• European bourses are firmer extending on APAC performance with miners leading the way; US futures are also firmer though closer to the unchanged mark pre-NFP
• The Biden administration is likely to go ahead with former President Trump's China investment ban and Blinken is to keep the pressure up in his UN speech
• EUR and GBP are the outperformers with the single currency seeing upside around Kazak remarks and GBP as local election results filter through
• Looking ahead, highlights include US and Canadian labour market reports, ECB's Lagarde, BoE's Haldane, Broadbent, Fed's Barkin

CORONAVIRUS UPDATE

US CDC reported total COVID-19 cases rose to 32.36mln from 32.31mln the day before and total deaths rose to 576,238 from 575,491 the day before. (Newswires)

UK Health Department spokeswoman said the position of MHRA and JCVI continues to be that the AstraZeneca (AZN LN) COVID-19 vaccine's benefits outweigh the risks for a vast majority of adults, adds on track to offer a jab to all adults by end-July. (Newswires/Independent)

Japanese Government is extending the state of emergency for Tokyo, Osaka, Kyoto and Hyogo until May 31st, while the government is also seeking to add Aichi and Fukuoka to the emergency declaration. Furthermore, the government will continue to ask that bars and karaoke parlours serving alcohol to remain closed and for people to avoid taking unnecessary trips outside, while Japanese PM Suga is to hold a news conference at 11:00BST/06:00EDT today. (Newswires)

ASIA

Asian equity markets traded mostly higher following the late ramp up on Wall St. and encouraging trade data from China, but with gains capped ahead of the key risk US NFP jobs data and as increased US-China hawkish rhetoric contributed to the tentativeness. ASX 200 (+0.3%) was lifted by strength in mining names after gold prices reclaimed the USD 1800/oz level and with Dalian iron ore prices at record highs, while the latest RBA Statement on Monetary Policy saw upgrades to the central bank’s economic growth forecasts with GDP seen at 9.25% in June and 4.75% in December this year. Nikkei 225 (+0.1%) was kept afloat after yesterday’s outperformance although upside was limited as Japan braces for an extension of the state of emergency for four key areas including Tokyo and with the government seeking to add Aichi and Fukuoka to the emergency declaration. Hang Seng (-0.1%) and Shanghai Comp. (-0.6%) benefitted from firm Chinese Caixin Services and Composite PMI data in which the former printed a 4-month high, while the latest Chinese trade data mostly topped expectations. However, risk appetite in the mainland was affected by the hawkish US-China rhetoric in which sources noted that top US and Chinese trade negotiators may hold talks soon to review the Phase 1 trade deal and that the Biden administration is likely to go ahead with former President Trump's China investment ban, while there were also comments from President Biden that the Chinese are "eating our lunch" economically and officials noted that Secretary of State Blinken is to keep pressure on China in his UN speech today. Finally, 10yr JGBs were flat amid the mild positive mood across stocks and after the choppy lead in T-notes, while firmer demand at the enhanced liquidity auction for 2yr, 5yr, 10yr and 20yr JGBs was also largely ignored by prices.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.4678 vs exp. 6.4685 (prev. 6.4895)

US Secretary of State Blinken is to keep pressure on China in UN speech this Friday and will defend rules-based order, according to US officials who also noted that US Secretary of State Blinken, Chinese Foreign Minister Wang Yi and Russian Foreign Minister Lavrov are to speak at the event. Furthermore, Blinken tweeted that the US stands with people in Hong Kong and rejects the sentencing of activists for attending the Tiananmen commemoration, while he called for the release of those imprisoned for non-violent exercise of freedoms. (Newswires/Twitter)

China is reportedly considering tighter rules for firms listing overseas. (Newswires)

• Chinese Trade Balance (USD)(Apr) 42.85B vs. Exp. 28.1B (Prev. 13.8B)
• Chinese Exports (USD)(Apr) Y/Y 32.3% vs. Exp. 24.1% (Prev. 30.6%)
• Chinese Imports (USD)(Apr) Y/Y 43.1% vs. Exp. 42.5% (Prev. 38.1%)
• Chinese Trade Balance (CNY)(Apr) 276.5B vs. Exp. 129.5B (Prev. 88.0B)
• Chinese Exports (CNY)(Apr) Y/Y 22.2% vs. Exp. 12.5% (Prev. 20.7%)
• Chinese Imports (CNY)(Apr) Y/Y 32.2% vs. Exp. 33.6% (Prev. 27.7%)
• Chinese Caixin Services PMI (Apr) 56.3 (Prev. 54.3); 4-month high
• Chinese Caixin Composite PMI (Apr) 54.7 (Prev. 53.1)

US

Fed Semi-Annual Financial Stability Report warned of booming stocks, internet-driven "meme" investments and hedge fund financing as posing increasing risks to the US economy as it emerges from the pandemic, while it noted that some measures of risk compensation have fallen to levels that are low relative to historical norms and stated that "structural fixes" are needed in money market funds that faced redemptions. Furthermore, it noted that potential risks ahead include a worsening of COVID, falling asset prices particularly for highly leveraged hedge funds and life insurance companies, as well as a run on money funds. (Newswires)

