• A mixed picture was observed in Asia-Pac stocks as the region took its cue from the indecision stateside
• The Nasdaq was dragged lower by weakness in tech and growth, although S&P 500 and DJIA remained afloat
• In FX markets, the DXY was relatively contained overnight, EUR/USD oscillated around 1.20 and GBP/USD clings on to 1.39 status
• Brent crude printed a fresh COVID-era high just shy of the USD 70/bbl level
• Looking ahead, highlight include Norges, BoE & CBRT rate decisions, UK services PMI, US IJC, ECB's de Guindos, Schnabel, BoE's Bailey, Fed's Williams, Kaplan, Mester, supply from Spain and France
• Earnings from ViacomCBS, Peloton, AB Inbev, Continental, ArcelorMittal, ING, Volkswagen, SocGen, UniCredit

CORONAVIRUS UPDATE

US President Biden stated that he will back a WTO waiver and the USTR also announced support for the waiver of vaccine-patent protections at the WTO although negotiations will take some time, while there were comments from the White House Press Secretary that the White House may have news regarding the waiver of vaccine patents very soon. (Newswires)

IFPMA, which represents research-based pharma companies, warned that waiving COVID-19 vaccine patents will likely result in disruption. Furthermore, it stated that real COVID-19 challenges include trade barriers, supply chain bottlenecks and scarcity of raw materials, as well as willingness by rich countries to share doses with poor countries. (Newswires)

US CDC issued the next two phases for the framework for conditional sailing order for cruise ships and stated that cruise ship operators now have all necessary requirements 'to start simulated voyages before resuming restricted passenger voyages'. (Newswires)

Novavax (NVAX) COVID-19 vaccine showed 43% efficacy against the South African variant, according to a study. In relevant news, Moderna (MRNA) announced positive initial booster data against SARS-CoV-2 variants of concerns in which it stated that a single booster dose of 50mcg of MRNA-1273 or MRNA-1273.351 increased neutralizing titers against SARS-CoV-2 and 2 variants of concern. Furthermore, it stated that a booster dose of MRNA-1273.351 achieved higher titers against B.1.351 than a booster dose of MRNA-127305, while MRNA-1273.351 and MRNA-1273 booster doses were generally well tolerated. (Newswires)

Japan is reportedly considering extending the state emergency by one month but is said to relax restrictions on department stores in which they prefer reduced hours instead of a complete closure and may ease restrictions on movie theatres and amusement parks. (Newswires)

Twitter sources noted speculation that New Zealand could shut its border to Sydney today after New South Wales reported 2 new COVID-19 cases today, while NSW also announced fresh restrictions including limiting household gatherings to 20 people, as well as making masks compulsory for public indoor areas and transport. (Newswires)

ASIA

A mixed picture was observed in Asia-Pac stocks as the region took its cue from the indecision stateside where sentiment was clouded by disappointing data releases and the Nasdaq was dragged by weakness in tech and growth, although S&P 500 and DJIA remained afloat in which the latter posted a fresh intraday record with outperformance in the energy sector after Brent crude printed a fresh COVID-era high just shy of the USD 70/bbl level. ASX 200 (-0.7%) lagged after a couple of new COVID-19 cases were reported in NSW and with tech leading the declines across nearly all sectors aside from mining-related industries as underlying commodity prices benefitted from China’s return to the market. Furthermore, strong earnings from NAB failed to provide an uplift to the big 4 banks despite almost doubling its H1 cash profit, whereby its shares retreated from a yearly high, while Nikkei 225 (+1.8%) was boosted on reopen from the extended weekend on a foray above the 29,000 level and with the index underpinned by favourable currency flows. Hang Seng (Unch.) and Shanghai Comp. (-0.2%) were both initially positive as China reopened from the Labour Day holidays with notable gains in the blue-chip energy names and Budweiser APAC front-running the advances post-earnings, although the risk appetite then soured amid weakness in the ChiNext which slumped over 3% due to pressure across biological stocks after the US administration voiced support for a waiver of COVID-19 vaccine patents and following an announcement by the NDRC to suspend all activities under the China-Australia strategic economic dialogue mechanism indefinitely, citing Australia's disruption of cooperation with China. Finally, 10yr JGBs were marginally higher as they tracked the recent gains in T-notes which had been supported after the continued dovish Fed rhetoric and after the Treasury Quarterly Refunding hinted at auction size cuts in H2, while the presence of the BoJ in the market for JPY 650bln of JGBs in 5yr-25yr maturities also provided a tailwind for prices.

