• European bourses were initially firmer in a continuation of the APAC tone; however, benchmarks have tilted slightly red as Banking names pare gains
• Stateside, futures are similarly softer ahead of the Senate Banking Committee hearing on the recent banking turmoil
• DXY is softer in relatively modest parameters with Antipodeans and JPY leading while CHF lags
• EGBs and USTs remain lower given the stronger APAC handover/European start, but as sentiment slips benchmarks have pared some downside
• Commodities diverge with crude firmer while spot gold lost the 10-DMA but remains above USD 1950/oz
• Looking ahead, highlights include US Senate Banking Committee re. SIVB, Speeches from ECB's Lagarde, & Fed's Barr, Supply from the US

BANKS

• ECB's Enria says current events confirm that strong, demanding supervision is needed more than ever. Adds, there have been some fast outflows of bank deposits in some cases.
• BoE's Bailey says does not think any of the features of recent banks issues are causing stress in the UK; Ramsden says will keep a close eye on bank funding costs.
• US Treasury official Liang said the US government will use tools to prevent banking contagion again if warranted and that the US financial system is significantly stronger now due to stronger capital and liquidity requirements, while she added the US must ensure that banking regulations and supervision are appropriate for today's risk and challenges, according to her prepared testimony, according to Reuters.
• French PNF Financial Prosecutors says searches are underway at five banking/financial firms located within Paris and the Paris La Defense district re. a tax probe, German prosecutors assisting. Societe General (GLE FP) confirms its offices are being searched.
• S&P says they are yet to see any meaningful contagion for APAC from the US regional banks/Credit Suisse (CSGN SW) turmoil.

EUROPEAN TRADE

EQUITIES

• European bourses were initially firmer across the board in a continuation of the APAC tone, though benchmarks have since eased from best and are flat/mixed.
• Sectors are mixed with Energy outperforming while Banking names were firmer but have eased off of best levels and incrementally into the red alongside the broader benchmarks throughout the morning.
• Stateside, futures are mixed/flat, though with the bias inching further into the red, as the region awaits todays Senate Banking Committee hearing on the recent banking turmoil with Fed' Barr in attendance.
• Meta Platforms Inc. (META) plans to lower some bonus payouts and will more frequently assess employee performance, according to an internal memo, part of a sweeping revamp of the social-media company that includes large head-count reductions, WSJ reports.
• Alibaba (BABA/9988 HK) business unit can reportedly pursue fundraising and IPOs when ready, according to Bloomberg; Alibaba to restructure into six main business divisions.
• Click here for more detail.

FX

• The USD has been incrementally softer throughout the morning within relatively narrow 102.52-102.76 parameters, most recently the DXY has attempted to pare initial downside.
• Action which comes to the mixed fortune of peers, with AUD, NZD and JPY outperforming given the risk tone and as the JPY attempts to recover from Monday's pressures; holding below 0.67, 0.625 and above 131.00 respectively.
• CHF resides as the laggard, with downside seemingly stemming from the risk tone rather than any fresh Swiss banking concern, EUR/CHF above 0.99 to a 0.99300 peak.
• In close proximity is the CAD which is unable to benefit from crude upside while GBP and EUR are contained around 1.08 and 1.23 respectively vs USD with Central Bank speak thus far not moving the dial.
• Citi month-end model: Prelim. estimate points to moderate USD selling vs all major currencies ex-EUR, via Reuters. Click here for more detail.
• PBoC set USD/CNY mid-point at 6.8749 vs exp. 6.8737 (prev. 6.8714)
• Click here for more detail.

FIXED INCOME

• EGBs are under pressure in a continuation of the firmer risk tone from APAC trade; however, benchmarks are off worst levels as equities inch into the red.
• Specifically, Bunds are below 136.00 with the associated 10yr yield firmly above 2.30% though yet to breach 2.35%.
• Gilts and the EZ periphery are in-line with mentioned core counterparts and have been unaffected by numerous Central Bank officials where the focus has been on recent banking turmoil.
• Supply wise, the Italian and German sales passed without fanfare and were well-received overall though demand was slightly softer when compared to the prior outings.
• Click here for more detail.

