MNI EUROPEAN OPEN: Risk-Negative Weekend Headline Flow Sets The Tone In Asia

EXECUTIVE SUMMARY

• FED'S BARKIN SAYS HIKES NOT ON SET 50BP COURSE (MNI)
• ECB’S LAGARDE SAYS STAGFLATION ISN’T THE BASE CASE (DELO)
• ECB’S REHN WANTS JULY RATE HIKE AS SECOND-ROUND EFFECTS SEEN (BBG)
• G-7 LEADERS COMMIT TO BANNING IMPORTS OF OIL FROM RUSSIA (BBG)
• CHINA PREMIER WARNS OF ‘GRAVE’ JOBS SITUATION AMID LOCKDOWNS (BBG)
• LOCKDOWN SPECTRE CONTINUES TO LOOM OVER CHINA
• EYES ON PUTIN’S VICTORY DAY ADDRESS

Fig. 1: Chinese Exports USD Terms Vs. CNH/USD (Y/Y %)

Source: MNI - Market News/Bloomberg

UK

BOE: Former chief economist of the Bank of England Andy Haldane has accused it of acting too slowly to curb inflation – and warned steep price rises could last years. He said it faced its 'stickiest situation' since it became independent in 1997. Haldane, 54, who left last year, said acting earlier 'would have saved the need' for such sharp interest rate rises. He told The Sunday Telegraph that upward pressure on prices would 'prove more persistent' than thought. (The Daily Mail)

POLITICS: That the government got a hammering at local elections held in the midst of the worst cost of living crisis for a generation is not surprising. But talk of Boris Johnson’s defenestration after Thursday has been muted because Labour failed to make the most of what seemed like an open goal. The Tories lost more than a quarter of the near-2,000 seats they were defending in England, Scotland and Wales. Labour were far from the only beneficiaries. The Lib Dems advanced strongly in England, and the Green Party more than doubled its councillor numbers. This pincer effect should worry Tory strategists. It suggests that some electors have worked out how to cast their vote in a way that most damaged the party’s chances. That would be dangerous if the habit became ingrained as the government tries to convince voters it has both empathy with and answers to the problems they face. In an analysis for The Sunday Times, we have examined seven million local election votes cast across 137 councils. We have extrapolated a “national equivalent vote” of how the parties would have fared if these elections had taken place countrywide. This puts the Tories on 33 per cent, much lower than at last year’s local elections or the 2019 general election, and four points down on comparable contests in 2018. Labour is on 35 per cent, a slight decline on four years ago. This equates to a seven percentage point swing from the Tories to Labour since December 2019. Repeated uniformly at a general election, these figures would lead to a hung parliament. The Lib Dems, who usually perform more strongly at local level, are five points up on the general election, suggesting that they could return more MPs, mainly at the expense of the Tories. (Sunday Times)

POLITICS: The Liberal Democrats refused yesterday to rule out a post-election pact with Labour as a cabinet minister called on Boris Johnson to address the threat to the Conservative “blue wall”. (The Times)

POLITICS: Boris Johnson will reshuffle his cabinet before the summer recess, according to allies of the prime minister. Following dismal local election results for the Conservatives, a reshuffle is not thought to be imminent. However, allies of the PM told Sky News he is expected to change his top team before the summer recess, which is currently set to begin on 21 July. (Sky)

POLITICS: Michael Gove has suggested that falling levels of home ownership were a key factor in the Conservatives’ heavy local election losses. The levelling up and housing minister said more had to be done to get Britons on the property ladder, noting the party’s defeats to Labour in London. “There is a particular challenge for us in London and I think that challenge in London relates to ... homeownership,” Mr Gove told The Sunday Telegraph.Home ownership has fallen from 51 per cent in 1989 to 28 per cent in 2019 among 25 to 34-year-olds. “I think that for young people in London, there is a responsibility on the incumbent government to address some of the factors that have made it more difficult for them to own their own home,” Mr Gove said. He added: “There are people who are perfectly capable of servicing a mortgage who are paying more in rent than they would for their mortgage. That is wrong.” (The Independent).

POLITICS: Sir Keir Starmer was facing a crisis on two fronts last night as a witness prepared to tell police the Labour leader’s lockdown curry had broken pandemic rules and a leaked document appeared to show the gathering had been planned. Starmer has claimed the takeaway was order spontaneously between meetings. A source who was present when the Labour leader was filmed enjoying a late-night beer with activists in Durham claims Starmer did not return to work after eating. They also accused some in attendance, including the local Labour MP Mary Foy and her staff, of not working during the event and being there only to socialise. (Sunday Times)

BREXIT: The Prime Minister is promising to deliver a "super seven" of Brexit Bills which will cut red tape and "unnecessary barriers inherited from the EU. (BBG)

BREXIT: Fixing the Northern Ireland Protocol "cannot be put off", the deputy prime minister has said amid fears that progress on power sharing will remain stalled after last Thursday's elections. Dominic Raab told Sky News' Sophy Ridge on Sunday that stability was being "imperilled" by problems with the protocol, which governs Northern Ireland's post-Brexit trading arrangements. (Sky)

BREXIT: Liz Truss faces Cabinet opposition to her plans to rip up the Northern Ireland Protocol, The Telegraph can reveal, despite claims it could help to secure a devolved government in the province. (Telegraph)

BREXIT: Britain’s busiest port has warned that thousands of holidaymakers and lorry drivers face the worst border chaos yet later this year when the EU introduces onerous passport checks on UK soil. (Telegraph)

