• European bourses are pressured on continuing Manufacturing PMI softness alongside hawkish pricing implications
• Stateside, futures are essentially flat as we await further substantive debt ceiling updates and remarks from Fed’s Powell
• Biden said he is optimistic on making debt ceiling progress; McCarthy described the meeting as a productive discussion
• DXY is underpinned and benefitting further from EUR & GBP weakness post-PMIs while the JPY bucks the trend
• Crude is attentive to key officials while metals are dented by the USD; Saudi Energy Minister said “I keep telling speculators they will be ouching” and they did in April
• Fixed benchmarks are pressured on the hawkish PMI implications for the BoE & ECB; USTs directionally in-fitting
• Looking ahead, highlights include US PMIs (Flash), US Home-Sales. Speeches from Fed's Powell & Logan, ECB's Nagel, Villeroy & Enria. Supply from the US.

EUROPEAN TRADE

EQUITIES

• European bourses are pressured, Euro Stoxx 50 -0.5%, with the exception of the FTSE 100 +0.1% which is deriving some support from regional banking names on post-PMI hawkish BoE implications.
• Back to Europe, bourses came under pressure from the region's PMIs as it has hawkish ECB implications and with the Manufacturing sector still under marked pressure.
• Sectors are somewhat mixed with Real Estate bolstered while Luxury names are tarnished after a cautious note from Deutsche Bank.
• Stateside, futures are essentially flat with the ES pivoting 4200 as we await more substantive debt ceiling updates and remarks from Fed's Powell.
• Lowe's Companies Inc (LOW) Q1 2023 (USD): adj. EPS 3.67 (exp. 3.44), Revenue 22.35bln (exp. 21.6bln); SSS -4.3% (exp. -3.2%); updates outlook
• EU is seeking to reimpose a EUR 14.3bln tax demand on Apple (AAPL), via FT; Competition Commissioner Vestager is looking to overturn the EU's 2020 legal defeat over a tax bill to Ireland.
• Click here and here for a recap of the main European updates.
• Click here for more detail.

FX

• DXY underpinned after productive US debt ceiling discussions as the index meanders around a Fib at 103.330.
• Yen regains poise with some traction from upbeat Japanese PMIs and USD/JPY running into supply ahead of 139.00.
• Aussie underperforms either side of 0.6650 as iron ore slides and the Yuan depreciates below 7.0000.
• Kiwi loses traction on the eve of RBNZ irrespective of hawkish shift in pricing, with NZD/USD at the lower end of 0.6302-0.6254 bounds.
• Euro keeps tabs on 1.0800 as strength in EZ services counters manufacturing deficiencies, but Pound waning on 1.2400 handle as UK PMIs miss consensus across the board.
• PBoC set USD/CNY mid-point at 7.0326 vs exp. 7.0327 (prev. 7.0157)
• Click here for more detail.
• Click here for the notable FX expiries for today's NY cut.

FIXED INCOME

• Debt futures plumb new cycle lows as bearish momentum continues to build.
• Bunds down to 133.69, Gilts 97.22 and T-note 113-09 ahead of US prelim PMIs, new home sales and Fed's Logan all ahead of USD 42bln 2 year supply.
• Mixed EU PMIs largely shrugged aside along with UK and German auctions awaiting more talks on the US debt ceiling.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are in close proximity to the unchanged mark after Monday's circa. USD 0.40/bbl firmer settlement with the complex focused on Energy Officials at the Qatar Economic Forum.
• Currently, WTI and Brent are incrementally softer and around the mid-point of USD 71.71-72.62/bbl and USD 75.65-76.53/bbl parameters.
• Saudi Energy Minister says I keep telling speculators they will be "ouching" and they did hurt in April, I would tell them to watch out.
• Russian Deputy PM Novak says growth of Russian energy shipments to China at 40% in 2023, via Interfax.
• Spot gold slips as the USD remains underpinned though the yellow metal remains above Friday's USD 1954/oz trough; base metals similarly dented on the USD and with continued attention on China's recent sub-par metrics.
• Click here for more detail.

NOTABLE HEADLINES

• UK Chancellor Hunt will meet with food manufacturers today to ask for help from the industry to ease the pressure on households and steps up pressure on supermarkets to rein in soaring prices, according to FT.
• Hungary is accelerating discussions with Brussels to release nearly a third of its EU funding after a long stand-off, but officials warned funds will likely remain frozen because of differences over reform efforts, according to FT.

DATA RECAP

• UK PSNB Ex Banks GBP (Apr) 25.560B GB vs. Exp. 19.75B GB (Prev. 21.53B GB, Rev. 20.843B GB); PSNB, GBP (Apr) 24.739B GB (Prev. 20.709B GB, Rev. 20.022B GB)
• UK Flash Composite PMI (May) 53.9 vs. Exp. 54.6 (Prev. 54.9); Services PMI (May) 55.1 vs. Exp. 55.5 (Prev. 55.9); Manufacturing PMI (May) 46.9 vs. Exp. 48.0 (Prev. 47.8). "growth spurt is driving renewed inflationary pressures...these survey results are nothing but hawkish in suggesting the Bank of England has more work to do to quash stubbornly high inflationary pressures in the services economy.”
• French HCOB Composite Flash PMI (May) 51.4 vs. Exp. 52.0 (Prev. 52.4); Manufacturing Flash PMI (May) 46.1 vs. Exp. 46.0 (Prev. 45.6); Services Flash PMI (May) 52.8 vs. Exp. 54.0 (Prev. 54.6)
• German HCOB Composite Flash PMI (May) 54.3 vs. Exp. 53.5 (Prev. 54.2); Manufacturing Flash PMI (May) 42.9 vs. Exp. 45.0 (Prev. 44.5); Services Flash PMI (May) 57.8 vs. Exp. 55.3 (Prev. 56.0)
• EU HCOB Composite Flash PMI (May) 53.3 vs. Exp. 53.5 (Prev. 54.1); Manufacturing Flash PMI (May) 44.6 vs. Exp. 46.0 (Prev. 45.8); Services Flash PMI (May) 55.9 vs. Exp. 55.6 (Prev. 56.2). "The ECB "will have a headache with the PM price data. This is because selling prices in the services sector actually rose more than in the previous month."

