• European bourses are stronger this morning following the APAC lead, US futures are firmer but to a lesser extent ahead of Fed and on the busiest week of earnings this quarter
• 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
• 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
• FX sees the DXY softer this morning with major peers broadly outperforming the USD
• Looking ahead, highlights include ECB purchases, US 2 and 5yr supply

CORONAVIRUS UPDATE

Reports noted that preliminary results from a Remdesivir test by Chinese scientists found it may reduce sperm count in mice. (Newswires) Separately, Japanese gov't are reportedly to apply for special approval to streamline the procedure for remdesivir* on the condition it receives approval overseas, Kyodo citing Gov't Officials. (Kyodo)

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)

Spain's coronavirus cases stand at 209,465 (Prev. 207,634), deaths rise by 331 to 23,521 (Prev. 23,190), according to the Health Ministry. (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) This morning, in a speech outside Downing Street PM Johnson says we are making progress on COVID-19 and we are passing through the peak. However, he noted that the UK is at the moment of maximum risk and refuses to throw away efforts of the UK public and allow another wave of infections. Johnson concluded by noting that he cannot say when changes will be made but will say more in the coming days.

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 (+2.7%) 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. (+0.3%) 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 Governor Kuroda does not rule out deeper Negative Interest Rate Policy from future options; won't allow 10yr bond yields rise for the time being; will do whatever is necessary as a Central Bank to respond to the crisis. (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%

US

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)

US Treasury's semi-annual currency manipulation reportedly has been delayed given COVID-19, according to Taiwanese Central Bank sources. (Newswires)

UK/EU

UK PM Johnson is set to take personal charge of Brexit talks as he returns to work and looks to put pressure on 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)

European Commission is to temporarily ease rules on leverage ratio calculation to help banks lend more in pandemic, to propose allowing banks to opt into relief from the bad loan provisioning rule, according to sources. (Newswires) Separately, EU is reportedly considering state aid via subordinated debt injections, reports state.

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)

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)

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)

EQUITIES

European equities trade comfortably on a firmer footing [Euro Stoxx 50 +2.2%], as the risk-appetite from the APAC session followed through and intensifies as European economies near an easing lockdown measures – with Italy to begin its lifting from May 4th, Spain relieving some of its strictest measures and UK to reportedly update on measures as early as this week. Bourses see broad-based gains but Italy’s FTSE MIB (+2.5%) modestly outperforms after S&P refrained from downgrading the country’s rating on Friday. Sectors all reside in positive territory, with Financials leading the gains – propped up by Deutsche Bank (+11.2%) earnings – whilst energy underperforms amid price action in the oil complex. This performance is also reflected in the sector breakdown with Banks the outperformer and Oil & Gas the laggard, Travel & Leisure resides towards the top amid lockdown lifts across Europe and US. In terms of individual movers, earnings see more focus on German firms; DAX-giant Bayer (+2.7%) sees impetus from Q1 revenue and adj. EBITDA topping analyst estimates, and improvement in EPS and gains across all its units – the Co. accounts for 6.8% of the DAX 30. Adidas (+2.5%) conformed to the broad risk-appetite after nursing opening losses of over 3%, which initially emanated from dismal earnings alongside a failure to provide FY20 guidance. Adidas noted that 70% of its global stores remain shut. Deutsche Bank (+11.2%) shares soar on an early earnings release in which Q1 pre-tax posted a profit of EUR 206mln vs. Exp. loss 269mln, albeit the group notes that it is unlikely to meet its FY20 leverage ratio target of 4.5%. A spokesman said the release of key metrics was due to a significant divergence with analyst forecasts – Commerzbank (+6.5%) rises in sympathy. Elsewhere, Lufthansa (+7.2%) was propelled at the open after Germany’s Economy Minister stated the group must get a chance to return to profitability, whilst the Co. is also seeking a EUR 290mln loan from the Belgium gov’t for its Belgian subsidiary. Similarly, Air France-KLM (+4.7%) and Renault (+5%) see upside after the French gov’t announced a EUR 7bln package for the former, whilst mulling a EUR 5bln loan guarantee for the latter. On the flip side, Airbus (-1.5%) is pressured amid comments from its CEO regarding the severity of the group’s position – stating that the Co. is “bleeding cash” at a rate which threatens the Co’s existence, adding that a third of its business has been lost in the past few weeks.

FX

USD - The Greenback has retreated further against G10 counterparts and almost across the board, with the DXY struggling to retain grip or sight of the 100.000 mark within a 100.320-99.847 range amidst an upturn in broad risk sentiment that is only really being tainted by more weakness in crude oil on bearish supply/storage-demand dynamics.

