With the Fed set to begin its latest 2-day meeting (no rate hike is expected), S&P futures are little changed with European and Asian stocks higher after the VIX dropped to a 10 year low and the Nasdaq rose to record highs, sending the MSCI All-Country Index back to all time highs, as global markets reopen after holiday with investors focusing on stronger corporate earnings, while ignoring weaker than expected “hard” economic data and geopolitical concerns. The yen extended losses, with the USDJPY rising to the highest since March 21; gold slid and WTI crude futures rose while Treasury yields climbed after Steven Mnuchin said it “could absolutely make sense” for the U.S. to sell ultra-long bonds.

The MSCI All-Country World Index was poised for another all time high, as global market cap once again rose above $50 trillion. European shares advanced after the May 1 holiday, as BP jumped after posting stronger than expected earnings. European government bonds fell across the board. The Nasdaq Composite index hit a record high on Monday as the world’s five largest companies by market capitalization — Apple, Alphabet, Microsoft, Amazon and Facebook — all hit intraday or closing highs.

“Risk assets are performing well and investors are clearly bullish,” Claudio Piron, strategist at Bank of America Merrill Lynch wrote in a client note. “Nevertheless, we advise caution and this month is especially notorious for its refrain to ’Sell in May’,” he added, although lately it appears that nothing can dent the bullish mood on Wall Street, where the VIX “fear gauge” closed at its lowest since before the global financial crisis on Monday.

The MSCI All-Country World Index rose 0.1 percent as of 10:35 a.m. in London.

The Stoxx Europe 600 Index increased 0.2 percent, with BP climbing 1.6 percent, and the banking sub-index was up 0.4 percent, showing no reaction to comments from U.S. President Donald Trump, who told Bloomberg Television he was actively considering breaking up big banks.

The Topix index rose 0.7 percent to the highest since March 21 as the yen weakened. Japanese markets will be closed for holidays over the next three days.  MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.5 percent to its highest level since June 2015, as many of the region’s markets also reopened after a long holiday weekend. Japan’s Nikkei rose 0.7 percent after some robust earnings. South Korea paced gains, with the Kospi briefly topping its 2011 peak.

Much of the market’s attention has fallen on forecast-beating corporate earnings which have helped push shares higher across the globe this year. First-quarter profits at S&P 500 companies are expected to rise 13.6 percent, the strongest rise since 2011, according to Thomson Reuters I/B/E/S. European equivalents are seen up 13.9 percent.

“Higher corporate earnings and tax reform seem to be more important to the market than any off-the-cuff remark from Trump. That means people are not buying protection in the options market to protect themselves from a drop in the market,” said Neil Wilson, senior market analyst at ETX Capital.

Strong earnings have outweighed concern over patches of weak economic data. An official survey on Tuesday showed Chinese factory activity growth slowed more than expected in April.

The ISM measure of U.S. manufacturing activity also undershot forecasts on Monday.

“Soft” data in Europe was better with Euro-area factories expanding output at the fastest pace since 2011. The Markit Manufacturing PMI gauge rose to 56.7 in April from 56.2 the previous month, IHS Markit reported on Tuesday. An April 21 preliminary estimate was for an increase to 56.8.  “Companies are benefiting from the historically weak euro, improved growth in key export markets, rising domestic demand and ongoing central-bank stimulus including record-low interest rates,” said Chris Williamson, chief economist at IHS Markit. “Optimism about the year ahead, meanwhile, appears unaffected by political worries.”

The dollar hit a one-month high against the safe-haven Japanese yen on some signs of easing tensions over North Korea and as U.S. bond yields rose after U.S. Treasury Secretary Steven Mnuchin said the government was looking into issuing ultra-long debt of maturities in excess of 30 years. Greek government bond yields fell after Greece and its lenders reached a long-awaited deal on reforms required to release further bailout funds.

