• The tone in Asia was subdued owing to the mass closures in the region for Labor Day and the negative handover from Wall St
• US futures were pressured after-hours following mega-cap earnings from Amazon and Apple
• US President Trump said that he has seen evidence the virus had originated from Wuhan Institute of Virology in China
• UK PM Johnson said we have passed the peak, adding a comprehensive plan will be released next week on the reopening of the country
• Looking ahead, highlights include UK and US manufacturing PMI, US construction spending, ISM manufacturing, Baker Hughes. Note, today is Labour Day across Europe. 
• Earnings: Exxon Mobil, Chevron, Abbvie, Charter Communications, Honeywell International, Colgate-Palmolive, Estee Lauder, Aon, Phillips 66, Clorox Co, Johnson Controls International, LyondellBasell Industries

CORONAVIRUS UPDATE

US COVID-19 cases 1,031,659 (prev. 1,005,147); death toll 60,057 (Prev. 57505). cases rose 1.2% which was the slowest this month, while AFP also tweeted there were over 2000 deaths in US over the last 24 hours citing the Johns Hopkins tracker. (Newswires/AFP/Twitter)

US President Trump confirmed the US is planning to fast track the development of a coronavirus vaccine and that he is in charge of "Operation Warp Speed", which reportedly aims to rush a coronavirus vaccine and has a goal of 100mln doses by the end of 2020. (Newswires)

New York Governor Cuomo said the death toll rose 306 (prev. +330) and that hospitalizations are now below 12,000 (prev. 12,159), In related news, New York Central Park coronavirus hospital will close early this month as the worst of the virus surge is said to have passed. (New York Post)

UK PM Johnson said we have passed the peak and are on a downward slope, adding a comprehensive plan will be released next week on the reopening of the country. Furthermore, Johnson said austerity certainly will not be part of our approach in rebuilding public finances after the coronavirus pandemic. (Newswires) UK COVID-19 death toll rose to 26,711 (Prev. 26,097). (DHSC)

Australian PM Morrison said the National Cabinet agreed to bring forward consideration of easing social distancing restrictions to May 8th, awhile he also commented there are now about 1.5mln people on jobseeker allowance and that unemployment could surpass 10%. (Newswires)

ASIA

The tone in Asia was subdued owing to the mass closures in the region for Labor Day and following the negative handover from Wall St due to month-end rebalancing and with futures pressured after hours following mega-cap earnings from Amazon and Apple. Amazon shares declined around 5% in extended trade after mixed results in which the Co. missed on EPS but topped revenue forecasts and noted it expects to spend its entire USD 4bln of operating profit on COVID-related expenses, while Apple initially gained after it beat on top and bottom lines, boosted its share buyback by USD 50bln and raised its dividend, although the gains were only brief as the results were clouded by weaker than expected iPhone and iPad sales and after the tech giant refrained from providing a Q3 outlook. ASX 200 (-3.5%) was the laggard with downside led by heavy losses in the commodity related sectors and a slump in the top-weighted financials with selling exacerbated by profit taking after the index had rallied to its highest level in 6 weeks and notched its best month on record for April. Nikkei 225 (-2.5%) also suffered firm losses amid a slew of earnings and after Tokyo Core CPI data turned negative to trigger fears of a return to deflation, while reports also noted that PM Abe is to formally decide to extend the state of emergency due to coronavirus on Monday. As a reminder, markets in mainland China and Hong Kong were shut alongside most of the regional bourses, although China’s tensions with US remained in the spotlight after comments from US President who suggested he has seen evidence the virus had originated from the Wuhan Institute of Virology and that he can do tariffs to respond to China, with sources also later noting the US is considering blocking government retirement savings funds from investing in Chinese equities deemed a national security risk. Finally, 10yr JGBs were weaker amid spillover selling from T-notes which had reversed intraday gains and briefly fell below 139.00 amid heavy supply including Boeing’s USD 25bln 7-tranche offering, while JGB prices were also hampered by weaker demand at the enhanced liquidity auction for 2yr, 5yr, 10yr & 20yr JGBs.

US President Trump said the China trade deal is now secondary to what China did regarding the virus and that he has seen evidence the virus had originated from Wuhan Institute of Virology in China, while he stated that he cannot say why he has a high degree the virus originated there but suggested he can do tariffs to respond to China. Furthermore, reports later noted that President Trump is exploring blocking government retirement savings fund Thrift Savings Plan, from investing in Chinese equities deemed a national security risk. (Newswires)

White House is mulling plans to punish or demand financial compensation from China over COVID-19 handling with the measures being considered said to include asking for monetary damages, stripping China of sovereign immunity allowing it to be sued and considering the US cancelling part of its debt obligations to China. However, NEC Director Kudlow later denied that the US would cancel debt obligations to China. (Washington Post/CNBC)

BoJ minutes from March meeting stated that Japan's economic activity had been weak recently due mainly to the impact of the outbreak of COVID-19 and was likely to remain so for the time being mainly affected by the outbreak of the disease. Members concurred that the outlook for prices was likely to be somewhat weak for the time being, partly due to the effects of the decline in crude oil prices, while several board members said consumer and household sentiment could sour rapidly if markets remain unstable. Furthermore, members concurred that financial conditions in Japan were accommodative on the whole but had become less so and a few members said it was uncertain whether the economy can make a strong rebound once virus was contained. (Newswires)

