• European bourses are subdued after spending much of the session relatively mixed/flat, e-mini S&P just below Friday’s lows
• US President Trump’s administration and Democrats in Congress were said to be near a USD 450bln economic relief package for small businesses
• Trump said they are getting closer to a deal with Democrats regarding stimulus and could have an answer on Monday
• PBoC cut the 1-year & 5-year LPR rates, as expected by 20bp and 10bp respectively
• FX sees the USD softer, and below 100.00 this morning but GBP and EUR have been unable to capitalise thus far
• Looking ahead, highlights include ECB Purchases & NEC Director Kudlow at 15:00BST on BBG TV

CORONAVIRUS UPDATE

US President Trump’s administration and Democrats in Congress were said to be near a USD 450bln economic relief package for small businesses including billions for the paycheck protection programme, hospitals and expansion of testing, while other sources also noted that US Treasury Secretary Mnuchin and House Speaker Pelosi were very close to a deal for 2nd round of small business loans. (Newswires/Twitter) US President Trump said they are getting closer to a deal with Democrats regarding stimulus and could have an answer on Monday and that he is in favour of aid to state and local governments although that would be for a future package to negotiated with Congress, while President Trump also stated that VP Pence will lead call with Governors on Monday to discuss what can be done to further coronavirus response. (Newswires)

In the UK, Saturday’s DHSC statistics revealed an additional 888 deaths, with Sunday showing a further 596, bringing the total to 16,060. The Times’ reported that PM Johnson has told colleagues that he wants to be very cautious in lifting lockdown measures in order to avoid a second wave (note, this follows a report in The Sunday Times suggesting that Johnson had been slow to react to the outbreak of COVID-19. In terms of potential lockdown dates, The Telegraph has reported that two leading UCL economists have submitted a proposal to the government suggesting that measures could be eased as early as May 4th with small shops to reopen under the same social distancing measures as supermarkets. Elsewhere, the Telegraph also reported that a senior UK government adviser has suggested that the nation needs to start easing lockdown measures in 3-4 weeks. In terms of the economic fallout, The Times reports that the Treasury’s internal assessment of the impact of COVID-19 paints an even more pessimistic picture than the report released by the OBR earlier in the week (suggested GDP could fall by 35% in Q2).

In Europe, Spain reported that smallest single day of deaths on Sunday (410) since March 22nd, today that figure fell to 399. Italy revealed 433 additional deaths on Sunday; the smallest increase in a week. Germany are set to begin opening smaller shops as of today; ahead of the open the RKI Health Institute notes that coronavirus cases rose by 1775 to 141672 and death toll rose by 110 to 4404. French PM Philippe has said that the government will unveil plans to progressively lift current restrictions on business and travel within two weeks. (Newswires)

EU Economics Commissioner Gentolini states that aid totalling EUR 1.5trl may be necessary to combat COVID-19, according to Der Spiegel; subsequently, Spain are reportedly calling for a similar amount in total which is in-line with previous estimates from the ECB. (Der Spiegel/El Pais)

South Korean Finance Minister says by the end of May will prepare additional measures to offset the impact from COVID-19. (Newswires)

Singapore reports a prelim 1426 new cases of COVID-19, the first time it has eclipsed 1000 on a daily increase. (Newswires)

Tokyo has 102 new cases of COVID-19, according to Asahi. (Newswires)

ASIA

Asian equity markets traded mixed amid the ongoing fallout from the coronavirus pandemic and extended rout in oil prices which briefly saw the WTI May contract drop below USD 15/bbl for the first time since 1999 and the June contract briefly slip below USD 23/bbl with the sell-off due to a collapse in demand, concerns of declining storage capacity and ahead of Tuesday’s contract settlement. ASX 200 (-2.5%) and Nikkei 225 (-1.2%) were negative with the energy sector front-running the broad declines in Australia alongside the oil market woes and as Caltex also suffered from Couche-Tard abandoning its pursuit of the Co., while Tokyo risk appetite was sapped after mostly weaker than expected trade data including the largest decline in exports since 2016. Hang Seng (-0.2%) and Shanghai Comp. (+0.5%) were somewhat indecisive although outperformed their regional peers after the PBoC cut the 1-year and 5-year Loan Prime Rates by 20bps and 10bps respectively as expected, while the state planning agency noted that China will roll out more forceful and targeted fiscal, financial and employment policies. Finally, 10yr JGBs lacked demand following recent comments from the Japan Securities Dealers Association that global funds sold record levels of 10yr JGBs last month and with Japan’s government planning to issue more than JPY 25.69tln to fund supplementary budget, although losses were stemmed by support at 152.00 and amid weakness in Japanese stocks.

