• Sentiment is subdued this morning as the absence of month-end factors has seen focus return to the virus
• 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
• Spanish coronavirus cases stand at 102,135 (Prev. 94,417); deaths increase by 864 to 9053 (Prev. 8189)
• Russia is not planning to boost oil output amid oversupply, sources state, Russia is not holding talks with Saudi; but this could be done in a timely manner
• Note, OPEC+ production cuts have expired and Saudi Aramco’s oil supply has surged above 12mln BPD
• Looking ahead, highlights include US Construction Spending, ISM Manufacturing

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)

Spanish coronavirus cases stand at 102,135 (Prev. 94,417); deaths increase by 864 to 9053 (Prev. 8189). (Health Ministry)

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 (+3.6%) and Nikkei 225 (-4.5%) 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 (-2.2%) and Shanghai Comp. (-0.6%) 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

BoJ purchased JPY 120bln of ETFs (Prev. JPY 201.6bln). (Newswires)

US

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)

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)  

EQUITIES

The fading of month/quarter-end factors and the quietened stimulus news-flow have prompted global equitys to resume the sell-off, with Europe (Eurostoxx 50 -3.2%) following the negative lead from Wall Street and Asia overnight. Core markets see slightly more pronounced losses than peripheries, with particular underperformance seen in the UK’s FTSE 100 (-3.7%). The index is pressured by a slew of banks posting losses between 5-10% after agreeing to scrap a total of ~GBP 7.5bln in dividends and suspending share buybacks upon the order of the UK government. The BoE also stated that they are prepared to look into using their supervisory powers in the event the commitments are not adhered to; thus, HSBC (-8.5 %), Standard Chartered (-7.0%), Lloyds (-5.5%), Barclays (-6.1%) and RBS (-6.4%) are all on the backfoot. Unsurprisingly, the Financials sector is the laggard with Banks the underperformers in the sector breakdown. Energy follows a close second amid the rotting prices in the complex after yesterday’s mild reprieve. Travel & Leisure holds its place as one of the heavier-hit sectors due to the ongoing demand decline. In terms of individual movers Pirelli (-2.2%) failed to hold onto gains spurred by Italian brake maker Brembo purchasing a 2.43% stake in the company, as upside was potentially shaved by Continental’s (-5.0%) guidance withdrawal and bleak assessment of the auto and tire divisions – with material changes and disruptions seen in significant portions of its business – Nokian (-12.3%) and Michelin (-0.5%) also reside in the red, although the latter is somewhat cushioned by a broker upgrade at Barclays. Finally, Adidas (-2.9%) declines after suspending its EUR 1bln share buyback to conserve cash in light of retail store closures in Europe and North America.

China is reportedly considering easing the production quota on electric vehicles this year, delaying the implementation of emission rules by 6-months, according to sources. (Newswires)

FX

USD - The Dollar has regained momentum after Tuesday’s late tumble amidst dwindling demand for portfolio rebalancing and a 7th liquidity providing repo facility from the Fed, with widespread rebounds against G10 counterparts pushing the DXY up from sub-99.000 lows through 99.500 again. However, risk sentiment remains fragile to say the least and prone to further abrupt swings, while looming US economic indicators are destined to reveal more COVID-19 contagion that could scupper the latest Greenback revival. On that note, ADP will be viewed with added interest along with jobs components from the manufacturing PMI and ISM as proxies for the monthly BLS report on Friday and ahead of tomorrow’s weekly claims that many believe may top last Thursday’s 3.3 mn or so record breaking number.

AUD/NZD/CAD - In keeping with yesterday’s price action, the Aussie and Kiwi only received temporary overnight traction from another Chinese PMI beat and headline print back above the key 50.0 level (albeit just in the case of Caixin’s manufacturing index) before recoiling from around 0.6160 and just under 0.6000 respectively vs their US peer to almost 0.6050 and sub-0.5900 before paring some losses (latter circa chart support). Meanwhile, the Loonie also has declining crude prices to contend with and has fallen below 1.4200 ahead of Canada’s manufacturing PMI that could feasibly lose 50.0 status.

GBP/CHF/EUR - Also succumbing to the Buck’s bounce and renewed risk aversion, as Cable retreats from 1.2400, the Franc from near 0.9600 and Euro recoils from 1.1000+ towards 1.0900, with little or no reaction to UK, Swiss or Eurozone manufacturing PMIs irrespective of outcomes vs expectations.

JPY/SEK/NOK - In contrast to other majors, the Yen retains an element of safe-haven premium between 107.94-26 parameters and is well within striking distance of decent option expiries spaced equidistantly from 108.00 to 107.00 (2 bn at the top, 1.4 bn at 107.50 and 1 bn at the bottom). Meanwhile, the Norwegian Krona and its Swedish peer to a lesser extent have largely shrugged off sharp declines in manufacturing PMIs into contraction territory, and the former also the aforementioned downturn in oil, as Eur/Nok continues to trade off increased Norges Bank currency action below 11.4000 and Eur/Sek is capped ahead of 11.0000.

