• Asia-Pac bourses traded with firm losses amid spillover selling from the tech-led declines on Wall St
• All major US indices were dragged into the red with underperformance in the Nasdaq as tech names sold off
• Chinese CPI printed below forecast while PPI rose at its fastest pace since 2017
• The DXY heads into the European session relatively flat, EUR/USD rests just below 1.2150 and GBP/USD maintains 1.41 status
• US Senate Republicans reportedly signalled that they could increase the infrastructure counter proposal to President Biden
• Looking ahead, highlights include German ZEW, Australian budget, US JOLTS, OPEC MOMR, Fed's Williams, Brainard, Daly, Bostic, Harker, Kashkari, BoE's Bailey, supply from the UK and US (3yr)

CORONAVIRUS UPDATE

US FDA authorized the (PFE) / BioNTech (BNTX) COVID-19 vaccine for emergency use for the 12-15 age group and said the vaccine met the statutory criteria to amend the EUA, while known and potential benefits in individuals 12 years and above outweigh the risks. Pfizer (PFE) later commented its COVID-19 vaccine was 100% effective and well-tolerated by participants aged 12-15 years in the Phase 3 trial, while it also submitted data to the EMA and other global regulators with additional authorizations expected within weeks. (Newswires)

Novavax (NVAX) said it intends to file for authorisation of the NVX-COV2373 with US FDA, UK MHRA and European Medicines Agency in Q3, while it is committed to supply 200mln COVID-19 vaccine to countries worldwide in addition to 1.1bln doses to the Covax facility and expects to be able to produce 2bln doses annually at year-end, as well as throughout next year which includes production from the Serum Institute. (Newswires)

AstraZeneca (AZN LN) delivered nearly 50mln COVID-19 doses to the EU out of 300mln due by the end of June, according to latest EU internal supply data. (Newswires)

UK PM Johnson confirmed England is to move to step three of lockdown easing on May 17th with indoor hospitality to reopen including indoor cinemas, pubs, restaurants, and hotels to reopen with some capacity limits, while social-distancing rules are to remain in public settings in England and people are to make their own judgement in private. PM Johnson added that this unlocking is a considerable step on the road to normality and is confident the UK can go further. Furthermore, he noted that they will be saying more later this month on what role there could be, if any, for certification and social distancing, while there were separate reports that the US State Department reduced its travel advisory for the UK to level three. (Newswires)

British Virgin Islands and several Caribbean countries are among the limited destinations likely to be added to the UK "green list" for holidays, although a major expansion including popular destinations in France, Spain, Greece or Italy is unlikely, according to reports. (Telegraph)

ASIA

Asia-Pac bourses traded with firm losses on spillover selling from the tech-led declines on Wall St, where all major indices were dragged into the red amid higher yields and inflationary concerns, although the downside in the DJIA was contained after it briefly breached the 35k level for the first time ever. ASX 200 (-1.1%) was pressured amid underperformance in tech and with the commodity-related sectors subdued by a pullback in copper and iron ore futures from record levels which was not helped by reports of tougher supervision by China’s exchange. Nikkei 225 (-3.2%) was the biggest decliner after Japanese Governors warned that a nationwide state of emergency cannot be ruled out and as participants digested a slew of earnings updates, with better-than-expected Household Spending data doing little to stem the losses in Japan, while the KOSPI (-1.4%) succumbed to the broad risk aversion which overshadowed the strong early trade data for May which showed Exports jumped 81.2% Y/Y during the first 10 days of the month. Hang Seng (-2.4%) and Shanghai Comp. (-0.3%) weakened as the large Chinese tech stocks were impacted by the industry sell-off which resulted to losses of around 4% for the Hang Seng TECH Index, while a pullback for commodity prices and mixed inflation data in which Chinese CPI printed below forecast but PPI rose by its fastest pace since 2017, added to the uninspired mood. In addition, China released its latest Census which showed population growth in 2010-2020 slowed to 5.38% from 5.84% the decade before and the NBS chief noted that China’s population is declining, ageing is deepening and that steps must be taken to ensure a balanced population growth. Finally, 10yr JGBs were marginally higher amid the underperformance of Japanese stocks but with gains capped amid mixed results at the 10yr JGB auction and following the whipsawing in USTs where early gains were wiped out as yields recovered heading into this week's refunding auctions and heavy corporate supply including a USD 18.5bln offering from Amazon.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net daily injection of CNY 10bln. (Newswires) PBoC set USD/CNY mid-point at 6.4254 vs exp. 6.4256 (prev. 6.4425)

• Chinese CPI (Apr) M/M -0.3% vs. Exp. -0.2% (Prev. -0.5%)
• Chinese CPI (Apr) Y/Y 0.9% vs. Exp. 1.0% (Prev. 0.4%)
• Chinese PPI YY (Apr) 6.8% vs. Exp. 6.5% (Prev. 4.4%)
• Japanese Household Spending (Mar) M/M 7.2% vs. Exp. 2.1% (Prev. 2.4%)
• Japanese Household Spending (Mar) Y/Y 6.2% vs. Exp. 1.5% (Prev. -6.6%)
• South Korea May 1st-10th Exports +81.2% Y/Y, Imports +51.5% Y/Y and Trade Balance at provisional deficit of USD 2.16bln.

