• European bourses are contained and in proximity to the unchanged mark amid a sparse European session; energy names in particular choppy given similar action in crude once again
• German Health Minister Spahn says nationwide measures are needed to break the COVID-19 infection wave, a lockdown is required
• The USD remains underpinned but shy of yesterday's peak in DXY terms with antipodeans and JPY the current laggards
• Core debt is pressured with yields picking up and again action focused on the belly, while periphery yields outperform as Italy is looking to speed up plans for additional borrowing
• Looking ahead, highlights include US PPI, Canadian labour market report, Fed's Kaplan

CORONAVIRUS UPDATE

US COVID-19 cases +74,860 (prev. +61,258): deaths +871 (prev. +781), total vaccines administered 175mln (prev. 171mln), those fully vaccinated 66.2mln (prev. 64.423mln). (Newswires)

Some North Carolina vaccination sites were reported to have halted Johnson & Johnson (JNJ) vaccine shots following adverse reactions including fainting. (Newswires)

German Health Minister Spahn says nationwide measures are needed to break the COVID-19 infection wave, a lockdown is required. A top German public health official says that projections show that a lockdown should limit mobility massively and last 2-4 weeks. (Newswires)

UK travel taskforce said it will announce early next month which countries will be included in the red, amber or green categories as part of a new traffic light system based on virus risk and will also confirm early next month if travel can resume from May 17th. The task force added that restrictions for inbound passengers including 10-day hotel quarantine, home quarantine and testing will vary differently for arrivals depending on category in traffic light system, while key factors in assessing category will include % of population vaccinated, rate of infection and prevalence of variants of concern. Furthermore, it recommended removing the 'permission to travel form' which means passengers will no longer be required to provide a valid reason for travelling and it stated that the UK government is working on certification for both inbound and outbound international travel. (Newswires)

Italy is to ease COVID-19 restrictions for most of the country, according to Officials. (Newswires)

French Health Minister says France continues to encourage the use of the AstraZeneca (AZN LN) vaccine, and the health regulator should state later today that mRNA vaccine should be used as the second dose after AstraZeneca's first dose. (Newswires)

Australian PM Morrison said they have secured an additional 20mln Pfizer (PFE) vaccines and will now get 40mln doses this year with additional doses in Q4, while he also announced that large ticketed gatherings can operate at 100% capacity and that they are discussing how to permit vaccinated Australians to travel abroad and return without quarantine. Furthermore, the Australian Health Minister stated the vaccine rollout is relatively unchanged and that Pfizer plans an expansion of vaccine deliveries in April and May. (Newswires)

ASIA

Asia-Pac markets end the week with a cautious tone as regional bourses failed to sustain the early momentum from the tech-led gains in the US where sentiment was underpinned as yields eased and Fed Chair Powell stuck to the dovish script. US equity futures thereafter pulled back from session highs after the E-mini S&P briefly breached the 4,100 level for the first time. ASX 200 (-0.5%) was lacklustre with strength in tech, telecoms and gold miners offset by a subdued broader market amid concerns that the vaccination programme could be hindered after Australia recommended to halt the use of the AstraZeneca (AZN LN) vaccine for people under the age of 50 which also placed doubts on local partner CSL that has a contract to produce 50mln doses of the AstraZeneca vaccine. Nikkei 225 (+0.2%) was positive after an attempt to reclaim the 30k level although has partially retraced the advances with the government and expert panel set to discuss COVID-19 measures for Tokyo today. There were also mixed earnings from retailers as Seven & I posted a decline in its full year net and although Fast Retailing reported improved results, its shares were subdued with the Co. said to be facing pressure from the US to take a clear stand against the human rights abuses in Xinjiang. Hang Seng (-1.0%) and Shanghai Comp. (-1.0%) weakened amid continued US-China tensions after the US Commerce Department added 7 Chinese supercomputing bodies onto its entity list for alleged support to the Chinese military and with the US Senate’s legislation draft stating that the US must encourage allies to do more in balancing and checking China’s aggressive behaviour, while the latest Chinese inflation data was mixed as CPI and PPI topped estimates Y/Y with factory gate prices at its highest in more than 2 years amid rising commodity prices, but CPI M/M was at a wider than anticipated contraction. Finally, 10yr JGBs were flat as they took a breather from the prior day’s gains with demand subdued as Japanese stocks remained afloat and amid the absence of the BoJ purchases in the market today, while Australian yields were relatively unmoved following the 2025 Aussie government bond auction. 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 6.5409 vs exp. 6.5415 (prev. 6.5463)

