• Asian equity markets traded mixed as the regional bourses failed to fully sustain the momentum from their counterparts on Wall St
• The S&P 500 and the DJIA extended on fresh record highs in their first opportunity to react to last week’s NFP jobs report and yesterday's ISM print
• In FX, the DXY nursed some of yesterday’s losses after having dwindled towards 92.50, EUR/USD and GBP/USD sit on 1.18 and 1.39 handles respectively
• The RBA policy announcement provided very little to spur price action as the central bank maintained its key rates at 0.10% as expected
• The US does not expect early or imminent success in nuclear talks with Iran
• Looking ahead, highlights include EZ unemployment, ECB asset purchases, US JOLTS

CORONAVIRUS UPDATE

US CDC reported that cases rose to 30.53mln (from 30.49mln) and deaths rose to 554.1k from 553.7k, while 107.52mln have received first vaccine (prev. 106.21mln) and 167.19mln vaccines have been administered (prev. 106.21mln). Furthermore, CDC Director said the US has seen a 7% increase in daily cases vs previous 7-day rates and that cases are increasing nationally, predominantly among young adults with peaks seen in COVID cases among the 18-24 age group. (Newswires)

Novavax (NVAX) initiated a COVID-19 vaccine crossover arms clinical trial which will allow participants to continue in trials and will ensure all trial participants will receive an active vaccine. Furthermore, participants in the UK and US Phase 3 trials will be offered an additional round of injections and participants in the South Africa Phase 2b trial will receive either an active vaccine for those who initially received placebo, or a booster dose of an active vaccine for those who initially received active vaccine. (PR Newswire)

UK PM Johnson confirmed that COVID-19 restrictions will ease on 12th April and said there is nothing in the data that makes him think the UK will deviate from its roadmap. (Newswires)

New Zealand PM Ardern announced a quarantine-free travel bubble with Australia will begin on April 19th which she stated will give the economic recovery a boost but noted that passengers will not be able to travel if they have cold or flu symptoms. (Newswires)

ASIA

Asian equity markets traded mixed as the regional bourses failed to fully sustain the momentum from their counterparts on Wall St where the S&P 500 and the DJIA extended on fresh record highs in their first opportunity to react to last week’s blockbuster NFP jobs report and which was followed up by stronger-than-expected ISM Services PMI data. ASX 200 (+0.9%) rallied on return from the long weekend with gains spearheaded by tech after similar outperformance stateside, while shares in Cleanaway Waste Management surged by double-digit percentages on M&A news in which the Co. is to buy Suez’s Australian unit for around AUD 2.5bln. Nikkei 225 (-1.1%) retraced opening advances with sentiment clouded by a mixed currency and disappointing Household Spending data which contracted by 6.6% Y/Y. Shanghai Comp. (-0.3%) was also lacklustre despite stronger than expected Chinese Caixin Services PMI data which alongside Caixin Composite PMI, printed at their highest readings YTD, with the mainland subdued after the PBoC drained liquidity and amid reports China is said to have asked banks to curtail credit until year-end, while Hong Kong markets remained closed for holiday. Finally, 10yr JGBs were higher with prices supported amid weak domestic data and as Japanese stocks gave back initial gains, while prices also tracked the upside in T-note futures amid easing of yields and with improved results from the 30yr JGB auction.

PBoC injected CNY 10bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 10bln. (Newswires) PBoC set USD/CNY mid-point at 6.5527 vs exp. 6.5532 (prev. 6.5649)

China is said to have asked banks to reduce credit until year-end during a meeting with the PBoC on March 22nd where banks were told to keep total advances in 2021 at around the same level last year, while some foreign banks were urged to rein in new lending after ramping up their balance sheets last year. (Newswires)

S&P Dow Jones Indices said China domiciled securities that were removed due to sanctions will be re-eligible for inclusion to some fixed income indices from July 1st rebalancing, while it added that some regional China fixed income indices will shift from a US/UK/EU investor perspective to a China-based investor perspective. (Newswires)

• Chinese Caixin Services PMI (Mar) 54.3 vs. Exp. 52.1 (Prev. 51.5)
• Chinese Caixin Composite PMI (Mar) 53.1 (Prev. 51.6)
• Japanese All Household Spending (Feb) M/M 2.4% vs. Exp. 2.8% (Prev. -7.3%)
• Japanese All Household Spending (Feb) Y/Y -6.6% vs. Exp. -5.3% (Prev. -6.1%)

UK/EU

UK will launch a government-backed loan scheme today which seeks to help companies access finance as the economy reopens from a strict lockdown in which government will provide an 80% guarantee on loans to companies of as much GBP 10mln with the scheme to last until year-end and with interest rates to be capped at 14.99%. (Newswires)

UK government is reportedly taking a firm stance regarding requests for a Eurostar bailout with ministers stating that the Co. should instead look to its shareholders for support. (FT)

FX

In FX markets, the DXY nursed some of yesterday’s losses after having dwindled towards the 92.50 level amid the heightened risk appetite on Wall Street and as yields slightly eased and US ISM Services PMI exceeded expectations. EUR/USD held on to most of the prior day’s spoils and the 1.1800 status with the recent advances largely due to the softer greenback amid the holiday-thinned conditions which helped the single currency disregard the headwinds from the lockdowns affecting the bloc’s largest member states, while GBP/USD consolidated after it briefly reclaimed the 1.3900 handle to the upside following comments from UK PM Johnson who confirmed that COVID-19 restrictions will be relaxed next Monday and stated that there is nothing in the data that makes him think the UK will deviate from its roadmap. Elsewhere, JPY-crosses lacked firm direction although USD/JPY was off Monday’s lows after support at 110.00 held to provide some reprieve for the pair and antipodeans marginally pulled back as the risk appetite waned in Asia-Pac trade, while the RBA policy announcement provided very little to spur price action as the central bank maintained its key rates at 0.10% as expected and reiterated its guidance which suggests no rate hikes for the next 3 years, with the rhetoric practically a carbon copy of recent statements.

