• Equities are contained with the initial modest European strength dissipating while the ES is unchanged and NQ/YM are mixed
• DXY is off-lows and holding 90.00 but pressured with Cable eclipsing 1.40 amid Scottish election results
• US Colonial Pipeline shut down its entire network as prelim. reports indicate the cyber attack could have Russian links, no time-line for a restart at present
• LME copper hit record highs as did Dalian iron ore futures while Shanghai copper rose over 5%
• Looking ahead, highlights include ECB asset purchases, Fed's Evans and Kaplan

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)

UK Health Minister Dorries has hinted that PM Johnson could accelerate the lifting of lockdown later today, Daily Mail's Groves; saying it is data not date based and the data is looking very good. (Twitter)

French President Macron urged the US to remove restrictions on exports of COVID-19 vaccines and vaccine ingredients. Separately, Health Minister Veran confirms that outdoor bars and dining in France will re-commence as of May 19th. Elsewhere, Finance Minister Le Maire said there are no plans for a second economic recovery programme. (Newswires)

German Health Minister Spahn is aiming to strike an agreement this week to lift the quarantine requirements for fully-vaccinated people returning from abroad. (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)

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 (+1.3%) 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 (-0.1%) and Shanghai Comp. (+0.3%) 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)

US

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 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. Furthermore, Biden and Senate Majority Leader Schumer are open to continuing talks for bipartisan deal on infrastructure without setting any hard deadline, with sources suggesting nothing is likely to happen until the full budget for FY21. (Newswires/Punchbowl)

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)

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)

EU Sentix Index* (May) 21.0 vs. Exp. 14.0 (Prev. 13.1). (Newswires)

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

EQUITIES

Cash bourses in Europe trade mixed (Euro Stoxx 50 -0.3%) after the lukewarm momentum at the cash open lost steam as participants await the next catalyst – with the Monday docket somewhat mundane but the rest of the week looking livelier with US CPI/Retail Sales, Chinese inflation, ECB minutes, German ZEW, monthly oil market reports, the Aussie budget and UK GDP. US equity futures meanwhile are similarly mixed with some mild underperformance seen in the tech-laden NQ as US yields continue to recover from the NFP trough, with the US 10yr meandering around 1.60%. Back to Europe, the indices vary in performance - the IBEX 35 (+0.1%) and FTSE 100 (+0.1%) are kept afloat by the notable outperformance in basic resources as copper and iron ore prices continue to rip higher as speculative bets mount over the recovery and ramp-up in EV production. This sees the likes of Rio Tinto (+3.2%), BHP (+2.8%), Antofagasta (+2.5%) among the Stoxx 600 winners at the time of writing. Elsewhere, banks are supported by the high yield environment whilst Italy’s FTSE MIB (+0.5%) outperforms as its heavyweight banking sector cheers further rhetoric surrounding banking consolidations. The downside meanwhile sees Travel & Leisure – with UK airlines lower (easyJet -3.3%, Ryanair -1.2%, IAG -2.7%) after the UK green-list of countries was not well received as Spain, France, and Greece have been omitted for the time being. In terms of individual movers, MAN SE (+27%) surged and hold onto gains after Traton (+2.4%) offered a 27% premium to MAN’s minority shareholders in a bid to squeeze them out. Deutsche Bank (+0.6%) shares meanwhile were dented as reports suggested the Co. and JP Morgan (Unch pre-mkt) are among those being sued by 1MDB, although the broader banking sector's performance has cushioned losses.

JP Morgan (JPM) and Deutsche Bank (DBK GY) are reportedly among the Cos sued by 1MDB, according to reports. (Newswires)

US Pentagon is reportedly mulling ending the Joint Enterprise Defense Infrastructure (JEDI) cloud project due to the Amazon (AMZN) court fight. (WSJ)

FX

GBP/DXY/JPY - Sterling is sharply outperforming in similar vain to this time last Monday when most in the UK where absent due to the early May Day Bank holiday, and several factors are aligning to propel the Pound beyond key or psychological levels against its major counterparts. Indeed, Cable has breached the 1.4000 mark that has been impervious since late February and now looks primed for a run at the next round number with the aid of ongoing Buck weakness in wake of last Friday’s US labour data disappointment, but also after Scottish election results over the weekend revealing a win for the SNP, but a single vote short of the absolute majority needed to call another independence referendum. Meanwhile, UK Health Minister Dorries has alluded to the possibility that very good data regarding vaccinations and COVID-19 developments could prompt PM Johnson to bring forward the next stage of reopening from lockdown, and Sterling is also benefiting at the expense of the Yen as the Gbp/Jpy cross rallies to a new 153.30+ y-t-d high and Usd/Jpy rebounds markedly from just under 108.50 to probe 109.00 at one stage against the backdrop of rising US Treasury yields and curve re-flattening. However, the Greenback remains depressed overall and the index has dipped below the last base ahead of 90.000 from late February (90.125), albeit marginally within a 90.097-342 band ahead of employment trends and a speech by Fed’s Evans.

