• European equity indices and US futures are negative across the board with RTY the underperformer, -1.2%
• DXY is firmer on the session to the detriment of major counterparts ex-JPY; antipodeans lag dragged by Kiwi housing updates
• China responded to fresh sanctions by the US, EU, and UK in which it unveiled travel bans on 10 EU individuals and four entities
• AstraZeneca may have provided outdated info about its COVID-19 vaccine trial, according to the NIH
• Oil has seen continued downside on the day with both Crude and Brent seeing losses in excess of USD 2/bbl; but remain above last-week's troughs
• Looking ahead, highlights include ECB gross purchases, US new home sales, NZ trade, BoJ minutes, BoE's Bailey, Fed's Bullard, Bostic, Barkin, Powell, Williams, Brainard, supply from the US

CORONAVIRUS UPDATE

US President Biden's administration is said to be concerned that Johnson & Johnson (JNJ) may miss its vaccine target as the full tranche of vaccines the Co. committed delivering to the US in February may not be ready until April. (Politico)

US National Institute of Allergy and Infectious Diseases stated the data and safety monitoring board was concerned by info released from the AstraZeneca (AZN LN) trial which may have included outdated info and may have provided an incomplete view on efficacy data, while it urged the Co. to work with the data and safety monitoring board to review efficacy and ensure the most accurate, up-to-date data is made public ASAP. (Newswires)

Reports that Britons face a GBP 5,000 fine for travelling abroad without a reasonable excuse such as for work purposes or family matters and the threat of penalties for holidaying will remain in place until end-June. (Daily Mail)

German Chancellor Merkel said COVID-19 infections are increasing thanks to the British variant and that it is a race to get vaccinations done, while she added that we are in a very serious situation and announced stricter Easter lockdown restrictions. Merkel also stated that we must halt opening measures where cases are more than 100 for every 100k per week and there will be a period of quiet days with reduced social contact between April 1st-5th, which will be an extended Easter where people should stay at home and that for most of the time, strictly only food shops will be open. Furthermore, Merkel said they will decide responsibly on AstraZeneca (AZN LN) exports and suggested we are effectively in a new pandemic with the British variant which is more dangerous, deadly and prolonged. (Newswires)

UK Health Minister Hancock states there has been no change in timings for international travel which is currently May 17th. Additionally, UK he stated there are no intentions to add all of Europe to UK's travel 'red list'. (Newswires)

European Commission remains unhappy with AstraZeneca (AZN LN) in relation to the vaccine, EMA has formed an expert group to evaluate the reported blood clots. Additionally, the EU Drugs Regulator Chief says AstraZeneca has promised to provide US trials data and EU will adjust assessment if needed. (Newswires)

French President Macron says that the nation's vaccination strategy will be accelerated as of Saturday onwards. (Newswires)

Pfizer (PFE) is set to develop new shots with the use of mRNA technology to target other viruses and pathogens beyond COVID-19. They will continue to work with BioNTech (BNTX GY) on COVID-19 shots. (WSJ)

ASIA

Asian equity markets deteriorated throughout the session with the initial euphoria from the tech-led gains on Wall Street and the softer yield environment derailed as Chinese markets entered the fray following the latest sanctions announcements. ASX 200 (-0.1%) began positively amid strength in utilities and telecoms although gains were then wiped out as financials suffered due to softer yields and amid insurance claims from the ongoing flooding with warnings issued for Victoria state and east of the country. Nikkei 225 (-0.6%) was lifted at the open following the positive handover from US peers and with Goldman Sachs raising its 12-month target for the Nikkei 225 and TOPIX by 8.8% and 10.8% to 32,250 and 2,150, respectively, before the index eventually succumbed to the headwinds from currency inflows. Hang Seng (-1.3%) and Shanghai Comp. (-0.9%) were the worst performers and dragged down their regional peers after the US, Canada, UK and EU announced an array of sanctions on China over Uyghur Muslims to which China responded with its own travel bans and stated that the measures were based on lies and disinformation, while Baidu’s Hong Kong debut was viewed as a damp squib in which the Co.'s shares reversed early minimal gains. Finally, 10yr JGBs traded indecisive but held on to Monday’s gains with price action contained amid an indecisive risk tone and softer demand at the enhanced liquidity auction for 2yr, 5yr, 10yr and 20yr JGBs, while New Zealand yields were hit overnight with the 10yr down over 6bps following the government announcement of a NZD 3.8bln fund to accelerate housing supply and curb the rising house prices.

