US stocks were set to open lower, reversing a modest gain earlier and extending a three-day selloff as investors weighed the possibility of more bank failures against a pause in rate hikes by the Federal Reserve as growth slows. Contracts on the S&P 500 were down 0.3% as of 7:45 a.m. ET while Nasdaq 100 futures were flat. The benchmark S&P 500 had slid on Wednesday, marking its longest losing streak in nearly two months even as the Fed signaled a possible pause in its most aggressive tightening campaign in decades. Sentiment was routed as US regional banks tumbled further even after PacWest said its deposits rose since March and confirmed a Bloomberg report that it’s talking with potential investors in a bid to calm markets. The stock slumped as much as 45% premarket. And Western Alliance was down 23%, though it claimed it hasn’t seen unusual deposit flows.

Treasury yields kneejerked higher but have also since reversed as worries over the impending debt-ceiling deadline weigh.  A measure of the dollar is weakening as traders hike recession bets, and gold has steadied after jumping to just shy of record highs on news that the Fed may pause tightening. Iron ore is declining, while copper gains as concerns mount around global supply. Oil rose, recovering after a sudden dip early in the session on Thursday as Chinese traders returned after a break.

In premarket trading, PacWest Bancorp shares slumped as much as 46% with other regional lenders also plunging, after the Los Angeles-based bank confirmed that it is weighing strategic options. Western Alliance shares fell as much as 24%, headed for a fifth straight day of declines, as confidence in regional lenders remains shaky. The Arizona-based lender sought to reassure the market with an update on deposits after US markets closed, saying that it hasn’t seen unusual deposit flows following the sale of First Republic Bank. First Horizon stock was thrashed after TD terminated its planned $13.4 billion acquisition of the Memphis-based bank, citing uncertainty over a regulatory approval timeline. TD will fork out $200 million in cash to get out of the deal. TripAdvisor also dropped after the online travel company reported first-quarter adjusted earnings per share that missed consensus estimates. On the other end, Arconic surged 28% after a report that private equity firm Apollo Global Management was nearing a deal to buy the industrial-parts manufacturer. Here are all the notable premarket movers:

• Qualcomm falls as much as ~6.7% in premarket trading, after the chipmaker gave a third-quarter forecast that was weaker than expected. Analysts say the guidance shows that weakness in the smartphone market will persist until September.
• TripAdvisor shares drop 8.2% in premarket trading after the online travel company reported first-quarter adjusted earnings per share that missed consensus. Analysts flagged the performance of the company’s Viator business, which they said was the main driver behind the miss on adjusted Ebitda.
• Upwork shares drop as much as 14% in US premarket trading, set to hit a three-year low, after the online recruitment company cut its full-year revenue forecast. Analysts lowered their price targets on the stock, seeing an impact on spending from a tough macroeconomic backdrop, though some brokers were positive on the steps the company is taking to progress toward profitability.
• Etsy shares gained in extended trading, after the online retailer reported first- quarter results that beat expectations and gave an outlook that Bloomberg Intelligence sees as encouraging.
• Zillow Group advanced in extended trading, after the online real estate company gave a revenue outlook for the current period that at the midpoint of the forecast range topped the average analyst estimate. Analysts are positive on the report, and highlight the company’s Premier Agent offering as notably strong.

US stocks slumped to start the month of May as glum economic data has fueled concerns about a possible recession.  The Fed on Wednesday hiked rates as expected, while pausing the tightening process even as Chair Jerome Powell said his forecast was for modest growth and not a recession, and said he disagrees with the staff's bearish consensus. But he reiterated that the process of getting inflation down had a long way to go.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said hopes that a rate cut might come before the end of the year faded after the Fed’s statement. “It’s clear inflation is still not coming down as fast as policymakers hoped,” she said. “It looks like the hiking cycle is now at an end, but the door to another rise is still slightly ajar and that’s still causing nervousness given that rates are already at the highest level for 16 years.”

“The tightening in credit conditions will put some significant downward pressure on the economy,” Michelle Girard, head of US for NatWest Markets, said on Bloomberg Television. “You will see the Fed in a position to move policy to a less restrictive stance sooner than what the Fed chairman today was suggesting.”

Meanwhile, strategists at UBS Global Wealth Management said even a pause in hikes by the Fed may not necessarily spur a rally in equities as those expectations should now be baked in. In past cycles, the S&P 500 typically didn’t bottom until after the Fed started to cut rates, the team led by Mark Haefele wrote in a note.

