• Asian equity markets mostly benefitted from the more constructive handover from Wall St where sentiment rebounded in tandem with oil prices
• In FX, the DXY remains above 100.00, EUR/USD flat, Cable sits above 1.2350
• The ECB announced that it will accept some junk-rated debt as collateral in a move to insulate some economies in the face of  potential credit downgrades
• Oil prices continued to nurse recent losses in which Brent and WTI crude futures reclaimed USD 22.00/bbl and USD 15.00/bbl respectively
• Looking ahead, highlights include EZ, UK & US Manufacturing & Services PMIs, Initial Jobless Claims, EU Leaders Meeting, US House Bill Vote, earnings from Credit Suisse, Southwest Airlines, Eli Lilly

CORONAVIRUS UPDATE

US President Trump said the number of new coronavirus cases continues to decline and more states will soon be in a position to gradually reopen. (Newswires)

US NIH's Fauci said a mitigation program of physical distancing has worked and is the basis for being able to think seriously about reopening but added we're not finished and need to proceed in careful and measured way. Furthermore, Fauci suggest we will have coronavirus in the fall and our response will determine whether it is big or small. (Newswires)

UK Chief Medical Advisor Whitty said the chances of having a vaccine in the next calendar year is incredibly small and until then, will need to rely on disruptive social distancing measures. (Newswires)

German coalition parties agreed to further measures to protect workers and companies from the impact of the coronavirus pandemic which includes higher state transfers in short-time work scheme to cover up to 80% of lost net income and will increase state wage support until year-end. Furthermore, the parties agreed to temporarily lower tax burden for catering industry through lower VAT rate and are also said to plan more tax relief for companies by simplifying loss carry forward. (Newswires)

G20 Trade and Investment working group discussed long-term action to support multilateral trading system, while they also discussed strengthening international investment to expedite recovery from coronavirus pandemic. (Newswires)

US COVID-19 cases +3.4% at 802,583 (prev. +4% at 776,093); death toll +6.7% at 44,575 (prev. +6.8% 41,758). (Newswires)

ASIA

Asian equity markets mostly benefitted from the more constructive handover from Wall St where sentiment rebounded in tandem with oil prices amid touted bargain buying and increased US-Iran geopolitical risks after US President Trump instructed the US Navy to destroy any and all Iranian gunboats if they harass US ships at sea, with the Senate’s recent passage of the USD 480bln relief bill also adding to the bout of optimism stateside. ASX 200 (-0.2%) advanced at the open but with gains later pared after mixed data releases, as well as weakness in defensives and the largest weighted financials sector. Nikkei 225 (+0.9%) traded higher although upside was restricted by an indecisive currency and following abysmal PMIs in which Manufacturing PMI posted its worst reading since 2009 and both Services and Composite PMIs were at record lows, while the KOSPI (+1.2%) outperformed after it eventually shrugged off the largest contraction for South Korea GDP in more than 11 years. Elsewhere, Hang Seng (+0.4%) and Shanghai Comp. (-0.1%) were indecisive with price action kept rangebound amid a lack of fresh drivers and continued PBoC liquidity inaction, while Hong Kong policymakers remained focused on defending the currency peg. Finally, 10yr JGBs initially weakened amid the early broad optimism but then recovered from lows as the regional stock indices retraced some of the gains and following stronger results at 2yr JGB auction.

PBoC skipped open market operations and were net neutral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.0887 vs. Exp. 7.0946 (Prev. 7.0903) PBoC may refrain from rolling over CNY 267.4bln of Targeted Medium-term Lending Facility maturing on Friday as the objective to boost lending to SMEs may have been covered by the recent liquidity provisions. (CSJ)

US Secretary of State Pompeo said US calls on China to permanently close wildlife wet markets and those selling illegal wildlife, while he added that US expressed concerns Beijing’s upstream dam operations have altered flows of the Mekong and suggested the Chinese Communist Party is coercing neighbours in the South China Sea, even going as far as sinking a Vietnamese vessel. (Newswires)

HKMA sold HKD 3.37bln and then another HKD 1.82bln to defend the peg after HKD touched the stronger end of the trading band. (Newswires)

BoJ confirmed it will shorten next week's policy meeting to 1-day on April 27th which will begin at 0900 local time and it hopes to conclude at noon (0100BST-0400BST), with the change aimed at preventing the spread of coronavirus. (Newswires)

Japanese Manufacturing PMI (Apr P) 43.7 (Prev. 44.8); lowest since 2009. (Newswires) Japanese Services PMI (Apr P) 22.8 (Prev. 33.8); lowest on record. Japanese Composite PMI (Apr P) 27.8 (Prev. 36.2); lowest on record.

