• Asian equity markets were mostly positive with sentiment underpinned by optimism regarding the reopening of global economies
• US government trial of Gilead's (GILD) Remdesivir is running ahead of schedule and results from the trial could be possible by mid-May
• UK PM Johnson could announce plans for easing the lockdown as early as this week after returning to Downing Street
• Italy PM Conte announced the nation is to begin lifting the lockdown from May 4th with retailers set to open on May 18th
• BoJ kept NIRP at -0.1% and long term JGB yield target at around 0% but pledged to buy unlimited JGBs and increased its purchases of corporate bonds and commercial paper
• In FX markets, the DXY weakened overnight amid a lack of demand for safe-havens but remained above the 100.00 level
• Looking ahead, highlights include ECB purchases, US 2 and 5yr supply 

CORONAVIRUS UPDATE

US government trial of Gilead's (GILD) Remdesivir is running ahead of schedule and results from the trial could be possible by mid-May, with potential for earlier preliminary results. However, other reports noted that preliminary results from a Remdesivir test by Chinese scientists found it may reduce sperm count in mice. (Newswires)

US is to cap the amount each bank can lend under the coronavirus relief program with the Small Business Administration to impose a maximum amount for individual lenders at 10% of the Paycheck Protection Program and pace the applications filed. (Newswires)

New York Governor Cuomo said the state will follow the CDC’s recommendation to wait until hospitalization rates decline for 14 days before opening up and outlined that phase 1 will involve construction and manufacturing activities which pose low risk, while phase 2 to be based on a business-by-business analysis of how essential it is and the associated risks. Furthermore, Governor Cuomo noted that the number of deaths in the state from coronavirus increased by 367 on Saturday vs. Prev. 437 on Friday, while there were comments from New York City Mayor De Blasio that the city needs USD 7.4bln from the government to offset impact from the outbreak. (Newswires/Fox)

Italy coronavirus cases rose by 2324 to a total of 197,675 and death toll increased by 260 vs. Prev. 415 which was the smallest daily increase since March 14th. In related news, Italy PM Conte announced to begin lifting the lockdown from May 4th in which bars and restaurants will be able to provide home deliveries and retailers are to reopen on May 18th, while he added that it is reasonable to expect schools to remain shut until the end of the school year. (Newswires)

UK PM Johnson could ease lockdown restrictions before the May 7 deadline and is expected to announce plans for easing lockdown as early as this week after returning to Downing Street. (Telegraph) UK Foreign Secretary Raab said lockdown restrictions need to be eased carefully, meaning that social distancing will remain for "some time", while there were separate comments from UK Environment, Food and Rural Affairs Minister Eustice that lockdown measures will be reviewed in a couple of weeks and that it is very important not to act too soon. (BBC/Newswires) National Medical Director of NHS England Stephen Powis stated we now have a very definite trend of reduced hospitalizations and that it is highly likely there will be different types of measures combined which will keep transmission rate down. (Newswires)

China said there are no longer any coronavirus patients at hospitals in Wuhan and it was also reported that the Hong Kong government is considering easing social distancing measures. (Newswires)

ASIA

Asian equity markets were mostly positive with sentiment underpinned by optimism regarding the reopening of global economies after some US states began to reopen businesses and with Italy, Spain and France preparing to ease restrictions after recording their lowest death tolls in a month. ASX 200 (+1.5%) was led higher by tech and industrials with sentiment also supported by loosening of lockdown measures after Queensland announced to permit some outings from next Saturday. However, upside was initially restricted by weakness in the largest weighted financials sector after big 4 bank NAB posted a 51% slump in cash profit and unveiled plans for a substantial share placement, while Nikkei 225 (+2.6%) outperformed amid a weaker currency and the BoJ policy announcement where the central bank announced further measures including a shift to unlimited bond buying as widely speculated. Hang Seng (+1.9%) and Shanghai Comp. (+0.7%) were also higher with Hong Kong surging as its government was said to consider easing social distancing controls and the mainland somewhat lagged after weak Chinese Industrial Profits which contracted by almost 35% Y/Y. Finally, 10yr JGBs were initially lower amid the gains in stocks and similar pressure in T-notes, although JGBs prices were later boosted after the BoJ policy announcement in which the central bank also upped its corporate bond and commercial paper purchases with the maximum limits of purchases from a single issuer upped to JPY 500bln and JPY 300bln respectively from JPY 100bln.

