• Asian equity markets were mixed as a deluge of earnings and continued oil rout offset the momentum from Wall St.
• The DXY was marginally firmer after support at the 100.00 level just about held but with price action limited
• President Trump suggested the US is not happy with China and is doing a serious investigation of China's actions in response to the coronavirus outbreak
• WTI crude futures extended on its rout with another double-digit percentage loss to briefly break below USD 11.00/bbl
• Looking ahead, highlights include Riksbank rate decision, US Consumer Confidence, Richmond Fed, APIs, NZ trade, supply from the UK and US
• Earnings: BP, HSBC, ABB, Novartis, UBS, Alphabet, Merck & Co, Pfizer, PepsiCo, Starbucks Corp, United Parcel Service, 3M Co, Mondelez International, S&P Global, AMD, Caterpillar

CORONAVIRUS UPDATE

US President Trump said the US is continuing to see encouraging signs of progress and that all parts of the country are in good shape or getting better, while he added there is hunger for getting our country back to work. Furthermore, President Trump suggested the US is not happy with China and are doing a serious investigation of China's actions in response to the coronavirus outbreak. (Newswires)

US Senate Republican Leader McConnell said there probably will be another bill for funding state and local governments, while he suggested that the "red line" for next aid bill would be liability protections. There were also comments from House Majority Leader Hoyer that the House will be in session next week from Monday and that votes are possible. (Newswires) Banks are said to expect the next round of PPP stimulus loans to run out in days, while financial firms and brokers are still applying for money, according to FBN's Gasparino. Furthermore, Gasparino tweeted that talk of next wave of virus-related stimulus to include another USD 1trln in spending and that something known as a “negative payroll tax” is definitely on the table. (Twitter)

Texas Governor said the state-wide stay-at-home order will expire on April 30th and will not be renewed, while they will reopen businesses in phases beginning on May 1st and more in two weeks if the infection rates are tame. Furthermore, the Governor added that retail stores, bars and restaurants will be reopened on May 1st but at a 25% occupancy limit. (Newswires)

New York COVID-19 cases rose 1.4% at 291,996 (Prev. +2.1) and death toll rose 2% to 17,303 (Prev. +2.2%), while Governor Cuomo said they will extend the stay at home order beyond May 15th in many parts of the state. (Newswires)

Italy COVID-19 cases rose 0.9% to 199,414 (Prev. +1.2%), death toll rose 1.3% to 26,077 (Prev. +1.0%). (Newswires)

UK COVID-19 death toll rose to 21,092 (Prev. 20,732) which is an increase of 360 (+1.72%) vs. Prev. increase of 413 (+2.03%) and which represents the slowest daily increase since March 30th. (Newswires)

Downing Street sources have confirmed that PM Johnson will share his plan to begin easing lockdown restrictions with the public this week. The Telegraph reports that consultations have begun on how to get travel systems back up and running whilst ensuring strict social distancing measures. (Telegraph) Other measures could include ensuring practices are in place for workplaces to reduce the spread of the virus, opening of non-essential shops under social distancing guidelines and allowing people to mix with a wider group of friends and family. (Times)

ASIA

Asian equity markets were mixed as a deluge of earnings and continued oil rout offset the momentum from Wall St. where the major indices were underpinned by reopening efforts and ongoing stimulus measures. ASX 200 (-0.9%) swung between gains and losses with the index pressured by underperformance in the commodity-related sectors as oil prices suffered double-digit losses on continued demand concerns and after the USO announced to dump all its June contracts by mid-week in favour of later-dated contracts. The largest weighted banking sector also added to the indecision with NAB on the backfoot as it resumed trade post-earnings and after the completion of its AUD 3bln placement, although Westpac surged despite flagging a AUD 2.2bln impairment for H1. Nikkei 225 (-0.4%) was lacklustre as participants digested earnings releases, while Hang Seng (+0.7%) and Shanghai Comp. (+0.1%) also conformed to the choppy price action as focus turned to corporate updates and with participants kept tentative ahead of the blue chip banking names set to announce results this week beginning with HSBC which reported Q1 profit before tax fell nearly 50% Y/Y. Finally, 10yr JGBs were range-bound with prices restricted by resistance ahead of the 153.00 level and following the latest Rinban announcement in which the central bank upped its purchase intentions of 1yr-10yr JGBs but had recently reduced the frequency of purchases of 3yr-5yr maturities for next month.

