It has been a rather quiet session, which saw Japan modestly lower dragged again by a lower USD/JPY which hit fresh 17 month lows around 170.6 before staging another modest rebound and halting a six-day run of gains; China bounced after a slightly disappointing CPI print gave hope there is more space for the PBOC to ease; European equities rose, led by Italian banks which surged ahead of a meeting to discuss the rescue of various insolvent Italian banks, while mining stocks jumped buoyed by rising metal prices with signs of a pick-up in Chinese industrial demand.

The Italian bank rescue euphoria spilled over to the US where equity futures spent most of the session around the flatline before a sudden buying jolt after the Europen open sent them almost instantly to session highs. WTI started off stong, immediately printing above $40 on the break but has since faded the jump and was down 0.5% at last check even as the USD has dipped, with the DXY sliding once again.

European shares erased earlier losses of as much as 0.8 percent as measures of banking stocks and commodity producers posted the biggest gains of the index’s 19 industry groups. Spain’s Banco  Santander SA and Italy’s Intesa Sanpaolo SpA led the advance, while Anglo American Plc and ArcelorMittal rose at least 3 percent. As a result, the Stoxx Europe 600 Index extended Friday’s gains, putting it on course for the biggest back-to-back advance since March.

The U.S. earnings season unofficially kicks off later Monday, when Alcoa Inc. reports quarterly results after markets close. European peers including Tesco Plc and Sodexo SA are scheduled to release financial reports this week. Analysts are forecasting profit at companies in Europe’s Stoxx 600 index will shrink in 2016, reversing earlier calls for earnings to improve.

Some strategists were concenred about what this quarter's earnings season will reveal: "Investors won’t find it easy to believe in the rally until they get more evidence of a business-cycle recovery,” Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen, told Bloomberg. "The good news is that we already know that the beginning of the year was pretty tough for most companies, so the bar has been set pretty low for this earnings season.”

Others were more worried about the ongoing strength of the Japanese currency: "Yen strength is really hurting at the moment,” Steve Brice, chief investment strategist at Standard Chartered Bank, told Bloomberg TV in Singapore. “It’s shaken a lot of people’s confidence in Abenomics and the underlying thesis behind holding Japanese equities. The extent of the strength we’ve seen has surprised pretty much everybody."

All that really matters, however, is what Janet Yellen and company will say or do, and what the closing price pegged for the S&P500 at the New York Fed is today. And speaking of that, recall that today at 11:30AM the Fed will hold a closed, emergency session behind closed doors where rates will be discussed, followed by an impromtpu meeting between Obama, Biden and Yellen in the afternoon.

Market Wrap

• S&P 500 futures up 0.3% at 20470
• Stoxx 600 up 0.3% to 333
• FTSE 100 +0%
• DAX +0.7%
• Euro down 0.11% to $1.1387
• German 10Yr yield down 1bps to 0.09%
• Italian 10Yr yield down 1bps to 1.3%
• Spanish 10Yr yield down 1bps to 1.51%
• MSCI Asia Pacific down 0% to 126.3
• Nikkei 225 down 0.4% to 15751.1
• Hang Seng up 0.3% to 20440.8
• Kospi down 0.1% to 1970.4
• Shanghai Composite up 1.6% to 3034
• US 10Yr yield up 0bps to 1.72%
• Dollar Index down 0% to 94.23
• Brent Futures down 0.8% to $41.6/bbl
• WTI Futures down 0.8% to $39.4/bbl
• Gold spot up 0.7% to $1248.2/oz

Top Global News

• Greece Points Finger at IMF as Schaeuble Sees Deal Within Weeks: Greek Minister of State Nikos Pappas speaks in interview
• Italy Officials, Banks Said to Plan Monday Meeting on Fund Setup: UniCredit would be among investors in possible fund, CEO says
• Panama Furor Rumbles Into Second Week as Global Pressure Mounts: David Cameron to face parliament over offshore tax havens
• Daily Mail Says It’s In Early Talks With Potential Yahoo Bidders: Verizon, Google said to be among bidders for Yahoo’s Assets

Looking at regional markets, Asian stocks traded relatively mixed after inflation figures suggested deflationary pressures eased, while Nikkei 225 underperforms on JPY strength. JPY weighed on the Nikkei 225 (-0.4%) with a contraction in Machine Orders adding to the dampened sentiment, while ASX 200 (-0.1%) is also negative, although losses have been stemmed amid advances in energy. Shanghai Comp (+1.6%) was underpinned by commodity strength and a mixed bag of Chinese data in which CPI missed estimates but matched its 22-month high, while PPI was better than expected despite declining for a 49th consecutive month. 10yr JGBs saw muted trade with prices flat despite a cautious tone in Japan, while the BoJ refrained from entering the market under its bond-buying program.