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 6.5036 vs exp. 6.5056 (prev. 6.5191)

US intelligence recommended that the US should mull leading a multilateral coalition with South American countries to push back against illegal fishing and trade practices by China. (Axios)

China responded to fresh sanctions by the US, EU and UK in which it imposed travel bans and stated that the measures were based on lies and disinformation, while it severely undermined ties with the bloc. There were later comments from China's Foreign Minister Wang that it is wrong for the EU to sabotage international law and called on countries to oppose such actions when asked about the EU sanctions, while China's Foreign Ministry also summoned the EU Ambassador to lodge a protest regarding the sanctions. (Newswires/FT)

China-Russia joint statement following a meeting of their Foreign Ministers called on other countries to refrain from politicizing human rights issues and using them to interfere in domestic affairs, while it stated that other countries need to recognise the legal right of sovereign nations to choose own development path and that there is no one standard of democracy. Furthermore, Russian Foreign Minister Lavrov said Russia no longer has relations with the EU after Brussels destroyed them and instead Russia has relations with individual nations, while he added that Russia and China regard European and Western sanctions as unacceptable. (Newswires)

China Finance Ministry said it is to further extend favourable tax policies for companies and individuals impacted by the pandemic, while China is also reported to strengthen capital management at central government SOEs and control risk of overseas funds. (Newswires)

Japan's Finance Ministry stated it will use JPY 2.2tln of coronavirus reserve funds with JPY 598bln to be used on aid for non-regular workers, while the government also unveiled measures to help midsize and large companies boost capital funds in which it targets supporting restaurants and hotel businesses impacted by pandemic restrictions. (Newswires)

Japan maintains the view that the economy has shown weakness but is improving from severe conditions, Japan cuts view on exports for the first time since May 2020 but raises the assessment of business conditions and bankruptcies. (Newswires)

BoJ will commence purchasing ETFs under the new guidelines decided at March review from April 1st; removing Nikkei-linked ETFs from the programme and will only purchase TOPX-linked ETFs. (Newswires)

US

Fed's Bowman (voter) said she is concerned small business remains at risk even as recovery progresses with strong growth expected and that monetary policy will remain accommodative until the economic recovery is more fully complete, while she added that it will take time to achieve inflation and employment goals. Furthermore, she stated that severe pandemic restrictions in some US areas came at a very high economic cost and bankers suggested federal programs such as PPP may only have postponed but not eliminated financial pressure to small companies. (Newswires)

US Treasury Secretary Yellen's House testimony (speaking alongside Fed Chair Powell at 12:00EDT/16:00GMT) will state that she is confident Americans will get to the other side of the pandemic in the expanding economy due to the stimulus package and suggested that the US may return to full employment next year. (Newswires)

UK/EU

UK Chancellor Sunak will today publish several consultations on calls to enhance the nation's tax system. Sunak will refrain from unveiling big new revenue-raising measures but will attempt to clamp down on tax avoiders. (Times)

The UK is set to announce an enhanced trade deal with Canada after both sides ratified a post-Brexit agreement last week, according to Trade Secretary Truss. (City AM)

ECB's Lane says PEPP buy will show substantial and consistent increases over a number of weeks; EZ is facing a difficult Q2 as COVID infection rates rise. Furthermore, he later stated that the ECB's most recent forecasts allow for some extension to COVID-19 lockdown restrictions. (Newswires)

