• European bourses are modestly firmer after a flat/mixed open, US futures are slightly firmer than EU peers ahead of large-cap earnings, US GDP/PCE & FOMC
• US Senate Majority Leader McConnell said he is certainly open to considering more aid for state and local governments
• Fitch downgraded Italy by one notch to BBB-; Outlook Stable – BTP’s lag but have pulled back somewhat; BTP-Bund yield spread within recent ranges
• FX sees the USD softer with most counterparts benefiting aside from GBP, hit via EUR strength
• Looking ahead, highlights German national CPI, US GDP (Q1), PCE (Q1), DoEs, FOMC rate decision and press conference

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. (Newswires)

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)

Spain's coronavirus deaths stand at 24,275 (Prev. 23,822), according to the Health Ministry. (Newswires) Spain's Health Emergency Chief says almost all areas in the country have a COVID-19 R0<1.

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

ASIA

Asian equity markets were 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 (+1.5%) 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 (+0.7%) 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 (+0.3%) and Shanghai Comp. (+0.4%) 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%)

US

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)

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)

German Saxony State CPI MM (Apr) 0.4% (Prev. 0.1%)

German Saxony State CPI YY (Apr) 1.1% (Prev. 1.6%)

EU Consumer Confidence Final (Apr) -22.7 vs. Exp. -22.7 (Prev. -22.7)

-        Economic Sentiment (Apr) 67.0 vs. Exp. 74.7 (Prev. 94.5, Rev. 94.2)

-        Industrial Sentiment (Apr) -30.4 vs. Exp. -25.7 (Prev. -10.8, Rev. -11.2)

-        Services Sentiment (Apr) -35.0 vs. Exp. -27.0 (Prev. -2.2, Rev. -2.3)

-        Consumer Inflation Expectations (Apr) 29.1 (Prev. 23.0)

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)

EQUITIES

General Electric Co (GE) Q1 20 (USD): Adj. EPS 0.05 (exp. 0.08), GAAP Revenue 20.5bln (exp. 20.23bln).

Enterprise Products Partners LP (EPD) Q1 20 (USD): EPS 0.61 (exp. 0.52), Revenue 7.48bln (exp. 8.25bln); reduces capex by USD 1.1bln for FY20

Northrop Grumman Corp (NOC) Q1 20 (USD): EPS 5.15 (exp. 5.51), Revenue 8.6bln (exp. 8.54bln)

Boston Scientific Corp (BSX) Q1 20 (USD): Adj. EPS 0.28 (exp. 0.31), Revenue 2.543bln (exp. 2.52bln).

Ford (F) believe a phased restarts of Co's manufacturing plant, supply network and other dependent functions will probably recommence in Q2; FY20 operations results expected to be adversely affected from COVID-19. (Newswires)

Overall uninspiring trade in the equity sphere thus far (Euro Stoxx 50 Unch) as the region mimics a similar performance seen in Asia-Pac ahead of key US Q1 GDP, FOMC, and as participants digest a slew of earnings. SMI (-0.4%) sees modest underperformance on the back of large-cap stocks in the red, including Pharma-giants Roche (-1.0%) and Novartis (-0.8%) – which collectively account for just under 40% of the index, and thus pressure is also seen in the pharma sector. Other sectors are mostly mixed and do not reflect a clean risk sentiment. Energy tops the charts amid gains in the oil complex. The sector breakdown also paints the same mixed picture, with Oil & Gas at the top whilst Healthcare lags; Travel & Leisure sees itself in modest positive territory. As mentioned above, the morning saw a flurry of earnings; Airbus (+0.8%) rises despite dismal COVID-impacted numbers including a net loss of EUR 481mln, with potential upside attributed to French Finance Minister alluding to a safety net for the company if needed. Deutsche Bank (+2.2%) sees support from in-line numbers alongside FIC trading topping forecasts. Barclays (+6%) was bolstered at the open as its Corporate and Investment Bank (CIB) revenue came in at almost GBP 1bln above forecasts. Other earnings-related movers include: Volkswagen (+2.5%), Daimler (+2.2%), AstraZeneca (+0.8%), AMS (+18.8%) and Nordea Bank (+4.5%). Elsewhere, Wirecard (-4.3%) shares fell 10% at one point after activist Hohn called on the Co. to remove its CEO following the KPMG audit.

FX

NZD/AUD - Notwithstanding the underlying or overall sell US Dollar dynamic for portfolio rebalancing that is gathering momentum via more bank models signalling the same mantra (US and Canadian indices the latest to join the chorus along with UK and Japanese trackers), the Kiwi derived independent impetus from NZ data overnight revealing record exports in March, while the Aussie has rallied in wake of firmer than expected Q1 inflation metrics. Nzd/Usd is hovering just off 0.6100+ peaks and Aud/Usd got to within a whisker of 0.6550 before waning as Aud/Nzd pivots 1.0700 ahead of the NBNZ business survey for April and the DXY holds just above 99.500 within a relatively confined 99.524-884 range in advance of preliminary Q1 US GDP and the Fed.

