• Asian equity markets were cautious after the choppy performance stateside; Mainland China underperformed
• In FX, the DXY consolidated above 91.50 and G10 FX were largely rangebound
• The US is reportedly preparing to impose sanctions on Russia, targeting Russia's sovereign debt
• China's top official in Hong Kong said any foreign power which attempts to use Hong Kong as a pawn will face countermeasures
• Houthi military spokesman said they targeted an Aramco facility with a drone and 11 missiles in Jizan
• Looking ahead, highlights include US IJC, Philadelphia Fed, Retail Sales & New Zealand Manufacturing PMI, CBRT rate decision, Fed's Bostic, Daly, Mester & Logan
• Earnings from Bank of America, Citi, Delta, UnitedHealth, BlackRock, PepsiCo

CORONAVIRUS UPDATE

US COVID-19 cases +76,120 (prev. +61,526), deaths +769 (prev. +569), total vaccine dose administered 195mln (prev. 192mln), those fully vaccinated 76.68mln (prev. 75.32mln). (Newswires)

White House COVID Coordinator Zients said there is plenty of vaccine supply in the system even without Johnson & Johnson's (JNJ) and that the government is doing everything it can to accelerate doses of the Pfizer (PFE) and Moderna (MRNA) vaccines. (Newswires)

US CDC advisory panel members decided not to vote on recommendations regarding the pause of Johnson & Johnson's COVID-19 vaccine and stated that more data is required, while it plans to identify the next meeting date on the issue by Friday and aims to reconvene in a week to 10 days. Furthermore, Johnson & Johnson later released a statement that it continues to believe in the positive benefit-risk profile of its COVID-19 vaccine. (Newswires)

Moderna (MRNA) CEO stated the vaccine rollout may not quicken up in the upcoming months, while there were source reports that the Co. discussed COVID-19 vaccine manufacturing with Nexus Pharmaceuticals as the latter’s new plant has the capacity to process and fill 30mln doses a month. (Newswires)

Novavax (NVAX) will take part in Oxford University study comparing mixed COVID-19 vaccine combinations using vaccines from different manufacturers and which will assess potential for flexibility in delivering doses. (Newswires)

ASIA

Asian equity markets were cautious after the choppy performance stateside where there was a reversal of fortunes among the major indices from the day before in which the S&P 500 and Nasdaq finished negative amid underperformance in tech. Conversely, the DJIA bucked the trend and notched a fresh record high with energy the biggest gaining sector after oil prices rallied by more than 4% and financials remained afloat despite mixed trade among the blue-chip banks which kick-started earnings season. ASX 200 (+0.6%) swung between gains and losses as pressure in tech and an initially subdued financials sector were offset by energy and mining names, with participants also mulling over updates from the likes of Bank of Queensland, Qantas and Whitehaven Coal. Nikkei 225 (+0.1%) also lacked firm direction amid an indecisive currency and as Japan considers stricter COVID-19 measures for areas surrounding Tokyo, while KOSPI (+0.3%) was kept afloat after a lack of surprises by the BoK which kept rates unchanged at 0.50% and noted uncertainties for growth are high but added the recovery will continue on exports and investment. Hang Seng (-0.9%) and Shanghai Comp. (-1.2%) underperformed as tensions between US and China lingered amid the US delegation visit to Taiwan and with China’s military to conduct live-fire drills off Taiwan which is viewed as a ‘declaration of sovereignty’ and warning to foreign nations, while China's top official in Hong Kong also warned that any foreign power which attempts to use Hong Kong as a pawn will face counter measures. Furthermore, the PBoC announced a CNY 150bln 1-year MLF operation although this failed to spur risk appetite and is expected to result to net drain for the month as there were CNY 100bln of MLF maturing today and CNY 56bln of targeted MLF loans due next week. Finally, 10yr JGBs were flat as prices held on to yesterday’s gains amid the non-committal tone seen across most the regional bourses, while the firmer demand at then enhanced liquidity auction for long-end JGBs failed to inspire price action.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position and the central bank also announced a CNY 150bln 1-year MLF operation with the rate maintained at 2.95%. (Newswires)PBoC set USD/CNY mid-point at 6.5297 vs exp. 6.5310 (prev. 6.5362)

PBoC report suggested that China should ease birth restrictions to achieve long-term goals through 2035 and should prevent a rapid fall in the savings rate. (Newswires)

Taiwan President Tsai told the US delegation that their visit shows US bipartisan support for Taiwan and that her government is looking forward to resuming US-Taiwan trade talks ASAP. President Tsai added that China's military activities threatens regional peace and stability, while former US Deputy Secretary of State Armitage told Taiwan President Tsai that the US government will support Taiwan's self-defence. (Newswires)