UK ILO Unemployment Rate (Jan) 5.0% vs. Exp. 5.2% (Prev. 5.1%)

• UK Employment Change (Jan) -147k vs -167k (prev. -114k)
• February flash employment estimate -2.4% Y/Y, shows 693k fewer pay rolled employees when compared to February 2020

GEOPOLITICAL

US and South Korea are reportedly observing North Korea closely amid signs that rocket launchers are being deployed to border islets. (Yonhap)

US Secretary of State Blinken says they want to rebuild NATO alliances, likely to discuss the Nord Stream 2 pipeline with German representatives adding that the pipeline is a contradiction to the EU's energy goals and undermines Ukraine. Further comments from Blinken said they must ensure NATO is focused on China and the challenges it poses and they will work with Russia when it advances our interests. Additionally, US and NATO have strong interest to keep Turkey close. (Newswires)

The US and EU are set to reboot a collaborative effort on how to deal with an increasingly assertive China. A senior US official has stressed that Secretary of State Blinken's sparring with China's top foreign policy official did not mean that Washington will cooperate with Beijing. (FT)

France has reportedly summoned China's Paris Ambassador today amid China's comments made towards lawmakers and researchers, according to a source. (Newswires)

EU internal report to leaders says that EU states should authorize trade negotiations with Turkey to expand EU-Turkey customs union. (Newswires)

EQUITIES

Stocks in Europe kicked off the session with relatively broad-based losses across the board, but have since lifted off worst levels (Euro Stoxx 50 -0.3%) despite a distinct lack of fresh news flow throughout the morning and following on from a mixed APAC lead. Major bourses see broad-based losses, with the Euro Zone initially experiencing volatility in the DAX (-0.2%) as Germany is facing more stringent COVID-related measures during the Easter period. However, the FTSE MIB (-0.8%) currently stands as the laggard amid its large exposure to cyclicals coupled with some potential jitters over the COVID situation in neighbouring countries. Elsewhere, the FTSE 100 (-0.4%) underperformed at the open amid currency dynamics and losses across oil majors, but the UK index now trades in-line with regional peers somewhat aided by pressure in GBP. US equity futures are also subdued but with the cyclically led RTY (-1.3%) the clear underperformer vs the NQ (-0.2%), YM (-0.4%), and ES (-0.4%). This anti-cyclical tone is also reflected across European sectors as Autos, Oil & Gas, Leisure and Basic resources reside at the bottom. Autos continue to be hit by the ongoing chip shortages, with the EZ lockdowns only adding to the glum tone. Oil & Gas has been hit by notable losses in the crude complex. Travel & Leisure is battling with the less rosy outlook for the sectors, with reports via UK press also suggests that the threat of penalties for holidaying to remain in place until end-June, although the UK Health Secretary remarked that timings do remain unchanged. Nonetheless, the EZ measures to stem the rising infection rates have hindered the sectoral recovery. The upside meanwhile sees defensive sectors, with Consumer Staples, Utilities and Telecoms in the green whilst Healthcare is pressured by Roche (-1.4%) as the group discontinued trials of their Huntington's disease treatment candidate tominersen based on the results of a pre-planned review of the data. Further downbeat omens for the sector could also emanate from AstraZeneca (-1.2%) as US officials said the Co. might have included outdated information from its Covid-19 vaccine trial, providing an “incomplete” view of the data. In terms of individual movers, Volvo (-6.7%) resides as a notable laggard at the foot of the Stoxx 600 after its stated that the global semiconductor shortage will have a substantial impact on Q2 production and is expected to hurt earnings and cash flow.