NORTHERN IRELAND: British ministers have rejected claims that Sinn Féin’s election victory in Northern Ireland heralds the break-up of the UK, in spite of the nationalist party’s push for a referendum on a united Ireland within five years. Brandon Lewis, Britain’s Northern Ireland secretary, on Monday begins the painstaking process of trying to coax pro-UK unionists to join the region’s government, which now has a pro-Irish unity party claiming the role of first minister for the first time. Lewis is threatening to unilaterally rip up post-Brexit trading arrangements for Northern Ireland that are hated by unionists, in an attempt to bring the Democratic Unionist party — which finished second in Thursday’s elections behind Sinn Féin — into the region’s power-sharing executive. But British ministers were adamant that Sinn Féin’s emergence as the largest party at Stormont did not make it inevitable that a referendum could soon be held on whether to transfer rule over Northern Ireland from London to Dublin. (FT)

ENERGY: UK households struggling with surging energy costs are being tempted into “buy now, pay later” financing schemes to spread out payments on their electricity and gas bills as the cost of living crisis deepens, according to consumer groups. Energy and debt advice groups have warned the “really worrying” development is a sign that individuals and families are having to resort to increasingly “desperate” measures to cover basic expenses. Energy Support and Advice UK, which runs a Facebook-based advice service for consumers worried about their bills, this week issued a warning on its site to treat “buy now, pay later” (BNPL) offers to help with rising energy costs with “extreme caution” after detecting an increasing number of posts about such financing arrangements. (FT)

ENERGY: One of Britain’s biggest energy suppliers has warned households to brace for a further rise of more than £900 in their annual bills this year and appealed to the government to enter emergency talks over tackling the “crisis” of soaring electricity and gas costs. ScottishPower said it expected Britain’s energy price cap to go up by about 47 per cent to an average of £2,900 a year per household when it is next adjusted by regulator Ofgem in October. The price cap was increased by 54 per cent to £1,971 a year in April, reflecting sharp increases in wholesale gas and electricity prices that began last year following concerns over gas supplies in Europe. It dictates bills for more than 22mn households not on fixed-price deals and is currently recalculated twice a year. (FT)

EUROPE

ECB: Stagflation isn’t the most likely economic outcome for the euro area, even as the war in Ukraine slows growth and speeds inflation, according to European Central Bank President Christine Lagarde. “Stagflation isn’t our baseline scenario presently,” Lagarde told the Slovenian newspaper Delo in an interview published Saturday. “While extraordinarily large uncertainty could cause a slowdown in economic growth accompanied by high inflation, the current situation can’t be compared to that of the 1970s.” Lagarde reiterated that based on the data at hand, net asset purchases are expected to end “at the beginning of the third quarter.” Asked about interest rates, the ECB president said officials will keep “all options open” and progress gradually. (BBG)

ECB: The European Central Bank should start raising borrowing costs in July to prevent inflation expectations becoming de-anchored, said Governing Council member Olli Rehn. “We are seeing signs of second-round effects,” Rehn said in an interview in Salzburg, Austria, where he attended the Global Europe seminar. “It’s important that we send a signal that these higher inflation expectations we are currently witnessing will not become entrenched.” The Finnish central bank chief said it’s “reasonable that we will rather sooner, in my view in July, start raising rates in line with our normalization of monetary policy. And would expect that when autumn comes, we would be at zero.” (BBG)

ECB: The European Central Bank may have to raise interest rates up to three times this year to combat higher inflation, ECB Governing Council member Robert Holzmann said in an interview with Austrian newspaper Salzburger Nachrichten. Holzmann said any such rate hikes would still leave borrowing rates significantly below historical averages. Central bankers worldwide are struggling to corral inflation rates that have surged because of the war in Ukraine and the global pandemic. “I think it would be appropriate to take at least two or even three steps,” Holzmann said in reference to raising interest rates. “These could be smaller ones, like 0.25 percentage point each. If this were to happen by December, it would have the effect that by 2023 the deposit rates for banks, which are now minus 0.5 percent, would be in positive territory,” said Holzmann, who also is head of Austria’s central bank. (POLITICO)

GERMANY: German Chancellor Olaf Scholz’s Social Democrats suffered their first defeat in a regional election since he took office in December, tumbling by some 12 percentage points in the state of Schleswig-Holstein while the Christian Democratic Union gained, according to exit polls. The CDU, the main opposition party at the national level, was projected to take 43% of the vote in the northern region on Sunday while the SPD slumped to about 15.5%, which would be its worst result yet in the state of 2.9 million people, ARD public television projected. (BBG)

NETHERLANDS: Technology companies including ASML Holding NV and Adyen NV called on the Dutch government to maintain a tax break that seeks to attract expatriates to the Netherlands. Ingrid Thijssen, head of the Confederation of Netherlands Industry and Employers, said the government for budget reasons is considering shrinking or scrapping a rule that exempts 30% of an expat’s salary from income tax for five years. (BBG)

• Fitch affirmed the Czech Republic at AA-; Outlook changed to Negative
• Fitch affirmed Portugal at BBB; Outlook changed to Positive
• Moody's affirmed Norway at Aaa; Outlook Stable
• Moody's upgraded Ireland to A1; Outlook Positive

U.S.

