The good news for stocks started overnight when the final Chinese HSBC Manufacturing PMI printed well below the 49.4 expected, or at 48.9, the biggest contraction in one year, which meant calls for more easing would be imminent. And naturally, after starting off eark, the Shanghai Composite closed near its highs, up 0.9%. However, the good news (for stock) out of China's deteriorating economy was partially overshadowed by "bad news" for stocks following the final Eurozone Mfg PMI which rose from 51.9 to 52.0, with Germany rebounding from 51.9 to 52.1 even as France missed expectations and continued contracting at a 48.0 PMI.

Finally, a more positive tone out of the Greek negotiations ahead of the country's May 6 payment to the IMF, should have pushed the Stoxx into the red (because a "fixed" Greece means less ECB liquidity injections and intervention) but a nearly 100 pip swing lower in the EURUSD on no news and no volume to its day lows at 1.113 appears to have kept the sellers in check.

But the best news is twofold: volumes continue to be lethargic with both the UK (May Day bank holiday) and Japan closed until Thursday (Golden Week), while the bulk of the S&P500 has now exited the stock buyback quiet period. As such, ignore record equity outflows - all the matters is that corporate CFOs, flush with brand news bond issuance cash, will tell their favorite Wall Street trading desk to buy stocks at just the right inflection point sending the market surging just as shorts once again test the downtrend and the 50 DMA.

Meanwhile, the bond (and Bund) rout continues, with the 10Y Bund trading wide of 0.40% at last check as Mario Draghi is delighted that he will be able to continue QE much longer than if the entire German curve was trading at -0.2% and thus no longer eligible for purchases.

A deeper look at global markets shows Asian equities mostly rose with Chinese bourses at the forefront in the wake of disappointing Chinese data, with the final Chinese HSBC Mfg PMI posting its largest contraction in a year at 48.9 vs. Exp. 49.4. Shanghai Comp (+0.9%) and Hang Seng (+0.3%) both trade in the black as the poor data led to speculation the government would add to monetary stimulus. ASX 200 (+0.1%) fluctuated between gains and losses as strength in basic materials offset weakness in financials, after Westpac’s earnings (-3.5%), indexes 2nd largest bank, missed street expectations. Of note, Japanese stock markets are closed for the Golden Week holiday.

With the UK out of the market due to the bank holiday, European equities trade higher in a relatively muted session so far, following on from positive closes in Asia. Meanwhile, Syngenta (+7%) leads the gainers in Europe with US listed company Monsanto said to be an interested party in the Swiss agricultural giant. Separately, Infineon (+3.2%) and Dialog Semiconductor (+5.7%) are among the outperformers in Europe with the latter retracing some of last week’s losses and are said to have been awarded a contract to supply a power management socket for the Apple iWatch. According to a note from Deutsche Bank, Infineon are expected to boost guidance on tomorrow when reporting Q2 numbers.

Focus remains on Greece with talks continuing to gain traction following the shake-up of the Greek cabinet, which has helped the GR/GE spread to be the tightest in Europe. Meanwhile, Bunds play catch-up with UST’s due to the Labour Day holiday in Europe with 10y yields sitting above 0.4% for the first time since the start of the ECB’s bond buying programme. Meanwhile, UST trade relatively range-bound amid a lack of fundamental news driving much price action.

The USD-index bounced back off 2 week lows following hawkish comments on Friday prompting broad-based weakness in the EUR, with Greek optimism not yet filtering through to FX markets as uncertainty behind Greece having adequate funds continues to weigh ahead of their IMF payments due on Wednesday and May 12th. However, GBP/USD remains flat despite the heightened expectations of a hung parliament as Labour and the Conservatives look less likely to gain a sole majority heading into Thursday’s election. Ahead of tomorrow’s RBA rate decision, AUD fell for a 4th consecutive session, as participants continued bringing forward rate cut expectations, with OIS pricing in an 80% chance of a 25bps rate cut.