U.S. 30-year Treasury yield were 1 basis point higher at 3.02 percent, just below Monday’s three-week high, after Mnuchin told Bloomberg issuing ultra-long bonds “can absolutely make sense”. “Mnuchin’s comments have at least stabilized the long end of the curve,” said Lee Hardman, a currency economist with Japan’s MUFG. “But the dollar is still on the defensive in the near term. The data from the U.S. has been coming in on the disappointing side and the Fed is likely to acknowledge that at this week’s meeting.”

The yield on 10-year Greek government bonds fell 30 basis points to 6.18 percent, their lowest since October 2014, after the deal with its lenders, which followed half a year of talks. Oil prices rose as investors weighed rising production in Libya and elsewhere and expectations that the OPEC producers group and others will extend output curbs. Brent crude last traded 29 cents higher at $51.81.

Companies due to report earnings include Apple, Pfizer, Merck and Aetna. Wards total vehicle sales may rise.

Global Market Snapshot

• S&P 500 futures down 0.1% to 2,384.75
• MXAP up 0.4% to 150.04
• MXAPJ up 0.6% to 490.83
• Nikkei up 0.7% to 19,445.70
• Topix up 0.7% to 1,550.30
• Hang Seng Index up 0.3% to 24,696.13
• Shanghai Composite down 0.4% to 3,143.71
• Sensex up 0.02% to 29,924.82
• Australia S&P/ASX 200 down 0.1% to 5,950.37
• Kospi up 0.7% to 2,219.67
• STOXX Europe 600 up 0.2% to 387.44
• German 10Y yield rose 1.2 bps to 0.329%
• Euro up 0.2% to 1.0915 per US$
• Brent Futures up 0.6% to $51.81/bbl
• Italian 10Y yield rose 3.7 bps to 1.987%
• Spanish 10Y yield rose 2.2 bps to 1.67%
• Brent Futures up 0.6% to $51.81/bbl
• Gold spot down 0.1% to $1,255.34
• U.S. Dollar Index down 0.02% to 99.05

Bulletin Headline Summary from RanSquawk

• European equities trade modestly higher with BP earnings helping to lift the FTSE 100
• GBP finds support after surprise rise in UK Mfg. PMI
• Looking ahead, highlights include US vehicle sales data

Top Overnight News From Bloomberg

• Trump Says He’d Meet North Korea’s Kim If Conditions Right
• Trump Weighs Breaking Up Wall Street Banks, Raising Gas Tax
• Barclays Falls for Third Day as Trump Suggests Bank Breakup
• IAC to Buy Angie’s List in Deal Valued at Over $500 Million
• Soros Says It’s ‘Disappointed’ by Terms of Proposed KWE Deal
• Euro-Area Manufacturing Expands at Fastest Pace in Six Years
• Monsanto Abandons Deal With Deere as Merger With Bayer Looms
• Boeing Had 15 Orders Incl. 13 for 737s in Week Ended April 30
• McDonald’s Japan Says ‘Gran’ Burger, McFlurry Drove April Sales
• Discovery, ProSiebenSat.1 Start Joint German Streaming Service
• Infosys Plans to Hire 10,000 American Workers Over Next 2 Years
• AstraZeneca Approval Unlikely a Big Commercial Opportunity: JPM
• Liberty Interactive Buying HSN May Lead to 10% Accretion: BofAML

Asian equities traded mixed as the majority of the region returned from public holiday and digested the weaker than expected Chinese PMI data. ASX 200 (-0.3%) was led lower by miners and financials after gold prices declined and following earnings from Big 4 bank ANZ Bank which missed expectations despite showing H1 cash earnings rose 23%. Nikkei 225 (+0.7%) traded positive on a weaker currency, while Shanghai Comp. (-0.3%) and Hang Seng (+0.3%) were mixed with the mainland bourse pressured after the PBoC refrained from open market operations and as participants mulled over the latest PMI data in which the Official and Caixin Manufacturing PMIs missed estimates to print 6-month and 7-month lows, respectively. 10yr JGBs traded flat with slightly weaker demand seen in today’s enhanced-liquidity auction for 2yr, 5yr, 10yr and 20yr JGBs, while the curve was mixed with mild underperformance seen in the long-end. RBA kept the Cash Rate unchanged at 1.50% vs. Exp. 1.50% (Prey. 1.50%), while it reiterated that unchanged policy is consistent with sustainable growth and achieving inflation target. RBA also commented that higher commodity prices give significant support to Australia’s national income and that a broad-based pick up was seen globally since last year.