Top Asian News;

• Standard Chartered Said Selling $4.4 Billion of Asian Assets: Stressed Indian loan portfolio draws interest from SSG Capital
• Abenomics Rebuked as BlackRock Joins $46 Billion Japan Pullout: BlackRock among cos. ending bullish calls on Japan equities
• Chinese Authorities Said to Probe Nanjing Peer-to-Peer Lender: Easy Richness raised at least 10b yuan from investors
• Mystery $9 billion in Extra Cash Perplexes India: Cash spikes during election time, notes RBI’s Rajan
• HNA Agrees to Buy Airline Caterer Gategroup for $1.5 Billion: HNA makes all-cash offer for Swiss caterer at 20% premium

In Europe, this morning the Eurostoxx (+0.60%) pare opening losses led by gains in financial and material names. The FTSE MIB (+1.2%) outperforms in the region amid reports that Italy is finalising plans for a new multibillion-EUR rescue fund to shore up ailing banks. While upside in the precious metals complex underpinned strength in miners with Anglo American and Arcelormittal notching up gains of over 4%.

Bunds remain elevated as the 10 yield dropped to a fresh 12-month low of 0.077, just shy of the all-time low at 0.074 , however saw a modest pullback amid the turnaround in stocks. Interestingly, this week sees supply as largely net negative with around EUR 36b1n of redemptions (all due to be repaid on Friday) due to offset the circa EUR 10bIn of supply. Furthermore, the latest CFTC report has revealed that markets have placed their largest bet against treasuries in five months, while this week is also set to see USD 56b1n of US paper hit the market. Finally, analysts at RBS expect that the main driver for Bunds will be an acceleration of ECB QE rather than risk sentiment with expectations of outperformance in the periphery.

Top European News

• Vivendi Agrees to Buy Berlusconi’s Pay-TV Unit in Swap Deal: Vivendi and Mediaset will acquire stakes of ~3.5% in each other
• Aegon to Sell $8.5b of U.K. Annuity Portfolio to Rothesay: is disposal aimed at freeing up capital
• SAP Sales Miss Estimates as Some Deals Slip to Next Quarter: co. reiterates operating profit forecast for 2016
• HNA Agrees to Buy Airline Caterer Gategroup for $1.5b: Shareholders would get CHF53/shr as well as previously declared CHF0.30/shr dividend
• Standard Chartered Said Selling $4.4b of Asian Assets: Stressed Indian loan portfolio draws interest from SSG Capital
• CaixaBank, dos Santos Agree on Plan for BPI Angola Exposure: Deal allows Portuguese lender BPI to comply with ECB request
• Three-O2 Deal Should Be Banned If No Network Sale, U.K. Says: U.K.’s antitrust regulator tells EU concessions fall short
• Nordea Plans to Sell Baltic Units ‘In Near Future:’ Aripaev: says sale has been prepared for 1.5 yrs
• Total CEO Interested in Gas Downstream Sales in China: Caixin: Total aims to increase its lubricant market share in China from current 3%

In FX, a few interesting moves in FX this morning, with USD/JPY making a fresh cycle low at 107.61 but this was only a marginal extension of the lows seen last week. Price action suggests some demand ahead of 107.50, but back above 108.00, there seems little momentum for a full blown recovery to 109.00+ levels seen at the end of last week. Some of this support may have come from a reported buy order in GBP/JPY, which saw the recovery from sub 152.00 touching levels just shy of 154.00. Cable ripped through 1.4150-70 stops in the process, taking out 1.4200-10 before the latest dip back under the figure. We saw EUR/GBP back to .8000, but this level has held so far. Relatively tight ranges seen in the commodity currencies, with the CAD weakening temporarily through 1.3000 on a slip in Oil prices. Norwegian inflation pretty much in line with expectations. NOK makes new 4+ week highs vs the EUR.

In commodities, WTI initially opened above $40 but later erased gains as Iraq boosted its March oil production to a record before a meeting in Qatar of OPEC members and other producers on April 17 to discuss capping output. West Texas Intermediate dropped 0.4 percent to $39.57 a barrel and Brent lost 0.3 percent to trade at $41.82.U.S. natural gas futures slid 2.8 percent to $1.935 per million British thermal units, the biggest drop in more than two weeks.