In the energy complex, spot gold has held onto overnight gains despite the firmer USD after Chinese HSBC Manufacturing
PMI (Apr F) M/M 48.9 vs. Exp. 49.4 which is the biggest contraction seen in a year. Elsewhere, WTI and Brent crude are seen higher with Brent crude reaching its highest level in 2015 with nothing fundamental driving price action.

In summary:  European stocks rise as continental bourses reopen after May 1 holiday with Danish, Norwegian shares outperforming and Italian underperforming. U.K., Irish exchanges closed for holiday. Among sectors, basic resources, chemicals outperform while autos, banks underperform. Yields on German, French sovereign notes fall while Italian, Spanish yields rise. Brent crude falls in light trading. Gold, silver, PGMs rise. U.S. equity index futures down slightly. Germany April manufacturing PMI is 52.1 vs flash reading 51.9, while Eurozone April manufacturing PMI is 52 vs flash reading 51.9. U.S. factory orders, ISM New York due later.

Market Wrap:

• S&P 500 futures little changed at 2101.2
• Stoxx 600 up 0.1% to 394.9
• US 10Yr yield down little changed at 2.11%
• German 10Yr yield down 1bps to 0.37%
• MSCI Asia Pacific up 0.1% to 153
• Gold spot up 0.4% to $1183.8/oz
• Eurostoxx 50 -0.6%, CAC 40 -0.3%, DAX +0.1%, IBEX -0.5%, FTSEMIB -0.5%, SMI +0.1%
• Asian stocks rise with the Shanghai Composite outperforming and the Topix underperforming.
• MSCI Asia Pacific up 0.1% to 153; Nikkei 225 up 0.1%, Hang Seng down 0%, Kospi up 0.2%, Shanghai Composite up 0.9%, ASX up 0.2%, Sensex up 1.2%
• Guo’s Fosun to Buy Ironshore in $1.84b Insurance Deal
• Syngenta Rises 12% Amid Takeover Interest From Monsanto
• Myriad ‘Actively Looking’ for Acquisitions: WSJ Cites Capone
• Letv Sports Website Said Valued at $450m After Funding
• Mubadala, Temasek Unit Said to Plan Sale of Dunia
• Euro down 0.31% to $1.1164
• Dollar Index up 0.09% to 95.38
• Italian 10Yr yield up 3bps to 1.52%
• Spanish 10Yr yield down 3bps to 1.51%
• French 10Yr yield down 1bps to 0.64%
• S&P GSCI Index up 0% to 444
• Brent Futures down 0% to $66.5/bbl, WTI Futures up 0.1% to $59.2/bbl
• LME 3m Copper closed up 1% to $6400/MT on May 1
• LME 3m Nickel closed down 1.4% to $13750/MT on May 1
• Wheat futures down 0.4% to 472.3 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

• A relatively quiet session with the USD -index (+0.2%) bouncing back off 2 week lows and Greek optimism failing to filter through to FX markets
• Bunds (-47 ticks) play catch-up with UST’s, after positive data from the US on Friday spurred a selloff in US Treasuries
• Treasuries steady overnight, 10Y and 30Y yields holding near highest since early March, after losses last week that pushed 5Y-30Y yields out of 6-week ranges amid bund- led losses for EGBs.
• Greece is still far from an agreement with its international creditors as Prime Minister Alexis Tsipras tries to persuade officials to ease the flow of liquidity to the country
• Unemployment data on Wednesday will highlight that more than a quarter of Greeks remain out of work, according to economists; EC will also give latest assessment of country this week, will probably cut its 2015 growth forecast
• Asian companies are thinking twice about their dealings with European partners as jitters persist over whether Greece will splinter the euro area, the Asian Development Bank’s chief economist said
• HSBC/Markit’s final China PMI was at 48.9, missing the median estimate of 49.4 in a Bloomberg News survey and lower than the preliminary reading of 49.2
• Two gunmen were killed Sunday in Texas after opening fire on a security officer outside a provocative contest for cartoon depictions of Prophet Muhammad, and a bomb squad was called in to search their vehicle as a precaution, authorities said: AP
• Afghan security forces are suffering record casualties in their first battles against the Taliban since the U.S. combat mission in Afghanistan ended in December after more than 13 years
• Sovereign bond yields higher.  Asian, European stocks higher; U.S. equity-index futures gain. Crude oil, gold and copper higher

