• Asian equity markets traded positively as the region took impetus from the gains on Wall St where sentiment was underpinned by coronavirus treatment hopes
• FOMC left rates unchanged via unanimous decision and is to continue asset purchases in amounts needed to support market functioning and policy transmission
• Fed made no mention of forward guidance or YCC in the statement and the dollar amount of asset purchases was also withdrawn from the text
• NIH’s Dr. Fauci said the data showed Remdesivir had a benefit in reducing time of recovery in patients with COVID-19
• UK PM Johnson is to dash hopes that the lockdown could be lifted soon and will warn the country today not to expect major changes to restrictions
• Looking ahead, highlights include German labour market report, EZ CPI, GDP, ECB policy announcement & press conference, US initial jobless claims, Canadian GDP, Chicago PMI
• Earnings:  BASF, BBVA, Deutsche Lufthansa, Nokia, Orange, Apple, Amazon.com, Visa, Comcast, McDonald's, Gilead Sciences, Altria, Twitter, Kraft Heinz

FOMC

FOMC left rates unchanged at 0.00%-0.25% via unanimous decision and IOER was maintained at 10bps, while it is to continue asset purchases in amounts needed to support market functioning and policy transmission.

Fed stated it continues to offer large-scale overnight and term repo facilities but noted that disruptions to economic activity globally have significantly affected financial conditions and stated that weaker demand as well as significantly lower oil prices are holding down consumer inflation. Furthermore, the Fed made no mention of forward guidance or YCC in the statement and the dollar amount of asset purchases was also withdrawn from this statement.

Fed Chair Powell commented at the presser that next week unemployment will move into double digits and the economy will fall at an "unprecedented rate". Powell reiterated that purchases will remain as needed and interest rates will stay at these low levels until the economy has weathered this crisis and is inline with the Fed's mandate. Powell also noted that credit policies have no specific limit which will be increased as needed and that he believes there will be a need for the Fed to do more. In addition, Powell stated that the policy stance and pace of asset purchases are appropriate for now and that they are waiting to see more from the economy before changing the policy given that there are many paths that could follow, while he added there will be no rush to withdraw support for the economy. (Newswires)

CORONAVIRUS UPDATE

NIH’s Dr. Fauci said the data showed Remdesivir had a benefit in reducing time of recovery in patients with COVID-19 and stated that the data needs to be further analysed but it has proven a drug can target the coronavirus. Furthermore, NIH noted preliminary the results indicated patients who received the drug had a 31% faster recovery time than those with a placebo. The results also showed Remdesivir accelerated recovery from advanced COVID-19 and suggested a survival benefit with a mortality rate of 8% for the group receiving Remdesivir vs 11.6% for those with a placebo, while median recovery time was 11 days for those with Remdesivir compared to 15 days for those who received a placebo. (Newswires)

US Treasury Secretary Mnuchin said there have been no discussions yet regarding another replenishment of PPP loans and that USD 259bln in unallocated COVID-19 capital will be used to supplement or create new Federal Reserve lending programmes. Furthermore, Mnuchin said Federal Reserve programmes should be broad based and not industry-focused, while he added there are no plans for additional money for airlines at this time. (Newswires)

US Democrats and Republicans are reportedly "horse trading" on the next phase of COVID-19 stimulus with the GOP said to be softening on aid to states in exchange for business liability protection and possible bailouts of small oil companies. (FBN)

US COVID-19 cases rose to 1,005,147 (Prev. 981,246) and the death toll rose to 57,505 (Prev. 55,258), while AFP tweeted there were 2502 deaths in US over the last 24 hours citing the Johns Hopkins tracker. (Newswires/AFP/Twitter)

UK PM Johnson is to dash hopes that the lockdown could be lifted soon and will warn the country today not to expect major changes to restrictions as UK risks having among the world's worst death rates. (Telegraph) Note, the next scheduled review for the lockdown is on May 7th. However, a separate article in the Telegraph notes that a blueprint for ending the lockdown could be unveiled as soon as Monday. UK COVID-19 death toll rose to 26,097 in which deaths increased by 765 (578 hospital vs. yesterday’s 586). (Newswires)

WHO's Ryan said that even in areas of intense transmission, the proportion of individuals with antibodies is "quite low" which is a concern and that the chance of the disease rebounding is quite high if controls and lockdown measures are released too quickly. (Newswires)

ASIA

Asian equity markets traded positively as the region took impetus from the gains on Wall St where sentiment was underpinned by coronavirus treatment hopes after preliminary results from Gilead’s Remdesivir drug trial showed a 31% faster recovery time and lower mortality rate compared to patients that were given a placebo. Furthermore, the Fed reiterated to keep supporting the economy as necessary and encouraging earnings from several tech heavyweights after-market briefly added fuel to the momentum for US index futures. ASX 200 (+2.6%) was lifted by strength in the energy sector as oil prices continued to make up ground and with a slew of corporate updates in focus. Nikkei 225 (+2.8%) outperformed as it played catch up on return from the holiday closure and as a weaker currency provided an uplift to exporter sentiment, while Industrial Production and Retail Sales data were not as bad as had been feared despite both printing in contraction territory. Shanghai Comp. (+1.2%) was also positive ahead of the extended 5-day weekend in the mainland for Labor Day holidays and amid several blue chip earnings, although gains were somewhat capped by the absence of Hong Kong participants and following mixed Chinese PMI data in which official Manufacturing and Caixin Manufacturing PMIs fell short of estimates but Non-Manufacturing and Composite PMIs both improved. Finally, 10yr JGBs were lacklustre with demand subdued by gains in riskier assets and following a similar uninspired tone in T-notes, while the absence of the BoJ in the market today and resistance ahead of the 153.00 level also ensured the mundane price action.

