• Asian equity markets began the week mostly lower as concerns mount over US-Chinese tensions and activity at the inter-Korean border
• US President Trump said tariffs would be the ultimate punishment on China and warned that that if China doesn't buy US goods, the US will end the trade deal
• US Secretary of State Pompeo stated that there is enormous evidence that the coronavirus outbreak originated in a laboratory in Wuhan
• UK is looking to relax the lockdown measures beginning May 26th, according to The Sun
• North Korean leader Kim visited a factory in his first public appearance in 20 days which follows conflicting reports that suggested he may have died or was incapacitated
• Looking ahead, highlights include EZ manufacturing PMIs, ECB asset purchases, US factory orders, ISM New York

CORONAVIRUS UPDATE

US President Trump said during virtual town hall that we can have it both ways with opening the economy and staying safe, while he sees 75k-100k deaths from coronavirus and again questioned China and warnings of the virus. Furthermore, President Trump said tariffs would be the ultimate punishment on China and warned that that if China doesn't buy US goods, the US will end the trade deal. (Newswires)

US President Trump said the FDA approved Gilead's (GILD) Remdesivir for emergency use authorization and that the Co. is donating 1mln vials of the drug, while VP Pence said the 1mln vials of remdesivir will start being distributed to hospitals on Monday. (Newswires)

US President Trump said he is not doing stimulus without a payroll tax cut, although there were previous comments from White House Press Secretary McEnany that US wants to negotiate the next stimulus bill immediately, while other reports noted that senior sources in the US Republican Senate Conference want to wait before approving another coronavirus stimulus package. (Newswires)

US Secretary of State Pompeo stated that there is enormous evidence that the coronavirus outbreak originated in a laboratory in Wuhan although he didn’t provide evidence to support the claims, while he accused China of stonewalling investigations and refusing to co-operate with experts. (Newswires/BBC) New US intelligence analysis claimed that China intentionally concealed severity of coronavirus pandemic to stock up on critical medical supplies needed to combat the outbreak. (AP)

New Jersey Governor Murphy said he will announce a plan for school reopenings on Monday. Elsewhere, New York City Mayor De Blasio commented that reopening the city is "obviously a few months away at the minimum", while the Washington State Governor extended the stay at home order to May 31st. (Newswires)

US CDC reported total coronavirus cases as of previous day at 1600EDT increased to 1,133,486 (Prev. 1,092,815), while total death toll was at 65,735 (Prev. 64,283). (Newswires)

UK is looking to relax the lockdown measures beginning May 26th according to The Sun (other reports have suggested the plan could be unveiled as soon as Thursday), while it was also reported that PM Johnson’s plan will include workplace proposals such as staggered shifts, curtailing hot desking and face-to-face meetings, while staff canteens will remain shut and lifts kept half empty. (The Sun/FT) UK Cabinet Minister Gove commented that a staged easing of the lockdown would mean restrictions could be imposed to tackle localized outbreaks and also stated that the UK will be piloting a new test, as well as trace and track procedures in the Isle of Wight. (Newswires)

UK coronavirus death toll rose by 315 to 28,446 vs. Prev. increase of 621 deaths, while France’s death toll rose by 135 to 24,895 vs. Prev. increase of 166 deaths and Italy’s death toll rose by 174 to 28,884 vs. Prev. increase of 474 to represent its lowest daily death toll since the lockdown began on March 9th. (Newswires)

India extended its nationwide lockdown from May 4th for two weeks but will permit "considerable relaxations" in districts marked as Green and Orange Zones. (Newswires)

ASIA

Asian equity markets began the week mostly lower amid several holiday closures in the region and cautiousness ahead of this week’s risk events, with sentiment also dragged by a flare up at the inter-Korean border and as US-China trade tensions simmered with President Trump stating that tariffs would be the ultimate punishment for China and warned to end the trade deal if China doesn't buy US goods. ASX 200 (+1.2%) was choppy with notable weakness in energy as crude prices resumed the rout brought on by oversupply concerns and with banking names initially pressured after Westpac reported a 62% drop in H1 net, although the big 4 bank eventually reversed its losses which helped the turnaround in the largest weighted financials sector and the index as a whole. KOSPI (-1.9%) gapped lower by over 2% at the open on geopolitical concerns after South Korea and North Korea exchanged gunfire at the demilitarized zone for the first time since 2014 which comes a day after North Korea Leader Kim made his first public appearance since rumours circulated that he may have died or was incapacitated, although the index is off its lows as reports also noted there were no casualties from the incident which could have been accidental. Hang Seng  (-4.2%) slumped as it played catch up from the extended weekend and ahead of today’s GDP which could show the largest contraction on record with Financial Services Secretary Chan suggesting GDP data could be worse than the GFC and Asian Financial Crisis which saw economic contractions of 7.8% and 8.3% respectively. The lack of participants added to the uninspired mood for Hong Kong and the region, with markets in mainland China to reopen on Wednesday due to Labor Day holidays and with Japanese participants returning on Thursday after Golden Week. Finally, Indian markets were the worst performers with the NIFTY and SENSEX both collapsing by as much as 5% after the government extended the nationwide lockdown for two weeks but will permit "considerable relaxations" in certain districts.