“The ECB meeting is expected to be a more complex one compared to that of the Federal Reserve,” said Erick Muller, director of product and investment strategy at Muzinich & Co. “If no one doubts the ECB will raise rates again at this week meeting, the magnitude of the rise and the tone of the communication are difficult to forecast.”

European stocks are on the back foot as investors count down to a rate decision from the European Central Bank later today. The Stoxx 600 is down 0.7% with media, real estate and autos the worst-performing sectors. Energy names have outperformed, led higher by Shell who maintained the pace of share buybacks after quarterly profit topped estimates.  Here are the most notable European movers:

• Shell rises as much as 3.5%, the most since April 3, after the oil major’s quarterly profit beat expectations, with strong performances across divisions and particularly its gas business, analysts say
• Equinor rises as much as 4.4% after reporting 1Q profits that beat estimates. Analysts say the firm exceeded expectations across all key divisions as higher production offset lower oil and gas prices
• Hargreaves Lansdown shares rise as much as 4.5% after the investment platform’s net new business flows in its fiscal 3Q topped expectations, offsetting a small deterioration in asset retention
• Next shares rise as much as 2.7%, best performer in the Stoxx 600 Retail Index, after the UK clothing and furnishings seller’s 1Q sales beat estimates despite the cold weather
• Scout24 rises as much as 4.4% after digital marketplace operator reported better-than-expected revenue and Ebitda in 1Q thanks to strong growth in its core business as well as cost cuts
• Novo Nordisk falls as much as 6.5% after its blockbuster obesity drug Wegovy missed estimates due to supply woes. Analysts say their 1Q update, while beating expectations, otherwise held few surprises
• Airbus shares fell as much as 3.2% as analysts said the quarterly update indicates continued supply-chain challenges at the planemaker, which may weigh further on its delivery numbers for the year
• Zalando shares drop as much as 7.7% to the lowest since March after the online fast fashion retailer reported 1Q earnings, with Citigroup analysts noting caution around elevated inventory levels
• Leonardo falls as much as 7.5% and are the lead decliners on the FTSE MIB index after the Italian defense company reported what analysts called disappointing first-quarter results at the Ebita level
• Rheinmetall shares fall 3.8% after the German defense company’s first quarter operating profit misses estimates due to rising costs. Stifel says results were expected to be weak but “came in weaker”
• Virgin Money shares drop as much as 11%, the most since November 2020, as analysts flagged higher costs and impairments for the UK lender, which offset a small net interest income beat
• Casino shares plunge as much as 17% after the debt- laden French supermarket operator reported 1Q sales that missed the average analyst estimate

Earlier in the session, Asian stocks climbed as the dollar weakened on bets the Federal Reserve will pause interest-rate hikes, while Chinese shares ended flat as traders returned from the Golden Week holiday. The MSCI Asia Pacific Index advanced as much as 0.6%. The Fed hinted the latest hike could be the last one in its policy decision Wednesday, although pushed back against market expectations of rate cuts this year. Utilities and energy shares led broad-based gains. Onshore China stocks pared losses to close little changed as trading resumed following the Golden Week holidays. Concerns remain about the pace of China’s economic rebound despite strong holiday spending figures, as data showed factory activity struggled in April. Benchmarks in Hong Kong led gains in the region after falling in the previous session.

Expectations of lower US interest rates and a weaker dollar are boosting bets of outperformance for Asian equities as borrowing costs decline and US equities are weighed down by recession risks. The MSCI Asia Pacific Index is up about 3.6% this year, lagging the S&P 500. “While a lot of people are focused on the dollar smile theory, saying risk off is good for the dollar, when the epicenter is the US that’s not necessarily the case,” Steve Brice, group chief investment officer at Standard Chartered Wealth Management, told Bloomberg Television. “If you look at the growth differentials between the developed world and Asia, and also the dollar outlook, it paints a picture of Asian equity outperformance.”

In FX, the Bloomberg Dollar Index is flat having pared an earlier drop. The Swiss franc is the weakest among the G-10 currencies while the Norwegian krone sits atop the intraday rankings after the Norges Bank hiked 25bps and signaled more tightening ahead.

In rates, US yields have recouped some of Wednesday’s post-Fed losses with two-year borrowing costs initially rising 6bps to 3.86% but then sliding back to 3.81%. Treasuries are slightly cheaper across the curve along with European bond markets ahead of ECB rate decision at 8:15am New York time. US stock futures had opening gap lower as regional lenders continued to slump but have pared losses. US yields are higher by less than 2bp across the curve with spreads narrowly mixed after steepening sharply after Wednesday’s Fed rate increase and pause signal; 10-year yields around 3.34% outperforms bunds and gilts by ~1bp.

