• Asian equity markets mostly shrugged off the subdued handover from Wall St peers but with gains capped ahead of this week’s risk events
• Chinese March trade figures saw exports and the trade balance miss expectations whilst imports topped estimates
• US Treasury Secretary Yellen will reportedly not label China as a currency manipulator in the Treasury's FX report due on Thursday
• In FX, the DXY recouped some of yesterday's losses, EUR/USD trades sub-1.1900 and cable remains on a 1.37 handle
• Fed's Bullard said it is too early to talk about a change in monetary policy but later added that a 75% vaccination rate would allow for the taper debate
• Looking ahead, highlights include UK GDP, German ZEW, US CPI, OPEC MOMR, Fed's George, Daly, Harker, Barkin, Bostic, supply from Netherlands, UK, Italy, and the US

CORONAVIRUS UPDATE

US COVID-19 cases +49,409 (prev. +68,012), deaths +328 (prev. +750), first vaccine dose administered 190mln (prev. 187mln), those fully vaccinated 74mln (prev. 72.6mln). (Newswires)

NIH’s Fauci said the recent Israeli study is misleading and suggested to be careful in reaching conclusions on the Pfizer (PFE) vaccine effectiveness against the South African variant. Furthermore, Fox's Lawrence tweeted that 50% of US adults will have at least one dose of a vaccine for coronavirus by the end of this week and that Dr Fauci stated the US does not need the AstraZeneca (AZN LN) vaccine for herd immunity. (Newswires/Twitter)

Gilead (GILD) said it decided to stop the Phase 3 Remdesivir intravenous study in high-risk non-hospitalized patients with COVID-19 although this was not due to efficacy or safety concerns, while patients enrolled in the study will continue to be followed and the Co. continues to develop investigational inhaled dosage forms of Remdesivir and novel oral antivirals. (Newswires)

UK PM Johnson said the UK has passed a significant milestone of offering jabs to everyone in the 9 highest risk groups and will now push ahead towards the goal of offering all adults a vaccine dose by end-July. In relevant news, a COVID-19 study published in the Lancet found that the B.1.1.7 variant which was first seen in the UK and is now the dominant strain in US, was not as dangerous as thought with the variant not linked to serious disease, but was found to spread faster than other strains. (Newswires)

Turkish Health Minister said the health body is to recommend alternative Government measures against the COVID-19 spread and stated that at least 30mln doses of Pfizer (PFE) and BioNTech's (BNTX) vaccines could come by the end of June. (Newswires)

Ireland limited the AstraZeneca (AZN LN) vaccine to people aged over 60-years old. (Guardian)

ASIA

Asian equity markets mostly shrugged off the subdued handover from Wall St peers but with gains capped ahead of this week’s risk events including US earnings and as participants digested the latest mixed Chinese trade data. ASX 200 (Unch.) and Nikkei 225 (+0.8%) were lifted from early trade with Australia initially led higher by outperformance in tech although upside was later capped by a subdued commodities complex and ongoing vaccine delay concerns after Australia abandoned plans to purchase Johnson & Johnson's (JNJ) one-dose COVID-19 vaccine due to AstraZeneca (AZN LN) similarities, while Tokyo sentiment was underpinned as exporters found relief from a reversal of some of the recent currency inflows. Hang Seng (+1.0%) and Shanghai Comp. (Unch.) were varied with outperformance in Hong Kong as Alibaba shares extended on the prior day’s post-penalty gains and after affiliate Ant Group kowtowed to Beijing via an overhaul in which it will become a financial holding company, although the mainland was indecisive as participants digested the March trade figures in which Exports and Trade Balance missed expectations but Imports topped estimates and which also followed mixed loans and aggregate financing data from China. Finally, 10yr JGBs were flat with demand sapped amid the gains in Japanese stocks and after the results of the enhanced liquidity auction for long to super-long end JGBs showed the b/c printed unchanged from the previous, while yields across the Tasman were higher with the Australian 10yr up around 6bps after the inflation-indexed bond auction and 2032 bond sale through syndication in Australia, as well as a slightly reduced RBNZ QE operation.

