• Asian equity markets were mostly higher and US equity futures also recovered from the tech-led declines on Wall St
• Alphabet shares were seen higher by around 8% after hours post-earnings as revenues topped expectations
• Fitch downgraded Italy by one notch to BBB-; Outlook Stable. Italy says that economic fundamentals remain solid
• In FX markets, the DXY remained softer following the recent decline below the 100.00 level ahead of upcoming key risk events stateside
• Looking ahead, highlights include German regional and national CPI, EZ sentiment data, US GDP (Q1), PCE (Q1), DoEs, FOMC rate decision and press conference, supply from UK, Italy and Germany
• Earnings: Airbus, Deutsche Bank, Iberdrola, Volkswagen, AstraZeneca, Barclays, GSK, Microsoft, Facebook, Mastercard, American Tower Corp, Qualcomm, CVS Health, Boeing

CORONAVIRUS UPDATE

US President Trump signed the executive order on keeping meat processing plants open during coronavirus outbreak, as expected. Furthermore, US President Trump said economic growth in Q3 will be a transition but added that Q4 will be very strong and that 2021 is to also see strong economic growth, while there were also comments from NEC Director Kudlow that US President Trump has asked for a review of a possible middle-class tax relief. (Newswires)

US Small Business Administration said it has decided with the Treasury to review all loans in excess of USD 2mln, as well as other loans as appropriate. (Newswires)

US Senate Majority Leader McConnell said he is certainly open to considering more aid for state and local governments, but added his red line is that liability protections need to be included in the next bill for businesses reopening. Furthermore, McConnell stated he is as interested as President Trump in doing an infrastructure bill but does not want it to be debt-financed and noted that infrastructure is unrelated to coronavirus. Other reports also noted that McConnell panned the idea of using a coronavirus stimulus bill to fund major infrastructure investment in a conference call with Republican Senators in which he stated he won't support infrastructure in a COVID-19 bill and suggested they need to keep the White House in the box. (Newswires/Axios)

US House Speaker Pelosi said lawmakers are mulling USD 500bln in support for states and additional money for county and municipal governments, while she hopes to have more funding for the medicaid health insurance programme in the next bill. (Newswires)

US COVID-19 cases rose 2.4% to 981,246 (Prev. 957,875); death toll rose 2.4% to 55,258 (Prev. 53,922). (Newswires)

UK COVID-19 cases rose to 161,145 (prev. 157,149) and death toll rose to 21,678 (prev. 21,092) which is an increase of 586 (+2.78%) vs. yesterday's increase of 300 (+1.74%).

The UK Treasury is looking at plans which could see workers in the worst affected parts of the economy be furloughed for longer than others. (Times)

Spanish PM Sanchez said the government is seeking to lift the lockdown and return to a new normal during the next 8 weeks. (Newswires)

Tokyo Governor Koike is reportedly seeking an extension to the state of emergency declaration. (Newswires)

ASIA

Asian equity markets were mostly higher and US equity futures also recovered from the tech-led declines on Wall St, with the US tech giants making atonement after-hours following Alphabet earnings which missed on EPS but topped revenue forecasts. ASX 200 (+1.3%) was lifted by outperformance in energy after a rebound in oil prices and as the top-weighted financials sector also notched firm gains, while KOSPI (+1.0%) was underpinned by strong data including a surprise expansion in Industrial Production with participants also digesting earnings including Samsung Electronics which fell short of estimates for Q1 net, but operating profit printed inline and revenue beat forecasts. Hang Seng (+1.1%) and Shanghai Comp. (+0.3%) were positive amid a heavy slate of earnings including 3 of the big 4 banks which all showed an improvement from a year ago, with sentiment in Hong Kong also firmer ahead of the extended weekend. It was also reported that China’s National People’s Congress will begin from May 22nd, amid confidence the coronavirus outbreak is under control in China, where officials are anticipated to announce a new stimulus package and set this year’s growth targets. As a reminder, Japan was shut for Showa Day, while Hong Kong and South Korea will begin an extended weekend after today’s close.

PBoC skipped open market operations and were net neutral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.0704 vs. Exp. 7.0777 (Prev. 7.0710)

China is to conduct annual NPC on May 22nd and CPPCC proposes to hold annual meeting from May 21st, while state media stated control and prevention of coronavirus is improving and that conditions for convening the annual parliament meeting have been met. (Newswires/Xinhua)

South Korean Industrial Production (Mar) M/M 4.6% vs. Exp. -1.3% (Prev. -3.8%, Rev. -3.8%). (Newswires) South Korea Industrial Production (Mar) Y/Y 7.1% vs. Exp. -1.9% (Prev. 11.4%, Rev. 11.3%)

