• Asian equity markets traded tentatively following the flat performance of US peers as caution lingered ahead of the FOMC
• Microsoft declined and Google shares surged after-hours with both beating on top and bottom lines in their respective earnings
• In FX, the DXY lingers around the 91.00 mark, EUR/USD and GBP/USD are marginally softer
• US President Biden plans to ask Congress to pay for the entirety of the USD 1.8tln in new spending
• Looking ahead, highlights include German GFK consumer sentiment, FOMC rate decision & Fed Chair Powell press conference, ECB's Centeno, Lagarde, supply from the UK & Germany
• Earnings from Apple, Ford, Facebook, Boeing, Qualcomm, eBay, Spotify, Santander, Deutsche Bank, GSK, Sanofi, Sainsbury

CORONAVIRUS UPDATE

US COVID-19 cases +41,321 (prev. +34,641), deaths +499 (prev. +294), total vaccines administered 232.41mln (prev. 230.77mln), fully vaccinated 96.75mln (prev. 95.9mln). (Newswires)

US is reportedly moving to assert greater influence over a scientific investigation led by the WHO into the origins of COVID-19, with plans to submit recommendations to the agency for a new phase of studies. (WSJ)

US President Biden said Novavax (NVAX) may have their vaccine coming soon, while he will layout the path for COVID next week and said there has been 'stunning progress' against the virus. There were separate comments from White House COVID Adviser Slavitt who stated nearly 30mln COVID vaccine doses will be released this week, while he added that the AstraZeneca (AZN LN) vaccine is very safe and effective, as well as approved in other parts of the world. (Newswires)

EMA reaffirmed that the AstraZeneca (AZN LN) COVID vaccine benefits continue to outweigh the risks. In relevant news, Canada confirmed its first death from a blood clot after receiving the AstraZeneca (AZN LN) COVID-19 vaccine, while Public Health Canada said that blood clots are serious and very rare. (Newswires)

US Trade Representative Tai discussed increasing COVID-19 production with Novavax (NVAX) executives and proposed waiver of WTO intellectual property rights. (Newswires)

Spanish Tourism Minister confirmed that Spain will allow UK holiday makers in June. (The Sun)

ASIA

Asian equity markets traded tentatively following the flat performance of US peers as caution lingered ahead of the FOMC and amid a deluge of earnings. ASX 200 (+0.4%) and Nikkei 225 (+0.4%) were kept afloat owing to their softer currencies although the upside was contained by weakness in Australia’s miners following a pullback in commodity prices and with the tech sector hindered after weakness in US peers, as well as the mixed fortunes of industry heavyweights post-earnings in which Microsoft declined and Google shares surged after-hours despite both beating on top and bottom lines. Meanwhile, stronger than expected Japanese retail sales and earnings releases have supported the risk appetite in Tokyo with Fuji Electric and Osaka Gas among the biggest gainers after both reported a jump in FY net. Hang Seng (+0.3%) and Shanghai Comp. (Unch.) were choppy as focus also centred on corporate results with Chinese participants bracing for an influx of releases that involve over a thousand earnings updates set for today. Finally, 10yr JGBs were lower on spillover selling from USTs which were pressured after a mixed 7-year auction and due to corporate supply in US, while firmer results at the 2yr JGB auction also failed to spur prices and Australian 10yr yields were choppy with early gains wiped out following soft inflation data.

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 mid-point at 6.4853 vs exp. 6.4834 (prev. 6.4924)

Asian Development Bank upgraded forecast for 2021 Developing Asia economic output growth to 7.3% from 6.8%, upgraded China 2021 GDP forecast to 8.1% from 7.7% and upgraded India 2021 GDP forecast to 11.0% from 8.0%. (Newswires)

Japanese government is said to consider raising subsidies for stores forced to close due to the COVID-19 state of emergency, while reports later stated that the government is to tap JPY 500bln of reserve funds to support businesses hit by coronavirus curbs. (Newswires/Nikkei)

• Japanese Retail Sales (Mar) M/M 1.2% vs. Exp. 0.6% (Prev. 3.1%)
• Japanese Retail Sales (Mar) Y/Y 5.2% vs. Exp. 4.7% (Prev. -1.5%)

