• European bourses are currently printing modest gains but US futures are notably firmer than their EU counterpart
• Crude is bolstered after constructive remarks from Trump and reports that China are to begin purchasing oil for state reserves after the recent price crash
• Fed exempted US Treasury debt and Federal Reserve deposits from supplementary leverage ratio for one year as it seeks to ease strains in Treasury market
• EU Commission proposes borrowing EUR 100bln against EU government guarantees to finance the EU short-time work scheme
• Looking ahead, highlights include US Initial Jobless Claims, ISM New York Index & Business Conditions, Canadian Trade Balance, SNB’s Maechler & Moser

CORONAVIRUS UPDATE

Spanish coronavirus cases stand at 110,240 (Prev. 102,136), deaths increase by 950 to 10,003 (Prev. 9,053). (Newswires)

US President Trump said during the coronavirus task force daily press briefing that we are going to have a couple weeks that will be rough, while Trump responded that we are looking at the whole thing when asked about curtailing domestic flights. (Newswires)

US Treasury Department said US Social Security recipients will automatically receive coronavirus economic impact payments, while there were separate reports that the US Treasury Department is planning to hire Wall St advisers to advise on providing aid to the airline sector from the recently approved USD 2tln stimulus bill. (Newswires/WSJ)

EU's Economics Commissioner Gentiloni states that annual GDP growth declines by 3% each month in a lockdown - there are no discussions regarding a bailout for Italy. (Newswires)

Australian PM Morrison said we are slowing the spread of coronavirus and that Parliament will return next Wednesday. PM Morrison added it is not known when social restrictions can be relaxed and there were also separate reports that lockdown laws will be in place for 90 days in New South Wales which is Australia's largest state by population. (Newswires)

Omani oil minister says the country is not held by commitments to reduce output after March 31st, does not support increasing oil output at this sensitive stage. (Newswires)

ASIA

Asian equity markets traded mixed after a weak handover from Wall St where stocks extended on the prior quarter’s historical rout to finish the day with losses of more than 4% and the DJIA suffered a near 1000-point drop amid ongoing coronavirus fears. ASX 200 (-1.98%) was dragged lower by its top-weighted financials sector after the RBNZ ordered all banks in New Zealand to suspend dividends which pressured Australia’s big 4 that have operations across the Tasman and amid concerns there could be similar restrictions domestically, with airline shares also in a tailspin after the government denied Virgin Australia’s request for a loan and indicated it would not provide the Co. with a bailout. ASX 200 (-1.98%) was was also downbeat but off lows as the JPY-risk dynamic remained the main driver for Tokyo sentiment and with automakers lacklustre following abysmal monthly sales updates. Hang Seng (+0.8%) and Shanghai Comp. (+1.69%) initially struggled for direction amid the broad cautiousness and after PBoC liquidity inaction, while tensions with the US also risk flaring up as the latter is to tighten rules to prevent China from obtaining US tech for commercial purposes that could also be applied for military use and following US intelligence reports that alleged China concealed the coronavirus outbreak and underreported the number of cases and deaths. Finally, 10yr JGBs initially continued its pullback to below 152.50 with demand sapped heading into the 10yr JGB auction, although prices the rebounded on return from the lunch break and following mixed results in the 10yr auction which was mixed but still showed a jump in the b/c and minimal tail in price.

PBoC skipped open market operations and are net neutral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.0995 vs. Exp. 7.0949 (Prev. 7.0771)

US is to tighten rules to prevent China from obtaining US tech for commercial purposes that could also be applied for military use. (Newswires)

Japanese Gov't are to offer JPY 100bln in financial support to large Co's through the Development Bank of Japan, according to the Nikkei. (Nikkei)

US

Fed exempted US Treasury debt and Federal Reserve deposits from supplementary leverage ratio for one year as it seeks to ease strains in Treasury market and boost banks' ability to provide credit. (Newswires)

UK/EU

EU Commission proposes borrowing EUR 100bln against EU government guarantees to finance the EU short-time work scheme, according to a document. (Newswires)

-          Urges a quick resolution on a new long-term budget that would support the recovery from epidemic effects; states that there will be no national co-financing requirement for any of the EU's cohesion funds

-          Subsequently, EU Commission President Von der Leyen says that the Gov't heads she spoke to are interested and positive in regards to the short-term work proposal, says EUR 100bln short-term scheme is a massive support; adds that the invention of new tools would take too long to agree among member states for use in the current crisis

French Finance Minister Le Maire says Europe should utilise all means available in response to the virus, adding that we should use ESM with light conditionality and no stigma attached; he favour activating new financing from EIB for EUR 200bln.  (Newswires)

GEOPOLITICS

US Secretary of State Pompeo tweeted that reports Iranian diplomats were involved in an assassination of a dissident in Turkey are disturbing but consistent with their assignments, while he added that Iran's "diplomats" are agents of terror and have conducted multiple assassinations and bomb plots in Europe in the past decade. (Twitter)

