• Asian equity markets traded mixed with sentiment cautious after Wall St wrapped up the worst quarterly performance in the S&P 500 since 2008
• In FX markets, the prior day’s retreat in the DXY was stemmed after finding support around the 99.00 level
• OPEC members failed to unanimously agree on an emergency meeting of its economic commission board according to source reports
• US President Trump is to suspend certain tariffs payments for 90-days on imports such as apparel and light trucks,
• Relief will not include some of the high-profile tariffs including the metals tariffs and punitive tariffs on USD 360bln of imports from China
• Looking ahead, highlights include German Retail Sales, EZ & UK Manufacturing PMI (Final), EZ Unemployment, US Construction Spending, ISM Manufacturing and supply from Germany

CORONAVIRUS UPDATE

The White House issued 30-day social distancing guidelines and President Trump commented that following social distancing guidelines for the next 30 days is a matter of life and death, while he also suggested that there is light at the end of the tunnel but we will go through a painful 2 weeks. In related news, the US emergency medical stockpile is nearly out of protective equipment to combat coronavirus, according to officials. (Newswires)

US CDC says COVID-19 cases rise to 163,539 (prev. 140,904), death toll rises to 2,860 (prev. 2,405)

Italy COVID-19 cases rise to 105,792 (prev. 101,739), death toll rises to 12,428 (prev. 11,591)

UK Cabinet Minister Gove said that there may be some signs that the curve may be flattened, but now is not the time to ease social distancing measures. (Newswires) The UK's NHS is preparing to release an app that will alert users if they come into contact with someone who has tested positive for coronavirus, a move that could define a pathway to the end of the lockdown. (Telegraph)

Dutch PM Rutte said schools, restaurants and gyms are to remain shut until at least April 28th. (Newswires)

ASIA

Asian equity markets traded mixed with sentiment cautious after Wall St wrapped up the worst quarterly performance in the S&P 500 since 2008 and biggest quarterly loss on record for the DJIA, as risk appetite remained centred on the ongoing coronavirus pandemic in which the US, UK and Spain all experienced their highest daily death tolls to date. ASX 200 (+2.2%) and Nikkei 225 (-2.0%) were mixed with outperformance in Australia led by the energy sector after oil prices found mild reprieve overnight and as financials also benefitted from recent regulatory concessions, while the Japanese benchmark faltered on the weight of the detrimental currency flows and after negative Tankan numbers which showed the lowest reading in the Large Manufacturing Index in 7 years. Elsewhere, Hang Seng (-1.2%) and Shanghai Comp. (+0.3%) diverged with the mainland underpinned by the surprise expansion in Chinese Caixin Manufacturing PMI and recent comments by China’s State Council which pledged further support measures including targeted RRR cuts. However, the mood in Hong Kong was less productive after a record slump in Retail Sales and with hefty losses seen in HSBC and Standard Chartered after they scrapped dividend and share repurchase plans on the directive of UK authorities to provide an extra cushion amid the coronavirus fallout. Finally, 10yr JGBs were slightly higher amid the negative risk appetite in Japan and after the BoJ recently raised the frequency of its purchase intentions for this month, although upside was capped by resistance ahead of 153.00 and due to a reserved Rinban operation in which the BoJ reduced its purchase amount for 3yr-5yr bonds. 

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 7.0771 vs. Exp. 7.0743 (Prev. 7.0851)

Chinese Caixin Manufacturing PMI (Mar) 50.1 vs. Exp. 45.5 (Prev. 40.3).

Japanese Tankan Large Manufacturing Index (Q1) -8 vs. Exp. -10 (Prev. 0); lowest reading since 2013. Japanese Tankan Large Manufacturing Outlook (Q1) -11 vs. Exp. -14.0

UK/EU

UK BRC Shop Price Index (Mar) Y/Y -0.8% (Prev. -0.6%). (Newswires)

FX

In FX markets, the prior day’s retreat in the DXY was stemmed after finding support around the 99.00 level, which resulted to a mild pullback in its peers across the pond with EUR/USD briefly homing in on the 1.1000 level where there is a large EUR 1.9bln option expiry for today’s New York cut and with GBP/USD slipping below 1.2400, as well as its nearby 20-Hour and 50-Hour MA levels. USD/JPY attempted to nurse some of the recent losses but remained sub-108.00 and JPY-crosses were lacklustre amid the subdued risk-appetite in Japan, while antipodeans consolidated near the prior day’s lows with better than expected Chinese PMI data and Australian Building Approvals doing little to spur price action. Furthermore, the RBA minutes from the March emergency meeting provided very little in the way of fresh insight but suggested the likelihood of significant job losses ahead, while New Zealand officials were also downbeat with the Treasury anticipating at least a 10% contraction in Q2 GDP.

