• Asian equity markets traded cautiously during the quarter- and fiscal year-end with sentiment not helped by the uninspiring lead from the US
• Participants were tentative ahead of President Biden’s speech later today where he is to unveil USD 2.25tln of infrastructure spending
• Biden is also expected to comment on increasing the corporate tax rate to 28%
• Chinese Manufacturing and Non-Manufacturing PMI data exceeded expectations
• In FX, the DXY extended gains above 93.00, EUR/USD held on to 1.17 status and GBP/USD remains on a 1.37 handle
• Looking ahead, highlights include German labour market report, EZ CPI, US ADP, Canadian GDP, Chicago PMI, DoEs, OPEC+ JMMC, US President Biden, Treasury Secretary Yellen, Fed's Bostic

CORONAVIRUS UPDATE

US COVID-19 cases +60,699 (prev. +47,464), deaths +592 (prev. +560), total dose of vaccine administered 148mln (prev. 146mln), those fully vaccinated 53.423mln (prev. 52.614mln). In relevant news, Michigan Governor Whitmer urged for the White House to boost vaccines to virus hotspots amid an increase of infections. (Newswires/Washington Post)

German Chancellor Merkel stated that the government agreed with German states to follow experts’ recommendation regarding administering the AstraZeneca (AZN LN) vaccine only to the over 60s, while the German Health Minister said new guidance on AstraZeneca vaccine is without a doubt a setback in the vaccination campaign. (Newswires)

Residents of Ruili City in China's Yunnan province were told to stay at home for a week after new COVID-19 cases were detected, while Yunnan is to severely crack down on illegal border crossings and will begin mass testing in the Ruili City area. (Newswires)

Japanese PM Suga is reportedly preparing to apply coronavirus-prevention measures for Osaka. (Newswires)

ASIA

Asian equity markets traded cautiously during the quarter- and fiscal year-end with sentiment not helped by the uninspiring lead from the US where participants were tentative ahead of President Biden’s speech later today where he is to unveil USD 2.25tln of infrastructure spending and is also expected to comment on increasing the corporate tax rate to 28%. ASX 200 (+1.5%) outperformed helped by strength in financials after the RBNZ partially relaxed dividend restrictions to allow a pay-out of up to 50% of earnings and with nearly all industries in the green aside from gold miners after the precious metal recently slipped beneath the USD 1700/oz, while Nikkei 225 (-0.7%) failed to benefit from favourable currency flows with the index subdued on the last day of the financial year following weak Industrial Production data and with Mitsubishi UFJ warning of a USD 300mln loss related to the Archegos fallout. Hang Seng (-0.4%) and Shanghai Comp. (-0.6%) were subdued despite better-than-expected Chinese Manufacturing and Non-Manufacturing PMI data as a deluge of earnings releases also took plenty of the focus, while US-China tensions continued to linger in which the US State Department's annual human rights report cited China for "crimes against humanity" and FCC Commissioner Carr called for the US to take further steps to remove Huawei and ZTE equipment from US networks. Finally, 10yr JGBs were softer following the indecisive performance in USTs and with mild upside in yields, although downside was cushioned amid the BoJ’s presence in the market for a total of JPY 510bln of JGBs in the belly to super-long end.

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 6.5713 vs exp. 6.5713 (prev. 6.5641)

US State Department's annual human rights report cited China for "crimes against humanity", while it was also reported that the US strongly condemned China's actions to further reduce political participation in Hong Kong. (Newswires)

UK Trade Secretary Truss called for countries to get tough with China and for the G7 to work to revive the WTO which she claimed is stuck in the 1990s. (FT)

Australia is reportedly seeking to develop missiles amid increased tension in Indo-Pacific with analysts noting that officials want domestic manufacturing capability to counter China assertiveness. (FT)

• Chinese NBS Manufacturing PMI (Mar) 51.9 vs. Exp. 51.0 (Prev. 50.6)
• Chinese Non-Manufacturing PMI (Mar) 56.3 vs. Exp. 52.0 (Prev. 51.4)
• Chinese Composite PMI (Mar) 55.3 (Prev. 51.6)

UK/EU

Brussels is reportedly gearing up as it seeks to battle the City of London to gain ground in the latter's dominance of the EUR 81tln euro swaps clearing industry. (FT)

• UK BRC Shop Price Index (Mar) Y/Y -2.4% (Prev. -2.4%)

FX

In FX markets, the DXY extended on its gains above the 93.00 level to reach its highest since early November amid the cautious risk tone, higher US yields and much stronger than expected US Consumer Confidence data, with participants also looking ahead to President Biden’s infrastructure spending announcement. EUR/USD was subdued by the firmer greenback although the single currency just about held on to the 1.1700 handle, while GBP/USD was lacklustre as attempts to nurse recent losses were thwarted by resistance at 1.3750. USD/JPY extended on its best levels in more than a year with gains exacerbated heading into the Tokyo fix and on a break above 110.50 which inspired JPY-crosses in tandem, while antipodeans were contained by the cautious mood, weaker PBoC reference rate setting and mixed data releases including better than expected Australian Building Approvals and weaker New Zealand Business Surveys.

