• European equity indices and US futures are firmer on the session with RTY the mild US outperformer, +0.9%
• The Dollar has been choppy to the benefit of its major counterparts, EUR/USD testing 1.18
• In Europe, officials suggest that Germany is beginning a third COVID wave and there are clear signals that the current wave could be worse than the first
• North Korea confirmed that it test-fired a new tactical guided missile on Thursday without leader Kim's inspection
• Clearance of the Ever Given in the Suez Canal could take at least one week
• Looking ahead, highlights include BoE’s Tenreyro, Saunders, US PCE & core PCE, personal income & spending, Uni. of Michigan (final) & Baker Hughes oil rig count

CORONAVIRUS UPDATE

NIH's Collins stated that Americans must stick with COVID-19 public health measures until at least summer. (Newswires)

European Commission President von der Leyen said "we are at the beginning of a third wave of the virus and the situation is of great concern", while she added that it could have been a much faster response and for that, all pharmaceutical firms would have had to fulfil their contracts. Von der Leyen also commented that Europe is the region that exports most vaccines worldwide and invited others to match its openness. Furthermore, she stated that companies have to honour their contracts to the EU before exporting vaccines which is the case with AstraZeneca (AZN LN) and that the Co. needs to catch up. (Newswires)

German Chancellor Merkel said "we are in a third wave of the virus but also in a new pandemic dominated by the new variants" and stated "we don't want any disturbance of international supply chains but companies must adhere to their vaccine contracts". Merkel also stated that export curbs shouldn't disrupt international trade and she completely trusts the European Commission regarding export controls, while she added that we want a win-win situation with Britain regarding vaccine exports. (Newswires)

German RKI Chief Wieler says that there are clear signals that the current wave could be worse than the first. German Health Minister Spahn also stated, if the situation continues as-is then there is a risk the health system could hit capacity in April. (Newswires)

Top German Public Health Official states they can imagine daily infections could reach 100,000 if COVID is not restrained. (Newswires)

French President Macron said it would have been incorrect to block all vaccine exports and stated that Pfizer (PFE) and Moderna (MRNA) respected their contracts with the EU but AstraZeneca (AZN LN) did not. Furthermore, Macron added that we must block all exports when some pharmaceutical firms do not respect their contracts, while there were separate comments from Dutch PM Rutte that he is cautiously optimistic vaccine issues with Britain can be resolved. (Newswires)

France's European Minister Le Drian says that Germany will not be imposing a mandatory quarantine. (Newswires)

SARB Governor Kganyago states the indications are there will be a third wave of COVID infections; sees economy only returning to pre-COVID economic levels in 2023. (Newswires)

ASIA

Asia-Pac stocks traded mostly higher following the rebound in the US where small caps atoned for the prior day's underperformance. ASX 200 (+0.5%) was propped up by strength in telecoms and commodity-related sectors but with upside capped by weakness in defensives and concerns regarding Australia’s ties with its largest trading partner after Chinese industry representatives confirmed that some Australian hay imports were halted and that they are seeking alternative sources, while Nikkei 225 (+1.6%) continued to outperform and reclaimed the 29k level amid a weaker currency and with the JPY-risk dynamic intact. Hang Seng (+1.6%) and Shanghai Comp. (+1.6%) adhered to the positive mood with Xiaomi and Great Wall Motor among the biggest gainers in Hong Kong after news that the smartphone maker plans to make EVs and is in discussions to partner with and use Great Wall Motor’s factory for the production. Attention was also on a deluge of earnings releases including China’s oil majors CNOOC and PetroChina lagged. Finally, 10yr JGBs were relatively flat with demand hampered by the heightened risk appetite and following on from another soft 7-year auction stateside, although the downside in JGBs was stemmed amid the BoJ’s presence in the market for JPY 850bln of JGBs with mostly 1yr-3yr and 5yr-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 6.5376 vs exp. 6.5359 (prev. 6.5282)

China's Foreign Ministry sanctioned 9 UK individuals and 4 entities for spreading lies and false information regarding Xinjiang, while it reserved the right to take further measures. (Newswires)

A PBoC working paper suggested that China's potential growth rate or maximum rate of expansion without spurring inflation was between 5.0%-5.7% for the 5-year period to 2025 which represents medium to high growth. There were also reports that suggested the recent China Beige Book showed China is cracking down on debt again as it found borrowing by SOEs fell to the lowest in around a decade. (Newswires/CNBC)

• Tokyo CPI (Mar) Y/Y -0.2% vs. Exp. -0.2 (Prev. -0.3%)
• Tokyo CPI Ex. Fresh Food (Mar) Y/Y -0.1% vs. Exp. -0.2 (Prev. -0.3%)
• Tokyo CPI Ex. Fresh Food & Energy (Mar) Y/Y 0.3% vs. Exp. 0.2 (Prev. 0.2%)