RBA Minutes from March Emergency Meeting stated that members strongly supported proposed policy response as a comprehensive package and noted that focus of the program was on bond yields rather than quantity or timing of bond purchases. RBA also noted that it is important to emphasise that the bank expected a recovery once the coronavirus outbreak is contained although the timing is uncertain, while it stated there were likely to be significant job losses over the months ahead. (Newswires)

New Zealand Finance Minister Robertson said GDP and unemployment will take a serious hit, while the New Zealand Treasury sees Q2 GDP contraction of at least 10%. (Newswires)

COMMODITIES

Commodities were mixed in which WTI crude futures traded flat to outperform the losses in Brent crude after comments from US President Trump who suggested Saudi and Russia are in discussions, while the US also reportedly plans to lease SPR storage space to address the supply glut which risks collapsing prices even further. However, upside in WTI was minimal with prices contained around the USD 20.50/bbl level after the larger than expected build in headline private crude inventories and after Saudi recently instructed oil service companies to be prepared to support increasing domestic oil output to 12mln BPD from today. Elsewhere, gold prices saw mild reprieve overnight from the prior day’s slump below USD 1600/oz, while copper was pressured amid the indecisive overnight risk tone.

US Private Inventory Crude Stocks (w/e 27th Mar) +10.5mln vs. Exp. +4.0mln (Prev. -1.2mln). (Newswires)

OPEC members failed to unanimously agree on an emergency meeting of its economic commission board according to source reports, while sources also noted the US and Saudi oil alliance has for now been put aside. (Newswires)

US President Trump said he raised the issue of oil prices with Russian President Putin and that it is hurting the US oil industry, while he added that Russia and Saudi are discussing the issue. (Newswires)

US Energy Secretary Brouilette spoke with Russia Energy Minister Novak regarding global oil markets and they agreed to continue dialogue among major energy producers and consumers, as well as to keep discussing oil market volatility in G20. (Newswires)

US Energy Department plans to lease space for energy companies to store crude oil in SPR in an effort to address a growing glut of crude oil that risks overwhelming commercial storage tanks and sending world energy prices deeper into a tailspin, according to sources which suggested it could be announced as early as today. (Newswires)

US Commerce Department launched antidumping, countervailing duty probes of common alloy aluminium sheets imported from 18 countries. (Newswires)

CME raised palladium futures NYMEX margins by 2.3% to USD 44000/per contract from USD 43000/contract

GEOPOLITICS

US Secretary of State Pompeo held out the possibility on Tuesday that US may consider easing sanctions on Iran and other nations to help fight the coronavirus epidemic which is a shift in tone, although reports added he gave no concrete sign they plan to do so. (Newswires/Twitter)

US

The TPLEX was little changed on Tuesday, excluding the long end, which was weaker by settlement. The Fed remains the main buyer in town across the curve, and similar to Monday, its completion of purchases in the belly earlier on in the session saw yields rise off their lows heading into settlement, although by no means drastically, as desks note a supply drought as gauged by lower take-up in the Fed’s Treasury purchases on Tuesday. Meanwhile, the Fed’s RRP operation continued to balloon while the regular repo ops saw miniscule take-up. The IG slate continues to let it rip, albeit less pronounced than Monday (IFR noted March as the largest volume month ever with USD 256.47bln in supply), while Israel came to the SSA market (10s, 30s, 100s). By settlement, yields were relatively unchanged, if not higher at the long end, 2s +1bps at 0.238%, 10s +3bps at 0.702%, 30s +7.5bps at 1.359%. T-note (M0) futures settled 4+ ticks lower at 138-22.

Fed's Mester (voter, hawk) said an unemployment rate above 10% is feasible because economic activity is being shut down to stop the spread of the virus, while she expects some very bad numbers for the economy but added that the situation can improve when we get to the other side. (Newswires)

Fed's Daly (non-voter, dovish) said she expects the economy to get worse before it gets better and already believes US is in a recession, while she added that what the Fed does depends on the evolution of the virus and that it is prepared to do whatever is required within its powers. (Newswires)

US President Trump is to suspend certain tariffs payments for 90-days on imports such as apparel and light trucks, although it will not include some of the high-profile tariffs including the metals tariffs and punitive tariffs on USD 360bln of imports from China. (FT)