In commodities, crude futures advance with WTI rising 0.9% to trade near $69.20 after whipsawing at the open. Spot gold is down 0.2% around $2,035.

Bitcoin is essentially unchanged, pivoting the USD 29k mark in parameters that are even thinner than those seen at this time yesterday.

To the day ahead now, and the main highlight will be the ECB’s policy decision and President Lagarde’s press conference. We’ll also get the final services and composite PMIs from Europe for April, Euro Area PPI for March, and from the US there’s the weekly initial jobless claims, the March trade balance, and nonfarm productivity in Q1. Otherwise, earnings releases include Apple. And local elections will be taking place in the UK.

Market Wrap

• S&P 500 futures down 0.3% at 4,093.5
• STOXX Europe 600 down 0.4% to 460.71
• MXAP up 0.5% to 161.32
• MXAPJ up 0.6% to 514.21
• Nikkei up 0.1% to 29,157.95
• Topix down 0.1% to 2,075.53
• Hang Seng Index up 1.3% to 19,948.73
• Shanghai Composite up 0.8% to 3,350.46
• Sensex up 0.5% to 61,505.99
• Australia S&P/ASX 200 little changed at 7,193.11
• Kospi little changed at 2,500.94
• German 10Y yield little changed at 2.27%
• Euro down 0.2% to $1.1045
• Brent Futures up 1.2% to $73.23/bbl
• Gold spot down 0.2% to $2,033.95
• U.S. Dollar Index little changed at 101.37

Top Overnight News

• Chinese tourist spending during one of the country’s most important national holidays has exceeded pre-pandemic levels for the first time, authorities said, in a sign of economic momentum after China ended its coronavirus containment policies. FT
• China’s Caixin manufacturing PMI fell short of expectations in April, dipping into contraction territory at 49.5 (vs. the Street consensus of 50 and down from 50 in March). RTRS
• China's fight against a weaponized dollar puts the yuan front and center. Its use in contracts for everything from oil to nickel is gathering speed and its share of global trade finance has tripled since the end of 2019. The US remains the world's clear financial hegemon, but these moves help China play a bigger role in the international financial system. BBG
• The ECB is set to slow the pace of rate hikes, matching the Fed's 25-bp move yesterday and taking the key rate to 3.25%, after its preferred inflation measure eased for the first time in 10 months. BBG
• Regional banks remain in focus after PACW announced post-close they are weighing strategic options (deposits rose since March). FHN -40% pre mkt after TD scrapped its planned $13.4 billion acquisition of the Memphis-based bank, citing uncertainty over a regulatory approval timeline. TD will pay $200 million in cash to First Horizon. FT
• Leaders on both sides of the aisle in Washington insist they won’t enact a short-term debt ceiling fix to allow more time for negotiations on a larger fiscal package. Politico 
• Bill Isaac, a former regulator credited with stabilizing the US banking system during the 1980s crisis has hit out at the decision to sell First Republic to JPMorgan Chase as he warned of “more problems” to come for regional lenders. “We are kidding ourselves if we think there are only four problem banks in the country,” Isaac said. “We have not gotten that smart. It’s been so long since we had a lot of problems, that I can’t help but think that there are going to be more problems.” FT
• Apple's sales may have dropped for a second quarter when it reports postmarket, though share buybacks may hold up. Analysts see revenue down 5% year on year, though Bloomberg Intelligence expects higher-end iPhone sales to help the gross margin as Mac sales underwhelm. In other earnings, Peloton is up before the bell, while Lyft and Carvana report later. BBG
• Biden's Fed picks. He's chosen current Governor Philip Jefferson for a promotion to vice chair and will nominate economist Adriana Kugler to an open board slot, people familiar said. The selections may be announced tomorrow. Jefferson voted to raise rates by 25 bps yesterday. Kugler is currently the World Bank's executive director for the US. BBG
• Almost half of US adults say they’re worried about the safety of their deposits in banks and other financial institutions — levels of concern as high or higher than during the 2008 financial crisis....(BBG)

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mixed in the aftermath of the FOMC meeting where the Fed delivered a widely expected 25bps rate hike and paved the way for a pause, although Fed Chair Powell pushed back against cutting rates this year and alluded to banks tightening lending standards and slowing the pace of lending. ASX 200 was lacklustre amid weakness in its top-weighted financial sector after big four bank NAB's H1 profit missed analysts’ estimates, although losses were cushioned by resilience in mining names and improved trade data. KOSPI was subdued as participants digested mixed earnings results, while Nikkei 225 remain closed. Hang Seng and Shanghai Comp. were firmer as mainland participants returned from the golden week break with Chinese markets shrugging off the surprise contraction in Caixin Manufacturing PMI and the PBoC’s significant liquidity drain, as well as the HKMA’s 25bps rate hike in lockstep with the Fed.

