• Asian equity markets began the week mixed as the region took its cue from the indecisive performance last Friday stateside
• The EU is reportedly expected to block AstraZeneca vaccine and ingredient exports to the UK
• The US & China did not announce any breakthrough in talks last week
• In FX, the DXY consolidated around the 92.00 mark with price action relatively contained in the G10 space
• TRY slumped around 15% at the reopen after Turkish President Erdogan replaced CBRT Governor Agbal
• Looking ahead, highlights include ECB asset purchases, ECB's Lane, Schnabel, Fed's Powell, Barkin, Daly, Quarles, Bowman

CORONAVIRUS UPDATE

US CDC reported total COVID-19 cases rose to 29.61mln from 29.55mln the day before and total deaths rose to 539.0k from 538.3k the day before. NIH’s Dr. Fauci commented on Friday that the UK variant is becoming more and more dominant in the US. (Newswires)

UK COVID-19 cases +5,312 (prev. + 5,587) and deaths +33 (prev. +96), France cases +30,581 (prev. +35,327) and deaths +138 (+185), Italy cases +20,159 (prev. +23,832) and deaths +300 (prev. +401). (Newswires)

UK ministers are working on plans to speed up the onshoring of COVID-19 vaccine manufacturing to make the country more self-sufficient amid concerns of increasing vaccine nationalism. There were also separate comments from UK Defence Minister Wallace who responded that we cannot be deaf and blind to what is occurring abroad and cannot put the gains from our vaccination campaign at risk when asked about foreign holidays this summer. (Newswires/Telegraph)

EU is reportedly expected to block AstraZeneca (AZN LN) vaccine and ingredient exports to the UK which could impact 20% of supply and could delay the UK’s COVID-19 vaccine drive by 2 months, while it rejected the claim of contractual right by UK officials who had warned that they must receive the doses it developed and paid for. In other news, the Therapeutic Goods Administration approved CSL’s (CSL AT) Seqirus to manufacture the AstraZeneca vaccine in Australia. (Newswires/MailOnline/Guardian/FT)

EU Commissioner Breton stated that the EU absolutely does not require the Sputnik V vaccine and will achieve immunity by July 14th. (Newswires)

Germany is reportedly set to extend its lockdown for a 5th month as infection rates remain above levels that would overstretch hospitals, according to a draft proposal. German Chancellor Merkel said on Friday that they are in a good position with three and soon to be four, vaccines available. (Newswires)

China administered 74.96mln doses of COVID-19 vaccines as of March 20th and stated that its vaccine production can fulfil the demand of the entire country’s population, while it considers differentiated policies related to visa issuance, flights and numbers of those entering China based on vaccination and virus situation of different countries. (Newswires)

ASIA

Asian equity markets began the week mixed as the region took its cue from the indecisive performance last Friday stateside following bitter US-China talks in Alaska and despite an overnight easing of yields. ASX 200 (+0.7%) was kept afloat with M&A news in focus after Blackstone made an offer to acquire Crown Resorts at a 20% premium which lifted shares in the latter by a similar extent although gains in Australia were capped amid heavy rain and floods in New South Wales which resulted in evacuation orders and pressured insurers. Nikkei 225 (-1.9%) suffered intraday losses of as much as 2% in the aftermath of the BoJ policy tweaks, ban on foreign spectators at the Tokyo Olympics and with auto stocks spooked due to a recent fire at the Renesas chip plant in Naka which the Co. stated could have a very large impact on its supply to automakers, while a firmer JPY also provided headwinds for Japanese markets. Hang Seng (-0.2%) and Shanghai Comp. (+0.9%) were mixed after the Alaska summit failed to reset relations between the world’s two largest economies and with Hong Kong tentative as it braces for IPO activity with Baidu to debut tomorrow, although the mainland was positive amid updates from the PBoC which kept the 1yr and 5yr Loan Prime Rates unchanged for an 11th consecutive month as expected, while there were also recent comments from PBoC Governor Yi that China has ample monetary policy tools and relatively large room for monetary policy adjustments. Finally, 10yr JGBs were higher as they tracked the rebound in USTs and decline in yields, with prices also supported by underperformance in Japanese stocks and the BoJ's presence in the market for over JPY 1.2tln of JGBs heavily concentrated in 1yr-10yr maturities.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.5191 vs exp. 6.5177 (prev. 6.5098)