US Event Calendar

• 9:45am: ISM New York, April (prior 50)
• 10:00am: Factory Orders, March, est. 2.1% (prior 0.2%); Factory Orders Ex-Trans, March (prior 0.8%)

Central Banks

• 9:00am: Fed’s Tarullo speaks in Boston
• 12:25pm: Fed’s Evans speaks in Columbus, Ind.
• 3:10pm: Fed’s Williams speaks in San Francisco

DB's Jim Reid concludes the overnght recap

This morning China released its final April HSBC manufacturing PMI print and it makes for somewhat subdued reading after the figure was revised down 0.3pts to 48.9, the lowest monthly print in 12 months. Having initially declined over a percent, equity markets in China have recovered with the Shanghai Comp (+0.85%) and CSI 300 (+0.86%) both rebounding and no doubt helped by the hope that the soft print adds to the argument for further stimulus for the region. Elsewhere, with a number of markets closed in Asia for public holidays, the region is fairly low on activity however bourses are mostly in positive territory with the Hang Seng (+0.38%), Kospi (+0.35%) and ASX (+0.12%) higher in particular.

Moving on, Greece continues to generate plenty of headlines. Despite the better tone last week that some sort of deal may be announced on the weekend, as we’d largely expected no agreement was made with reports on various wires now suggesting that Greece is aiming for a deal sometime this month. Despite further commentary that progress is being made, key differences are said to still remain around fiscal assumptions and labour and pension reforms which continue to hold up progress. With talks due to resume this morning, a report in Greek press Ekathimerini has caught our attention with the article suggesting that the Greek government is hopeful enough that a common ground will be found to trigger an emergency Eurogroup meeting before this Wednesday. The article notes that Wednesday is an important date given that the ECB may look to increase the haircuts applied to collateral offered by Greek lenders in exchange for liquidity. We expect that significant progress would need to be made between now and then however in order for this to be true.

We'll review the week ahead in detail later, however quickly looking at the potential market moving events this week, US payrolls on Friday will be the clear focus. In terms of expectations, our US colleagues are expecting a +225k print which matches the current Bloomberg consensus, while they expect the unemployment rate to drop one-tenth to 5.4%. Elsewhere, Thursday’s UK Election will be closely followed while Greece will once again be front and centre.

In terms of the UK General Election, our economics colleagues noted in the Focus Europe piece published on Friday that opinion polls continue to suggest an uncertain outcome with the conservatives now expected to be the largest party by a narrow margin over Labour. This appeared to be backed up by the YouGov poll for the Sunday Times on the weekend which showed the Conservatives at 34% versus Labour at 33%, with UKIP (13%), Liberal Democrats (8%) and the Scottish National Party (5%) following. With the polls extremely close, our colleagues expect that coalition negotiations could be tense and lengthy. In terms of market impact, they note that a labour win would likely see a slower deficit reduction and possibly (modest) higher interest rate rises, while a Conservative government could rattle markets concerned with the promise of an EU referendum.

Looking back at markets on Friday, it was fairly quiet in the European timezone with most equity markets closed (the UK being the exception with the FTSE closing +0.36%), however over in the US the S&P 500 rebounded +1.09% after two previous days of declines, despite a host of softer data prints and a stronger day for the Dollar. Indeed the Dollar, as measured by the DXY recovered +0.74% after seven previous days of declines, while Treasuries continued their weak stretch as the benchmark 10y widened 8.2bps to close at 2.114% - the highest yield since March 13th.