US

Fed's Daly (voter) said the US jobs market is definitely still in a ditch, while she suggested we should not be worried about inflation right now and that negative rates are not on her list for possible tools. (Newswires)

Fed announced it will end temporary income-based restrictions on bank dividends and share buybacks for most firms after June 30th, while it added that banks with capital above what is required by 2021 stress tests will no longer be subject to restrictions from June 30th and banks with capital that is below the required will be subject to restrictions until September 30th. (Newswires)

The US Senate voted 92-7 to approve the two-month extension of the small business pay check protection programme. (Newswires)

UK/EU

UK-US trade talks are likely to miss the month-end deadline imposed by Washington and discussions will likely be extended. Delays are said to have occurred as a result of the Biden administration focusing on resolving the Boeing/Airbus saga. (FT)

Italy PM Draghi is expected to request further borrowing next month. (Newswires)

GEOPOLITICAL

North Korea confirmed that it test-fired a new tactical guided missile on Thursday without leader Kim's inspection. In relevant news, US condemned North Korea's ballistic missile launch which it stated is destabilizing and that the nuclear and ballistic missile programs constitute serious threats to peace and security. (Yonhap/Newswires)

South Korea President Moon says South Korea, North Korea and US should work to continue with dialogue and not create difficulties, adds South Korea has world's top level missile capabilities and is able to defend itself. (Newswires)

German Chancellor Merkel said she is grateful to see a de-escalation in the eastern Mediterranean between Turkey and Greece, while she suggested that contact with Turkey is needed at all levels to talk about differences and non-controversial issues. Furthermore, Merkel stated that they gave a mandate to further develop the customs union with Turkey and will revisit this at the June summit. There were also comments from the Turkish Foreign Ministry that they welcome efforts in the EU report and rhetoric in the EU summit conclusions to advance the positive climate, but then added that EU calling Turkish operations in the eastern Mediterranean illegal is against international law and that the EU has no jurisdiction concerning the issue. (Newswires)

Yemen's Houthis say they have launched attacks against Narjan and Asir military sites in Saudi Arabia; Aramco facilities in Ras Al-Tanura, Rabigh, Yanbu and Jizan have also been targeted. (Newswires)

Saudi Arabia intercepted a ballistic missile over Narjan, according to Al Hadath TV (Newswires)

Saudi Arabia Defense Ministry states they will take actions to protect oil exports due to the Houthi attacks, according to Saudi Press Agency. (Newswires)

EQUITIES

European equities (Eurostoxx 50 +0.6%) trade on a firmer footing bringing the Eurostoxx 50 to relatively unchanged levels for the week. Today’s session has seen a preference towards some of the more cyclically-exposed sectors with Basic Resources the clear outperformer, alongside gains in Autos and Oil & Gas names; albeit, gains for the latter have been trimmed alongside a pullback in crude prices. Note, the gains for cyclicals have not come at the expense of Tech/Momentum stocks with the Technology sector in Europe currently firmly in the green despite the US 10yr yield moving back above 1.65%. The latest IFO report from Germany failed to have much sway on indices. However, it is worth noting that the above-expectations report was relatively bullish on the German economy with IFO economists noting that German industry is very strong and order books have filled up. In terms of stock specifics, notable gainers including Smith Group (+6.8%) post-earnings and Maersk (+4.9%) in the wake of ongoing disruptions in the Suez Canal which has led to a surge in shipping costs. To the downside, Burberry (-1.3%) lags peers with the company embroiled in the Xinjiang criticism row, whilst Ocado (-0.6%) is also lower on the session after being downgraded at Berenberg.

WeWork has agreed to merge with a SPAC in a deal to take the Co. public, according to WSJ sources. (WSJ)

Apple (AAPL) considers launching a rugged watch for extreme sports. (Newswires)

FX

USD - Pre-weekend position paring and general consolidation may be contributing to the Greenback’s loss of momentum, but a marked improvement in risk sentiment and the latest recovery in crude prices are also dampening demand for the Dollar that has enjoyed 3 successive winning sessions vs most if not quite all rivals. The DXY closed above a key technical level on Thursday in the form of the 200 DMA that stands around 92.600 today, but could not quite reach 93.000 and chart proponents may have been somewhat disappointed or simply persuaded to take some profit and trim longs. However, the index and Buck remain firm overall ahead of US data including PCE inflation and final Michigan sentiment, with the former meandering between 92.836-684.

JPY - No relief for the Yen at the Greenback’s expense at all or Tokyo CPI that was a tad firmer than forecast on balance, as Usd/Jpy continues to rebound through 109.00 and has now posted a new y-t-d high circa 109.55. Moreover, there is little in terms of resistance tech-wise before 110.00 and spot month, Q1 and FY end is yet to come on Monday for the Yen that carries a historically large rebalancing hedge SD for the last day of March.

