• Asian equity markets began the week subdued amid key market closures and a lack of fresh macro-drivers over the weekend
• In FX, the DXY retained gains seen on Friday, EUR/USD and GBP/USD sit on 1.20 and 1.38 handles respectively
• ECB's de Guindos says the ECB can consider phasing out emergency stimulus once the economy picks up pace and 70% of the adult population is vaccinated
• Iran's Deputy Foreign Minister said that a deal was nearing for a removal of sanctions, which the US later denied
• Looking ahead, highlights include EZ/US Manufacturing PMI (Final), ISM Manufacturing PMI, Fed’s Powell & Williams. UK bank holiday (desk open as normal)

CORONAVIRUS UPDATE

US CDC reported total COVID-19 cases rose to 32.19mln from 32.15mln the day before and total deaths increased to 573.8k from 573.0k the day before. (Newswires)

New York City indoor dining to expand to 75% capacity starting May 7th, fitness center capacity to rise to 50% on May 15th. (Newswires)

The Transportation Security Administration is expected to extend a requirement that air travellers wear masks in airports and during flights for several more months, according to sources. There were also reports last week that President Biden is set to ban travel to the US from India by most non-US citizens due to the pandemic with travel restrictions set to take effect on May 4th, according to a White House official. (Newswires/CNBC)

AstraZeneca (AZN LN) confirmed a delay in deliveries of its vaccine to Latin America excluding Brazil, while it stated that lower-than-expected production of first batches of vaccines produced in the region, supply shortages and longer periods to meet internal controls have resulted in lower volumes and slower production. (Newswires)

UK COVID-19 cases +1,670 (prev. +1,907) and deaths +14 (prev. +7), France cases +9,888 (prev. +25,670) deaths +112 (prev. +193), Italy cases +9,148 (prev. +12,965) and deaths +144 (prev. +126). (Newswires)

UK is likely to resume non-essential international travel from May 17th, while other reports noted the UK is drawing up a Pfizer (PFE) vaccination plan for children and that the UK is sending 1,000 additional ventilators to India. (Newswires/The Times/Sky News)

Netherlands is postponing lifting of some lockdown measures that were scheduled for May 11th in which zoos, amusement parks and gyms will remain closed for the time being, while a review of the restrictions is expected next week. (Newswires)

ASIA

Asian equity markets began the week subdued amid key market closures, lack of fresh macro-drivers over the weekend and ahead of this week's risk events including earnings, central bank updates and US NFP data. ASX 200 (Unch.) traded indecisively although was just about kept afloat by the top-weighted financials sector after big four bank Westpac posted a 256% jump in H1 net and with sentiment initially helped by strong data after AiG Performance of Manufacturing Index rose to its third highest on record. KOSPI (+0.1%) lacked firm direction as the partial lifting of the short-selling ban was counterbalanced by trade data released late last week which showed exports rose by the most in over a decade. The Hang Seng (-1.5%) was heavily pressured amid an ongoing crackdown by China which ordered tech giants to unbundle their financial services as Beijing calls for a stop to companies turning their mobile payment apps into financial supermarkets through the offering of loans and insurance policies. US-China tensions also lingered after the USTR announced it will keep China on its watchlist for IP violations and suggested the new China IP protection law was insufficient, while the absence of Stock Connect trade added to the headwinds due to market closures in mainland China, which alongside Japan, will remain shut through to Wednesday.

US Secretary of State Blinken said China is acting more repressively at home and more aggressively abroad in recent years, while he added that he has real concerns about Chinese economic actions including theft of US intellectual property. (Twitter)

New Zealand PM Ardern stated that differences with China are becoming harder to reconcile and called for China to act in a manner consistent with its responsibilities as a growing power. (Newswires)

Finance Ministers and central bank chiefs from Japan, China and South Korea stated that the regional outlook has improved but added that they should remain vigilant as the economic recovery has been uneven. Furthermore, they are committed to providing necessary support measures and to upholding open, rule-based multi-lateral trade and investment, according to a joint statement. (Newswires)

UK/EU

UK PM Johnson approved a new legislative drive involving over 25 bills which includes planning reform and new state aid. (FT)

The latest Opinium poll showed the ruling Conservative party’s lead narrowed from 11 points to five points ahead of the local elections this week. (Observer)

ECB's Weidmann (hawk) said huge stimulus can make the ECB's price stability job harder and that money supply rise will not spur sustained high inflation. (Berliner Zeitung)

ECB's de Guindos says they can consider phasing out emergency stimulus once the economy picks up pace and 70% of the adult population is vaccinated. (La Repubblica)

EU Trade Commissioner Dombrovskis said the EU and US are engaging very intensively on resolving the trade dispute, saying there has been a welcome shift since the Biden admin. Thinks we will not return to the mutual imposition of tariffs. (FT)

The European Comission is pressing for Ireland to change its tax rules in exchnage for access to the bloc's recovery fund. (Telegraph)