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 reference rate at 6.5454 vs. Exp. 6.5460 (Prev. 6.5578)

US Treasury Secretary Yellen will not label China a currency manipulator in the Treasury's FX report due to Congress on Thursday and may at some point, reverse the expansion under Mnuchin by tightening the criteria for designation and reducing the number of countries reviewed, according to sources. There were also separate reports that US is expected to designate Taiwan as a currency manipulator as it satisfies the three criteria used by the Treasury Department although analysts have warned that any tariffs imposed could hamper the strengthening ties between US and Taiwan. (Newswires/FT)

PBoC policy adviser Wang said China should avert a credit contraction and prevent inflation expectations from intensifying, while the adviser suggested that they should make contingency plans to cope with possible policy shifts by the US Fed. In other news, it was also reported that China is said to be investing CNY 1.8tln in new infrastructure this year. (Newswires/China Daily)

• Chinese Trade Balance (CNY)(Mar) 89.98B vs. Exp. 327.80B (Prev. 675.90B)
• Chinese Exports (CNY)(Mar) Y/Y 20.7% vs. Exp. 28.6% (Prev. 50.1%)
• Chinese Imports (CNY)(Mar) Y/Y 27.7% vs. Exp. 17.6% (Prev. 14.5%)
• Chinese Trade Balance (USD)(Mar) 13.80B vs. Exp. 52.05B (Prev. 103.25B)
• Chinese Exports (USD)(Mar) Y/Y 30.6% vs. Exp. 35.5% (Prev. 60.6%)
• Chinese Imports (USD)(Mar) Y/Y 38.1% vs. Exp. 23.3% (Prev. 22.2%)

China's Customs spokesman said steady domestic growth boosted trade, while Customs also stated the nation's foreign commerce improved and is increasing but noted the international economic landscape remains grim with foreign trade hampered by instability and uncertainties. (Newswires)

UK/EU

• UK BRC Retail Sales (Mar) Y/Y 20.3% (Prev. 9.5%)

The EU Commission has, in contrast to some expectations, said the UK should be left out of the Lugano convention due to the UK not being a member of either the EEA or EFTA, Commission’s view is subject to approval from member states. (FT) Lugano convention determines which countries courts have jurisdiction in cross-border disputes

ECB's Centeno stated that a premature withdrawal of stimulus could initiate substantial costs. (Newswires)

Italy is preparing a new EUR 40bln economic stimulus package, according to sources. (Newswires)

FX

In FX markets, the DXY recouped some of yesterday’s losses amid some positioning ahead of the approaching key economic releases stateside including CPI data later today, followed by industrial production and retail sales on Thursday. There were also comments from Fed officials including Bullard who stated that it is too early to talk about a change in monetary policy and that he will leave it to Fed Chair Powell to initiate the talk on tapering but later added that 75% vaccinations would allow for the taper debate. The mild recovery in the greenback forced EUR/USD to give back some of the recent gains along with the 1.1900 handle, while GBP/USD consolidated with the pair contained by resistance around 1.3750. USD/JPY and JPY-crosses rebounded as risk appetite improved for the region although antipodeans remained lacklustre after the recent pressure in commodity prices and mixed Business Survey data from Australia and New Zealand.

• Australian NAB Business Confidence (Mar) 15 (Prev. 16)
• Australian NAB Business Conditions (Mar) 25 (Prev. 15); record high.
• New Zealand NZIER Confidence (Q1) -13 (Prev. -6.0)
• New Zealand NZIER QSBO Capacity (Q1) 93.3% (Prev. 95.1%)

COMMODITIES

WTI crude futures reclaimed the USD 60/bbl level amid the mostly constructive mood in the APAC region although price moves were limited after yesterday's whipsawing as participants reflected on the ongoing global virus concerns and associated restrictions in Europe where German states agreed a 3-week extension to lockdown measures. Geopolitical concerns also lingered after the Houthis launched drone attacks targeting Aramco facilities in Jeddah and Jubail, while focus for the complex shifts to the latest stockpile data with the private sector inventory report due later today. Gold traded subdued with prices hampered as the greenback nursed losses and with CPI data on the horizon, while copper languished near yesterday's lows around the USD 4/lb level amid the indecisive mood in its largest purchaser China.

