• European bourses are mixed but range-bound for the morning, Euro Stoxx 50 U/C; Stateside, futures are slightly softer but contained
• USD is downbeat with lower yielding peers beginning to pick-up as the US yield curve bull-flattens slightly as EGBs pick back up from Friday's pressure
• Fed's Powell said the economic recovery is better than he expected and with vaccinations, there is a resumption of what seems to be a very strong expansion
• Crude has once again been choppy, WTI & Brent +1.0%, with geopolitical updates re. Ukraine and Saudi/Houthis likely a factor
• Looking ahead, highlights include ECB asset purchases, de Cos, BoE's Haldane, Tenreyro, Fed's Rosengren, 3 & 10yr 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)

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. Subsequently, Germany reportedly sees six to eight weeks of heightened infections and could see longer restrictions than initially expected, according to Tagesspiegel. (Newswires/Tagesspiegel)

Italian Health Minister says less restrictive COVID-19 measures could be implemented from May, will need to lift such measures slowly, according to a paper. (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 (-0.3%) 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 (-0.8%) 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 (+0.1%) 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 (-0.9%) and Shanghai Comp. (-1.1%) 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 (-3.3%) 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)

Chinese M2 Money Supply YY* (Mar) 9.4% vs. Exp. 9.6% (Prev. 10.1%)

• New Yuan Loans* (Mar) 2730B vs. Exp. 2450.0B (Prev. 1360.0B)
• Outstanding Loan Growth* (Mar) 12.6% vs. Exp. 12.6% (Prev. 12.9%)

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. (Newswires)

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)

US

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)

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 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. Subsequently, German Chancellor Merkel's CDU is reportedly backing the bid from Laschet to run for Chancellor. (Newswires)

German BDI Industry Association cuts its 2021 GDP forecast to 3% from 3.5%

• German Engineering Association VDMA has upgraded its 2021 production growth forecast to 7% from 4%; markets in China, rest of Asia, and the US are providing confidence

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. Subsequently, the Iranian Foreign Minister Zarif said he is blaming Israel for the Natanz nuclear site sabotage, according to TV; adding that they will respond by undertaking further nuclear progress, Journalist Aslani. While Iran said the attack did not impact uranium enrichment, with affected centrifuges to be replaced shortly with more capable ones. (Newswires/Twitter)

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)

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. Subsequently, the Ukraine Foreign Ministry says Russia has boycotted attempts to commence dialogue over the increased military presence on the Ukraine border. Followed by similar commentary from Ukraine's President (Newswires)

Yemeni Houthis state have attacked targets in Saudi Arabia with 17 drones, including Aramco facilities in Jubail in Jeddah; military targets were also attacked in Southern Saudi, according to state TV. Two ballistic missiles also fired. (Newswires)

EQUITIES

European equities (Euro Stoxx 50 Unch) have kicked the week off with little in the way of firm direction. Macro drivers remain very much the same in Europe as pessimism from current lockdowns is expected to subside at some stage to a more upbeat outlook as the European vaccination effort picks up steam. In the US, strong data continues to accompany a successful vaccine rollout, which could see the nation reach herd immunity by around May. All of which comes amidst a highly support monetary and fiscal backdrop, whilst market participants also hope that some of the more aggressive elements of the Democratic Party tax plans can be curbed. This week sees US earnings season kick-off in earnest with some of the large-cap banks due to report. Goldman Sachs highlights that consensus currently forecasts aggregate sales growth of 5% and EPS growth of 19%. From a sectoral standpoint, GS notes that “consumer Discretionary is anticipated to pace the market with 97% year/year EPS growth powered by an 11% rise in sales”. Back to Europe, sectors are currently broadly lower across the board with the exception of Autos & Parts, which have been supported by the likes of Continental (+1.7%), Daimler (+1.8%) and BMW (+1.3%). To the downside, some of the other more cyclically-exposed stocks lag, with losses seen in Basic Resources, Retail, Oil & Gas and Banks. In terms of stock specifics, Diasorin (+7.9%) sit at the top of the Stoxx 600 after agreeing to purchase Luminex (+10% pre-market) for USD 37/shr in a USD 1.8bln deal. Suez (+8%) and Veoilia (+9) shares have been supported by news that they have come to an agreement, allowing for the merger of the two companies. Finally, another deal to watch out for is the potential acquisition of Nuance Communications (+21% pre-market) by Microsoft (+0.3% pre-market) for circa USD 16bln, with sources suggesting that an announcement could be made this week.

