• European bourses initially opened unchanged but have strengthened significantly in what has been a relatively quiet session ahead of upcoming risk events
• Fed expanded scope and duration of municipal liquidity facility and increased the duration of eligible securities to 3 years from 2 years
• FX sees the USD softer to the benefit of counterparts particularly JPY with USD/JPY comfortably below 107.00; while SEK strengthened post Riksbank
• 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
• Looking ahead, highlights include US Consumer Confidence, Richmond Fed, APIs, NZ trade, supply from the US

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)

Tokyo has 112 new cases of COVID-19, according to Fuji TV. (Newswires)

Downing Street sources have confirmed that PM Johnson will share his plan to begin easing lockdown restrictions with the public this week. (Telegraph)

German Robert Koch Institute says the R0 for COVID-19 is currently at 1.0. (Newswires) Previously, they estimated it at 0.7

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 (-0.2%) 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 (U/C) was lacklustre as participants digested earnings releases, while Hang Seng (+1.2%) and Shanghai Comp. (-0.2%) 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)

Japanese Finance Minister Aso says it has hard to understand JPY, adding that interest rates remain stable despite large government spending

US

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)

UK/EU

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

GEOPOLITICS

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)

EQUITIES

European equities extend gains after a relatively flat open (Euro Stoxx 50 +1.8%) after a rather mixed APAC session, with sentiment skewed more towards the upside as the session goes underway. Bourses are mostly comfortable in the green, although the IBEX (+1.1%) sees underperformance on account of some large-cap stocks in the red – with Utility names weighing on the Spanish index. Elsewhere in the periphery, Italy’s FTSE MIB (+2.5%) continues to benefit after the country dodged a debt downgrade by S&P. Looking at sectors, Energy initially underperformoned but has since outpaced its peers to reside as a top performer amid the rebound in the energy complex. Financials outperform with the aid of higher yields and some more-upbeat earnings from regional banks. UBS (+5.7%) and Santander (+3.4%) trade firmer amid some bullish internals, although the former also saw improvements in Q1 pre-tax and Adj. pre-tax whilst highlighting high-quality credit exposure. On the flip side, HSBC (-0.5%) remains pressured as Q1 profits halved on increase loan loss provisions emanated from COVID-19. The bank also guides its FY20 to have materially lower profitability. Individual movers predominantly consist of other large-cap stocks post-earnings; BP (-1.9%) reported a 66% decline in Q1 earnings as it was hit by the plunge in energy prices – with the oil behemoth also anticipating a material impact in Q2 downstream from the pandemic. Novartis (+0.9%) has trimmed some of its opening gains but remains underpinned as top and bottom line topped estimates, with a favourable sales impact of USD 400mln expected from COVID-19. Aside from earnings, Wirecard (-19.7%) shares fell despite KPMG’s special report not identifying incriminating evidence for public allegation of balance sheet forgery – with downside potentially induced by the audit noting that not all data could be obtained that would have been required to proof revenue in these years as required data are primarily controlled by third parties. Furthermore, the Co. has delayed its earnings release and presser – originally due on April 30th. Finally, Lufthansa (-0.2%) was initially bolstered by reports that the German gov’t is to present a EUR 9bln rescue package for the Co. and the Swiss gov’t agreeing to a CHF 1.5bln support package via state-backed loans, although sources later downplayed an agreement on Germany’s aid, although separate reports noted that the Co. is said to be mulling insolvency proceedings as an alternative option.

Caterpillar Inc (CAT) Q1 20 (USD): EPS 1.98 (exp. 1.68), Revenue -21% Y/Y at 10.64bln (exp. 10.92bln). Withdraws FY guidance due to COVID-19.

3M Co (MMM) Q1 20 (USD): Adj. EPS 2.16 (exp. 2.03), Revenue 8.1bln (exp. 7.91bln); Withdraws FY20 guidance

Merck (MRK) Q1 2020 (USD): EPS 1.50 (exp. 1.34); revenue 12.1bln (exp. 11.46bln); lowers FY revenue range to USD 46.1-48.1bln (exp. 48.7bln); lowers FY GAAP EPS range to 4.12-4.32 (exp. 5.56)

Pfizer Inc (PFE) Q1 20 (USD): Adj. EPS 0.80 (exp. 0.73), Revenue 12.03bln (exp. 11.87bln). Reaffirms FY guidance for adj. EPS and revenue - not seen a significant disruption in its supply chain

