• Asian equities traded mostly positive as the region reacted to last Friday's disappointing US jobs data, which saw US majors hit record highs
• In FX, the DXY remains below 90.50, EUR/USD holds on to 1.2150 and GBP/USD trades on a 1.40 handle
• The SNP won 64 seats in the Scottish Parliamentary election, falling one short of the number required for an absolute majority
• A ransomware attack forced the shutdown of the Colonial Pipeline, which is the largest refined products pipeline in the US
• Looking ahead, highlights include Eurozone Sentix Index and ECB asset purchases

CORONAVIRUS UPDATE

US President Biden’s administration reportedly signalled that COVID-19 restriction guidance could be relaxed with mask wearing recommendations to be eased as more people get vaccinated, while White House COVID-19 response coordinator Zients stated the US is turning the corner on the virus and that focus now is on vaccinating more Americans. (Newswires/WSJ)

EU Commission President von der Leyen said the vaccine IP waiver will not solve problems in the short and medium term and that we should be open to the discussion on patent waivers. Furthermore, von der Leyen called on the US to match EU vaccine exports, while there were separate comments from French President Macron who urged for the US to remove restrictions on exports of COVID-19 vaccines and vaccine ingredients. (Newswires)

Pfizer (PFE) said it opposes TRIPS IP waiver for COVID vaccines and noted that it had shipped approximately 450mln COVID vaccine doses until today. (Newswires)

EU Commission signed a deal with Pfizer (PFE) and BioNTech (BNTX) for up to 1.8bln doses of their COVID-19 vaccine between 2021-2023 in which the contract calls for 900mln doses with an option to double it, while there were separate comments from EU Commissioner Breton that the EU did not renew its order for AstraZeneca (AZN LN) vaccine after June. (Newswires)

AstraZeneca (AZN LN) is reportedly mulling bypassing the EUA process for its COVID-19 vaccine in the US and instead apply for a full authorization from the FDA. (Newswires)

Fosun Pharma (2196 HK) subsidiary agreed to set up a JV with BioNTech (BNTX) for COVID-19 vaccine production and commercialization. (Newswires)

UK Transport Secretary stated that from May 17th, travel will be permitted to 12 green list countries, include Portugal and Israel but not Spain, France or Greece, while they hope to have further destinations unlocked by the summer. (Newswires)

Italy is planning to ease quarantine restrictions for some travellers beginning mid-May. (Newswires)

ASIA

Asian equity markets began the week mostly positive as the region reacted to last Friday's disappointing jobs data stateside where Non-Farm Payrolls severely missed expectations and saw major US indices hit fresh record highs as the data supported the case for continued stimulus efforts. ASX 200 (+1.0%) was led higher by the mining related sectors after underlying commodity prices extended on gains which saw copper prices print fresh record levels and Dalian iron ore futures jumped by 10% at the open to hit limit up, while the energy sector was also lifted following a ransomware attack that forced the shutdown of the Colonial Pipeline, which is the largest refined products pipeline in the US and transports 45% of the east coast’s fuel supply. Furthermore, M&A related newsflow added to the encouragement with Crown Resorts among the best performers after it received an improved offer from Blackstone and a separate merger proposal from Star Entertainment. Nikkei 225 (+0.6%) benefitted from favourable currency flows and as participants took the recent state of emergency extension within their strides as this was widely flagged beforehand, although there were increased concerns regarding the Olympics after a recent poll showed 59% of the Japanese public think the games should be cancelled. Hang Seng (-0.4%) and Shanghai Comp. (+0.1%) were less decisive amid lingering concerns of a regulatory crackdown and with the Chinese telecom firms hampered after their failed appeal against a NYSE delisting. However, energy and biopharmaceuticals names outperformed after Sinopharm’s COVID-19 vaccine was approved by the WHO for emergency use listing and Fosun Pharma’s subsidiary agreed with BioNTech to set up a JV for COVID-19 vaccine production and commercialization. Finally, 10yr JGBs were lacklustre amid the mostly positive risk tone in the region and following the recent tumultuous price action in T-notes in the aftermath of the US jobs data, although downside in JGBs was stemmed amid the presence of the BoJ in the market for JPY 925bln of JGBs with 1yr-5yr maturities.

