• European bourses are firmer following the positive APAC performance with US futures following suit ahead of data, ES +0.6%
• USTs have been climbing all morning recovering recently lost ground with yields suppressed and the USD downbeat as such to the modest benefit of peers
• President Biden told Republicans that he wants to see real progress on a possible bipartisan deal by Memorial Day
• Israeli PM Netanyahu is reportedly showing signs of flexibility in ending military operation on Gaza soon, sources
• Looking ahead, highlights include ECB minutes, US retail sales, industrial production, Uni. of Michigan, Fed's Kaplan

CORONAVIRUS UPDATES

The Times' Political Editor Swinford tweeted that, in the UK, given the Indian COVID-19 variant 10mln could receive 2nd jabs early and a rollout for over 50s could be accelerated to protect the most vulnerable, while added there is concern the June 21st phase of the roadmap could be delayed. (The Times)

UK COVID vaccine passport plans have reportedly been scaled back as ministers question their benefits amid a decline in infections and hospitalization numbers. (Telegraph)

Extending the gap between the first and second doses of the Pfizer (PFE)/BioNTech (BNTX) COVID-19 vaccine to 12-weeks vs 3-weeks prompts a better antibody response in the elderly, according to a Birmingham University study. (FT)

Japanese Economic Minister Nishimura said they are to add three additional prefectures to the state of emergency and reports noted that Hokkaido, Hiroshima and Okayama will be added to the emergency declaration list. There were also comments from Japanese Finance Minister Aso that they will use JPY 512bln of reserve funds to pay for vaccines and that around JPY 4tln of reserve funds remain but noted that they are not considering immediately compiling a new extra budget to address the pandemic. (Newswires)

Singapore Health Ministry tightens COVID-19 curbs including limiting groups to 2 and ceasing dine-in at restaurants, while Transport Minister says its very likely we will not reach threshold for planned travel bubble with Hong Kong. (Newswires)

Taiwan Premier said there is no need to raise the COVID-19 alert level for the time being and that the island already has more experience and resources to fight the pandemic compared with last year, while they will also spend more to assist people and sectors impacted by the pandemic. (Newswires)

ASIA

Asia-Pac stocks were higher as the region took impetus from the firm performance in the US where the major indices recovered from the recent inflation-triggered sell-off and snapped a 3-day losing streak, with sentiment helped by data releases including pandemic-low jobless claimant numbers and although PPI printed firmer than expected, it remained within the range of analysts’ estimates unlike the recent blow out CPI. ASX 200 (+0.5%) was led higher by commodity-related stocks and with the energy sector atoning for the underperformance in US counterparts despite the continued retreat of oil prices from cyclical highs, while Treasury Wine Estates was among the biggest gainers as it plans to pivot to the US market and focus on its profitable Penfolds brand in an effort to spur profit growth amid the impact from Chinese tariffs. Nikkei 225 (+2.3%) benefitted from recent favourable currency moves and the global stock rebound, which has helped participants look past the ongoing COVID concerns and looming inclusion of 3 additional prefectures to the state of emergency list. Hang Seng (+1.1%) and Shanghai Comp. (+1.8%) were also firmer but with gains initially moderated as US-China tensions lingered following comments from US Secretary of State Blinken who reiterated support for Australia against economic coercion from China and USTR Tai suggested new trade laws are required to address the anti-competitive threats from China against key high-tech US industries. Earnings releases also provided a catalyst for price moves with Alibaba shares the biggest laggard in the Hang Seng. Finally, 10yr JGBs were positive as they tracked the rebound in T-notes and with the BoJ also present in the market for nearly JPY 1.4tln of JGBs with 1yr-10yr maturities, although gains in the 10yr benchmark were capped amid the outperformance in Japanese stocks.