Top Asian News

• PBoC injected CNY 33bln via 7-day reverse repos with the rate at 2.00% for a CNY 529bln net drain.
• HKMA raised its base rate by 25bps to 5.50%, as expected.
• Chinese airlines will be allowed to expand their flights to the US, according to FT.

European equities, Euro Stoxx 50 -0.7%, trade mostly lower following the post-FOMC selling pressure in US indices. Equity sectors in Europe are mostly lower in what has been a busy morning for corporates. To the downside, Media and Auto names lag while Energy names are the clear outperformer in what has been a tough week for the sector amid declines in underlying crude prices, with upside also spurred by Shell's +1.8% update. US equity futures have spent the morning slightly better than flat in an attempted recovery following the Fed rate decision and further jitters on the regional banking front, with PACW's shares plunging over 50% in after hours trade. PacWest (PACW) has reportedly been approached by several potential partners and investors, according to Bloomberg.. -35% in the pre-market.

Top European News

• UK March Mortgage Approvals Unexpectedly Rise to 5-Month High
• UK April Composite PMI 54.9 vs Flash Reading 53.9
• Norway Hikes by Quarter-Point Again as Krone Woes Fester
• European Gas Prices Ease as IEA Sees Weaker Demand This Year
• Bud Light Brewer AB InBev Beats Forecasts on Strong Pricing
• Casino Plunges After 1Q Net Sales Misses Estimates
• European Stocks Retreat as Investors Await ECB After Fed Hike

FX

• DXY defends 101.000 in post-FOMC aftermath, as EUR/USD rejects 1.1100 in the run-up to the ECB amidst mixed EZ PMIs and a raft of hefty option expiries.
• Kiwi retains momentum above 0.6200 vs Buck and around 1.0700 vs Aussie as NZ building consents rebound firmly, AUD/USD underpinned within a 0.6699-41 band after export-led wider than forecast trade surplus.
• Pound perky near new YTD peak vs Buck just under 1.2600 with impetus from upgraded UK services and composite PMIs.
• PBoC set USD/CNY mid-point at 6.9054 vs exp. 6.9061 (prev. 6.9240)
• Norges Bank Key Policy Rate: 3.25% vs. Exp. 3.25% (Prev. 3.0%); policy rate will most likely be raised further in June. If NOK remains weaker than projected or pressures in the economy persist, a higher policy rate than envisaged earlier may be needed.
• Brazil Central Bank maintained the Selic rate at 13.75%, as expected. BCB said it will assess if the strategy of maintaining the Selic rate for a long period will be sufficient to ensure the convergence of inflation to the target and will persist in its strategy until consolidating disinflation and anchoring expectations around its targets.

Fixed Income

• Treasuries retain their bull-steepening trajectory post-Fed and ahead of several US data points, with T-notes holding above 116-00.
• Bunds probe 136.00 from 136.66 a peak as ECB looms and hawkish guidance is seen accompanying a 25 bp hike.
• Gilts teeter towards base of 101.37-93 range after upwardly revised UK services and composite PMIs.

Commodities

• WTI and Brent futures are firmer following the recent hefty losses in the complex. WTI June and Brent July slumped to lows of USD 63.64/bbl and USD 71.28/bbl respectively overnight as futures reopened amid banking sector woes.
• Spot gold shot higher by some USD 40/oz overnight, very briefly to a fresh all-time high on some charts, north of USD 2,080/oz. The yellow metal then immediately pulled back to levels under USD 2,050/oz and trades lower intraday in the European morning.
• Base metals are mostly firmer, underpinned by the return of the markets largest purchaser China from a five-day holiday.
• Shell (SHEL LN) CEO says they are getting close to Chinese levels of oil demand last seen in 2019; sees strong rebound in gas demand in China's services sectors, but less in the industrial sectors.