Microsoft (MSFT) is nearing completion of a deal to purchase Nuance Communications (NUAN) for circa USD 16bln, deal could be announced as soon as this week according to sources. (FT)

US Sen. Josh Hawley (R-Mo.) is to unveil a new "trust-busting" plan for tech whereby corporate giants would be barred from acquisitions, and antitrust laws would get sharper teeth under the new proposal. (Axios)

FX

DXY: A somewhat choppy start to the week for the broader Dollar and Index, albeit in a relatively contained range with the upside conviction seen in early European trade abating - the intraday band currently stands at 92.331-091. The weekend saw remarks from Fed Chair Powell, who stuck to his guns with emphasis on the labour market, whilst noting the economy is recovering better than he had expected, but virus flare-ups remain a significant risk. On that note, it is worth keeping on the radar the White House semiconductor summit slated for today (time TBC), as around 20 heavy-cap companies convene to discuss the chip shortage and its knock-on effect on auto production and subsequently jobs. From a fiscal standpoint, reports suggest US President Biden aims to complete the infrastructure program by the summer and is open to cooperate on the structure of the spending plan – although the proposal drew for Republicans last week. Key risk events for the European session remain on the lighter side, although the state-side Note auctions (3s, 10s) may garner attention. Looking ahead, the week is abundant with risk events, including US inflation, Fed speaks, and the official start of US earnings season, which could induce some sentiment-driven Dollar flows.

GBP, EUR: Mixed fortunes for the core European currencies with Sterling outpacing the Single Currency amidst some technical influence alongside reports that the UK and EU are reportedly nearing an agreement regarding implementation of post-Brexit trading laws for Northern Ireland, whilst ECB speakers offered little in terms of the impetus for the EUR. The divergence also comes against the backdrop of the UK easing its COVID-related restrictions as the Eurozone observes more stringent rules. As such, EUR/GBP has been on a steady downward trajectory since the European open as the pair eyes its 50 DMA at 0.8635 vs 0.8695 at best. Cable as such has been bolstered from its 1.3667 base, back above its 100 DMA (1.3689) to a high just shy of 1.3750 ahead of the 8 April high (1.3782) and the 1.3800 psychological mark. EUR/USD meanwhile relinquished its 1.1900-status in early hours and dipped below its 200 DMA (1.1898) as it inched closer to 1.1850 and its 21 DMA (1.1846), before the waning Dollar took the pair back to 1.1900, whilst above-expected but outdated February retail sales data unsurprisingly failed to spur any action.

AUD, NZD, CAD: All now narrowly firmer against the Buck to varying degrees, with the Loonie the laggard amid early losses across the crude complex, with the Aussie and Kiwi initially succumbing to the modestly firmer Buck and softer risk tone alongside negative omens emanating from the downbeat Chinese performance. AUD/USD has picked up pace north of 0.7600, having had earlier dipped below the figure, whilst upside levels see the 100 and 21 DMA both converging at 0.7657. NZD/USD holds a 0.70+ status with the round the nearest point of support and the 21 DMA (0.7061) the closest point of resistance above 0.7050.

CHF, JPY: Elsewhere, the CHF and JPY are narrowly mixed with USD/JPY reacting to the soured risk tone as it dips below 109.50 (vs 109.76) to a current low around 109.30, whilst the Swissie remains flat in a tight range vs the USD and EUR whilst weekly sight deposits only portrayed incremental changes W/W.

