• Equities are modestly firmer in Europe with US futures performing marginally better, ES +0.4%, while the Russell 2000, +0.9%, outperforms
• DXY has been pressured for much of the morning but as pared losses and largely unchanged now with antipodeans once again outperforming while RUB is hindered on potential US sanctions
• Fed's Clarida (voter) expects a similar sequencing regarding reducing bond purchases vs. hiking rates as in 2014-2015 cycle
• Houthi military spokesman said they targeted an Aramco facility with a drone and 11 missiles in Jizan
• BAC beat on top and bottom lines posting pre-market gains +1.0%, as did UNH and PEP
• 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 Citi, Delta

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)

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)

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)

Oxford University study determines that the risk of CVT following COVID-19 infection is circa 100x greater than normal; compared to the AstraZeneca (AZN LN) vaccine risk of CVT is 8x greater from COVID-19 itself. (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 (+0.5%) 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 (-0.4%) and Shanghai Comp. (-0.5%) 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)

Tencent (700 HK) opens USD 4bln bond sale; offering 10-, 20-, 30- and 40-year bonds, according to its term sheet. (Newswires)

US

Fed's Clarida (voter) expect similar sequencing regarding reducing bond purchases vs. hiking rates as in 2014-2015 cycle, SEP projections and Fed Chair Powell's press conference will provide information on whether the economy has sufficiently progressed to review asset purchases. (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. Elsewhere, the Kremlin says it is not possible to organise a quick Biden-Putin summit, premature to discuss a de-escalation of tensions around Ukraine given US warship deployment to the Black Sea(Newswires/WSJ)

Moscow threatens to destroy Kiev, according to a Ukrainian Minister cited by Al Arabiya; separately, the Ukraine Foreign Ministry says its red line regarding Russia is the state border; if Russia crosses the border then they must bear the consequences. (Newswires)

Representatives from some Arab countries who disfavour the JCPOA are now in Vienna; with the aim being to impede the likely progress in ongoing discussions with Iran, according to sources cited by Journalist Aslani. (Twitter)

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)

EQUITIES

Major bourses in Europe eke mild gains (Euro Stoxx 50 +0.2%) after experiencing somewhat of a lukewarm cash open as sentiment is seemingly more constructive following a cautious and indecisive APAC lead. US equity futures meanwhile see more pronounced gains following the reversal seen on Wall Street yesterday - with the cyclically-driven RTY (+1.0%) outpacing peers - whilst the next wave of US earnings gets underway; for reference, Bank of America, Citi, Delta, UnitedHealth, BlackRock and PepsiCo are on the docket. Back to Europe, the FTSE 100 (+0.6%) has thus far maintained a narrow lead as heavyweight oil and mining names reap rewards from the higher crude and base metal prices, whilst broad-based gains are seen across Euro bourses. Sectors in Europe kicked off trade with a more pro-cyclical tilt, but that earlier bias dissipated with no theme to be derived. Energy and Financials lag amid recent losses in the oil/gas and yields. The sectoral breakdown does not provide much by way more meat on the bones, but the tech sector bodes well following upbeat earnings from chip-giant TSMC, who also sees chip demand continuing to be high and the chip shortage maybe lasting into 2022. The Travel & Leisure sectors has also waned alongside commentary from the German Health Minister who stated it will take until Q3 for group immunity from COVID in Germany. In terms of individual movers, AB InBev (+4.5%) leads the gains in the Stoxx 600 as the a broker upgrade at Barclays bolstered the Co., whilst Publicis (+3.8%) is a close second amid a constructive Q1 sales update. Meanwhile, Deutsche Wohnen (+4%) and AroundTown Properties (+1.1%) derived impetus from reports a German Court has ruled that the Berlin rent cap is invalid.

TSMC (2330 TT) Q1 net TWD 139.7bln vs exp. TWD 136.22bln. sees Q2 gross margin at 38.5-40.5% vs 41.5% in Q1; sees 2021 Capex at USD 30bln vs prev. view USD 25-30bln. Confident it cant grow by around 20% in USD terms this year. Further expansion of Arizona plant if possible; does not exclude possibility of overbooking of chip orders, hope to offer more capacity by 2023; supplies are still very tight. (Newswires)

Bank of America Corp (BAC) Q1 21 (USD): EPS 0.86 (exp. 0.66), Revenue 22.8bln (exp. 22.13bln). USD 25bln repurchase plan.

UnitedHealth Group Inc (UNH) Q1 2021 (USD): EPS 5.31 (exp. 4.38/4.22 GAAP); Revenue 70.2bln (exp. 69.22bln)

PepsiCo Inc (PEP) Q1 2021 (USD): EPS 1.21 (exp. 1.12/1.10 GAAP); Revenue 14.82bln (exp. 14.55bln)

FX

USD: The Dollar is holding in, albeit remaining soft against most major counterparts and several EM rivals as the DXY pares some losses within a 91.487-704 range. US Treasury and other bond yields are softening again awaiting a relatively busy docket including top-tier data, regional Fed surveys and 4 speakers, while the Greenback is also striving to stay above certain psychological and technical levels amidst decent option expiry interest.