Tokyo CPI (Apr) Y/Y 0.2% vs. Exp. 0.2% (Prev. 0.4%). (Newswires) Tokyo CPI Ex. Fresh Food (Apr) Y/Y -0.1% vs. Exp. 0.1% (Prev. 0.4%) Tokyo CPI Ex. Fresh Food & Energy (Apr) Y/Y 0.2% vs. Exp. 0.5% (Prev. 0.7%)

UK/EU

UK factory output risks declining by more than half in Q2 after 80% of manufacturers reported a drop in orders due to the coronavirus outbreak, according to trade body Make UK. (Newswires)

UK Treasury has held discussions with business groups regarding redesigning the furlough scheme to reportedly allow employees to return to work on a part-time basis initially. (FT)

Bank of Italy said Italian banks are likely to face losses on unlikely to pay loans totalling EUR 65bln at end of 2019, while it sees a risk of a sharp increase in loan deterioration and stated that the pandemic has significantly increased financial stability risks for Italy. (Newswires)

FX

In FX markets, the risk averse tone and comments from US President Trump regarding protecting the dollar helped DXY bounce back to reclaim the 99.00 level but with the recovery only marginal compared to the prior day’s losses which were attributed to month-end flows and post-ECB strength in EUR/USD. As such, the single currency held on to most its recent gains and traded steady around the 1.0950 level. GBP/USD also pared back some of its gains and extended its retreat from 1.2600 despite recent optimism by UK PM Johnson who suggested the country has passed the peak and that a comprehensive plan on reopening will be released next week, while comments from trade body Make UK were less encouraging as it suggested factory output risks declining by more than half in Q2 with 80% of manufacturers reporting a drop in orders. Elsewhere, USD/JPY and JPY-crosses were mostly driven by the safe-haven flows and antipodeans also declined with AUD/USD and NZD/USD giving up the 0.6500 and 0.6100 handles respectively amid the subdued risk tone and with a Westpac note bearish on the pairs as it anticipates brutal economic and earnings data in the approaching weeks. In addition, underperformance in CNH contributed to the pressure for the China-exposed currencies with USD/CNH surging nearly 500 pips to test 7.1300 to the upside after President Trump’s tariff suggestion.

COMMODITIES

Commodities were mixed overnight in which WTI crude futures continued to make up for lost ground which saw the June contract briefly break back above the USD 20/bbl level with the OPEC+ agreement taking effect from today. However, gains were limited amid the lack of overnight participants due to the mass closures and amid reports Iraq could face difficulties in adhering to its obligations under the deal. Elsewhere, gold languished after recently slipping below the USD 1700/oz level and with the mild overnight rebound in the greenback containing the precious metal near session lows, while copper deteriorated throughout the session on the risk averse tone and absence of regional participants including its largest buyer China.

US President Trump said the US has no plans to take equity stakes in energy companies and does not plan to nationalize oil firms, according to an Energy Department spokesperson. (Newswires)

Iraq could reportedly face difficulties to cut up to 1mln BPD in line with OPEC+ deal and said it is still in talks with international oil companies for a deal to cut output in line with the agreement, according to sources. (Newswires)

Kazakhstan Energy Ministry said the country will reduce output at giant, large and medium-sized oil fields. (Newswires)

GEOPOLITICS

North Korean Leader Kim's younger sister Kim Yo-Jung is the most likely to succeed him if he dies or becomes incapacitated, according to South Korean press citing a US congressional report. (Yonhap)

US

A choppy session for the TPLEX, which had initially gotten off on the front-foot amid receding risk appetite, before reversing course into the settlement as IG corporate supply flooded. Disappointing GDP figures out of Europe, although expected, alongside month-end flows (read below) supported Treasuries heading into the US session. Another round of dire US data left the door open to inflows, and ECB’s Lagarde alluding to further stimulus to come. However, selling pressure began in the latter part of the session, in a steepening fashion. The selling pressure was likely a function of both month-end flows and corporate supply, where around ten IG issuers came to the dollar market as corporates emerge from the other side of earnings. Most notably, Boeing, who launched USD 25bln across seven tranches (3s, 5s, 7s, 10s, 20s, 30s, 40s) with orders books reportedly reaching above USD 75bln for the - on average - T+450bps issue. IFR noted that April set a monthly IG issuance record of USD 288bln. By settlement, on the Treasury curve, 2s unch at 20bps, 10s unch at 63bps, 30s +3bps at 1.27%. Note that LIBOR continued to fall with the 3-month down by 13bps although nearby Eurodollars didn’t budge again today. US T-note futures (M0) settled 3 ticks higher at 139-02.

Fed widened access to its Paycheck Protection Program Facility to include all SBA-approved lenders including non-depository institutions, while it added that eligible borrowers will be able to pledge entire PPP loans that they purchased as collateral to the PPPLF. (Newswires)

US President Trump said we have to protect the dollar, while he also commented that we are going to look at aid for states mentioned by House Speaker Pelosi although we want to get something for it. (Newswires)