China's top official in Hong Kong said any foreign power which attempts to use Hong Kong as a pawn will face counter measures, adds safeguarding national security is a common responsibility for administration and judiciary

BoK maintained its 7-Day Repo Rate unchanged at 0.50%, as expected via unanimous decision. BoK stated that uncertainties to the growth path are high but added that South Korea's recovery will continue on exports and investment. BoK also noted that inflation will run higher and labor market conditions are improving, while it will monitor the virus spread and financial stability. Furthermore, BoK Governor Lee said it is too early to discuss changes in monetary policy direction and that the pace of recovery depends on virus and vaccinations, while he added that growth could be around mid-3% for this year. (Newswires)

UK/EU

ECB's Schnabel sees a short-term but not sustained inflation rise and noted that there are signs of overvalued stock markets, especially in the US. (Newswires)

FX

In FX markets, the DXY consolidated which provided some reprieve from the prior day’s weakness whereby it extended on losses and approached the 91.50 level despite the slightly firmer yields and mixed risk appetite during Wall St trade. There were plenty of commentary again from FOMC officials in which Fed Chair Powell repeated that the US economy is at an inflection point and is moving into a period of faster jobs growth but warned of familiar pandemic risks, and reiterated guidance that the Fed will not raise rates until its goals are achieved. Furthermore, Vice Chair Clarida suggested to expect a similar sequencing regarding reducing bond purchases vs. hiking rates as in the 2014-2015 cycle, while he added that SEP projections and the Fed Chair’s press conferences will provide information on whether the economy has sufficiently progressed to review asset purchases and that bond tapering will occur prior to a rate increase. EUR/USD was flat and held on to most the prior day’s gains after it benefitted from the recent USD slide to print a monthly high despite mixed Industrial Production data from the bloc. GBP/USD lacked firm direction but remained above the short-term support level of 1.3750. USD/JPY and JPY-crosses mirrored the indecisive mood across stocks and antipodeans were also rangebound with AUD/USD pulling back slightly following the latest jobs data in which the headline Employment Change beat expectations at 70.7k vs. Exp. 35.0k and Unemployment Rate fell to 5.6% from 5.8%. This spurred an initial knee-jerk reaction to the upside for AUD which was instantly reversed given that the increase in jobs was solely fuelled by part-time workers as the number in full-time employment declined by 20.8k.

• Australian Employment Change (Mar) 70.7k vs. Exp. 35.0k (Prev. 88.7k)
• Australian Full Time Employment (Mar) -20.8k (Prev. 89.1k)
• Australian Unemployment Rate (Mar) 5.6% vs. Exp. 5.7% (Prev. 5.8%)
• Australian Participation Rate (Mar) 66.3% vs. Exp. 66.1% (Prev. 66.1%)

COMMODITIES

Crude prices were uneventful overnight. WTI crude futures traded around the USD 63.00/bbl level and took a breather after yesterday's gains of more than 4% which had been inspired by the recent bullish DOE inventory data and the latest IEA report. In addition, the ongoing geopolitical climate is also conducive to the risk premium amid concerns that Iran is to start enriching uranium at 60% and after another Houthi attack on sensitive targets in Jazan - which was said to have caused a fire at an Aramco installation. Gold prices were rangebound as the greenback consolidated throughout the session, while copper prices were also contained amid the cautious risk tone and underperformance in China.

Goldman Sachs said it remains above consensus regarding oil demand expectations through to 2025 and does not anticipate peak oil demand during this decade. Goldman Sachs added it sees transport oil demand to peak in 2026 but expects robust growth for petrochemicals and jet fuel to offset lower transport demand during second half of the decade. (Newswires)

GEOPOLITICAL

US is reportedly preparing to impose sanctions on Russia in which around 30 entities are expected to face US sanctions and around 10 Russian officials are to be expelled from the US for election interference and the SolarWinds hacking according to a source. Furthermore, the expected US sanctions on Russia are to target Russia's sovereign debt with President Biden to issue an executive order to broaden restrictions on US banks' transactions of Russian government debt. (Newswires/WSJ)

White House said the point of US President Biden's recent call with Russian President Putin was to stress there will be consequences to Russian activities. In related news, US Secretary of Defense stated the US is committed to assisting Ukraine with self defense needs and a German government spokesman stated that Chancellor Merkel and US President Biden agreed that Russia should reduce its military presence along Ukraine's border in order to de-escalate the situation in the area. (Newswires)