EIA sees US total shale oil production for May up 12,000 BPD at 7.612mln BPD (vs up 5,000 BPD in April). (Newswires)

GEOPOLITICAL

US President Biden's admin team will keep Trump's choice for US Ambassador in Moscow in place which highlights a will to support stability in some areas in the US-Russia relationship, according to sources. There were separate reports that White House said the US is concerned about Russia's growing aggression on the Ukraine border, while it also stated that the US was not involved in the attack on Iran’s nuclear facility. (Newswires)

US

Treasuries were slightly lower, with the belly weakest, as they continue to pare last week's strength; supply also on the radar. By settlement, 2s +1.4bps at 0.171%, 5s +1.9bps at 0.887%, 10s +0.5bps at 1.671%, 30s +0.3bps 2.342%; TY1 volumes were below average. TIPS yields were flat to modestly cheaper at the front-end, seeing breakevens widen a touch. SOFR unch. at 1bps. NY Fed RRP demand at USD 30.221bln across 15 bidders (prev. 31.265bln across 11 bidders). US sold USD 58bln of 6-month bills at 4bps; sold USD 58bln of 3-year notes at 0.376%; sold USD 38bln of 10-year notes at 1.680%. Treasuries were choppy overnight with initial downside seen amid the approaching US supply, in addition to spillover from Aussie bonds ahead of local supply (2032 paper) down under on Tuesday. Wires reported a USD 530k/bp block 5s20s steepener printing too in US futures. However, weakness in sovereigns reversed later in APAC trade as the latest episode in China tech stocks hit sentiment. As New York arrived there was a resumption of selling pressures, with IFR noting a 4k USM1 sale linked to the announcement of United Airlines (UAL) USD 5.5bln two-part HY offering (5- and 8-year notes). Concession into the Treasury mini-refunded continued through the NY morning, with little other catalysts in the way to see any strong bids emerge, although the concession was by no means a large move, with volumes light - for what it's worth, some of that could be a result of reduced London participation with UK Gilt volumes particularly light and FX ranges thin amid Pub reopenings on Monday. Across the pond, the 3-year auction tailed ever so slightly but had no noticeable reaction along the curve, while the lacklustre 10-year offering saw some brief volatility, with hedge funds reported knee-jerk selling, although prices soon reversed slightly firmer. Digging into the 10-year, auction tailed by 0.2bps, covered slightly less than average, while Primary Dealers and foreign participation all came in line with averages. The mediocre offering keeps sentiment somewhat positive for Tuesday's 30-year auction. However, just as much attention will be on the March US CPI print, with participants looking to decipher in the release what is transitory and anything that perhaps isn't. T-note (M1) futures settled 3+ ticks lower at 131-20.

Fed's Bullard (non-voter) said it is too early to talk about a change in monetary policy and that he will leave it to Fed Chair Powell to initiate the talk on tapering but later added that 75% vaccinations would allow for the taper debate. (Newswires)

Fed's Rosengren (non-voter) said monetary policy is currently appropriate for the state of the economy and expects rapid growth in the economy but noted that a full recovery may take longer than anticipated, while he added that reducing slack and an increase in inflation sustainably to 2% would kick start the rate hike discussion and that he sees risks on both sides of the inflation outlook. (Newswires)

US President Biden reportedly brought up the idea of a USD 0.05 increase in gas tax during a meeting yesterday, according to Democratic Rep. Payne and President Biden was also said to be open to a user fee on EVs. However, the White House later stated that President Biden is not in favour of raising the gas tax and mentioned the idea to suggest there is not a lot of money to be raised from it. (Newswires)

US Republican Senator Wicker told President Biden that GOP will not support tax hikes in the infrastructure package, while President Biden said there are 58 corporations not paying taxed and Wicker is willing to work on that issue but not undo tax law. Furthermore, Wicker stated that President Biden is inviting another group of bipartisan lawmakers next week. (Newswires)