PBoC skipped open market operations and are net neutral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.0710 vs. Exp. 7.0798 (Prev. 7.0703)

UK/EU

Bank of England said in the current circumstances, it will be challenging for many businesses to provide forecasts for financials with a high degree of confidence to support the loan underwriting process. (Newswires)

UK Lloyds Business Barometer (Apr) -32 (Prev. 6). (Newswires)

FX

The DXY was marginally firmer after support at the 100.00 level just about held but with price action limited ahead of Wednesday’s Q1 GDP growth data and FOMC meeting. In addition, there were recent comments from White House Advisor Hassett that suggested Q2 GDP will be the worst reading since the Depression with a likely contraction of 20%-30% and Barclays noted its month-end rebalancing model pointed to moderate USD selling. EUR/USD and GBP/USD were relatively quiet at the 1.0800 and 1.2400 handles respectively with the single currency stuck in between its 100-Hour and 200-Hour MA levels, while GBP/USD lacked firm direction after the return of UK PM Johnson to Downing Street. Elsewhere, USD/JPY was lacklustre amid the indecisive risk tone, with the pair just south of a large USD 3.2bln option expiry at 107.50 rolling off at today’s New York cut, and antipodeans were subdued due to their high beta statuses and with NZD/USD the underperformer following a recent note by Westpac which suggested further action from the RBNZ will be required in the future and forecasts the OCR to be lowered into negative territory of -0.5% later this year from the current 0.25%.

Australian Treasury said they are not working on any new economic packages at this time although Treasury Secretary Kennedy commented that Australia will distribute AUD 30bln in stimulus to households over the next month. (Newswires)

COMMODITIES

WTI crude futures extended on its rout with another double-digit percentage loss to briefly break below USD 11.00/bbl on continued demand concerns and after the USO recently announced to exit all its June contracts within a 3-day period in favour of longer-dated contracts, with the fund now looking to take up some allocations in October, December and even as far as the June 2021 contract. Elsewhere, gold prices were subdued and fell below the USD 1700/oz level amid the mild gains in the greenback and with China’s consumption of the precious metal down 48% Y/Y in Q1, while copper was indecisive alongside the mixed overnight risk appetite.  

Mexico's state-run Pemex trading arm PMI, considers options to sharply reduce fuel purchases during May-June with options including declaring a force majeure, negotiating cargo cancellations and rescheduling, as well as lowering demurrage fee payments. (Newswires)

CME raised RBOB gasoline futures margins by 5.6% to USD 9500/contract from USD 9000/contract

GEOPOLITICS

Venezuelan President Maduro appointed Tareck El Aissami who is under sanctions by the US for being a drug kingpin as the new Oil Minister and Maduro named Asdrubal Chavez as the interim president of PDVSA. (Newswires)

US President Trump says he is aware of the health status of North Korean Leader Kim Jong Un but declined to reveal details at this stage. (Newswires)

US

The Treasury curve bear-steepened on Wednesday, amid a constructive risk backdrop which was supported by optimism on the easing of lockdown restrictions. Although the FOMC meeting this week is only expected to “take stock” of the situation, with no major announcement expected, desks will, however, be keeping an eye on any commentary regarding Japanese/Australian-style YCC on the horizon. The US Treasury sold both 2-year and 5-year notes - both solid auctions that stopped-through the screens on decent demand. Starting with the former, which was sold at 0.229% (from the prior 0.39%), stopping-through by a chunky 1.3bps - the largest amount since July 2012; cover was 3.1x, the highest since January 2018. Direct participation was in line with recent averages, and indirects took a higher share than recent sales, leaving dealers with the lowest since last November. The 5s auction was similar, but to a lesser extent, stopping through by 0.7bps.  Both auctions highlight that, despite projections of the US deficit rising to above USD 3trln in 2020, demand is still strong for shorter-dated Treasuries; some have suggested that this is as the market eyes potential yield curve control from the Fed, which isn’t likely to be a feature of Wednesday’s confab, though will be a key issue into the June FOMC, where some believe that the Fed might pledge to leave rates at the effective lower bound for a couple of years, supported by its action in controlling short-term yields. T-notes (M0) settled 14+ ticks lower at 138-21.

Fed expanded scope and duration of municipal liquidity facility and increased the duration of eligible securities to 3 years from 2 years, while it widened the scope to cover counties with populations of at least 500k (Prev. 2mln) and cities of 250k residents (Prev. 1mln), and will consider expanding facility to include limited number of government entities that issue revenue bonds. Furthermore, it noted that it is to lend as much as USD 500bln under the facility on USD 35bln of Treasury equity and that the changes will permit substantially more entities to borrow. (Newswires)

White House Advisor Hassett said the US economy will not see a V-shaped recovery without another stimulus bill. Furthermore, he earlier stated that Q2 GDP will be the largest negative number since the great depression and likely between -20 to -30%, although Q3 will likely be positive. (Newswires)