FED: Two of the Federal Reserve’s most hawkish policy makers defended the central bank on Friday against charges that it had fallen well behind the curve in fighting inflation. Fed Governor Christopher Waller and St. Louis Fed Bank President James Bullard argued that critics don’t take enough account of the tightening of financial conditions that the Fed engineered even before it began raising interest rates in March. “Credible forward guidance means market interest rates have increased substantially in advance of tangible Fed action,” Bullard said in remarks prepared for a conference organized by the Hoover Institution at Stanford University. “This provides another definition of ‘behind the curve,’ and the Fed is not as far behind based on this definition.” (BBG)

FED: MNI INTERVIEW: Fed's Barkin Says Hikes Not On Set 50BP Course

• Federal Reserve Bank of Richmond President Tom Barkin told an MNI podcast Friday interest rate increases are not on a preset course and he would like to see interest rates on a path to normal that is as fast as feasible, backing this week's historic FOMC decision to raise the fed funds rate 50bps, while not ruling out the potential for a supersized 75bp increase if needed. Given that inflation remains uncomfortably high, broad-based, and persistent and with demand extremely strong, raising rates by 50bps was "pretty straightforward," Barkin said in his first public comments after the FOMC meeting, backing the Committee's move - on MNI Policy MainWire now, for more details please contact sales@marketnews.com.

INFLATION: President Biden will give remarks on inflation Tuesday, a White House official said in an emailed statement. “He’ll detail his plan to fight inflation and lower costs for working families, and contrast his approach with Congressional Republicans’ ultra-MAGA plan to raise taxes on 75 million American families and threaten to sunset programs like Social Security, Medicare, and Medicaid,” the statement said. (BBG)

BANKING: The impact on U.S. banks from Russia’s invasion of Ukraine has been limited, the Federal Reserve said in a report on Friday. While some American lenders have started to exit the region, the overall impact on their operations has been moderate, the central bank said in its semiannual Supervision and Regulation Report. Still, the conflict has prompted banks to bolster cyber defenses, the Fed said. (BBG)

OTHER

GLOBAL TRADE: Commerce Secretary Gina Raimondo reiterated her pledge that the agency would move as quickly as possible to advance a trade investigation that is disrupting the domestic solar industry. “This case has my attention, we are focused on it, and we’re doing everything we can to move it as swiftly as we can in the confines of the law,” Raimondo said in a Friday interview with Bloomberg Television, a day after calling the issue an “urgent” matter. “Any place that we can accelerate within the bounds of the law, we are doing that.” (BBG)

GLOBAL TRADE: Members of Congress will meet Thursday to open negotiations on a compromise measure that would fund $52 billion in semiconductor manufacturing subsidies and boost U.S. competitiveness with Chinese technology, a source told Reuters. (RTRS)

GEOPOLITICS: The director of the CIA said that Chinese president Xi Jinping has been “unsettled” by the war in Ukraine, which had demonstrated that the friendship between Beijing and Moscow had “limits” at a time when western allies were moving closer together. Speaking at the FT Weekend Festival in Washington on Saturday, Bill Burns said the “bitter experience” of the first 10 to 11 weeks of the conflict had come as a surprise to the Chinese leadership and may be affecting its calculations with respect to Taiwan. “It strikes us . . . that Xi Jinping is a little bit unsettled by the reputational damage that can come to China by the association with the brutishness of Russia’s aggression against Ukrainians [and] unsettled certainly by the economic uncertainty that’s been produced by the war,” Burns said, adding that Xi’s “main focus” was on “predictability”. (FT)

GEOPOLITICS: Finland will decide on whether to apply for NATO membership this month, its leader said, hinting at a historic change in the Nordic country's long-held position of neutrality. "We are now discussing whether we should become a member of NATO or not," Prime Minister Sanna Marin said in an exclusive interview with Nikkei Asia earlier this week, adding the country will make a decision probably "this month." Local media reported the decision could come as soon as Thursday, citing anonymous government sources. (Nikkei)

BOJ: Bank of Japan (BOJ) policymakers remained unwavering in their resolve to keep massive monetary stimulus, even as some saw signs of change in the country's low-inflation environment, minutes of their March policy meeting showed on Monday. Several in the nine-member board said some big firms were raising wages and companies were more eagerly passing on rising raw material costs to households, which could put upward pressure on consumer inflation, the minutes showed. But most others in the board warned of heightening risks to Japan's economy from the Ukraine crisis that would keep inflationary pressure subdued, the minutes showed. "Unlike the United States and the United Kingdom, Japan was not in a situation where the inflation rate would likely exceed the BOJ's 2% price target in a sustained manner," some members were quoted as saying in the minutes. "It was therefore important for the BOJ to continue with monetary easing to support the economy's recovery from the pandemic," they said. (RTRS)

BOJ: Seichi Shimizu, who oversaw the Bank of Japan's 2021 policy review and its monetary easing during the COVID-19 pandemic, has been promoted as one of the central bank's six executive directors, the institution said on Monday. Appointed to his new position by the government, Shimizu will advise the nine-member board on several areas, including the BOJ's analyses of the banking sector, according to a statement by the central bank. (RTRS)

AUSTRALIA: Australia’s center-right Liberal National coalition government has slipped further behind the opposition Labor party in opinion polling, as campaigning ramps up with less than two weeks left before the national election. A new opinion survey by Newspoll published by The Australian newspaper on Sunday showed Labor leading the government by 54% to 46%, as early voting was due to begin on Monday at pre-polling stations across Australia. (BBG)

AUSTRALIA: Labor has increased its lead on the back of the Reserve Bank of Australia's decision to lift interest rates, giving Scott Morrison just two weeks to close a sizeable gap. With pre-poll voting to start on Monday and the government to ramp up its attack ads, the latest The Australian Financial Review-Ipsos poll shows Labor could win government in its own right if the numbers hold. Labor's primary vote has inched up 1 percentage point to 35 per cent and the Coalition's has fallen 3 points to 29 per cent. The Greens remain steady at 12 per cent, One Nation is on 4 per cent, the United Australia Party is on 3 per cent, others are on 10 per cent and 7 per cent are undecided. This gives Labor a two-party preferred lead of 52 per cent to 40 per cent for the Coalition, with 8 per cent undecided. That represents a two-party swing towards Labor of 2 points since the last poll a fortnight ago. (Australian Financial Review)