Hong Kong civil servants began to gradually return to work from today and it was also reported that Hong Kong is to raise the limit on public gatherings to 8 people from 4, while it may open gyms and cinemas this week. (Newswires)

UK/EU

UK is to start trade talks with the US in the upcoming week. The first round of negotiations will last for two weeks with future discussions taking place every six weeks. (FT)

FX

In FX markets, the DXY was firmer as it benefitted from safe-haven bid to extend above the 99.00 level after US President Trump’s tariff warning and continued finger-pointing by the administration on China regarding the origins of the coronavirus outbreak in which Secretary of State Pompeo reiterated Trump’s view that there is enormous evidence the coronavirus originated in a laboratory in Wuhan, while he also accused China of stonewalling investigations and refusing to co-operate with experts. As such, EUR/USD and GBP/USD weakened below 1.0950 and 1.2450 respectively but with losses somewhat cushioned after the daily death tolls on both sides of the Channel dropped with Italy also reporting the lowest number of deaths since the beginning of its lockdown. Elsewhere, USD/JPY and JPY-crosses were hampered by the subdued risk tone and absence of Japanese participants, while antipodeans suffered due to their high-beta statuses with the retreat in AUD/USD below the 0.6400 handle also the impact of early weakness in CNH after President Trump’s tough rhetoric on China.

New Zealand PM Ardern will join Australia Cabinet meeting tomorrow and she was said to have discussed with PM Morrison the reopening of trans-Tasman travel, as well as easing restrictions on economies. (Newswires)

S&P affirmed New Zealand at AA; Outlook Positive, while it stated the positive outlook reflects strong fundamentals and that fiscal profile should strengthen after coronavirus outbreak subsides. Furthermore, it believes New Zealand’s economy is in recession and forecasts a 2.4% contraction in the economy in fiscal 2020 but then growing 1.7% fiscal 2021 and 4.4% in fiscal 2022. (Newswires) 

COMMODITIES

Commodities were mostly softer with WTI crude futures June contract declining below the USD 19.00/bbl level amid the risk averse tone and a resumption of the selling pressure triggered by oversupply concerns, while there were also comments from the Texas Railroad Commission Chairman Christian who dismissed the notion of voting to reduce output ahead of this week’s meeting. Elsewhere, gold prices were steady with price action contained by resistance at the USD 1700/oz level and amid a firmer greenback, while the lacklustre sentiment and key holiday closures kept sapped demand for copper overnight.

Texas Railroad Commission Chairman Christian said the state will not be reducing output and noted that he and Commissioner Craddick oppose proration, while he thinks the issue is settled and is disturbed seeing it viewed as a big question heading into the commission meeting this week. (Energy Intel)

GEOPOLITICS

North Korean leader Kim visited a factory in his first public appearance in 20 days which follows conflicting reports that suggested he may have died or was incapacitated. In related news, North Korea and South Korea exchanged shots at the demilitarized zone, although there were no reported injuries and US Secretary of State Pompeo suggested the gunfire exchange was probably accidental. (Newswires)

US

The TPLEX lacked direction on Friday amid light news flow and month-end passing. On the supply front, corporate issuance cooled to end the week following the Boeing jumbo USD 25bln deal on Thursday, although investors may be cautious about bidding rates lower ahead of next week’s Treasury refunding announcement (May 6th), where the Treasury will explain how it plans to funds its ballooning deficit (it will likely launch the much touted 20-year Bond); furthermore, with corporates emerging from the other side of earnings, companies will be likely to flood the pipeline with debt offerings as many look to pay off short term credit facilities that have been maxed out amid the economy standstill. Elsewhere, the NY Fed announced it would be tapering its Treasury purchases to USD 8bln per day for next week from this week’s USD 10bln – note that the pace of the tapering has been declining in recent weeks, where last week it cut to USD 10bln from USD 15bln per day. By settlement, yields were little changed, 2s +1bps at 0.20%, 10s +1bps at 0.63%, and 30s unchanged at 1.27%. US T-note futures (M0) settled 6 ticks lower at 138-28.

NY Fed cut Treasuries/TIPS purchases to USD 8bln per day for the upcoming week (Prev. USD 10bln)

Fed's Bullard (non-voter, dove) sees an eventual need for a "far more granular, far more risk-based" approach to reopening the economy and suggested if the crisis extends for too long there is a risk that the economy won't recover swiftly. Bullard added the Fed has made commitments to remain at low rates until the economy gets on a better footing, while he added that as long as the shock is temporary, the economy could recover in H2 this year and he thinks inflation could be maintained not too far from the 2% target. (WSJ)

NYSE is to hold a meeting with the floor community on Tuesday and officials may address a timetable for reopening, while they are said to be unlikely to set a firm date but could provide guidance, according to FBN's Gasparino. (Fox)