RBA kept its Cash Rate Target and 3yr Yield Target unchanged at 0.10% as expected and maintained the parameters of its QE program. The central bank reiterated that it does not expect inflation and employment goals to be reached until 2024 at the earliest and that it will not raise the cash rate until inflation is sustainably within 2%-3% target. Furthermore, the board remains committed to maintaining highly accommodative policy until goals are met, while it stated the economic recovery is well underway and stronger than expected in which it expects above-trend growth in 2021 and 2022. (Newswires)

COMMODITIES

WTI crude futures reclaimed USD 59.00/bbl overnight after partially nursing Monday's losses where prices declined by over 4% following last week's OPEC+ decision to increase production and with Saudi to also phase out its voluntary cuts from May-July. Furthermore, Goldman Sachs sees supply concerns shifting to the potential return of Iran to the nuclear deal ahead of today's meeting in Vienna aimed at reviving the agreement, although the US does not expect an early or imminent success in nuclear talks with Iran and Iran had already ruled out discussions with the US unless sanctions are removed. Gold saw mild gains amid the recent USD weakness and as sentiment waned overnight, while copper prices were lacklustre as its largest buyer China failed to benefit from strong Caixin PMI data and amid reports of China asking banks to curb credit.

Goldman Sachs stated that OPEC's decision to raise output suggests the group anticipates summer demand will improve sufficiently and that with OPEC+ appearing to manage its exit for now, supply concerns will shift to a potential return of Iran to the nuclear agreement. Furthermore, Goldman Sachs added that its base case is that a full recovery will not occur until summer 2022 which implies an agreement likely in early-2022. (Newswires)

GEOPOLITICAL

US State Department spokesperson stated that they do not expect any early or imminent success in nuclear talks with Iran and that there will not be direct talks with Iran, but added the US remains open to the possibility. Furthermore, the spokesperson said the US will not entertain unilateral gestures to get Iran to a better place in talks, while the US will be thorough and not cut corners in talks. (Newswires)

US State Department said the US has asked Russia for an explanation of its 'provocations' on the border with Ukraine, while it was also stated that Washington is open to engagement with Moscow regarding the situation in Eastern Ukraine. (Newswires)

US

The stronger-than-expected data impulse does not appear to have resulted in any major selling of Treasuries; while yields did print post-pandemic highs on Friday in wake of the solid jobs data, yields are unchanged at the long-end of the curve and rallying in the belly, despite the solid ISM services data released Monday. Some had suggested against reading too much into the tape action while many key financial centres were on market holidays; others suggested that the rally in the belly was a function of short-covering. There has also been a recent argument that global fixed income will need fresh catalysts to resume its reflationary vigor that saw yields surge at the early part of the year; some desks said it is hard to envisage this while the pandemic situation remains troubling in Europe, and while China reported its highest number of cases in two months. Nevertheless, from the US perspective, there is renewed focus on the Fed in wake of a better-than-expected jobs report and ISM beats; some argue the central bank will need to signal a tapering of asset purchases sooner than it is leading on as the data improves, slack is eroded, and pandemic re-openings result in more activity. The Fed has, of course, leaned back against this thinking, highlighting how many remain out of work since the pandemic, and how there is still a great deal of slack in the labour market (it has said it wants to see max employment before lifting rates), while it will look through any 'transitory' spike in inflation in the months ahead. US T-note futures (M1) settled 10 ticks lower at 131-03+.

Fed's Mester (non-voter) said the economic outlook is brightening and they need more jobs report like the March one, while she expects to see a stronger H2 and said the outlook is pretty good but noted that they are still far from policy goals. Furthermore, Mester commented that 8.5mln still remain out of work and that the Fed will do what it can to support the economy, as well as needs to be deliberately patient in its monetary policy approach. (Newswires)

US President Biden is not concerned that a tax increase would harm the US economy, while there were separate comments from White House Press Secretary Psaki that President Biden is open to ideas on how to pay for the jobs plan. (Newswires)

US Democrat Senator Manchin (moderate Dem) said the corporation tax rate should be 25% and he would not support a corporation tax rate hike to 28%. (Newswires)

US Senate Parliamentarian ruled in favour of Democrats efforts and stated that a revised budget resolution may contain budget reconciliation instructions, which paves the way for the Democrats to approve additional measures along party lines at the Senate. There were also comments from Senate Democrat Leader Schumer's spokesman that the Senate Parliamentarian's opinion is important but no decisions have been made on the legislative path ahead. (Newswires)

US Treasury Secretary Yellen said the US has the fiscal space to afford Biden's infrastructure plan and doubts the plan would cause inflationary pressures. Yellen also commented that a global minimum tax can ensure a more equal playing field and could help incentivize innovation, as well as growth prosperity. Furthermore, Yellen stated they will use the IMF-World Bank spring meetings to discuss further climate change and press countries to support a strong economic recovery. (Newswires)