• Asian equity markets traded mixed following on from the flat performance on Wall St where most major indices consolidated
• A lack of incremental macro newsflow and looming FOMC minutes ensured a non-committal tone
• RBI kept rates unchanged with the Repurchase Rate kept at 4.00% and Reverse Repo Rate kept at 3.35%, as expected
• In FX, the DXY languished beneath 92.50, EUR/USD retained a firm hold of the 1.18 handle and GBP/USD maintains 1.38 status
• Looking ahead, highlights include EZ, UK & US final services & composite PMIs, ECB asset purchases & bi-monthly PEPP summary, DoEs, FOMC minutes, Fed's Evans, Kaplan, Barkin, Daly, supply from the UK & Germany

CORONAVIRUS UPDATE

US COVID-19 cases +62,878 (prev. +40,680), deaths +353 (prev. +385), vaccines administered 169mln (prev. 167mln), those fully vaccinated 63mln (prev. 62.4mln). (Newswires)

US President Biden reportedly seeks all adults to be offered a COVID vaccine by April 19th and stated that the US is on course to surpass the target of 200mln vaccine shots in his first 100 days in office but added that new virus variants are spreading and moving quickly with cases increasing. (Newswires/CNN)

NIH's Fauci reiterated the US is on the edge of another COVID surge and that people should limit air travel to essential trips, while there were separate reports that US CDC stated cruises could restart with restrictions by the middle of summer. (Newswires)

California will end nearly all COVID-19 business limitations by June 15th if vaccine supply is sufficient and hospitalization rates are stable/low. (Newswires)

Moderna (MRNA) COVID-19 vaccine rollout in the UK is to begin with people in Wales to receive the vaccine from today. (Newswires) Elsewhere, a senior UK government adviser has suggested that the vaccine rollout for younger people should be paused until regulators have issued safety guidance for the AstraZeneca (AZN LN) vaccine. (Telegraph)

EU drug regulator is to commence an investigation into the Sputnik V COVID-19 vaccine around whether it adhered to ethical and scientific standards of ‘good clinical practice’ during the trial, amid reports that this is not the case, according to sources. (FT)

South Korea's COVID-19 daily infections increased by the most in 3 months with 668 new cases and the government stated there is an increasing possibility of a 4th wave of the virus. Elsewhere, Japan's Osaka prefecture is set to report a record high of more than 800 new daily infections. (Yonhap/Kyodo)

ASIA

Asian equity markets traded mixed following on from the flat performance on Wall St where most major indices consolidated after recently hitting fresh record highs and with a lack of solid macro drivers, as well as the looming FOMC Minutes ensuring a non-committal tone. ASX 200 (+0.5%) was positive as outperformance in real estate, gold miners and tech kept the index afloat but with gains limited by pressure in industrials and the largest-weighted financials sector, while Nikkei 225 (+0.1%) briefly gave back its early gains as the index succumbed to the JPY strength although there was also plenty of focus on Toshiba shares which were so far untraded with a glut of buy orders after reports of a USD 20bln buyout proposal from CVC Capital. KOSPI (+0.3%) remained positive following preliminary earnings from Samsung Electronics which reported Q1 operating profit rose 44% Y/Y to KRW 9.3tln as expected and with LG Electronics topping forecasts for its preliminary quarterly operating profit and revenue. However, the gains were only marginal as concerns of a 4th wave of the pandemic were stoked after daily infections increased by the most in three months and with by-elections taking place in Seoul and Busan which are a bellwether for next year’s Presidential Elections. Hang Seng (-0.7%) and Shanghai Comp. (-0.5%) were subdued after continued PBoC liquidity inaction and with the former suffering from holiday blues on return from the extended weekend as it gets its first opportunity to digest the recent reports of the PBoC instructing banks to curtail lending. Finally, 10yr JGBs were flat as they took a breather from yesterday’s gains but with prices kept afloat by the flimsy picture in Japanese stocks and with the BoJ also present in the market for JPY 710bln of JGBs with the majority in the belly, while it also offered to buy JPY 125bln of corporate bonds with 1yr-3yr maturities from April 12th.

PBoC injected CNY10bln 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 6.5384 vs exp. 6.5383 (prev. 6.5527)

White House Council of Economic Advisers Chair Rouse said the US must invest heavily in workforce, research and development, as well as other areas to stay competitive with China. (Newswires)

US State Department spokesman stated the US is discussing a joint boycott of the 2022 Beijing Winter Olympics, while there were later comments from the Japanese chief government spokesman who stated that there are no talks between Japan and US about boycotting the Beijing Winter Olympics. (Newswires)

RBI kept rates unchanged with the Repurchase Rate kept at 4.00% and Reverse Repo Rate kept at 3.35% as expected, while the MPC maintained its accommodative stance which it will keep for as long as necessary to boost growth on a durable basis. RBI Governor Das noted that the inflation trajectory is subject to both upward and downward pressure and that COVID places uncertainty on the growth outlook in which lockdowns could delay a return to normal. Furthermore, he stated that fiscal and monetary authorities stand prepared to act in a coordinated manner and stated that the RBI will support the market through adequate liquidity with measures available in the tool kit and will put in place a secondary market G-Sec acquisition programme, as well as will commit to a fixed amount of open market operations. (Newswires)

