• European bourses are marginally softer at present, dented on abysmal PMI numbers and ahead of the EU Leaders meeting
• EU recovery plan could trigger EUR 2tln of spending and investment, recovery find would allow Commission to raise EUR 320bln on the market
• EU is looking to launch the recovery fund on 1st January 2021; however, Italy state they cannot wait until even June for the approval
• Iran's Guards Chief says US ships will be destroyed if they threaten Iranian ships; crude is bolstered on the geopolitical tensions
• FX sees the USD firmer aided on EUR data and recovery plan woes
• Looking ahead, highlights include US Manufacturing & Services PMIs, Initial Jobless Claims, EU Leaders Meeting, US House Bill Vote, earnings from Southwest Airlines

CORONAVIRUS UPDATE

China are to purchase over 30mln tonnes of crops for State stockpile given COVID-19, the majority of these farm goods are to come from the US, according to sources. (Newswires)

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)

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)

Spain's coronavirus cases stand at 213,024 (Prev. 208,389); death toll 22,157 (Prev. 21,717, +440).

Tokyo see 134 additional COVID-19 cases on Thursday, NHK.

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 (-0.1%) 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 (+1.5%) 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 (+1.0%) 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. (-0.2%) 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)

Chinese President Xi says that China's long-term economic improving trend has not changed, according to Xinhua; to accelerate the transition of economic development mode & boost the real economy; focus on the manufacturing sector. (Newswires)

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 Gov't cuts economic assessment of the economy amid the pandemic; notes that the economy is "worsening rapidly" and is in an "extremely severe" situations - with the bleakest assessment in 11 years. (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.

US

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)

UK/EU

EU recovery plan could trigger EUR 2tln of spending and investment, recovery find would allow Commission to raise EUR 320bln on the market, according to a EU Commission note. (Newswires)

EU is looking to launch the recovery fund on 1st January 2021, according to an official. However, Italy's Deputy Economy Minister Castelli says they cannot wait until June for approval of the European recovery fund. (Newswires)

German Chancellor Merkel says the issue of joint debt will be a topic of discussion at the EU Summit; adding that we should be ready in spirit of solidarity to pay more into the EU budget. (Newswires)

ECB's Villeroy says that "Inflation is low today, and we expect it to remain low afterwards. This will allow us to maintain low interest rates and abundant liquidity for companies in difficulty”

BoE's Vlieghe says it seems that we are experiencing an economic contraction that is faster and deeper than anything we have seen in the past century, or possibly several centuries; economy’s potential is severely disrupted at the moment but, once the pandemic is over, and other things equal, in principle it should return approximately to the pre-virus trajectory. (BoE)

UK Flash Composite PMI (Apr) 12.9 vs. Exp. 31.4 (Prev. 36.0)

-        Manufacturing PMI (Apr) 32.9 vs. Exp. 42.0 (Prev. 47.8)

-        Services PMI (Apr) 12.3 vs. Exp.   (Prev. 34.5)

EU Markit Comp Flash PMI (Apr) 13.5 vs. Exp. 25.7 (Prev. 29.7)

-        Manufacturing Flash PMI (Apr) 33.6 vs. Exp. 39.2 (Prev. 44.5)

-        Services Flash PMI (Apr) 11.7 vs. Exp. 23.8 (Prev. 26.4)

German Markit Comp Flash PMI (Apr) 17.7 vs. Exp. 31.0 (Prev. 35.0)

-        Manufacturing Flash PMI (Apr) 34.4 vs. Exp. 39.0 (Prev. 45.4)

-        Services Flash PMI (Apr) 15.9 vs. Exp. 28.5 (Prev. 31.7)

EQUITIES

The optimism seen in the APAC session faded as European trade went underway [Euro Stoxx 50 -0.1%], with the deterioration attributed to a string of dismal April Flash PMIs across the region and as participants look ahead to the Eurogroup summit later today (Primer available on the Newsquawk headline feed). A meeting which could see disagreement over the rollout of the European Recovery Fund – officials touting a launched in 2021; however, Italy stated they cannot wait until June 2020 for approval. European bourses trade mixed with no standout under/outperformers, whilst broader sectors also paint a mixed picture and fail to reflect a clear risk tone – albeit the energy sector outperforms as the complex continues to post gains. The breakdown also sees a similarly mixed picture – again with Oil & Gas leading the gains. A slew of earnings were reported in the pre-market, including prelim figures for Daimler (+0.9%) and Software AG (+0.8%), whilst Renault (+2.3%), Orange (+0.5%), Pernod Ricard (+0.3%), Accor (+1.1%), Swedbank (-0.7%), Volvo (-7.0%) all reported quarterly numbers – with Renault firmer despite a downbeat earnings release on reports Renault CEO is to unveil cost-cutting measures next month, whilst Volvo is pressured after substantially missing on its EPS and adj. operating profit expectations. Moving to Credit Suisse’s (-2.2%) earnings, the group topped net income forecasts but reported a deterioration in revenue and a Q1 loan loss provision over double its expectations. That being said, market volatility saw its FICC and Equity trading and sales both higher in excess of 20% YY. Elsewhere, Wirecard (+8.0%) sees itself at the top of the DAX after an independent audit of the Co. has uncovered no substantial findings with regards to questionable accounting methods; however, the full report is yet to be published. Results from the audit are now expected for April 27th and the Co’s FY results are to be published on April 30th. Finally, Tullow Oil (+30%) opened with gains above 60% and holds its place at the top of the Stoxx 600 after divesting its stake in Uganda to reduce net debt, whilst also seeing tailwinds from favourable price action in oil.