AUD/CAD/NZD - A blistering rise in iron ore prices, record increase in the case of copper and a stellar improvement in NAB business sentiment in contrast to slightly weaker than anticipated retail sales, are all helping the Aussie extend gains vs its US and NZ rivals, with Aud/Usd approaching 0.7875 and Aud/Nzd back within striking distance of 1.0800. However, the Kiwi is also holding firm against its US peer and only pips shy of 0.7300 following fairly upbeat remarks from NZ Finance Minister Robertson on the domestic recovery overnight, and the Loonie is having a close look at offers around 1.2100 with support from firm WTI after the closure of the Colonial Pipeline in the US (biggest for refined products) due to a ransomware attack.

EUR/CHF - The cross is on a more even keel either side of 1.0950 as the Euro and Franc both take advantage of the Dollar’s demise to trade above 1.2175 and 0.9000 respectively at best, with Eur/Usd also underpinned by a significantly better than forecast Eurozone Sentix Index and Usd/Chf not that surprised to see a modest rise in weekly Swiss domestic bank sight deposits.

SCANDI/EM - The Nok has hardly been undermined by mainly softer than expected Norwegian inflation given strength in Brent and the fact that the Norges Bank has already shifted to a more hawkish stance (reaffirmed last week, though accompanied by recognition of a recent slowdown in the economy). Conversely, Riksbank minutes retaining a dovish skew and some Board members remarking that a repo rate cut is completely possible, have hampered the Sek to an extent. Elsewhere, more Cnh appreciation vs the Usd after a firmer PBoC midpoint fix for the Cny, WHO approval of Sinopharm’s vaccine and a subsidiary of Fosun Pharma’s JV with BioNTech to produce and commercialise vaccines. The aforementioned rise in crude and ongoing strength in Gold are keeping the Mxn and Zar elevated, and latter may also be content that Moody’s decided to shelve its SA ratings review last Friday, but the Try and Rub are on the back foot again.

Notable FX Expires, NY Cut:

• USD/JPY: 108.00 (415M), 109.00-05 (594M), 109.35-50 (1BLN)

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)

FIXED

The foundations of the recovery in bonds may be somewhat sentimental and technical as losses in Bunds and Gilts were contained beneath 170.00 and 128.00 at 169.97 and 127.98 respectively, but the latest leg up appears US Treasury-related or led as the 10 year note inches above par at 132-25 vs a 132-18+ low and 132.24 prior close. However, debt could also be taking stock of the overall situation in rival assets given waning stocks and crude prices coming off the boil, as the 10 year German benchmark and its UK equivalent trade near minor new intraday peaks of 170.25 and 128.20 (-22 and -32 ticks on the day compared to -1/2 point and -54 ticks at the Eurex and Liffe lows). Ahead, weekly ECB asset purchase updates, US employment trends, more from the Riksbank via Ohlsson and Fed’s Evans.

COMMODITIES

WTI and Brent front-month futures are on a modestly firmer footing at the start of the week in what is seemingly a move in sympathy with RBOB gasoline in wake of the Colonial Pipeline being taken offline after a cyber-attack. The pipeline is a major artery for the delivery of refined products to the East Coast, transporting some 2.5mln BPD of products and accounting for around half of the East Coast’s consumption. Similar to the playbook during the Texas deep freeze, the bullishness of the situation will likely be determined by how prolonged the issue is - with no timeline touted thus far. Furthermore, it is worth keeping the geopolitical angle on the radar as preliminary findings indicate that the group involved in the hacking could be tied to Russia. Sticking with geopolitics, the general tone regarding the Iranian talks essentially remains that “progress is being made, but differences remain”, with little new to report on this front. WTI gapped higher above USD 65/bbl and trades around the middle of a USD 0.7/bbl range. Brent is back under USD 69/bbl having printed a USD 68.44-69.20 intraday range so far. Elsewhere, spot gold and silver are relatively uneventful and await fresh catalysts around recent ranges of USD 1830-39/oz and USD 27.40-82/oz respectively. Focus overnight and in early hours has been on the surge in base-metal prices, with LME copper hitting record highs, whilst Shanghai copper rose over 5% and Dalian iron ore futures hitting fresh all-time highs, surging some 10% - with traders and analysts citing speculative bets placed on re-inflation and the recovery.

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)

Citi expects the strong momentum in AUM for commodities to continue in Q2 and into the summer. (Newswires)