• Chinese CPI (Mar) M/M -0.5% vs. Exp. -0.4% (Prev. 0.6%)
• Chinese CPI (Mar) Y/Y 0.4% vs. Exp. 0.3% (Prev. -0.2%)
• Chinese PPI (Mar) Y/Y 4.4% vs. Exp. 3.5% (Prev. 1.7%)

US Secretary of State Blinken and Philippines Foreign Affairs Secretary Locsin expressed concerns regarding Chinese militia vessels in the South China Sea and Blinken reaffirmed the applicability of the US-Philippines Mutual Defense Treaty to the South China Sea. (Newswires)

CAAM, Chinese auto industry body, expects the chip shortage to have a larger negative impact on China and production during Q2 than Q1. (Newswires)

PBoC says they will enhance Yuan convertibility within the Hainan province to facilitate cross-board trade/investment; will allow Co's in the province to issue Yuan-denominated products overseas, which would include bonds; to commence a pilot scheme for cross-border capital pool to integrate the use of Yuan and FX. (Newswires)

US

Fed's Daly (voter) said she is seeing a lift to the economy and anticipates a sharp rebound for activity but also noted that risks remain and that there are areas of vulnerability and concern around the US. (Newswires)

NY Fed's SOMA manager Logan said the Fed may mull adjusting administered rates in the event of undue downward pressure to overnight rates and that the Fed is planning minor tweaks to Treasury purchase sectors to remain roughly proportional to outstanding coupon and TIPS supply. Furthermore, she added that an environment of increased reserves will likely become the new normal and that updates to purchase allocations will be unveiled with the normal purchase calendar release in approaching months. (Newswires)

US President Biden is said to seek USD 715bln for the Pentagon in his discretionary request today which would be an increase from the USD 704bln the prior year. (Newswires)

Google (GOOG) is appealing to President Biden to work with the EU on tech/trade, saying the lack of coordination on such policy is hurting business. (Axios)

UK/EU

ECB's Schnabel fears an economic disaster for Europe if the EU recovery fund is halted, but sees no problem regarding the growing national debt levels arising from the Recovery Fund as an increase in public debt is inevitable and sensible in crisis. Separately, Stournaras said that Q3 would be too soon to commence a tapering of PEPP. (Spiegel/Newswires)

France sees public debt rising from 117.8% of GDP in 2021 to peak at 118.3% in 2025 and public deficit is seen falling from 9.0% in 2021 to 2.8% in 2027, while GDP seen at 5% in 2021, 4% in 2022, 2.3% in 2023, 1.5% in 2024 and 1.4% afterwards, according to sources. (Newswires)

GEOPOLITICAL

Russian Kremlin says the current developments around East-Ukraine pose the risk of full scale combat operation; on the call with German Chancellor Merkel says Russia has the right to move troops as it sees fit. (Newswires)

Chinese delegate in Vienna, on the JCPOA talks, says we have seen the satisfaction of the parties on the work of the expert committees and Vienna may witness the revival of the nuclear agreement. via Al Jazeera. (Twitter)

