• European bourses gave up opening gains but have recovered from lows to largely mixed/unchanged performance; US futures are marginally firmer
• China was mixed on its return with pressure in bio stocks as the US administration is in favour of waiving IP rights, with the EU announcing a similar stance
• 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
• DXY has been pressured all morning with EUR outperforming while Cable is steady pre-BoE and unreactive to PMIs
• Looking ahead, highlight include BoE rate decision, US IJC, ECB's Schnabel, BoE's Bailey, Fed's Williams, Kaplan, Mester
• Earnings from Moderna and Peloton

CORONAVIRUS UPDATE

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)

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 (-0.5%) 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 (+0.8%) 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)

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)

US

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)

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. Subsequently, France has sent some navy vessels to the area as well. (FT)

UK Markit/CIPS Services PMI Final (Apr) 61.0 vs. Exp. 60.1 (Prev. 60.1); Composite PMI Final (Apr) 60.7 vs. Exp. 60.0 (Prev. 60.0)

EU Retail Sales YY* (Mar) 12.0% vs. Exp. 9.6% (Prev. -2.9%, Rev. -1.5%); MM (Mar) 2.7% vs. Exp. 1.5% (Prev. 3.0%, Rev. 4.2%)

GEOPOLITICAL

US Secretary of State Blinken calls for Russia to cease its reckless actions re. Ukraine. (Newswires)

EQUITIES

Major bourses in Europe see a choppy session and mixed trade with the earlier modest upside bias reversing (Euro Stoxx 50 -0.2%), this follows on from a similarly mixed APAC session which saw the return of Chinese and Japanese participants following their respective holidays. US equity futures meanwhile eke mild gains with no clear standout performer. The tone across the market is rather tentative heading into the BoE policy decision and US jobless claims, with participants also likely to keep some powder dry for tomorrow’s NFP release. Europe sees varying performances across the majors and peripheries, with Italy’s FTSE MIB (+0.3%) narrowly outperforming as banks are lifted in unison with a post-earnings UniCredit (+5.0%) and SocGen (+3.7%), although ING (-1.9%) bucks the trend. Sectors in Europe are mixed with no clear theme, albeit sectors have attained a downside bias in recent trade, and again distorted by earnings. Food & Beverage leads the gains and AB InBev (+5%) pulls up the sectors after topping revenue and volume growth forecast, whilst the Co’s Budweiser unit also saw a strong performance in Hong Kong. Autos also remain supported but have lost momentum in recent trade, though the sector was initially underpinned by Volkswagen’s (-2.0%) stellar earnings which also prompted a guidance upgrade. That being said, the group noted that the chip shortage is expected to be more significant in Q2 vs Q1. Elsewhere, Tech and Basic resources reside as the laggards following yesterday’s firmer performances. In terms of individual movers, Telecom Italia (-5%) opened lower a much as 9% amid rumours that the Italian government could ditch plans for a single broadband network. Meanwhile, Curevac (-18%) and BioNTech (-18%) plumb the depths in German trade after 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 – seen as a hindrance on companies' profits.

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

FX

USD/EUR/CHF - The Buck continues to meander ahead of Friday’s potentially pivotal US jobs data, with the DXY encountering offers and resistance on approaches towards 91.500, but finding underlying bids for support into and around 91.000. However, the index and Greenback in general have been undermined by another sub-consensus ISM and mainly dovish Fed speak that have prompted renewed bull-flattening in US Treasuries alongside what appears to be a largely technical recovery in several major and EM counterparts. Ahead, another pre-NFP proxy in the form of Challenger lay-offs, latest weekly and continuing jobless claims, Q1 labour costs and productivity plus more Fed commentary from an array of officials. Meanwhile, the Euro may have derived some comfort or momentum from better than expected Eurozone data as retail sales and German industrial orders both beat expectations, but the rebound in Eur/Usd from just below 1.2000 to around 1.2045 looks more chart-based and positional after the headline pair found a base above a Fib retracement level yesterday and managed to close a few pips above the round number. Nevertheless, the 100 DMA remains a formidable hurdle and the Euro could yet be hampered by option expiries totalling 2.7 bn between 1.2025-15 and the 1.2000 strike, not to mention the fact that 200 and 50 DMAs have crossed in deathly fashion. Similarly, the Franc has clawed back losses vs the Dollar to retest 0.9100+ levels compared to circa 0.9165 at worst so far this week and is also firmer against the Euro as the cross eyes 1.0950 in the ongoing absence of visible intervention.