Top Asian News

• China’s $11 Trillion Economy and Markets Are in a Tug of War
• DBS Profit Beats Forecasts, Helped by Wealth-Management Fees
• Pimco Warns of Credit Risks as Asia Bond Sales at Record
• Guangzhou R&F Halted Pending 1Q Results Release
• Hong Kong Stocks Fluctuate; Belle Surges While Developers Drop
• India’s Sensex Holds Close to Record; Reliance, Tata Motors Fall
• Asia’s FX Laggards Turn Leaders of Pack as Ringgit Rebounds
• Modi Adviser Says Bad Bank Not Needed to Solve Loan Mess
• Japan Stocks Rise to 6-Week High as Yen Weakens Before Holiday
• RBA Statement’s Unwritten Line: Baton Handed to Fiscal Stimulus

European equities have started the holiday-shortened week on the front-foot in the wake of the largely positive sentiment seen on Wall Street yesterday. More specifically, the FTSE 100 (+0.5%) outperforms its peers as a positive earnings update from BP (+1.4%) props up energy names across the continent with gains otherwise relatively broad-based in what has otherwise been a relatively light morning for stock specific newsflow. Fixed income markets trade modestly lower alongside some of the upside seen in European bourses with prices also relatively unreactive to the latest slew of largely in-line core Eurozone manufacturing PMIs. More specifically, French paper has been relatively steady as Macron continues to maintain his lead over Le Pen ahead of tomorrow’s televised debate and Sunday’s election results. Elsewhere, peripheral focus has been on Greece with a notable decline in yields after the Greek government has managed to strike a deal with creditors regarding austerity measures.

Top European News

• Greek Debt-Relief Talks Move Closer After Late-Night Athens Deal
• May Says Juncker Clash Shows Brexit Talks Will ‘Not Be Easy’
• Italian Joblessness Unexpectedly Increases as More Seek Work
• U.K. Manufacturing Growth Surges to Fastest in Three Years
• Soros Says It’s ‘Disappointed’ by Terms of Proposed KWE Deal
• Macron Tells Le Pen, Melenchon Voters He Hears Their Anger
• A $1 Trillion Asset Management Boom Is a Guide to Nordic Banking

In currencies, the yen slid 0.3 percent to 112.21 per dollar, the lowest since March 21, following a 0.3 percent slide on Monday. The euro rose 0.2 percent to $1.0917, while the British pound was little changed. The Bloomberg Dollar Spot Index was flat.  The early price action in London this morning favoured the USD despite some data misses reported in yesterday’s holiday thinned markets. USD personal income and spending and ISM manufacturing PMIs all came in softer than expected, buy we saw the greenback on the front foot against a selection of currencies. USD/JPY was standout as we broke above 112.00, with some suggesting this was partly in the short term plug in the US finding gap, though we prefer the correlation to equities. UST yields still looking buoyed to maintain support through the figure, but upside momentum is clearly lacking. Gains also seen against the CAD and GBP, but Oil prices have recovered modestly to fend off a move to 1.3700 for now, but the spot rate remains poised for another push higher. GBP was trading on the backfoot as all things Brexit are back at the fore. Cable had slipped below 1.2880 from the mid-upper 1.2900’s seen late last week, but was given a boost this morning from the much better than expected UK manufacturing PMIs — at 57.3.

In commodities, West Texas Intermediate crude rose 0.4 percent to $49.04, erasing earlier losses. Oil fell 1 percent Monday as Libyan output surged, more rigs were added in the U.S. and Saudi Arabia cut prices to Asian customers. Oil prices initially took another dip, and any support coming in for WTI and Brent at predominantly based on hopes of the production cut agreement being extended into H2. Plenty of talk that there is strong intent, but we are unlikely to see a notable pick up until this is rubber stamped. Copper prices have risen on fresh strikes in Indonesia, with supply concerns outweighing demand issues emanating from the softer China PMIs. Nickel and Zinc keeping up with Copper this morning. Gold will likely find some support as the market looks to the French election this weekend, but little negative impact on the EUR as Le Pen softens her tone on the single unit.