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 reference rate at 6.4525 vs exp. 6.4499 (prev. 6.4612)

US

Fed's Bullard (2022 voter) said US output will hit a new high by end-June and a return to the pre-pandemic peak far ahead of predictions from last year, while he added that fiscal policy to sustain households worked well beyond initial hopes and that the low ratio of unemployed to job openings means labour market is tighter than headline payroll and unemployment levels indicate. Furthermore, Bullard stated that monetary policy is in a good position today and don't want to shift policy in a crisis, as well as noted that it is too soon to worry about tapering bond purchases. (Newswires)

US President Biden said they didn't compromise on anything in the meeting with Republicans on infrastructure and is very optimistic a reasonable agreement will be reached, while he will talk to Republicans again next week. There were also comments from the White House that President Biden told Republicans that he wants to see real progress on a possible bipartisan deal by Memorial Day and a spokesman separately noted that President Biden is to release first detailed budget proposal on May 27th. (Newswires)

GEOPOLITICAL

Large Israeli military build-up reported on Gaza border but no signs of ground operation, according to Al-Arabiya; most recently, Israeli PM Netanyahu is reportedly showing signs of flexibility in ending military operation on Gaza soon, according to Israeli sources cited by Sky News Arabia; some army leaders support the decision to end the operation on Gaza after Hamas strikes. (Twitter)

Russia is to postpone the enforcement of the ban on the US Embassy hiring foreign staff, via IFAX. (Newswires)

EQUITIES

Bourses in Europe trade with broad-based gains across the board (Euro Stoxx 50 +0.6%) following the recovery seen on Wall Street yesterday which resulted in a positive vibe reverberating across APAC after a tumultuous week. US equity futures also see modest gains with participants awaiting fresh fundamental catalysts and further US data releases in what has, thus far, been a quiet morning. Sectors in Europe are mostly in the green except for Basic Resources amid a pullback in base metal prices (see commodities section), but it is difficult to discern a particular risk profile. Banks, Insurance, Retail, Household Goods, Oil & Gas, and Tech reside as the top performers while Healthcare and Travel & Leisure dwell among the laggards. Travel & Leisure has been underwhelmed by reports of uncertainty regarding UK tourism in Portugal after the Portuguese “state of calamity” was extended. In terms of individual movers, Adidas (+1.2%) are firmer amid source reports that Authentic Brands Group has teamed up with Wolverine World Wide to offer around USD 1bln for Reebok, albeit sources valued the unit at around EUR 1.2bln back in February. Meanwhile, French heavyweight Danone (-1.7%) is pressured after being downgraded at Goldman Sachs.

Foxconn (2317 TT) Q1 net profit TWD 28.3bln (exp. TWD 24.4bln); sees Q2 revenue +15%. (Newswires)

Tesla (TSLA) is in discussions with Eve Energy (300014 CH) to add the latter as a battery supplier and aims to finalize partnership in Q3, according to sources. (Newswires)

TSMC (2330 TT) - Co. is mulling USD 23-25bln investment for the next Arizona factory over 10-15yrs, according to sources. (Newswires)

FX

USD - The Dollar continues to cool off after its midweek melt-up in response to significantly stronger than forecast US CPI data, awaiting the remaining releases of the week that comprise retail sales, ip and preliminary Michigan sentiment with updates to year ahead and 5 year inflation expectations, all before another speech from Fed hawk Kaplan. The Buck is also drifting back amidst renewed bull-flattening along the Treasury curve, albeit fairly mild and more in relief that the latest Quarterly Refunding has been completed rather than a positive reaction to the long bond finale that was far from well received. Moreover, broad risk sentiment has recovered somewhat following a positive Wall Street session to ‘end’ a 3-day run of consecutive losses to leave the DXY prone to further retracement from Wednesday’s peaks and a test of support around 90.500 having narrowly failed to scale technical resistance ahead of 91.000 when the headline and core inflation heat was full on.

CHF/EUR/NZD - All taking advantage of the Greenback’s loss of impetus, with the Franc now considerably closer to 0.9000 compared to just shy of 0.9100 at the current w-t-d peak and Euro looking appreciably more comfortable on the 1.2100 handle than it has of late, while the Kiwi is probing 0.7200 again irrespective of a marked slowdown in NZ’s manufacturing PMI.