CAD/GBP/JPY/AUD/NZD - All rangebound vs their US rival, though mildly divergent as the Loonie extends to new 3 year peaks of 1.2240 before Friday’s Canadian labour report showdown with its NA neighbour, while the Pound remains perky either side of 1.3900 (and 0.8650 against the Euro) awaiting the BoE from midday and in wake of an unexpected upgrade to the final UK services PMI. Elsewhere, the Yen is still contained inside 109.50-00 with option expiry interest from 109.00-05 (1.1 bn) perhaps keeping Usd/Jpy underpinned on return of Japanese markets following Golden Week, and the Aussie is well off overnight lows with assistance from upbeat RBA remarks (Deputy Governor Debelle noting that the economic recovery has been significantly better than even the most optimistic expectations – see 10.00BST post on Headline Feed for more) to counter further deterioration in relations with China. Note, the latter has suspended Strategic Economic Dialogue measures indefinitely, pushing Aud/Usd back to 0.7700 at one stage and Aud/Nzd down further below 1.0750 as the Kiwi gleaned some support from improvements in ANZ’s preliminary April business survey to keep Nzd/Usd on the 0.7200 handle.

SCANDI/EM - A hawkish hold from the Norges Bank, but no material change in policy guidance (details available on Headline Feed at 9.00BST) has left the Nok weaker for choice and sub-10.0000 vs the Eur again, as crude prices ease back from fresh cycle highs, but the Brl could continue to outperform after the BCB matched market expectations with another 75 bp hike and signalled 3 in a row for the key Selic rate at the next convene. Turning to the Try, no change is anticipated from the CBRT at noon, though the tone of the accompanying will be the defining factor as the new Governor attempts to walk a tightrope between keeping President Erdogan on side and returning runaway inflation back to target.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1950-60 (566M), 1.2000 (1.3BLN), 1.2015-25 (1.4BLN), 1.2035 (385M), 1.2050-55 (738M), 1.2075 (250M), 1.2100 (1BLN)
• JPY: 109.00-05 (1.1BLN), 109.30 (470M), 109.60-70 (560M), 109.75-85 (834M)

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)

Norges Bank maintained its Key Policy Rate at 0% as expected; reiterates forward guidance and language around policy normalisation. (Newswires)

RBA Deputy Governor Debelle says the economic recovery has "significantly exceeded" even the most optimistic expectations; a tighter labour market is needed to lead to higher wages. These conditions are unlikely to be met until 2024 at the earliest. Wage growth in Australia has been noticeably weaker than in many comparable economies, most notably the United States. (RBA)

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

FIXED

In many ways, bonds are still playing a waiting game given this week’s major risk events are yet to come, but Gilts did carve out a minor new Liffe peak at 128.18 (+23 ticks on the day and 20 ticks off the early intraday base) before running out of steam again as the clock ticks down to noon and a possible, if not probable BoE APF taper. Conversely, Bunds extended their Eurex range marginally to the downside at 170.42 (-5 ticks vs +23 ticks at best), but are comfortably back above par amidst mild underperformance in Italian BTPs and US Treasuries are holding fractionally firmer, with the curve flattish before more jobs data and another busy slate of Fed speakers intermingled with BoE Governor Bailey, several ECB members including President Lagarde and Norges Bank head Olsen.

COMMODITIES

WTI and Brent front-month futures remain choppy within tight with the former retreating to sub-65.50bbl levels after failing to top USD 66/bbl, whilst Brent July dips back under USD 69/bbl from a high of around USD 69.40/bbl. News flow for the complex has again remained light in early European hours and in the run-up to key risk events including the BoE decision alongside the US IJC and a slew of central bank speakers, which could see some sentiment-driven oil action in the absence of oil-specific catalysts. Elsewhere, spot gold and silver have been tracking the waning Dollar and yields with the yellow metal reaching levels close to USD 1,800/oz before encountering barriers, whilst spot silver trades on either side of USD 26.75/oz. On the topic of precious metals, Shanghai gold exchange said it is to lower margin requirement from May 7th on gold contracts to 8% from 12%, and will also lower trading limit on gold contracts to 7% from 12% from 10th May. Base metals meanwhile were bolstered overnight upon China’s return to the markets – although sentiment was dented as China announced the indefinite suspension of the Sino-Aussie economic dialogue. LME copper is back under USD 10,000/t whilst the Shanghai contract played catch-up. Dalian iron ore futures continued to surge in APAC trade to reach an intraday record high. Shanghai aluminium hit an 11yr high with traders citing the Chinese/Aussie spat stoking supply concerns.

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)

Shanghai gold exchange is to lower margin requirement from May 7th on gold contracts to 8% from 12%; will also lower trading limit on gold contracts to 7% from 12% from 10th May. (Newswires)