PBoC skipped open market operations and are net neutral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.0703 vs. Exp. 7.0687 (Prev. 7.0803) Chinese Industrial Profits (Mar) Y/Y -34.9% (Prev. 5.4%); YTD (Mar) Y/Y -36.7% (Prev. -38.3%). (Newswires)

China began the Standing Committee of the NPC plenary session where they will decide on the date for when the NPC will take place. (Xinhua)

BoJ kept NIRP at -0.1% and long term JGB yield target at around 0% but pledged to buy unlimited JGBs and increased its purchases of corporate bonds and commercial paper. BoJ said it will buy up to JPY 20tln of corporate bonds, as well as relax rules for corporate bonds and commercial paper purchases, while it will expand the type of assets it accepts as collateral for loan programme to tackle coronavirus. Furthermore, BoJ said it won’t hesitate to ease further if required and removed price momentum from its forward guidance in which it stated it expects short and long-term policy rates to remain at current or lower levels. (Newswires)

BoJ’s Outlook Report stated Japan's economy is to remain in a severe situation due to the spread of coronavirus and that uncertainty on Japan's economic outlook is extremely high but noted the economy is likely to improve on pent-up demand once virus effect subsides and that inflation is likely to gradually accelerate as economy improves.

Real GDP   

Fiscal 2019 forecast lowered to between -0.4% and -0.1% from 0.8%. Fiscal 2020 forecast lowered to between -5.0% and -3.0% from 0.8%. Fiscal 2021 forecast revised to between 2.8% and 2.9% from 1.1%. Fiscal 2022 forecast at between 0.8% and 1.6%.

Core CPI

Fiscal 2019 forecast kept at 0.6%. Fiscal 2020 forecast lowered to between -0.3% and -0,7% from 1.0%. Fiscal 2021 forecast lowered to between 0% and 0.7% from 1.4%. Fiscal 2020 forecast at between 0.4% and 1.0%

UK/EU

UK PM Johnson is set to take personal charge of Brexit talks as he returns to work and looks to put pressure o the EU to move red lines on areas such as regulatory alignment and fisheries. (Times)

EY ITEM Club estimates it will 3 years to return to levels pre-coronavirus levels and forecasts half of UK consumer spending this year will be delayed or lost. (Newswires)

Italian Foreign Minister and 5-Star Leader Di Maio clarified that his remarks that Italy must be “pragmatic” in talks referred to discussions with the EU over aid tools and not the ESM, while he stated they continue to see the ESM as an inadequate tool, (Newswires)

S&P affirmed United Kingdom at AA; Outlook Stable and affirmed Italy at BBB; Outlook Negative, while it affirmed Portugal at BBB; Outlook revised to Stable from Positive and affirmed Greece at BB-; Outlook revised to Stable from Positive on adverse effects of COVID-19. Fitch affirmed Netherlands at AAA; Outlook Stable. (Newswires)

FX

In FX markets, the DXY weakened overnight amid a lack of demand for safe havens but remained above the 100.00 level as participants also look ahead to this week’s key releases including US GDP, as well as the latest central bank policy meetings from the Fed and ECB. As such, EUR/USD was relatively flat at the 1.0800 handle and near about EUR 1.6bln of option expiries set to roll off at today’s New York cut, while GBP/USD was firmer and briefly broke above 1.2400 with reports suggesting UK PM Johnson could ease lockdown restrictions before the May 7th deadline. JPY-crosses were mostly higher on the constructive risk tone although USD/JPY was initially flat before slipping lower despite the BoJ’s actions which markets had widely anticipated, while antipodeans were lifted by the risk appetite which helped AUD/USD reclaim the 0.6400 handle and spurred NZD/USD to prod the 0.6050 level despite the absence of participants in New Zealand for ANZAC Day.

