Whether it is in sympathy with the now relentless surge in the Shanghai Composite which tacked on another 2.44% overnight to close at a fresh multi-year high just shy of 4400, well more than double from a year ago, or because Mrs Watanabe was unable to read the latest Japan trade data whose first trade surplus in 3 years hinted that there will be no new easing by the BOJ any time soon, but overnight the Nikkei closed above 20,000 for the first time in 15 years, with "makers of chocolate, mayonnaise, potato chips and household appliances" helping lift the Tokyo market according to the WSJ.

The now daily Asian euphoria however did not last long in the European session, and after opening higher, the Stoxx Europe 600 slipped into negative territory just an hour into trading, and was down 0.4% by midmorning, lead by a near 1% decline on Athens' mains stock index, which has since recouped losses stemming from the overnight report that the ECB is considering an up to 50% haircut on Greek bank collateral, a move that would wipe out the Greek financial sector with ease.

As the WSJ notes, Greek Prime Minister Alexis Tsipras is expected to meet with German Chancellor Angela Merkel at a summit in Brussels on Thursday, before eurozone finance ministers meet in Riga, Latvia, on Friday. However, a deal on fresh aid - having been delayed for weeks and weeks - will be delayed once more, and is unlikely to be agreed before the Eurogroup meeting on May 11, a day before Greece must pay €780 million ($838 million) due to the International Monetary Fund.

"Given no discernible reform progress at technical or political levels, we expect both of these occasions to be nonevents that mark another missed opportunity for Greece to avoid a descent into financial oblivion, " said Emily Nicol, economist at Daiwa Capital Markets.

A closer look at the overnight trading session reveals that the FTSE 100 (-0.5%) underperforms its European counterparts (Eurostoxx50 -0.3%) with negative sentiment emanating in UK stocks as Goldman Sachs said a Labour victory in the election will spark a sell-off in the market. Furthermore, utilities are the laggard sector in the FTSE (and Europe) as Labour leader Ed Miliband is expected to implement policies which will have negative implications on the sector.

Although Greek assets appear relatively unfazed this morning, sources overnight suggested ECB are to demand that the value of Greek banks' collateral held at the Greek central bank to secure emergency loans be cut by as much as 50% which has offered support to both the Bund and UST’s which trade marginally firmer. However, since then, additional ECB sources have denied these reports. Elsewhere, there is little supply from the Eurozone this week, however next week there are sizeable redemptions from the Eurozone expected at approximately EUR 65bln.

In FX, the only major release this morning was the BoE Minutes which showed that the weaker GBP could result in a faster pickup in inflation and maintained a slightly hawkish tone by communicating that the next move will be upwards, which buoyed GBP/USD to touch session highs above 1.50. Elsewhere, the USD-index has taken a turn into negative territory with AUD/USD the notable outperformer after it snapped it recent declines in the wake of a buoyant Australian Q1 CPI report, prompting investors to trim their May rate cut expectations Elsewhere, EUR/USD is also seen stronger after tripping stops above yesterday’s high of 1.0780 as the USD continues to edge lower, while there are 3 yards of expiries in the pair at 1.0800 due to roll off at the 1500BST NY cut.

WTI and Brent crude futures initially extended on yesterday’s losses after the API crude inventories showed a bigger than prev. build in oil stockpiles at 5.5mln vs. Prev. 2.6mln. Analysts are forecasting the DoE crude inventories to log a higher build of 3.2mln (Prev. 1.29mln). Nonetheless, the recent bout of weakness in the USD has helped provide some reprieve for prices. The USD-weakness has also helped spot gold move back above USD 1,200/oz, with price action otherwise subdued.

In summary: European shares remain close to intraday lows with the construction and retail sectors underperforming and tech, basic resources outperforming. Varoufakis sees differences narrowing in Greece’s creditor talks. Nikkei closes above 20,000 for first time since April 2000. Tesco reverses early gains after FY results, takes GBP7b one-off charges. A minority of Bank of England policy makers said the decision to keep interest rates at a record-low in April was “finely balanced”. The Spanish and German markets are the worst-performing larger bourses, the Dutch the best. The euro is stronger against the dollar. German 10yr bond yields fall; French yields decline. Commodities decline, with WTI crude, Brent crude underperforming and zinc outperforming. U.S. mortgage applications, FHFA house price index, existing home sales due later.

