• US futures are lower this morning, but have remained relatively steady at such levels; while focus remains on the improving prospects for crude
• OPEC+ are reportedly preparing for a Monday meeting; cuts in the range of 6-15mln BPD have been touted
• Reports note that Russia’s involvement in this is contingent on US cutting production; which Trump has previously stated has not been agreed to
• PBoC lowers the RRR for some banks by 1ppt; could release around CNY 400bln in funds and will be implemented in two phases
• Germany are to reject the prospect of "Coronabonds" at the April 7th meeting of EZ Finance Ministers, according to Spiegel
• Looking ahead, highlights include US Composite and Services PMI (Final), US Labour Market Report & ISM Non-Manufacturing PMI

CORONAVIRUS UPDATE

Germany are to reject the prospect of "Coronabonds" at the April 7th meeting, according to Spiegel: German Finance Minister Scholz says that he has always been a supporter of Eurobonds. However, "As long as we are so divided within the Eurozone, there will unfortunately be no Eurobonds. Therefore, they are not the short-term solution now". (Spiegel)

US Treasury Mnuchin said they will raise the interest rate on new small business loans to 1.0% from 0.5% to make the loans economic for banks and noted they were working around the clock to get the SBA payment protection program up and running for today. Mnuchin added that this doesn't mean businesses will get the loan today, but the program will be up and running, while he stated the first stimulus checks will be directly deposited in 2 weeks which is a week ahead of schedule. (Newswires)

US VP Pence said updated CDC guidance on wearing of face masks will follow in the next several days although there were separate reports that New York Mayor De Blasio urged residents to wear face coverings in public to prevent the spread of coronavirus. (Newswires)

Spanish coronavirus cases stand at 117,710 (Prev. 110,240), deaths increase by 932 to 10935 (Prev. 10,003). (Newswires)

Washington State extended the stay at home order through to May 4th and Louisiana will also extend the stay at home order through to April 30th. (Newswires)

EU Commission President von der Leyen says discussion are underway with member states to consider how to proceed on border closures after Easter. {(Newswires)

China Wuhan Communist Party Secretary said the risk of coronavirus resurgence in the city is still high and must guide residents to strengthen self-protection, while the official added that residents should avoid going out if not necessary. (Newswires)

ASIA

Asian equity markets were mostly lower as the region failed to sustain the energy-led euphoria from Wall St where risk appetite was driven by the record surge in oil prices after comments from President Trump spurred hopes of a potential Saudi Arabia and Russia oil price truce, in which he noted that he spoke to the Saudi Crown Prince who spoke with Russian President Putin and expects them to announce an oil production cut of 10mln-15mln BPD. Nonetheless, the momentum lost steam overnight given Russia’s denial of any talks occurring between President Putin and the Saudi Crown Prince, with key data releases including Chinese Caixin PMIs and looming US NFPs adding to the cautiousness. ASX 200 (-1.7%) gave up early gains as the initial surge in the energy sector reversed course and amid continued weakness in financials, while Nikkei 225 (U/C) also deteriorated after failing to hold above the 18000 level. Hang Seng (-0.2%) and Shanghai Comp. (-0.6%) conformed to the overnight indecision as participants digested the latest PMI releases from China in which Caixin Services PMI topped estimates and Composite PMI improved, although both remained in contraction territory with the former at its 2nd weakest reading on record. Finally, 10yr JGBs were pressured as Japanese stocks initially traded positive and following the BoJ’s Rinban announcement in which it lowered purchases in the short-end, although this wasn’t much of a surprise given the increased frequency of purchases for this month and JGBs later rebounded off lows as the risk appetite waned.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 7.1104 vs. Exp. 7.1115 (Prev. 7.0995), weakest fix since March 2008

PBoC lowers the RRR for some banks by 1ppt; could release around CNY 400bln in funds and will be implemented in two phases; PBoC to cut excess RRR for financial institutions to 0.35% (Prev. 0.72%) effective April 7

