US equity futures are lower with small-caps lagging, while Treasuries and the dollar rose as traders braced for a landmark day tomorrow that sees the release of both CPI data in the morning and then the Fed’s latest decision at 2pm ET. The crowded schedule sets up a crucial 36 hours for risk assets, including Bitcoin, which is currently getting hammered despite billions in ETF purchases in recent weeks, and is moving in the opposite direction to Treasury yields to an unusual degree. As of 7:50am, S&P futures were down 0.3%, near session lows while Nasdaq futures dropped 0.4%; both underlying indexes closed at record highs on Monday.

US Treasuries gained before inflation data and the Federal Reserve’s interest rate decision on Wednesday; bond yields are 3-5bps lower ahead of today’s 10Y auction and follows yesterday’s poor, tailing 3Y auction. The USD is stronger pre-mkt with both EUR and JPY weaker. French bonds tumbled the most since 2020 and the French-German yield spread blew out to October level following rumors that Macron could resign after his decision to call snap elections. Commodity markets are mostly lower with Ags finding a bid and natgas outperforming crude. Small Business Optimism is the macro data release today and even though it rose and beat expectations, coming in at 90.5, vs exp. 89.7, it will not be market-moving. As JPM notes, today’s pre-market setup is similar to yesterday but let’s see how many position adjustments are made into tomorrow’s CPI/Fed double feature as today sets up as the proverbial calm before the storm.   

In premarket trading, Mag7 and Semi stocks were lower. Among US single stocks, Apple were set for a second day of losses, after its much-anticipated AI announcement last night saw no major surprises. The firm is making a high-stakes bid to catch up with rivals in the booming AI market, and yesterday announced a new platform called Apple Intelligence. A partnership with OpenAI — in the works for months — was only briefly mentioned at the event; it failed to inspire traders and sparked an angry backlash from Elon Musk who said he would ban Apple devices from his companies. LLY was the standout gainer, rising 2% after an FDA advisory panel deemed the firm’s Alzheimer’s drug effective and recommended US regulatory approval. Here are some of the biggest US movers before the opening bell:

Calavo Growers rises 12% after the distributor of avocados and other produce posted 2Q profit and sales that topped estimates.
Cleveland-Cliffs slips 3% after JPMorgan downgrades its rating on the steel producer to neutral, citing concerns over free cash flow and shareholder returns.
DXC Technology rises 2% after Reuters reported Apollo Global and Kyndryl Holdings are in talks for a joint bid for the information technology services company.
General Motors rises 1% after announcing a $6 billion share buyback.
Target Hospitality sinks 28% after a Wall Street Journal report that the Biden administration is closing an Immigration and Customs Enforcement detention center in Dilley, Texas, that was used to jail migrant families who crossed the border illegally.
Yext falls 13% after the digital-media technology company cut its full-year revenue forecast.

Ahead of tomorrow’s busy calendar, where the market is focused on tomorrow’s CPI/FOMC double whammy, some bond traders are already turning their attention to next year. With sticky inflation raising the prospect of higher-for-longer interest rates through 2024, the big question in the fixed-income space is how to game out 2025 and beyond, heaping more attention on the Fed’s interest rate projections, aka the dot plot.

Meanwhile, European assets extended Monday’s rout as jitters over political upheaval in France continued. The euro edged lower and the Stoxx 600 fell for a third day. US equity futures dropped. Initially, it looked like some calm had returned to European markets on Tuesday after rising political risks rocked assets at the beginning of the week. But things took a turn throughout the day, with stocks sliding and French bonds remaining under pressure, pushing the 10-year spread over German bunds to the highest since October following rumors that President Emmanuel Macron was preparing to resign; while the rumors were swiftly denied, the selling in local bonds continued…

… and appears to have quickly spread to other regions too.