UK/EU

ECB's Kazaks says the decision to slow bond buying would be possible in June, would discuss boosting APP after PEPP in the event inflation is weak. (Newswires)

England local council elections early results with 13 out of 143 councils declared, showed Conservatives gaining 54 and opposition Labour losing 56, while the Labour candidate in Hartlepool (which Labour has held since 1974) has conceded defeat. (Guardian/BBC) Note, results of the Scottish election will likely not be known until over the weekend

UK PM Johnson and French President Macron intend to conduct talks regarding the fishing dispute in Jersey. (The Times)

UK employers' demand for workers surged by the fastest pace since 1990s due to the reopening of the economy from the lockdown, according to an REC/KPMG survey. (Newswires)

European Commission has rejected a UK compromise re. Northern Ireland Protocol which would require the EU to take a more flexible approach on food safety, RTE's Connelly. (RTE)

UK Markit/CIPS Construction PMI (Apr) 61.6 vs. Exp. 62.3 (Prev. 61.7)

German Trade Balance, EUR, SA (Mar) 14.3B vs. Exp. 19.5B (Prev. 19.1B)

• German Imports MM SA (Mar) 6.5% vs. Exp. 0.7% (Prev. 3.6%); Exports MM SA (Mar) 1.2% vs. Exp. 0.5% (Prev. 0.9%)

EQUITIES

Major European bourses trade mostly positive but off best levels at the time of writing (Euro Stoxx 50 +0.3%) as the initial optimism seen at the cash open turned more into a cautious tone as the US labour market report looms. The initial downside across the European equity complex coincided with comments from ECB’s Kazak who suggested that a decision on slowing down bond purchases is possible in June, although the comments do not make it clear as to whether a slow-down equates to a return to the pre-March pace, or a more pronounced decrease. US equity futures meanwhile remain caged heading into the US labour market report with the main contracts largely unchanged. Back to Europe, the DAX (+1.0%) remains the outperformer as Adidas (+8%) and Siemens (+3%) remain elevated post-earnings - with the former upgrading its guidance - whilst the FTSE MIB (-0.1%) is the laggard after outperforming yesterday. Sectors in Europe are mostly firmer with Basic Resources outperforming as base metal prices remain firm, closely followed by Oil & Gas whilst the Personal and Household Goods sector is propped up by Adidas. Autos meanwhile gave up some gains as the continued chip shortage remains a grey cloud over automakers, with Volkswagen (-1%), Renault (-0.7%), Stellantis (-0.1%) all subdued but BMW (+0.9%) bucks the trend after stellar earnings – with deliveries of electrified vehicles more than doubling – although the Co. warned that the rising cost of raw materials could dampen earnings ahead. The Construction/Manufacturing sector remains the laggard with rising costs of materials eating into margins. In terms of individual movers, Meggitt (+11%) rose around 15% at the open amid a report suggesting that Woodward is working with banks on a potential deal with Meggitt named as a potential target.

China's Auto Body CAAM says Chinese sales hit 2017mln units in April, +5% Y/Y. (Newswires)

FX

EUR - Not the best performing major or even the biggest mover, but certainly volatile in the run up to monthly US jobs data that often keeps currency moves relatively contained. However, reports of a big buy order in Eur/Usd on a break of 1.2070 saw the headline pair extend above the 100 DMA to post a new w-t-d peak circa 1.2090, and given the timing of the spike could well have been linked to or sparked by comments from ECB’s Kazaks on the prospect of scaling down the pace of QE from June – see 8.15BST post on the Headline Feed for more details, analysis and some context. 1.2100 may cap further Euro gains for psychological reasons and the fact that 1.4 bn option expiry interest resides at the strike, but by the same token 1.4 bn between 1.2050-40 and 1.8 bn from 1.2035-25 should provide support over NFP and into the NY cut.

GBP - The Pound is actually topping the G10 ranks, and in truth has been relatively resilient around 1.3900 vs the Dollar for a while, albeit unable to breach 1.3950 and revisit highs around 1.4000 or maintain momentum against the Euro to breach resistance ahead of 0.8600 in the form of the 50 DMA. In terms of Sterling fundamentals, not much independent impetus from the BoE or somewhat mixed UK PMIs, so Cable and the Eur/Gbp cross have been moving on external and seasonal factors in the main, with some attention to latest Brexit developments as the NI protocol stand-off and fishing dispute rumble on.

USD - Although the Greenback remains mixed overall, losses vs key DXY components are accumulating to nudge the index further below 91.000 and away from recent recovery highs as the countdown to NFP continues and expectations build for a consensus beating headline number. Hence, the Buck may be prone towards a deeper setback as the bar has risen and the Fed, bar more hawkish factions stick to an accommodative stance awaiting substantial progress towards inflation and full employment policy goals. Returning to the DXY, 90.963-742 covers trade so far.

