• European bourses are firmer at present with mining, oil and tech names the outperformers; US futures are also supported though magnitudes are more contained
• US Treasury Secretary Yellen clarified her remarks stating she was not predicting or recommending a rate increase
• DXY largely recovered from initial pressure, briefly surpassing yesterday's peak though it is now pivoting the unchanged mark with peers contained and rangebound ex-NZD
• Core debt is lower but contained, US yields marginally firmer with the curve largely unchanged shape-wise while Bunds shrugged off a soft Bobl outing
• Looking ahead, highlights include US services & composite PMIs, ISM services PMI, DoEs, Fed's Evans, Rosengren, Mester, ECB's Lane, US quarterly refunding & Earnings from GM

CORONAVIRUS UPDATE

US CDC reports total COVID-19 cases rose to 32.27mln from 32.23mln the day before and total deaths rose to 574,679 from 574,220 the day before. (Newswires)

Britain will offer a 3rd COVID-19 vaccine jab to everyone over 50yrs old in Autumn in an effort to fully eradicate the threat from COVID-19 by Christmas. The UK Vaccine Minister has since stated that no decision has been made on this. (The Times/Newswires)

Canada's Alberta province imposed stricter COVID-19 restrictions which include retail stores to operate at just 10% capacity, while restaurants are to end dining and all students will learn from home. There were also reports that the Alberta chief medical health officer confirmed the death of a woman in her 50s following vaccination of the AstraZeneca (AZN LN) vaccine. (Newswires)

Tokyo and Osaka prefectures are to request an extension of the state of emergency, while it was later reported that Japan's government is considering extending the state of emergency for Tokyo and other areas beyond May 11th. (Newswires/Yomiuri)

ASIA

Asian equity markets traded cautiously as the region battled to shrug off the tech-led declines in the US and amid holiday-thinned conditions due to market closures in China, Japan and South Korea. There was also plenty of attention on recent comments by US Treasury Secretary Yellen who stated that interest rates will have to rise somewhat to ensure the economy does not overheat, which added to the headwinds on Wall Street, although some of the jitters gradually eased given that the comments were taken somewhat out of context and was regarding the future not imminent policy, while Yellen later clarified that she is not predicting nor recommending a rate increase. ASX 200 (+0.4%) brushed aside the early indecision and climbed above the 7,100 level for the first time since early last year helped by much stronger than expected Building Approvals data and with gains in most the big four banks aside from ANZ Bank despite a surge in H1 cash profit which more than doubled to AUD 2.99bln as the CEO also flagged significant uncertainty. Hang Seng (-0.5%) was choppy after disappointing Retail Sales data for Hong Kong and continued absence of stock connect trade with the mainland, although downside was also limited after data from MOFCOM showed China’s online retail sales jumped 29.0% in Q1 and the China Iron and Steel Association noted a 15.6% output expansion for the nation’s steel sector. India’s NIFTY (+0.9%) was also mildly supported following RBI Governor Das unscheduled speech in which he eventually announced several measures including another INR 350bln of purchases of government securities and on-tap liquidity facility of INR 500bln for fresh lending to vaccine manufacturers and others.

White House Asia tsar Campbell said any declaration that the US would defend Taiwan from a Chinese attack i.e strategic clarity, has significant downsides. (FT)

RBI Governor Das said economic situation has changed drastically with increase in infections and that fresh crisis is still unfolding, while he added that they will continue to monitor and deploy all resources as necessary. Governor Das then stated that they will conduct a second purchase of government securities for INR 350bln under G-SAP on May 20th and announced an on-tap liquidity facility of INR 500bln for fresh lending to vaccine manufacturers and others, while banks will create a COVID loan book which will be allowed for priority sector lending and the RBI will also conduct a special 3-yr long term repo operations valued at INR 100bln for small finance banks. (Newswires)