• PBoC 1-Year Loan Prime Rate (Mar) 3.85% vs exp. 3.85% (prev. 3.85%)
• PBoC 5-Year Loan Prime Rate (Mar) 4.65% vs exp. 4.65% (prev. 4.65%)

PBoC Governor Yi stated that China has ample monetary policy tools and relatively large room for monetary policy adjustments but also noted that interest rates are appropriate, while he added that China will maintain policy continuity, stability and sustainability. Furthermore, Yi stated that monetary policy will strengthen targeted support for key sectors and weak parts of the economy. (Newswires)

China’s Vice Premier Han stated that China’s economy continues steady recovery this year and is planning to raise its high-quality imports as the economy rebounds, while China will strengthen intellectual property protection and will participate in the global anti-virus drive. (Newswires)

China’s state planner head said the foundation of the nation’s economic recovery is not solid and that China will avoid a sudden policy turn, while it will keep the share of manufacturing in the economy stable. (Newswires)

The US did not announce any breakthrough in talks with China, with Secretary of State Blinken stating the US had candid conversations with China. White House National Security Adviser Sullivan said we had tough talks on a wide range of issues and will continue to work with China in the normal diplomatic channels going forward. There were also comments from the US State Department that meetings in Alaska with China are serious discussions and the US is not letting theatrics from the other side distract from laying out its principles. Furthermore, China’s top diplomat Yang stated that dialogue with the US was candid, constructive and helpful but of course there are differences which remain and he added that the sides should follow the policy of ‘no conflict’ to guide a path towards a healthy and stable trajectory moving ahead. (Newswires)

Philippines Defence Minister said the presence of Chinese boats in the South China Sea is a clear provocative action of militarizing the area and called on China to recall the boats which are violating the maritime rights of the Philippines and encroaching into its sovereign territory. (Newswires)

South Korean March 1st-20th Exports rose 12.5% Y/Y and Imports rose 16.3% Y/Y, while Trade Balance was at a provisional surplus of USD 820mln. (Newswires)

UK/EU

UK Chancellor Sunak is to postpone the decision regarding online sales tax until Autumn which seeks to level the playing field between high street shops and online retailers. (FT)

EU Financial Services Commissioner McGuinness said we are in a difficult place regarding Northern Ireland and need to reduce the temperature, as well as find solutions. (Newswires)

Italian PM Draghi aims to inject EUR 11bln into the economy in April and approved the EUR 32bln stimulus package. It was also reported that PM Draghi said now is not the time to look at rising debts and not the time to consider the stability pact, while he added it is not a priority for Italy to request an ESM loan and that an ESM loan without a plan for how to use it for health spending would be a waste of money. (Newswires)

Slovak PM Matovic is reportedly prepared to step down regarding the Russian vaccines dispute after he decided to purchase the Sputnik V vaccine without consulting partners. (FT)

S&P affirmed Spain at A-; Outlook Negative and Fitch affirmed Poland at A-; Outlook Stable. (Newswires)

FX

In FX markets, TRY slumped around 15% at the reopen after Turkish President Erdogan replaced CBRT Governor Agbal following last week’s 200bps rate hike and with new central bank chief Kavcioglu previously critical of the prior governor’s policy actions. This had far-reaching effects on other currencies aside from the Lira as USD/JPY and JPY-crosses initially slumped amid speculation that retail investors in Japan, hunting for higher yielding currencies, would be forced to liquidate positions which underpinned the Japanese currency. This also pressured EUR/USD and GBP/USD on cross-related flows and with the currencies not helped by tensions from vaccine nationalism as the EU is reportedly expected to block exports of the AstraZeneca's vaccines and ingredients to the UK which could impact 20% of supply and delay the UK’s COVID-19 vaccine drive by 2 months. Elsewhere, the DXY failed to benefit from the weakness in its transatlantic peers and consolidated around the 92.00 level amid a softening in yields whereby the US 10yr yield declined by more than 5 bps despite comments from Fed’s Barkin who stated that the US is on the brink of a full recovery and that yields are reflecting good news concerning vaccines and fiscal support. Antipodeans were also subdued following the developments in Turkey, as well as the tentative risk tone, softer commodity prices and weaker CNY reference rate setting.

