• Asian equity markets traded indecisively following the soured mood on Wall St amid ongoing US-China tensions and a disappointing drug update
• Moderna (MRNA) COVID-19 vaccine reportedly did not produce data critical to assessing the vaccine, according to STAT News citing experts
• In FX markets, the DXY oscillated around the 99.50 level amid the indecisive risk tone
• WTI July crude futures edged mild gains and broke back above the USD 32/bbl level supported by a somewhat encouraging private inventory report
• Looking ahead, highlights include UK, EZ & Canadian CPI, EZ consumer confidence, DoEs, FOMC minutes, BoE's Bailey, Broadbent, Cunliffe, & Haskel, BoC's Lane, supply from France, UK, Germany and US 20yr

CORONAVIRUS UPDATE

US CDC stated US coronavirus cases rose 1.7% to 1.5mln and the death toll rose 1.0% to 90,340. In related news, AFP tweeted that there were over 1500 coronavirus related deaths in US during the past 24 hours citing the Johns Hopkins tracker and that US virus deaths are projected to surpass 113000 by mid-June citing models. (AFP/Twitter)

US President Trump said he had a good meeting with Republican senators and that progress was made on many issues, while he believes Hydroxychloroquine gives you an additional level of safety. There were also reports that President Trump expressed opposition to the USD 600 per week unemployment benefit boost once it expires in July, according to sources. (Newswires/Washington Post)

US Senate Majority Leader McConnell said over the next couple of weeks he will assess the need for additional coronavirus aid legislation. In related news, FBN's Gasparino noted there is reportedly a growing congressional consensus on another round of stimulus after Memorial Day and possibly as much as USD 1 trillion. (Newswires/Fox)

US extended the ban on non-essential travel with Mexico and Canada to June 22nd, while President Trump was also considering a travel ban on visitors from Brazil. (Newswires)

New York Governor Cuomo said the capital region in the Eastern and Central part of the state will reopen on Wednesday, becoming the seventh region to reopen. (Newswires)

UK COVID-19 death toll rose to 35,341 (Prev. 34,796) which was an increase of 545 vs. Prev. increase of 160. (Newswires)

Singapore government is in discussions with Australia, New Zealand, China and South Korea on reopening borders. (Newswires)

Moderna (MRNA) COVID-19 vaccine reportedly did not produce data critical to assessing the vaccine, according to STAT News citing experts. (Newswires)

ASIA

Asian equity markets traded indecisively following the soured mood on Wall St amid ongoing US-China tensions and with the major indices pressured heading into the close as vaccine hopes were knocked by reports that Moderna's COVID-19 vaccine did not produce data critical to its assessment. ASX 200 (+0.4%) was initially subdued by weakness in the utilities and energy sectors, while a record decline in preliminary retail sales and deteriorating relations with China added to the lacklustre tone, before a recovery in financials and strength in tech helped overturn the losses. Nikkei 225 (+1.0%) was underpinned by stimulus hopes after the BoJ announced to hold an off-schedule meeting this Friday to discuss a new loan scheme for firms impacted by the virus and with the Japanese government to set up a JPY 50bln fund with the private sector to inject capital into businesses. However, weakness was seen in Fujifilm on reports its Avigan drug was not showing apparent efficacy as a coronavirus treatment and earnings releases were also a catalyst for price action with both Sharp and Mitsubishi Motors suffering from weaker results in which the latter posted a full-year loss. Hang Seng (+0.1%) and Shanghai Comp. (-0.5%) mirrored the choppy trade after the PBoC kept its Loan Prime Rates unchanged as expected and following the verbal jousting between China and the US. Finally, 10yr JGBs attempted to nurse the prior day’s losses following the recent rebound in T-notes and following stronger results at the 20yr JGB auction although the gains were eventually reversed amid outperformance in Japanese stocks.

