• European equity indices are softer on the session but US futures are firmer with the tech heavy NQ the modest outperformer, +0.9%
• Dollar has seen early morning gains to the detriment of major counterparts, though action has been slightly choppy at YTD DXY highs
• South Korean Military confirmed reports that North Korea fired two cruise missiles off its west coast on Sunday
• Oil is firmer on the day and attempting to reclaim yesterdays losses perhaps deriving support from the Suez Canal issues, which is set to reopen shortly
• Looking ahead, highlights include US flash PMIs, CNB rate decision, DoEs, EZ consumer confidence, Fed's Barkin, Powell, Williams, Daly, Evans, Treasury Secretary Yellen, ECB's Lagarde & supply from the US

CORONAVIRUS UPDATE

US President Biden said the US will have 600mln doses of COVID-19 vaccines by end-May and that his administration would have distributed 100mln relief checks by Wednesday. (Newswires)

Hong Kong halted its COVID-19 vaccinations for a single batch of BioNTech (BNTX) shots due to defective packaging and the Macau government also suspended the use of Fosun/BioNTech vaccine due to defects in some vial caps. However, Shanghai Fosun (600196 CH) later stated it does not expect the suspension of BioNTech vaccines in Hong Kong and Macau to impact operations or production. Subsequently, has paused further vaccinations with the batch until an investigation is complete, no other batches are affected. (Newswires)

Initial reports this morning suggests around 30mln AstraZeneca vaccines that were supposed to be shipped to the UK are being held in Italy; however, subsequently appears they were destined for Canada and Mexico. (Twitter)

Australia's New South Wales is to ease restrictions further from Monday in which masks will no longer be mandatory on public transport and restrictions on events such as weddings and dancing will be lifted, while sports venues can operate at 100% capacity. (Newswires)

German Chancellor Merkel to meet with Head's of State today to discuss COVID-19 lockdown measures, according to sources. (Newswires)

Germany does not want export restrictions of COVID vaccines "per say" but the details remain light, according to suggestions by a German government source. (Newswires)

EU should begin preparing for potential approval of the Sputnik COVID-19 vaccine, German Officials. (Newswires)

Children in the UK will be inline to receive COVID-19 vaccines from August. (Telegraph)

French Head of ICU in Paris hospital states next month will be 'infernal'. (Newswires)

ASIA

Asia-Pac bourses traded mostly lower following the losses seen stateside where cyclicals and value underperformed amid a stronger USD and rise in treasuries, while soft US new home sales data, talk of future tax hikes and a continued slump in oil prices also contributed to the glum mood. The weak handover pressured most regional markets although antipodes bucked the trend helped by softer currencies, with the ASX 200 (+0.5%) also underpinned as strength across most its sectors atoned for the energy-related woes and following the substantive easing of COVID-19 restrictions in New South Wales. Nikkei 225 (-2.0%) was weighed on by currency inflows and as automakers suffered from the ongoing chip shortages, while KOSPI (-0.3%) reflected on geopolitical events after it was confirmed that North Korea resumed its missile tests last weekend and with chipmakers initially dampened by Intel’s plan to invest USD 20bln on new chip plants to challenge Asian dominance of the sector, although Taiwan’s Economy Minister has since suggested that Intel’s investment plan is not a threat to Taiwan’s chipmakers. Hang Seng (-2.0%) and Shanghai Comp. (-1.3%) were subdued in which the former entered correction territory amid ongoing US-China tensions and the BioNTech vaccination suspension in Hong Kong and Macau due to defective vial caps. Furthermore, participants digested a slew of earnings releases and reports noted expectations of tighter scrutiny on Tencent after its founder met with antitrust officials earlier this month, while the Co. along with Xiaomi are scheduled to announce their results today. Finally, 10yr JGBs gained as they tracked the upside in T-notes and with demand spurred by the broad risk aversion, while the Australian 10yr yield saw the steepest decline overnight and fell by 7bps in the aftermath of the 2032 bond auction.

