• Asian equities traded positively after taking impetus from the rebound on Wall St where major indices gradually pared initial losses
• Senior Trump administration aides have signaled there will not be any economic punishment for China if it sticks to the trade agreement made in January
• University of Washington Institute for Health Metrics and Evaluation (IHME) updated model predicted the number of US deaths from coronavirus could reach over 134k by August
• In FX, the DXY was softer and traded below the 99.50 level with price action in the FX space otherwise relatively light
• WTI crude futures extended on its rebound amid the constructive risk tone which saw the June contract briefly test the USD 22/bbl level to the upside
• Looking ahead highlights include UK Construction & Services PMI, Canadian Trade Balance, US Composite & Services PMI, German Court ruling on ECB PSPP, ECB’s Mersch, Fed’s Evans & Bostic. Supply from the UK & Germany
• Earnings from: Total, BNP, Infineon, Fiat Chrysler, Walt Disney, Allergan, Regeneron

CORONAVIRUS UPDATE

US COVID cases rose 2.7% to 1,152,372 (Prev. +2.3%) and death toll rose 2.6% to 67,456 (Prev. +1.8%), while AFP tweeted there were 1015 deaths in US over the last 24 hours which is the lowest in a month citing the Johns Hopkins tracker. (Newswires/Twitter)

University of Washington Institute for Health Metrics and Evaluation (IHME) updated model predicted the number of US deaths from coronavirus could reach over 134k by August which is nearly double than its last projection, citing easing of lockdown restrictions and increased mobility. (Newswires)

California Governor Newsom said he will release guidelines on Thursday for some reopenings where some lower risk businesses could reopen as soon as Friday. There were also comments from New York Governor Cuomo that regions can assess whether to reopen from May 15th and that he will base the reopening of regions on new infections, health care capacity, diagnostic capacity and contact tracing capacity. (Newswires)

US Ways and Means Committee Chairman called for a 90-day suspension of all tariffs on products related to coronavirus and urged the Trump administration to conduct steps needed to raise domestic production and resolve shortages of medical supplies and drugs. (Newswires)

German state premiers are to agree on further measures to ease lockdown restrictions with Chancellor Merkel on Wednesday including reopening of shops likely from May 11th, school resumptions with rotating classes and to allow Bundesliga matches from May 15th under strict conditions without fans in stadiums according to sources. (Newswires)

UK COVID-19 cases rose 2.1% to 190,584 (Prev. +2.4%) and death toll rose by 1% to 28,734, while Italy COVID-19 cases rose 0.6% to 211,938 (prev. +0.7%), death toll rises +0.7% to 29,079 (prev. +0.6% at 29,079). (Newswires)

ASIA

Asian equity markets traded positively as the region took impetus from the rebound on Wall St where all major indices spent the session gradually paring earlier losses from the renewed US-China trade tensions and geopolitical concerns in the Korean peninsula, with the upside led by strength in tech and energy. As such, ASX 200 (+1.4%) is higher with the energy names mirroring the outperformance of the sector stateside on continued gains in oil prices and with strength seen across all of the big 4 banks, while Afterpay Touch extended on its rally after Tencent recently became a substantial shareholder in the Co. Hang Seng (+0.7%) was also underpinned by the improved risk tone and following comments from Chief Executive Lam who stated the time has come to ease social distancing measures and that she will announce the easing of restrictions as soon as possible. However, gains were limited by GDP data which showed Hong Kong fell deeper into a recession with the largest contraction on record for Q1 and as mainland China remained shut, alongside holiday closures in Japan and South Korea.

Senior Trump administration aides have eased up on China with officials signalling there will not be any economic punishment for China if it sticks to the trade agreement made in January. (WSJ)

Hong Kong Chief Executive Lam said the time has come to ease social distancing measures and she will announce easing of restrictions as soon as possible. (Newswires)

UK/EU

US Chamber of Commerce said it is vital for Britain to secure a comprehensive deal with EU ASAP to remove uncertainty for US firms and suggested that the lack of certainty on UK-EU ties will impact inbound investment and risks limiting prospects for US-UK trade negotiations. Furthermore, it stated that US and UK should work to remove all tariffs and barriers to boost long-term outlook for both sides, while it urged the completion of comprehensive US-UK trade deal and not a phased approach. (Newswires)

US is reportedly reviewing whether spy planes, intelligence officials and other assets need to be pulled out of Britain after the UK government permitted Huawei to help build its 5G network. (Newswires)

Analysis of official figures has revealed that over half of the British adult population is being bankrolled by the state amid warnings that the current furlough scheme could start costing as much as the NHS. Chancellor Sunak has attempted to provide some reassurance to people using the scheme by stating that there "will be no cliff-edge" to those using it. (Telegraph) Furthermore, nearly 110k small businesses have applied for the government's Bounce Back Loan Scheme. (Telegraph) 