PBoC injected CNY 10bln via-7-day reverse repos at rate of 2.20% for a net daily drain of CNY 40bln. (Newswires) PBoC set USD/CNY mid-point at 6.4895 vs exp. 6.4862 (prev. 6.4672)

China NDRC announced it is to suspend indefinitely all activities under the China-Australia Strategic Economic Dialogue mechanism, citing Australia's disruption of cooperation with China. (Newswires)

G7 Communique stated they continue to be deeply concerned about human rights violations and abuses in Xinjiang and Tibet. Furthermore, they urge China to assume and fulfil obligations and responsibilities within its global economic role, while they remain seriously concerned about the situation in and around the East and South China Seas. (Newswires)

BoJ March meeting minutes stated that members agreed YCC is exerting intended policy effect and that it was appropriate to continue with powerful monetary easing under the framework of QQE with Yield Curve Control. The minutes noted that some members said the review confirmed some fluctuations in bond yields won't diminish effect of monetary easing and that members agreed the BoJ must respond flexibly and without hesitation to changes in economic, price and financial developments. Furthermore, members agreed to continue to assist funding of business and priority must be to keep entire yield curve stably low while the economy remains under the impact of the pandemic. (Newswires)

UK/EU

UK has ordered Royal Navy vessels to patrol waters off Jersey amid a dispute with France regarding fishing rights, while EU Commission is seeking clarification from UK, and France has threatened to cut its power supply to the island. (FT)

FX

In FX markets, the DXY initially flatlined around 91.25 after yesterday’s soft data releases. There was also a plethora of Fed speakers with statements from Fed’s Clarida, Bowman, Williams, Evans, Mester and Rosengren although the collective language remained dovish across the board in which they reiterated that that policy will remain accommodative and that they are still a long way from goals, while the greenback was eventually underpinned as its cyclical counterparts were spooked after China’s NDRC announced it is to halt activities under the China-Australia Strategic Economic Dialogue. EUR/USD was choppy and oscillated through the 1.2000 level in a continuation of yesterday’s indecisiveness and GBP/USD remained stuck near 1.3900 ahead of the BoE policy announcement, UK local elections and Scottish Parliament elections all set for today. USD/JPY and JPY-crosses were mostly positive due to outperformance in Japan and antipodeans were initially kept steady amid gains in commodities but were later pressured following the announcement by China’s state planner which is a further deterioration of Australia’s relationship with its largest trading partner.

Brazil Central Bank hiked the Selic rate by 75bps to 3.50% as expected, through a unanimous decision, while it sees another policy adjustment of the same magnitude at the next meeting. Brazil Central Bank stated that current inflation shocks are temporary but will closely observe their evolution and that uncertainty about the economic growth outlook remains larger than normal although normality should gradually return, while it added that a 75bps rate increase at the next meeting depends on the evolution of economic activity, balance of risks, inflation outlook and expectations. (Newswires)

• New Zealand ANZ Business Confidence (Apr P) 7.0 (Prev. -2.0)
• New Zealand ANZ Activity Outlook (Apr P) 32.3 (Prev. 22.2)

COMMODITIES

WTI crude futures rebounded from a floor at the USD 65.00/bbl and Brent crude reclaimed the USD 69.00/bbl level following yesterday's profit taking from COVID-era highs just shy of USD 70.00/bbl, although the rebound overnight was limited amid the indecisive risk tone in the region and following news of a wage agreement between Norwegian oil companies and labour unions which would avert a potential strike later in the year. Gold prices were contained by a relatively steady greenback and copper gained with support seen as Chinese participants entered the market for the first time this week which also bolstered Shanghai commodity prices, although some of the gains were then pared as markets wobbled after China announced to suspend all activity China-Australia Strategic Economic Dialogue mechanism.