SPREAD BETWEEN ITALIAN AND GERMAN 10-YEAR YIELDS WIDENS TO 150 BPS, WIDEST SINCE FEBRUARY

The biggest moves were in French markets. The yield on 10-year notes jumped as much as 10 basis points to 3.32%, putting them on course for the biggest two-day increase since March 2020. The selloff has widened the spread over equivalent German bonds to 64 basis points, the highest since October on a closing basis. European stocks were also lower with energy and industrial goods and services gain while miners are the worst performers as copper and iron ore fall. Here are some of the biggest movers on Tuesday:

UCB gains as much as 5.6%, the most since February and to a record high, after JPMorgan raised its recommendation for the Brussels-listed biotech to neutral from underweight, betting on continued strong demand for UCB’s key Bimzelx drug.
Covestro shares gain as much as 7.6% after Bloomberg News reported the German chemical company is close to granting Adnoc access to in-depth due diligence in expectation of an improved takeover bid.
Oxford Instruments shares jump as much as 12% after the instrument maker delivered annual results ahead of expectations and outlined new medium-term growth targets that should keep investors happy, according to analysts.
Idox rises as much as 4.7% as analysts at Canaccord Genuity (buy) say that the British software company continues to deliver reliable growth and forecast stability.
Maersk and European shipping peers fall after several Asian peers notched double-digit declines in Tuesday trading as traders assess the impact of revised interest-rate paths and the geopolitical impact from the latest Israel-Gaza ceasefire plan. In the US, American dockworkers halted labor talks.
European Miners were the worst performers in Europe as they followed copper and iron ore prices lower, with both commodities weakened by concerns over Chinese demand.
Naturgy shares fall as much as 13%, the most since March 2020, after Taqa and Criteria Caixa ended talks to jointly acquire the Spanish utility.
GN said it will gradually wind-down its Elite and Talk product lines and lowered its financial forecast range. The shares fell as much as 9.7% in Copenhagen.
CBrain falls as much as 14% after ABG Sundal Collier downgraded the Danish software firm to sell from hold, quoting an “excessive” near-term valuation.

In the UK, an unexpected rise in the jobless rate boosted the outlook for rate cuts later this year. Traders are fully pricing in the first quarter-point reduction by November and see around a 40% chance of a second decrease the following month.  In a separate development, the country attracted over £104 billion ($132 billion) of orders for bonds in a record for gilt sales.

Earlier,  Asian stocks fell, as Chinese and Australian shares led declines as markets reopened following holidays. The MSCI Asia Pacific Index fell 0.5%, with BHP Group, Samsung Electronics and China Construction Bank among the biggest drags. Benchmark in mainland China fell to their lowest closing levels since April. Korean shares were among the few gainers in Asia. Slow travel growth over the Dragon Boat Festival holiday was the latest sign of weak consumer demand in China. Property woes in the country also continued to weigh on sentiment, despite signals of additional government support measures.

Hang Seng and Shanghai Comp. were pressured amid ongoing property sector concerns after a Hong Kong court issued a wind-up order to Chinese property developer Dexin China.
ASX 200 declined amid broad weakness across sectors and as miners led the descent.
Nikkei 225 bucked the trend as it benefitted from recent currency weakness.

“The recent weekend holiday didn’t see as strong consumption as the previous May Golden Week, and weekly property sales are weak,” said Xin-Yao Ng, director of investment at abrdn.

In FX, the Bloomberg Dollar Spot Index gained for a fourth day and was up 0.2% as investors positioned for the Fed’s policy decision on Wednesday at which officials are expected to scale back forecasts for a pivot; US CPI data will be released the same day. 

“The US dollar has bounced back, underpinned by widening monetary policy divergences,” Elias Haddad and Win Thin, strategists at Brown Brothers Harriman & Co., wrote in a note. “We expect the Fed to deliver a hawkish hold Wednesday”
Treasury 10-year yields slipped 4bps to 4.43%, tracking gains in European bond markets; the Department of the Treasury will auction $39 billion of 10-year debt on Tuesday, which follows the sale of three-year notes on Monday which drew a higher-than-expected yield. Traders see an 80% possibility that the Fed will start cutting rates in November, compared with 75% on Monday; they are pricing a total of 40bps of cuts by the end of the year

In rates, treasury futures extend advance in early US session, with yields near lows of the day, richer by up to 5bp across belly of the curve and outperforming European rates. US yields richer by 3bp to 5bp across the curve with belly-led gains steepening 5s30s spread by ~2bp vs Monday’s close. US 10-year yields around 4.43%, outperforming bunds in the sector by 2bp and French bonds by 10bps. Main focal point for Tuesday’s US session is $39 billion 10-year note auction, while in Europe French bonds continue to fall amid heightened political uncertainty following the European Parliament elections. Treasury coupon auction cycle resumes with $39b 10-year reopening at 1pm New York, concludes Thursday (after FOMC decision Wednesday) with $22b 30-year bond reopening; WI 10-year yield at around 4.425% is ~6bp richer than last month’s, which tailed by 1bp.