Despite the weaker set of US data on the whole on Friday, the moves in Treasuries appeared to come about following the ISM manufacturing print in particular. With the April headline reading unchanged at 51.5 (vs. 52.0 expected), markets appeared to latch onto some of the finer details in the print which showed new orders (+1.7pts), new export orders (+4pts) and production (+2.2pts) all rising. The employment (-1.7pts) component made for slightly more subdued reading however. Elsewhere, ISM prices paid rose less than forecast to 40.5 (vs. 42.0 expected) while construction spending for March was weak (-0.6% mom vs. +0.5% expected). The final April prints for manufacturing PMI (revised down one-tenth of a point to 54.1) and the University of Michigan consumer sentiment (unchanged at 95.9) were largely as expected – the latter seeing the 1y inflation expectations reading tick up a touch to 2.6% (from 2.5%). Finally vehicle sales also disappointed with total vehicle sales coming in below market (16.5m saar vs. 16.9m expected) for April. Following Friday’s data, the Atlanta Fed GDPNow model lowered its Q2 GDP expectation to +0.8% from the initial +0.9% estimate.

There was also some focus on Fedspeak on Friday which may have contributed to the move in Treasuries on Friday. The Cleveland Fed’s Mester – the first to comment post last week’s FOMC – hovered on the hawkish side after saying that ‘all meetings are on the table’ in relation to a first rate rise. Mester (non-voter) went on to say that ‘we’re getting close to the point where it’s going to be time to lift off, and now it’s going to be this decision based on the data’. The San Francisco Fed’s Williams somewhat reinforced Mester’s comments later in the day, saying that liftoff may be possible at any time but that ‘it would require the data to be good’.

Elsewhere, in Europe equity markets were closed on Friday as mentioned. Bond markets were open however and Bunds extended their recent weakness as the 10y closed wider (+1bp) for the fifth consecutive day (and eighth in nine sessions) at 0.373%, marking a +22bps move on the week. The move over the course of the week was in fact the largest widening move (in basis points) since the first week of 2013. Peripherals on the other hand outperformed as 10y yields in Spain (-7.2bps), Italy (-6.3bps) and Portugal (-3.3bps) all tightened.

Turning over to this week’s calendar now, we kick off this morning in Europe with the final April manufacturing PMI readings for the Euro area, Germany and France. The May Sentix investor confidence reading for the Euro area is also due today also. Over in the US this afternoon, focus will be on the ISM New York followed closed by factory orders data. Moving to Tuesday, the European Commission Economic Forecasts will be of some interest in the morning session, while data wise it’s fairly quiet in Europe with just Euro-area PPI due. It’s busier in the US however, with trade data, the IBD/TIPP economic optimism survey as well as the final April composite and services PMI’s and preliminary ISM non-manufacturing print due. Wednesday’s early attention will be on the April services and composite PMI readings which are scheduled for China (preliminary) as well as the UK (preliminary), Euro-area, Germany and France (all final). March retail sales for the Euro-area will also be of some focus. Over in the US on Wednesday, the April ADP employment change print will be an important prelude for Friday, while we are also due nonfarm productivity and unit labour costs. It’s fairly quiet data-wise on Thursday, with just French industrial and manufacturing production and German factory orders scheduled, however much focus will be on the UK General Election. We’ve got more employment data due in the US on Thursday meanwhile with Challenger job cuts and initial jobless claims readings expected as well as consumer credit. It’s a busy end to the week on Friday with industrial production and trade data expected for Germany, as well trade data for the UK due. Friday’s focus in the US will of course be on the April payrolls. The usual employment associated readings are also due on Friday including the unemployment rate and average hourly earnings. Aside from the data, earnings season continues with 86 S&P 500 companies due and 108 Euro Stoxx companies. Fedspeak will of course warrant much attention with Evans, Williams, George, Kocherlakota and Lockhart expected to speak while the Fed’s Yellen and IMF’s Lagarde are due to speak on Wednesday.