PBoC 1-Year Loan Prime Rate 3.85% vs. Exp. 3.85% (Prev. 4.05%). (Newswires) PBoC 5-Year Loan Prime Rate 4.65% vs. Exp. 4.65% (Prev. 4.75%)

PBoC skipped open market operations and were net neutral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.0657 vs. Exp. 7.0667 (Prev. 7.0718)

China NDRC said the nation will roll out more forceful, targeted fiscal, financial and employment policies with relevant departments, while it added there is still very large room for macro hedging policy to work with. (Newswires)

Japan's economic stimulus package will be revised to JPY 117.1tln from JPY 108.2tln with JPY 46.4tln earmarked for fiscal spending and the extra budget will be revised to around JPY 25.6tln from JPY 16.8tln, while the government will issue extra bonds valued more than JPY 25.69tln to fund supplementary budget according to a draft. (Newswires)

Japanese Trade Balance (JPY)(Mar) 4.9B vs. Exp. 420.0B (Prev. 1108.8B). (Newswires) Japanese Exports (Mar) Y/Y -11.7% vs. Exp. -10.1% (Prev. -1.0%) Japanese Imports (Mar) Y/Y -5.0% vs. Exp. -9.8% (Prev. -13.9%)

US

US postponed some tariff payments for 90 days but does not include anti-dumping and countervailing duties while reports added it also does not apply to section 201, 232 and 301 trade remedies. (Newswires)

UK/EU

BoE Deputy Governor Broadbent says that the COVID-19 crisis is quite unlike a normal cyclical downturn and it is hard to think distinctly about the demand hit vs. supply. OBR 25% Q2 GDP decline scenario is not unrealistic. While Chief Economist Haldane stated MPC cannot prevent a sharp downturn but can cushion it and rate cuts are being passed on to the economy as best as the MPC can tell but the pass-through is not complete yet. (Newswires)

ECB’s De Guindos and Villeroy commented that ECB is flexible and could act further if required. (Newswires)

ECB high-level officials, including Governing Council member Stournaras, as well as Supervisory Board head Enria, are reportedly pushing for an EZ bad-bank to deal with debts from the ’08 crisis. However, the plan is, as bad-bank plans previously have in the EZ, facing opposition from the European Commission regarding state-aid rule changes and that there are better alternatives; as such, talks have reportedly stopped. (FT)

British Retail Consortium said footfall was down 83% Y/Y since the UK lockdown started. (Newswires)

UK Rightmove House Prices (Apr) M/M -0.2% (Prev. 1.0%). UK Rightmove House Prices (Apr) Y/Y 2.1% (Prev. 3.5%). Rightmove said new home sales are almost impossible and it cannot provide meaningful price data.

EQUITIES

European equities have given up gains since the open and trade mostly lower (Euro Stoxx 50 -0.4%), as the cautious tone from APAC trade reverberated across the continent. US equity futures see more pronounced losses in comparison following the State-side gains posted on Friday. European sectors remain mixed with no clear indication of the risk-tone, whilst Energy and Materials reside at the bottom of the bunch. Looking at the breakdown, the downside sees Basic Resources alongside Oil & Gas, whilst Healthcare resides at the other end of the spectrum; Travel & Leisure remains relatively flat. In terms of movers, miners see pressure in European trade after giant Vale reported Q1 iron ore sales -6.8% YY and iron ore production -18% YY. Co. cut its FY20 iron ore production to 310-330mln tons vs. Prev. 340-355mln tons amid delays to the resumption of operations at certain mines. FY nickel production guidance cut to 180-195k tons vs. Prev. 200-210k tons. Thus, Glenore (-1.6%), Rio Tinto (-1.8%), Anglo American (-2.8%), Fresnillo (-2.5%), BHP (-1.3%) all see losses. European bank also see downside after reports downplayed ideas that the a EZ bad-bank will be formed to deal with debt from the 2008 crisis. Elsewhere, Phillips (+6.4%) extends on opening gains despite overall downbeat earnings as the Co. aims to return to growth and improved profitability in H2 2020. Sanofi’s (+1.1%) Head of French business said the Co. will pay out a dividend this year, with the overall value modestly higher YY, albeit shares are moving in tandem with the European Healthcare sector.