CHF/NZD/JPY/AUD - The Franc is consolidating off fresh peaks vs the US Dollar and Euro near 0.9058 and 1.0936 respectively in wake of a better than forecast Swiss sa jobless rate, while the Kiwi has faded ahead of 0.7250 against its US rival following firmer Q2 NZ inflation expectations overnight and the Yen has not been able to keep its head above 109.00 against the backdrop of moderately higher US Treasury yields and 1.2 bn option expiries from the round number up to 109.10. Similarly, the Aussie has waned into 0.7800 where 1.2 bn expiry interest resides even though robust Chinese trade data and Caixin PMIs may offer some incentive to resolve differences on tariffs and subsidies that have resulted in suspension of dialogue between the 2 sides.

CAD - Some understandable position paring has clipped the Loonie in full stride through 1.2150, as Usd/Cad eases back towards the big figure above before Canada and the US go head-to-head with April labour market reports amidst starkly contrasting expectations.

EM - The aforementioned upbeat Chinese macro releases have helped the Yuan outperform, predictably, as the Cnh and Cny straddle 6.4500 vs the Usd, but other EMs are treading more cautiously ahead of the US jobs data, including the Zar that has decoupled from Gold to a degree to sub-14.2500 from 14.2000+ at best irrespective of bullion retaining Usd 1800+/oz status.

RBA Statement on Monetary Policy noted that the economy is beating forecasts although policy needs to remain highly accommodative and that they will not raise rates until inflation is in target range which is unlikely until 2024. RBA raised its growth forecasts and stated that GDP was expected to reach pre-pandemic levels in Q1 2021. RBA also stated wage growth has been especially slow and expected to remain low, while it will be some years before wage growth is fast enough to lift inflation to target and stated that household consumption and savings was an important source of uncertainty. Furthermore, RBA forecasts GDP Y/Y growth at 9.25% in June 2021 and 4.75% (prev. 3.5%) in December 2021, sees the Unemployment Rate at 5.25% for June 2021 and 5.0% (prev. 6.0%) for December 2021, while Underlying Inflation is seen at 1.5% for June 2021 and 1.5% (prev. 1.25%) for December 2021. (Newswires)

Notable FX Expiries, NY Cut:

FIXED

Aside from a few initial and early flurries before ECB’s Kazaks rekindled the QE taper, trade in debt futures has been relatively subdued and quiet, with the obvious exception of more pronounced weakness in the Eurozone periphery compared to the core. Nevertheless, bears have exerted influence and the path of least resistance has kept Bunds, Gilts and US Treasuries depressed as losses extended to 38 ticks at 170.21 on Eurex, 20 ticks at 128.07 on Liffe and 4/32 for the T-note amidst strength in EU stocks and upbeat vibes for NFP in contrast to the consensus for Canadian employment data out at the same time. Also ahead, more from the BoE’s MPC, including hawkish dissenter Haldane, while Barkin rounds off this week’s heavy scheduled (and unscheduled) slate of Fed speakers.

COMMODITIES

WTI and Brent front month futures remain choppy within a contained range yet again amid a lack of fresh catalysts heading into the US labour market report alongside further central bank commentary. The geopolitical landscape also remains little changed thus far, although a US official did note that the pace of talks would need to speed up in order to reach a deal in the coming weeks re. Iran, adding that the sides are not in the final stages of discussions yet. Meanwhile, eyes remain on the COVID situation in India, although concerns are seemingly under control as far as the crude markets go, whilst reports yesterday suggested that Indian state refiners placed orders for regular supplies from Saudi Aramco for June following a dip in May. WTI Jun reside around USD 64.50/bbl (vs a 64.44-65.24 range) whilst Brent Jul meanders USD 68/bbl (vs a 67.86-68.65 range). Moving on, spot gold and silver are on stand-by for the Tier-1 US data but hold onto a lion’s share of its recent gains with the former above USD 1,800/oz (1813-23 range) and the latter retaining its USD 27/oz handle. Turning to base metals, LME copper continues to gain ground above USD 10,000/t with similar upside price action seen in Shanghai copper and Dalian iron ore, with traders citing Chinese demand upon their return to the markets alongside Dollar weakness. There was also some commentary from the mining giant Glencore’s CEO who suggested that copper prices will need to increase to USD 15,000/t in order to encourage sufficient new supply to meet projected demand, specifically the mining industry would need to generate an additional 1mln tonnes of the metal each year.

CME lowered COMEX 100 gold and gold enhanced delivery futures initial margins for speculators by 10% to USD 9,900/contract, while it lowered COMEX 5000 silver futures initial margins by 9.1% to USD 16,500/contract and platinum futures NYMEX initial margins for speculators by 9.1% to USD 4,400/contract. (Newswires)

New Zealand Business Inflation Expectations (Q2) 2.1% (Prev. 1.9%)

USD/JPY: 109.00-10 (1.2BLN), 110.00 (407M)

AUD/USD: 0.7730-35 (442M), 0.7745-50 (491M), 0.7800 (1.2BLN)

EUR/USD: 1.2000 (537M), 1.2025-35 (1.8BLN), 1.2040-50 (1.4BLN), 1.2100 (1.4BLN), 1.2130-35 (618M)