In commodities, oil held its biggest jump since March ahead of an OPEC report that will provide a snapshot on the market outlook. Crude surged on Monday as traders piled back into the commodity after the biggest weekly loss since early May.

The OPEC report will be followed by a Short-Term Energy Outlook from the US later on Tuesday, and a monthly release from the International Energy Agency on Wednesday.

Bitcoin slumped below $68K with Ethereum also sliding towards $3.5k, giving back some of its overnight advances. Crypto insiders are said to be meeting with US Senate staffers to try to resolve a surprise crypto policy push embedded in a recent Senate spending package that cleared the intelligence committee, according to CoinDesk.

Looking at today’s calendar, US economic data is empty for the session, while Fed officials are expected to refrain from commenting until after Wednesday’s policy announcement

Market Snapshot

S&P 500 futures down 0.1% to 5,365.50
STOXX Europe 600 little changed at 521.82
MXAP down 0.5% to 179.29
MXAPJ down 0.5% to 558.40
Nikkei up 0.2% to 39,134.79
Topix down 0.2% to 2,776.80
Hang Seng Index down 1.0% to 18,176.34
Shanghai Composite down 0.8% to 3,028.05
Sensex up 0.2% to 76,670.09
Australia S&P/ASX 200 down 1.3% to 7,755.38
Kospi up 0.2% to 2,705.32
German 10Y yield little changed at 2.67%
Euro little changed at $1.0760
Brent Futures up 0.1% to $81.73/bbl
Gold spot down 0.1% to $2,307.44
US Dollar Index little changed at 105.20

Top Overnight News

Elon Musk isn’t a fan of Apple’s AI announcement. He said he’d ban Apple devices from his companies if OpenAI’s software is integrated at the OS level, calling the tie-up a security risk. BBG
An aggressive market grab by low-cost Chinese retailers has delivered bumper earnings for some firms but has also intensified a bruising price war, exacerbating deflationary fears in the world’s second-largest economy. From coffee to cars to clothes, China’s discount retailers have cut prices on just about everything as they chase a consumer whose confidence has been battered by a property crisis, high unemployment and a gloomy economic outlook. RTRS
France’s National Rally expected to win the upcoming election but fall short of an absolute majority. RTRS
ECB’s Lagarde repeats that policy isn’t on a preset path and rates could stay on hold for more than one consecutive meeting. FT
UK labor report showed a rise in Apr unemployment (employment fell 139K vs. the Street -98K and the UR climbed to 4.4% vs. 4.3% in the prior period) while wages stayed elevated (+5.9% vs. the Street +5.7%). WSJ
Israel is ramping strikes against Hezbollah and Hezbollah-related targets in Syria, signs the country is “gearing up for a full-scale war” against the terror group in Lebanon. RTRS
Blackstone is targeting ~$10B in Japanese deals over the next few years as the country’s economy continues improving. Nikkei  
OpenAI dismissed speculation that Sarah Friar’s hiring means it is about to pursue an IPO. Market Watch
Advertising outlook increased by WPP’s GroupM to +7.8% for ’24 (ex-politics) vs. the prior estimate of +5.3% (although a big chunk of the increase was a function of how certain areas of the industry in China are measured). WSJ

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded with a negative bias after the choppy performance stateside where the S&P 500 and Nasdaq notched fresh record closes but the gains were capped ahead of the mid-week key events. ASX 200 declined amid broad weakness across sectors and as miners led the descent. Nikkei 225 bucked the trend as it benefitted from recent currency weakness. Hang Seng and Shanghai Comp. were pressured amid ongoing property sector concerns after a Hong Kong court issued a wind-up order to Chinese property developer Dexin China.

Top Asian News

China’s Auto Industry CPCA said China sold 1.72mln passenger cars in May, -2.2% Y/Y; said China’s pure EV exports saw a temporary decline in May amid Red Sea shipping issues alongside other factors; still have strong growth momentum despite disruptions in European markets.
China saw 110mln domestic tourist trips during the three-day Dragon Boat Festival holiday and official data showed that Chinese cross-border trips rose 45.1% Y/Y during the three-day holiday.
Hong Kong court issued a wind-up order to Chinese property developer Dexin China (2019 HK), while it was later reported that Dexin China suspended trading in Hong Kong.