Chinese Caixin Services PMI (Mar) 43.0 vs. Exp. 39.5 (Prev. 26.5); 2nd weakest reading on record. Chinese Caixin Composite PMI (Mar) 46.7 (Prev. 27.5)

PBoC's Vice Governor Liu said the benchmark deposit rate is the bedrock of the PBoC toolbox and further consideration is needed before adjusting the deposit rate, while PBoC also stated it will not allow a credit crunch nor will it allow a flood of credit and that China has ample policy tools to cope with the impact from coronavirus. (Newswires)

China MOFCOM said China supports foreign companies returning to work and will stabilize foreign investment amid coronavirus pandemic, while it will further reduce the negative list for foreign investment. There were also comments from the China Banking and Insurance Regulatory Commission vice head that they will support local governments to inject capital into small banks and that they welcome foreign, as well as private firms to participate in restructuring of small banks. (Newswires)

Japanese Economic Minister Nishimura said they are working on deciding stimulus measures during first half of next week and want to provide support to those who are facing hardship or directly impacted from the coronavirus. (Newswires)

Asia Development Bank lowered Developing Asia 2020 growth forecast to 2.2% from 5.2% and sees 2021 growth at 6.2%, lowered China 2020 growth forecast to 2.3% from 5.8% and sees 2021 growth at 7.3%, while it lowered India 2020 growth forecast to 4.0% from 6.5% and sees India growth at 6.2% for 2021. (Newswires)

US

US Fed total balance sheet size increased to USD 5.86tln on Wednesday from USD 5.30tln the prior week, while Fed holdings of Treasuries rose to USD 3.34tln from USD 2.98tln W/W and its holdings of MBS rose to USD 1.46tln from USD 1.38tln W/W. (Newswires)

S&P affirmed US at AA+; Outlook Remains Stable. (Newswires)

UK/EU

UK Finance Ministry expanded the business loan scheme to medium-sized companies in which those with a turnover of GBP 45mln-500mln can apply for government-guaranteed loans of up to GBP 25mln from banks, while it also eased the criteria for small companies under the current program. (Newswires)

Germany are to reject the prospect of "Coronabonds" at the April 7th meeting, according to Spiegel.

Italy are reportedly planning on up to EUR 40bln in new stimulus packages, according to Corriere. (Newswires) Italy are set to pass emergency income measures worth EUR 3bln, according to a minister. (Newswires)

UK Composite PMI Final (Mar) 36.0 vs. Exp. 36.2 (Prev. 37.1)

UK Markit/CIPS Services PMI Final (Mar) 34.5 vs. Exp. 34.8 (Prev. 35.7)

EU Markit Comp Final PMI (Mar) 29.7 vs. Exp. 31.4 (Prev. 31.4)

EU Markit Services Final PMI (Mar) 26.4 vs. Exp. 28.4 (Prev. 28.4)

German Markit Comp Final PMI (Mar) 35.0 vs. Exp. 36.8 (Prev. 37.2)

German Markit Services PMI (Mar) 31.7 vs. Exp. 34.3 (Prev. 34.5)

Italian Composite PMI (Mar) 20.2 (Prev. 50.7)

Italian Markit/IHS Services PMI (Mar) 17.4 vs. Exp. 22.0 (Prev. 52.1)

EQUITIES

A relatively tame session thus far in the European equity space, albeit major cash bourses reside in negative territory (Euro Stoxx 50 -0.8%), after the optimism seen on Wall Street yesterday faded during the overnight session – in which APAC bourses lost steam and closed largely in the red. European sectors mostly with energy faring the worst amid yesterday’s pullback in energy prices, although financials stand as the marked laggard, whilst healthcare names outperform – potentially on the back of heavyweight Novartis (+1.6%) after the Co. announced it plans to initiate Phase III clinical trials to evaluate the use of Jakavi for treating a severe immune overreaction in coronavirus patient. In terms of individual movers, Tullow Oil (+25%) sees significant upside after noting it remains on production target, whilst shares also see tailwinds from the rising energy prices. H&M (+3.7%) rises after Q1 products were considerable above forecasts, whilst revenue, group sales and online sales saw YY increases – albeit the Co. warned that losses will be seen in Q2 amid material negative virus impacts. Adidas (-3.8%) falls amid reports the Co. is seeking EUR 1-2bln in government aid due to the fallout from COVID-19. Remy Cointreau (-2.6%) is similar subdued as the virus is to cause steeper Q1 2020 losses than the -26% YY figure seen in Q4 2019.  State-side, Tesla shares rose some 18% after-market after Q1 deliveries topped estimates and its Shanghai factory achieved record production.