US

Fed's Kashkari (2023 voter) said the Fed has powerful tools if inflation surprises to the upside and that the Fed doesn't want to cut off the recovery prematurely. Kashkari stated he is not concerned the fiscal packages so far will create inflation and that the Fed will normalize monetary policy once the labour market has recovered and inflation is back to target, while he added that achieving full employment will take a few years. (Newswires)

Fed's Williams (voter) does not see signs that the central bank’s aggressive bond buying is creating financial-sector imbalances, via WSJ; reiterates that near-term inflation increases are transitory (re. exceeding the 2% goal) and will not outlines his red line on the matter. (WSJ)

US Treasury Secretary Yellen said she does not anticipate that inflation will be an issue in the US economy and that the Fed has tools to address it, while she added that she is not predicting nor recommending a rate increase and does not see the rescue package as overheating the economy. Yellen also commented that they are actively engaged with other countries to end a race to the bottom regarding corporate taxes and stated that asking companies to pay more for investments will be important for their competitiveness. (Newswires/WSJ)

CME will close most open outcry trading pits although Eurodollar options pit will stay open, while it added that S&P 500 futures and options will be delisted after the September roll and open interest will migrate to E-mini S&P 500 contracts. (Newswires)

UK/EU

The Times Shadow MPC says that the BoE should leave rates and QE unchanged but prepare the market for a slowdown in weekly gilt purchases under its QE programme. (Times)

EU Markit Composite Final PMI (Apr) 53.8 vs. Exp. 53.7 (Prev. 53.7); Services Final PMI (Apr) 50.5 vs. Exp. 50.3 (Prev. 50.3)

• German Markit Composite Final PMI (Apr) 55.8 vs. Exp. 56 (Prev. 56); Services PMI (Apr) 49.9 vs. Exp. 50.1 (Prev. 50.1)

UK new car registrations in April increased 30-fold Y/Y to 141,000. (Newswires)

GEOPOLITICAL

China is planning to revive the strategic Pacific airstrip, according to Kiribati lawmakers; airstrip would be the closest Chinese-backed facility yet to US' Hawaii bases; plan, thus far, is a feasibility study for the rehabilitation of the runway and bridge of the airstrip. Pacific Gov't advisor said that the Kanton island would be a 'fixed aircraft carrier'. (Newswires)

Explosions were heard near Latakia and Tartus in Syria, while state media reported that Syrian air defences were engaged near both cities to intercept an Israeli attack on Latakia, Misyaf and Hifa areas. (Newswires/SANA)

Draft conclusions of next week’s EU Foreign Ministers meeting will be viewed by Ambassadors today, draft says the EU remains deeply concerned about the China National Security Law being placed on Hong Kong and will pay increased attention to the situation; note, Hungary is, at present, saying no to the draft in-spite of it being watered down. (Politico)

EQUITIES

Major bourses in Europe trade higher across the board (Euro Stoxx 50 +1.3%) as the region stages a somewhat of a recovery or retracement from yesterday's selloff, albeit putting the price action into context, indices remain some way off yesterday's best levels. US equity futures also coat-tail on the sentiment seen across the pond, although gains across the futures are less pronounced with the RTY (+0.6%) modestly outperforming peers though the NQ (+0.5%) is catching up. The overall tone across the market however, is tentative with mixed final PMIs failing to spur much action, and as participants await a busy docket ahead in the run-up to tomorrow's super-Thursday followed by Friday's US jobs update. Back to Europe, varying gains are seen across the majors, whilst the periphery narrowly outperforms. Sectors in Europe are all in the green with cyclicals broadly performing better than defensives. Basic Resources top the charts as base metals are back on the grind higher. Oil & Gas is supported by the oil complex itself which is underpinned by the attempted revival of swift and safe international travel - namely between OECD countries. The Tech features among the gainers today, albeit after yesterday's underperformance given Infineon, among other factors. Conversely, the Auto sector resides as one of the laggards as Daimler (-1.7%) is dealt a blow by Nissan offloading its stake at a discount, although losses are cushioned by Stellantis (+2.7%) strength post-earnings. Earnings-related movers this morning include the likes of Deutsche Post (+4%), Hannover Re (-1.2%), Siemens Energy (+0.4%), Hugo Boss (+5.5%), Axa (Unch), Veolia (Unch), Novo Nordisk (+2.5%) and Maersk (+4%). Finally, Delivery Hero (-4.0%) is among Europe's laggards after reports stated that shareholders are looking to offload almost 10mln shares with a bookrunner guiding the price at a notable discount vs the last close.