Looking at the day ahead, this morning in Europe we’ll get the final April manufacturing PMI readings along with a first look at the data for the UK and the periphery. We’ll also get the Euro area wide unemployment rate for March. The only data due out in the US this evening is vehicle sales data for April. Away from the data the ECB’s Nouy is set to speak at two separate events today while Nowotny also speaks this evening. Germany’s Merkel is also due to meet Russia’s Putin which might be worth keeping an eye on. On the earnings front we’ve got 43 S&P 500 companies reporting including Merck, Pfizer (both at the open) and Apple (after the close).

US Event Calendar

• Wards Total Vehicle Sales, est. 17.1m, prior 16.5m
• Wards Domestic Vehicle Sales, est. 13.3m, prior 13m

DB’s Jim Reid concludes the overnight wrap

Perhaps the highlight of a light US session last night was the VIX closing at the lowest level since February 16th 2007, a span of nearly 123 months. The index closed at 10.11 which compares to the close on Friday of 10.82. It did actually touch an intraday low of 9.90 yesterday which is only the second time this year that the index has fallen below 10.00 (it touched 9.97 intraday in early February). To put yesterday’s closing level in context, in the 6871 business days since the inception of the VIX (going back to 1990) we have only ever seen the index close lower than last night’s level on 14 occasions. Quite impressive stats.

Given the holidays around the globe it won’t come as a surprise to hear then that price action in US equities wasn’t hugely exciting yesterday. The S&P 500 (+0.17%) and Dow (-0.13%) both faded into the close despite the Nasdaq (+0.73%) notching up a new record high. Initially sentiment was boosted by that news of a tentative agreement by Congress on a near $1.2tn spending bill, which is likely to be voted on in the coming days. In fact politics largely dominated yesterday’s session with banks under the spotlight after President Trump said in an interview with Bloomberg News that he is actively considering a breakup of Wall Street Banks and specifically calling for a “21st century” version of the 1933 Glass-Steagall law. Any weakness in bank stocks was short lived however with JP Morgan (+0.10%), Morgan Stanley (+0.88%) and Bank of America (+1.24%) all finishing up. In addition to the bank comments, Trump also added that he is open to increasing the US gasoline tax rate with additional revenues to be used to fund infrastructure development.

Away from this Treasury yields crept higher as the session progressed with the curve steepening too. 10y yields finished the day up 3.8bps at 2.319% while 30y yields rose a little over 5bps to close back above 3.000% again. Much of that move reflected comments from Treasury Secretary Steven Mnuchin who said that ultralong bond issuance “could absolutely make sense”. He added that the Treasury currently “have a working group looking at it”. Meanwhile, following the soft Q1 GDP print last week the Atlanta Fed released their initial first estimate of Q2 growth which they have pegged at 4.3%.

Staying with the macro, the main focus of the data yesterday was the ISM manufacturing reading which came in at a slightly disappointing 54.8 for April (vs. 56.5 expected) from 57.2 in March. At face value the index still remains firmly in expansion territory and points to much stronger growth than what the initial Q1 real GDP figures suggest. However there were some disappointing aspects within the details of the report. Ahead of payrolls this week the employment component tumbled 6.9pts to 52.0 which is essentially the biggest one-month decline since July 2011 when there were concerns about the US debt ceiling. The new orders component was soft too, falling 7.0pts to 57.5, albeit still at an elevated level. There was however some improvement seen in components for production and exports.