COMMODITIES

• Crude benchmarks continue to climb aided by the softer dollar and the latest geopolitical tensions re. N. Korea; WTI and Brent holding above USD 73/bbl and USD 78/bbl respectively.
• European and US gas benchmarks diverge slightly in European trade; Morgan Stanley writes that “prices likely still need to move lower to incentivize an adequate supply response, but we may be approaching the bottom”.
• Spot gold is pressured by the risk tone and failing to benefit from the softer USD with the yellow metal below the USD 1959/oz 10-DMA and holding around USD 1950/oz currently, base metals conversely are modestly firmer.
• Russian Deputy PM Novak says the domestic fuel and energy complex is sustainable despite challenges, hopes to agree on key contract terms for the Power of Siberia 2 gas pipeline to China this year. Russia should look to produce at least 100mln/T of LNG per year by 2030.
• Click here for more detail.

NOTABLE HEADLINES

• Kantar UK Supermarket update (Mar): Grocery price inflation has climbed again to reach 17.5% over the four weeks to 19 March 2023, a new record based on our latest market data.
• ECB's Muller says inflation is slowing but it is too early to declare a victory.

DATA RECAP

• UK BRC Shop Price Index YY (Mar) 8.9% (Prev. 8.4%)

NOTABLE US HEADLINES

• Fed's Jefferson (voter) said inflation has come down and should fall back to towards the 2% target as demand falls but noted that inflation has been longer lasting and the current level is too high, while they want inflation to return to 2% sooner rather than later and don't want expectations to become embedded. Jefferson also commented that they are still learning how much tight monetary policy has influenced the economy and inflation, as well as noted that Fed's actions in recent weeks aimed to show depositors that there is someone out there willing to lend.
• US HHS Secretary declared a public health emergency for Mississippi in response to severe weather.
• Click here for the US Early Morning Note.

GEOPOLITICS

• Russian Defence Ministry said it fired supersonic anti-ship missiles at a mock target in the Sea of Japan.
• North Korean leader Kim guided the nuclear weaponisation programme and inspected nuclear trigger technology during a recent simulation. Kim also called for constant efforts to improve nuclear capability and said the country should be fully ready to use nuclear weapons at any time, while he called for the scaling up of weapons-grade nuclear materials to exponentially increase nuclear weapons arsenal. North Korea also alleged that US and South Korea military drills involving an air carrier are aimed at pre-emptive nuclear strike and said that US anti-North Korean activities are intensifying to unacceptable levels, according to KCNA.
• North Korea is reportedly preparing to resume foreign diplomatic activity after three years of COVID isolation, according to FT; North Korean officials recently resumed travels to Russia and China.
• Belarus' Foreign Minister says they have been forced to take steps ensuring security in the face of NATO potentially increasing within neighbouring nations, via Tass.

CRYPTO

• Binance CEO said the CFTC complaint appears to have an incomplete recitation of the facts and they do not agree with the issues alleged in the complaint. Binance CEO said they intend to respect and collaborate with US and other regulators around the world, while he added that Binance.com does not trade for profit or manipulate the market under any circumstances, according to Reuters.

APAC TRADE

• APAC stocks traded mixed with a mild positive bias as global banking sector fears continued to dissipate and with early advances led by energy after the recent surge in oil prices although gains were capped in the region as North Korean nuclear rhetoric stoked geopolitical concerns.
• ASX 200 was boosted amid strength in the commodity-related sectors with outperformance in energy after oil prices notched the largest daily gain since October and financials were also lifted as Australia downplayed the risks to domestic banks from the recent global banking issues.
• Nikkei 225 was indecisive despite Japan reiterating plans for a JPY 2.2tln economic stimulus package with trade stuck in a narrow range near 27,500 after the nuclear rhetoric by North Korea which called for the scaling up of weapons-grade nuclear materials and included similar language used before its last nuclear test in 2017.
• Hang Seng and Shanghai Comp. were choppy ahead of key earnings results and after PBoC liquidity efforts.

NOTABLE ASIA-PAC HEADLINES

• China's Foreign Ministry said Premier Li Qiang met with foreign representatives at the China Development Forum in Beijing on Monday and met with executives including Apple (AAPL) CEO Cook, while Li told executives China will unswervingly expand its opening up, according to Reuters.
• US and Japan reached a trade deal for critical EV battery minerals in which the deal prohibits enacting export restrictions on lithium, cobalt, nickel, manganese and graphite, according to US officials. Furthermore, the deal includes provisions to combat non-market practices, while access for Japanese automakers to the battery minerals portion of USD 7,500 in US EV tax credit depends on the tax guidance this week from the US Treasury.
• China is reportedly aiming to set up 30+ key auto chips standards by 2025, according to the Ministry of Industry and Information Technology.
• A magnitude 5.7-5.9 earthquake occurred offshore Eastern Aomori Prefecture, Japan; NHK says it has a prelim. magnitude of 6.1; no tsunami warning issued.