NEW ZEALAND: Fonterra, the world’s biggest dairy exporter, reduced its forecast payment to its New Zealand farmers due to weaker global demand. The payment for the 2021-22 season will be between NZ$9.10 and NZ$9.50 per kilogram of milksolids, the Auckland-based company said Monday. The NZ$9.30 midpoint is 30 cents lower than its previous guidance. The change “is due to a number of recent events which have resulted in short-term impacts on global demand for dairy products -- in particular, the lockdowns in China due to Covid-19, the economic crisis in Sri Lanka and the Russia-Ukraine conflict,” Chief Executive Officer Miles Hurrell said in a statement. “We’re seeing the impact of multiple events. Coupled with inflationary pressures, it’s not surprising to see buyers being cautious.” (BBG)

SOUTH KOREA: The incoming government of President-elect Yoon Suk-yeol is expected to announce an extra budget proposal estimated at some 34-36 trillion won (US$26.8-28 billion) later this week in its efforts to support merchants hit hard by the pandemic, officials said Sunday. The finance ministry plans to unveil details about this year's second extra budget this week after Yoon takes office Tuesday, according to government officials. The now-dissolved transition team earlier said the new government aims to spend 33.1 trillion won or more to fully compensate the losses of micro business owners. (Yonhap)

NORTH KOREA: South Korean President-elect Yoon Suk-yeol has said he is willing to meet with North Korean leader Kim Jong-un, but any talks should be made only when they would produce tangible results on the North’s denuclearization or cross- border exchanges. “There is no reason to shun meetings (with Kim). But if such meetings are only for show and fail to make practical results on the denuclearization and our economic assistance to the North, they will not be helpful for denuclearizing the North and advancing the inter-Korean relationship,” Yoon said in a recent interview with the Voice of America (VOA) reported Saturday. (Yonhap)

NORTH KOREA: North Korea fired a ballistic missile from a submarine on Saturday, South Korea said, an escalation just before the inauguration of a South Korean president who has vowed to take a hard line against the North and the visit of the U.S. president. South Korean military said North Korea fired what is believed to be a submarine-launched ballistic missile (SLBM) into the sea off its east coast around 0507 GMT on Saturday from near Sinpo, where North Korea keeps submarines as well as equipment for test-firing SLBMs. Japan also said the projectile was a short-range ballistic missile. Defence Minister Nobuo Kishi said North Korea's recent development in nuclear missile-related technology and repeated launches of ballistic missiles threatened the region and the international community. (RTRS)

HONG KONG: John Lee has been named Hong Kong's new leader, after a closed voting process in which he was the sole candidate. His appointment is being widely seen as a move by the Chinese government to tighten its grip on the city. Known as a staunch Beijing supporter, Mr Lee oversaw the sometimes violent crackdowns on pro-democracy protestors in 2019. Mr Lee replaces outgoing chief executive Carrie Lam, who had served since 2017. (BBG)

ASIA: Japanese Prime Minister Fumio Kishida is arranging his attendance at the Shangri-La Dialogue Asian security summit in Singapore on June 10-12 to foster an understanding of Japan's defence buildup, Nikkei newspaper reported on Saturday. The Japanese premier's appearance at the security forum would be the first since 2014 by Shinzo Abe, the paper said. (RTRS)

BRAZIL: Luiz Inacio Lula da Silva officially launched his bid to return to Brazil’s presidency on Saturday more than a decade after he left office. The widely expected announcement, marked by an official event in Sao Paulo, kicks off a new phase of the campaign, in which Lula and his running mate Geraldo Alckmin will start traveling across the nation trying to gather broad support to defeat President Jair Bolsonaro in the October vote. (BBG)

RUSSIA: President Vladimir Putin may divulge his next steps in the invasion of Ukraine on Monday when he is due to speak at Russia’s May 9 Victory Day parade marking the anniversary of Nazi Germany’s surrender in 1945. (BBG)

RUSSIA: Ukraine’s Ambassador to the U.S. said Sunday that the nation is making preparations ahead of Russia’s Victory Day. “We know that there are no red lines for the regime in Moscow, so we are preparing for everything,” Oksana Markarova said Sunday on CBS’ “Face the Nation.” “We can count that Putin and imperialistic Russia will do everything bad they can possibly try to do. The question is, are we all prepared — the civilized world — to do everything possible to defend our democracy and freedom,” she said. (CNBC)

RUSSIA: Pushback from Kyiv’s forces northeast of Kharkiv “is making significant progress and will likely advance to the Russian border in the coming days or weeks,” according to the Institute for the Study of War. The U.S.-based think tank said the offensive “likely intends to push Russian artillery away from Kharkiv city and drive to the border” of Belgorad oblast in Russia. (BBG)

RUSSIA: Ukrainian troops retreated from the eastern Ukrainian city of Popasna, the governor of Luhansk region said on Sunday, confirming previous reports that it had been taken. The head of Russia's republic of Chechnya, Ramzan Kadyrov, had said on Sunday his troops had taken control of most of Popasna. Luhansk Governor Serhiy Gaidai told Ukraine television that Ukrainian troops had retreated to take up more fortified positions, adding: "Everything was destroyed there." (RTRS)

RUSSIA: All women, children and elderly have been evacuated from the Azovstal steel mill in Mariupol, Ukrainian deputy prime minister Iryna Vereshchuk said on Saturday without elaborating. (BBG)