In terms of other data, the final manufacturing PMI for April was confirmed at 52.8 which was unchanged relative to the flash reading. Away from that personal spending in March came in flat after consensus was for a +0.2% mom rise. The February reading was also revised down a tenth while personal income was also below market (+0.2% mom vs. +0.3% expected). Meanwhile, as expected the PCE deflator (-0.2% mom) fell while the PCE core (-0.1% mom) was also down and in line with expectations. That has pushed the YoY rate down two-tenths to +1.6%.

This morning in Asia and with the exception of China we’ve seen most major bourses advance in early trading. The Nikkei (+0.70%), Hang Seng (+0.27%) and Kospi (+0.84%) are all up with the latter briefly edging above its all time record close at one stage. In China the Shanghai Comp (-0.35%) is in the red perhaps in response to a disappointing run of data in recent days. After the official PMIs were confirmed as weakening in April over the weekend this morning we saw the Caixin manufacturing PMI come in at 50.3 for April which is both down from 51.2 the month prior and also well below expectations for 51.3. Meanwhile in Australia the Aussie Dollar (+0.34%) is firmer after the RBA left rates on hold as expected.

Moving on. Today brings the latest monthly ECB purchasing data where hopefully we’ll get a much better guide to how the ECB is splitting their taper between corporate and government bonds. April was full of holidays which distorted the weekly data but viewed over the month we should get some guidance. Given the bank holidays yesterday in Europe we thought it would be worth quickly recapping some of the main news from the weekend which we touched on in yesterday’s EMR. In Italy former PM Renzi won the Democratic Party Primary with over 70% of votes which will likely be seen as a strong mandate ahead of next year’s general election. In France recent polls still point to a 20pp lead for Macron over Le Pen ahead of this weekend’s second round election. Finally the European Council released the guidelines intended to govern the EU’s Brexit negotiations with the UK after they were unanimously backed in Brussels. EU President Tusk noted that the unanimous support gives the EU a “strong political mandate for negotiations”. We also had a wrap up of what has been a decent earnings season so far on both sides of the pond.

Looking at the day ahead, this morning in Europe we’ll get the final April manufacturing PMI readings along with a first look at the data for the UK and the periphery. We’ll also get the Euro area wide unemployment rate for March. The only data due out in the US this evening is vehicle sales data for April. Away from the data the ECB’s Nouy is set to speak at two separate events today while Nowotny also speaks this evening. Germany’s Merkel is also due to meet Russia’s Putin which might be worth keeping an eye on. On the earnings front we’ve got 43 S&P 500 companies reporting including Merck, Pfizer (both at the open) and Apple (after the close).

In terms of the remainder of this week, kicking things off tomorrow will be Germany where the April unemployment numbers are due to be released. Shortly after that we’ll get Euro area PPI for March and then the advanced Q1 GDP report for the Euro area. In the US tomorrow we’ll get the ADP employment change report in April and the final April PMIs and ISM non-manufacturing reading. In the evening on Wednesday all eyes then turn over to the Fed meeting. In Asia on Thursday the early data is out of China with the remaining April Caixin PMIs. In Europe we’ll also get the remaining April services and  composite PMIs as well as Euro area retail sales in March and UK money and credit aggregates data. In the US on Thursday the data includes initial jobless claims, Q1 nonfarm productivity and unit labour costs, March trade balance, March factory orders and the final revisions to March durable and capital goods orders. With little of note in Europe on Friday the main focus will be on the US where we’ll get the April employment report including nonfarm payrolls.

Away from the data, this week’s Fedspeak is reserved for Friday when we’ll hear separately from Fischer, Williams and Yellen, as well as a panel debate with Rosengren, Evans and Bullard. Over at the ECB, in the remainder of this week we are due to hear from Lautenschlaeger, Praet, Draghi and Mersch on Thursday. Other important events this week include Wednesday’s live televised debate between French presidential candidates Macron and Le Pen, Wednesday’s meeting between President Trump and Palestinian Authority President Abbas and UK local elections on Thursday. Finally, on the earnings front a total  of 131 S&P 500 companies report this week and 85 Stoxx 600 companies report. Amongst those still to report from tomorrow are BNP Paribas, Facebook, Tesla, Time Warner, HSBC, BMW, Shell and VW.