Morning all.. Wall St closed higher as Mnuchin made comforting noises about getting tax reform done this year and the S&P closed up 0.18% in a quiet session in NY. It was quiet in Asia too and the Nikkei caught up some lost ground from the previous day, closing up 0.59% but China stocks were lower as Moody’s downgraded China to A1 from Aa3; changed outlook to stable from neg; reflects expectation that financial strength and potential growth will erode over coming yrs; potential growth to decline to close to 5% over next 5y; stable outlook represents broadly balanced risks; expects economy-wide leverage will increase further over coming yrs; expects Govt debt burden to rise gradually to 40% of GDP by 2018 and closer to 45% by end of decade; no specific timing for reassessment of rating FX markets were quiet overnight with the EUR seeing a 20 pip range and USDJPY 30 pips. Little appetite for risk and low volumes elsewhere in Asia. UK PM: raised terror threat level from severe to critical; cannot ignore that there is a wider group of individuals linked to Manchester attack; military personnel may be deployed at public events (NB. critical threat means further attacks may be imminent). Fed’s Harker: June rate hike is a distinct possibility, could be delayed by downside surprise to infl; two more rate hikes this yr is appropriate; remaining 2017 hikes would ideally not be ‘bunched up; concerns over weak Q1 GDP were an overreaction; starting to see upward pressure in wages, very little slack left in labour mkt; discussing different options for reducing Fed bond portfolio, prudent to start b/s run off then see how it goes; unwinding balance sheet policy with be equivalent of watching paint dry, will be gradual and on autopilot; Fed will give mkts plenty of warning before reducing portfolio but currently not sure about specific timing nor how much accommodation will be removed; no discussion of politics at FOMC. In Japan BoJ’s Kuroda: uncertainty about the natural rate of interest makes it difficult to steer policy. This morning we get Swedish Consumer confidence and PPI, Spanish PPI and little else but Draghi is due to speak at 13:45 BST.. A quiet European session expected.. good luck.