Geopolitics

• An oil refinery in Krasnodar Krai, southern Russia caught fire after a drone attack, according to TASS.
• The governor of the Russian Voronezh region announces that the air defenses shot down a drone over the city, according to Sky News Arabia citing Tass.
• Russian Foreign Ministry says "Moscow will quickly deal with Kiev's terrorist and subversive activities", via Al Jazeera.
• Indian and Russia suspend negotiations to settle bilateral trade in Rupees, Russia reportedly not willing to amass INR as trade gap remains large, via Reuters citing sources.
• Russia's Kremlin says we know decisions about such terrorist acts are taking in Washington and not Kyiv; Washington is definitely behind the attack, Kremlin is well aware of this; Russia has multiple response options, response will be thought-out.

US Event Calendar

• 07:30: April Challenger Job Cuts 175.9% YoY, prior 319.4%
• 08:30: April Initial Jobless Claims, est. 240,000, prior 230,000
  • April Continuing Claims, est. 1.87m, prior 1.86m
• 08:30: March Trade Balance, est. -$63.1b, prior -$70.5b
• 08:30: 1Q Unit Labor Costs, est. 5.5%, prior 3.2%
• 08:30: 1Q Nonfarm Productivity, est. -2.0%, prior 1.7%

DB's Jim Reid concludes the overnight wrap

With the combination of a Fed that is now fully data dependent and further woes in the US regional banking sector before and after the closing bell, a decent survey question today might be, “when will the Fed next raise rates?”. I’d imagine the bid-offer would be somewhere between next month and only in 10 years’ time. Monetary policy clearly operates with a lag and the current US regional banking woes might be near the early stages of the fallout from this tighter policy rather than the end of it. That is a big worry. Before we recap the latest regional banking woes, let’s take a look at the Fed.

They delivered the expected 25bps hike last night with the upper bound of the target policy rate now 5.25%, the highest level it has been since 2007. The Fed also maintained their monthly pace of shrinking the balance sheet by $60bn for Treasuries and $35bn for MBS. It was a unanimous decision but the Fed dropped the phrase “some additional policy firming may be appropriate.” Fed Chair Powell called the removal of the phrase “meaningful”. The Fed pointed to inflation, labour-market strength, and credit conditions as factors they will be watching to decide future policy decisions. By doing away with forward guidance and transitioning to a more “data-dependent approach”, as Chair Powell said, the Fed opened the door to pausing rate hikes next meeting.

At the press conference, Chair Powell once again addressed the recent strains in the banking system following regulators seizing First Republic on Monday. He noted that the conditions in the banking sector “broadly improved” since early March and that the financial stability tools are not at odds with the monetary policy tools. Chair Powell noted that the banking system is “sound and resilient” but that the issues in the sector are further tightening lending conditions for small businesses and households. On credit conditions, Chair Powell – who received the Senior Loan Officer Survey data ahead of the meeting – said that “these tighter credit conditions are likely to weigh on economic activity, hiring and inflation.”

He also noted that the survey results are consistent with what policy makers have said and other data points have showed recently – namely that lending has grown in aggregate but the pace has slowed since 2H’22. When discussing a possible recession, Chair Powell acknowledged that a mild recession is possible as the Fed’s staff forecast shows, but that “the case of avoiding a recession is in (his) view more likely than that of having a recession.” On this he pointed to the excess demand in the labour market which seems to be cooling without a surge of unemployment seen in previous periods. Lastly on a question about the current market pricing of rate cuts in 2023, Chair Powell cautioned that the FOMC is not expecting inflation to come down that quickly and that rate cuts would not be appropriate, hence why it is not in their forecast. Fed futures are now pricing in a -11.5% chance of a rate cut in June and 82.7bps of cuts by year-end. However, before the after-market weakness in regional banks fed futures closed yesterday with a smaller chance of a cut next meeting (5%). See Matt Luzzetti’s review of the FOMC here. He continues to believe that the Fed is now done but that the first cut won’t come until Q1 2024.

Before the FOMC decision, US 2 year Treasury yields were down -2.9bps with 10 year yields down around -4.5bps. The S&P 500 was up +0.33%, with the USD index down -0.5%. As the statement came out, the dollar sold off initially whilst yields and equities rose. However there was a reversal during the last hour or so of US trading with equities selling off -1.4% from just after Powell started his presser to see the S&P 500 finish -0.70% lower on the day. US 10 year yields continued to fall after a brief rate selloff with yields finishing near their lows of the day down -8.8bps at 3.335%, as 2 year yields fell -15.6bps to 3.805. That’s the lowest the 2yr and 10yr yield has been in nearly a month and down an impressive -36bps and -27bps from their intra-day peaks on Monday just before the close.