NZD/AUD: Both still gleaning more than most from Buck weakness, but the Kiwi also benefiting from further retracement in the Aud/Nzd cross post-RBNZ and in wake of a somewhat mixed Aussie labour report overnight, as the headline employment change exceeded expectations 2-fold, but was all due to part-time workers given a near 21k fall in the number of full time jobs. Nzd/Usd is hovering towards the upper end of 0.7135-80 parameters, with Aud/Nzd testing 1.0800 and Aud/Usd trying to clear resistance around 0.7750 convincingly, but also facing a formidable hurdle in the form of 1.1 bn option expiries from the half round number up to 0.7765. Ahead, NZ manufacturing PMI and more Chinese data after conflicting trade earlier this week.

CAD: The next best G10 performer as the Loonie reclaims 1.2600+ status vs its US peer awaiting Canadian manufacturing sales for some independent impetus rather than ADP payrolls that are now pretty outdated, if not redundant in wake of last Friday’s blowout official employment release.

JPY/GBP/EUR: Also firmer against the Dollar with the Yen nearer 108.70 than 109.00 where the start of some hefty option expiry interest resides stretching up to 109.25 (2 bn from 109.00-10 and 1 bn between 109.15-25 to be precise), Sterling eyeing 1.3800 vs a 1.3765 low and the Euro looking at 1.2000 next despite ongoing COVID-19 concerns across the Eurozone that have prompted Germany’s Economic Institutes to downgrade their 2021 GDP forecast to 3.7% from 4.7%, though raising next year’s growth estimate to 3.9% from 2.7% at the same time. Note also, Eur/Usd has option expiries to contend with as 1.9 bn roll off at the NY cut between 1.1975-60, so covering the 1.1970 trough.

CHF: The Franc is straddling 0.9225 and 1.1055 against the Greenback and Euro respectively in the run up to speeches from SNB’s Maechler and Moser on the pandemic, financial markets and digital transformation that is likely to reinforce standard policy guidance if either Board member make remarks on negative rates and currency intervention.

SCANDI/EM: The Nok is marginally outperforming relative to the Sek and Eur following Norwegian trade data showing a fractionally wider surplus and irrespective of the Swedish Spring Budget delivering a Sek 45bln economic boost, while the Try and Zar are both on firmer footings vs the Usd ahead of the CBRT and as Gold stages another attempt to breach a double top protecting Usd 1750/oz and the 50 DMA only a Buck or so beyond. Conversely, the Rub is on the ropes yet again as Russia-Ukraine tensions continue to ratchet up across the border.

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

Notable FX Expiries, NY Cut:

• USD/JPY: 109.00-10 (2BLN), 109.15-25 (1BLN), 109.40-50 (715M)
• AUD/USD: 0.7700 (592M), 0.7730-40 (402M), 0.7750-65 (1.1BLN)
• EUR/USD: 1.1900 (2.1BLN), 1.1940 (730M), 1.1960-75 (1.9BLN), 1.1990 (450M)

FIXED

It’s been a slow grind and debt futures have dovetailed each other at times in the process of recouping losses after Wednesday’s reversal, but US Treasuries appear to have taken over the baton in recent trade as the 10 year note reclaims 132-00+ status and the curve re-flattens. Meanwhile, Bunds still have a few ticks to go before reaching the halfway point of their midweek retreat at 171.13 vs 171.06 and Gilts are 15 ticks shy of completing a full round trip, at best levels of 128.35 thus far. Ahead, a very busy pm agenda and US especially given multiple data points, 2 Fed surveys and 4 speakers.

COMMODITIES

WTI and Brent front-month futures are again experiencing choppy price action heading into the US open with no particular catalyst attributed to the price action. That being said, the energy market attempts to juggle several factors including the resurgence of the virus in some economies, the limited vaccine rollouts amid blood clot reports, OPEC+ supply and geopolitical developments. Some earlier weakness in oil prices coincided with commentary from the German Health Minister who stated it will take until Q3 for group immunity, which translates to a slower pickup in domestic activity, but more-so a slower recovery in air travel. In terms of geopolitical developments, Saudi Aramco facilities were again targeted by Houthi militia - but Saudi reportedly intercepted these attacks. Elsewhere, eyes remain on the Russia/Ukraine tensions as rhetoric ramps up, with Ukraine laying out its red lines - the crossing of the border - which could prompt a military response. Meanwhile, China is poised to conduct military drill during US' visit to Taiwan. Further, participants will also be eyeing the JCPOA talks that are set to continue today as Iran gets closer to developing weapon-grade uranium. WTI Jun is back below USD 63/bbl (vs high USD 63.50/bbl) whilst Brent loses ground below USD 66.50/bb (vs high 65.96/bbl). Elsewhere, spot gold and silver benefit from the softer Buck with the former meandering just under the USD 1,750/oz (vs low USD 1,734/oz) mark with technicians citing a double-top at 1,749/oz. Turning to base metals, LME copper is benefitting from the broader gains across stocks, and the softer Buck, with prices comfortably back above USD 9,000/t.

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)