• Asian equity markets traded mixed following on from a mostly positive US session after sentiment was underpinned amid an easing of COVID restrictions
• The Nasdaq underperformed with tech pressured by losses in work-from-home stocks
• In FX, the DXY reclaimed 91.00, dragging EUR/USD and GBP/USD below 1.2050 and 1.39 respectively
• The RBA maintained its key rates at 0.10% and the parameters of its QE program, as expected
• Fed Chair Powell said the economy has brightened and is making progress but added the economy is still not out of the woods
• Looking ahead, highlights include UK manufacturing PMI, US factory orders, NZ unemployment, ECB's Villeroy, Fed's Daly, Kaplan
• Earnings from Marathon Petroleum, Pfizer, ConocoPhillips, Adecco, AMS, Ferrari, Infineon Technologies

CORONAVIRUS UPDATE

US COVID-19 cases +36,661 (prev. +32,452), deaths +640 (prev. +423), total vaccines administered 246.78mln (prev. 245.59mln), those fully vaccinated 105.52mln (prev. 104.77mln). (Newswires)

NY Governor Cuomo said most capacity restrictions are to end across the tri-state region on May 19th, meaning restaurants, bars, retail, salons and live performances can reopen, while it was separately reported that Governor Cuomo is expected to say that the 24-hour subway service is to resume on May 17th. In relevant news, it was reported that New Jersey moved forward the date for easing of some restrictions to Friday and Florida Governor DeSantis signed an executive order which immediately suspended the state’s remaining COVID-19 public health restrictions. (Newswires/NBC)

France, Greece and Spain are among nations that could be added to the UK's safe "green list" by the end of June. (Telegraph)

White House backs Pfizer's (PFE) move to start US vaccine exports, while it was separately reported that the FDA is set to authorize the Pfizer (PFE)/BioNTech (BNTX) vaccine for 12-15 year-olds by early next week. (Newswires/NYT)

ASIA

Asian equity markets traded somewhat mixed following on from a mostly positive US session after sentiment was underpinned amid an easing of COVID restrictions in the Tri-state area and for Florida. The Nasdaq underperformed with tech pressured by losses in work-from-home stocks and US equity futures also marginally pulled back in overnight trade. ASX 200 (+0.5%) was positive with the index kept afloat as the commodity-related sectors benefitted from recent upside in the complex but with gains limited by weakness in tech and a lacklustre mood for the top-weighted financials, while the RBA announcement and soft Trade Data added to the tentativeness. KOSPI (-0.1%) swung between gains and losses as some inflation concerns re-emerged following firmer than expected CPI data which printed 2.3% vs exp. 2.2% and was the fastest pace of increase since 2017, as well as the first time above the 2% target in 2 years. Hang Seng (+0.4%) was mildly underpinned after the recent stronger than expected Hong Kong GDP data for Q1, but with relatively light newsflow and continued absence of participants in mainland China and Japan, keeping price action in the region tepid.

US Secretary of State Blinken will attend a high-level UN Security Council meeting on Friday which will include other countries' foreign ministers and will be chaired by China's Foreign Minister Wang Yi. (Global Times)

UK/EU

UK and India reached a preliminary GBP 1bln trade deal which paves the way for a free trade agreement and includes investment in UK’s health and tech industries, while reports added that the deal could create over 6,500 jobs. (Telegraph/Sky News)

UK businesses are reportedly bracing for an increase of contract disputes and employment litigation when the furlough scheme ends later in the year, according to reports citing a new study. (FT)

German Chancellor Merkel's Conservatives and Germany's Greens are tied with 24% of support, according to INSA poll for Bild. (Newswires)

FX

In FX markets, the DXY nursed some of the prior day’s losses after it briefly slipped to beneath the 91.00 level amid a decline in yields and mostly positive performance for US stocks. The recent data releases from the US were also underwhelming as ISM Manufacturing PMI and Construction Spending fell short of estimates, while the latest Fed rhetoric remained dovish in which Fed Chair Powell noted the economy has brightened and is making progress but is still not out of the woods and Fed’s Williams suggested that data and conditions are not nearly enough for the FOMC to shift its policy stance with the economy still far from goals of max employment and price stability. Nonetheless, the greenback has recouped some of the lost ground and forced a mild pullback in its major counterparts including EUR/USD which retreated beneath the 1.2050 level and nearby 100DMA, while GBP/USD also relinquished 1.3900 status. USD/JPY continued to climb off its lows with the 109.00 level providing some support for the pair although the rebound was limited amid the lack of Tokyo participants, while antipodeans languished following the soft Australian trade data and as participants awaited the RBA policy announcement where the central bank maintained its key rates at 0.10% and the parameters of its QE program, as expected, while it also reiterated its guidance that suggested no rate hikes through to at least 2024 and upgraded its growth forecasts which only provided brief support for AUD/USD.