EQUITIES

Bourses in Europe trade mixed and continue to lack a firm direction (Euro Stoxx 50 -0.1%), with ranges of the price action also relatively narrow and contained following a directionless and uninspiring cash open. US equity futures meanwhile are similarly mixed/contained with modest underperformance experienced in the NQ (-0.1%) amid headwinds from rising yields and following the tech sector’s outperformance on Wall Street yesterday. Back to Europe, Spain’s IBEX (-0.2%) narrowly underperforms amid pressure from its financials exposure – with the banking sector among the laggards. Conversely, Switzerland’s SMI (+0.3%) gleans support from its vast healthcare exposure as the sector resides as the top performer. Overall, sectors are mixed with no clear theme nor risk biases. The tech sector is firmer with potential tailwinds from TSMC reported a third straight quarter of record sales, with revenue narrowly ahead of forecasts reporting a third straight quarter of record sales, revenue narrowly ahead of forecasts. In terms of individual movers, Credit Suisse (-1.3%) is pressured after the bank tightened financing terms it offers hedge funds following the Archegos situation, with the bank moving from static margining to dynamic margining which could reduce profitably for traders and force them to post more collateral. On the flip side, Tui (-5.3%) trades at the foot of the Stoxx 600 after it commenced a convertible bond offering of EUR 350mln which can be extended to EUR 400mln – with the proceeds to be used to improve its liquidity position.

China's Foreign Ministry says they will take the necessary measures to uphold the rights/interests of their Co's, in response to the US adding supercomputing names to the economic blacklist. (Newswires)

Norwegian Gov't is proposing that the Sovereign Wealth Fund cuts the number of companies within its reference index by 25-30%; index would then contain circa 6.6k firms vs current 8.8k firms. Recommend a continuation of gambling name investment but no investment in cannabis names. (Newswires)

FX

USD - Nothing new from Fed chair Powell to augment FOMC minutes or fresh catalyst for a rebound in US Treasury yields amidst relatively mild re-steepening, but enough it seems for the Dollar to regain some composure as the week draws to a close. Indeed, the index has rebounded from Thursday’s 91.995 low to probe above 92.300, with the ripples reaching all DXY components and spreading beyond to other Greenback counterparts as several psychological and key technical levels are being breached or rigorously tested. However, the Buck still has a long way to go before getting back on track, and the nearest hurdles come in the form of 200 and 21 DMAs at 92.330 and 92.363, then recent highs and 92.500 before the index even considers staging an attempt to revisit Monday’s 93.000+ peak. Turning to fundamentals, PPI data is due and could provide a guide for CPI next week.

AUD/NZD - The Aussie is underperforming across the board, with Aud/Usd struggling to retain grasp of the 0.7600 handle and Aud/Nzd fading below 1.0850 as the Kiwi maintains 0.7000+ status against its US rival ahead of the RNBZ next week. Hence, at this stage hefty option expiry interest in Nzd/Usd at the 0.6950 strike (1.2 bn) does not appear influential in contrast to expiries between 0.7600-20 (almost 1 bn) that could keep Aud/Usd capped amidst a suspension of AZN vaccinations in the state of NSW.

JPY - Having touched, but failing to pierce 109.00 vs the Dollar yesterday, the Yen has subsequently retreated through 109.50 on the aforementioned resumption of UST bear steepening that leaves JGBs with some catching up to do. However, 110.00 may continue to keep Usd/Jpy firmly in retracement mode after 2 consecutive rejections of the round number on Tuesday and Wednesday.

GBP/CHF/EUR/CAD - All conceding ground to the mini Greenback revival, as Sterling strives to pare declines from a deeper reversal to circa 1.3670 and under the 100 DMA at one stage (1.3687), but the Pound looks destined to give up more 2021 gains against the Euro as the cross approaches 0.8700 following a bullish close over 0.8670. Nevertheless, the single currency remains locked in its own battle vs the Buck around 1.1900 and the 200 DMA that comes in at 1.1896 today, while the Franc is pivoting 0.9250 and 1.1000 against the Dollar and Euro respectively in wake of lower than expected Swiss jobless rates. On that note, the Loonie is eyeing Canada’s labour report for independent direction between 1.2611-1.2555 parameters vs its US peer, and is also mindful that 1.2 bn option expiry interest at 1.2600 will be withdrawn barring execution at the NY cut.

