• European indices began the session firmer though initial gains diminished to largely mixed/flat performance with tech underperforming post Infineon and as NQ lags
• USD outperforms with EUR/USD having tested 1.20 and Cable dropping below 1.39, though unmoved on final PMIs while NZD lags pre-data
• Core debt is subdued with Bunds rangebound and Gilts playing catch-up while action is contained to the belly of the US yield curve
• The RBA maintained its key rates at 0.10% and the parameters of its QE program, as expected
• Looking ahead, highlights include US factory orders, NZ unemployment, Fed's Daly, Kaplan
• Earnings from Marathon Petroleum, Pfizer, ConocoPhillips

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)

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

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 (+0.6%) 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 (+0.6%) 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 (+0.7%) 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)

UK Markit/CIPS Manufacturing PMI Final (Apr) 60.9 vs. Exp. 60.7 (Prev. 60.7)

• M4 Money Supply* (Mar) 0.6% (Prev. 0.8%)
• BOE Consumer Credit* (Mar) -0.535B GB vs. Exp. -0.5B GB (Prev. -1.246B GB, Rev. -1.168B GB)
• Mortgage Approvals* (Mar) 82.735k vs. Exp. 92.3k (Prev. 87.7k, Rev. 87.385k)
• Mortgage Lending* (Mar) 11.832B GB vs. Exp. 5.8B GB (Prev. 6.2B GB, Rev. 6.434B GB)

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

GEOPOLITICAL

Russian delegate says Vienna talks on Iran nuclear deal is make progress and is surprised by comments about its collapse, via Al Jazeera. (Twitter)

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)

EQUITIES

Major bourses in Europe trade mixed (Euro Stoxx 50 Unch) after the optimism seen at the cash open waned as newsflow remains light and as participants look ahead to the US entrance for direction, as has been the case over recent sessions. US equity futures remain subdued with the NQ (-0.3%) narrowly lagging its peers, although the breadth of the price action is relatively narrow. Back to Europe, the FTSE 100 (+0.6%) is outperforming as it plays catch-up after yesterday's bank holiday, whilst the DAX (-0.4%) resides on the other end of the spectrum - pressured by Infineon (-5.1%) as earnings overall underwhelmed with the global chip shortage also in mind. Sectors are also mixed with somewhat of a more pro-cyclical bias, as Basic Resources top the charts, closely followed by Oil & Gas. Travel & Leisure is bolstered by reports that France, Greece, and Spain are among nations that could be added to the UK's safe "green list" by the end of June. Tui (+4%), easyJet (+3%), and IAG (+4%) are among the beneficiaries, with the latter also underpinned by an upgrade at JPM. Elsewhere, Mediaset (+2%) remains supported after reaching a deal with Vivendi (-0.2%) to settle their dispute - which would see a EUR 26.3mln outflow from Vivendi's subsidiary Dailymotion. Earnings-related movers include Pandora (+5.6%), Telenor (+1.8%), AMS (-0.4%), Adecco (-4%) and Vonovia (-1.4%).

TSMC (2330 TT) is reportedly planning to build as many as five facilities in Arizona, sources state. Elsewhere, Infineon (IFX GY) CEO expects automotive supply constraints to ease in fiscal H2 adding that chip foundries have not undertaken sufficient investment to keep up with demand, new capacity from foundries won't be available until ~2023. (Newswires)

Please see the Daily European Equity Opening News and the Additional European Equity News headlines for the morning's European earnings

FX

USD - Well that didn’t last long or amount to much in terms of an adverse reaction to disappointing US macro news in the form of the manufacturing ISM, as the Buck has already stopped the rot and is turning tables back on all major counterparts with the DXY firmly back above 91.000 and marginally eclipsing Monday’s peak between 91.393-90.985 extremes. Next up, NY ISM and factory orders before more Fed speak via Daly who is a current voter and neutral, dove and non-voter Kashkari and hawk Kaplan who also resumes FOMC voting rights in 2023.