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 6.4425 vs exp. 6.4400 (prev. 6.4678)

EU and India have agreed to restart trade discussions as both sides look to counter China’s rise. (FT)

UK/EU

UK PM Johnson is to pledge a boost to economies in struggling towns and will use the debate on the Queen’s Speech on Tuesday to set several bills related to his levelling up agenda. (FT)

UK government ministers admit that companies in freeports will not be able to enjoy full benefits of tax-efficient zones and will face tariffs if they export to certain countries. (FT)

The SNP won 64 seats in the Scottish Parliamentary election, falling one short of the number required for an absolute majority. However, the Scottish Green party, which are also pro-independence, won 8 seats to give secessionists parties a majority. In the wake of the results, First Minister of Scotland Sturgeon stated that when the pandemic has passed, she intends to hold another independence referendum as the outcome of the election showed that holding one is now "the will of the country". PM Johnson stated ahead of the results that holding a referendum in the current context would be "reckless and irresponsible". (BBC/Telegraph)

UK Labour party announced a shadow cabinet reshuffle following the crushing defeat in the local council elections. (Newswires)

ECB’s Rehn urged changes to the ECB’s inflation target which he wants to be inline with the Fed’s approach of allowing an overshoot and stated that aside from price stability, focus on full or maximum employment makes sense in the current environment of lower natural rate of interest. Rehn also suggested it was very important that governments plan lowering debt levels that have surged amid COVID-19 (FT)

ECB's Lane says the road to recovery will be long. Adding that EZ unemployment will not return to 2019 levels until 2023 and GDP will not return to 2019 levels until Spring 2022. (Le Monde)

German Finance Minister Scholz vowed to raise taxes on the rich and invest in cleaner energy, as well as widen social programs in an effort to revive his bid to succeed Chancellor Merkel. (Newswires)

Fitch affirmed France at AA; Outlook Negative and affirmed Austria at AA+; Outlook Stable. (Newswires)

FX

In FX markets, the DXY nursed some post-NFP losses although remained firmly beneath the 90.50 level following the disappointing jobs data. This prompted comments from several officials including President Biden who stated the US is still digging out of an economic collapse and that it will take time to get the US economy moving again, while Fed’s Kashkari suggested the labour market remains in a “deep hole” and needs aggressive support to speed its recovery with the US still somewhere between 8mln-10mln jobs below pre-pandemic levels. EUR/USD held on to most of Friday’s gains around the 1.2150 level and following recent comments from ECB’s Rehn who urged the ECB should follow suit to the Fed’s inflation approach of allowing to overshoot the target to address sluggish price growth and suggested it was very important that governments plan lowering debt levels that have surged amid COVID-19. GBP/USD reclaimed the 1.4000 handle after the ruling UK Tory party’s strong results at last week’s local council elections, while the SNP won 64 seats in the Scottish Parliamentary Election which was 1 more than previous and a seat short of a majority although the Scottish Green party, which are also pro-independence, won 8 seats to give secessionists parties a majority which was the status quo beforehand. USD/JPY and JPY-crosses gained amid the mostly positive risk tone and with some also noting Gotobi demand, while antipodeans consolidated after mixed data from Australia which showed Retail Sales disappointed but NAB Business Surveys improved and with the recent gains in commodities helping restrict the downside for relevant currencies.

New Zealand Finance Minister Robertson said the economic rebound provides us with more options and that there is a bit more room in operating and capital allowances, while he added that there is increased scope to keep a lid on debt and that the economic recovery was better than expected. (Newswires)

• Australian Retail Trade (Q1) Q/Q -0.5% vs. Exp. -0.4% (Prev. 2.5%)
• Australian Retail Sales (Mar) M/M 1.3% vs. Exp. 1.4% (Prev. 1.4%)
• Australian NAB Business Confidence (Apr) 26 (Prev. 15.0)
• Australian NAB Business Conditions (Apr) 32 (Prev. 25.0)

COMMODITIES

Commodities began the week on the front-foot with an early surge in gasoline prices after the Colonial Pipeline, which transports nearly half of the fuel supply in the east coast, was shut down due to a ransomware attack with no set timeline for a restart which has triggered concerns of fuel shortages. This lifted RBOB gasoline by around 4% to briefly above USD 2.20 at the open although prices have since retraced the majority of the move, while WTI gapped above the USD 65.00/bbl level but with gains kept only mild amid uncertainty from the disruption of the refined products pipeline and following the recent disappointing US jobs data. Elsewhere, gold prices plateaued and copper extended to fresh record levels as Chinese commodities trade got underway whereby Dalian iron futures also rose to unprecedented levels with a 10% jump at the open to hit limit up.

Baker Hughes US Rig Count (w/e May 7th): Oil +2 at 344, Nat gas +7 at 103, Total +8 at 448. (Newswires)

The Colonial Pipeline, which is the largest refined products pipeline in the US and transports 45% of the east coast’s fuel supply, shut down its entire network after it was hit with a ransomware cyberattack which prompted concerns that gasoline and diesel prices could spike. Colonial Pipeline stated its main fuel lines are still offline following ransomware attack but noted some smaller lateral lines between terminals and delivery point are back in operation, while US Commerce Secretary Raimondo said she will be working closely with the DHS regarding the oil pipeline hacking and that officials are working with the Co. to return operations ASAP. Furthermore, the government declared a state of emergency in an effort to keep fuel supply lines open and the White House established a task force to investigate Colonial Pipeline security breach with preliminary findings indicating that the group involved could be tied to Russia. (Newswires/Guardian)