NZD/AUD - Conversely, the mood has improved somewhat down under along with risk appetite, and to the extent that the Kiwi is back near 0.7000 against its US counterpart, while the Aussie has actually reclaimed 0.7600+ status against the backdrop of Westpac’s dovish RBA call for QE to be extended in October at the current Aud 100 bn pace compared to Aud 50 bn previously and China slapping anti-dumping tariffs of up to 218.4$ on wine for 5 years with effect from March 28.

GBP/NOK/CAD/EUR - Sterling is fending off an oil-fuelled Norwegian Krona for 3rd spot in the G10 ranks as Cable eyes 1.3900 and Eur/Gbp retests bids/support around 0.8550 due to risk back on impulses and hopes that the UK-EU vaccine stand-off will be resolved before too long. Meanwhile, Eur/Nok is straddling 10.1500, Usd/Cad has retreated through 1.2600 ahead of Canadian budget balances and Eur/Usd has pared declines from the low 1.1760 area that also arrested losses beneath a Fib retracement yesterday to take another look at 1.1800 in wake of an upbeat German Ifo survey slightly tarnished by the RKI’s stark warning of clear signs that the current COVID-19 wave might be more sever than the first.

CHF/SEK - The other major laggards, as the Franc pivots 0.9400 vs the Buck and 1.1075 against the Euro post-SNB, while the Swedish Crown rotates either side of 10.1800 and reversed through par vs the single currency and its Scandinavian peer respectively with no real impetus from trade or retail sales data.

EM - While the commodity bloc gleans traction from the aforementioned revival in crude, precious and base metals, the Try remains locked in a battle to hold above 8.0000 or deeper lows vs the Usd even though Turkish manufacturing confidence improved in March, as investors continue to shun the Lira on CBRT credibility grounds.

FIXED

The retreat in debt futures and rebound in yields has not been as rapid of dramatic as retracements can often be following a decent rally, but Bunds, Gilts and US Treasuries have erased more of their recovery gains to trade at new intraday lows of 127.02, 128.27 and 131-22+ respectively. Moreover, these new troughs are all under yesterday’s session basis to signal more of a turning point and perhaps the end of the road for bonds in context of a revival, barring a renewed wave of buying on something supportive and/or further asset-reallocation and rebalancing for month/quarter/2020-21 fy end next Wednesday. More immediately, a batch of US data including a preferred Fed inflation set in the guise of PCE and then final Michigan sentiment for March.

COMMODITIES

WTI and Brent front month futures have started the last session of the week on the front foot, seeing a continuation of gains, but have since dipped off best levels. Fundamentally, support for prices has come alongside reports that it could take weeks to dislodge the Ever Given container ship from the Suez Canal. The blockage is leading to a squeeze in oil supplies and increasing fears of supply constraints over the coming weeks. Note, gains have been somewhat capped by growing COVID infection rates in Europe and emerging markets, such as Brazil and India. Rising case counts could push back expectations for a summer recovery for jet fuel demand. The May WTI contract trades just below the USD 60.00/bbl handle (vs low 58.32/bbl) whilst its Brent counterpart trades marginally above USD 63.00/bbl (vs low 61.85/bbl). Looking ahead, notable risk events include possible JMMC & OPEC+ source reports ahead of next week’s meeting, where expectations remain that OPEC+ will maintain current production. Note, today’s Baker Hughes Rig Count data is released in the UK today at the earlier time of 17:00GMT. Spot gold has traded choppy, but, like spot silver is firmer on the session alongside a slight pullback in the Dollar. That said, the DXY hit a four-week high yesterday and as such, gold is set for its first weekly decline in three weeks. Spot gold remains just below USD 1,730/oz (vs low USD 1,723/oz) and spot silver is trading around the USD 25.20/oz mark (vs low USD 25.04/oz). In base metals, LME copper follows the broader firmer sentiment and is up on the session and resides in proximity to USD 8,930/t. Additionally, there is growing optimism around the versatile metal amid its faster-than-expected COVID vaccination progress in the US. Lastly, Dalian iron ore is set for its first weekly rise in four weeks, amid declining steel inventories and rising demand in China.

Clearance of the Ever Given in the Suez Canal could take at least one week, according to sources. Later reports from Shoei Kisen (owner of the ship blocking the Suez Canal) is looking to free the ship by Saturday evening (Japanese time). (Newswires/Nikkei)

Egyptian Suez Canal Authority says the dredging operations at the bow of the stranded ship is around 87% complete. Following this, tugging operations are expected to resume as soon as dredging is completed. (Newswires)

Saudi Arabia said a petroleum distribution station in Jazan was attacked and that a fire broke out following the attack by Houthis, although no casualties were reported. (Twitter)

Rusal Deputy CEO is open to discussions with other shareholders in Nornickel about the Co. possibly lowering its dividend but is yet to be convinced that the existing policy should change. (Newswires)

Indian oil minister says they disagree with the response from Saudi Arabia to India's request for an easing of output curbs by OPEC+. (Newswires)