• Sentiment was supported overnight following the announcement of reopening guidelines in the US and hopes of a vaccine breakthrough
• In FX markets, the DXY softened overnight and pulled back below the 100.00 level amid the heightened risk appetite
• US President Trump noted that experts say the curve has flattened and we have passed the peak of new cases
• President Trump unveiled a 3-phase approach to re-opening the economy, while he noted that some states can reopen sooner than others
• There were reports that the Chicago hospital treating severe COVID-19 patients with Gilead’s (GILD) antiviral medicine Remdesivir is seeing rapid recoveries in fever and respiratory symptoms
• UK Foreign Secretary Raab said the current UK measures must remain in place for at least the next 3 weeks
• Looking ahead, highlights include EZ CPI and the Baker Hughes Rig Count

CORONAVIRUS UPDATE

US President Trump noted that experts say the curve has flattened and we have passed the peak of new cases, while he also expects fewer deaths than even most optimistic of projections. President Trump also unveiled a 3-phase approach to re-opening the economy and expects the economy to boom once opened. Phase 1) reopening of certain places such as restaurants, cinemas, gyms as long as they observe strict social distancing, high-risk individuals to stay at home, non-essential travel is discouraged 2) Travel can resume, schools can reopen, size of gatherings can be expanded and social distancing measures moderated, high-risk individuals to stay at home 3) High-risk individuals would not need to remain at home but would need to practice social distancing, large venues operate with limited social distancing rules, employers start lifting restrictions on staffing (Politico). Trump also noted that some states can reopen sooner than others and states which have met the criteria to start Phase 1 of reopening, can literally begin tomorrow. Furthermore, Trump commented that 29 states should be able to reopen relatively soon and that Governors will be empowered to tailor the approach to their own states and if they need to stay closed, that will be permitted. US President Trump's reopening guidelines suggested a 14-day downward trajectory in coronavirus cases before beginning a phased reopening although the document was said to not offer a specific timeframe for opening up the economy. NY Governor Cuomo said the stay-at-home and business closure orders will be extended by two weeks to 15th May. (Newswires)

There were reports that the Chicago hospital treating severe COVID-19 patients with Gilead’s (GILD) antiviral medicine Remdesivir is seeing rapid recoveries in fever and respiratory symptoms, with nearly all in the closely observed clinical trial discharged in a week. However, Gilead later stated that anecdotal reports do not provide statistical power necessary to determine safety and efficacy profile of its Remdesivir drug as treatment for COVID-19. (Newswires)

UK Foreign Secretary Raab said the current UK measures must remain in place for at least the next 3 weeks and suggested it would not be responsible to pre-judge what experts will say in three weeks’ time. Raab unveiled five criteria for easing lockdown measures 1) protect the NHS, 2) consistent decline in death rates, 3) lower infection rates across the board, 4) testing and PPE issues under control, 5) prevention of a second peak. (Telegraph)

ASIA

Asian equity markets notched firm gains after tracking the advances in US equity futures following the announcement of reopening guidelines for the US economy and amid hopes of a COVID-19 treatment after positive results for Gilead's Remdesivir drug in closely observed clinical trials, despite the Co. downplaying the reports. In addition, Boeing shares took off after-hours as the Co. plans to resume commercial airline production in Washington state factories next week. ASX 200 (+1.6%) and Nikkei 225 (+2.4%) surged from the open with corporate updates contributing to the stock rally in Australia including Rio Tinto which posted higher quarterly iron ore output and shipments, while Tokyo sentiment benefitted from the government’s relief efforts including the JPY 100k cash handouts to all citizens, and the TAIEX (+2.2%) was also boosted with chipmakers inspired by strong earnings from global semiconductor giant TSMC. Hang Seng (+2.4%) and Shanghai Comp. (+0.9%) conformed to the broad optimism following reports the PBoC will continue to the guide credit funds to support smaller firms through targeted RRR cuts and with the gains maintained regardless of the slew of mixed tier-1 data which showed Chinese GDP Y/Y at -6.8% vs. Exp. -6.5% Y/Y, although GDP Q/Q was at a slightly narrower than expected contraction. Furthermore, Industrial Production and Retail Sales added to the varied narrative although China’s stats bureau remained optimistic in which it suggested a visible improvement in major economic indicators last month and likelihood of a continued recovery. Finally, 10yr JGBs were pressured amid spillover selling from T-notes with prices dampened as stocks rallied from US reopening guidelines and hopes of progress for COVID-19 treatment.