Iraq put out a fire at the second of two oil wells that were attacked by militants on Wednesday in the north of the country near Kirkuk. (Newswires)

Goldman Sachs said it forecasts returns of 10.3%, 8.3% and 11.8% on commodities over 3-, 16- and 12-month horizons, respectively, on the S&P GSCI Index, while its baseline forecasts for commodity prices include Brent rising to USD 80/bbl in Q3, natgas increasing to USD 3.25/mmbtu in Q3 and copper prices to gain to USD 11,000 in 12 months. Furthermore, it sees Brent and WTI to reach USD 80/bbl and 77/bbl respectively in 6 months and continues to expect OPEC+ to accommodate any demand weakness or ramp up in Iranian output which will keep oil market fundamentals tight, while it broadly favours energy and industrial metals over precious metals but added that they still believe gold can perform in this environment amid wealth effect in EMs and a weaker USD. (Newswires)

GEOPOLITICAL

US President Biden said he still wants to meet with Russia President Putin and that a meeting is still being worked on, while the White House said President Biden's invitation for Putin meeting is not based on having all issues resolved in advance. (Newswires)

White House stated there has been some progress made with Iran and there is a positive sign talks are continuing, while it added that sanctions could only be lifted if Iran returns to JCPOA status. (Newswires)

US

Treasuries were mixed on Friday after a sloppy jobs report saw the belly bid hard while approaching refunding supply kept duration cheaper, seeing 5s30s rise by over 6bps. 2s -1.2bps at 0.145%, 5s -2.4bps at 0.773%, 10s +1.6bps at 1.577%, 30s +3.6bps at 2.272%; TYM1 volumes were solid. 5yr TIPS -4.9bps at -1.922%, 10yr TIPS -2.8bps at -0.919%, 30yr TIPS -0.4bps at -0.038%. EDU2 +0.025 at 99.720, EDU3 +0.060 at 99.225, EDU4 +0.055 at 98.600. SOFR and EFFR unchanged at 1bp and 6bps. NY Fed RRP demand rises to USD 161.856bln across 28 bidders (prev. USD 154.92bln across 20 bidders). The action for the day arrived, unsurprisingly, on the back of the 266k US jobs added print, well below the expected 978k, while unemployment saw a surprise rise to 6.1% from 6.0%. There was a knee-jerk drop lower in yields, seeing cash 10s hit an intra-day low of 1.47%, a support level from early March, before paring half the move within the space of 10 minutes - there were close to 800k TYM1 contracts traded in the 30 minutes after the release. As the session progressed and the dust settled (shorts finished covering) weakness in duration resumed, with next week's refunding (2s, 10s, and 30s) on the horizon and dealers likely on the defensive to make concession, seeing 5s30s steepen by over 6bps on the day as the belly held firmer. T-note (M1) futures settles 2+ ticks higher at 132-24.

Fed’s Kashkari (2023 voter) said the US labour market remains in a “deep hole” and needs aggressive support to speed its recovery from the pandemic, while he suggested we are still somewhere between 8mln-10mln jobs below pre-pandemic levels and that there was “some truth” to the idea that enhanced jobless benefits create a disincentive to returning to work. (CBS)

US President Biden said the American Rescue Plan was set out to support the country over a year not 60 days and that the US economy is moving in the right direction but has a long way to go, while he added that Friday's jobs report shows how important its economic actions are. President Biden added that the US is still digging out of an economic collapse and that the jobs report shows the economy is not at risk of overheating, while it will take time to get the US economy moving again and parts of recovery plan are still being implemented. Furthermore, he expects state and local jobs to start coming back and said the US jobs plan is needed to bolster the economy. (Newswires)

US President Biden is to meet with Democrat and Republican congressional leaders on Wednesday to discuss policy areas of mutual agreement and identify common ground where they can work together, while the White House previously noted that President Biden believes the debt ceiling should be a process Democrats and Republicans can move on and stated that they are seeing little evidence that unemployment benefits are impacting people's willingness to work. (Newswires)

US Treasury Secretary Yellen said the April jobs report highlights the long climb back to US economic recovery and believes the US will reach full economic employment next year, while she noted bright economic spots in service industries and expanding labour market. Yellen also stated there has been 'remarkable' economic progress and that she is confident there will be a strong economy in 2021 and 2022. (Newswires)

US Commerce Secretary Raimondo said we have a long way to go to recover from the pandemic and stated that the US has fallen behind regarding investments in the economy during the pandemic. Furthermore, Raimondo added that the data does not contain anything that suggests unemployment insurance is why Americans are out of work and noted that fear was the top reason for why Americans were not going back to work, while she also stated that supply chain disruption was a significant worry with the semiconductor industry a particular concern. (Newswires)

US Senate Leaders draft compromise USD 110bln measure to bolster US technology research and development efforts, in an attempt to address Chinese competition and which would create a White House Chief Manufacturing Officer. (Newswires)