PBoC skipped open market operations and were net neutral on the day. (Newswires) PBoC set USD/CNY mid-point at 7.0571 vs. Exp. 7.0618 (Prev. 7.0707) PBoC will reportedly offer long term funding through RRR and MLF next month, according to Chinese press.

US President Trump said China will do anything they can for him to lose the 2020 election and stated the US is looking at different options regarding consequences for China for its handling of coronavirus crisis in which he suggested he could do a lot. Furthermore, US President Trump stated the US trade deal with China has been upset very badly by coronavirus, while he doesn't see elections as a referendum of his handling of the crisis and doesn't believe polls showing Biden is ahead. (Newswires)

Chinese Manufacturing PMI (Apr) 50.8 vs. Exp. 51.0 (Prev. 52.0). Chinese Non-Manufacturing PMI (Apr) 53.2 vs. Exp. 52.5 (Prev. 52.3) Chinese Composite PMI (Apr) 53.4 (Prev. 53.0) Chinese Caixin Manufacturing PMI (Apr) 49.4 vs. Exp. 50.3 (Prev. 50.1); Export Orders fell by the fastest pace since the GFC and employment declined further.

Japanese Industrial Production (Mar) M/M -3.7% vs. Exp. -5.2% (Prev. -0.3%). (Newswires) Japanese Industrial Production (Mar) Y/Y -5.2% vs. Exp. -7.4% (Prev. 5.7%) 

UK/EU

UK car production declined 38% Y/Y in March and companies risk losing over GBP 8bln due to coronavirus, according to the Society of Motor Manufacturers and Traders. (Newswires)

EU's Gentiloni said Europe's stimulus package should kick in in H2 of this year and that it is out of the question for the recovery plan to wait a year. (Les Echos)

FX

DXY was choppy overnight and tested support at the 99.50 level in the aftermath of an unsurprising FOMC. The greenback’s transatlantic peers were indecisive in which EUR/USD consolidated ahead of today’s ECB policy meeting, while GBP/USD marginally pulled back overnight amid reports UK PM Johnson is to dash hopes for the lockdown to be lifted soon and will warn the nation not to expect major changes to restrictions. Elsewhere, USD/JPY was briefly underpinned by the constructive risk appetite and there was a non-committal tone in antipodeans as their high beta statuses offset mixed Chinese PMI data and weak New Zealand Business surveys.

New Zealand ANZ Business Confidence (Apr) -66.6% (Prev. -63.5%). (Newswires) New Zealand ANZ Activity Outlook (Apr) -55.1% (Prev. -26.7%)

S&P cut South Africa by one notch to BB-; Outlook Stable. (Newswires)

COMMODITIES

WTI crude futures climbed above the USD 17.00/bbl on several supportive factors including the recent smaller than expected build in headline DoE inventories and surprise gasoline stockpile draw. Furthermore, there were comments from IEA’s Birol who suggested global storage capacity could run out in June and called for further output cuts, while Norway also announced efforts to reduce production with a cut of 250k bpd in June. Elsewhere, gold prices were held up by support at the USD 1700/oz level, while copper prices were underpinned in tandem with the broad risk appetite.

IEA's Birol warned that global oil storage could be full by mid-June and called on OPEC+ countries to consider more cuts. (Twitter)

US President Trump said they will have a plan to support oil companies soon. Other reports also noted the Trump administration is close to rolling out new lending facilities to help oil and gas companies struggling from a collapse in prices. The program which is still under development, would primarily consist of the US Treasury Department offering bridge loans to help the industry through this pandemic and the Federal Reserve offering emergency lending under the so-called Section 13(3) program, while US Energy Secretary Dan Brouillette stated the lending facilities were not meant for "big players" in the sector that have other sources of capital. (Newswires/Argus) US Treasury Secretary Mnuchin that the administration is looking at a lot of strategies for the energy industry but rules out a bailout for oil companies, while Mnuchin added the administration is exploring having the ability to store another several hundred million barrels of oil. (Newswires)

Texas Railroad Commission Chairman Christian said he still opposes mandated oil production cuts to address global oil curbs and noted that state producers are cutting output although a 20% reduction in Texas will not impact global supplies. (Newswires)

Norway Oil Ministry said Norway will be cutting oil output by 250k BOE/D in June and 134k in H2, while the startup of production at several fields will be delayed until 2021 and that production in December 2020 will be 300k BPD less than originally planned. (Newswires)

US

The T-PLEX had a choppy session, albeit tight ranges, after ultimately reversing earlier gains following the FOMC rate decision, which lacked some details that had been sought after. While equities had made solid gains post the remdesivir announcements, The T-Note’s kneejerk losses were quickly reversed in anticipation of the FOMC, where there had been some expectation of some sort of yield curve control as well as forward guidance. However, upon the release of the statement, no such details were specified, and duration was offered. Although as the Fed Chair Powell press conference got underway, the initial rate backup was pared, perhaps as participants digested the lack of limits to the Fed’s asset purchases, and as Powell stressed the Fed would still be needed to do more – one could cherry-pick several comments for the renewed Treasury strength. By settlement, yields were mixed, although major curve spreads were steeper, with the 10-year yield gravitating around the 62bps area. US T-note futures (M0) settled 1+ ticks lower at 138-31.

US NEC Director Kudlow stated the economic contraction is going to go on for a bit although he predicts a growing and recovering economy by summertime. (Newswires)