RUSSIA: Speaking in a lengthy online press conference on Sunday, an intelligence officer of the Azov regiment holed up in the southeastern port city’s massive Azovstal steel factory said surrender would amount to suicide. He said they had enough food and weapons to hold out a while yet. Describing their increasingly grim, and likely ultimately hopeless, circumstances, Illia Samoilenko also made clear his bitterness with the Ukrainian government in Kyiv. It had, he said, failed in its defense of southern Ukraine, where Russia made much faster progress than in the north, and had abandoned Mariupol’s garrison to its fate. Samoilenko said aerial and artillery bombardment of Azovstal continued on Sunday and had escalated since the civilians were evacuated. He also said Russian forces were sending in small groups of around 100 ground troops to try and seize the plant. “We are ready,” Samoilenko said, when asked if fighting had begun in the tunnels. At the same time, he proposed a military rescue he acknowledged would take months to execute against well-established Russian defenses. He called on nations to stop being afraid of Russia and devise a way to ensure the regiment’s safe evacuation to Ukrainian-held territory. (BBG)

RUSSIA: Ukraine will only reenter peace talks with Russia if the the Kremlin guarantees the restoration of preinvasion borders and returns thousands of Ukrainians who were forcefully evacuated to Russia, Ukrainian President Volodymyr Zelensky said Friday. Zelensky left open the possibility of a peace settlement and said "not all the bridges are destroyed" between Russia and Ukraine. Russian President Vladimir Putin has previously promised to continue Russia's unprovoked invasion "until its full completion." Zelensky's requirements for a peace settlement directly conflict with Russia's stated military goals for its invasion, which includes full control of southern Ukraine and the country's Donbas region. During an online forum organized by the British think tank Chatham House, Zelensky said Ukraine seeks membership in the European Union and accountability for war crimes committed throughout the invasion. (Axios)

RUSSIA: U.S. first lady Jill Biden made an unannounced visit to western Ukraine on Sunday, holding a surprise Mother’s Day meeting with the nation’s first lady, Olena Zelenska, as Russia presses its punishing war in the eastern regions. Biden traveled under the cloak of secrecy, becoming the latest high-profile American to enter Ukraine during its 10-week-old conflict with Russia. (AP)

RUSSIA: Linda Thomas-Greenfield, U.S. ambassador to the United Nations, said it isn’t necessary for the Biden administration to designate Russia as a state sponsor of terrorism, arguing that Russia has already “defined their role on that list.” “They are carrying out terror acts against the Ukrainian people,” Thomas-Greenfield said during an interview with CNN’s “State of the Union.” “It’s not necessary for us to put them on,” she said. “They certainly deserve to be called out for the acts of terror that they are committing.” (CNBC)

RUSSIA: The Biden administration announced a new weapons package for Ukraine worth $150 million, as the war-weary country enters its 11th week of conflict with Russia. The Pentagon said the next tranche of weapons will include 25,000 155mm artillery rounds, three AN/TPQ-36 counter-artillery radars and electronic jamming equipment. The latest military aid package, the ninth security assistance installment, brings the U.S. military aid commitment to $3.8 billion since Moscow invaded its neighbor in late February. The $150 million pledged on Friday comes from the remaining $250 million in presidential drawdown authority, which allows the president to transfer excess weapons from U.S. arsenals without congressional approval. (CNBC)

RUSSIA: The Russian Foreign Ministry summoned U.K. Ambassador Deborah Bronnert to warn that it would continue to act “harshly and decisively” in response to U.K. sanctions, including by taking retaliatory measures, according to a ministry statement. On Wednesday, the U.K. cut off Russia’s access to management consulting and public relations services, and moved to block the websites and social media of state-run media outlets RT and Sputnik. (BBG)

RUSSIA: A further £1.3bn in military support will be provided by the UK to Ukrainian forces as they fight against Russia's invasion. The escalation of British assistance for Volodymyr Zelenskyy's forces is the highest rate of UK military spending on a conflict since the height of the campaigns in Iraq and Afghanistan. (Sky)

RUSSIA: Canadian Prime Minister Justin Trudeau announced new weapons and equipment for Ukraine on Sunday after an unannounced visit to Kyiv, the capital. Trudeau, addressing a news conference after talks with Ukrainian President Volodymyr Zelenskiy, also said Canada was imposing new sanctions on Russian individuals and entities in connection with Moscow's invasion of Ukraine. "Today, I'm announcing more military assistance, drone cameras, satellite imagery, small arms, ammunition and other support, including funding for demining operations," Trudeau said. "And we're bringing forward new sanctions on 40 Russian individuals and five entities, oligarchs and close associates of the regime in the defence sector, all of them complicit in Putin's war," in a reference to Russian President Vladimir Putin. (RTRS)

RUSSIA: NATO Secretary General Jens Stoltenberg has called on the West to supply more modern weapons to Ukraine. “In the long run, Ukraine cannot carry out its defence only with weapons that date back to the era of the Soviet Union, but it must switch to modern Western weapons,” Stoltenberg told Welt am Sonntag. “The West should intensify its deliveries” as Ukraine must prepare for “a long war,” he said. (BBG)

RUSSIA: Chancellor Olaf Scholz outlined limits on Germany’s efforts to help Ukraine in a televised address. While Germany will continue to supply heavy weapons to help Ukraine defend against Russia, Europe’s biggest economy won’t sacrifice its security or affluence, he said. (BBG)

