• Asia-Pac bourses traded choppy after the mild positive bias from Wall Street wore thin as month-end looms
• In FX, the DXY consolidated at 90.00, EUR/USD failed to reclaim 1.2200, whilst USD/CNH and USD/CNY remained below 6.4000
• The call between China's Vice Premier Liu He and USTR Tai was said to be candid and constructive, while both sides agreed to maintain communication
• US President Biden's administration and other Democrats close to the infrastructure discussions are reportedly willing to allow discussions to extend past the Memorial Day deadline
• Bank of Korea maintained the 7-Day Repo Rate unchanged at 0.50%, as expected, via unanimous decision and it raised GDP growth forecast for 2021
• Looking ahead, highlights include the German GfK, US Durable Goods and IJC, ECB's Hakkarainen, de Guindos, Elderson, BoE's Vlieghe, ECB's Schnabel, and supply from the US

CORONAVIRUS UPDATE

US President Biden said he has asked the US intelligence community to redouble efforts to collect information to help determine the origin of COVID-19, while further areas of inquiry could include specific questions for China and the White House also stated the US will continue to press China to participate in a full international investigation of COVID. There were later comments from China’s Embassy in the US said it supports a comprehensive study of all early cases of COVID-19, while China added that the origin probe should be global and transparent. (Newswires)

The US FDA said it is authorizing the emergency use of Sotrovimab which is produced by GlaxoSmithKline (GSK LN) and Vir Biotechnology for the treatment of COVID-19, while the FDA added that it is reasonable to believe it may be effective for treating mild-to-moderate COVID in adults and paediatric patients. Furthermore, GSK later stated that discussions with global regulators regarding authorisations in additional countries continue to advance and that Sotrovimab will be available for appropriate patients in the US in approaching weeks. (Newswires)

EU’s drug regulator has asked Johnson & Johnson (JNJ) to carry out additional studies to assess the possible link between its vaccine and rare blood clots. (Newswires)

Ocugen (OCGN) said it is on track to submit EUA applications to US FDA for its COVID-19 vaccine candidate Covaxin and believes FDA's new guidance confirms that the Co. continues to satisfy all criteria for EUA submission. (Newswires)

Australia's Victoria state acting Premier confirmed the state will go into a 7-day lockdown from 23:59 local time today. (Newswires)

ASIA

Asia-Pac bourses were choppy as markets continued to waver heading into month-end and after the mildly positive bias from the US wore thin overnight, which saw US equity futures also pare back their marginal gains. ASX 200 (+0.4%) swung between gains and losses with strength in the broader commodity-related sectors offset by underperformance in gold miners after the precious metal recently retreated below the USD 1900/oz level, while the confirmation of a 7-day snap lockdown for Victoria state, which impacts Australia’s second most populated city of Melbourne, added to the sombre mood. Nikkei 225 (-0.4%) was constrained by an indecisive currency, lingering COVID concerns, and with telecom stocks cautious on reports that the government is mulling eliminating 2-year internet contracts. The KOSPI (-0.1%) meanwhile languished despite the upgrades to growth forecasts at the BoK policy meeting where the central maintained its base rate at 0.50%, before Governor Lee eventually flagged the potential for a rate hike this year - contingent on the pace of growth. Hang Seng (Unch.) and Shanghai Comp. (+0.2%) were mixed with Tencent among the laggards in Hong Kong after it was told by regulators to put its finance-related business into a new financial holding company where they can be better supervised. However, a resumption of the strength in biopharmaceuticals and improved earnings from Xiaomi has stemmed the downside for the broader market, with the mainland also kept afloat after China pledged to boost support for smaller business and following recent constructive dialogue between the US and China’s top trade envoys whereby the sides agreed that bilateral trade was important and to maintain communication. Finally, 10yr JGBs are flat with price action indecisive after the recent whipsawing in T-notes and mixed results at the 40yr JGB auction which showed the b/c remained inline with the previous 40yr offering in March.