A senior US government official says the addressing the semiconductor shortage via the Defense Production Act could hurt consumer goods and medical device makers. (Newswires)

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

FX

USD/CHF/EUR - The Greenback is not universally firmer against G10 counterparts, but has gained sufficient ground vs several index components to surpass Tuesday’s US Treasury Secretary inspired spike high and print a new best since April 19, albeit fractionally at 91.436 vs 91.430 on April 21 and 91.425 on the day after. The Franc is trailing in wake below 0.9150 having probed 0.9100 yesterday and Monday, with no reaction to in line Swiss CPI (naturally), but Euro weakness is arguably more eye-catching as the 1.2000 marker is finally breached irrespective of mostly softer than expected Eurozone services and composite PMIs. Eur/Usd is now banking on Fib support in the form of a 38.2% retracement from 1.1704 to 1.2150 at 1.1980 rather than decent option expiry interest between 1.2050-55 (1 bn) or any desire to retest the 100 DMA in that vicinity. Back to the DXY, 91.500 is the obvious nearest resistance level and next upside objective ahead of 91.748 and 91.813 (latter being the high on April 16) awaiting ADP, the services ISM and yet more Fed speak.

NZD/AUD/CAD - All resisting the Buck’s latest advances, and in the case of the Kiwi recouping all and more of its Yellen rate rise knee-jerk losses with the aid of NZ jobs data that beat consensus on all counts. Indeed, Nzd/Usd has rebounded even more firmly from the low 0.7100 zone to 0.7175+ before fading, and probably also boosted by the RBNZ’s FSR flagging further tightening of LVR restrictions if required to keep a lid on property prices. On that note, NZ building consents are due later tonight and Aussie building approvals exceeded expectations by more than double to help Aud/Usd reclaim 0.7700+ status ahead of a speech from RBA’s Debelle on Thursday. Elsewhere, the Loonie has also regained composure after Tuesday’s disappointing Canadian trade balance, though largely on the back of a more pronounced recovery in crude prices as Usd/Cad retreats through 1.2300 compared to just over 1.2350 at one stage yesterday. However, 1.1 bn option expiries at the round number could well keep the Loonie in check, like 1 bn at 0.7750 for the Aussie.

GBP/JPY - The Pound and Yen are relatively resilient in the face of broad Dollar strength as well, with Cable containing declines sub-1.3900 to circa 1.376 amidst favourable Eur/Gbp cross flows under 0.8650 and towards the 50 DMA that comes in at 0.8620 today. Meanwhile, Usd/Jpy has withdrawn into a narrower band inside 109.50-00 following Monday’s false breaks either side, but still lacking depth on the final day of Golden Week in Japan.

SCANDI/EM - The aforementioned leg up in oil post-bullish API weekly inventory update that has lifted WTI over Usd 66.50/brl and Brent close to Usd 70 is propelling the Nok back beyond 10.0000 against the Eur, but the Sek is lagging near 10.2000 regardless of an acceleration in Sweden’s services PMI or marked pick up in new manufacturing orders. Similarly, the Rub and Mxn are weaker despite the ongoing crude rally, while the Try is also suffering from a rise in year end Turkish inflation expectations, but the Zar is deriving some underlying support via SA’s Whole Economy PMI extending above the key 50.0 threshold.