Expanding on the equity moves, 20 of 24 industry sectors were lower on the day led by further weakness in cyclicals and banks. The KBW bank index was -1.89% lower as every member ended the day lower, as regionals were under pressure yet again. PacWest Bancorp, which was down -42% over the last 5 sessions and trading at its lowest share price since March 2009, announced after the US close that it has been approached by several partners and investors. The stock was down -52.49% in after-market trading. The news and weakness of the California-based lender caused fellow regional banks Western Alliance Bancorp to fall -22.42% after-hours and Zion Bank to decline -9.09%.

With the Fed now out of the way, attention will turn to the ECB today as they make their own policy decision. In terms of what to expect, both the consensus and DB view is that they’ll slow down their rate hikes to a 25bp pace, which would take the deposit rate up to 3.25%. However, as our European economists write in their preview (link here), it’s a close call between that and 50bps, since underlying inflation remains high and a rapid return to target is far from proven. So irrespective of how much they hike by, their view is that the underlying and conditional message will be that the tightening cycle isn’t over yet. Moreover, to stop financial conditions from overreacting to a slower hike, they expect the ECB to announce faster QT, with an increase in the roll-off of APP reinvestments from €15bn per month to €20bn per month from Q3.

As we look forward to the ECB decision, European markets had put in a decent performance ahead of the Fed as we got several positive data releases from both sides of the Atlantic. In the US, the ADP’s report of private payrolls showed growth of +296k in April (vs. 150k expected), which was the strongest print since July and also above every economist’s expectation on Bloomberg. Then the ISM services index came in at 51.9 (vs. 51.8 expected), and there was also upward movement in the new orders component, which rose to 56.1. Meanwhile in the Euro Area, unemployment hit a new record low in March at 6.5% (vs. 6.6% expected). That helped the STOXX 600 (+0.31%) to recover some of the previous day’s declines but it may well all change again this morning. 10yr yields also fell back, with those on bunds (-1.1bps), OATs (-1.9bps) and BTPs (-5.5bps) all moving lower.

Despite the positive data from yesterday, commodity prices took another hit from growing fears about a recession and what that would mean for energy demand. Indeed, Brent crude fell -3.97% to close at $72.33/bbl, which is its lowest level since December 2021. It was a similar story for European natural gas prices (-1.99%), which came down to their lowest since July 2021 at €36.78/MWh. So these are big positive tailwinds for the ECB as they make their decision today, and show how the prospect of a downturn has more than outweighed the effect from the OPEC+ group limiting output only a month earlier.

This morning in Asia equity markets are mixed. Across the region, the Hang Seng (+0.96%) is outperforming with the Shanghai Composite (+0.54%) also trading in positive territory while the CSI (-0.10%) and the KOSPI (-0.22%) are slightly lower in early trade. Elsewhere, markets in Japan are closed for a holiday. In overnight trading, US stock futures have recovered with those on the S&P 500 (+0.14%) and NASDAQ 100 (+0.40%) turning positive, indicating a recovery in risk appetite.

In early morning data, we have Chinese manufacturing activity slipping into contraction territory for the first time in 3 months as the Caixin manufacturing PMI fell to 49.5 in April from 50.0 in March, reflecting weakening market demand. Elsewhere, Australia’s trade surplus grew to a nine-month high of A$15.27 billion in March, surpassing market expectations for a surplus of A$13.0 billion, as well as February’s revised reading of A$14.15 billion, as commodity demand picked up.

On the political side, keep an eye out on the UK today, since local elections are taking place in England that will be the biggest electoral test for the main parties ahead of the next general election. In terms of where things currently stand, Politico’s polling average shows that the opposition Labour Party has a 16-point lead over the governing Conservatives, which is the biggest lead they’ve had going into a set of elections since the early 2000s. So Labour are widely expected to make gains at the Conservatives’ expense today. The more important question will be how many, and according to local election experts Rallings and Thrasher, Labour will be wanting to make gains in the high-hundreds of council seats to persuasively argue they’re on track to return to government. For the Conservatives, current polls imply they could lose over 1,000 council seats, but if they can limit that to around 750, it would suggest things aren’t as bad for them right now as the polls might suggest.

To the day ahead now, and the main highlight will be the ECB’s policy decision and President Lagarde’s press conference. We’ll also get the final services and composite PMIs from Europe for April, Euro Area PPI for March, and from the US there’s the weekly initial jobless claims, the March trade balance, and nonfarm productivity in Q1. Otherwise, earnings releases include Apple. And local elections will be taking place in the UK.