in nearly 6 months amid political uncertainty as well as gilt yields reaching fresh 2-year lows. JPY was mixed in which USD/JPY meandered around 109.50 before ticking higher following ongoing widening yield differentials between US and Japan, while antipodeans were somewhat indecisive after an uneventful New Zealand budget announcement and as initial pressure in AUD/USD following a miss on Private Capex and Building Approvals, was dispelled by upgrades to 2018/19 and 2019/20 capex estimates.

Australian Private Capital Expenditure (Q1) Q/Q -1.7% vs. Exp. 0.5% (Prev. 2.0%, Rev. 1.3%). (Newswires) Australian Private Capital Expenditure 2019-2020 (Est. 2) 99.14B (Prev. 92.14B)

Australian Private Capital Expenditure 2018-2019 (Est. 6) 122.2B (Prev. 118.4B) Australian Building Approvals (Apr) -4.7% vs. Exp. 0.0% (Prev. -15.5%, Rev. -13.4%) Australian Building Approvals (Apr) Y/Y -24.2% vs. Exp. -22.4% (Prev. -27.3%)

New Zealand released its budget in which its sees 2018/19 Cash Balance at -2.785B vs. Prev. forecast of -4.993B and sees 2018/19 GDP growth of 2.1% vs. Prev. 2.9% forecast in Half Year Economic and Fiscal Update. Furthermore, New Zealand Finance Minister Robertson said increased government spending will help domestic economy in the face of global slowdown, while he added that US-China trade dispute, Brexit uncertainty and slowing global growth pose continuing risks. (Newswires)

Israel is heading for a 2nd election this year after Israel PM Netanyahu failed to build a coalition and lawmakers voted for bill to dissolve the Knesset, while the election date has been set for September 17th. (Newswires)

COMMODITIES

Commodities were mixed with WTI crude futures now steady in comparison to the prior day’s whipsaw in which prices briefly tested USD 57.00/bbl before staging an aggressive comeback, while the latest API inventory report was also bullish for prices and showed a much larger than expected draw in headline crude stockpile which in turn underpinned US oil prices to above USD 59.00/bbl. Elsewhere, gold remained subdued by a firmer greenback and with participants awaiting GDP and Core PCE Prices, while the risk averse tone kept copper at 4-month lows. 

API Crude Inventories -5.27mln vs. Exp. -0.9mln (Prev. +2.4mln). (Newswires)

Chile's CODELCO mine workers voted in favour of a strike in the Chuquicamata mine which is the largest open-pit copper mine in the world. (Newswires)

GEOPOLITICS

US State Department said it is alarmed that Russia continues to disregard its international arms control obligation after earlier reports that Russia was conducting low yield nuke tests. (Newswires)

Iran Supreme Leader Khamenei said Iran will not negotiate with the US and will use military pressure if needed. (Newswires)

US

The T-plex continued its rally during the European session before paring back gains going into settlement. Looking at the curve, the 2s/10s steepened by c. 1.8bps, with the 5s/30s flattening by c. 1bps. The 7-year auction was relatively weak, where it tailed by 1.9bps, above the six-auction average of -0.3bps, and the B/C ratio came in at 2.3x, below the six-auction averages of 2.53x. It is worth highlighting that the high-yield was the lowest it has been since September 2017, coming amidst a sharp rally in bonds in recent sessions. In regard to the breakdown, dealers took a chunky 30%, almost double the six-auction average, with discretionary buyers (indirects/directs) both taking below averages. In the fallout from the auction Treasuries sold off, with newswires attributing dealers as the main sellers as they seek to offload their large holdings. US T-note futures (M9) settled 7+ ticks higher at 125-20.

Canada PM Trudeau said a draft ratification of the USMCA has been formally presented to Canadian parliament, while there were also reports that Canadian PM Trudeau will conduct a joint press conference with US Vice President Pence on today at 1345EDT. (Newswires)

US House Speaker Pelosi said she still thinks President Trump wants to do an infrastructure deal. (Newswires)