Gold rose to the highest level in almost three weeks. Bullion for immediate delivery advanced 0.6 percent to $1,247.66 an ounce, extending a gain of 1.5 percent last week, as a subdued USD overnight underpinned the commodities complex and supported copper and iron ore prices, with the latter higher by over 3% alongside firm gains in steel prices on lower stockpiles and after a Chinese government official called for more capacity reductions. However, the FT are running a story suggesting that restructuring of the sector will lead to much more capacity than is required and thus the glut of supply will remain. Silver added 0.9 percent.

There is nothing on today's economic calendar, although the relentless speeches from Fed presidents continue, with Dudley and Kaplan on deck. Of course the actually relevant Fed meetings, those in the close session at 11:30 where the Fed will be discussing rates, and the subsequent in which Yellen will meet Obama, will be entirely behind closed doors.

Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities enter the US session in positive territory amid outperformance in Italian banks and materials names
• Despite printing a cycle low of 107.61, USD/JPY ran in to support above 107.50 to reclaim 108.00 while GBP/USD ripped through stops to take out 1.4200 to the upside
• Looking ahead, the calendar is relatively light with the only notable highlight being potential comments from Fed's Kaplan
• Treasuries lower in overnight trading as European equity markets rally on news of Italian bank clean up, Asian markets rise; this week will feature Treasury auctions of $56b 3Y,10Y and 30Y.
• Italian Treasury and central bank officials will meet with executives of major banks on Monday to discuss the creation of a fund that would buy bank shares and help the institutions tackle non-performing loans
• Italian industrial production fell 0.6% in February, reflecting concerns about the pace of recovery that prompted the government to cut this year’s growth outlook
• After correctly predicting the yen’s advance beyond 115 and then 110 per dollar, the former Finance Ministry official in charge of currency intervention in Japan Eisuke Sakakibara now says Japan’s currency may strengthen to 100 by year-end
• Foreign traders have been pulling out of Tokyo’s stock market for 13 straight weeks, the longest stretch since 1998, dumping $46 billion of shares as economic reports deteriorated, stimulus from the Bank of Japan backfired and the yen’s surge pressured exporters
• Standard Chartered Plc is seeking to sell at least $4.4 billion of assets in Asia, people with knowledge of the matter said, as the lender pares its balance sheet after booking record impairments
• Five years after Occupy Wall Street protesters spawned a national discussion about the divide between America’s highest and lowest earners, the pay gap has only gotten wider; Wall Street bankers earned five times the national average in 2014
• The fallout from the Panama leaks showed no sign of abating as U.K. PM David Cameron was forced to provide more transparency over his wealth and European officials pledged measures to require companies to report their offshore bank accounts
• Brazilian security forces are deploying thousands of troops and erecting barricades in the capital city of Brasilia this week to prevent violent clashes as Congress holds key votes on the impeachment of President Dilma Rousseff
• Sovereign 10Y bond yields mostly steady; European, Asian equity markets mixed; U.S. equity-index futures rise. WTI crude oil and copper fall, gold rallies

US Event Calendar

• No major reports scheduled

Central Banks

• 9:25am: Fed’s Dudley speaks in New York
• 1:00pm: Fed’s Kaplan speaks in Ruston, Louisiana

DB's Jim Reid concludes the overnight wrap

In Asia this morning there is some important inflation numbers out of China data to digest. CPI for the month of March has printed at +2.3% yoy which was a smidgen below expectations (of +2.4%) but flat on the prior month which was then the highest since July 2014 and will likely provide for some comfort that the data is stabilising. Meanwhile the latest PPI numbers continue to show improvement after printing at -4.3% yoy (vs. -4.6% expected), and up six-tenths from the prior month. While factory gate prices remain yet again in negative territory, the +0.5% mom reading is the first positive monthly rise in prices since 2013.

Looking at the market reaction, sentiment appears to be buoyed in China post the data where the Shanghai Comp and CSI 300 have bounced +1.82% and +1.74% respectively. Elsewhere, it’s a bit more mixed. Following a 3.24% rally last week for the Yen, further modest gains this morning appear to be weighing on Japanese equity markets where the Nikkei is currently -1.30%. Meanwhile the Kospi and ASX are flat and the Hang Sang (+0.51%) is posting a modest gain. Credit markets are little moved, as are US equity index futures this morning.

Away from the data the newsflow over the weekend has been fairly quiet on the whole. We highlighted on a few occasions in the EMR last week the notable underperformance of European Banks since the ECB bazooka over a month ago now. The notable drag for that asset class has come from Italian banks in particular where concerns for the sector have remained elevated. That said sentiment was greatly improved on Friday (FTSE MIB +4.08%) over hopes that the nation is looking to piece together a bank rescue fund. According to the FT, Italy’s finance minister, Padoan, has called a meeting in Rome today to run over and agree upon the final details of a ‘last resort’ bailout plan. The article suggests that the plan could become official as soon as tonight but there are still concerns about whether or not the proposal will be sufficient enough to ring fence Monte dei Paschi from contagion. One to keep an eye on.

