• European bourses began with modest gains that have since fizzled out to reside in negative territory amid a holiday-thinned session
• Core debt has been pressured after Bunds failed to eclipse Friday's peak convincingly with EZ Final PMIs not moving the dial but US ISM and Fed speak in focus
• The EU Commission is recommending the easing of restrictions on non-essential travel to the EU, whilst addressing variants via a new "emergency brake" mechanism
• 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
• Looking ahead, highlights include 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)

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)

Pfizer (PFE) is discussing a expedited approval pathway with the Indian Government in order to make the COVID-19 vaccine available there. (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)

The EU Commission is recommending the easing of restrictions on non-essential travel to the EU, whilst addressing variants via a new "emergency brake" mechanism, proposed to allow entry into the EU for non-essential reasons not just for people coming from nations with a good epidemiological situation but also to those who have received their last recommended dose of an EU-authorised vaccine - reportedly to be approved by end-May. (Newswires)

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 (-0.6%) 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 (-1.3%) 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)

US

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)

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 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)

EU is reportedly to increase the regulatory pressure on China with proposals said to aim restricting subsidised foreign companies. (FT)

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

EU Markit Manufacturing Final PMI (Apr) 62.9 vs. Exp. 63.3 (Prev. 63.3)

• German Markit/BME Manufacturing PMI (Apr) 66.2 vs. Exp. 66.4 (Prev. 66.4)
• French Markit Manufacturing PMI (Apr) 58.9 vs. Exp. 59.2 (Prev. 59.2)

Fitch affirmed Germany at AAA; Outlook Stable. (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. Subsequently, Iranian Foreign Minister says Vienna talks have reached two drafts so far and "at this stage it requires high accuracy", according to Al Jazeera. (Newswires/CNN/Twitter) Note, the Al Jazeera remark has been translated from Arabic and appears to have some context/meaning lost in translation

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)

Iranian Foreign Ministry says there is acceptance of the lifting of sanctions but the dispute concerns some figures and entities on the US list, according to Al Jazeera; ready to have talks with Saudi at any level. (Twitter)

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)

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)

EQUITIES

European majors kicked the first session of May off with respectable gains across the board before fading earlier upside (Euro Stoxx 50 -0.2%) following on from a more cautious APAC session – with Japanese and Chinese players away until Wednesday. US equity futures meanwhile see varying gains with the cyclically-led RTY (+0.6%) outpacing whilst the tech-heavy NQ (Unch). From a more macro lens, eyes continue to remain on vaccination efforts/COVID developments and their corresponding effects on economic data and subsequently on monetary and fiscal policy. In early hours this morning, the ECB’s VP floated the idea of thinking about tapering emergency measures when 70% of Europe’s adult population (currently under 30%) is vaccinated – with experts suggesting the end of August as a more realistic deadline for this to be achieved. Turning to earnings, overall around 60% of the S&P 500 have reported actual results for Q1 thus far, according to FactSet, who suggest that of these companies, 86% have reported beats on EPS and 78% on revenue. During this week, 133 S&P 500 companies are due to report including three Dow components. Back to Europe, UK’s FTSE is closed on account of the early May Bank Holiday, whilst broad-based gains are seen across the Euro Zone bourses. Sectors are mostly in the green with the exception of Oil & Gas with a modest downside in prices keeping gains in the sector capped – also do note that sector heavyweights Shell and BP are not trading. Overall it is difficult to discern a particular theme or tone via the sectors. In terms of induvial movers, Lufthansa (+2.3%) is firmer after its CEO said the Co. and its Eurowings are aiming to fly to a minimum of 100 locations this summer. Siemens Healthineers (+1.9%) and Siemens Gamesa (-3.8%) see varying performances post-earnings. Finally, KPN (-3.0%) is pressured after rejecting two separate takeover offers, one from EQT/Stonepeak and the other from KKR.

FX

DXY - The Dollar index looks quite comfortable above the 91.000 handle after Friday’s rebound to register a late peak for the week, but is off best levels between 91.190-390 parameters as several components claw back some losses and other majors derive a degree of traction via supportive fundamental and technical impulses. However, trading conditions are relatively thin at the start of the new month due to market closures in various countries, such as Japan (Constitution Day), China (Labour Day) and the UK (early May Bank holiday) awaiting the final US Markit manufacturing PMI, ISM and construction spending before speeches from Fed’s Williams and Chair Powell.