European bourses, Stoxx 600 (-0.4%) began the session on a modestly firmer footing, though did succumb to slight selling pressure as the morning progressed, in a continuation of the downbeat mood in APAC trade overnight. European sectors are mixed, with the breadth of the market fairly narrow. Basic Resources is the standout laggard, given the broader weakness in metals prices. US equity futures (ES -0.2%, NQ -0.3%, RTY -0.7%) are modestly in the red, with price action tentative ahead of Wednesday’s key risk events, including the FOMC & US CPI.

Top European News

ECB’s Villeroy said rate reduction markets a “decisive orientation”; limited spill-over from Fed/ECB’s difference in timing. Fed policy should not greatly impact the ECB’s. Significant leeway to reduce rates before exiting restrictive territory. Monitoring actual inflation data, in particular for services but monthly figures will be volatile due to base effects on energy. “Noise” is not very meaningful and as such is more outlook driven. Will look more closely at inflation forecasts. Remains confident that the Bank will bring inflation to target by next year; will reach it with a soft, rather than hard landing.
ECB’s Simkus said it is too early to declare victory over inflation; rates can be cut more if ECB is sure the 2% inflation target will be met.
ECB’s Rehn said monetary policy has dampened price pressures; considerable progress has been made. ECB knows the inflation path is a bumpy road, but sees stabilisation ahead
France’s National Rally party and lawmaker Marion Marechal are in talks about potentially joining forces to oppose President Macron in the upcoming elections, according to Bloomberg.
Moody’s said France’s snap election is negative for France’s credit rating; said outlook and rating could move to negative if interest payments relative to revenue and GDP are seen to be significantly larger than peers.
French President Macron is said to be mulling potential resignations in the case of a possible right-wing victory in early parliamentary elections, according to News AZ.
French Elysee Palace has reportedly denied media reports suggesting that French President Macron might resign.
French President Macron is to hold a press conference on June 12 around 11:00 BST/ 06:00 EDT.

FX

USD is broadly steady vs. peers with DXY holding above the 105 mark and within yesterday’s 104.93-105.38 range; trade is contained ahead of Wednesday’s CPI/FOMC where focus will reside on the M/M core rate and any adjustments to the Fed’s FFR dots.
EUR is softer vs. the USD and ultimately still weighed on via the double-whammy of Friday’s NFP and the weekend’s EU parliamentary elections. For now, the pair is stuck on a 1.07 handle and holding above Monday’s 1.0732 low.
GBP is a touch softer vs. both the USD following UK jobs metrics which showed an unexpected uptick in unemployment, a larger-than-expected decline in employment, and mixed, but sticky wage growth. Cable ventured as low as 1.2714 but refrained from testing the 1.27 mark.
JPY is marginally building on the losses vs. the USD seen since Friday with USD/JPY now up to 157.38.
Antipodeans are both steady vs. the USD in quiet trade after managing to claw back some of Friday’s losses during yesterday’s session.
PBoC set USD/CNY mid-point at 7.1135 vs exp. 7.2724 (prev. 7.1106).

Fixed Income

USTs are firmer but ultimately unable to recoup much of the lost ground seen in the wake of Friday’s NFP release; price action has been tentative as focus lies on the US CPI and FOMC on Wednesday. The Sep’24 UST contract continues to hold above the 109 mark and did catch a recent bid in tandem with news that French President Macron is said to be mulling potential resignations in the case of a possible right-wing victory in early parliamentary elections, according to News AZ – although this was later denied. A record Gilt sale also played a factor.
European debt markets are slightly more contained, though OATs remain under pressure with Moody’s noting that the snap election called by Macron is negative for the nation’s credit rating. Sep’24 Bund sits towards the bottom end of yesterday’s 129.52-130.27 range.
Gilts are outperforming peers on account of the latest UK jobs data, which showed an unexpected uptick in unemployment and mixed, but sticky wage growth. Gilts are currently higher by around 35 ticks, taking another leg higher after UK got a record GBP 104bln in orders for its Gilt sale, via Bloomberg; beating the prior record of GBP 100bln; pricing +4bps over UKT, pricing expected later on Tuesday.