Tesla (TSLA) - CEO Musk says China could become the largest market for Tesla in the long-term. (CCTV)

GameStop (GME) Chief Customer Officer Hamlin is leaving the Co. (Newswires)

FX

NZD/AUD - Almost all change down under as the Kiwi unwinds all and more of its recovery gains through 1.0800 vs the Aussie to slide below 1.0850 and not far from 1.0900 in wake of the NZ Government launching a Nzd 3.8 bn housing fund to boost supply and curb a rise in prices with the ultimate aim of preserving economic stability. The moves takes some of the onus off RBNZ monetary policy following an amendment to the remit to incorporate property price inflation and aside from Nzd weakness it also resulted in a relatively steep retreat in bond yields. Nzd/Usd is now testing new y-t-d lows around 0.7025 ahead of trade data, while Aud/Usd is holding above its 2021 trough circa 0.7621 and 0.7650 in advance of PMIs.

DXY - The demise of its Antipodean rivals may have provided the Greenback with traction and a solid overnight platform to build on, but the subsequent rebound has been much more broad-based with only the Yen evading the Dollar’s clutches in G10 land and Lira putting up some resistance alongside the Yuan on the EM front. Moreover, the index gathered more momentum and bullish technical impetus once 92.000 was breached as counterparts lost psychological and key chart levels and the DXY is now just shy of 92.155 vs 91.753 at worst in the run up to a raft of Fed speakers, more US housing data and the start of this week’s auction schedule in the form of Usd 60 bn 2 year notes.

CHF/GBP - Little surprise to see Monday’s outperformer concede quite a lot of ground to the bouncing Buck, as the Franc retreats abruptly from another test of 0.9250+ terrain towards 0.9300 and to 1.1050 or so against the Euro from not far off 1.1000 at one stage. Similarly, Sterling has lost more momentum approaching 1.3900 and pulled back through the 50 DMA at 1.3830 before losing 1.3800+ status altogether and is now looking even more prone around the 1.3760 pivot point that prefaced Cable’s rally, while Eur/Gbp is back in the ascendency after a fleeting test of underlying bids/support around 0.8600, with the deriving little if anything from mixed UK labour and wage data.

CAD/EUR- Also recoiling vs their US peer, with the Loonie struggling to stay afloat of the 1.2600 handle against the backdrop of collapsing crude prices and awaiting comments from BoC’s Gravelle for any independent impetus, while the Euro is striving to stay within sight of 1.1900 and stop the rot before getting too close to the 200 DMA (1.1860).

JPY - As noted above, the Yen is bucking the overall trend and revisiting peaks beyond 108.50 vs the Greenback on a wave of pre-month end buying, but also benefiting from the fact that US Treasuries are rebounding and the curve re-flattening post-Tuesday’s official JGB close. However, decent option expiry interest at the 108.00 strike (2 BN) and just above may underpin Usd/Jpy.

SCANDI/EM - The Sek is holding up a bit better than the Nok amidst risk-off trade due to the aforementioned renewed weakness in oil, while the Try has clawed back more of its huge declines and ‘settled’ into a firmer range awaiting the next chapters of the unfolding drama in Turkey that is expected to include a cabinet reshuffle and perhaps some kind or rate adjustment after new the CBRT chief has consulted with general managers from banks tomorrow, according to sources. Elsewhere, the Cnh continues to cope better than the Rub with the feuds and sanctions as Brent eyes Usd 62/brl to the downside.

Turkish President Erdogan advisor says the CBRT will not be taking any extraordinary action, which is similar to commentary over the weekend from the new CBRT Governor. They pledged there will not be any immediate changes to policy after Erdogan fired the prior Governor Agbal, for recent rate hikes. Additionally, Turkish AKP leader confirms that President Erdogan will be undertaking a cabinet reshuffle today. (Newswires)

Commerzbank upgrade USD/TRY forecast to 10.00 from 8.00, says the next Lira crisis is "upon us". (Newswires)

Notable FX Expiries, NY Cut:

• USD/JPY: 108.00 (2BN), 108.12 (1.8BN)
• AUD/USD: 0.7750 (1.3BN)
• AUD/NZD: 1.0790 (1.6BN)

FIXED

No sting in the tail for Gilts via a tepid 2049 tap on all counts bar the modestly higher 2+ cover, or downside on the back of a considerably better than expected CBI trends survey, as debt remains in recovery mode with some assistance from the latest plunge in crude oil that has seen WTI slide below Usd 59/brl and Brent briefly duck under Usd 61.50. The 10 year UK benchmark is lagging a bit behind Bunds, but has been up to 128.30 (+55 ticks on the day) as its German equivalent touches 172.15 (+66 ticks) and T-note tops 132-00+. Ahead, US data and several central bank speakers before 2 year supply and the API.