FX

USD - The Dollar is back in the ascendancy after Thursday’s oil-induced stumble and regaining momentum as most other currencies flounder amidst the ongoing spread of COVID-19 and economic fallout evident in services PMIs. The DXY has extended above 100.000 and currently probing a relatively key upside chart level at 100.631 (50% retracement from 102.999 ytd peak to recent 98.270 trough) in the run up to NFP, the final US Markit PMI and non-manufacturing ISM.

GBP/AUD/NZD - The biggest G10 losers, with Sterling succumbing to all round selling pressure in wake of the weaker than prelim UK services PMI that nudged the composite reading further below 50.0 and pushing Cable back under 1.2400 then 1.2300 to circa 1.2263, while Eur/Gbp has rebounded to 0.8800 from around 0.8740 even though the Eurozone surveys were even bleaker, Spain and Italy in particular. Meanwhile, the Aussie and Kiwi have handed back all their recovery gains from 0.6075 and 0.5900+ to sub-0.6000 and almost 0.5850 despite slightly firmer than forecast Australian retail sales overnight and another PBoC RRR cut that has not helped the Yuan either (Usd/Cnh just under 7.1200 vs 7.1115 Usd/Cnh fix – highest midpoint since March 2008).

CHF/CAD/EUR/JPY - Also losing more ground vs the Greenback, as the Franc slips towards 0.9800 where a 1.1 bn option expiry resided and Loonie hands back gains forged from yesterday’s crude price spike within a 1.4208-1.4116 range. Meanwhile, the aforementioned dire Eurozone services PMIs and composite prints have precipitated a further pull-back in Eur/Usd to sub-1.0800 and the Yen has reversed from 108.00+ all the way back above the 200 DMA (108.33).

NOK/SEK - In contrast to their major counterparts, more upside for the Scandinavian Kronas as oil returns to the boil ahead of Monday’s hastily convened OPEC+ meeting to discuss an output cut and the Riksbank continues to rule out a repo reduction in favour of any other monetary stimulus that may be deemed necessary. On that note, more should be forthcoming after Sweden’s services sector slumped into contractionary territory alongside manufacturing in March, while Norway’s jobless rate jumped nigh on 5-fold to 10.7%, though not quite as high as anticipated (consensus 13.5%). However, Eur/Nok is hovering shy of 11.2500 and Eur/Sek near 10.9600.

EM - Widespread depreciation, bar the Rouble that is cheering Brent’s hefty advances with Usd/Rub at the low end of 77.8480-76.5810 extremes.

Australian Retail Sales MM (Feb) 0.5% vs. Exp. 0.4% (Prev. -0.3%). (Newswires)

Notable FX Expiries, NY Cut:

-        USD/CHF: 0.9800 (1.1BLN)

-        USD/JPY: 107.00 (1.1BLN), 107.35-45 (1.1BLN), 108.00 (2BLN), 108.35 (900M), 109.35 (550M)

FIXED

Not much if any further leverage for Bunds, Gilts or US Treasuries by default from the dismal set of services and composite PMIs, or reports that Germany will resist mounting pressure from its Eurozone compatriots to issue joint debt in the form of coronabonds. In fact, the 10 year German benchmark is still struggling to advance from 172.00 after topping out at 172.32 and its UK peer remains capped ahead of 137.00, while T-notes have slipped to 139-00 from 139-08 at best. Perhaps pre-NFP caution has prevailed over temptation to push the boundaries higher or the latest advances in oil and relative calm in risk assets/sentiment is contributing to defensive trade and positioning. Also ahead, final Markit services PMI and non-manufacturing ISM with forward-looking components that way well offer more than the US jobs data in terms of how bad COVID-19 is weighing on the economy, especially as the BLS cut-off was early in March like ADP

