• Asian equity markets began the week subdued and US equity futures marginally pulled back from record levels
• Participants were tentative ahead of the start of US earnings season and this week’s key data releases
• In FX, the DXY consolidated above 92.00, EUR/USD trades in close proximity to 1.1900 and GBP/USD sits just north of 1.3700
• US President Biden aims to complete the infrastructure program by the summer, according to the US Energy Secretary
• Looking ahead, highlights include EZ retail sales, ECB asset purchases, ECB's Panetta, de Cos, BoE's Haldane, Tenreyro, Fed's Rosengren, 10 and 30yr supply from the US

CORONAVIRUS UPDATE

US CDC reported total COVID-19 cases increased to 30.97mln from 30.90mln the day before and total deaths increased to 558.8k from 558.0k the day before. (Newswires) NIH's Fauci said there is no need to be concerned about any change in efficacy of the J&J (JNJ) vaccine and that there was nothing in its report that was a red flag. (Newswires)

Pfizer (PFE) and BioNTech (BNTX) requested that regulatory agencies expand emergency use of their COVID vaccine to adolescents. It was also separately reported that the South African COVID-19 variant could be more likely than other strains to “break through” and infect those who had two doses of the Pfizer/BioNTech vaccine, according to an Israeli study. (Newswires)

UK COVID-19 cases +1,730 (prev. +2,589) and deaths +7 (prev. +40), French cases +34,895 (prev. +43,284) and deaths +176 (prev. +210), Italian cases +16,746 (prev. +17,567) and deaths +331 (prev. +344), while Dutch cases +8,218 which was the largest increase in over 2 weeks. (Newswires)

German Chancellor Merkel’s coalition is drafting legislation to transfer the authority to impose COVID-19 restrictions to the federal government from regional leaders and plans a lockdown in which all non-essential stores will need to close and an evening curfew for areas where the 7-day incidence rate of infections is greater than 100 cases per 100,000 of people for three consecutive days. (Newswires)

India overtook Brazil as the 2nd worst affected by COVID-19 after cases increased by a record 168,912 to a total 13.53mln and deaths increased by 904 to a total of 170,179. It was also reported that India banned the exports of Remdesivir and its respective active pharmaceutical ingredients amid the surge in domestic COVID-19 cases with the ban to last until the situation improves. (Newswires)

Director of the Chinese Center of Disease Control dismissed claims by some press and international social media users that the director “admitted” Chinese vaccines have a low protection rate against COVID-19, while the agency also raised the idea of mixing vaccines and varying doses to increase efficacy. (Global Times/FT)

ASIA

Asian equity markets began the week subdued and US equity futures marginally pulled back from record levels with participants tentative ahead of the start of US earnings season and this week’s key data releases including Chinese trade tomorrow, as well as GDP, Industrial Production and Retail Sales data on Friday. ASX 200 (-0.4%) was pressured with gold miners and real estate the underperformers of the broad subdued picture across Australia's sectors amid vaccine-related pessimism after the government abandoned its vaccination target of inoculating the entire population by year-end with PM Morrison refraining from setting a new target. Nikkei 225 (-0.7%) swung between gains and losses with price action at the whim of a firmer currency and after restrictions were reimposed for Tokyo, Kyoto and Okinawa. KOSPI (Unch.) was relatively flat with downside cushioned following a continued surge in exports during the first 10 days in April and with SK Innovation and LG Chem lifted after they agreed to settle a trade secret dispute whereby SK Innovation will pay USD 1.8bln to LG Chem’s unit which boosted SK Innovation shares by double digits as it paves the way for the Co. to complete building an EV lithium-ion battery plant in Georgia that will supply batteries to Ford and Volkswagen. Hang Seng (-1.1%) and Shanghai Comp. (-0.8%) weakened ahead of key Chinese data releases and amid lingering tensions in the region as US Secretary of State Blinken noted the US is concerned about China's aggressive actions against Taiwan and warned it could be a "serious mistake" for anyone to try to change the status quo by force. Focus was also on Alibaba shares after Chinese regulators imposed a USD 2.8bln fine for the Co. for abusing market dominance which weighed on other tech giants including Tencent and Meituan Dianping on concerns they could be next to face tighter scrutiny, although Alibaba shares actually rallied despite the record penalty as it was said to just account for 4% of the Co.’s domestic revenue in 2019 and with the Co. not expecting any material impact on its business from the change of exclusivity arrangements imposed by regulators. Indian markets suffered with the Nifty (-2.8%) heavily pressured from COVID-19 concerns amid another record daily increase in infections which pushed India back above Brazil to the 2nd spot of countries worst impacted by the pandemic. Finally, 10yr JGBs were flat despite the lacklustre picture across stocks, with price action dejected after Friday’s retreat and amid the absence of the BoJ purchases in the market today, while operations from the RBA and RBNZ who were in the market for AUD 2bln and NZD 170mln of government bonds had little effect on their respective yields.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net CNY 10bln injection. (Newswires) PBoC set USD/CNY mid-point at 6.5578 vs exp. 6.5587 (prev. 6.5409)

