• European equity indices are mixed whilst US equity futures are largely unchanged but with the NQ outperforming, +0.4%
• DXY is softer on the session to the benefit of its major peers, with GBP/USD seeing further upside but yet to breach 1.38
• In President Biden’s speech at 21:20BST/16:20EDT he is expected to unveil USD 2.25tln of infrastructure spending, and to comment on increasing corporate tax to 28%
• Chinese Manufacturing and Non-Manufacturing PMI data exceeded expectations
• Looking ahead, highlights include US ADP, Canadian GDP, Chicago PMI, DoEs, OPEC+ JMMC, US President Biden, Treasury Secretary Yellen, Fed's Bostic & ECB’s de Galhau

CORONAVIRUS UPDATE

Michigan Governor Whitmer urged for the White House to boost vaccines to virus hotspots amid an increase of infections. (Newswires/Washington Post)

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 crackdown 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 (+0.8%) 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 (-0.9%) 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 (-0.7%) and Shanghai Comp. (-0.4%) 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.

BoJ Official urges a focus on keeping yield curve at stably low levels as the COVID-19 impact remains. (Newswires)

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 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)

US

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)

US President 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. (Politico/Twitter)

UK/EU

BoE's Haldane states they will be changes in behaviour and business models and due to COVID some jobs will not return. (Newswires)

ECB's Lagarde says the economic situation is marked by uncertainty recent decisions have been guided by the rise in yields and PEPP will be used with maximum flexibility. Markets can test us as much as they wish too and does not believe the German Court challenge will impact the EU recovery fund, if the matter is resolved soon. (Newswires)

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)

EU Commission has sued Poland within a top-EU court and is asking for interim measures until a final ruling can occur, over the undermining of the independence of judges. (Newswires)

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

EU HICP-X F&E Flash YY (Feb) 1.0% vs. Exp. 1.1% (Prev. 1.4%) -EU HICP Flash YY (Mar) 1.3% vs. Exp. 1.3% (Prev. 0.9%) -EU HICP-X F,E,A&T Flash YY (Mar) 0.90% vs. Exp. 1.10% (Prev. 1.10%)

GEOPOLITICAL

US is reportedly willing to negotiate a wider nuclear deal road map with Iran if the latter wishes to, according to sources. (Newswires)

Italian police have arrested a Russian diplomat and an Italian navy captain on suspicion of spying, according to a statement. Later reports stated, Italy has expelled two Russian officials involved in the spying case. (Newswires)

EQUITIES

European equities (Eurostoxx 50 -0.1%) and US futures (e-mini S&P flat) trade with little in the way of firm direction as markets await US President Biden’s infrastructure speech at 21:20BST/16:20EDT. US President Biden is set to unveil USD 2.25trln of infrastructure spending in the first part of the bill today, 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 the elderly. Furthermore, other reports note 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%. From a sectoral standpoint, performance is relatively mixed in Europe with not much in the way of breadth. Telecom names outperform, whilst some of the more cyclically-exposed sectors such as Banks, Basic Resources and Oil & Gas lag. Credit Suisse continue to act as a drag on banking names as speculation lingers around the extent of its losses related to the Archegos blow-up. Elsewhere, the Deliveroo IPO has commenced on a weak footing with the stock enduring losses of circa 25%; Just Eat (-1.4%) have posted modest losses in sympathy. Finally, H&M (-2.4%) trade lower on the session after posting a loss for Q1 and amid recent criticism from the Chinese government after the Co. raised concerns over forced labour in the Xinjiang region.

Apple (AAPL) led a USD 50mln fundraising round for UnitedMasters, a Co. which assits in distributing and marketing music while allowing copyright retention. (WSJ)

China is considering an exchange that would attract overseas-listed companies, according to sources. (Newswires)

FX

DXY/JPY - Although the Euro enjoys a greater share of the Dollar index, the sharp ascent of Usd/Jpy and sheer magnitude of the rally has been instrumental if not quite responsible for its breach of 93.000. To recap, the Yen put up a pretty staunch defence of 109.00 and 109.50 before caving in at the end of last week when US Treasury yields set off on their most recent ramp higher and it appeared that most Japanese hedgers had completed their buying for month, quarter and fiscal year end. Subsequently, the rate of decay and Usd/Jpy upside have accelerated amidst reports of demand from importers and M&A related buying in the headline pair, not to mention residual rebalancing for the March/April, Q1/Q2 and FY turn plus weaker than forecast Japanese IP data. However, 111.00 seems to be a line in the sand and the DXY also ran out of steam just ahead of 93.500 at 93.439, albeit with resistance also coming via Eur/Usd that narrowly held above 1.1700. The index is currently just above 93.000 and a 93.092 low awaiting ADP as a proxy for NFP and the Chicago PMI that might be a reliable guide for the ISM also on Friday, and both due before pending home sales and President Biden unveiling his Economic Vision for the Future.