COMMODITIES

Anther rocky session for the energy complex amid a flurry of OPEC-related headlines after prices soared in the prior session before paring gains in APAC trade, as participants found it hard to envisage a scenario in which Saudi and Russia will contribute to a bulk of the 10-15mln BPD proposed by the US President. Thereafter, the complex was bolstered in early EU trade as OPEC+ seemingly edges closer to a platform for discussions – with a webinar meeting to take place on Monday, as according to the Azeri Oil Minister. That being said, Russian President Putin still has not given any mandate to the Russian Energy Ministry to cut output, according to EnergyIntel's Bakr; additionally, Energy Minister Novak’s attendance is yet to be confirmed. Sources via WSJ’s Summer Said noted that Russia is not likely to agree to output cuts if US does not also curb production. On that front, US administration official said the US doesn't know formal details of Saudi and Russian plans to cut oil supply and that US President Trump doesn't plan to ask domestic producers to agree on a specific cut. Furthermore, in-fitting with prior sources, OPEC+ is reportedly mulling inviting the US and Canada to Monday's call and OPEC plus cuts will depend on US efforts, with a crude curtailment of 10mln being considered. Yesterday, a Saudi official reportedly stated a best-case scenario would be, maybe a 6mln BPD cut. All-in-all, despite the lack of concrete commitment or quota allocations, crude markets are bolstered on hopes of a coordinated action from key global energy producers – prices will likely sway with incoming headlines throughout the day. WTI front-month futures reside around USD 26.50/bbl having tested USD 27/bbl to the upside ahead of yesterday’s USD 27.39/bbl high. Brent Jun’20 meanwhile outperforms and nudges higher towards USD 33/bbl, having eclipsed USD 36/bbl to the upside in the prior session. Something to keep an eye on - SGH Macro reports (last night) that Chinese sources dispute speculation in markets that China has purchased large quantities of crude in recent days, which follows reports that China is in the market for cheap oil; thus, opening the door to speculation as the country does not publish its free emergency stockpiling data. Elsewhere, spot gold remains uneventful just north of USD 1600/oz, having clocked in a tight range of USD 1606.60-1618.27/bbl thus far. Gains in copper remain capped at USD 2.25/lb as the red metal tracks movement in stocks.

OPEC+ preparing for a meeting, which could potentially occur next week, according to Tass. (Newswires) Later reports noted that this will likely take place via teleconference Monday 6th April 6th. (Twitter) Russian press suggested that OPEC+ will be holding discussions over a potential 10mln BPD reduction (no set quotas yet), which was later echoed by further source commentary which also noted that any deeper reductions would likely require the involvement of producers outside of OPEC+. Note, Russia are yet to confirm their attendance to the call and President Putin has not given any mandate to the Energy Ministry to lower production. WSJ suggests that OPEC+ is considering inviting US and Canada on to the call, depending on US efforts.

Global output cut of 10mln BPD is a realistic goal, according to an OPEC+ delegate. (Newswires)

US President Trump said he did not make concessions during talks with Saudi and Russia on oil, while he added that he did not agree to a US domestic production cut. (Newswires)

Russian Kremlin says President Putin is to hold a meeting with Russian oil majors today on global oil markets; remains in active contact with global energy ministries. (Newswires)

US Department of Energy announced it is offering oil producers the option to lease space to store oil in the SPR, in fitting with source reports earlier in the week and is to lease space for 30mln bbls of oil. (Newswires)

Goldman Sachs said even if a Saudi and Russia output deal is reached, the coordination required would result to a delayed and gradual implementation, while it added that considering size of current demand hit of 26mln bpd, an output cut is necessary rather than voluntary. (Newswires)