China Census noted total population in the mainland was at 1.41bln in 2020 and that total population growth in the mainland between 2010-2020 was at 5.38% vs. 5.84% growth in 2000-2010. There were comments from a China Census official that the nation's employment pressures are still large despite a falling working age population, while China's stats bureau chief expects the population growth in China to continue to slow and said China's population births are declining, ageing is deepening and that steps must be taken to ensure a balanced population growth. (Newswires)

A report suggested that Australia's AUD 50bln LNG industry could become the latest victim of China’s increasing trade dispute with Australia, while other sources noted that at least 2 smaller LNG importers were instructed not to buy from Australia although these instructions were not given to China's larger importers. (Newswires/The Australian)

BoJ Summary of Opinions from the April meeting stated that Japan's economy is picking up but risks from COVID-19 resurgence continue to warrant attention and that the economy is likely to recover mainly on external demand although the outlook is highly uncertain. Furthermore, it stated that they may see sustained recovery due to pent up demand once the pandemic subsides but risks to the economy remain skewed to the downside and that the BoJ must strengthen easing as hitting the price target is not easy. (Newswires)

UK/EU

EU former chief Brexit negotiator Barnier warned that the trade agreement is not being respected and said the UK is acting like buccaneers regarding the fishing dispute in Jersey. (Telegraph)

UK is said to be seeking restrictions on bulk property purchases in property developments below a certain density by summer. (The Times)

Barclaycard UK April consumer spending rose 0.4% vs April 2019 which is the first growth by that measure so far YTD, while it stated that confidence in the economy was at the highest since February 2020 at 36% vs 28% in March. (Newswires)

• UK BRC Retail Sales YY (Apr) 39.6% (Prev. 20.3%)

ECB's Schnabel said inflation in Germany could surpass 3% this year although the ECB will look through such fluctuations. (Newswires)

EU Council and Parliamentary negotiators are meeting today to discuss the 'green certificate' designed to allow travel in the bloc by confirming vaccination status; senior diplomats say the best-case is a mid-May deal if not then one by month-end. (Politico)

FX

In FX markets, the DXY traded rangebound after yesterday’s early losses and brief test of the 90.00 level to the downside was reversed amid a rebound in yields and as risk appetite soured during US hours. Commentary from Fed officials continued to centre around the recent jobs data although Fed’s Evans thinks the disappointing number will just be for one month and expects strong employment growth for the remainder of year, while Fed's Daly stated she was not that disappointed at the April jobs report as she had anticipated volatility and Fed’s Kaplan suggested the jobs report may reflect supply issues, enhanced jobless benefits and lack of childcare. EUR/USD was choppy after its fluctuations back and forth of the 1.2150 level owing to the recent USD swings and GBP/USD held on to the 1.4100 status after the outperformance in the wake of the local council elections in England and Scottish Parliament election. USD/JPY and JPY-crosses were rangebound and have mostly weathered the tech-led sell off across stocks, while antipodeans languished with price action contained by the recent pullback in commodities, mixed Chinese inflation data and as participants await the federal budget announcement in Australia.

COMMODITIES

Commodities were mixed overnight with WTI crude futures subdued after falling back beneath the USD 65.00/bbl which then acted as resistance with price action subdued amid the heavy losses in stocks and continued reversal of the gains from the Colonial Pipeline. Furthermore, the latest updates noted it aims to substantially restore service by the end of the week and is manually operating the pipeline segment from North Carolina through to Maryland which will only run for a limited period, while focus now shifts to the latest inventory reports and OPEC monthly production data. Gold prices were steady amid a rangebound greenback and copper prices languished following a pullback from record highs with price action constrained by the broad risk aversion.

Motiva Port Arthur, Texas refinery (636k BPD) crude units were shut due to the Colonial pipeline outage, while it was also reported that the Total (FP FP) Port Arthur, Texas refinery (185k BPD) reduced gasoline production due to the Colonial outage, according to sources. (Newswires)

US President Biden stated he will be meeting with Russian President Putin and that there is no evidence that Russia has been involved in the Colonial Pipeline hack. In relevant news, White House Homeland Security Advisor Sherwood-Randall said there is currently not a supply shortage and the administration is preparing for multiple contingencies regarding the Colonial Pipeline. Furthermore, the White House Deputy National Security Adviser for Cyber earlier stated that the US intelligence community is probing hackers for connection to Russia, while DarkSide has been assessed as a criminal actor and US officials are looking for any ties to state actors. (Newswires)

Colonial Pipeline aims to substantially restore service by the end of the week and noted that segments are coming back online in a stepwise fashion, while it added that the attack affected some of its IT systems and temporarily halted all pipeline operations. Furthermore, it is evaluating product inventory at storage tanks and is working with shippers to move product to terminals. It was later reported that the Colonial Pipeline said it is manually operating the pipeline segment from North Carolina through to Maryland which will only run for a limited period and the White House said the administration is continually assessing the impact of Colonial Pipeline shutdown on fuel supply to the east coast, while it is also monitoring supply shortage to southeast and evaluating all actions it can take to mitigate impact. (Newswires)