NOTABLE US HEADLINES

• Fed's Kashkari (voter) said rates may have to rise from here and that he doesn't want to say that they are done hiking rates, while he noted that they may not raise rates as aggressively or quickly. Kashkari added he is confident the US can get back to a pre-pandemic economy and said they have a solid job market and are on track to reduce inflation.
• US President Biden said that he is optimistic they will make some progress on the debt ceiling and that they need a bipartisan agreement and sell it to constituencies, while he added that they need to cut spending and should look at tax loopholes and that the wealthy pay their fair share, according to Reuters. US President Biden later commented that he concluded a productive meeting with House Speaker McCarthy about the need to prevent a default and reiterated once again that default is off the table, while they will continue to discuss the path forward.
• US House Speaker McCarthy said after the meeting with President Biden that he felt they had a productive discussion but don't have an agreement yet and that staff will continue discussions with negotiators instructed to come back together and find common ground. McCarthy also noted the tone of the conversation was better than any previous time and believes they can get a deal done. Furthermore, he is confident that President Biden wants a deal, while they both agreed that they want to reach an agreement and will talk daily until they get this done.
• White House debt limit negotiators returned to Capitol Hill to resume talks but later declined to comment after the talks concluded for the night, according to Bloomberg.
• White House and GOP had reportedly agreed to cut excess COVID funding as talks progress, according to sources cited by Fox Business News prior to the Biden-McCarthy meeting.
• US Treasury Secretary Yellen reiterated that debt-limit measures could still run out as soon as June 1st and that it is highly likely cash will run out by early June, according to a statement from the Treasury Department.
• "Sources close to McCarthy said the House could pass a short-term boost if there was a deal and the Treasury Department needed a very brief patch to avoid default, But barring that, don’t expect it to happen", according to Punchbowl.
• US National Security Advisor Sullivan has reportedly asked and suggested that President Biden and Chinese President Xi speak on the phone in June and for in-person talks to occur in September, via SGH Macro. Before this, on May 25th/26th, China's Commerce Minister Wentao is to hold talks with US Commerce Secretary Raimondo and USTR Tai; reportedly, the Chinese side does not have particularly high hopes for this meeting. US and Chinese Defence Ministers are expected to speak on June 2nd-4th. Click here for details & context.
• China's new ambassador to the US is set to arrive in Washington to take up his position today, according to WSJ
• Click here for the US Early Morning Note.

GEOPOLITICS

• Twitter source noted a drone attack was said to have targeted the departments of the Ministry of Internal Affairs and FSB in Russia's Belgorod, while air raid alerts sounded in central and western Ukraine due to Shahed drone activity.
• Russia's Belgorod regional Governor said a counter-terrorism operation continues and a return to homes in the region's Gaivoron district is not possible yet, according to Reuters.
• Hungarian PM Orban says the nation will continue to block EU Ukraine aid and the 11th sanctions package; says Ukraine must stop backlisting OTP Bank.

CRYPTO

• Bitcoin is bid and has convincingly surmounted the USD 27k handle to a USD 27.47k peak as we await a busy US agenda where the debt ceiling, Powell and PMIs are all potential macro movers.

APAC TRADE

• APAC stocks were indecisive as participants digested the latest from the debt limit negotiations with the meeting between US President Biden and House Speaker McCarthy said to be productive but still lacked any major breakthrough.
• ASX 200 was kept afloat but with the upside capped by weakness in the consumer sectors and after Australia’s Flash Manufacturing PMI remained in a contraction.
• Nikkei 225 initially climbed to its highest level since August 1990 and was on course to match its longest win streak in around four years, before eventually deteriorating in afternoon trade.
• Hang Seng and Shanghai Comp. were subdued following Hong Kong’s failure to sustain the early tech-led momentum from China’s approval of 86 domestic online games in May, while the mainland was pressured after Chinese press reports noted expectations for the PBoC’s benchmark lending rates to remain unchanged for some time and after the US denied it was planning to lift sanctions on China's defence minister.

NOTABLE ASIA-PAC HEADLINES

• Chinese press reports stated that the PBoC's Loan Prime Rates are expected to remain unchanged for some time and noted the LPR faces little downside due to the economic recovery and banks' tight NIM.
• Russian PM Mishustin said on his visit to China that Russia-China ties will positively impact both countries and 2023 trade turnover between the countries could reach USD 200bln, according to TASS and RIA.

DATA RECAP

• Japanese Manufacturing PMI Flash SA (May) 50.8 (Prev. 49.5); Services PMI Flash SA (May) 56.3 (Prev. 55.4)
• Australian Manufacturing PMI (May P) 48.0 (Prev. 48.0); Services PMI (May P) 51.8 (Prev. 53.7)