Market Wrap

• S&P 500 futures down 0.4% to 2083.5
• Stoxx 600 down 0.6% to 406.6
• US 10Yr yield down 1bps to 1.89%
• German 10Yr yield down 1bps to 0.09%
• MSCI Asia Pacific up 0.7% to 155.1
• Gold spot up 0.1% to $1203.9/oz
• 14.5% of Stoxx 600 members gain, 85% decline
• Eurostoxx 50 -0.7%, FTSE 100 -0.7%, CAC 40 -0.7%, DAX -0.9%, IBEX -1.1%, FTSEMIB -0.3%, SMI -0.2%
• Asian stocks rise with the Shanghai Composite outperforming and the ASX underperforming.
• MSCI Asia Pacific up 0.7% to 155.1; Nikkei 225 up 1.1%, Hang Seng up 0.3%, Kospi down 0%, Shanghai Composite up 2.4%, ASX down 0.6%, Sensex up 0.8%
• Euro up 0.52% to $1.0792
• Dollar Index down 0.54% to 97.48
• Italian 10Yr yield down 3bps to 1.42%
• Spanish 10Yr yield down 4bps to 1.41%
• French 10Yr yield down 2bps to 0.35%
• S&P GSCI Index down 0.4% to 424.5
• Brent Futures down 0.6% to $61.7/bbl, WTI Futures down 0.8% to $56.2/bbl
• LME 3m Copper down 0% to $5943/MT
• LME 3m Nickel up 0.2% to $12700/MT
• Wheat futures up 0.3% to 501.8 USd/bu

Bulletin Headline Summary From Bloomberg and RanSquawk

• European equities enter the North American crossover lower in a move led by the FTSE, while concerns over Greece continue to linger
• The latest BoE minutes were slightly more hawkish than expected, seeing GBP/USD reclaim 1.5000 and the USD lose ground to its major counterparts
• Looking ahead, today sees the release of US existing home sales, DoE inventories and a slew of large cap earnings including Facebook, Coca Cola, AT&T, Qualcomm, Boeing and McDonalds
• Treasuries gain within recent ranges as markets wait for Fed meeting and 2Y/5Y/7Y auction cycle next week.
• Greece and its creditors are narrowing their differences as officials on both sides recognize that the best chance for success is an accord that leaves them all somewhat unsatisfied, Finance Minister Yanis Varoufakis said
• Germany’s government expects the economy to expand 1.8% this year as consumers spend more, an increase over the 1.5% growth forecast in January
• A minority of Bank of England policy makers said the decision to keep interest rates at a record low was “finely balanced” amid a risk that inflation would pick up faster than expected
• Japanese government debt twice the size of the economy will make exiting stimulus a nightmare for central bank Governor Kuroda, according to the nation’s former top currency official
• Weak growth in Chinese consumer and producer prices provides sufficient room for additional cuts in reserve-requirement ratios, PBOC adviser Chen Yulu says on State Council website
• JPMorgan (JPM) increased the yuan’s weighting in its foreign-exchange indexes while lowering the dollar’s, to reflect China’s surging share in global trade
• Australia’s core consumer prices matched economists’ forecasts in the first three months of the year, providing scope for the central bank to reduce interest rates
• OAO Gazprom (OGZPY) was accused by the EU  of abusing its market power to raise gas prices as EU antitrust regulators escalated a probe that’s been attacked by Vladimir Putin
• The Saudi-led coalition struck Yemen’s Houthis amid clashes between the group and forces loyal to the exiled president, hours after the kingdom said it would restrict its use of force to preventing the rebels from gaining ground
• Sovereign bond yields mostly lower. Asian stocks gain, European stocks, U.S. equity-index futures mostly lower. Crude oil, copper lower; gold little changed

US Event Calendar

• 9:00am: FHFA House Price Index, Feb., est. 0.5% (prior 0.3%)
• 10:00am: Existing Home Sales, March, est. 5.03m (prior 4.88m)

DB's Jim Reid concludes the overnight recap

We’re kicking off in Asia this morning where equity bourses are enjoying a strong start. The Nikkei (+0.91%), Hang Seng (+0.28%), Shanghai Comp (+1.78%) and Kospi (+0.59%) are all higher as we go to print and credit markets are around a basis point tighter. The Nikkei in particular has struck a fresh record 15-year high as data in Japan shows that the economy has registered its first trade surplus since June 2012. Export growth of +8.5% yoy was in line, while imports declined more than expected (-14.5% yoy vs. -12.6% expected).

Interestingly, following on from the default of Kaisa on Monday, the Chinese power manufacturer Baoding Tianwei yesterday became the first Chinese SOE to default in the onshore bond market having failed to pay interest on a RMB bond. Up until then, only private sector companies had defaulted in the domestic market, despite the vast majority of debt being issued by SOE’s according to Bloomberg. The default raises a potentially interesting change in dynamic in credit markets in China. With the current Chinese government looking to be more willing to let market forces dictate, government support may perhaps be less of a perceived assumption for SOE’s compared to before, particularly for those in non-strategic sectors which in turn could potentially open the door to further defaults in the future.

Back to markets yesterday, with earnings season in the US now kicking into gear and a lack of data releases for markets to react to, the micro rather than the macro is providing most of the direction for now, although Oil and Greece are continuing to have their say. Indeed, yesterday saw both the S&P 500 (-0.15%) and Dow (-0.47%) close down, although the NASDAQ (+0.39%) had a better day supported by M&A news around Mylan after the company received a takeover offer from Teva.