US Secretary of State Blinken said the US is concerned about China's aggressive actions against Taiwan and warned it could be a "serious mistake" for anyone to try to change the status quo by force. It was also reported that the White House said the US is not looking for confrontation with China but expressed concern about actions related to Taiwan, while the US is said to ease restrictions on meeting Taiwanese officials with the Biden administration seeking to boost support for Taipei amid growing Chinese aggression in the region. (Newswires/FT)

US Secretary of Defense Austin spoke with the Philippines Defense Secretary regarding the South China Sea and both sides were said to look forward to conducting joint exercises, while the Philippines’ side stated that Austin is to look into the issue of expediting the delivery of Moderna’s COVID-19 vaccines which Philippines ordered. (Newswires)

China’s Financial Stability and Development Committee called for efforts to stabilise prices after rising commodity costs spurred the largest increase in producer prices in almost 3 years. In other news, China’s government told smaller, local financial institutions to bolster risk management and avoid “excessive” growth as they step up a campaign to curb on a build-up of debt as the economy stabilizes. (Newswires)

South Korea April 1st-10th Exports rose 24.8% Y/Y and Imports rose 14.8% Y/Y. (Newswires)

UK/EU

UK Business Secretary Kwarteng revised the proposed stake threshold for when overseas buyers must inform authorities of a bid under the National Security and Investments Bill to a 25% stake from the proposed 15%. It was also reported that UK MPs and business figures have set up a new independent commission to seek improvements to the UK's trade deal with the EU and the rest of the world. (FT)

UK and EU are reportedly nearing an agreement regarding implementation of post-Brexit trading laws for Northern Ireland. (FT)

The Deloitte CFO survey noted that optimism among CFOs has risen to a record high. The successful rollout of vaccines in the UK, prospective re-opening of the economy and a gathering US recovery have all boosted sentiment. (Deloitte)

ECB's President Lagarde stated that the recovery is delayed but not derailed and reiterated that they do not have to use the full PEPP envelope. (CNBC)

ECB’s Panetta said the central bank should not accept a further delay in lifting inflation back to its target as the current outlook is unsatisfactory and that persistent misses risk damaging the economy. (El Pais)

Germany CDU leader Laschet said he had a long conversation with CSU leader Soeder regarding who will run as candidate and that they are both ready to stand, while Soeder stated that the discussion was not conclusive and that it is important for them that the decision regarding the chancellor candidate depends on who has the best chances. (Newswires)

FX

In FX markets, the DXY consolidated above the 92.00 level and well within Friday’s ranges after the latest comments from Fed Chair Powell remained in-fitting with the dovish Fed and strong economic outlook rhetoric in which he stated that reopening too quickly is a principal risk to the economic recovery and that the Fed will support the economy until the recovery is complete, while he added the economic recovery is better than he expected and that with vaccinations, there is a resumption of what seems to be a very strong expansion. EUR/USD was slightly softer after giving up the 1.1900 handle, with the single currency not helped by the continued elevated COVID-19 cases across the bloc and as German Chancellor Merkel’s coalition drafts legislation to transfer the authority to impose virus restrictions to the federal government from regional leaders including plans for a lockdown and curfew for certain areas with high infections. GBP/USD was subdued after briefly slipping back beneath 1.3700 to revisit its 2-month lows despite a further easing of UK lockdown restrictions from today in which non-essential retail, outdoor dining and sports facilities will be permitted to reopen. USD/JPY and JPY-crosses were pressured by the cautious risk mood which also weighed on antipodeans alongside a weaker CNY reference rate setting and pressure in Chinese commodity prices.