PBoC skipped open market operations and were net neutral for the day. PBoC set USD/CNY mid-point at 7.0956 vs. Exp. 7.1070 (Prev. 7.0912)

PBoC 1-Year Loan Prime Rate (May) 3.85% vs. Exp. 3.85% (Prev. 3.85%). PBoC 5-Year Loan Prime Rate (May) 4.65% vs. Exp. 4.65% (Prev. 4.65%)

Japanese Machinery Orders (Mar) M/M -0.4% vs. Exp. -7.1% (Prev. 2.3%). Japanese Machinery Orders (Mar) Y/Y -0.7% vs. Exp. -9.5% (Prev. -2.4%)

South Korean Finance Minister Hong said they need to aggressively create jobs and that measures to create jobs will be central to the bi-annual economic policy plan due early next month, while South Korea is to create a KRW 10tln fund to buy corporate bonds which will be expanded to KRW 20tln if needed. (Newswires)

UK/EU

French Finance Minister Le Maire acknowledges it will be "difficult" to convince "some" member states (Austria, Denmark, Sweden, Netherlands) on the proposed German-Franco recovery fund, namely the loans vs grants aspect (BBC HARDtalk)

FX

In FX markets, the DXY oscillated around the 99.50 level amid the indecisive risk tone and after Fed Chair Powell’s Senate Banking Committee testimony provided very little in fresh info as he stated they are continuing to look into ways to accommodate additional borrowers and that he expects the balance sheet to gradually shrink over time, with participants also looking ahead to the FOMC Minutes later today. EUR/USD eked mild gains as the recent EU recovery fund proposal continued to reverberate for the currency, while GBP/USD was also higher after bouncing off support around 1.2240-50. Elsewhere, USD/JPY and JPY-crosses are kept afloat amid anticipation of looming BoJ support later this week, and antipodeans were also mildly higher after a firmer than expected reference rate setting by the PBoC and following comments by RBNZ Governor Orr who noted they are prepared to go negative but not at this time and a lot later.

Australia Preliminary Retail Sales for April fell 17.9% vs. Prev. increase of 8.5%, according to the Australian Bureau of Statistics. ABS stated this was the largest seasonally adjusted decline on record with turnover in clothing, footwear, personal accessories, cafes, restaurants and takeaways around half the level of April last year, while  the food retailing industry, which increased strongly in March, slipped 17.1% since then. (Newswires)

COMMODITIES

WTI July crude futures edged mild gains and broke back above the USD 32/bbl level supported by a somewhat encouraging private inventory report which printed a surprise draw in headline crude stockpiles, as well as a significant drop in Cushing numbers albeit slightly less than expected at 5.0mln vs. Exp. 5.1mln. Elsewhere, gold prices were rangebound with the precious metal hampered by resistance at the USD 1750/oz level, while copper prices little changed as price action mirrored the indecisive risk tone.

US Private Inventory Crude Stocks (w/e 15th May) -4.8mln (exp. +1.2mln, prev. -0.7mln)

Standard Chartered raised its gold price forecast to USD 1689/oz for 2020 and sees prices averaging USD 1750/oz In Q4. (Twitter) 

US

Treasury yields were lower across the curve, and major curve spreads were mixed on Tuesday; 2s unchanged at 17bp, 10s –3bp at 71bp, and 30s -2bp at 144bp. After the chunky UST sell off on Monday, real money was said to have lifting offers across the curve in the APAC session (yield thirsty Japanese funds have been noted as the marginal buyer in recent weeks as FX hedging costs declined). However, as US participants returned, hedge fund reallocation flows were said by one desk to have continued to exert pressure on USTs, creating somewhat of a tug-of-war with buyers in Asia. Some suggested that the long-end underperformance was a function of concession heading into Wednesday’s sale of new 20-year bonds. US T-note futures (M0) settled 8+ ticks higher at 138-27+.

Fed Chair Powell stated he expects the balance sheet to gradually shrink over time and that what matters is the size of the balance sheet relative to the size of the US economy, while he added that the balance sheet does not yet raise financial stability concerns. (Newswires)

Fed's Rosengren (non-voter, hawk) said policymakers will do whatever they can to support the return to full employment and that the unemployment rate will likely remain at double digit levels by year-end. (Newswires)

White House economic adviser Kudlow reiterated that he sees some early glimpses of a recovery and called for middle-class tax cuts and for the US to make good trade deals. Furthermore, Kudlow said US President Trump is not saying he was tearing up the China trade deal but noted that President Trump is in a bad place over China's virus mistakes and that China must be held accountable. (Newswires)

White House Economic Advisor Hassett said they are watching and planning if more stimulus is needed after the COVID-19 outbreak. (Fox News)