EUR/AUD/NZD/GBP/CAD - All benefiting from the Greenback’s fade, as the Euro eyes 1.1750 amidst fairly familiar rhetoric from ECB President Lagarde and decent option expiry interest at the strike (1.2 bn) that extends up through 1.1775 (1 bn) to 1.1800 (1.2 bn). Meanwhile, the Aussie has also gleaned encouragement from a bumper rise in building approvals that beat consensus more than 4-fold, plus stronger than expected Chinese PMIs, services in particular, to retain grasp of 0.7600. Conversely, 0.7000 is still proving elusive for the Kiwi and a deterioration in NBNZ business sentiment alongside a decline in the activity outlook will hardly have helped. Elsewhere, the Pound is hovering below 1.3800 having bounced off a marginally firmer low 1.3700 base, but staging another attempt to fill bids into 0.8500 vs the Euro, but could be scuppered by option expiries between 0.8525-15 (1.1 bn) and even undermined by those at 0.8540-50 (1.3 bn) if the round number emerges unscathed again.

SCANDI/EM - The Norwegian Crown is getting tantalisingly close to breaking the 10.0000 barrier vs the Euro in wake of the Norges Bank raising its daily foreign currency sale quota to Nok 1.8 bn from tomorrow vs Nok 1.7 bn in March, but the Swedish Krona is still lagging even though the NIER has upgraded is 2021 GDP and inflation projections quite markedly from those made in December. In contrast, the aforementioned encouraging official PMIs are helping the Cnh pare some recent losses and the Try has drawn some comfort from a rise in Turkish consumer confidence irrespective of the prospect that it comes before a fall on the back of latest investor qualms over CBRT independence.

• 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%)

FX options expiries, NY cut: -EUR/USD: 1.1650 (714M), 1.1750 (1.2BLN), 1.1775 (1BLN), 1.1800 (1.2BLN), 1.1850 (1.4BLN), 1.1900 (1.8BLN) -USD/JPY: 110.00 (2.6BLN), 110.15-20 (1.3BLN), 110.50 (685M) -EUR/GBP: 0.8515-25 (1.1BLN), 0.8540-50 (1.3BLN), 0.8600 (1.3BLN) -AUD/USD: 0.7500 (1.3BLN), 0.7600 (624M), 0.7650 (774M), 0.7700 (1BLN)

FIXED

All things considered, a lukewarm rather than welcome reception afforded to German 15 year issuance and the token bounce in Bunds reflects the feeling of relief more than anything else. Nonetheless, the core EZ bond is back above 171.00 from 170.88 and Gilts have also pared some losses to stand flat vs 8 ticks below their 127.58 previous Liffe close at one stage. Elsewhere, US Treasuries are still lagging and essentially flat-lining in outright and curve profile terms in advance of a busy final agenda for March including ADP, Chicago PMI and more housing data before the stage clears for President Biden to deliver his outlook for the economic future address.

COMMODITIES

WTI and Brent front month futures opened the session on a firmer footing, following on from Asia’s positive lead, but have since reversed course and now sit in negative territory. The initial price rise followed suit from mounting expectations that OPEC+ will maintain current output cuts into May. That said, bearish macro impulses are likely to be the driver for any such action. Note, the OPEC+ JTC panel raised concern over growing COVID infection rates, new lockdown measures and travel restrictions. As such, the panel stated the uncertainties could hinder oil demand recovery, especially fuel transport, and it sees prevailing volatility as a sign of fragile market conditions. Accordingly, OPEC+ revised its 2021 global oil demand growth forecast down by 300,000 BPD to 5.6mln BPD. The May WTI contract trades low/mid USD 60.00/bbl (vs high USD 61.17/bbl) whilst its Brent counterpart trades just shy of USD 64.00/bbl (vs high USD 64.79/bbl). Spot gold is flat on the session whilst spot silver is seeing mild upside amid the softer Dollar. Moreover, for the quarter, due to the surge in US treasury yields and the stronger DXY spot gold is set for its worst quarter since 2016. At the time of writing, spot gold trades at USD 1,685/oz (vs high USD 1,688/oz) and silver trades just shy of USD 24.10/oz (vs low USD 23.79/oz). Onto base metals, LME copper is firmer on the session, but it is set for its first monthly fall in a year, due to aforementioned DXY strength and rising yields. Lastly, Dalian iron ore has seen a fall in price alongside Chinese environmental policies reducing demand.

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)

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. Citing later reports, OPEC+ revises 2021 global oil demand growth down by 300,000 BPD to 5.6mln BPD, via a document. (Newswires)

Kuwait calls on OPEC+ nations to full comply with oil production reductions, according to the Kuna News Agency; oil market supply/demand balance has seen an improvement. Whilst they are cautiously optimistic that indicators in the oil market will improve as COVID-19 rollouts pick up pace and global industry recovers (Newswires)

Oman crude OSP has been calculated at USD 64.43/bbl in May vs. USD 60.85/bbl in April, according to DME. (Newswires)

Japan Steel Industry Head states the rally in US steel prices is overdone and expects the market to see a correction. (Newswires)