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 6.5228 vs exp. 6.5232 (prev. 6.5036)

US Admiral warned the threat of Chinese aggression towards Taiwan may be nearer than anticipated. (Kyodo)

BoJ Minutes from the January Meeting stated that members agreed the central bank must ease without hesitation if required with an eye on the pandemic. Furthermore, a member stated that the BoJ must scrutinize side-effects of its easy policy such as the impact on financial intermediation and market functions, while a member also suggested that allowing 10yr yields to fluctuate inline with BoJ's current directive will help stabilize the financial system. (Newswires)

China is set to consider a state backed Co. to oversee tech data. (Newswires)

US

Fed's Bullard (non-voter) sees target interest rate staying near zero through to 2023 and said that they are not debating tapering yet although discussion could begin later this year if we see all the good things happening. (Newswires)

Fed’s Bostic (voter) expects the Fed to raise rates in 2023, possibly in H1. Bostic expects inflation to overshoot Fed’s 2% goal for a while and believes there is still a 'fair amount' of time before we will have to contemplate dialling back purchases. (WSJ)

US Secretary of State Blinken says they continue to support NATO's dual-track approach to Russia by enhancing our deterrence and defense, including with combat-ready troops in the eastern part of our Alliance. (Twitter)

UK/EU

German IFO Institute lowers 2021 GDP forecast to 3.7% from 4.2% and raises 2022 to 3.2% from 2.5%. (Newswires)

German cabinet has approved a supplementary debt-financed budget of EUR 60bln, pushing up annual new borrowing to a record of EUR 240bln in 2021, according to an official. (Newswires)

EU Markit Composite Flash PMI (Mar) 52.5 vs. Exp. 49.1 (Prev. 48.8)

• Manufacturing Flash PMI (Mar) 62.4 vs. Exp. 57.7 (Prev. 57.9); Services Flash PMI (Mar) 48.8 vs. Exp. 46 (Prev. 45.7)

UK Flash Services PMI (Mar) 56.8 vs. Exp. 51.0 (Prev. 49.5)

• Composite PMI (Mar) 56.6 vs. Exp. 51.1 (Prev. 49.6); Manufacturing PMI (Mar) 57.9 vs. Exp. 55.0 (Prev. 55.1)

UK CPI YY (Feb) 0.4% vs. Exp. 0.8% (Prev. 0.7%)

GEOPOLITICAL

South Korea Military confirmed reports that North Korea fired two cruise missiles off its west coast on Sunday, while it was monitoring it in real time and had detected prior signs. It was also reported that US President Biden responded that nothing much has changed when questioned regarding the North Korean missile launch and there were also comments from a US senior official that the recent North Korean activity is within normal range and that the missile launches were at the low end of the spectrum which involved a short-range system not covered by UN resolutions. Furthermore, US officials do not see the weekend actions by North Korea as closing the door to dialogue, while other reports later noted that the US, Japan and South Korea will meet next week to discuss North Korea. (Newswires/Yonhap)

China's cabinet will provide more favourable tax incentives for R&D of the manufacturing sector. (Newswires)

UK Foreign Secretary Raab said he met with US Secretary of State Blinken, German Foreign Minister Maas and French counterpart Le Drian in person to discuss challenges and opportunities for peace in Yemen. (Newswires)

Russian Deputy PM says new US sanctions could target the aviation sector and potentially lead to the breakup of current contracts, via Ifax. (Newswires)

EQUITIES

European equities opened softer across the board (Euro Stoxx -0.1%) following on from Asia’s mostly negative lead, but Europe has since drifted off worst levels. After the cash open, UK, France, Germany, and the Eurozone all reported notable beats across the board in Flash PMIs for March, although some of this data could be stale given that France and Germany recently renewed COVID-related restrictions. Across the pond, US equity futures are not abiding by the same sentiment and all reside in firmer territory but do not immediately portray much growth/value bias as the RTY (+0.8%) and NQ (+0.9%) are neck and neck at the time of writing, with the latter feeling tailwinds from an overnight pullback in yields coupled with Intel’s (+4.8% pre mkt) update as it upped guidance and undertake a significant expansion of manufacturing capacity with USD 20bln to be spent on chip plants – lifting the likes of ASML (+5.6%) and Infineon (+2.0%) in tandem. Back to Europe, sectors opened firmly in the red featuring an anti-cyclical bias, with Technology (+1.8%) the only sector residing in the green upon market open. This has since stabilised into a mixed and more pro-cyclical picture, with defensives residing towards the bottom. Nonetheless, Auto (-0.5%) remains as a laggard amid the ongoing chip shortage, with Honda extending its suspension of output in certain North American factories due to chip supply issues. In terms of individual movers, dwelling to the downside is Leonardo (-6.0%) which comes after the Co. announced the postponement of its DRS IPO amid adverse market conditions. On the flip side, Carrefour (+2.3%) is supported amid reports the Co. is to acquire Grupo BIG for EUR 1.1bln, which if approved, the Co. would control the number one and three largest food retail names in Brazil.