RUSSIA: The Group of Seven leaders said in a joint statement on Sunday that they will reinforce Russia's economic isolation and "elevate" a campaign against Russian elites who support President Vladimir Putin. After meeting virtually with Ukrainian President Volodymyr Zelenskiy, the leaders said they would cut off key services on which Russia depends, reinforcing the isolation of Russia "across all sectors of its economy." They also committed to phasing out dependency on Russian energy, including by banning imports of Russian oil. "(W)e will continue and elevate our campaign against the financial elites and family members, who support President Putin in his war effort and squander the resources of the Russian people," the statement added. The United States on Sunday unveiled sanctions against three Russian television stations, banned Americans from providing accounting and consulting services to Russians, and sanctioned executives from Gazprombank to punish Moscow for its invasion of Ukraine. (RTRS)

RUSSIA: The U.S. and the Group of Seven will increase its short-term financial support for Ukraine in the coming weeks, G7 leaders said in a statement. “We will step up our collective short-term financial support to help Ukraine close financing gaps and deliver basic services to its people, while also developing options – working with the Ukrainian authorities and international financial institutions – to support long-term recovery and reconstruction,” according to the release. (CNBC)

RUSSIA: The U.S. banned American accounting and consulting firms from working with Russia and imposed its first sanctions on Gazprombank as part of a package of new penalties targeted at Moscow. The latest penalties also include new export controls on industrial goods, limits on three of Russia’s top state-controlled television stations and additional visa restrictions, a U.S. official told reporters Sunday. The official spoke on condition of anonymity to detail the measures before they became public. (BBG)

RUSSIA: EU capitals should consider seizing frozen Russian foreign exchange reserves to help pay for the cost of rebuilding Ukraine after the war, the bloc’s top diplomat has said, as the west debates how to force Moscow to pay for some of the damage the conflict has caused. Josep Borrell, the EU’s high representative for foreign policy, said the US had taken control of billions of dollars’ worth of assets belonging to the Afghan central bank, in part to potentially compensate victims of terrorism as well as for humanitarian aid for the country, and that it would be logical to consider similar steps with Russia’s reserves. “I would be very much in favour because it is full of logic,” said Borrell in an interview with the Financial Times. “We have the money in our pockets, and someone has to explain to me why it is good for the Afghan money and not good for the Russian money.” (FT)

RUSSIA: Insurance could be the next financial weapon deployed by the European Union against Russia. EU officials have proposed a ban on insuring ships that carry Russian oil, a move aimed at blocking Russia’s access to global oil markets and the revenue that has fueled its military invasion of Ukraine. “In effect, it would be a very strong hindrance to export Russian crude,” said Lars Barstad, chief executive of Frontline Ltd. , which owns one of the world’s biggest tanker fleets. Mr. Barstad said his ships don’t carry oil if Frontline can’t insure the vessels against hazards such as environmental damage. (WSJ)

RUSSIA: Britain announced on Sunday it will increase tariffs on platinum and palladium imports from Russia and Belarus in a new package of sanctions targeting 1.7 billion pounds ($2.10 billion) of trade, which it said aimed to further weaken Russian President Vladimir Putin's war machine. (RTRS)

RUSSIA: Pro-Russian hackers carried out cyberattacks on German government websites and politicians, including Chancellor Olaf Scholz’s party-affiliated site, Der Spiegel reported, citing an official investigation. Germany’s Defense Ministry, parliament, Federal Police and several state police authorities were also attacked in recent days, temporarily knocking some of them offline, the magazine reported. (BBG)

IRAN: European officials are preparing to make a fresh push to salvage a nuclear deal with Iran, offering to send a top European Union negotiator to Tehran in an effort to break a stalemate in talks, according to Western diplomats. Enrique Mora, the European Union coordinator of the negotiations, has told Iranian counterparts he is ready to return to Tehran to open a pathway through the deadlock, the people said. So far, Iran hasn’t responded with an invitation, the people added. (WSJ)

METALS: CME Group is talking to market participants about the idea of a cash-settled nickel contract for companies to hedge costs of the electric vehicle battery raw material, two sources with knowledge of the matter said. Market participants say a viable alternative trading venue would give disgruntled users the opportunity to move away from the London Metal Exchange (LME) where nickel trading was thrown into chaos early in March. (RTRS)

ENERGY: Gazprom PJSC has written to its European clients seeking to reassure them that they can keep paying for gas without breaching sanctions, the latest indication that Russia may be trying to find a way to keep the gas flowing. European companies are scrambling to work out how they can keep buying Russian gas after Moscow demanded payments be made in rubles and the European Commission said such a move would breach sanctions. Poland and Bulgaria have already been cut off and other countries’ payment deadlines fall later this month. (BBG)

OIL: Croatia is considering asking for an exemption to the European Union’s planned embargo on Russian oil, primarily to protect production at INA Industrija Nafte’s refinery in Rijeka, according to a state official. The EU plans to offer Hungary, Slovakia and the Czech Republic as many as two additional years to comply with a ban it hopes to put into effect at the end of the year. (BBG)

OIL: Bulgaria will not support European Union's new set of sanctions against Russia if the Balkan country does not get a derogation from the proposed ban on buying Russian oil, Deputy Prime Minister Assen Vassilev said late on Sunday. European Union governments moved closer on Sunday to agreeing to tough sanctions against Russia over its invasion of Ukraine, but scheduled more talks for Monday to work out how to ensure countries most dependent on Russian energy can cope. (RTRS)

OIL: Hungary continued to block a European Union proposal that would ban Russian oil imports, holding up the bloc’s entire package of sanctions meant to target President Vladimir Putin over his war in Ukraine, according to people familiar with the talks. A meeting of the EU’s 27 ambassadors ended on Sunday without an agreement, with talks expected to resume in the coming days, said the people, who asked not to be identified because the discussions were private. (BBG)