NZD/AUD/EUR/GBP - All firmer against the Greenback, with the Kiwi holding within a 0.7156-83 range ahead of NZ jobs data on Tuesday and the Aussie hovering around 0.7725 following a bounce from the low 0.7700 area in wake of solid manufacturing PMIs (AIG survey especially) and ahead of trade in the run up to the RBA tomorrow. Similarly, the Euro has drawn encouragement from resilience into 1.2000 rather than somewhat mixed Eurozone manufacturing PMIs or significantly stronger than expected German retail sales, and Sterling seems content after staving off offers within a pip of 1.3800.

JPY/CAD/CHF - The Yen is retesting support close to a key Fib retracement level that appears to be the only real prop protecting a more pronounced reversal from recent highs and return to 110.00 vs the Buck. Specifically, 109.64 represents a 61.8% bounce in Usd/Jpy from 107.48 low on April 23 to 110.97 apex from March 31 and the headline pair has been up to 109.69, but not convincingly through may Japanese participants are out of action and will not be back until Thursday due to Golden Week. Elsewhere, the Loonie has lost some steam alongside oil prices and is back around 1.2300 in advance of Canada’s manufacturing PMI, while the Franc is fairly flat circa 0.9130 and 1.0985 against the Euro following a strong Swiss manufacturing PMI and weekly sight deposit balances suggesting no intervention even though Eur/Chf has fallen to lows last seen on April 19.

SCANDI/EM/PM - The tables have turned to an extent for the Nok and Sek, as the former is back beneath 10.0000 vs the Eur amidst the aforementioned downturn in crude and a dip in Norway’s manufacturing PMI before Thursday’s Norges Bank policy meeting, but the latter pares some declines from almost 10.1900 on the back of a marked acceleration in the Swedish manufacturing PMI. Meanwhile, EM currencies are on the back foot vs the Usd and the Try has not benefited from softer then forecast Turkish CPI as it pivots 8.3000, but Gold is outperforming around Usd 1775/oz and flanked by DMAs as the 50 sits at Usd 1744.15 and 100 resides at Usd 1798.34.

FIXED

Having laboured in early European trade and only just eclipsing last Friday’s Eurex session high by a tick at 170.20 the ensuing reversal in Bunds and their Eurozone peers has been relatively rapid and pronounced through several downside chart levels and with stops tripped along the way. The core debt future is now hovering near a 169.47 low and technical analysts are eyeing the 169.29-24 area next, while the corresponding 10 year yield is edging towards -15 bp, and US Treasuries appear to be being dragged down with the EZ counterparts or falling in sympathy as the curve flips back in to steepening mode. Ahead, NA manufacturing PMIs, ECB APP and PEPP updates, US ISM and construction spending data all before Fed’s Williams and Chair Powell emerge to deliver speeches.

COMMODITIES

WTI and Brent front month futures again experience a choppy session with conditions also thin as China, Japan, and the UK are away on domestic holidays. The front-month contracts have thus far printed a USD 1/bbl range apiece with WTI now just under USD 64/bbl and Brent around USD 67/bbl. Prices found a floor in recent trade with news about the EU permitting vaccinated travellers from abroad also supporting sentiment in the complex. However, COVID continues to take its toll on India with the recent string of case increases continuing to mark records. Reports have also suggested that LNG cargoes are said to have been diverted away from India amid its situation. It will be interesting to see whether the developing situation prompts any response from OPEC+ after the group, in essence, opted to maintain its plan to gradually bring back oil to the market. Turning to geopolitics, there was some confusion surrounding the progress in Iranian nuclear talks, but it seems a deal remains in the balance after the US and UK refuted Iranian media reports regarding a prisoner swap and the unfreezing of funds. That being said, talks seem to have made some headway with the Iranian foreign ministry suggesting two deals have been drafted but there is a dispute over some figures and entities on the US list. Elsewhere, the Iranian spokesman also said Tehran is ready to have talks with Saudi Arabia at any level and in any form – one to watch given the two countries reside on either side of the Persian Gulf. Also to keep on the radar, Petrobras could see action from labour unions could impact production in Brazil’s 750k BPD Campos basin. Turning to metals, spot gold and silver benefit from the softer Buck but remain around recent ranges with the former around UDS 1,775/oz and the latter around USD 26/oz at the time of writing. LME and Shanghai copper both see domestic holidays. Finally, Citi expects benchmark iron ore to hit USD 200/t in the upcoming weeks but notes the average price in Q2/Q3 could be around USD 183/t before waning to USD 160/t in Q4.

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)

Iraqi oil minister says the OPEC+ deal aimed at easing production cuts will help keep oil prices within normal levels; sees oil prices at no less than USD 65/bbl. (Newswires)

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