• Australian Building Approvals (Feb) 21.6% vs. Exp. 5.0% (Prev. -19.4%)
• Australian Private Sector Credit (Feb) 0.2% (Prev. 0.3%)
• New Zealand NBNZ Business Confidence (Mar) -4.1% (Prev. 7.0%)
• New Zealand NBNZ Activity Outlook (Mar) 16.6% (Prev. 21.3%)

COMMODITIES

WTI crude futures nursed some of the prior day's losses beneath the USD 61/bbl level but with the recovery limited by demand concerns after OPEC+ delegates were reportedly revising down estimates of oil demand. Furthermore, the JTC panel raised concerns regarding rising COVID-19 infections globally, lockdown measures and travel restrictions, while the latest private sector inventory data showed a larger than expected build in headline crude inventories. Gold remained subdued after its recent retreat beneath the USD 1,700/oz as the greenback extended on gains and copper prices were lacklustre owing to the cautious risk tone.

US Private Inventory Data (w/e March 26th): Crude +3.9mln (exp. +0.1mln), Cushing +0.9mln, Gasoline -6.0mln (exp. +0.7mln), Distillate +2.6mln (exp. +0.2mln). (Newswires)

OPEC internal report forecasts 2021 oil stocks falling by 445mln bbls (prev. forecast of 406mln bbls decline). It was separately reported that OPEC+ JTC panel raised concerns regarding rising COVID-19 infections globally, lockdown measures and travel restrictions despite faster vaccinations. The panel also stated that uncertainties could hit oil demand recovery especially fuel transport in the summer and that it sees prevailing volatility in the oil market structure as a sign of fragile market conditions, while the next JTC panel meeting is set for April 26th. (Newswires)

GEOPOLITICAL

French President Macron, German Chancellor Merkel and Russia President Putin agreed to co-ordinate efforts so that Iran returns to full compliance with its obligations as soon as possible. In related news, the US is reportedly willing to negotiate a wider nuclear deal road map with Iran if the latter wishes to, according to sources. (Newswires)

US

Treasuries were mixed, but all yields pared from overnight peaks with desks pointing to quarter-end. By settlement, 2s +0.3bps at 0.149%, 5s +1.6bps at 0.907%, 10s +1bps at 1.722%, 30s -3.5bps at 2.389%; TYM1 volumes were average. Inflation breakevens were narrow, particularly at the front-end with 5yr TIPS yields rising 10bps; Fed bought USD 1.199bln of 7.5-30yr TIPS. US sold USD 40bln of 42-day CMBs at 1.5bps. SOFR unch. at 1bps. NY Fed RRP saw its largest take-up YTD of USD 104.725bln across 35 bidders (seven-op average rises to 32.90bln from 20.640bln; prev. 40.354bln across 22 bidders), as more and more participants begin to park cash at the facility to avoid negative repo and T-Bill rates. Treasuries were offered out of Asia on decent volume, particularly the belly amid 10s breaching past their cycle peak above 1.75%, accentuated by reports of stop-loss selling. Speculation on a "chunky" NFP beat this Friday is growing among traders (albeit these rumours often turn out to be nothing more than that), while the chants around a USD 3/4trln infrastructure package grow louder - not to mention concerns around bank intermediation after the SLR decision. The long-end was better supported, however, with desks noting real money type accounts - both domestic and foreign - adding duration into month-end. Yields hit their peaks in the European morning - 1.775% for 10s - before trundling lower through the rest of the session. There was a block buy of 4.250k in the long-bond June future (USM1) supporting that recovery, perhaps alongside some jitters around raised potential losses from the Archegos fund and PIMCO heads out warning of no inflation coming, as one desk suggested. T-note (M1) futures settled 5+ ticks lower at 131-06.

Fed's Barkin (voter) said he is hopeful we are on the brink of completing the recovery and that once we get past this crisis, we need to get the fiscal house in order. Barkin also stated that pent-up demand and supply shortages will push up prices this year although businesses expect this to be a one-off and not long-term, while he added there is no way we will spend all the excess savings this year and that will support the economy in 2022 and 2023. Furthermore, he commented that the Fed will keep rates at the current level until their three-part test is met and stated that longer-term rates have clearly risen in part due to economic optimism and inflation expectations. (Newswires)

Fed's Bostic (voter) said leisure and hospitality firms are beginning to see bookings comparable to or above 2019 and is hopeful that the US will see "large" job numbers in the coming months, while he added that upside risk could include an addition of a million jobs a month through the summer. (Newswires)

Fed's Williams (voter) said he is optimistic about the overall economy and fiscal support is an important part of the bridge to move forward, while he added that a lot of small businesses taking on other debt is not what they need. (Newswires)

Fed's Kaplan (non-voter) reiterated that the Fed should be taking action when it comes to interest rate hikes once goals are met, while he suggested regarding conditions for tapering, that he would want to see evidence that Fed has weathered the pandemic, meaningful improvement in mobility and engagement, meaningful job growth, evidence of real progress on lowering the unemployment rate and firming of inflation towards the goal. (Nikkei)

US President Biden will reportedly unveil USD 2.25trln of infrastructure spending in the first part of the bill on Wednesday, with USD 650bln said to have been earmarked for roads and bridges, USD 300bln for housing, USD 400bln for clear energy credits and USD 400bln for elderly. Furthermore, other reports noted that Biden's plan is to include spending over 8 years and that he will not call for a wealth tax to pay for spending proposal but is expected to comment on increasing the corporate tax rate to 28%, while sources suggested that the infrastructure address will be at 16:20EDT/21:20BST. (Washington Post/Politico/Twitter)

US President Biden will reportedly expand the pause in student loan interest and collections, while the White House stated that Biden has not ruled out unilateral action such as cancelling student debt. (Newswires/Washington Post)