OIL: Japanese Prime Minister Fumio Kishida said it would take time to phase out imports of Russian oil, hours after he joined other Group of Seven leaders to impose a ban on crude over the Kremlin’s invasion of Ukraine. Kishida also told reporters in Tokyo on Monday there was no change to the plan for Japan to retain its interests in the Sakhalin 1 and 2 Russian oil and natural gas projects. (BBG)

OIL: Commodity firms will find it much harder to buy and sell Russian oil from the middle of this month, according to the world’s biggest independent crude trader, as Europe tightens sanctions on Moscow for invading Ukraine. Russia’s exports of crude and oil products have probably dropped by around 1 million barrels a day from 7.5 million before the attack in late February, Mike Muller, head of Asia at Vitol Group, said Sunday on a podcast produced by Dubai-based Gulf Intelligence. They could fall further after May 15, he said. (BBG)

OIL: Saudi Arabia cut oil prices for buyers in Asia as coronavirus lockdowns in China weigh on demand, countering uncertainty around Russia’s supplies as the Ukraine war drags on. Saudi Aramco is lowering prices for the first time in four months. The state-controlled company dropped its key Arab Light crude grade for next month’s shipments to Asia to $4.40 a barrel above the benchmark it uses, from $9.35 in May. That’s in line with a Bloomberg survey of refiners and traders from late April that forecast a $5 decrease. Aramco also lowered all grades for the north west Europe region and almost all for the Mediterranean. Prices for U.S. customers were kept unchanged from May. (BBG)

OIL: Iraq said it will start implementing a court ruling that gives the federal oil ministry oversight of Kurdish production after failed talks with officials from the semi-autonomous region. The Oil Ministry didn’t reach an agreement with the Kurdistan Regional Government over oil output and exports after 75 days of talks, Oil Minister Ihsan Abdul Jabbar said during a round-table meeting with officials in the Iraqi National Oil Co. (BBG)

CHINA

POLITICS: Shanghai’s top official seemed only months away from securing one of the seven positions on the politburo standing committee, China’s most influential political body, as his longtime patron Xi Jinping prepared to secure a third term as leader in November. Yet in China’s most modern and one of its best-run cities, weeks of brutal lockdowns have descended into a surreal crisis, with signs that faith in the Communist party’s ability to govern has been eroded. Fears of families being torn apart under a draconian quarantine system have coupled with a torrent of administrative botches and rising dissent: a body mistakenly stuffed inside a body bag while the person was still alive; piles of undelivered food rotting outside apartment compounds even as people have worried about going hungry and struggled to obtain essentials; the careful staging of nightly protests, with residents singing or banging pots, and rare clashes between citizens and police. While many of the city’s 25mn residents blame their enforced isolation on Xi and his zero-Covid policy, the future of Li and other top lieutenants hangs in the balance as pressure mounts on Beijing to find a scapegoat for the chaos and embarrassment. The question weighing on Xi is what to do with Li, a close ally for two decades after the pair worked together in Zhejiang in the early 2000s, and Shanghai mayor Gong Zheng. The decision will ripple through the party and return an unwanted spotlight to secretive infighting as a clutch of rising cadres compete for coveted top government positions. (FT)

ECONOMY: Chinese Premier Li Keqiang warned of a “complicated and grave” employment situation as Beijing and Shanghai tightened curbs on residents in a bid to contain Covid outbreaks in the country’s most important cities. Li instructed all government departments and regions to prioritize measures aimed at helping businesses retain jobs and weather the current difficulties, according to a late Saturday statement, which cited the premier’s comments in a nationwide teleconference on employment. (BBG)

PBOC: China's central bank will readjust its monetary policy to expand support for the real economy to stabilize market entities, prices, employment and public expectations, in order to achieve the nation's annual economic and social development goals and keep the economy running within a reasonable range, Chen Yulu, deputy governor of the People's Bank of China (PBoC), said in an interview with the Xinhua News Agency on Saturday. The PBC plans a re-lending facility equivalent to 100 billion yuan ($15 billion) for the logistics and warehousing sectors, which have been hit hard by the outbreaks, and it will also support banks' expansion of credit supply and encourage financial institutions to reduce service fees, Chen said. (The Global Times)

POLICY: China will strengthen macro policy to stabilise economic growth with expansionary plans in boosting infrastructure investment and consumption as well as targeted monetary tools likely to be introduced, the Economic Information Daily reported citing Zhong Zhengsheng, chief economist of Ping An Securities. Local authorities are striving to stabilise Q2 GDP growth, mainly by ensuring major projects are kicked off as early as possible as well as increasing the security and stability of supply chains, the newspaper said. (MNI)

YUAN: The yuan may continue to weaken with the narrowing of interest spreads between China and foreign countries and volatility of cross-border capital flows, though it is unlikely to depreciate significantly as forex regulators have sufficient tools to keep it at a reasonable level, the China Securities Journal reported citing analysts. The central bank is expected to maintain yuan flexibility and promote the self- balancing of the forex market by adjusting supply and demand, the newspaper cited analysts as saying. The Journal noted that introducing counter-cyclical factors in the CNY central parity rate, adjusting the risk reserve ratio for forward forex sales as well as the liquidity of offshore yuan trade are options. (MNI)

CAPITAL FLOWS: Stringent anti-epidemic measures adopted in some key Chinese cities including Shanghai and Beijing, in hopes of curbing the rapid spread Omicron variant and bringing back sound bounce after a temporary economic shock, may inevitably hurt some foreign firms' performance, yet some Western media outlets are exaggerating the situation, hyping the "investor flight" theory, warning that such measures will result in a large-scale retreat of foreign firms and undermine China's attractiveness in the long run, which Chinese experts and industry players have dismissed. The "ditch China" claim has been refuted by many foreign firms and industry players, who reasserted their confidence in the world's second-largest economy and its key role in the global industrial chain, and also appreciated the government's efforts of striking a balance between epidemic control and work resumption. Observers and experts are also calling for foreign investors to ride out the temporary difficulties together with the Chinese and the Chinese market, believing in its ability in the fight against virus, and once this round of outbreaks ebbs away, those sticking to their vision will have a lot to gain. (Global Times)