Commodities

Crude is slightly softer after spending much of the session flat in what has been a catalyst thin session, except for news that Hamas is reportedly ready to negotiate the details of the ceasefire following yesterday’s UNSC vote; oil markets were unreactive to the news. Brent Aug trades within 81.37-82.02/bbl.
Bullish price action across nat gas futures with US Henry Hub front-month back above USD 3/MMBtu for the first time since January. The rise in US prices is partly attributed to expectations of a tightening market in the medium-to-long term.
Subdued trade across precious metals despite relatively steady markets elsewhere aside from metals. Spot gold is flat/modestly lower while spot silver and spot palladium see deeper losses to the tune of -1.5 to 1.7%.
Considerable weakness across base metals with desks citing recent developments of US rate cuts expectations coupled with high Chinese inventories whilst a softer CNY also reduces the purchasing power of Chinese buyers.
India Oil Minister said India state refiners in talks for long term oil import deal with Russia.
OPEC MOMR to be released at 12:30 BST/ 07:30 EDT.

Geopolitics

Israel conducted raids on the Hosh al-Sayed Ali area of the Hermel district near the Lebanese-Syrian border, according to Al Jazeera.
US State Department said Secretary of State Blinken discussed with Israeli Defence Minister Gallant on Monday the Gaza ceasefire proposal.
“Hamas ready to implement ceasefire agreement: Senior official”, via IRNA; Senior Hamas official Mahmoud al-Mardawi said that the Hamas movement is ready to cooperate for the implementation of the ceasefire agreement. According to the Palestinian Samaa News Agency, al-Mardawi made the remarks in reaction to a United Nations Security Council (UNSC) resolution; Wider reporting: Hamas agreed to Security Council ceasefire resolution and is ready to negotiate details, according to a Hamas official cited by Reuters.
“Israeli media: About 40 rockets were launched from southern Lebanon and one landed in the Upper Galilee”, according to Sky News Arabia.
US President Biden is to lift the ban on allowing a controversial Ukrainian unit to use US weapons, according to The Washington Post.
South Korean military said it fired warning shots after North Korean soldiers briefly crossed the border on Sunday, according to Yonhap.

US Event Calendar

6:00: May small business optimism 90.5 Est. 89.7, Prior 89.7

DB’s Jim Reid concludes the overnight wrap

As I cry in a corner and hang on tight to my last day in my 40s, its fair to say its been a dramatic couple of weeks for elections with each of them having their own major surprises in a year with the largest % of the global population ever going to national elections. As we discussed yesterday the European Parliamentary elections broadly went as the polls suggested (a slight move to the right but with the centre holding) but that the big news was President Macron calling a snap legislative election. This led to sizeable losses across Europe with France at the epicentre, albeit taking Italy along for the ride. But the declines were clear across the rest of the continent, with governing parties experiencing defeats in several countries, including Germany as well.

When it came to markets, French bonds were the worst-affected, with their 10yr yield surging by +12.8bps yesterday to 3.22%. That’s their highest level since November, and the Franco-German 10yr spread also widened by +7.6bps, which is its biggest daily widening since July 2022. Moreover, equities slumped, with the CAC 40 (-1.35%) falling to its lowest level since February, though it did recover by about 1% from intra-day lows. Banks were among the worst performers, including Société Générale (-7.46%) and BNP Paribas (-4.76%). The STOXX 600 closed -0.27% lower, having traded -0.88% intra-day, while the DAX and the FTSE MIB both fell back by -0.34%. As we’ll see in more detail later, the S&P 500 (+0.26%) ignored the European noise and hit a new record high.

The French losses come against the backdrop of recent jitters around their public finances, and it was only at the end of May that S&P downgraded their credit rating from AA to AA-. Remember as well that France hasn’t run a budget surplus since 1974, and its budget deficit stood at 5.5% of GDP in 2023. In terms of what’s next, the first round of the parliamentary election is on June 30, with the second round taking place the following weekend on July 7. See our economists’ note for more on the potential implications of the snap vote here. So that’s another busy political calendar that week, as the votes come either side of the UK election on July 4. However the UK is for once looking like a beacon of potential stability and it was noticeable that GBP rose +0.52% against the Euro yesterday to 1.184, its highest since August 2022. The euro also weakened -0.44% against the dollar.

The uncertainty over the snap parliamentary vote in France certainly heightened concern over the EP election results but the reality is that they were broadly in-line with expectation. In Germany, Chancellor Scholz’s SPD had their worst-ever performance in a European election, with just 14% of the vote. By contrast, the AfD came in second place with 16% of the vote, up from 11% in 2019. Meanwhile in Italy, Prime Minister Meloni’s Brothers of Italy party came first, with provisional results placing them on 29% of the vote. Maybe markets suddenly woke up to the prospect of populists having greater influence in Europe’s policy making, just as election uncertainty persists in the US.

