• APAC stocks were subdued after the risk-on mood from Wall Street (S&P 500 +2.45%) waned overnight amid pressure in commodities.
• European equity futures are indicative of a lower open with Eurostoxx 50 -1.3% after the cash market closed higher by 0.7% yesterday. 
• DXY is firmer but still on a 104 handle, EUR/USD has lost 1.05 status, antipodeans lag. 
• Crude benchmarks took another leg lower as risk appetite in Asia deteriorated.
• Looking ahead, highlights include Canadian & UK Inflation, EZ Consumer Confidence (Flash), Speeches from Fed's Powell, Barkin, Evans & Harker, ECB's de Guindos & Elderson, BoC's Rogers, Supply from Germany & US.

US TRADE

• US stocks gained as US participants returned from the holiday weekend to a broad risk-on mood with Wall Street partially atoning for last week's worst weekly performance since March 2020.
• SPX +2.45% at 3,764, NDX +2.49% at 11,546, DJIA +2.15% at 30,531, RUT +1.54% at 1,691.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (2024 voter) said the bar is high in terms of using the balance sheet to add to tightening and that adjusting the balance sheet reduction could be sensible but it is 'down the road', while he also said the Fed has made clear it will do what it takes to reduce inflation and is on a path to return it to normal levels according to Reuters.
• US President Biden said they will get through this year with COVID funding but it is not enough for the next pandemic, while Biden also noted that he hasn't set a time regarding talks with Chinese President Xi, according to Reuters.
• US Treasury Secretary Yellen said she believes there is a path to bringing down inflation while maintaining a strong labour market. Yellen also stated that the traditional recession measure of two consecutive quarters of negative growth has typically worked but recessions aren't alike and that most economists do not believe the US will enter a recession because they are taking into account post-pandemic economic features, according to Reuters.
• White House economic adviser Boushey said she remains optimistic that the US can avoid a recession and responded that US President Biden is considering anything he can to lower prices when asked if Biden will cut tariffs on Chinese imports, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

• White House spokesperson said US President Biden is keeping an open mind about how to deal with the issue of Russian President Putin weaponising food and grain, while it was also stated that China buying oil from Russia is just one element of Beijing going along with Moscow.
• India reportedly informed oil companies to load up on discounted Russian crude and purchases by state-owned companies could limit the pain for Moscow from Western sanctions over the invasion of Ukraine, while state-owned Indian Oil Corp. is negotiating more supply contracts with Russia's Rosneft, according to WSJ.

APAC TRADE

EQUITIES

• APAC stocks were subdued after the risk-on mood from Wall Street waned overnight amid pressure in commodities and with global markets lacking any fresh macro catalysts.
• ASX 200 pared early gains as resilience in energy and defensives was offset by losses in tech and financials.
• Nikkei 225 was indecisive after the Japanese currency bounced off its weakest level since 1998.
• Hang Seng and Shanghai Comp. were subdued amid ongoing COVID woes as Macau closed most public services through to Friday and with the Chinese city of Zhuhai also shutting entertainment venues in some areas, while there was some encouragement for the property sector with Chinese property developers planning to meet with banks regarding relief measures in July.
• US equity futures weakened with a lack of catalysts leaving participants questioning the recent relief rally; ES -0.9%.
• European equity futures are indicative of a lower open with Eurostoxx 50 -1.3% after the cash market closed higher by 0.7% yesterday.

FX

• DXY gained amid the subdued mood but was capped by softer yields and ahead of Powell’s testimony; the index maintains 104 status.
• EUR/USD continued its retreat from Tuesday’s peak and heads into the European session on a 1.04 handle.
• GBP/USD was constrained by the downbeat risk tone but stuck to a 1.22 handle during the APAC session.
• USD/JPY retraced some of the prior day’s advances after climbing to its highest level in around 24 years.
• Antipodeans declined amid pressure in stocks and commodities, as well as a weaker CNY reference rate setting.

FIXED INCOME

• 10yr UST futures traded higher in an unwinding of the prior day’s bear steepening with upside spurred by the declines in stocks and with a slide in energy prices easing some of the inflationary concerns.
• Bunds gained amid the soured risk mood.
• 10yr JGBs were subdued following yesterday's after-hours retreat and with the BoJ reducing the amount of today’s Rinban purchases.

COMMODITIES

• Crude futures were pressured despite the lack of clear catalysts with the move set off as risk appetite in Asia deteriorated and on a breakdown of support at the prior day's lows.
• US President Biden will deliver remarks on gas prices at 14:00EDT/19:00BST on Wednesday and is expected to call for a gas tax holiday, according to Reuters citing the White House and sources.
• Spot gold traded rangebound as the dollar marginally strengthened.
• Copper fell beneath the USD 4/lb level amid the subdued risk mood and weakness across the commodities complex.

CRYPTO

• Bitcoin was slightly pressured as risk appetite soured overnight although prices held above the 20,000 level.

NOTABLE APAC HEADLINES

• Chinese property developers are planning to meet with banks regarding relief measures in July, according to Shanghai Securities News.
• Chinese Premier Li Keqiang’s struggle to revive China’s economy under the zero-Covid policy championed by President Xi Jinping has spurred rumours of rifts between the country’s top two leaders and considerable speculation over succession plans, according to SGH Macro Advisors.
• BoJ April meeting minutes stated board members agreed on no change in the BoJ's stance of taking additional easing steps as needed and a member noted that rising raw material costs would hurt the economy so they must keep powerful monetary easing. Furthermore, it was stated that Japan's monetary policy challenge is to address too-low inflation, unlike in western economies, while a member said it is inappropriate to change the monetary policy stance as Russia's invasion of Ukraine added to the downside risks for Japan's economy.

DATA RECAP

• Australian Westpac Leading Index MM (May) -0.1% (Prev. -0.2%, Rev. -0.1%)
• New Zealand Trade Balance (May) 263M (Prev. 584.0M, Rev. 440M)
• New Zealand Exports (May) 6.95B (Prev. 6.31B, Rev. 6.16B)
• New Zealand Imports (May) 6.69B (Prev. 5.73B, Rev. 5.72B)

EU/UK

NOTABLE HEADLINES

• UK Chancellor Sunak is to meet with North Sea oil and gas producers in Scotland on Thursday amid their discontent over the latest windfall tax, according to Bloomberg sources.
• UK PM Johnson is of the view that the government must win its battle with the rail unions and is prepared for the stand-off to last months, according to The Times
• French central bank cut its growth outlook to 2.3% in 2022 (prev. 3.4%) and 1.2% in 2023 (prev. 2.0%), while it raised its inflation outlook to 5.6% in 2022 (prev. 3.7%) and to 3.4% in 2023 (prev. 1.9%), according to Reuters.
• Italy is reportedly preparing EUR 3bln of aid to curb energy bills, according to la Repubblica
• Italian Foreign Minister Di Maio quit the 5-Star Movement (5SM) to set up a new group, according to Reuters.