EM - No such luck for the Hungarian Forint after a horrendous plunge in the manufacturing PMI to 29.1 from 50.3 and added dire news in the breakdown as new orders sunk. Hence, Eur/Huf has advanced to fresh all time peaks approaching 364.00.

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)

UK Markit/CIPS Manufacturing PMI Final (Mar) 47.8 vs. Exp. 47.0 (Prev. 48.0)

EU Markit Manufacturing Final PMI (Mar) 44.5 vs. Exp. 44.7 (Prev. 44.8)

German Markit/BME Manufacturing PMI (Mar) 45.4 vs. Exp. 45.5 (Prev. 45.7)

French Markit Manufacturing PMI (Mar) 43.2 vs. Exp. 42.9 (Prev. 42.9)

Italian Markit/IHS Manufacturing PMI (Mar) 40.3 vs. Exp. 40.5 (Prev. 48.7)

FIXED

The marked change of fortunes for UK bonds continues in wake of the first leg of this month’s hefty refunding that augurs well for the remaining auctions, albeit it’s very early days to be certain. However, the Gbp 3bn 2028 offering was devoured in comparison to barely covered German Bobls that would have been a technical failure without retention, though nothing out of the ordinary. In response, new intraday highs for Gilts on Liffe and closer to Monday’s 137.33 best, at 137.19, while Bunds are keeping their head above 173.00 vs 173.48 at one stage and the 10 year T-note is poised a few ticks off its 139-13+ overnight session apex. Ahead, a busy US agenda in keeping with the first trading day of the month, and with several items that should register, like ADP, Markit’s PMI and the ISM.

COMMODITIES

WTI and Brent front-month futures resume the decline following the prior session’s mild reprieve – whilst divergence is seen between the energy benchmarks. Brent underperforms as it sees renewed pressure from further OPEC roadblocks after members failed to agree on an emergency meeting to deal with the price rot. OPEC’s President has been pushing for a meeting of OPEC’s Economic Commission Board – an OPEC body that does not set policy but makes recommendations. Sources noted that Saudi, UAE, Kuwait, and Nigeria pushed for no such meeting. The meeting itself could be agreed to by a simple majority of the 13 members, although the absence of Saudi would mean the meeting has no power to come to a consensus even if agreed upon as the Kingdom accounts for around 33% of total OPEC output. As a reminder, prior sources noted that Saudi opted for the next meeting to take place on the scheduled June date. Furthermore, as the OPEC+ production pact expired last night, the Kingdom is readying to ramp up its supply levels above 12mln BPD from ~10mln BPD in March, a move confirmed by an industry official. Russia is reportedly ditching its plans to raise production by 300k BPD (with scope for it to be raised to 500k BPD) amid the supply glut, albeit the rift with Saudi remains. Brent futures briefly dipped below USD 25/bbl, having slipped from yesterday’s USD 27.90/bbl high. Meanwhile, WTI fares modestly better amid a seemingly growing alliance between US and Russia after sources suggested a US-Saudi partnership has been put on hold, possibly after Saudi refused US’ request to ditch production hikes. The US and Russian Energy Ministers, after President Trump and President Putin’s call, agreed to continue the dialogue among major producers and keep tabs on the market volatility. Furthermore, sources State-side said the Trump Admin is mulling leasing SPR storage to energy companies. The plan could be announced as soon as today and comes after the Admin failed to secure funding from Congress to purchase cheap oil to fill the SPR’s 77mln barrels of free capacity. The idea of the revised plan is to tackle the risk of overwhelming commercial storage from the growing supply glut, oil will be stored for sale later once the crisis subsides. Elsewhere, the weekly Private Inventory data only adds to the bearish fire after a larger-than-expected build of 10.5mln barrels vs. Exp. 4mln barrels – traders will be eyeing today’s DoEs for confirmation. In terms of metals, spot gold recoups some of the prior day’s losses after the downside was exacerbated heading into the US cash close. The yellow metal dipped below USD 1600/oz and its 21 DMA at USD 1589/oz. Prices currently hover in-between those levels. Copper prices largely move in tandem with the overall risk appetite, albeit to a lesser extent. The red metal remains north of USD 2/lb but off best levels.

Russia is not planning to boost oil output amid oversupply, sources state, Russia is not holding talks with Saudi yet; echoed by the Kremlin stating that they are not holding talks with Saudi Arabia on the oil market at present; but talks could be set up in a timely manner if necessary (Newswires) Separately, Russian Energy Minister Novak discussed the current oil market with US Energy Secretary on Tuesday, as well as mutual co-operation, according to the Energy Ministry; adding the slump in demand and oversupply in market creates long-term risks. (Newswires)

Saudi Aramco oil supply has surged above 12mln BPD (vs. 9.7mln BPD production in March), according to Industry Official. (Newswires)

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

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