Fitch affirmed Germany at AAA; Outlook Stable. (Newswires)

FX

FX markets were quiet in which the DXY retained Friday’s gains that were spurred amid the subdued mood on Wall Street and firm US data releases such as Core PCE and Chicago PMI data, while there were also comments from Fed's Kaplan who stated he has not changed his view that rates should start to rise in 2022 and that they should start talking about tapering soon. EUR/USD languished near a weekly low after its recent slip beneath several key moving average levels including the 100DMA. Price action in GBP/USD was contained owing to the bank holiday weekend in UK and USD/JPY extended on last week’s advances to breach 109.50 as JPY-crosses recouped lost ground despite the absence of Japanese participants, while antipodeans were kept rangebound by a steadfast greenback, recent commodity pressure and the cautious risk appetite.

COMMODITIES

Commodities were subdued amid the lacklustre risk appetite and absence of key markets in the region due to holiday closures, with an initial attempt to nurse losses in WTI crude futures hampered by resistance near the USD 64.00/bbl level. There were several notable stories over the weekend including higher output by Russia for last month although this was amid an increase in OPEC quotas, while there were also comments from Iran's Deputy Foreign Minister that a deal was nearing for a removal of sanctions which the US later denied. Gold prices were marginally higher following a slight breakout from Friday's tight range, while copper was choppy amid the indecisive risk tone and with its largest buyer, China, away from the market through to mid-week.

Baker Hughes US Rig Count (w/e April 30th): Oil -1 at 342, Nat gas +2 at 96, Total +2 at 440. (Newswires)

Russia increased oil output last month to 42.8mln tons or 10.46mln bpd which is an increase of 1.9% M/M amid OPEC+ quota increase. (Newswires)

Magnitude 6.0 earthquake was reported for offshore Coquimbo, Chile on Sunday. (Newswires)

GEOPOLITICAL

Iran’s Deputy Foreign Minister stated that a deal was nearing and sanctions against Iran will soon be lifted, although White House officials later denied that the US had agreed to lift sanctions and noted that there remains much to be negotiated in the approaching weeks. (Newswires/CNN)

It was initially reported that Iran and US agreed to a prisoner swap and release of frozen funds in which Iran will free four Americans accused of spying in exchange of four Iranians held by the US and USD 7bln of frozen funds, although it was later reported that Iran’s UN envoy denied reports of a prisoner swap. In other news, UK Foreign Office official played down speculation regarding potential release of British aid worker Nazanin Zaghari-Ratcliffe after Iranian State TV cited comments from an official that she could be released after Britain pays a military debt it owes to Iran. (Newswires)

White House National Security Adviser Sullivan said he spoke on Friday with his Russian counterpart on planning for the Biden-Putin summit although the White House later noted there is no meeting confirmed yet with Russian President Putin. Sullivan also commented that indirect US-Iran talks in Vienna on the JCPOA are in an "unclear place", while reports also noted that the plan for Iran talks was to take a break for consultations back in capitals and a senior diplomat described last week's discussions as "desperately slow", according to WSJ's Norman. (Newswires/WSJ)

UK Foreign Secretary Raab said G7 will look at a rapid mechanism to counter fake news and propaganda from Russia, while he also commented that they want a common front against Russian attempts to sow confusion and disrupt things such as the vaccine rollout. Furthermore, Raab stated that they want to bolster resilience of allies in the face of China cyberattacks. (Newswires)

White House said North Korea policy review is complete and that the US goal remains for complete denuclearisation of the Korean peninsula. In related news, North Korea pushed back against US President Biden’s labelling of the country a serious threat and stated that President Biden’s policy shows hostile intent, while they vowed a response and issued new warnings to South Korea regarding activists sending anti-Pyongyang leaflets across the border. (Newswires)

Saudi air defences intercepted an explosive-laden drone that was launched towards the southern region, while there were separate reports that at least two rockets landed near Baghdad International Airport in Iraq, although no injuries were reported. (Newswires)

US

Treasuries were bought on Friday amid month-end duration extension superseding selling flurries on data and hawkish Fed commentary. By settlement, 2s -0.4bps at 0.162%, 3s -0.2bps at 0.338%, 5s -1.1bps at 0.856%, 7s -0.7bps at 1.318%, 10s -0.9bps at 1.631%, 20s -1.2bps at 2.182%, 30s -0.8bps at 2.302%; futures volumes were light for a majority of the session before surging into settlement, taking yields off their lows in what is assumed to be month-end flows in lack of other catalysts. T-note (M1) futures settled 1+ ticks higher at 132-01.

US Treasury Secretary Yellen said President Biden believes permanent increases in spending should be paid for which she agrees with and expects great returns for the investment. Yellen added that deficits should be contained in the long-run and does not believe inflation will be an issue although if it is, the US has tools to the deal with it. (Newswires)