The EU is to raise EUR 8bln from its 5yr bond and EUR 5bln from its 25yr bond with total investor demand in excess of EUR 81bln, according to lead managers. (Newswires)

UBS projects US Treasury extension of 0.07yrs for March-end; EZ +0.09yrs; Gilt +0.28yrs owing to Mar/22 leaving the index. (Newswires)

COMMODITIES

WTI and Brent front month futures have started the session on a markedly softer footing and have been selling off throughout the European morning. Currently, WTI trades below USD 59.00/bbl (vs high USD 61.35/bbl) and Brent trades mid USD 61.00/bbl (vs high USD 64.30/bbl), ahead of last week’s lows around USD 58.30/bbl and USD 61.50/bbl respectively. Additionally, the Brent May and April curve has flipped into contango for the first time since January. Moreover, the softer sentiment seen could largely be down to the slow vaccine rollouts and increasing COVID infection rates across large Eurozone economies. Consequently, it has led to new pandemic measures which can be in illustrated in Germany, Europe’s biggest oil consumer, who announced over Easter (April 1st to April 5th) people should stay at home and only food shops will be open. This also comes as France observes its respective lockdown whilst reports via UK press suggested that international travel could be affected, although the UK government later poured cold water on this. Elsewhere, Saudi Arabia is proposing a peace initiative to the Houthis to end the Yemen war, which would include a nationwide ceasefire. This could potentially be of interest as it may put the Saudi Aramco facility at ease and reduce the likelihood of it getting targeted in the interim. In terms of bank commentary, Barclays expects US crude oil output to grow by 600k BPD Q4 2020 to Q4 2021 and be priced at USD 62/bbl, whilst for 2022 output is seen growing 800k BPD and WTI trading at USD 68/bbl. For Brent, Barclays forecasts prices at 66/bbl and USD 71/bbl for 2021 and 2022 respectively. Today’s notable risk events include Fed’s Powell & weekly private inventory data, although market sentiment, lockdown/virus developments are likely to hold the narrative. Onto precious metals, spot gold has traded choppily and currently resides in marginally firmer territory whereas silver has seen pronounced downside all morning, which could be tied into the Dollar upside. XAU trades just above USD 1,740/oz (vs low USD 1,731/oz) and XAG is marginally above USD 25.50/oz (vs high USD 25.81/oz). Moving onto base metals, LME copper follows the general sentiment and is softer whilst trading just above USD 9,000/t at the time of writing. Overnight, the most-actively-traded Shanghai aluminium futures hit limit-down and its lowest level in a month amid reports China is contemplating over whether to sell aluminium state reserves to cool prices. Dalian coke futures fell for a third straight session potentially due to the weak demand, and in tangent with the steel mills in Shanxi and Hebei lowering their buying prices because of plentiful stocks.

Barclays expects US crude oil output to grow by 600k BPD and 800k BPD, Q4-Q4, for 2021 and 2022 respectively; expects Brent to average USD 66/bbl and USD 71/bbl for 2021 and 2022; WTI USD 62/bbl and USD 68/bbl. (Newswires)

Goldman Sachs says Brent-WTI has tightened to some USD 3/bbl in the front and GS expects this spread to remain through 2022; GS remains bullish on medium-term outlook for crude and sees backwardation as the likely outcome. (Newswires)

Iranian oil exports under 600k BPD for the first 18-days of March, elevated levels vs 2020's figure, via Petro Logistics. (Newswires)