GEOPOLITICAL

White House said the US has serious concerns about the situation in Israel and the US State Department stated the US' priority in the longer term may head towards depicting a mediating role between Israelis and Palestinians. Rocket sirens were issued in Jerusalem, Israel and explosions were heard whereby Hamas claimed responsibility for the rocket fire, while it was also reported that Israel began air strikes on Hamas targets and that over 200 rockets were fired into Israel from Gaza. (Newswires)

IRGCN fast boats had an unsafe and unprofessional interaction with US military vessels in strait of Hormuz where about 30 warning shots were fired by US Coast Guard vessel before the vessels left, according to the Pentagon. (Newswires)

Saudi-led coalition stated it intercepted an explosives-laden boat south of the Red Sea, according to State TV. (Newswires)

US

The TPLEX bear steepened as participants prepared for this week's refunding auctions and heavy corporate supply, while fresh metals surges kept inflation fears present. By settlement, 2s +1.0bps at 0.155%, 5s +1.3bps at 0.784%, 10s +2.3bps at 1.602%, 30s +4.0bps at 2.317%; TYM1 volumes were lacklustre. 5yr TIPS -2.9bps at -1.943%, 10yr TIPS -1.3bps at -0.928%, 30yr TIPS -0.3bps at -0.038%; 5yr BEI at 2.728%, 10yr BEI at 2.533%, and 30yr BEI at 2.356%. SOFR and EFFR unchanged at 1bp and 6bps. Bonds were lightly offered overnight in continuation from Friday post-NFP, with a metals price rally adding upside momentum to yields - indeed, inflation breakevens saw decent rallies today. However, as European trade got underway the belly led a charge firmer. There was talk around fresh 5s30s steepeners being initiated ahead of long-end auctions and belly strength as traders continued to pare back risk premia in that part of the curve after the disappointing jobs report. That strength carried through right into the NY cash equity open, while the long-end failed to join in. But, as the corporate supply slate picked up, including the jumbo 8-parter from Amazon, 10s cash found its lows for the day at 1.56%. Offers resurfaced across the curve, with some renewed hawkish comments from newswire regular Kaplan supporting the move, although refunding concession was the main culprit. in the latter part of the session, as stock selling accelerated, buyers took prices off the lows for T-Notes, although the announcement of AMZN's USD 18bln, duration-heavy offering took yields back to highs. T-note futures (M1) settled 4+ ticks lower at 132-19+.

Fed's Daly (2021, 2024 voter) said she was not that disappointed by the April jobs report as she had expected there will be volatility. Daly added we are in a transition state and remain encouraged, while she suggested to not call it a worker shortage and that it is a bottleneck. Furthermore, she reiterated that we are a long way from home and that it is not yet time to think nor talk about tapering. (Newswires)

Fed's Evans (2021, 2023 voter) said Friday's job numbers were definitely a surprise and thinks the disappointing number will be a one-month thing only as he expects strong employment growth for the remainder of year. Evans also stated that he believes supply chain, school and childcare issues are more important to hiring difficulties. (Newswires)

Fed's Kaplan (2023 voter) agrees on guidance to reach substantial further progress before they start tapering purchases and reiterated it will be healthy to start talking about tapering sooner rather than later as we approach substantial further progress, while he stated that it would be good to discuss the efficacy of bond-buying vs side effects and the unintended consequences. Kaplan had also commented that demand from businesses to hire is greater than what was reflected in the April jobs report and he still thinks job growth will be strong this year. Furthermore, he suggested the jobs report may reflect supply issues, enhanced jobless benefits and lack of childcare. (Newswires)

US Senate Republicans reportedly signalled that they could increase the infrastructure counterproposal to President Biden ahead of a key meeting which could make-or-break hopes for a bipartisan agreement. (Politico)

US Senator Manchin stated meeting with President Biden at the White House went well, while CNN's Raju tweeted that meeting between US President Biden and Democrat Senator Manchin did not include discussion on price tag of infrastructure. (Newswires/CNN)

US House conservatives criticised a bipartisan bill authored by Senate Majority Leader Schumer and stated it does too little to protect American interests from Chinese threats, while the conservative Republican Study Committee, which has 154 members and is the largest GOP caucus in Congress, also stated that the bill is too expensive. It was separately reported that US Senate Minority Leader McConnell took a dig at the Democrats USD 1.9trln rescue package when commenting on the recent jobs report and stated the additional unemployment benefits are keeping people at home. (The Hill/Fox)

US Treasury launched access and guidance for USD 350bln in state and local COVID-19 aid under the American Rescue Plan act whereby if the unemployment rate is 2 ppts above Feb 2020 rate it can receive funding in a single payment with state funding totalling USD 195.3bln. (Newswires)

California Governor Newsom says California is providing immediate relief to renters through the largest renter assistance package in the US which includes USD 5.2bln for renters to cover their back-rent and rent for several months going forward and USD 2bln to help pay overdue water and utility bills. (Newswires)