CORONAVIRUS: A key district in China’s capital has ordered some businesses providing non-essential services such as gyms and movie theaters to close to prevent the spread of Covid infections after President Xi Jinping reaffirmed his stringent Covid Zero policy. Beijing’s eastern Chaoyang district, home to embassies and offices of multinationals including Apple Inc. and Alibaba Group Holding Ltd., ordered companies “providing services other than those supporting residents’ livelihoods” to be closed until further notice, an official said at a briefing on Friday evening. (BBG)

CORONAVIRUS: Shanghai is tightening its already strict COVID-19 lockdown in a fresh push to eliminate infections outside quarantined areas of China's biggest city by late this month, people familiar with the matter said. Curbs will likely vary across the city's 16 districts as some have already hit the target, but the people said movement curbs will generally remain until the end of May due to fears of a rebound, despite recently falling case numbers in the country's worst coronavirus outbreak. Accounts from residents in several districts as well as social media posts showed the government of the city of 25 million accelerating and expanding an effort to transfer the close contacts of positive cases to central quarantines centres. (RTRS)

PROPERTY: China’s embattled property market is struggling to generate a turnaround despite supportive pledges from the top decision-making body, underscoring Beijing’s challenge to revive one of the nation’s biggest growth drivers. New-home sales in 23 major cities tracked by China Real Estate Information Corp. fell 33% by area during a five-day national holiday compared with a year earlier. The plummet adds to the pain this year, after combined sales at the top 100 developers halved in the first four months. (BBG)

CHINA MARKETS

PBOC NET INJECTS CNY10 BLN VIA OMOS MONDAY

The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rates unchanged at 2.10% on Monday. The operation has led to a net injection of CNY10 billion as no reverse repos maturing today, according to Wind Information.

• The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
• The 7-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.1000% at 09:34 am local time from the close of 1.5509% on Friday.
• The CFETS-NEX money-market sentiment index closed at 39 on Friday vs 43 on Thursday.

PBOC SETS YUAN CENTRAL PARITY AT 6.6899 MON VS 6.6332

The People’s Bank of China (PBOC) set the dollar-yuan central parity rate higher at 6.6899 on Monday, compared with 6.6332 set on Friday.

OVERNIGHT DATA

CHINA APR FOREIGN RESERVES $3,119.72BN; MEDIAN $3,130.00BN; MAR $3,187.99BN

CHINA APR TRADE BALANCE $51.12BN; MEDIAN $51.90BN; MAR $47.38BN
CHINA APR EXPORTS +3.9% Y/Y; MEDIAN +2.7%; MAR +14.7%
CHINA APR IMPORTS +0.0% Y/Y; MEDIAN -3.0%; MAR -0.1%
CHINA APR TRADE BALANCE CNY Y325.08BN; MEDIAN Y339.48BN; MAR Y300.58BN
CHINA APR EXPORTS CNY +1.9% Y/Y; MEDIAN +3.1%; MAR +12.9%
CHINA APR IMPORTS -2.0% Y/Y; MEDIAN -3.3%; MAR -1.7%

JAPAN MAR LABOUR CASH EARNINGS +1.2% Y/Y; MEDIAN +0.9%; FEB +1.2%
JAPAN MAR REAL CASH EARNINGS -0.2% Y/Y; MEDIAN -0.6%; FEB +0.0%

JAPAN APR, F JIBUN BANK SERVICES PMI 50.7; FLASH 50.5
JAPAN APR, F JIBUN BANK COMPOSITE PMI 51.1; FLASH 50.9

Japanese service sector businesses signalled a renewed expansion in business conditions at the start of the second quarter of 2022, as activity rose for the first time in four months. The easing of COVID-19 restrictions allowed customer-facing businesses to operate more freely in April, however concerns about the demand impact of the Ukraine war and rising cases globally filtered through to Japanese service providers, leading to a renewed fall in new orders. "This mainly impacted domestic markets as foreign demand for Japanese services rose at the fastest pace since October 2019 amid rising orders, particularly from outside China. Moreover, business optimism rose to the highest for five months. "Overall private sector activity improved at modest pace at the start of the second quarter, following the renewed rise in services activity. Private sector firms commented on a stagnation in new order growth, however, as demand conditions eased at both goods and services firms. "Cost burdens among Japanese private sector firms continued to intensify in April, pushing both input price and output charge inflation to the second-highest levels recorded in the survey history amid sustained material shortages, delivery delays and global price rises. A continuation of these price and supply pressures, alongside an extension of COVID-19 restrictions in China and the Ukraine war were cited as key downside risks to the outlook for the Japanese economy. That said, firms remained strongly optimistic that output would rise over the coming year. (IHS Markit)

MARKETS

UP TODAY (Times GMT/Local)

Date	GMT/Local	Impact	Flag	Country	Event
09/05/2022	0645/0845	*		FR	Current Account
09/05/2022	0645/0845	*		FR	Foreign Trade
09/05/2022	1230/0830	*		CA	Building Permits
09/05/2022	1300/1400			UK	BOE Saunders Speaks at Resolution Foundation Event
09/05/2022	1400/1000	**		US	Wholesale Trade
09/05/2022	1500/1100	**		US	NY Fed Survey of Consumer Expectations
09/05/2022	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
09/05/2022	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill