US stocks finished lower amid trade-related cautiousness and ahead of the FOMC although futures were boosted after hours on news US and China are set for talks this week - Newsquawk Asia-Pac Market Open

• US stocks declined amid cautiousness related to the ongoing trade uncertainty and heading into the FOMC on Wednesday with most sectors pressured aside from Utilities and Energy which were the only ones in the green as the former was buoyed by Constellation Energy (CEG) earnings and the latter by firmer oil prices. Furthermore, the upside in the energy complex was partially aided by the geopolitical developments amid Israel expanding its operations in Gaza and conflicting reports regarding the Houthis as a spokesman for the group denied that it will stop attacking Red Sea ships and stated that President Trump's statement that Houthis don't want to fight and the US will stop bombing is false, while it was also later reported that India fired missiles targeting terrorist infrastructure in Pakistan and that Pakistan was responding to India's attacks.
• USD extended on recent losses after failing to sustain the 100.00 status amid a lack of fresh macro drivers and as participants await the FOMC.
• Looking ahead, highlights include Australian AIG Manufacturing & Construction, New Zealand Employment & Labour Costs, Japanese Services PMI, Supply from Australia.

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LOOKING AHEAD

• Highlights include Australian AIG Manufacturing & Construction, New Zealand Employment & Labour Costs, Japanese Services PMI, Supply from Australia.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks declined amid cautiousness related to the ongoing trade uncertainty and heading into the FOMC on Wednesday with most sectors pressured aside from Utilities and Energy which were the only ones in the green as the former was buoyed by Constellation Energy (CEG) earnings and the latter by firmer oil prices. Furthermore, the upside in the energy complex was partially aided by the geopolitical developments amid Israel expanding its operations in Gaza and conflicting reports regarding the Houthis as a spokesman for the group denied that it will stop attacking Red Sea ships and stated that President Trump's statement that Houthis don't want to fight and the US will stop bombing is false, while it was also later reported that India fired missiles targeting terrorist infrastructure in Pakistan and that Pakistan was responding to India's attacks.
• SPX -0.77% at 5,607, NDX -0.88% at 19,791, DJI -0.95% at 40,829, RUT -1.05% at 1,983.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said China wants to negotiate and will meet at the right time, while he added they're losing nothing by not trading with China. Furthermore, he said China's doing no business right now and its economy is suffering from a lack of US trade.
• US President Trump said they will possibly start to renegotiate the USMCA and will be friends with Canada, as well as commented that the US-Canada border is an artificial line. Furthermore, Trump said the US won't do much business with Canada and responded "No, it is what it is" when asked about if Canadian PM Carney could say anything to get the removal of tariffs.
• Canadian PM Carney said discussions with US President Trump were very constructive and they agreed to have discussions in the coming weeks and a meeting at the G7, while Carney said they had a wide-ranging discussion and it was clear with Trump that Canada will never be for sale. Carney thinks they established a good basis and they discussed all major issues including autos but there were no decisions on tariffs. Carney also stated that they made progress and had very comprehensive, tangible exchanges, as well as noted there will be meetings between ministers and officials but stated that progress would not necessarily be evident during negotiations and he feels better about relations in many respects.
• Senior Canadian government official said Canadian PM Carney's lunch with US President Trump was constructive and that Trump can't have a Canada deal without tariffs being lifted, while the official stated they discussed the border and fentanyl. Furthermore, the official said Carney told Trump why none of the tariffs made sense but did not make the point in a confrontational way.
• US President Trump said "We don't really want cars from Canada" and at some point, it will not make economic sense for Canada to build those cars, while he added there is no reason for the US to subsidise Canada and they do not want Canadian steel and aluminium, amongst other things.
• US President Trump said on trade deals that they are not chaotic and are flexible, while he said they do not have to sign trade deals but will sign some deals and noted the USMCA is fine.
• US Treasury Secretary Bessent said the US is negotiating with 17 trading partners but is not yet engaged with China and that trading partners have approached the US with very good offers, while he said they will be announcing trade deals with some of their largest trading partners as early as this week.
• EU Trade Commissioner Sefcovic said another EUR 170bln of US exports may be impacted by tariffs and that the EU-US tariff situation is not acceptable. Sefcovic also said the EU does not feel weak or under undue pressure to accept an unfair deal with the US, while he added that US tariffs are unfair and that everyone wants to accelerate a free trade agreement with the EU.
• EU will target EUR 100bln of US goods with tariffs if talks fail, according to Bloomberg.
• UK closes in on US trade pact with lower tariff quotas for cars and steel, according to FT citing officials in London and Washington. The deal, which is set to be signed this week, is due to include quotas that spare some UK exports from the full brunt of the additional 25% tariffs that Trump levied on steel and car imports in February and March. Furthermore, it was noted that UK trade negotiators returned to Washington this week for the final stages of negotiations, which one senior UK official said were continuing “at speed” but cautioned that disagreements remained over pharmaceuticals.
• UK reached a free trade agreement with India in which India is to cut tariffs on 90% of UK imports and 85% of those will become tariff-free within a decade, while India is to halve whisky and gin tariffs for UK imports to 75% and cut auto tariffs to 10% under a quota. Furthermore, the UK-India deal is expected to boost UK GDP by GBP 4.8bln a year by 2040 and is expected to boost bilateral trade by GBP 25.5bln a year by 2040.
• Chinese President Xi is prepared to work with EU leaders to expand mutual openness and properly handle frictions and differences, while he called on the EU and China to safeguard fairness and justice, according to Xinhua.
• China’s Commerce Ministry is to impose anti-dumping duties on imports of cypermethrin from India for five years starting from May 7th.
• Saudi Arabia is to discuss and sign a deal with the US in mining and mineral resources, according to a Saudi Cabinet statement.

NOTABLE HEADLINES

• US President Trump said they will have a very big announcement before the Middle East trip with a really positive announcement on Thursday, Friday or Monday before they leave. Furthermore, Trump said the announcement is to be 'as big as it gets' but later stated the announcement over the next few days is not necessarily on trade.
• Kansas City Fed President Schmid will miss the upcoming FOMC meeting due to the death of his wife and his vote will be replaced by Minneapolis Fed President Kashkari, according to Bloomberg.
• Fed officials agree that rate cuts aren't appropriate until they see concrete signs of slower spending and higher joblessness, but differences flaring over how confident they can be that price hikes from tariffs/shortages will be temporary, according to WSJ. Furthermore, Fed watcher Timiraos stated that there are also fears that supply disruptions could amplify price pressures beyond a simple tariff pass-through.
• US Treasury Secretary Bessent said he would not be in favour of the Fed issuing digital currency and stated a CBDC is a 'sign of weakness'. Bessent added it is hard to know when the market would rebel against US debt and that the US debt trajectory is unsustainable.
• US Senate Democrats are unveiling a sweeping new proposal to ban presidents, lawmakers and their families from issuing, endorsing or sponsoring crypto assets, according to Axios.
• Atlanta Fed GDP Now (Q2 2025): 2.2% (prev. 1.1% on May 1st)

DATA RECAP

• US International Trade (USD)(Mar) -140.5B vs. Exp. -137.0B (Prev. -122.7B, Rev. -123.2B)
• US Goods Trade Balance (R) (Mar) -163.17B (Prev. -161.99B)

FX

• USD extended on recent losses after failing to sustain the 100.00 status amid a lack of fresh macro drivers and as participants await the FOMC.
• EUR benefitted from the dollar weakness and gained a firm footing at the 1.1300 handle with Germany a key focus after CDU Leader Merz was elected Chancellor in the second round Parliamentary vote.
• GBP was underpinned as reported noted the UK is closing in on US trade pact with lower tariff quotas for cars and steel, while the UK reached a free trade agreement with India and agreed with the EU to hold annual summits to discuss their relationship.
• JPY strengthened with USD/JPY retreating beneath the 143.00 handle amid the dollar pressure and downbeat risk appetite.

FIXED INCOME

• T-notes were choppy on the mixed risk environment, German political chaos and supply, but rose to fresh session highs after the US 10yr auction.

COMMODITIES

• Oil prices were firmer as prices rebounded from the earlier OPEC-induced downside and were also partially aided by the geopolitical developments.
• EIA STEO sees world oil demand for 2025 at 103.7mln BPD (prev. 103.6mln BPD in the prior forecast) and for 2026 at 104.6mln BPD (prev. 104.7mln BPD).
• Kazakhstan is weighing its options to fulfil its OPEC+ cut obligations, according to Bloomberg.
• EU Commission will propose in June to phase out all remaining Russian gas and LNG imports by end-2027 and will propose in June banning Russian gas and LNG imports under new deals and existing spot contracts by end-2025. It was later reported that a Kremlin spokesman responded that Europe is shooting itself in the foot and is acting against its own interests.

GEOPOLITICAL

MIDDLE EAST

• Israeli military issued a warning to all residents in the Sanaa International Airport area.
• Senior Israeli official said reports that a new American proposal was forwarded to mediators was not known to Israel regarding according to Axios.
• Hamas said the Israeli occupation's approval of plans to expand its operation in the Gaza Strip is an explicit decision to sacrifice Israeli prisoners. according to Al Jazeera.
• US President Trump said the Houthis don't want to fight and the US will stop bombings effective immediately, while he added the US will take the Houthis’ word that they won't be blowing up ships and commented that the Houthis said "please don't bomb us and we will not attack your ships."
• A defence official confirmed to CNN that the US military had been instructed to stand down on the strikes against the Houthis, while the apparent ceasefire is the result of talks between the US and the Houthis mediated by Oman that began last week and which was led by Steve Witkoff.
• Houthi spokesman denied the group will stop attacking Red Sea ships and said US President Trump’s statement is false.
• Houthi official said the US's halt of 'aggression' against Yemen will be evaluated first and that US President Trump’s announcement shows the separation of US support to Israel PM Netanyahu's 'failure'. However, it was also reported that a senior Houthi official said they will continue to support Gaza and attacks will continue, while he called on Israelis to 'remain in shelters' because their government will not be able to protect them, according to Al Masirah TV.
• US is trying to schedule the fourth round of nuclear talks with Iran this weekend, according to Axios citing White House envoy Witkoff.

OTHER

• Pakistan's Defence Minister said Pakistan will destroy anything that India builds to stop water to Pakistan and said an India clash is "imminent". It was later reported that multiple loud explosions were heard in Pakistan’s Kashmir area near Muzaffarabad and Pakistan said it would respond to attacks by India, while it was confirmed that Indian armed forces launched 'Operation Sindoor' which hit terrorist infrastructure in Pakistan and Pakistan-occupied Jammu and Kashmir, according to a statement seen by Reuters
• White House seeks to hasten nuclear deployment, according to Axios.

ASIA-PAC

NOTABLE HEADLINES

• China’s State Council is to hold a press conference with PBoC officials, the securities regulator and the financial regulator on Wednesday which will be on a financial policy package to stabilise the market and expectations, according to the State Council Information Office.
• China's Finance Minister said China will adopt more proactive macroeconomic policies and is confident to achieve around a 5% growth target in 2025.
• EU countries reportedly softened the push to stop Chinese tech buyouts, according to Politico.
• HKMA said it has been lowering its duration in US Treasury holdings and the exchange fund has been diversifying into non-US assets.

EU/UK

NOTABLE HEADLINES

• EU and UK have agreed to hold annual summits to discuss their relationship, according to a draft summit statement seen by Reuters.
• Germany's CDU leader Merz initially fell short of a majority needed to become Chancellor in the first round of voting in parliament but was later elected Chancellor in the second round of parliamentary voting.