FIXED

A firmer, but overall largely contained start to the week for core counterparts in what can perhaps be best surmised as a retracement or paring back of the downside seen on Friday. The periphery is modestly outperforming at present but this magnitude would be befitting of the pronounced pressure, particularly in BTPs, experienced at the tail end of last week. Throughout the morning, fresh macro drivers have been somewhat sparse with resistance marks still someway off the current peaks; for instance, the Bund best thus far is at 171.87 and little resides after this until 172.12 the high from last-Thursday. Currently, benchmarks are firmer but off earlier highs with yields subdued as such but again off lows and outside of Europe performance is essentially unchanged though directionally in-fitting with EGBs. For the session ahead, attention resides on Central Bank speak after weekend commentary from ECB members which was somewhat critical around the current outlook but such remarks have not attracted too much attention or seemingly exerted much influence on prices. Alongside the weekly net ECB PEPP update which could well be hindered by an Easter-shortened week for the operations, Goldman Sachs expects a print of EUR +15.7bln with circa EUR 4bln in downward adjustments re. Easter. Stateside, participants digest remarks from Fed Chair Powell on Sunday in which he was upbeat saying the economy has performed better than expected. Powell is scheduled to speak again on Wednesday amid a packed week on the speaker front with Williams and Clarida also featuring. Elsewhere, but just as in focus, is the hefty supply slate which commences with a USD 58bln 3yr and a USD 38bln 10yr note auction today before a 30yr outing later in the week which could well dictate price action in the near-term depending on how the issuance is received. For reference, the US curve is currently bull-flattening a touch though, in-fitting with the EZ, yields are currently off lows and well within Friday’s ranges.

COMMODITIES

WTI and Brent front month futures have been subject to yet another choppy European morning as the complex attempts to tackle the COVID-related demand headwinds alongside supply-side risks emanating from several geopolitical standoffs. Kicking off with the latter, the most notable development has been reports that Yemeni Houthis have bombarded areas in Saudi Arabia with drones and ballistic missiles, with 10 drones reportedly targeting Aramco facilities and some military sites - markets are still awaiting confirmation from the Saudi side. Elsewhere, Iran experienced an accident at its Natanz nuclear operation with Tehran pointing the finger at its adversary Israel - although uranium enrichment has not been impacted and more sophisticated centrifuges will soon be introduced. On this note, Iranian nuclear negotiation will once again commence this week as the US mulls removing some tariffs to salvage the deal. Meanwhile, heightened tensions between Ukraine and Russia have seeped into the west after US sent two warships to express its presence in the Black Sea in a bid to deter Russia. Ukraine's Foreign Ministry also stated that Russia has boycotted attempts to commence dialogue over the increased military presence on the Ukraine border as over 40k troops have been amassed by Moscow is both Crimea and Ukraine's eastern border. It's also worth keeping China tensions on the radar as US Secretary of State Blinken said the US is concerned about China's aggressive actions against Taiwan. On the demand side, COVID continues to be the overarching theme as India overtook Brazil as the worst-hit country by the pandemic, while over in Europe, Germany reportedly sees six to eight weeks of heightened infections and could see longer restrictions than initially expected. On the flip side, Britain has eased its respective COVID-related restrictions with most of the services sector seeing a controlled re-opening. WTI May resides around USD 59.85/bbl (vs low USD 58.73/bbl) while Brent Jun sees itself near USD 63.50/bbl (vs low USD 62.41/bbl). Elsewhere, spot gold and silver have been uneventful, contained within recent ranges and mirroring Dollar action as the metals await fresh catalysts. In terms of base metals, LME copper eases further from the USD 9,000/t mark as it mimics similar action seen in the Shanghai contract overnight as Chinese markets succumbed to softness. Chinese steel futures also saw losses on concerns over disruption as Premier Li pledged to tighten control of iron ore. That being said, participants expected the April-June period to see a notable increase in Chinese construction activity. Note, the China Iron & Steel Association will hold a meeting on April 13.

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)