SCANDI/EM - A bit of a double whammy for the Norwegian Krona as softer crude prices on balance compound considerably weaker than forecast headline CPI to leave Eur/Nok hovering near new wtd highs around 10.1270 compared to sub-10.0250 lows and Nok/Sek unwinding gains as the Swedish Crown holds above 10.2000 in Euro cross terms. Elsewhere, broad weakness vs the Usd and the Zar having to contend with Russia surmising that its Sputnik V vaccine is not as effective against SA’s COVID-19 strain, while the Cnh weighs up mixed Chinese data and Try digests latest CBRT survey findings revealing higher year-end projections for inflation and the 1-week repo rate, but significant Lira depreciation – see 8.00BST post on the headline feed for details.

RBA Financial Stability Review stated that housing price growth is being observed by regulators and that it is important for banks to refrain from excessive risks amid the low-rate environment. RBA also stated that Australian banks are in a strong position exiting the pandemic with abundant liquidity and funding, as well as adequate provisions for non-performing loans, while it added that the committed liquidity facility for banks may no longer be needed due to increase of bond issuances. (Newswires)

Notable FX Expiries, NY Cut:

• USD/CAD: 1.2600 (1.2BN)
• NZD/USD: 0.6950 (1.2BN)

FIXED

The tide could easily turn again, but the signs are somewhat ominous for debt futures as Bunds retreat from a slightly lower high to trade below worst levels posted in the previous 2 Eurex sessions, while BTPs are beating a hasty retreat from 149.00+ peaks to new w-t-d lows following reports that Italy is fast-tracking preparations to increase borrowing by Eur 48 bn. Meanwhile, Gilts are at a fresh 128.13 Liffe base and closer to a double bottom (128.12) that is protecting 128.00 and Tuesday’s 127.62 trough and US Treasuries are extending losses with the curve re-steepening ahead of US PPI that may or may not be overshadowed by Canadian jobs at the same time.

Italy is said to be speeding up plans for up to EUR 48bln in extra borrowing, according to reports. (Newswires)

COMMODITIES

WTI and Brent front-month futures traded with modest losses in early European hours as the indecisive risk tone and firmer Dollar keep prices subdued but somewhat contained. At the time of writing, WTI resides around USD 59.50/bbl (vs 59.13-95 range) whilst its Brent counterpart trades near USD 63/bbl (vs 62.57-63.49 range). Futures saw a similar bout of pre-US-entrance choppiness as had been experienced throughout the week, with no specific fundamental catalyst at the time of the move. The narrative remains little changed as participants eye any demand impacts from the rising COVID cases among key consumers, prompting more stringent lockdown measures – with the German Health Minister today stating that nationwide measures are needed to break the latest wave. On the flip side, France has announced that the first AstraZeneca dose should be followed by a second dose of an mRNA-based vaccine for those under 55 years of age. Although this announcement may have been a function of the rare blood clots, this may provide more flexibility when it comes to the vaccination drive as the EU has secured more orders of the latter. On the supply front, Chinese oil giant CNOOC said today a fire that broke out on an offshore platform Monday was extinguished on Tuesday. The incident may affect its production by up to 600k barrels, or 0.1% of the annual total. Aside from the above, oil-specific news flow has remained on the lighter side. Elsewhere, spot gold and silver are subdued as they track the firmer Buck, with the former back below USD 1,750/oz (vs high 1,757/oz) and the latter still holding its head above USD 25/oz (vs high 25.49/oz). In terms of base metals, LME copper remains softer whilst Shanghai copper and Dalian iron prices were pressured overnight by the firmer Dollar, indecisive risk tone – with some also citing fears over potential Chinese policy tightening following the inflation figures.