PBoC skipped open market operations and were net neutral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.0718 vs. Exp. 7.0745 (Prev. 7.0714)

Chinese GDP (Q1) Q/Q -9.8% vs. Exp. -9.9% (Prev. 1.5%). Chinese GDP (Q1) Y/Y -6.8% vs. Exp. -6.5% (Prev. 6.0%) Chinese Industrial Production (Mar) Y/Y -1.1% vs. Exp. -7.3% (Prev. -13.5%) Chinese Retail Sales (Mar) Y/Y -15.8% vs. Exp. -10.0% (Prev. -20.5%)

China stats bureau said there was a visible improvement in major economic indicators last month and that economic activity is being restored with China's economic rebound will likely continue. The stats bureau also stated there has not been large scale layoffs, while it expects Q2 economic performance to be better than Q1 and noted that China will step up support measures. (Newswires)

RBI Governor Das says to announce certain additional measures with objective to maintain sufficient liquidity in the system, adds decided to undertake TLTRO ops 2.0 valued at INR 500bln which can be stepped up as necessary

UK/EU

French President Macron said EU countries have no choice but to set up a fund that could issue common debt with a common guarantee, while he added the fund would allow member states to finance according to their needs rather than size of economies. (FT)

FX

In FX markets, the DXY softened overnight and pulled back below the 100.00 level amid the heightened risk appetite which spurred safe-haven outflows. This benefitted the greenback’s major counterparts including EUR/USD which recovered from the lows seen in the prior session, but with the gains in the single currency limited amid several large option expiries totalling nearly EUR 5bln spread out between 1.0800-1.0900 for today’s New York cut. Elsewhere, GBP/USD reclaimed the 1.2500 handle to wipe out the losses seen after the UK lockdown was extended by at least 3 more weeks as expected, USD/JPY slipped below 108.00 amid the USD woes, and antipodeans gained helped by their correlation to risk with AUD/USD rising north of 0.6350 and NZD/USD back above 0.6000.

BoC Governor Poloz said when we get back to normal, interest rates will certainly increase and that it will take the economy a couple of years to make up for lost ground. There were also comments from BoC’s Wilkins that recovery for Canada could begin over the summer but recovery from low oil prices could take longer, while she noted that their corporate bond program will purchase 1yr-5yr maturities. (Newswires)

COMMODITIES

Commodities were mixed with WTI crude futures lacklustre as prices continued to oscillate around the USD 20/bbl amid the ongoing demand concerns, while a contraction in Chinese GDP added to the humdrum tone for the energy complex. Elsewhere, gold declined and briefly tested the USD 1700/oz level amid the lack of safe haven demand and copper rallied alongside the heightened risk appetite amid optimism of a sooner reopen of the US economy and on coronavirus treatment.  

Russian Energy Minister Novak and Saudi Energy Minister held a call and expressed commitment to the oil cut deals, while they are said to be willing to take more measures with other OPEC+ members and oil producers if needed. (Newswires)

CME raised crude oil NYMEX margins by 11.9% to USD 7500/contract from USD 6700/contract for May. (Newswires)

US

The Treasury bid continued as equities slumped lower in recent ranges, with the shape of the curve bull-flattening; the Treasury Bond June future move over one-and-a-half points upwards, while the 2-year futures were little changed. By settlement, 2s unchanged at 0.20%, 10s -3.5bps at 0.60%, and 30s -7bps at 1.20%. Similar to Wednesday, the lions’ share of strength came in the European session before the upward trajectory levelled-off in later trade, with real money accounts reportedly still heavy sellers into the Fed’s buyback operations. Further, as yields hit two-week lows, investors were likely cautious about extending the move. For instance, 2-year yield secular low was 0.143% on 9/20/2011, today’s low print of 0.187% is the lowest of this recent rally, a mere 4bps, or 2+/32, off the lows. More broadly, some Bond market participants have likely been enticed into longs given recent dismal data points, while value proxies in the equity market lead losses. In credit, Lipper data showed USD 5.184bln of inflows into investment grade rated funds in the latest week, the first inflow in six weeks, while HY rated funds saw their third week of inflows, a sign of stabilisation in the market, no doubt the Fed’s latest Primary/Secondary Market Corporate Credit Facilities will be reinvigorating investors as the bank has shown its commitment to backstopping credit markets. It is worth noting also that FRA-OIS spreads widened slightly amid USD LIBOR rose after eight consecutive declines; white strip Eurodollars were offered. US T-note futures (M0) settled 2+ ticks higher at 139-07+.

Fed's Williams (voter, neutral) said stresses in financial market will not entirely abate until the pandemic is behind us and that the NY Fed is taking rapid and significant actions to promote liquidity and stability. Williams also stated the Fed is limited in what it can and should do, while he suggested fiscal policy is playing the main role. (Newswires)

Fed's Bostic (non-voter, dove) said hopefully the rebound in the economy means the Fed's lending will be repaid quickly and the balance sheet will "resolve itself", while he is looking for further market stresses and stated the Fed is willing to do more with Treasury backed facilities if needed. (Newswires)

Fed's Harker (voter, hawk) said the Fed is not going to bring all financial markets to where they were but it can help them function and that policy will stay low until the dual mandate can be reached. (Newswires)

Fed's Kaplan (voter, dove) said the US economy will start to grow in Q3 and believes peak unemployment will be at the mid-high teens but expects it to fall to 8-10% by year end. (Newswires)

US President Trump tweeted the Democrats are blocking funding for the Paycheck Protection Programme and called on them to support refilling funds for the programme which ran out of funds yesterday. In related news, US Senate Majority Leader McConnell said there has been "absolutely no progress" among lawmakers to come to an agreement on pay check funding for small businesses, although there were later comments from US Senate Democrat leader Schumer that talks on additional relief funding are ongoing. (Newswires)