FX

SEK/JPY/NZD - All taking cues from Central Bank and monetary authority directives, to an extent, as the Swedish Krona responds to relatively hawkish or less dovish than anticipated Riksbank guidance after rates were left on hold alongside current QE remits and a truncated repo path due to high levels of uncertainty over the outlook due to COVID-19. Some were looking for an increase in asset purchases or an extension in the schedule beyond the current end of September timeframe, and more than just another pledge to lower rates if required, so Eur/Sek has fallen from pre-policy pronouncement levels through the 55 DMA (10.8110) and Fib support (10.7999) on the way down to circa 10.7800, thus far. Meanwhile, the Yen paused at the psychological 107.00 mark again in wake of comments from Japan’s Ministry of Finance raising uncertainty about the currency’s value given stable interest rates despite high levels of Government spending, but Usd/Jpy subsequently breached the round number and supposedly strong technical levels just below amidst a stop-fuelled run to around 106.60 and eying a 50% retracement to 106.45 next, assuming 106.50 is pierced first. Conversely, the Kiwi has been undermined by an aggressive call from Westpac on RBNZ rates looking for -0.5% by this November vs market expectations via OIS pricing for just a 25 bp ease between now and Q1 next year. Hence, Nzd/Usd struggling to rebound much further above 0.6050 from sub-0.6000 overnight lows even though the Greenback is broadly softer.

GBP/CAD/AUD/EUR/CHF/NOK - Cable has peered over 1.2500 amidst general, albeit moderate Usd selling for month end from one rebalancing model exacerbated by the aforementioned Yen outperformance, but Sterling has also clawed back more losses against the Euro with the cross back down 0.8700 as the single currency is capped ahead of 1.0900 and the DXY finds a degree of underlying support at 99.5000. Elsewhere, the Loonie has derived momentum and encouragement from a firm rebound in crude alongside overall risk sentiment to reclaim 1.4000+ status and the Aussie eclipsed 0.6500 at one stage with favourable Aud/Nzd tailwinds through 1.0700 and touching 1.0750. The oil price revival has also helped the Norwegian Crown, Russian Rouble and Mexican Peso rally, while even the Swiss Franc has nursed some recent losses vs the Buck, though has extended its post-sight deposit retreat against the Euro to 1.0612 or so.

Riksbank leaves its Repo Rate unchanged at 0.0% as expected; decided to continue govt' and mortgage bonds purchases up to the end of Sept-2020 at the current pace. The repo rate path is seen unchanged until February 2021, but does not rule out the possibility of the interest rate being cut at a later date. (Riskbank) In the post meeting press-conference, Governor Ingves largely reiterates remarks from the release stressing the willingness to act whenever is most appropriate; as has been clearly illustrated by the QE related intra-meeting action. (Newswires)

FIXED

Although core bonds have seen range extension on the downside, at 172.09 for Bunds, 136.77 for Gilts and 138-17 in 10 year T-notes, trade in debt markets has been somewhat bland and almost inconsequential compared to the moves in currencies and commodities, as the Dollar weakened considerably and crude prices regained some much needed composure. However, UK bonds remain relatively buoyant after yet more well received DMO issuance and the Eurozone periphery hopeful ahead of Thursday’s ECB meeting as the more immediate global Central Bank focus switches to day one of the FOMC after a relatively ‘hawkish’ Riksbank. More immediately, US data and the 7 year auction before API crude/product inventories.

COMMODITIES

WTI and Brent front-month futures initially deteriorated , but have pared back a lion’s share of its losses in recent trade - with notable underperformance experienced in the US benchmark as downside was exacerbated by US Oil Fund unexpectedly began selling all its holdings of the WTI June contract against the backdrop of dwindling storage and decimated demand. Furthermore, the S&P GSCI Commodity Index announced that it will be moving all WTI exposure away from June. Desks note that the funds’ moves highlight a trend among market participants, with little-to-no demand in the contract amid fears of a repetition of deep negative prices seen heading into the May expiry. For reference, June WTI is set to expire on May 19th. “The move we are seeing suggests that the Jun-20 contract is going to become increasingly illiquid, and as a result, will likely suffer from increased volatility in the lead up to expiry”, ING writes. Meanwhile, eyes will be on today’s API release with attention on the Cushing figure as a gauge of when the WTI delivery hub will reach full capacity – “If we see similar builds to the last few weeks, we will likely reach full capacity at Cushing over the first half of May”, the Dutch bank says. WTI June trades lower by some 20% and printed a current base at USD 10.13/bbl (vs. high USD 13.18), whilst its Brent counterpart initially follows suit, albeit to a much lesser extent, with prices now in positive territory around the top of today’s USD 18.73-20.86/bbl range. Elsewhere, spot gold trades on either side of USD 1700/oz as the yellow metal balances risk appetite with a weaker buck. Copper nursed losses seen in APAC trade as sentiment attempts to make somewhat of a recovery.

Russian Energy Minister Novak says a significant rise in oil prices is unlikely in the nearest future amid high storage volumes; he is counting on global oil market to start gradually balancing once OPEC+ deal is implemented on May 1st. (Newswires)

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