UK/EU

ECB took steps to mitigate the impact of potential debt rating downgrades on collateral availability in which marketable assets and issuers of these assets that met the minimum credit quality requirements for collateral eligibility on 7 April 2020 (BBB- for all assets, except asset-backed securities) will continue to be eligible in case of rating downgrades, as long as their rating remains at or above credit quality step 5 (CQS5, equivalent to a rating of BB) on the Eurosystem harmonised rating scale. ECB said it is to grandfather until September 2021 eligibility of marketable assets used as collateral in Eurosystem credit operations falling below current minimum credit quality requirements and that appropriate haircuts will apply for assets that fall below the Eurosystem minimum credit quality requirements, while it may decide further measures if needed to continue ensuring the smooth transmission of its monetary policy in all jurisdictions of the euro area. (Newswires)

FX

The DXY was flat overnight near the prior day’s highs above the 100.00 level heading into today’s economic relief bill vote at the House and the latest Initial Jobless Claims data which is expected to show another 4.2mln applied for unemployment benefits. EUR/USD languished near the prior day’s lows after the ECB agreed to accept certain ‘junk’ bonds as collateral to mitigate the impact of potential rating downgrades and with the currency also contained amid a heavy slate of option expiries totalling over EUR 5bln between 1.0800-1.0845 rolling off at today’s New York cut, while GBP/USD consolidated above 1.2300 amid ongoing lockdown uncertainty with the UK Chief Medical Advisor suggesting the chances of a near-term vaccine are incredibly small and that it would be necessary to continue with disruptive social distancing measures. Elsewhere, USD/JPY traded flat below 108.00 and antipodeans were lacklustre with AUD/USD choppy around the 0.6300 level amid mixed data including weak PMIs and a jump in preliminary trade figures helped by a surge of exports in the resources sector.

Australian CBA Manufacturing PMI (Apr P) 45.6 (Prev. 49.7). (Newswires) Australian CBA Services PMI (Apr P) 19.6 (Prev. 38.5) Australian CBA Composite PMI (Apr P) 22.4 (Prev. 39.4)

Australian Trade Balance (Mar P) 12.3B (Prev. 4.4B). (Newswires) Australian Exports (Mar P) M/M +29% (Prev. -5%) Australian Imports (Mar P) M/M +10% (Prev. -4%)

Hungarian Central Bank Governor said smaller balance sheet provides room for them to deploy QE-type measures that other major central banks are using, while they are ready to use all tools and may start asset purchases first week of May. (Newswires)

COMMODITIES

Oil prices continued to nurse recent losses in which Brent and WTI crude futures reclaimed USD 22.00/bbl and USD 15.00/bbl respectively, with the rebound attributed to bargain buying and increased US-Iran geopolitical tensions after US President Trump instructed the Navy to fire at Iranian boats if they were harass US ships at sea, while there were also reports that Saudi Aramco had begun scaling back output to prepare for when the OPEC++ deal takes effect in May. Elsewhere, gold prices were steady amid similar uneventful trade in the greenback and as the precious metal takes a breather after recently surmounting the psychological key USD 1700/oz level, while copper prices were rangebound as the risk momentum somewhat waned overnight.

Saudi Aramco has started to scale back production from its maximum capacity (12mln BPD) in preparation for lowering its output to 8.5mln BPD in May, according to industry sources cited by Energy Intelligence. (Newswires)

US is reportedly probing whether traders profited off tips on Russia at OPEC+. (Newswires)

USO may allocate 20% of its portfolio in June contracts (Prev. 40%), 50% in July (Prev. 55%), 20% in August (Prev. 5%) and 10% in September (Prev. 0%). (Newswires)

GEOPOLITICS

US President Trump said US ships will shoot Iranians out of the water if they get too close to US ships. (Newswires)

US

The Treasury curve bear-steepened amid the bounceback in risk appetite, lead by crude oil futures. After the 10-year yield fell below 0.55% on Tuesday, it today grinded back above 0.60%; at settlement, short end yields were relatively unchanged (2s around 0.21%), while long-end yields were up around 6bps (30s +6bps around 1.22%). The more constructive risk appetite coincided with raised dollar issuance, including several foreign issuers – such as the BoE (USD 2bln) and Mexico (USD 3bln) – which supported the swap spread compression seen on the session with a handful expected to swap. Meanwhile, other rates spreads compressed, too. The supportive risk tone saw credit default spread indices continue to move lower. At the same time, nearby Eurodollar contracts caught a bid as USD LIBOR posted further declines (the rest of the packs sold off in a steepener, similar to USTs), supporting a narrowing of FRA/LIBOR-OIS spreads; USD 3-month LIBOR-OIS sits around 90bps, down from its March peak of just beneath 140bps. T-notes (M0) settled 11 ticks lower at 139-01+.

US President Trump says he signed executive order suspending immigration to the US, while he later stated he may extend or change the executive order on immigration even during the 60-day period it is in force. (Newswires)

US Senate Majority Leader McConnell said we will wait until at least next month to work on aid for states, while he added we will wait until at least May 4th and assess the effects of the stimulus before mulling a Phase 4 bill. Furthermore, McConnell stated we are not interested in revenue replacement for state governments or solving their pension problems and that state aid should be limited to virus issues. (Newswires)