Eli Lilly and Co (LLY) Q1 20 (USD): Adj. EPS 1.75 (exp. 1.48), Revenue 5.86bln (exp. 5.51bln). FY Non-GAAP EPS view 6.70-6.90 (exp. 6.73); FY20 guidance unchanged

FX

EUR - The single currency is languishing at the bottom of the G10 table and looking precarious under 1.0800 vs the Dollar not to mention across the board as Eur/crosses teeter over psychological or key technical levels, like Eur/Chf on the verge of 1.0500, Eur/Jpy edging towards 116.00 and even Eur/Gbp testing the 200 DMA (0.8736). Much worse than anticipated preliminary Eurozone PMIs, and particularly poor services sector prints have undermined the Euro, but Eur/Usd is holding in just above or around chart supports ahead of 1.0750 in the form of April 6’s so called reaction low at 1.0769 and a 1.0757 Fib retracement level, for now, with some additional buffers provided by option expiries extending from 1.0800-1.0790 to 1.0750 in 3.1 bn and 1.2 bn respectively.

NZD/AUD/JPY/GBP - The Kiwi and Aussie continue to see-saw vs their US counterpart, with the former recovering from a stop-induced slide overnight after 0.5900 held and subsequently retesting resistance ahead of 0.6000, while the latter was able to withstand weak PMIs with the aid of trade data revealing a much wider surplus as exports outpaced imports nearly 3-fold. Aud/Usd has reclaimed 0.6300+ status and briefly extended gains to circa 0.6370 before fading alongside Aud/Nzd ahead of 1.0650. Meanwhile, the Yen continues to retain an underlying safe-haven bid between 108.00 and 107.50 with decent option expiry interest also keeping the pair contained (1 bn at 107.50 and 1.6 bn from 107.85 to 108.00). Elsewhere, Sterling has (somehow) taken bleak UK PMI and CBI surveys in stride and resisting Greenback advances after Cable came close to filling bids touted at 1.2300, though this could be due to the aforementioned Eur/Gbp correction from recent 0.8800+ peaks rather than anything especially or uniquely Pound positive.

USD - The Buck may be primed for a fall after the latest US initial claims release and/or Markit PMIs, but for now the DXY is establishing a more assured base on the 100.000 handle and building momentum through 100.500, albeit with indirect traction from the Euro underperformance noted above and more pronounced Franc depreciation below 0.9700 through 0.9750.

SCANDI/EM - The Scandi Crowns are back on the front foot as crude prices continue to stabilise and sharp falls in Swedish sentiment indicators are acknowledged, but partially taken in context when compared to the starker deterioration elsewhere in Europe. However, in contrast to crude-related recoveries for EM currencies like the Rouble, COVID-19 contagion has intensified in SA where the Rand is back under 19.0000 vs the Dollar in the run up to President Ramaphosa setting out plans to re-open the economy after rolling out fiscal stimulus representing around 10% of the country’s GDP..

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%)

FIXED

A hectic first half for core bonds as initial/early losses were pared and partially reversed in wake of dire PMIs that has stalled a broader and partly oil-fuelled revival in risk sentiment. However, UK debt stands alone above parity between 136.98-135.93 Liffe parameters, while Bunds have topped out within their 172.20-171.29 Eurex range amidst ongoing outperformance at the Eurozone margins post-ECB fallen angel collateral assistance and pre-EU videoconference to try and launch a fiscal recovery fund. Elsewhere, US Treasuries have been largely side-lined, but impending data (namely weekly jobless claims) and preliminary Markit PMIs are likely to arouse more price action ahead of supply vibes from next week’s auction schedule and possibly results of the 5 year TIPS sale.

UK Gov't intend to issue GBP 180bln worth of bonds for May-July period, will not detail maturity split for the year at this stage; further details on June 29th; Expects a significantly higher proportion of issuance will occur in first 4-months of financial year, does not believe the high issuance volume will be required for the entire period. (Newswires)

COMMODITIES

WTI and Brent front month futures trade on a firmer footing as geopolitical risks continue to be priced in following US President Trump’s tweet regarding his order to the US Navy to shoot down all Iranian gunboats that harass US vessels. Aside from that, the underlying fundamentals remain broadly unchanged. The supply glut remains, and storage space remains scarce. “Given the glut we have in the oil market, it is difficult to see this offering lasting support to the market, unless the situation does escalate further” – ING says. Elsewhere and in fitting with recent source reports, Saudi Aramco has started to implement the OPEC+ pact ahead of its inauguration on May 1st. Aramco will be lower output to 8.5mln BPD, the output level mentioned under the terms of the of the deal – markets are yet to see if other producers follow suit, with Kuwait the only other country to publicly announce their early cuts thus far. WTI resides around USD 15.5/bbl having had briefly topped USD 16/bbl in early trade ahead of yesterday’s high of USD 16.18/bbl. Brent futures meanwhile meander just above 22/bbl after printing a current intraday high at USD 23.22/bbl. Elsewhere, spot gold remains relatively steady north of USD 1700/oz thus far and briefly topped 1725/oz. Meanwhile, copper trades on a firmer footing after Anglo American’s copper production showed a YY decline, meanwhile, Antofagasta also stated it expects copper output this year towards the lower end of its guidance.

Iran's Guards Chief says that Tehran will give a crushing response to any US threat within the Gulf; US warships will be destroyed if they threaten Iranian ships, according to TV remarks. (Newswires)

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

Kuwait Oil Minister says that the decision to impose production cuts before the OPEC++ deal comes into effect is a sovereign decision, according to Kuna. (Newswires)

Russia average oil output for first 22 days of April: 11.28mln BPD, according to a source. (Newswires) Previously 11.29mln BPD in March