EUR/CAD/JPY/CHF/GBP - All benefiting at the expense of the Greenback, but to varying degrees. The Euro remains toppy on approach towards 1.0900 amidst contrasting Eurozone economic indicators, German state CPIs inferring an upward bias to consensus for the national number and Italy suffering a ratings downgrade at the hands of Fitch having evaded the same fate from S&P. Note also, Eur/Usd has an array of decent option expiries to navigate pre-FOMC and the ECB on Thursday, with 1 bn at the 1.0800 strike, 1 bn between 1.0815-20 and 1.1 bn at 1.0865 rolling off today. Elsewhere, the Loonie continue to draw encouragement from comparative stability in crude prices and is inching closer to 1.3900, while the Yen has extended its break through 107.00 beyond 106.50 and briefly over a key 50% retracement level at 106.45, albeit in thinner volumes due to Japan’s Showa Day holiday. Meanwhile, the Franc has rebounded further from recent lows and is now eyeing 0.9700, but the Pound is lagging after failing to revisit 1.2500+ highs and maintaining its recovery vs the single currency as Eur/Gbp bounces from sub-0.8700 to circa 0.8745 and back over the 200 DMA in time for the 9 am fix and with month end RHS demand likely to persist.

SCANDI/EM - The Swedish and Norwegian Krona have both lost a bit of traction, though remain in bullish mode despite Riksbank rhetoric reiterating that ZIRP is not the lower bound and NIER slashing its 2020 GDP estimate to -7% from -3.2% previously, while the latest Norges Bank survey portrays a bleaker picture for Q2 vs Q1 with most respondents reporting weaker activity, and for some a dramatic decline. Conversely, EM currencies are broadly bid on the back of the flagging Buck and Rub due to the aforementioned calmer waters in oil as Russia’s Energy Minister Novak confirms full compliance with the OPEC+ production pact. However, the Try is still underperforming near the 7.0000 handle that is being staunchly defended by the CBRT after a slump in Turkish economic sentiment.

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.0800 (1BLN), 1.0810 (400M), 1.0815-20 (1BLN), 1.0865 (1.1BLN)

-        AUD/USD: 0.6435 (800M), 0.6450 (1.8BLN)

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)

FIXED

The latest leg up for Bunds, Gilts and US Treasuries has been gradual and somewhat laborious, but fresh intraday highs have been forged for the 10 year benchmarks at 173.19, 137.33 and 139-065 to nudge the respective debt futures nearer technical resistance levels that could compound the pre-Fed, ECB and month end bid. 173.26, 137.45 and 139-07+ are now all well within striking distance and the latter tantalisingly close, especially if remaining data is weak and equities really feel the weight of asset rebalancing. However, Italian bonds continue to flounder following Tuesday’s downgrade that pulls the sovereign down another rung just above junk and the ECB’s lower bound.

COMMODITIES

WTI and Brent futures continue their rebound from yesterday’s volatile session, with some desks citing short covering as a potential catalyst. Underlying fundamentals remain unchanged, although firms have been cutting exposure to the front-month contracts amid fears of similar price action in the run-up to the WTI May contract expiry. Yesterday’s API printed another substantial 10mln barrels build in US inventories, but below market expectations. Cushing also showed a lower build than the prior which could provide short-term relief regarding the pace of dwindling storage at the WTI delivery hub. The weekly DoEs will be eyed for confirmation of this. In terms of OPEC, Russian Energy Minister Novak reaffirmed Moscow’s commitment to the output pact but noted that Russian energy firms will be cutting output by around 19% from February levels. Assuming the 11.29mln BPD February output reported by IFAX – this would take production to just over 9mln BPD vs. the 8.5mln BPD output cap agreed with Saudi. Although, Novak added that smaller oil firms will also cut output, which may take production to the threshold. WTI (June) meanders around USD 14/bbl having printed a base at USD 12.67 and a high of USD 14.50/bbl, whilst Brent (July) also trades on a firmer footing, albeit to a much lesser extent, and resides around the middle of its current USD 22.73-23.77/bbl range. Elsewhere, spot gold trades flat within a tight band just north of USD 1700/oz and remains relatively uneventful ahead of US GDP and the FOMC monetary policy decision. Copper meanwhile benefits from the weaker Buck and reclaimed USD 2.35/lb to the upside. Zinc prices continued advancing in overnight trade amid supply woes induced by COVID-19 alongside improving Chinese demand.

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)

Russian Energy Minister Novak says volatility in the oil market is to continue next month, Russian energy firms will cut output by 19% vs. Feb levels, via IFAX; will fully comply with OPEC++ deal. (Ifax)

Russian President Putin is to chair a meeting with heads of Russian oil firms today; Energy Minster Novak is to report the situation in the oil market, according to Kremlin. (Newswires)

United States Oil Fund (USO) says it had USD 725.5mln of unrealised losses on oil contracts heading into April, according to a filing. (Newswires)