Tesla's (TSLA) can now be purchased using Bitcoin and any Bitcoin paid to Tesla will be retained as Bitcoin as of a tweet from CEO Musk. Additionally, capacity for this outside of the US will be available later in the year. (Newswires)

Eni (ENI IM) announces a new significant oil discovery in the Northern North Sea. (Newswires)

Didi is reportedly erring towards a New York IPO rather than Hong Kong, looking for a valuation in excess of USD 100bln, according to sources; SPAC was also considered, though less viable. (Newswires)

FX

USD - The Dollar remains upwardly mobile amidst deteriorating risk sentiment on latest waves of the coronavirus that are forcing many countries to roll-back reopening plans and some to re-enter lockdown or tighten restrictions. However, the DXY has encountered some resistance in chart terms beyond 92.500 and its prior 2021 peak around the 200 DMA (92.604) alongside resilience in the Euro and Pound belatedly following significantly better than expected preliminary PMIs from France, Germany, the bloc as a whole and UK even though the EZ readings could all be downgraded in the final reckoning given fresh pandemic outbreaks since the cut-off point for compiling the flash surveys. Hence, the index has drifted down from best levels within a 92.608-338 band awaiting US durable goods data and Markit’s initial March PMIs before another bunch of Fed speakers and a double helping of supply.

CAD/NOK/SEK - A relatively firm rebound in crude prices on the back of Suez canal passage problems caused by a container tanker has helped the Loonie, Norwegian Krona and other commodity currencies pare declines vs the Greenback. Meanwhile, Usd/Cad has also retreated from just over 1.2600 in wake of confirmation from the BoC that several emergency QE lines will be terminated as planned and comments from Deputy Governor Gravelle alluding to scaling down the pace of sovereign bond purchases from an operational standpoint rather than providing fresh guidance for tapering that is widely anticipated to come with the April policy meeting. Back to Scandinavia, Eur/Nok is back under 10.2000 and roughly on a par with Eur/Sek following a squeeze on Nok/Sek back through zero when oil was plummeting.

GBP/EUR - Sterling is still sitting at the bottom of the G10 table after significantly softer than forecast UK inflation data, but Cable has regained 1.3700+ status and Eur/Gbp is flattish between 0.8645-10 parameters following the aforementioned PMI beats that have also helped the Euro retain hold of the 1.1800 handle against the Buck.

AUD/NZD/JPY/CHF - All now narrowly mixed vs their US counterpart, but not before conceding more ground as the Aussie and Kiwi tumbled below 0.7600 and 0.7000 respectively overnight with no visible support via trade data or PMIs amidst further dovish rhetoric from RBA Assistant Governor Debelle on balance – see posts on the Headline Feed at 10.20GMT and 9.41GMT for details. Conversely, risk aversion is offering the Yen some respite either side of 108.50, while the Franc is still retreating across the board as the clock ticks down to the SNB tomorrow.

EM - The Mxn and underperforming Rub are drawing comfort from the recoveries in WTI and Brent, but no joy for the Try from a rise in Turkish consumer sentiment or efforts by President Erdogan to talk the Lira up and persuade his subjects to convert FX and Gold holdings into domestic currency denominated assets. In contrast, softer than anticipated SA CPI has not hampered the Zar irrespective of potential implications for the SARB policy meeting/guidance on Thursday, and the Rand may be content that Gold is holding above Usd 1700/oz quite comfortably.

Exit polls suggest that Israeli PM Netanyahu is set to fall short of securing the required seats needed to form a new government. (BBC)

Turkish President Erdogan says the recent market volatility does not reflect Turkey's economic fundamentals whilst calling on citizens to convert FX and gold into TRY-based financial instruments. Additionally, he calls on international investor to maintain confidence in Turkey and states the Turkish economy will grow on the basis of production, employment and investment. (Newswires)

Deutsche Bank says that Turkish local currency fixed income is cheap after the recent selloff and is at levels which provide a 'decent' risk-premium. (Newswires)

RBA Deputy Governor Debelle says that the unemployment rate is a lot lower than anticipated and expects positive surprises on numbers to continue. Furthermore, they are not picking up any signs of any great upward wage pressure and the view remains that wage pressures are likely to be subdued for some time. Later comments from Debelle stated if they had not provided stimulus then the currency would be much higher. (Newswires)