COMMODITIES

Commodities were mixed with oil prices resuming their downturn amid the ongoing demand-related concerns and widespread views the incoming OPEC++ cuts are insufficient in offsetting the demand rout brought on by the coronavirus outbreak. As such, WTI crude futures declined below the USD 16.00/bbl and although there weren’t much fresh catalysts for the energy complex overnight, recent reports had suggested the US Oil Fund could adjust its allocations to increase holdings of later month contracts. Elsewhere, gold prices were subdued by the positive risk tone but with downside stemmed by a weaker greenback, while copper outperformed due to the risk appetite and reopening hopes.

Baker Hughes US Rig Count (w/e Apr. 24th) oil rigs fell by 60 to 378 and nat gas rigs fell by 4 to 85, while total rigs fell by 64 to 465. (Newswires)

US President Trump believes Saudi Arabia and Russia could make further production cuts and believes that will be a natural process now, while he added that Texas, Oklahoma and Canada are cutting production. (Newswires)

US Treasury Secretary Mnuchin said it can be assumed that one option is that the administration is looking at the government taking stakes in energy companies and that several options are being examined, while he added that President Trump also floated the idea of the US government purchasing fuel in the US in advance, as well as airline tickets. (Newswires)

US Oil Fund (USO) may allocate 20% of its portfolio in June contracts (Prev. 20%), 40% in July futures (Prev. 50%), 20% in August (Prev. 20%) and 20% in September (Prev. 10%). (Newswires)

GEOPOLITICS

Japanese media report claimed that North Korea Leader Kim was in a vegetative state following heart surgery. In related news, North Korea state radio issued a statement reportedly from Leader Kim in appreciation of workers furnishing Samjiyon but made no comments on his health or whereabouts. (Yonhap)

Iranian President Rouhani urged the Iranian military to follow strategies ensuring regional stability while keeping vigilance and a strong presence, according to state TV. (Newswires)

US Secretary of State Pompeo is said to prepare a legal argument that the US remains a participant of JCPOA as an effort to pressure Iran and extend arms embargo. (NYT)

Southern Transitional Council separatists which are backed by the United Arab Emirates, scrapped a peace agreement with the Saudi-backed government in Yemen and declared a state of emergency, while the Saudi-led coalition called for an end to any escalation and immediate return to Riyadh agreement. (Newswires)

US

Choppy day for the Treasury complex, albeit in tight ranges with the 10-year yield bouncing between 58/62bps, before moving lower on the updated Fed purchases schedule. As risk appetite rose in the European session, T-Notes and Bunds were offered from their highs overnight. However, after the US cash equity open gains were pared in equities/oil and yields were anchored from rising any further; note that relatively less corporate issuance likely also supported the Treasury curve. Then later, yields broke out of their range to the downside as investors digested the less pronounced cut in Fed asset purchases of USD 10bln/day from 35bln/day (read below). By settlement, 2s unchanged at 0.22, 10s -2bps at 0.59, and 30s -3bps at 1.17%. Meanwhile, Short end rates were supported after the 3-month USD LIBOR posted a chunky 10bps fall, supporting front pack Eurodollars and seeing swap spreads and FRA-OIS tighten. T-notes (M0) settled 3 ticks higher at 139-03+.

Fed plans to purchase USD 50bln in Treasury purchases for the upcoming week from USD 75bln total last week. (Newswires)

White House Adviser Hassett said the US unemployment rate is likely to reach 16% or higher when this month’s jobs report is released. (Newswires)