Staying in Europe, our European Economists – in their Focus Europe piece from Friday – also gave their latest thoughts on the current political situations in Greece and Spain which had weighed on fixed income markets (particularly in rates) to some degree last week. With regards to the latter, our colleagues believe their central scenario of a new election in June in Spain has become more likely. Last Thursday negotiation teams from centre-left PSOE, liberal Citizens and left-wing Podemos met to see whether they could find an agreement to form a government. Their pessimism appears to have been justified and the Citizens’ and Podemos’ economic and political agendas continue to appear irreconcilable. Should their prediction prove correct and no PM nominee wins a confidence vote by the 2nd of May then the King will dissolve parliament and call a new election, likely due three days after the Brexit referendum.

Meanwhile, in terms of Greece, our Economists judge that a return of Grexit fears as being unlikely over the coming weeks. While they note that the ongoing disagreements between Greece, the IMF and European creditors suggest that there remains some way to go until agreement is reached, they highlight two important factors as dampening risks. First, both the refugee crisis and the Brexit referendum significantly increases the costs to Europe of a crisis in Greece. Second, the Syriza government has a greater commitment to the program with PM Tsipras having obtained voters’ support for continued cooperation with Europe last September and espousing the benefits of co-operation with European partners over the last six months. The perhaps greatest risk for now is that debt relief negotiations are not completed in time for Greece’s July ECB redemptions, once again deferring full IMF participation in the program and leaving some of Greece’s medium term issues – including the full lifting of capital controls on the banking system – unresolved.

Over to markets and a quick recap of how we closed out last week on Friday. Sentiment was broadly improved with a large part of that owing to the big rally across the Oil complex on Friday. WTI and Brent both closed up more than 6% on the day meaning they finished just shy of $40/bbl and $42/bbl respectively (although they have broken through those respective levels this morning). There didn’t appear to be any fresh news to drive those big moves but the rally did help to conclude the first five-day gain for both (WTI +7.96%, Brent +8.46%) in three weeks. Those gains boosted energy stocks which led the Stoxx 600 firstly to a +1.15% gain, and then helped the S&P 500 get off to a decent start before momentum faded as the session came to close, with the index eventually stumbling to a much more modest +0.28% gain. EM currencies were the big outperformer (Brazilian Real +2.83%, South African Real +1.91%, Russian Ruble +1.39%) while the better tone was reflected in a boost for peripheral rates markets where we saw yields drop 7-8bps, while core markets were little changed.

In terms of the macro, the economic data out of the US on Friday was fairly soft and representative of a further drag on growth this quarter from diminishing inventories. Both wholesale inventories (-0.5% mom vs. -0.2% expected) and trade sales (-0.2% mom vs. +0.2% expected) came in lower than expected and so much so that we saw the Atlanta Fed downgrade their Q1 GDPNow forecast by three-tenths to a lowly 0.1% and the lowest forecast they have predicted so far. After getting back into positive territory not too long ago, US economic surprise indices have now slipped back into negative territory again.

Away from this the latest comments out of the Fed were from NY Fed President Dudley, who certainly came across as more cautious and dovish than some of his colleagues. Dudley noted that risks to the US outlook are ‘slightly’ tilted to the downside and that caution is warranted ‘because of our limited ability to reduce the policy rate to respond to adverse developments, recognizing that we could also use forward guidance and balance sheet policies to provide additional accommodation if that proved warranted’.

Wrapping up the rest of the Friday dataflow, in Europe the highlight was a couple of softer IP reports covering the month of February. Both the UK (-0.3% mom vs. +0.1% expected) and France (-1.0% mom vs. -0.4% expected) missed to the downside which poses some downside risk for the Euro area reading this Wednesday. Finally on Friday, Germany reported a slightly higher than expected trade surplus as of February owing to a notable beat in exports (+1.3% mom vs. +0.5% expected) during the month.

There’s more important Fedspeak to keep an eye on including Dudley and Kaplan today, Harker, Williams and Lacker all tomorrow Lockhart and Powell on Thursday and finally Evans on Friday. Over at the ECB we’ll hear from Knot on Wednesday. Finally this week will also see the unofficial commencement of earnings season in the US with Alcoa due to report today. Also scheduled to report are the banks with JP Morgan (Wednesday), Bank of America (Thursday), Wells Fargo (Thursday) and Citigroup (Friday) all due up. Tuesday will also see the release of the IMF’s World Outlook ahead of its spring meetings.