Having initially opened nearly half a percent higher, a batch of mixed earnings reports and a decline in energy stocks in particular helped dragged US equities lower. Starting with earnings, thematically it was a case of corporates reporting better than expected profits but disappointing at the revenue line with the stronger Dollar theme a case throughout. Amongst others, yesterday we saw Dupont (DD), United Technologies (UTX), Under Armour (UA), Amgen (AMGN) and Stryker (SYK) suggest that the stronger Dollar has either impacted current earnings or will negatively impact full year earnings. Looking across earnings so far for S&P 500 companies, of the 102 companies to have reported, 82 have reported better than expected EPS, however just 48 have reported better than expected sales, which is unsurprising given the stronger Dollar theme. We’ll review the day ahead at the end but with Boeing, McDonalds and Facebook due to report today, expect markets to remain focused on the earnings story.

In terms of oil, energy stocks (-1.01%) led yesterday’s declines as both WTI (-2.19%) and Brent (-2.16%) fell. With the supply story still determining much of the price action, news yesterday that Saudi Arabia is calling a halt to airstrikes against rebels in Yemen may have also played a part. According to the BBC, the month long operation to target Houthi rebels had largely failed to halt their advance and instead, a new operation focusing on a political solution and reviving talks will start. On the subject of oil, yesterday we got the US state employment data and there was some clear oil-related weakness in certain areas of the country. Texas and Oklahoma in particular were the hardest hit, losing 25k and 13k jobs respectively last month, while North Dakota lost 3k jobs – significant for a small state.

Elsewhere, there was little change in the Dollar yesterday as the DXY closed +0.06%. Treasuries were a touch weaker however, with 10y yields closing 1.9bps higher at 1.909%. In reality though 10y Treasuries have been stuck in a relatively tight range since Mid-March now, trading from 1.85%-2% having been a lot more volatile earlier in the year.

Greece continues to be the other headline generator at the moment and yesterday we heard that the ECB is looking at proposing an increase to haircuts banks take on the collateral that they post when borrowing from the Bank of Greece in a bid to tighten pressure on ELA funding. Greek press Ekathimerini reported that while the measure has not been formally discussed by the Governing Council, it may be considered should Greece’s leaders fail to convince Euro-area leaders on reforms. Meanwhile, there are various headlines suggesting that the proposed decree forcing local governments to transfer reserves to the Bank of Greece could keep the country afloat until the end of May, although pressure appears to be mounting politically with opposition from various local government officials. With Tsipras due to meet Merkel tomorrow and the Eurogroup meeting scheduled for Friday, a senior euro zone official was quoted on Reuters saying that no deadline will be set for Greece to come up with reforms as doing so leads to brinkmanship in negotiations, suggesting that the uncertainty may well drag on for a while longer. Deadline aside, the next two scheduled Eurogroup meetings this Friday and on May 11th will be the key events upcoming, while the €750m IMF repayment on May 12th is the next significant hurdle.

Despite the weakness in US equity markets, European equities had a better day yesterday as the Stoxx 600 (+0.55%), DAX (+0.40%) and CAC (+0.10%) all closed higher. Greek equities (-3.33%) were unsurprisingly the underperformer while Greek 3y yields (+118bps) continue to widen. Data was focused on the German ZEW survey which made for slightly mixed reading. Despite a 1.5pt rise in the expectations survey to 55.3 (vs. 53.3 expected), the current situation print was a notable miss to the downside (56.5 vs. 70.2 expected). Elsewhere, bond markets were a tad mixed. 10y Bund yields widened for the first time since last Monday, closing 2.6bps wider at 0.101%. In the peripherals meanwhile, similar maturity Italy (-3.1bps) and Spain (-1.4bps) bonds closed tighter. On the subject of the periphery, yesterday DB’s Abhishek Singhania published a report looking at trying to understand the recent sell off in the periphery. He notes that 10y peripheral bond yields are lower now than before the ECB announcement on 22nd January, but that the 10y spread vs. Bunds is wider for most of the periphery compared to pre-announcement. Abhishek points out that this weakness could be a reflection of a few factors. The increasing use of BTP futures as a hedge instrument could be one reason, while the rise in yield and spread volatility during sell-offs may have reduced the attractiveness of peripherals from a technical point in the SR. The supply response from the various treasuries which has resulted in increased maturity of issuance and usual front-loading of issuance in Q1 has likely also offset the positive ECB QE impact. The correlation to Greece which has picked up over the past couple of weeks also cannot be ignored, which is further detracting from the overall constructive backdrop for the periphery which should be less affected by any adverse outcome in Greece.

Looking at the day ahead, the data calendar remains relatively light with just Italian industrial orders, the Euro-area flash consumer confidence reading and the UK Bank of England minutes due out. Over in the US, data releases include March existing home sales and also the FHFA house price index print. Earnings will likely determine much of today’s price action however with 34 S&P 500 companies due to report.