• Australian Trade Balance (AUD)(Feb P) 8.1B (Prev. 10.1B)
• Australian Exports (Feb P) M/M 2% (Prev. 6%)
• Australian Imports (Feb P) M/M 2% (Prev. -2%)
• New Zealand Trade Balance (NZD)(Feb) 181M (Prev. -626.0M, Rev. -647M)
• New Zealand Exports (NZD)(Feb) 4.47B (Prev. 4.19B, Rev. 4.20B)
• New Zealand Imports (NZD)(Feb) 4.29B (Prev. 4.82B, Rev. 4.85B)

FIXED

Bullish momentum was already on the wane well before results of the UK linker auction of German 10 year sale, so supply has not really been an issue or reason for the gradual pare back from peaks in Bunds, Gilts and US Treasuries that topped out at 172.44, 128.82 and 132-09 to sit at or just above new intraday lows of 172.09, 128.34 and 131-31. Instead, it appears that a combination of technical and fundamental factors like the unexpected strength in EZ and UK flash PMIs have impacted alongside a general lack of follow-through buying when debt was in the ascendancy. Ahead, notoriously erratic US durable goods data, Markit PMIs, more Fed speakers and the 2nd slug of T-notes that come with a 2 year FRN offering.

COMMODITIES

WTI and Brent front month futures are grinding higher in what is seemingly a reversal of the substantial losses seen this week, with WTI and Brent May contracts below USD 59.50/bbl and USD 62.50/bbl respectively. However, putting these numbers into context, the contracts were closer to USD 65/bbl and USD 69/bbl at this time last week. One of the developments that have garnered attention has been the blockade at the Suez Canal in Egypt – which provides the shortest sea link between Asia and Europe. GAC noted that traffic is expected to resume soon as the Suez Canal authority is close to re-floating the ship. Tanker Trackers has estimated that 10mln bbls of Saudi, Russian, US and Omani crude remains parked, Vortexa estimated 13mln bbls, whilst Bloomberg’s Chief Energy Correspondent suggests that the blockade is a problem for refined products but not a major one for crude as it can bypass the canal via two large nearby regional pipes. Nonetheless, market participants are seemingly receiving this as a short-term bullish factor for prices, which also coincides with gains across stocks and blockbuster but outdated EZ Flash PMI metrics. Meanwhile, underlying fundamentals are little changed, with France, Germany and the Netherlands observing stricter COVID-related measures in light of rising cases and slower-than-expected inoculation. That being said, it will be interesting to see what OPEC+ opts to do at its upcoming meeting, with Saudi’s unilateral 1mln BPD production still offline and prices somewhat in a sweet spot and amid fears of rising US market share. Analysts at ING continue to hold a constructive medium-term outlook in the complex, “with inventories set to continue declining as we move through the year. In addition, if for any reason the market continues to weaken as we move towards the end of the month, OPEC+ would likely take action to support the market when they meet on 1 April.” The bank notes that if this weakness persists, then a rollover of current cuts look increasingly likely. Elsewhere spot gold and silver have been trading sideways during APAC and early European hours, but have since drifted towards the top of todays tight intraday ranges of USD 1724-35/oz for the yellow metal and USD 25.00-25.36/oz for silver. In terms of base metals, LME copper is now firmer as the red metal tracks the Buck waning off highs and stocks climbing off lows. Finally, Dalian iron ore futures saw a rebound as it retraced some losses from the Tangshan developments, albeit the front month April contract in Singapore fell almost a percent.

US Private Energy Inventories (w/e March 19th): Crude +2.9mln (exp. -0.3mln), Cushing -2.3mln, Distillates +0.2mln (exp. -0.1mln), Gasoline -3.7mln (exp. +1.2mln). (Newswires)

Suez Canal traffic expected to resume soon; Suez Canal authority is close to re-floating ship, according to GAC. (Newswires)

The Suez Canal in Egypt was blocked by a large container ship which was run aground and has blocked traffic in one of the world's busiest shipping lanes, while it was later reported that Suez Canal authorities have diverted traffic to the older branch after the newer branch was blocked by the container ship. On the Suez canal blockage, Javier Blas writes "For the crude oil market, the blockade is a problem for refined products, but not for crude (at least, not a major issue)" as it can bypass the canal by regional pipelines Sumed and Ashkelon-Eliat.(Newswires/Twitter)

Vortexa notes than ten tankers carrying 13mln bbls of crude could be affected by the Suez Canal blockage so far. (Newswires)