White House said Iran talks will reconvene on Thursday in Vienna. In related news, US Secretary of State Blinken said US ‘takes very seriously’ Iran's announcement to start enriching uranium at 60% and stated that P5+1 should be unified and united in rejecting Iran's intent, while he added it remains to be seen whether Iran has the same seriousness and purpose to return to the JCPOA. (Newswires)

UN Nuclear Watchdog stated that Iran has nearly finished preparations to begin enriching uranium to up to 60% purity at the Natanz plant. Furthermore, IAEA stated Iran has informed them it intends to install six additional cascades of ir-1 centrifuges at the plant, comprising of a total of 1,024 centrifuges. (Newswires)

Houthi military spokesman said they targeted an Aramco facility with a drone and 11 missiles in Jizan. Furthermore, the attack caused a fire at the Aramco installation, while Patriot defense structures and sensitive targets were also attacked. (Newswires)

US

Duration was better offered on Wednesday although newsflow was light and volumes low. By settlement 2s +0.2bps at 0.163%, 5s +1.6bps at 0.856%, 10s +1.3bps at 1.636%, and 30s +1.6bps at 2.324%; TYM1 volumes were light. Inflation breakevens slightly wider. SOFR unch. at 1bps. NY Fed RRP op demand at USD 50.856bln across 19 bidders (prev. USD 37.543bln across 16 bidders). US sold USD 35bln 119-day CMBs at 2.5bps. Fed bought USD 12.801bln in 0-2.25yr Treasuries; O/C 3.66x (prev. 3.65x). Choppy trade overnight on lacklustre volumes, with some reported block buys in T-Notes tied to short-covering behind some price surges, only to see yields fade back off their lows. EGB issuance has been fairly heavy recently and there is also fresh reports today of the EU bloc planning to raise close to EUR 1trln over five years, with bonds, mainly green bonds, issued regularly across 3-30yr maturities, in addition to short-dated bills, in efforts to develop its own haven asset equivalent to US Treasuries. Speaking of, Treasuries trundled lower as US players arrived on Wednesday, with some repeated comments from Fed's Kaplan - talking about conditions for tapering discussions - supporting the move. The lows were made as Europe began closing up for the day, with yields fading slightly off highs into the futures settlement, particularly as stocks began trending lower, although volumes were light. Next up, participants are looking to Thursday's US Retail Sales print for March, which are expected to rise by a solid 5.9% on the back of fiscal stimulus after a tepid February print; Jobless Claims and Philly Fed also to be released, with the latest TIC flows data due that evening. T-note (M1) futures settled 5 ticks lower at 131-29+.

Fed Beige Book stated that national economic activity accelerated to a moderate pace from late February to early April and that all 12 districts reported economic growth with 9 calling it moderate and 1 calling it strong. Beige Book stated that consumer spending strengthened and reports on tourism were more upbeat, bolstered by a pickup in demand for leisure activities and travel which contacts attributed to spring break, an easing of pandemic-related restrictions, increased vaccinations, and recent stimulus payments among other factors. Furthermore, auto sales grew even as new-vehicle inventories remained constrained by microchip shortages and non-financial services generally improved, partly supported by strengthening demand for transportation, professional and business, as well as leisure and hospitality services. (Newswires)

Fed Chair Powell repeated that the US economy is at an inflection point and is moving into a period of faster jobs growth with more job creation but warned of familiar pandemic risks and that the main risk is another spike in cases. Powell also repeated guidance in which the Fed will not raise rates until its goals are achieved including a recovery in the labour market, inflation sustainably at 2% and inflation on track to overshoot, while he noted most on FOMC do not see rate hikes until 2024 and that it is unlikely that rates would be lifted before 2022 but reiterated the Fed is outcome based. (Newswires)

Fed's Clarida (voter) stated that policy will not tighten because unemployment falls below the natural level and stated the Fed expects monetary policy will remain accommodative for some time after conditions to commence policy normalization have been met. Clarida also suggested to expect a similar sequencing regarding reducing bond purchases vs. hiking rates as in 2014-2015 cycle, while he added that SEP projections and Fed Chair Powell's press conference will provide information on whether the economy has sufficiently progressed to review asset purchases and that bond tapering will occur prior to a rate increase. (Newswires)

Fed's Williams (voter) said he thinks the economy will get back to full strength despite unknowns and that increased vaccinations and stronger business activity may limit long term economic damage. Williams also reiterated that the economy is still quite far from maximum employment and inflation is going to be volatile but expects it to stay relatively subdued near the 2% goal, while he added that the US should get jobs lost in the pandemic in the next year or two. (Newswires)