RBNZ Financial Stability Report stated the financial system is sound although vulnerabilities remain and that they are seeing the impact of low global interest rates resulting in increased risk-taking and higher asset prices. RBNZ added that new capital rules will start being implemented from October 1st and they will be watching how market conditions respond to government's recent policy changes, while it noted that if additional tightening in policy settings is needed, the most straightforward approach is to tighten LVR restrictions further. RBNZ also stated that increases in minimum requirements will begin in July 2022 and that the pathway to higher capital requirements under capital review will start from next year. (Newswires)

• New Zealand HLFS Job Growth (Q1) Q/Q 0.6% vs. Exp. 0.2% (Prev. 0.6%)
• New Zealand HLFS Unemployment Rate (Q1) 4.7% vs. Exp. 4.9% (Prev. 4.9%)
• New Zealand HLFS Participation Rate (Q1) 70.4% vs. Exp. 70.3% (Prev. 70.2%)
• New Zealand Labour Cost Index (Q1) Y/Y 1.6% vs. Exp. 1.5% (Prev. 1.5%)
• Australian Building Approvals (Mar) M/M 7.4% vs. Exp. 3.0% (Prev. 21.6%)

Notable FX Expiries, NY Cut:

• EUR/USD: 1.2025-30 (560M), 1.2040 (367M), 1.2050-55 (1BLN), 1.2120 (650M)
• AUD/USD: 0.7700 (481M), 0.7750 (1BLN), 0.7775 (488M), 0.7800 (452M), 0.7850-70 (1BLN)
• USD/CAD: 1.2300 (1.1BLN)

FIXED

10 year UK supply drew appreciably more demand than 5 year German issuance in absolute terms, but both auctions saw average yields rise several bp from prior sales and covers decline, so little in the way of a bounce in underlying debt futures or even a relief rally. For Gilts that may be understandable given the impending 2046 DMO offering, but Bunds are also much closer to their Eurex session trough than peak, while US Treasuries are also near worst levels and the curve is slightly steeper in the run up to Quarterly Refunding details. Looking at levels more precisely, the respective 10 year benchmarks have been down to 170.33, 127.88 and 132-10. Next up, ADP and Fed’s Evans before final Markit services and composite PMIs, the non-manufacturing ISM alongside ECB’s Lane, then more from the Fed via Rosengren and Mester.

Greece has received EUR 14bln of initial demand for its 5yr bond; guidance lowered to mid-swaps +50bps (prev. 55bps) and is set to price within a 3bps range. (Newswires)

COMMODITIES

WTI and Brent front-month futures are firmer on the session with the former around USD 66.50/bbl (vs low 66/bbl) and the latter just under USD 70/bbl (vs low 69.25/bbl). The complex has been underpinned by optimism surrounding swift and safe international travel, with reports yesterday suggesting that some Euro Zone holiday hotspots could be given the green light for travel from the UK. Meanwhile, yesterday's Private Inventory (crude: -7.7mln bbl vs exp. -2.3mln bbl) report added further fuel to the bullish fire as the refined product inventories also proved to be constructive - with eyes on confirmation from the weekly DoEs with headline expectations pointing to a draw of 2.3mln bbl. Elsewhere, spot gold and silver are uneventful within recent ranges at USD 1,775/oz and above USD 26/oz as prices track the Buck in the run-up to today's risk events including ADP and ISM Services. Finally, LME copper has regained a footing above USD 10,000/t with traders citing the higher demand prospect underpinning the red metal.

US Private Inventory Data (bbls): Crude -7.7mln (exp. -2.3mln), Cushing +0.5mln, Gasoline -5.3mln (exp. -0.7mln), Distillate -3.5mln (exp. -1.1mln). (Newswires)

Oil production has stopped at two Iraq oilfields, following an attack earlier today, according to AJ Breaking citing security sources; following initial reports that militants attacked oil wells in Northern Iraq oilfields, production operations were unaffected by this, according to sources. (Twitter/Newswires)