COMMODITIES

WTI crude futures were choppy around the USD 59.50/bbl level with prices not helped by the ongoing COVID-19 situation among the EU's largest members while there was also recent commentary from Morgan Stanley which exited its long Brent idea and moderated it Q3 price forecast to USD 65-70/bbl from a prior estimate of USD 70/bbl citing a potential quicker return of Iranian exports and continued increase in US drilling activity. Gold prices were marginally softer as the greenback held steady and copper prices were pressured as Shanghai metals trade came online and Chinese commodity prices were pressured amid price control concerns after Premier Li suggested last Friday that China is to strengthen market regulation of raw materials to ease the cost pressure of enterprises and which follows the surge in China's factory gate prices by the most in nearly 3 years.

Baker Hughes Rig Count (09/Apr.): Oil unchanged at 337, Nat gas +2 at 93, total +2 at 432. (Newswires)

Saudi Jeddah Islamic Port halted maritime traffic on Saturday due to an increase in wind speed, but the port was then reopened on Sunday. (Newswires)

Maersk’s Head of Global Ocean Network’s Jensen has cautioned that we should not expect a swift return to normal service following the Suez Canal blockage, as the real backlog/congestion will begin shortly at destination ports and voyage schedule negotiations. Expects the effects to continue into May. (FT)

GEOPOLITICAL

Iran stated that a problem with an electrical distribution grid at the Natanz nuclear facility caused an accident on Sunday, while its nuclear chief claimed that this was the result of a “terrorist” attack and that Iran reserves the right to take action against the perpetrators. (Newswires)

Israeli Defense Minister Gantz stated that Israel views the US as a full partner in all operation theatres including Iran and will work to ensure any new deal with Iran prevents a dangerous arms race in the region. (Newswires)

The US Pentagon said the US routinely operates and conducts operations in the Black Sea and it is not anything new. In relevant news, German Foreign Minister Maas said they discussed Ukraine with US Secretary of State Blinken and stated the situation is concerning which NATO and the EU are closely following, while Maas further stated they agreed with Blinken that Russia must de-escalate and restore 'military transparency'. (Newswires)

Russia’s Kremlin stated that no one allows for the possibility of war with Ukraine and that civil war in Ukraine is also unacceptable, while it stated that German Chancellor expressed concern about the situation during a conversation with President Putin but did not demand Russia to reduce its military presence near the border with Ukraine. (Newswires)

US

The Treasury Curve bear-steepened, although longer end yields were only slightly firmer, with 20-year yields flat. There was much attention on US PPI data, after Chinese inflation metrics came in higher than expected overnight, leading some desks to cite ‘inflation fears’ in the early part of the day; Treasury yields rose in wake of a higher-than-expected reading in the US, despite recent commentary from Fed officials suggesting that they would be looking through the ‘transient’ nature of CPI spikes in Q2, since they were likely to be a function of pandemic base effects. Some desks suggested that the higher-than-expected PPI data helped provide some concession ahead of next week’s 3s, 10s and 30s supply. On inflation, Fed’s Vice Chair Clarida offered an interesting framework on how he was viewing inflation, arguing that if inflation at the end of this year had not declined from levels seen around mid-year, then he would not consider the spike higher in prices to be ‘transitory’ (with the implication being that the Fed may then step in to cool pressures). Fed’s Kaplan was also on the tape, highlighting his hawkish disposition, stating that while he did not want the Fed to be pre-emptive, he did not want the central bank to be late in its reaction. T-note futures (M1) settle 8+ ticks lower at 131-23+.

Fed Chair Powell stated that what we are seeing now is the economy at an inflection point and noted that the major risk to the economy is a resurgence of the virus. Fed Chair Powell also stated that reopening too quickly is a principal risk to the economic recovery and that the Fed will support the economy until the recovery is complete, while he wants to see labor force participation moving higher in assessing progress and noted that some parts of the country have more than fully recovered but there are real disparities with the recession over for many although for millions of others, it is not yet finished and we will keep those people in mind. Furthermore, Powell added the economic recovery is better than he expected and with vaccinations, there is a resumption of what seems to be a very strong expansion. (Newswires)

US President Biden aims to complete the infrastructure program by the summer and is open to cooperate on the structure of the spending plan, according to US Energy Secretary Granholm. In other news, President Biden's budget plan includes USD 6.5bln of funding for a new DARPA-like health agency which would aim to boost development of medical treatments, while the agency would be named ARPA-Health and operate under the NIH. (Newswires)

White House will hold a virtual summit on Monday regarding semiconductors and the supply chain, while it was separately reported that US President Biden will join in on the semiconductor conference. (Newswires)