Norway's Industri Energi, SAFE and Lederne labour unions stated that a wage deal was agreed for oil workers, which the Norwegian Oil and Gas Association also confirmed. (Newswires)

Britain is reportedly set to stockpile rare earth metals for electric cars to beat the Chinese threat, while officials at the UK Department for Business are discussing options to protect the UK's access to vital materials, including Lithium and Cobalt. (Telegraph)

GEOPOLITICAL

G7 said they are deeply concerned by Russia's irresponsible and negative behaviour including the military build-up on Ukraine's border, while they want stable relations with Russia but will bolster collective capabilities to deter threatening Russian actions. (Newswires)

US

Treasuries were firmer on Wednesday after the Treasury Quarterly Refunding hinted at H2 auction size cuts and a slew of dovish Fed commentary put caution on any imminent policy shifts. By settlement, 2s -0.5bps at 0.157%, 3s -1.1bps at 0.308%, 5s -2.0bps at 0.800%, 7s -2.0bps at 1.254%, 10s -1.4bps at 1.578%, 20s -0.8bps at 2.142%, 30s -1.3bps at 2.253%; TYM1 volumes were slightly soft. 5yr TIPS -11.4bps at -1.897%, 10yr TIPS -6.9bps at -0.884%, 30yr TIPS -4.8bps at -0.040%. Refunding sizes all as expected: 3-year 58bln (prev. 58bln in Feb); 10-year 41bln (prev. 41bln in Feb); 30-year 27bln (prev. 27bln in Feb); TIPS auctions to rise by 1bln each again. Fed bought USD 6.001bln 4.5-7yr Treasuries, O/C 3.04x (prev. 3.09x). US sold USD 35bln of 119-day CMBs at 2.5bps, covered 3.62. NY Fed RRP op at USD 162.8bln across 29 bidders (prev. USD 147.806bln across 30 bidders). SOFR and EFFR unchanged at 1bp and 6bps. T-note (H1) futures settled 4 ticks higher at 132-17+.

Fed Vice Chair Clarida (voter) said now is not the time to talk about tapering and that they are still a long way from goals, while he wants to see actual progress and stated that they are not there yet on "substantial progress". Clarida added the true US unemployment rate is closer to 10%, that the baseline view is that we do not overheat and noted risks to both sides of the outlook that the Fed has to factor in. (Newswires)

Fed's Evans (2021, 2023 voter) stated that continued asset purchases show the Fed is "in it to win it" and that the current approach is a very patient one, while he added they are not in a hurry to taper and wants to see actual outcomes. Evans also reiterated that achieving 2% average inflation is "a lot" harder than many think and said he is looking forward to "very strong" job gains over the next several months. (Newswires)

Fed’s Mester (2022 voter) said monetary policy will need to be very accommodative for some time to support the broadening of the economy and that the Fed's Forward guidance is entirely consistent with revised monetary policy strategy, while she added that the Fed will not react to strong labour market indicators in absence of inflationary pressures or risks to financial stability. Mester also stated she would not consider the increase in inflation expected this year to be the type of sustainable increase needed to meet the forward guidance on Fed's policy rate and needs to see more labour market improvement before she would consider the conditions of forward guidance on asset purchases as being met. (Newswires)

Fed's Rosengren (2022 voter) said we need to have a substantial improvement for us to begin tapering, but it is quite possible that we'll see those conditions as we get to the latter half of the year and that right now, we just have one really strong employment report and one quarterly strong GDP report so it's premature right now to focus on the tapering. (Newswires)

US President Biden reiterated he is open to compromise on the corporate tax rate and stated that he is not willing to deficit spend, while it was also reported that President Biden expects to provide help to roughly 100,000 restaurants through the COVID relief plan. (Newswires)

US Senate Committee is to take up the proposal on May 12th regarding allocation of USD 112bln for basic and advanced technology research and science. In other news, a bipartisan trio of US lawmakers are requesting the Treasury Secretary to use some of President Biden's USD 1.9tln COVID stimulus for the opioid crisis. (Newswires/Axios)