FX

In FX markets, the greenback languished beneath 92.50 following the prior day’s weakening which was in tandem with a softer yield environment stateside and as participants looked ahead to the FOMC Minutes due later today. EUR/USD retained a firm hold of the 1.1800 handle owing to the recent USD weakness and is within sights of its 200DMA of 1.1889 although ING suggested that near-term gains for the single currency could be limited citing the challenging pandemic situation across the bloc, as well as vaccination progress and a stronger economy stateside. GBP/USD was little changed with the currency dejected following its pullback beneath 1.3900. USD/JPY was subdued with a sub-110.00 status amid the uninspired risk tone and antipodeans consolidated as the recent tailwinds from the weaker greenback were offset by the cautious mood in overnight markets. INR eventually weakened after the RBI kept its key rates unchanged as expected and maintained its accommodative stance which it will maintain for as long as necessary to boost growth on a durable basis, although it then announced it will put in place a secondary market G-Sec acquisition programme, committed to a fixed amount of open market operations and extended its targeted long-term repo operations on-tap scheme by 6 months with liquidity support of INR 500bln for fresh lending being provided to all domestic financial institutions.

COMMODITIES

WTI crude futures held above the USD 59.00/bbl level after a larger than expected draw in headline private crude inventories, although the price reaction was muted as the report also showed bearish data for gasoline stockpiles. Furthermore, the EIA's latest demand estimates were somewhat inconclusive as it raised this year's world oil demand growth forecast by 180k but then cut next year's growth forecast by the same amount, while the first round of talks to revive the Iranian nuclear deal didn't provide any major breakthroughs as the US noted that upcoming discussions will be tough but also suggested that the discussions were constructive. Gold prices marginally pulled back as the greenback steadied while copper was lacklustre amid the mixed risk tone and underperformance in China.

US Private Inventory Data (w/e April 2nd): Crude -2.6mln (exp. -1.4mln), Cushing -0.8mln, Gasoline +4.6mln (exp. -0.2mln), Distillate +2.8mln (exp. +0.5mln). (Newswires)

US EIA raised 2021 world oil demand growth forecast by 180k BPD to a 5.5mln BPD Y/Y increase and cut 2022 world oil demand growth forecast by 180k BPD to a 3.65mln BPD Y/Y increase. (Newswires)

Kazakhstan Energy Ministry stated that March oil production was at 1.475mln bpd and that they will offset OPEC+ overproduction in the summer. (Newswires)

Saudi Aramco is in talks to sell up to 49% stake of pipeline assets to a consortium of US, Chinese and local investors for in between USD 10-15bln, according to sources. (WSJ)

GEOPOLITICAL

White House Press Secretary Psaki said indirect talks with Iran demonstrate that the diplomatic course is the right way to go and the White House said the US is not anticipating any steps at the moment on Iran and will allow negotiations to continue. There were also comments from the US State Department that they know difficult discussions are upcoming but added the Vienna talks are constructive and a potentially useful step, while it stated that the US delegation hopes to leave Vienna with a greater comprehension of a roadmap for both sides whilst continuing compliance with the Iran nuclear deal. (Newswires)

Iranian Deputy Foreign Minister said that that they reject suspension of 20% uranium enrichment in return for unfreezing USD 1bln of its assets. (Newswires)

An Iranian ship associated with the Revolutionary Guard has been targeted by a limpet mine in the Red Sea. (Al-Arabiya)

US

T-Notes rallied on Tuesday, with the outperformance in the belly of the curve, where yields narrowed by around 7bps. There hasn't been a specific headline catalyst for the curious Treasury moves seen on Monday and Tuesday; while the complex saw higher yields after last week's data, this week's action has not leaned towards an impulse for higher yields, underpinned by inflation. There are competing theories why this may be the case: some desks suggest that the stellar ISM and jobs data out of the US is still not enough to shift the dial at the FOMC towards signalling tighter policy; as Fed's Mester highlighted Monday, around 8.5mln Americans are still out of work vs pre-pandemic levels, and other officials have suggested that the 'real' unemployment rate might be closer to 10%; additionally, inflation pressures are expected to increase in the months ahead, but are likely to be transitory, once again keeping the Fed -- which wants to see actual inflation rise above its target, and for inflation to average 2.0% before raising rates -- at bay; the FOMC minutes on Wednesday may offer more colour around these themes. Other desks have noted that the 1.75-1.80% area in 10-year yields, the top-end of the post-pandemic range, has brought out buying interest recently, and particularly since the US enjoys a yield advantage over many other major debt markets; some have also suggested that Japanese interest was likely to return as their new Fiscal Year gets underway. Another reason which analysts at Rabobank have been talking about, is that much of the rise in yields witnessed this year was a function of elevated uncertainty, rather than reflation, which was reflected in the rise of term premia (as reported by the NY Fed); however, the Fed's data shows that term premia has fallen since last Thursday (it reports with a two-day lag) which Rabobank cites to explain the rally seen in yields. Finally, some have also argued that Biden's big infrastructure spending is not likely to clear his own party in its current form, and this reduces the likelihood of bumper issuance in the months ahead, possibly easing concerns amid Treasury bulls. T-note (M1) settled 18+ ticks higher at 131-22.

Fed's Barkin (voter) said more jobs will return as the US economy reopens and that he expects a strong spring and summer. (Newswires)

US President Biden said the Fed is independent and he will not do the types of things that were done in the last administration in relation to the Fed. (Newswires)

US Treasury Secretary Yellen said COVID-19 has revealed weaknesses in global supply chains and that we must work to shore up resilience including that of the financial system. (Newswires)