RBA kept the Cash Rate Target and 3 Year Yield Target unchanged at 0.10%, as expected and maintained the parameters of its QE program, while the Board will not raise the cash rate until inflation is sustainably within 2%-3% target and is committed to maintaining highly accommodative policy until its goals are met but doesn't expect conditions to be met until 2024 at the earliest. Furthermore, the central scenario for GDP growth was revised higher with growth seen at 4.75% this year and 3.5% next year (prev. 3.5% for 2021 and 2022), while it will decide in the July meeting the future of bond purchases following the completion of the current AUD 100bln program and will also consider whether to retain the April 2024 bond or switch to the next maturity for the target bond. (Newswires)

• Australian Trade Balance (AUD)(Mar) 5.57B vs. Exp. 8.00B (Prev. 7.53B)
• Australian Exports (Mar) M/M -2% (Prev. -1.0%)
• Australian Imports (Mar) M/M 4% (Prev. 5.0%)

COMMODITIES

Commodities were uneventful overnight amid the somewhat mixed risk appetite overnight although the complex has held on to the prior day's gains in which WTI crude futures maintained a firm footing above the USD 64.00/bbl level amid an easing of restrictions for New York and Florida. There were also recent comments from Iraq's Oil Minister who noted that the OPEC+ agreement to ease output cuts will help keep prices within normal levels and sees prices at a minimum of USD 65/bbl, while focus now shifts to the latest stockpile data beginning with the private sector inventories later today. Gold prices continued to plateau after recently stalling just shy of the USD 1,800/oz level and as the greenback recouped nursed some losses, while copper was on the backfoot after a failure to break through resistance at last Friday's highs and continued absence of Chinese buyers.

GEOPOLITICAL

US Secretary of State Blinken said reports of a US-Iran prisoner swap are not accurate, while he added that he is determined to bring every detained American back home. (Newswires)

There were initial reports that at least three rockets have hit Iraq's Balad Air Base which hosts US contractors, while other reports stated that a further three rockets fell near Iraq's Balad Air Base, according to sources. (Newswires)

US

Treasuries were firmer after disappointing ISM data cooled recovery momentum. By settlement, 2s -0.2bps at 0.160%, 3s -1.6bps at 0.322%, 5s -2.6bps at 0.830%, 7s -3.3bps at 1.285%, 10s -2.5bps at 1.607%, 20s -1.0bps at 2.171%, 30s -1.1bps at 2.289%. Fed bought USD 8.8bln of 2.25-4.5yr Treasuries, covered 3.17x (prev. 3.2x). US sold USD 65bln of 3-month bills at 1.5bps, covered 3.05x; USD 61bln of 6-month bills at 3.5bps, covered 2.72x. SOFR unch. at 1bp. NY Fed RRP demand falls to USD 129.724bln across 26 bidders (prev. USD 183.234bln across 32 bidders) as month-end factors fade. Treasuries were modestly on the defensive out of Europe alongside the broader cyclical bias, although it was hard to gain too much signal from the overnight/Europe session given the market holidays. IFR noted that a wave of CTA and spec account short-covering accompanied the US handover, as did buys from passive indexers - who buy on the 1st of the month. Treasuries spiked higher after the US ISM Manufacturing print came in lower than expected, seeing cash 10s briefly dip beneath 1.58%, before reports of hedge fund selling, seeing the benchmark gravitate back to the 1.60% area into the afternoon, with the duration-heavy corporate supply on the radar. Familiar commentary from Chair Powell and NY Fed's Williams made little impact. T-note (M1) futures settled 9+ ticks higher at 132-10+.

Fed Chair Powell said the economy has brightened and is making progress but added the economy is still not out of the woods. Powell also commented that the housing market is tight because of demand, low mortgage rates and fiscal support, while he added that it will be a tight housing market for some time now. (Newswires)

Fed's Williams (voter) said data and conditions are not nearly enough for the FOMC to shift its policy stance and that the strong growth we are seeing is still far from goals of max employment and price stability. Williams also stated the economy is on a very good trajectory but suggested we still have a long way to go, while he noted that adjustments to administered rates would not be a change in monetary policy and that the Fed has tools to control short rates such as IOER/RRP. (Newswires)

Fed's Barkin (voter in 2021 and 2024) said will assess substantial progress toward goals and sees only mild progression on employment-population ratio. Barkin added that we have not 'gotten there' on inflation and will see price pressures this year but does not tie Fed policy directly to COVID vaccination pace. (Newswires)

US Treasury expects to issue USD 463bln of net marketable debt in Q2 assuming a June-end cash balance of USD 800bln (prev. February estimate USD 95bln), while the increase in borrowing is due to COVID spending. (Newswires)