AUD/NZD - The Aussie and Kiwi are both seemingly reaping the rewards of relative progress and success on the coronavirus front as the respective Governments eye reopening schedules. Aud/Usd is now firmly back above 0.6400 and pivoting 0.6450, while Nzd/Usd is straddling 0.6050 and Aud/Nzd is probing above 1.0650 on Anzac Day. Note, NZ markets return on Tuesday and will be looking towards trade data for some fundamental direction/impetus in the same vein as Australia’s preliminary report last week.

GBP - The next best major and the Pound could well be receiving another Boris boost as the UK PM returns to his official residence to resume duties with an encouraging update on Britain’s battle to combat COVID-19. Cable has reclaimed 1.2400+ status and Eur/Gbp is meandering between 0.8754-10 parameters with the cross retreating below its 200 DMA again.

CAD/JPY/EUR - The Loonie is also outpacing its US peer even though oil prices are tanking again, with Usd/Cad under 1.4100 ahead of somewhat dated Canadian securities balances for February, while the Yen has strengthened in wake of the BoJ policy meeting despite further stimulus via QE as speculated ahead of the event. Usd/Jpy got close to 107.00 before a mild bounce that could have been option expiry related given 1.2 bn rolling off at the strike, but also technical as strong chart support sits just beneath the round number circa 106.93/92 (April 15th and 1st lows). On the flip-side, 2 bn expiries from 107.50 to 107.60 may cap the headline pair, while the Euro has 1.1 bn at 1.0800 to provide a cushion alongside a raft of options in to the Fed and ECB on Wednesday and Thursday respectively.

CHF/NOK/SEK - The Swiss Franc and Norwegian Krona are marginal underperformers following latest weekly sight deposits revealing another significant rise in bank coffers, while the latter is eyeing the aforementioned weakness in crude, like the Russian Rouble. However, the Swedish Crown continues to hold up better on the premise that the Riksbank will stick to its guns on rates tomorrow in favour of non-standard policy measures should the situation warrant more than already implemented. Hence, Usd/Chf idling within a 0.9744-13 band, Eur/Chf off recent near 1.0500 lows between 1.0532-58, Eur/Nok rotating around 11.5000, Usd/RUB encircling 74.5000 and Eur/Sek still suppressed sub-10.9000.

EM - Some much needed respite for the Rand that has pared declines from 19.1000+ amidst the aforementioned revival in risk appetite, but Usd/Zar may be impacted by thinner than normal volumes due to SA’s Freedom Day holiday, while the Hong Dollar remains close to the top of its peg vs the Dollar prompting the HKMA to intervene again.

FIXED

It’s been a gradual fade against the backdrop of broad risk-on positioning in asset markets with the exception of crude that is sliding again, and June WTI especially, but Bunds, Gilts and US Treasuries are all back underwater to varying degrees, as the 10 year UK benchmark nestles just above a fresh 136.84 Liffe low. Ahead, only Dallas Fed manufacturing after ECB QE updates and before US short end supply that is front-loaded this week due to the FOMC

COMMODITIES

Nigerian oil export plans for June have been delayed as NNPC undertakes talks with stakeholders and oil majors on reining in output, expected to revise down its oil export volumes for May and pare back June flows given OPEC+ cuts, according to sources. (Newswires)

WTI and Brent front-month futures have resumed selling off as storage scarcity continues to weigh on investor sentiment – with the former underperforming amid reports that Cushing, Oklahoma, may hit full capacity soon.  Goldman Sachs believes that storage capacity limits could be tested in as little as three weeks. This week also sees the official implementation of the OPEC+ reduction pact, but some members, including Saudi, have brought forward cuts in a bid to somewhat stabilise the price rout. ING, among other desks, believes that the move is “helpful, [but] it will have little impact on the oil balance in the short term.” Nonetheless, despite the recent geopolitically induced upside in prices – underlying fundamentals remain unchanged. That being said, with major economies set to loosen lockdown restrictions, pressure on demand could start to ease – early signs could be seen in China as refinery activity at independent refiners has been hitting record levels in the Shandong region. WTI June briefly dipped below USD 14.50/bbl to a current base at USD 14.18/bbl (vs. high USD 16.98/bbl), whilst its Brent counterpart sees declines in tandem having tested USD 20/bbl to the downside in early trade (vs. high USD 21.91/bbl). Elsewhere, spot gold sees losses despite a softer Buck, with desks attributing the pressure to improved risk appetite on countries lifting COVID-19 measures. The yellow metal remains comfortably north of USD 1700/oz, having waned off highs of around USD 1720/oz. Copper prices meanwhile remain in the green but somewhat subdued amid a slump in Chinese Industrial profits – prices edging towards USD 2.37/lb vs. high of around USD 2.39/lb. Finally, Dalian iron ore futures recovered as stocks of the raw material fell to their lowest in over 9 months.