UK/EU

• UK BRC Shop Price Index (Apr) Y/Y -1.3% (Prev. -2.4%)

FX

In FX markets, the DXY was marginally firmer and reclaimed the 91.00 level to the upside after the prior day’s rising yield environment and stronger than expected US Consumer Confidence data but with upside restricted as participants looked ahead to the looming events stateside including the FOMC and with President Biden to deliver his first joint address to Congress where he is set to unveil his American Families Plan. Furthermore, it was reported that President Biden is planning to ask Congress to fully pay for his new spending plans and top White House officials were said to have been quietly meeting with Republican Senators who drafted the counter-proposal to the infrastructure plan, while the President had also recently signed an Executive Order to raise the minimum wage for federal contractors to USD 15/hour. EUR/USD slightly softened after price action stalled near its 50-hour MA and amid a non-committal tone with the Fed meeting on the horizon, while GBP/USD was pressured after giving up 1.3900. USD/JPY continued its approach towards the 109.00 handle amid the slight positive mood in Japan and antipodeans were subdued by the recent pullback in metal prices and with AUD/USD the underperformer following a miss on Q1 inflation data in which the RBA’s preferred Trimmed Mean CPI printed softer than expected and well below the RBA’s 2-3% target.

RBNZ official Harris said unemployment remains relatively high and RBNZ is not meeting its employment objective, while Harris added that there is no need to remove monetary stimulus. (Newswires)

Australian Bureau of Statistics stated that Preliminary Trade Balance for March was at AUD 8.5B, Exports rose by 15% M/M and Imports rose 15% M/M, while it also released weekly payroll jobs and wages data for between the weeks ending 7th March and 10th April in which payroll jobs declined 1.8% and total wages paid fell 3.1%. (Newswires)

• Australian CPI (Q1) Q/Q 0.6% vs. Exp. 0.9% (Prev. 0.9%)
• Australian CPI (Q1) Y/Y 1.1% vs. Exp. 1.4% (Prev. 0.9%)
• Australian RBA Trimmed Mean CPI (Q1) Q/Q 0.3% vs. Exp. 0.5% (Prev. 0.4%)
• Australian RBA Trimmed Mean CPI (Q1) Y/Y 1.1% vs. Exp. 1.2% (Prev. 1.2%)

COMMODITIES

WTI crude futures were flat just beneath the USD 63.00/bbl level after the OPEC+ JMMC panel confirmed the decision regarding the May-July oil output production increase and with today's ministerial meeting cancelled, while the cautious risk mood also helped keep price action in check although there were some bullish comments from Goldman Sachs which sees a record jump in oil demand over the next 6 months. Gold prices were lacklustre amid the mild gains in the greenback, while copper prices declined following news that Chilean President Pinera will not block the bill that would allow an early drawdown from pensions which had been the cause for striking port workers and with the downside exacerbated as Chinese participants entered the fray.

US Private Inventory Data (w/e April 23rd): Crude +4.3mln (exp. +0.7mln), Cushing +0.7mln (exp. +1.1mln), Gasoline -1.3mln (exp. +0.5mln), Distillates -2.4mln (exp. -0.6mln). (Newswires)

Russian Deputy PM Novak said OPEC+ JMMC panel confirmed the decision on May-July oil output production increase and hopes oil prices will remain stable until the end of the year, while they see an increase of COVID cases in India and Latin America. Furthermore, he stated the OPEC+ ministerial meeting will occur on June 1st and that they will consider production levels in July and August. (Newswires)

Chile President Pinera said he will sign into law the opposition-led bill allowing a third drawdown from pensions. (Newswires)

Saudi Arabia's Crown Prince MBS said they are currently in talks to sell 1% stake in Aramco to a major investor. (Newswires)

Goldman Sachs said it sees commodities rallying a further 13.5% over the next 6 months with oil to reach USD 80/bbl and copper rising to USD 11,000/ton with risks to the upside. Furthermore, it expects a record jump in oil demand of 5.2mln bpd increase over the next 6 months with demand to increase sharply by June and from the current 94.5mln bpd to 99.0mln bpd in Q3. (Newswires)