NZD/AUD/CHF/EUR - The Kiwi is hovering just over 0.7150 after probing 0.7200 again briefly in the run up to NZ jobs data that is much more likely to provide independent direction or impetus than the latest bi-weekly GDT auction. Similarly, the Aussie has pulled back from overnight highs to sub-0.7750 levels, and more so on disappointing trade factors rather than the RBA’s policy meeting that ended with no change to dovish policy guidance even though the 2021 GDP forecast was upgraded appreciably. Elsewhere, the Franc has retreated through 0.9150 irrespective of a marked improvement in Swiss Q2 consumer sentiment and the Euro is back under the 100 DMA and trying to retain hold of the 1.2000 handle or at least stay close to decent option expiry interest at 1.2035 (1.1 BN).

CAD/JPY/GBP - Also unwinding gains vs their US rival, with the Loonie straddling 1.2300 ahead of Canadian trade and building permits, while the Yen is back under 109.00 on another Japanese holiday (Greenery Day), albeit keeping afloat of 109.50 and a key Fib retracement that was breached fleetingly yesterday (109.64) and Pound has bounced from circa 1.3851 having temporarily fallen beneath the 50 DMA (1.3864). However, Cable appears to be getting further assistance from the Euro as Eur/Gbp eyes 0.8650 to the downside amidst reports that the EU may prepared to be more flexible about business checks in Northern Ireland.

SCANDI/EM - Firmer oil prices have helped the Nok revisit 10.0000+ terrain vs the Eur, but the Sek is still under 10.1500 on the back of standard neutral to dovish remarks from Riksbank Governor Ingves and EM currencies are underperforming against the Usd with the Rub also undermined by a marked slowdown in Russia’s manufacturing PMI towards the 50.0 threshold and the Zar ruffled by Gold’s latest fade into Usd 1800/oz.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.2035 (1.1BLN), 1.2050 (300M) 1.2085 (238M)
• GBP/USD: 1.3700 (291M), 1.3800 (1.1BLN), 1.3900 (642M), 1.4100 (200M)
• AUD/NZD: 1.0855 (298M), 1.0860 (1.5BLN), 1.0865 (200M)

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%)

FIXED

Bonds remain somewhat erratic and divergent awaiting clearer direction after only a short-lived rebound or correction in wake of yesterday’s weaker than expected US manufacturing ISM. Bunds are still pivoting 170.00 after retreating to a minor new 169.91 Eurex intraday low and Gilts holding up a bit better in post-UK holiday trade, albeit also just off a slightly deeper 127.62 Liffe base (-5 ticks vs +21 ticks at best). Meanwhile, US Treasuries are nearer overnight session troughs than peaks, but rangebound and the curve relatively static ahead of NY ISM, factory orders and the next batch of Fed speakers, but probably biding time for the services ISM, latest IJC updates and Friday’s NFP.

COMMODITIES

Again a relatively directionless start to the European session for the crude complex before experiencing upside it what is seemingly a detachment from the broader sentiment and Dollar dynamics, with WTI front-month above the USD 64.50/bbl mark (vs low USD 64.39/bbl) and its Brent counterpart on north of of USD 67.50/bbl (vs low 67.37/bbl). There has been minimal development for oil with volumes also thin as Mainland Chinese and Japanese participants are away from their desks. Saudi Aramco released its earnings in the early hours but in line with its European counterparts, it has reaped in profits from the rise in oil prices whilst maintaining an optimistic outlook. Next up, the weekly Private Inventory data is the next scheduled catalyst for the complex. Elsewhere eyes remain on geopolitics but there is little new to report in terms of JCPOA talks thus far. Turning to metals, spot gold and silver are again uneventful as the precious metals once again await US presence for directionality in the absence of European news flow. LME copper prices are back on the rise and attempt to close in on the USD 10,000/t mark despite headwinds from the firmer Buck and the red metal's largest buyer China away from markets. Aluminium prices meanwhile rose amid concerns that efforts by the Chinese government to reduce emissions would impact supply.

Saudi Aramco Q1 net profit SAR 81.44bln, revenue SAR 272bln vs prev. SAR 225bln; cash dividends of USD 18.76bln for Q1. CEO says given the positive signs re. energy market demand, there are more reasons to be optimistic that better days are coming and are well-positioned to meet growing globally energy needs as economies begin to recover. (Newswires)