FX

NZD/AUD - The Kiwi only got a fleeting fillip from firmer than forecast NZ inflation overnight, but is outperforming fellow majors on PM Arden’s acknowledgement of the progress made in containing the spread of nCoV to the point that plans are afoot to re-open businesses end lockdown this time next week. Nzd/Usd is firmly back over 0.6000 in response and eyeing resistance ahead of 0.6100, while the Aud/Nzd cross has retreated markedly to test 1.0500 as the Aussie lags below 0.6400 vs its US peer amidst weak oil and other commodity prices, albeit with the DXY unable to retain a grasp of the 100.000 handle.

CAD/NOK/RUB/MXN - The Loonie, Norwegian Krona, Russian Rouble and Mexican Peso are all suffering alongside crude that is extending losses to deeper multi-year lows ahead of the looming May WTI futures expiry, with Usd/Cad hovering around 1.4050, Eur/Nok above 11.3000, Usd/Rub circa 74.5900 and Usd/Mxn back over 24.0000.

GBP/JPY/CHF/EUR - Pragmatic rather than poignant in terms of policy remarks from the BoE via Broadbent and Haldane have not really impacted the Pound, but Cable has pulled back from 1.2500 and Eur/Gbp is edging up towards the 200 DMA (0.8739) despite the draw of a particularly large option expiry at the 0.8700 strike (2.8 bn). Instead, Sterling seems to be suffering from general coronavirus fallout highlighted by IHS reporting the biggest fall in household income since it began publishing data. Similarly, but to a lesser extent due to fading risk sentiment after a mild boost from PBoC rate cuts, the Yen on a softer footing across the board, as Usd/Jpy meanders from 108.00 to 107.00 and Eur/Jpy pivots 117.00. Conversely, the Franc is rebounding from around 0.9700 and still close to 1.0500 against the Euro even though the single currency is forging gains vs the Greenback towards 1.0900 and latest Swiss bank sight deposits reveal even heftier intervention to curb Chf strength.

Notable FX Expiry, NY Cut:

-        EUR/GBP: 0.8700 (2.8BLN)

New Zealand CPI QQ (Q1) 0.8% vs. Exp. 0.4% (Prev. 0.5%). New Zealand CPI (Q1) Y/Y 2.5% vs. Exp. 2.1% (Prev. 1.9%) New Zealand RBNZ Sectoral Factor Model Inflation Index (Q1) 1.7% (Prev. 1.8%)

FIXED

Aside from gradual Dollar depreciation and ongoing oil drilling, debt markets have arguably been livelier than others given further underperformance in the Eurozone periphery that provided Bunds with enough momentum to briefly and fractionally surpass near term chart resistance ahead of 173.00. However, extended recovery gains have since been pared after failing to breach the next technical hurdle at 173.05 and Gilts have also drifted back down from a minor new Liffe high at 136.91 to leave US Treasuries alone in positive territory. Note, very little reaction from the 10 year German benchmark to the latest Bundesbank monthly bulletin that suggests a limp rather than V, U or even L-shaped recovery from severe recession this year. Ahead, second tier NA releases before the latest weekly ECB updates on QE and the PEPP that might revive flagging Italian BTPs, Spanish Bonos and even French OATs if skewed in their direction to offer a backstop.

COMMODITIES

WTI and Brent futures kick the week off on the back foot, with the former’s front-month future (May) -18% but disregarded given its expiry tomorrow and with open interest and volumes minuscule in comparison to the following month (June). There is little by way of fresh fundamental developments to sway the markets, although traders continue to attempt to gauge the supply/demand imbalance against the backdrop of COVID-19. WTI June dipped sub-23/bbl to a low of around USD 22.70/bbl (high USD 24.92/bbl), whilst the Brent June future losses further ground below USD 28/bbl, having printed a fresh intraday base at 27.06/bbl. Meanwhile, the Arb between the two June contracts has widened to almost USD 4/bbl vs. sub-3/bbl on Friday. Elsewhere, spot gold continues to be subdued below USD 1700/oz, with a firmer Buck providing further pressure to the yellow metal. Copper prices largely tracked lower with APAC sentiment, whilst action in the USD provides no relief to the red metal. Elsewhere, iron ore futures and nickel prices were supported overnight after mining giant Vale cut its production figures for the metals.