GEOPOLITICAL

US Secretary of State Blinken said US and Russia are discussing the scheduling of the Biden-Putin meeting and other reports stated that President Biden is to hold direct conversations with Russia regarding Moscow's retaliation to sanctions. (Newswires/Sputnik)

US and Israeli officials discussed serious concern regarding the Iranian nuclear program and agreed to set up a working group to focus on increasing threat from Iranian drones and precision guided missiles, while the White House said Iran nuclear envoy Malley is on his way to the region for additional talks. (Newswires)

Iran met with the UK, France and Germany over the nuclear deal and Iran said that the US must remove all Trump-era sanctions, while Iran also stated that big challenges remain in nuclear talks, according to local press. (Newswires)

Saudi Crown Prince MBS said the US is a strategic partner and that the kingdom is in agreement with the Biden administration on 90% of matters. MBS added that Saudi does not accept any pressure or interference with its internal affairs, while he added that Iran is a neighbour and that they want good relations with Iran but noted the problem is Iran's negative behaviour and that they are working with regional and global countries for solutions. (Newswires)

Saudi Arabia air defenses intercepted and destroyed a drone launched towards the kingdom and Yemen's Houthis stated they launched a drone attack on a military base in southern Saudi Arabia. (Newswires)

US

Treasuries were lower as the belly led the cheapening into latter trade amid an average auction and other dollar supply in quiet trade ahead of FOMC. By settlement, 2s +0.1bps at 0.180%, 5s +2.7bps at 0.878%, 7s +4.0bps at 1.302%, 10s +5.2bps at 1.622%, and 30s +4.9bps at 2.293%; futures volumes were well below recent averages; short TIPS yields modestly lower, while long TIPS slightly higher, with inflation breakevens wider by a few bps. No Fed purchases until April 29th. US sold USD 40bln of 42-day CMBs at 1bps, covered 3.41x; USD 28bln in 2-year FRN’s at 3.4bps; USD 62bln in 7-year notes, tail 0.1bps. SOFR unch. at 1bps. NY Fed RRP demand at USD 142.172bln (YTD high) across 31 bidders. Bonds were slightly offered overnight on light volumes and lack of major catalysts. The BoJ and Riksbank were both non-events, while supply out of Europe likely accentuating the offer, not to mention any concession before the US 7yr auction, following the mixed reception to Monday's auctions. There was little reaction in yields in wake of the solid April Consumer Confidence print. T-notes saw some additional cheapening into the 7-year auction, seeing 10s cash breach above 1.60% (ahead of last week's peak of 1.63%). But, the rout was stopped after the auction went down okay: a modest tail was offset by a decent cover ratio and less Dealer participation than average. But, note how Indirects (foreign demand proxy) have not shown a big pick-up in interest at now all of this week's auctions, In fact, all coupon auctions in April have seen (mainly) below average, or (occasional) in line with average, Indirect participation. There have been no clear signs of foreign accounts desperate to gobble up the latest Treasury supply. Recall that the recent Japanese Lifer survey showed a muted demand outlook for USTs from the key market cohort. Not long after the auction the belly led yields higher again, with IFR noting a sell programme being triggered as yields held above support levels. Additionally, some duration-weighted issuance from Italy (USD 3.5bln of 3s and 30s) and Citi (USD 5.5bln of 4s and 11s) priced in later trade, with desks noting such offerings added to the downside pressure across USTs. T-note (M1) futures settled 11 ticks lower at 132-01.

US President Biden plans to ask Congress to pay for the entirety of the USD 1.8tln in new spending and it was also reported that top White House officials have quietly been meeting with Republican Senators who drafted the counterproposal to President Biden's infrastructure plan, according to multiple sources. Furthermore, President Biden and his economic team are reportedly planning to refrain from increasing the estate tax in the upcoming tax-hike proposals as the proposed capital gains tax increase was already viewed as dramatic enough and Democrats are said to be among those that have doubts regarding US President Biden's plans to tax the rich with lawmakers in affluent districts set to oppose the plans as the party has built up a wealthy support base. (Newswires/Axios/FT)

US Treasury Secretary Yellen spoke with officials from the UK, Australia and New Zealand in which they reviewed the economic reaction to the pandemic and each country's medium-term fiscal strategies to facilitate a robust and long-term rebound. (Newswires)