EQUITIES

European stocks attempt to clamber from yesterday’s steep losses (Euro Stoxx 50 +0.4%) after sentiment somewhat improved in APAC trade following a downbeat session on Wall Street. Bourses see modest broad-based gains, with Netherland’s AEX (+1.2%) leading the pack – propped up by Shell’s (+9%) Dutch listing and with ABN AMRO (+8.3%) and ING Groep (+1.8%) rebounding from the broad downside seen in banks yesterday. Meanwhile, US equity futures see more pronounced gains with the contracts higher to the tune of 2%. Sector-wise, Energy significantly outperforms – led by the price action in the oil complex as President Trump voiced optimism regarding a Saudi/Russia resolution, whilst demand from China keeps the sector underpinned. Other sectors are broadly mixed with underperformance seen in IT and Utility names – sectors do not reflect a specific risk tone. Travel & Leisure reside at the bottom of the pack as it feels no reprieve from the demand destruction caused by the virus outbreak. In terms of movers, the top of the Stoxx 600 was initially largely dominated by oil and gas names with Aker BP, Subsea losing steam as trade went underway whilst Tullow Oil (+8.0%), BP (+5.5%) and Shell remain among the top gainers. IAG (+2.5%) sees upside amid reports that the Co’s British Airways is nearing a deal to suspend 36k workers given the impact of operations from COVID-19. On the flip side; Carnival (-8.6%) sees pressure after S&P cut its rating to “BBB-“ from “BBB; the lowest investment grade level. Centrica (-7.4%) is weighed on by dividend and guidance suspensions coupled with the interruption of its Spirit Energy divestment. Elsewhere, Handelsblatt reported that the heads of Daimler (+1.0%), BMW (+3%) and Volkswagen (+1.0%) had a conversation with German Chancellor Merkel in which they wanted to explore how the corporations can rekindle production. The auto makers also raised worries regarding supply chains and expressed great concern regarding Southern Europe. On that note, Fiat Chrysler (-1.0%) slid at the open after Italy reported car registrations slumping 85.4% YY in March amid the lockdown measures in the country.

FX

NOK/SEK/CAD/NZD/AUD - The Norwegian Krona and its Scandinavian partner are forging more gains on a combination of constructive technical factors, Euro underperformance and a recovery in oil prices prompted by China replenishing crude reserves at cheaper levels and US President Trump expressing confidence about resolving the spat between Russia and Saudi Arabia. Eur/Nok has been down below 11.2000 and Eur/Sek sub-10.9350, with the former also gleaning encouragement from ramped up Norges Bank selling of foreign currencies in April. Meanwhile, the Loonie is also benefiting from the firmer bounce in oil alongside the Rouble and Mexican Peso, as Usd/Cad tests support around 1.4100, Usd/RUB straddles 78.0000 and Usd/MXN pivots 24.0000. Elsewhere, the Kiwi and Aussie are consolidating off recent lows amidst less volatile trading conditions than seen of late, with Nzd/Usd holding firmly above 0.5900 and Aud/Usd not far from 0.6100 against the backdrop of relatively stable risk sentiment and Moody’s reaffirming NZ’s top notch triple A rating.

EUR/CHF/JPY - As noted above, the single currency remains under pressure across board as COVID-19 cases and deaths continue to rise in the Euro area, while chart impulses turn more bearish after shallower rebounds in Eur/Usd and even Eur/GBP despite the UK also suffering mounting nCoV infections and fatalities. Indeed, the headline pair has not been able to revisit 1.1000 and looks more prone to relinquishing 1.0900, while the cross is capped beneath 0.8800 after waning well short of 0.8900. Moreover, further or ongoing erosion in Eur/Chf towards 1.0550 is helping to keep the Franc on a fairly even keel vs the Dollar within confined 0.9687-51 parameters, and the Yen is almost as restrained between 107.56-06 eyeing big option expiries in close proximity, but also extending from 106.50 to 108.00-05 – full details on our Headline Feed as 7.29BST.

USD - Cautious trade ahead of the 2nd instalment of post-coronavirus global outbreak US initial claims that are widely expected to top last week’s circa 3.3 mn biggest ever total, with GS among those lifting already sky-high projections to 6 mn. The DXY is straddling 99.500 in the run up.

EM - Broad recoveries vs the Greenback, but the Rand a notable underperformer on well documented bearish SA fundamentals and Usd/Zar only paring back marginally from new record highs near 18.3900.

Notable FX Expiries, NY Cut:

-        USD/JPY: 106.50 (1.1BLN), 106.90-107.00 (2.3BLN), 107.25-35 (2.3BLN), 107.40-45 (670M), 107.50 (2.5BLN), 107.70-80 (1.6BLN), 108.00-05 (1.2BLN)

Australian NAB Business Confidence (Q1) -11 (Prev. -1). (Newswires)

RBNZ called on banks to freeze dividends, while it is to also unveil a term lending facility which will launch next month and plans a longer-term funding scheme for the banking system. (Newswires)

FIXED

Although the tide has turned again for Gilt futures, the 10 year benchmark has pared more early Liffe losses and briefly clambered back above parity, at 136.86 (+2 ticks vs -48 ticks at worst) in wake of another solid DMO sale, as bids exceeded the previous ratio for 2041 issuance even though the yield was around half the level when last auctioned in January. The more pronounced rebound also filtered through to Bunds and US Treasuries to an extent, although the former remains deep in negative territory after hitting a new Eurex base (171.60 and almost a full point underwater), while the latter is only a few ticks above 139-00 compared to 139-14+ at best. Ahead, all eyes on weekly US claims above all else, aside from breaking virus news of course.

COMMODITIES

US President Trump said he thinks Saudi and Russia will make a deal regarding oil production and suggested that he may know how to solve it. There were also comments from the US Energy Department which urged Saudi Arabia, Russia and others to work together to calm oil markets, while it noted it is frustrating that Saudi and Russia are boosting production and do not advance shared interests in stable markets. (Newswires)

Senior Gulf source said Saudi Arabia supports cooperation among oil producers to stabilize oil markets and that oil market turmoil was caused by Russia opposition to OPEC+ cuts at the meeting in early March. (Newswires)

China are to begin purchasing oil for state reserves after the recent price crash. (Newswires)

Omani oil minister says the country is not held by commitments to reduce output after March 31st, does not support increasing oil output at this sensitive stage. (Newswires)