UK new car sales in April fell to the lowest level since 1946, according to the Society of Motor Manufacturers & Traders. (Newswires)

FX

The DXY was softer and traded below the 99.50 level amid a lack of safe-haven demand but with price action relatively light amid the holiday-quietened conditions. This follows reports that a leading IHME model projected the US coronavirus death toll could surge to over 134k from a prior forecast of around 72k with the spike attributed to relaxed social distancing and increased mobility, although the White House have downplayed the accuracy of the projection. GBP/USD benefitted from the USD weakness to break above 1.2450 and EUR/USD bounced off support at 1.0900 but with upside limited ahead of the German Constitutional Court ruling on the legality of ECB's QE programme. Elsewhere, USD/JPY and JPY-crosses failed to take advantage of the improved risk tone amid the absence of Japanese participants and recent state of emergency extension, while antipodeans coat-tailed on the risk appetite and gains in oil prices but then slightly stalled after the RBA kept rates unchanged as expected and noted it will not hike rates until the economy meets inflation and employment goals, while it will maintain efforts in keeping funding costs low and projected a 10% decline of output in H1.

RBA kept rates at 0.25% as expected and maintained 3yr yield target at 0.25%, RBA said the board will not raise the cash rate target until the economy meets inflation and employment goals, while it will maintain efforts in keeping funding costs low and credit available. RBA stated that containment measures have reduced infection rates across countries and if this continues, a recovery in the global economy will start later this year. Furthermore, it sees output falling 10% in H1 and by around 6% for the year before rebounding 6% next year in its baseline scenario but noted that a stronger recovery is possible if there is further substantial progress in containing coronavirus in the near-term. (Newswires)

Australian Treasurer Frydenberg said they will continue to do what is necessary to support the economy but added the government has already committed a significant amount and the support provided will be sufficient. In other news, Australian Bureau of Statistics said employee jobs declined by 7.5% from week ending March 14th to week ending April 18th and that total wages paid declined 8.2%. (Newswires)

Argentina is ready to consider a 9th sovereign default unless investors engaged in negotiations to ease the burden, according to the Finance Minister following rejection of counteroffer from group of creditors led by BlackRock. (Newswires)

COMMODITIES

Commodities were mixed in which WTI crude futures extended on its rebound amid the constructive risk tone which saw the June contract briefly test the USD 22/bbl level to the upside where resistance held, while there were also comments from the Texas Railroad Commission that continued to dismiss the prospect of a voting for an output reduction ahead of today’s meeting. Elsewhere, gold prices were kept rangebound around the USD 1700/oz level by the lack of safe haven demand, while copper prices notched marginals gains overnight due to the improved sentiment.

Some OPEC+ states are already in pain because of the cuts and are calling for G20 countries outside the alliance to formally commit to production cuts, rather than letting privately owned companies make their own decisions, according to Energy Intel. (Twitter)

Texas RRC Commissioner Sitton said oil quotas are dead and that he will drop his proposal to mandate oil production reduction by 1mln BPD. (Newswires)

GEOPOLITICS

Venezuelan President Maduro said authorities captured 13 'terrorists' involved in a failed incursion plot with 2 US citizens among the detained. (Newswires)

US

The TPLEX lacked direction to start the week, similar to how it ended last week. On the one hand, a risk off tone overnight had seen the curve bull-flatten, although later in the session the long-end reversed course. Another slew of corporate issuance post-earnings likely influenced the move, including USD 8.5bln from Apple (AAPL), as well as some other large cap names such as Amgen, Altria and Starbucks – Boeing’s (BA) YTD record raise of USD 25bln was only recently digested too. Furthermore, the US Treasury refunding announcement is due on Wednesday where the Treasury will explain how it intends to fund its ballooning deficits as the economy comes to a halt – the prospect of a sovereign supply ramp up is likely keeping some duration bulls on the sidelines. Meanwhile, front-end yields didn’t reverse course like the belly/long-end, accompanied by what one desk notes as what appears to be a growing of cash relative to available collateral in the system, with all three of today’s T-Bill auctions stopping through the screws and seeing higher than average bid-to-cover ratios. Meanwhile, the US Treasury expects to borrow a record USD 2.999trln in net marketable debt in Q2 (April-June), USD 3.055trln more than it estimated in February. US T-note futures (M0) settle 3 ticks higher at 138-31.

US House Minority Leader Hoyer said that the house is not expected to be in session this week and that there is not timetable yet for a return to Washington. (Newswires)

Moody's downgraded the outlook for US local governments to negative from stable and noted the sector will face challenges for the remainder of the year and continuing into 2021. Furthermore, Moody's said the US economy is to contract by 5.7% in 2020 with a full return to pre-COVID levels in Q3 of 2021. (Newswires)