Turkish President Erdogan replaced CBRT Governor Naci Agbal less than five months after his appointment following the recent interest rate hikes, while the new central bank chief Sahap Kavcioglu had previously been critical of the prior governor’s policy although suggested in a call with bankers that there would be no immediate policy changes. In other news, Turkey withdrew from a European treaty protecting women from violence which prompted comments from US President Biden who stated that Turkey’s withdrawal from the Istanbul convention is deeply disappointing and a disheartening step backwards for the movement to stop violence against women around the world. (Newswires)

COMMODITIES

WTI crude futures briefly slipped beneath USD 61/bbl ahead of today's April contract settlement and with the latest Baker Hughes rig count showing an increase in the number of oil rigs. There were also comments from Saudi Aramco's CEO that energy is expected to rebound in tandem with the economic recovery although this failed to spur prices and he also noted that their Riyadh refinery was back on stream in a matter of hours after Friday's attack. Elsewhere, gold prices were kept rangebound as the greenback consolidated overnight amid an easing of yields, while copper prices were subdued by the tentative mood and lacklustre Chinese commodity prices.

Baker Hughes US rig count (w/e Mar 19th): Oil +9 at 318, natgas unchanged at 92, total +9 at 411. (Newswires)

Saudi Aramco CEO said there are signs of a recovery which is expected to continue and that demand for energy will rebound as economies recover, while he sees higher oil demand this year. Furthermore, he stated that they have all the right to conduct contingency plans to respond to any attack and stated that the Riyadh refinery began to come on stream hours after an attack on Friday. In relevant news, the Saudi-led coalition conducted an air strike on Houthi targets in Yemen’s capital. (Newswires)

GEOPOLITICAL

Iranian Supreme Leader Khamenei said Iran is in no rush regarding the nuclear deal and that the US should remove sanctions first, while he added that promises by the US have no credibility for Iran. (Newswires)

Russian jets conducted strikes in areas close to heavily populated towns and camps in north-western Syria, which reportedly hit a gas facility, as well as a hospital and killed 7 civilians. (Newswires/SCMP)

US

Treasuries were mainly firmer - barring some of the belly - after a knee-jerk UST sell-off after the SLR announcement ultimately faded. By settlement, 2s-1bps at 0.149%, 5s +1.2bps at 0.879%, 10s +0.1bps at 1.723%, 30s -2.5bps at 2.451%; TYM1 volumes were very strong earlier on, but thinned out in later trade. Front-end inflation breakevens were little changed while long-end ones were wider. While Treasuries faded the post-SLR move, Eurodollars didn't join in, with some traders attributing quiet trade for the dislocation. The Fed's RRP facility saw USD 18.908bln in demand at its RRP facility (prev. USD 26.570bln on Thursday), while some 3-month bills were reportedly offered at negative yields today; latest SOFR steady at 1bps. USTs were bid out of APAC with short-covering being touted on profitable duration shorts made in the recent sessions. The belly felt some pressure heading into the US session on the back of the AT&T (T) deal announcement. The corporate deal soon faded from traders attention, however, after the Fed announced that the SLR exemption would indeed not be extended, seeing a knee-jerk lower across the Treasury curve amid concerns of banks' willingness to hold and intermediate in Treasury markets. But, as analysts have said recently, there shouldn't be any immediate problems for bank balance sheets, and fears of wholesale selling by banks are overdone. Treasuries soon rebounded off the lows as traders bought the dip - after selling the rumour in recent weeks - with short-covering at play also. Furthermore, the 10-year hit the much anticipated 1.75% level, which desks noted triggered the step-in for many accounts. Yields pared a good portion of the move and moved sideways for the rest of the session, with many accounts likely calling it a week. Treasury (M1) futures settled 1+ ticks lower at 131-07.

Fed's Barkin (voter) said he expects the US will have a strong spring and summer, as well as for strong demand to be met by some supply chain issues and anticipated price pressures this year, while he also stated that yields are reflecting good news concerning vaccines and fiscal support. Barkin also suggested that the economy is on the brink of a full recovery and that it is a straightforward time for the Fed to put the foot on the gas. (Newswires)