AUD/CAD/GBP/JPY - The Aussie has overcome another pretty sharp reversal in copper and iron ore overnight to bounce firmly from the low 0.7700 area vs its US counterpart, but may find the half round number above tough to breach again given 1.3 bn option expiry interest rolling off at the NY cut. Conversely, a recovery in oil has helped the Loonie pare declines and regain 1.2150+ status even though BoC Governor Macklem expressed concerns about further Cad appreciation and the adverse impact this might have on Canadian exports plus policy settings if the Loonie rallies a lot further. On that note, and for reference Usd/Cad hit circa 1.2046 lows only 2 days ago to set yet another multi-year trough and was as high as 1.2654 before the BoC tapered QE and swivelled hawkishly on rates. Elsewhere, the Pound is still pivoting 1.4050, but looks increasingly bearish against the Euro as the cross rebounds a bit further above 0.8600, while the Yen is straddling 109.50 where 1.1 bn option expiries reside and not displaying too much dismay over Japan’s deteriorating COVID-19 situation at this stage against the backdrop of more favourable (softer) UST yields.

SCANDI/EM - Some relief for the Nok after Thursday’s slide via the aforementioned revival in risk appetite and crude prices, while the Mxn has reclaimed 20.0000+ status in wake of Banxico maintaining rates as expected, but retaining a commitment to ensure that headline inflation converges to the 3% target within the policy horizon. However, the Czk has not gleaned much upward thrust from CNB minutes largely confirming a hike in June.

FIXED

No obvious catalyst aside from short covering, pre-weekend position paring and a grinding bid as key or significant levels were breached, but US Treasuries and Gilts seem to have done most of the heavy lifting in terms of clawing back more lost ground. The 10 year T-note has now been up to 132-15+ vs 132-06 at worst (and sub-132-00 yesterday) and UK peer also beyond Thursday’s intraday high at 127.49 vs 127.34 for a 41 tick gain on the day compared to only 4 ticks above par at one stage, while Bunds reached 169.18 before fading (+29 ticks) just a tick shy of interim chart resistance. Perhaps the latter is treading more cautiously ahead of ECB minutes in case the account reveals more GC leanings towards QE tapering, and this would certainly explain underperformance in the Eurozone periphery where BTPs and Bonos are over ¼ point underwater. Also ahead, US data, Michigan sentiment and a final word for the week from the Fed courtesy of Kaplan.

Paris Club has reportedly agreed that no default will occur in the event Argentina misses a bond payment due in May, contingent on certain conditions. (Newswires)

COMMODITIES

WTI and Brent front month futures have trimmed overnight losses and some more, with traders citing yesterday's weakness to an unwind in the Colonial pipeline premium alongside the worsening COVID situation in Asia - with India still in a critical condition whilst Taiwan and Singapore see rising cases which prompted the latter to tighten restrictions. Meanwhile, geopolitics remain in vogue as the Israeli/Palestinian conflict remains heated, as headlines also emerged regarding an Azeri/Armenian violation and Russia is reportedly involved as a mediator. Meanwhile, there is little to report on the JCPOA front. WTI Jun has reclaimed a USD 64/bbl handle (vs low 63.33/bbl) whilst Brent Jul extends gains above USD 67/bbl (vs low 66.50/bbl). Elsewhere, precious metals have been moving in tandem with yields and the Buck and thus have been grinding higher, with spot gold just under USD 1,850/oz (vs low 1,826/oz) whilst spot silver inches higher above USD 27/oz. Base metals meanwhile have been seeing losses with LME copper back below USD 10,250/t at the time of writing following the recent run, whilst iron ore and coke futures in Dalian hit limit down overnight as China top steel-making Tangshan said it requires firms to control price surges and will severely punish price manipulation.

Colonial Pipeline said it restarted its entire pipeline system and product delivery has commenced to all markets, but added it will take several days for the product delivery supply chain to return to normal following the restart. (Newswires)

China's top steel-producing city of Tangshan warned mills to maintain market order and that local authorities will examine illegal practices, as well as punish those that manipulate prices. (Newswires)

Kazakhstan produced 1.483mln BPD in April vs. March 1.475mln BPD, according to the Energy Ministry; will offset overproduction in Summer. (Newswires)

CME raised COMEX copper futures maintenance margins by 8.2% to USD 6,600 per contract for May 2021 and raised RBOB gasoline futures maintenance margins by 7% to USD 6,100 per contract for June 2021. (Newswires)