The general concerns ignited a Europe-wide sovereign bond selloff, with yields on 10yr bunds (+5.2bps) and BTPs (+11.7bps) both rising sharply as well. Indeed, Italian 10yr yields were up to 4.07%, their highest since December, whilst 10yr bund yields closed at 2.67%, which is just shy of their 2024 closing high of 2.69%. It is an open question how much the Italian spread widening reflected Italy’s general position as being more sensitive to European stress versus reflecting more specific concerns that the policy-making of Italy’s government could take a more populist turn if a right-wing government is formed in France.

The bond selloff in Europe got further momentum thanks to comments from ECB officials, who struck a cautious tone on future rate cuts. For example, Slovakia’s Kazimir said that September “ will be the right moment to reassess our stance and decide whether we need to adjust our monetary policy settings.” So the implication there is that the next meeting in July would be too soon. Separately, Bundesbank President Nagel said that “ I don’t see us on a mountain top from which we will inevitably come down”, and instead he viewed it as “a ridge where we still have to find the right point for a further descent.” Quite poetic! Finally, around the European close, Lagarde said in an interview that “We’ve made the appropriate decision, but it doesn’t mean interest rates are on a linear declining path”. Those comments added to the sense that the ECB weren’t going to rush future rate cuts, and that narrative got further support from another rise in commodity prices yesterday. Indeed by the close, Brent crude oil prices (+2.52% to $81.63/bbl) posted their largest gain since March a nd they have now fully erased the decline seen in the aftermath of the OPEC+ meeting on June 2.

Back to politics, it’s worth noting that the European Parliament elections only mark the beginning of the EU’s new institutional cycle, and several important appointments now need confirming. Most notably, there’s the position of European Commission President, where incumbent Ursula von der Leyen is seeking a second term. What happens now is the EU leaders will propose a presidential candidate to the Parliament that takes account of the election results, and a majority of MEPs then need to vote in favour of the new Commission President. Von der Leyen’s political group, the centre-right European People’s Party, is still the largest in the parliament, so that leaves her in a good position on paper. But she’ll still need a majority of MEPs to vote in favour, so will need to put together a larger coalition of political groupings. Last time she only exceeded the majority threshold by 9 votes, which is done by a secret ballot, so this could well be very close. The next step is an EU leaders summit on June 17, where they’re set to discuss appointments for the next institutional cycle. See Marion Muehlberger’s note here on the EP elections and what happens next.

Over in the US, markets were much more subdued yesterday, with the focus now turning to the double excitement tomorrow of the CPI release and the Fed’s decision (with the latest dot plot). Treasuries did sell off in sympathy with Europe, but the moves were relatively contained, and the 10yr yield was up +3.4bps at 4.47%. For equities, the S&P 500 (+0.26%) managed to eke out another all-time high. The NASDAQ (+0.35%) and the Magnificent 7 (+0.30%) also posted new record highs, even as Apple slid by -1.91% after unveiling long-awaited new AI features and a tie up with OpenAI.

Ahead of tomorrow’s CPI release, one data point that was of interest was the New York Fed’s Survey of Consumer Expectations. It showed that 1yr inflation expectations were down a tenth in May to 3.2%, but 5yr expectations were up two tenths to a 9-month high of 3.0%. There was also growing optimism about the stock market, with the mean probability that US stock prices would be higher in a year up to a three-year high of 40.5%.

Asian equity markets are mostly lower this morning with Chinese stocks underperforming. The Hang Seng (-1.67%) is leading losses with the CSI (-1.08%) and the Shanghai Composite (-1.07%) also lower after returning from the holiday yesterday. Elsewhere, the S&P/ASX 200 (-1.49%) is also notably lower (again after a holiday) whilst the Nikkei (+0.30%) and the KOSPI (+0.41%) are higher. US equity futures are down around a tenth of a percent and 10yr US yields have reversed some of yesterday’s move falling -1.8bps. There is a 10yr US auction today so one to watch in terms of the demand.

In FX, the Japanese yen (-0.11%) is losing ground for the third consecutive day, trading at 157.20 against the dollar ahead of the BOJ’s policy decision on Friday and the edging back closer to the recent lows. The next major event in the region is tomorrow’s Chinese CPI data.

To the day ahead, and data releases include UK unemployment for April, and in the US there’s the NFIB’s small business optimism index for May. From central banks, we’ll hear from the ECB’s Simkus, Villeroy, Rehn, Holzmann, Lane and Elderson.