UK/EU

UK BRC Shop Price Index (Mar) Y/Y -1.7% (Prev. -0.8%), BRC stated that UK retailers reduced non-food prices Y/Y by the most on record of -3.7% vs. Prev. -1.9%. (Newswires)

Fitch downgraded Italy by one notch to BBB-; Outlook Stable. This spurred comments from Italy’s Economy Ministry that the country's economic fundamentals remain solid and Fitch have not taken into proper account economic decisions made by EU and ECB. (Newswires)

FX

In FX markets, the DXY remained softer following the recent decline below the 100.00 level which later acted as resistance, with participants also kept tentative heading into month-end and with US GDP and the FOMC announcements scheduled later today. The greenback’s major counterparts benefitted in which EUR/USD broke above its 200-Hour MA to test 1.0850 despite the sovereign rating cut by Fitch on Italy to the lowest investment grade of BBB-; Outlook Stable, and GBP/USD also strengthened with the pair undeterred by BRC data which showed UK retailers reduced non-food prices Y/Y by the most on record. Elsewhere, USD/JPY was on the backfoot amid the USD-woes and absence of Japanese participants, while antipodeans were buoyed by the risk appetite, rebound in oil and after encouraging data including relatively inline New Zealand Trade figures and firmer than expected Australian CPI which showed headline Y/Y inflation increased to 2.2% from 1.8% although the RBA’s preferred Trimmed Mean figure remained below the central bank’s 2%-3% target.

Australian CPI (Q1) Q/Q 0.3% vs. Exp. 0.2% (Prev. 0.7%). Australian CPI (Q1) Y/Y 2.2% vs. Exp. 2.0% (Prev. 1.8%) Australian RBA Trimmed Mean CPI (Q1) Q/Q 0.5% vs. Exp. 0.4% (Prev. 0.4%) Australian RBA Trimmed Mean CPI (Q1) Y/Y 1.8% vs. Exp. 1.6% (Prev. 1.6%)

New Zealand Trade Balance (Mar) 672M vs. Exp. 686M (Prev. 594.0M, Rev. 531M). (Newswires) New Zealand Exports (Mar) 5.81B vs. Exp. 5.81B (Prev. 4.92B, Rev. 4.87B) New Zealand Imports (Mar) 5.14B vs. Exp. 5.14B (Prev. 4.33B, Rev. 4.34B)

COMMODITIES

Commodities were higher overnight amid the improved risk sentiment in which June WTI crude futures briefly climbed above the USD 14.00/bbl level with prices underpinned as we move closer to the OPEC+ agreement taking effect in May and with global economies planning their reopening measures, while the latest private inventory report also showed a smaller than expected build in headline crude stockpiles, as well as a surprise draw to gasoline stocks. Elsewhere, gold was steady above the USD 1700/bbl level as participants look ahead to the looming FOMC, and copper edged mild gains due to the constructive risk tone.   

US Private Inventory Crude Stocks + 10.0mln vs. Exp. +10.6mln (Prev. +13.2mln). (Newswires)

Saudi Arabia Finance Ministry stated that oil revenues in Q1 fell 24% to SAR 128.77bln. (Newswires)

Operators of the Tengiz and Kashagan oilfields are reportedly close to agreeing a deal with Kazakhstan to cut output by 22% from May to contribute to the OPEC+ output reduction deal, according to sources. (Newswires)

South Africa's National Union of Metalworkers told members not to go back to work at Harmony Gold's target mine as it has not implemented the required safety procedures to ensure the safety after lockdown. (Newswires)

GEOPOLITICS

US Secretary of State Pompeo tweeted that the US renews its call for support and implementation of a nationwide ceasefire in Syria following a cowardly act of terror carried out on innocent victims in Afrin. (Newswires)

US

It was one-way traffic for the T-Note in the US session as yields trundled lower amid paring risk appetite and ahead of Wednesday’s FOMC. A positive risk tone in the European session kept yields slightly elevated, although as US participants stepped in, the bid made headway. The UST strength was likely a function of equity bourses coming off their highs as well as participants taking advantage of Treasury supply out the way and higher yields ahead of the FOMC, where there is a chance the Fed could hint at some form of YCC and tweak its current programmes; however, the base case is for the Fed to announce such measures at the June meeting instead. Additionally, another chunky fall in LIBOR saw the front-end lead the rally, particularly white pack Eurodollars, as market participants continue to lower their forecasts for funding costs to that of a level closer to the FFR. By settlement, the yield curve had flattened: 2s -2bps at 0.21%, while both 10s and 30s fell by 4.5bps to 0.61% and 1.20%, respectively. US T-note futures (M0) settled 11+ ticks higher at 139-00+.

NYSE said New York trading floors will remain closed for now but noted that Arca options floor to partially reopen in San Francisco on May 4th. (Newswires)