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 6.4030 vs exp. 6.4036 (prev. 6.4099)

• Chinese Industrial Profits (Apr) Y/Y 57.0% (Prev. 92.3%)
• Chinese Industrial Profits YTD (Apr) Y/Y 106.0% (Prev. 137.3%)

China's Vice Premier Liu He spoke with USTR Tai which was said to be a candid and constructive discussion, while they agreed to maintain communication and that bilateral trade was important. There were also comments from USTR Tai who said the US still faces very large challenges with China across the board and that the Phase 1 trade deal is very important but only one part of the overall relations with Beijing. Furthermore, USTR Tai was said to have raised issues of concern, while she discussed the Biden administration's guiding principles of worker-centred trade policy and ongoing review of US-China trade ties. (Newswires)

US President Biden Administration's Asia Coordinator Kurt Campbell commented that US-China ties are now about competition, not engagement. (Newswires)

Bank of Korea maintained the 7-Day Repo Rate unchanged at 0,50%, as expected, via unanimous decision and it raised GDP growth forecast for 2021 to 4.0% from 3.0% and raised 2022 growth forecast to 3.0% from 2.5%, while it increased 2021 CPI estimate to 1.8% from 1.3% and maintained 2022 CPI estimate at 1.4%. BoK Governor Lee stated that exports and investments are to lead the economic recovery and that private consumption is improving. Furthermore, he said they will maintain an accommodative stance for a while and the economic recovery has strengthened, but later added that they are preparing for an orderly normalization of monetary policy and whether or not a rate hike occurs this year will depend on pace of growth, while he also suggested that normalization shouldn't happen too quickly but shouldn't be too late either. (Newswires)

UK/EU

UK officials are working on trade deals with Gulf states including Saudi Arabia and the UAE, according to Trade Secretary Truss. (Telegraph)

French Finance Minister Le Maire said the government is to present to Parliament a further economic stimulus package of EUR 15bln. (Les Echos)

FX

In FX, the DXY consolidated at the 90.00 level after the prior day’s rebound which in the absence of pertinent data releases and alongside choppy price action in yields, was attributed to the month-end flows with Citi’s model pointing to a mild dollar buy. There were some varied comments from Fed’s Quarles who said that it will be important to begin discussing adjusting asset purchases at upcoming meetings but added that rate hikes are a long way off and he noted that inflation is to meet the bar for tapering later this year but suggested labour market improvement is slower and that they need to remain patient as it would be unwise to slow recovery prematurely. EUR/USD languished after retreating beneath the 1.2200 level owing to the USD strength and following dovish comments from ECB's Panetta yesterday. GBP/USD marginally extended on the prior day’s selling before finding a floor near 1.4100. USD/JPY and JPY-crosses were mixed amid the indecisive mood in the region in which the former retraced some of yesterday’s advances although just about retained the 109.00 status, while antipodeans were quiet with AUD/USD failing to benefit from the stronger than expected CAPEX data and with NZD/USD unmoved by comments from RBNZ Governor Orr who reiterated that they are willing to cut interest rates if needed and that they will maintain or raise monetary stimulus if there is a negative shock in the future, although he also noted that projections see normalizing of monetary policy by this time next year.

RBNZ Governor Orr reiterated that they are willing to cut interest rates if needed but also noted that projections see normalizing of monetary policy by this time next year, while he noted that house price growth will slow dramatically in H2 and that the labour market has been very resilient. Furthermore, he stated that confidence in the outlook is improving driven by the vaccine rollout and lower health risks but added that they will maintain or raise monetary stimulus if there is a negative shock in the future with the central bank keeping all alternatives open. (Newswires)

• Australian Capital Expenditure (Q1) 6.3% vs. Exp. 2.0% (Prev. 3.0%)
• Australian Private Capital Expenditure 2021-2022 (Est. 2) 113.6B (Prev. 105.5B)
• Australian Private Capital Expenditure 2020-2021 (Est. 6) 124.0B (Prev. 121.4B)

COMMODITIES

WTI crude futures retreated beneath the USD 66.00/bbl level but with price action light and contained within the relatively tight ranges seen since Tuesday. In addition, there was little overnight follow-through from this week's EIA inventory figures, while eyes in the crude complex remains on Iranian nuclear talks with little new to report on that front. Sources via Politico suggest that a deal is attainable but cautioned that critical questions remain only partially answered. Elsewhere, gold prices were contained by an uneventful USD and following the recent retreat beneath USD 1900/oz which the precious metal attempts to reclaim, while copper prices have returned flat with early losses stemmed by a floor at the USD 4.50/lb level.

Sources suggested that an Iranian nuclear deal is attainable but cautioned that critical questions remain only partially answered. (Politico)

BHP (BHP AT) confirmed that Chile control central workers will begin their strike on Thursday and noted that it will take contingency measures, while other workers at the Spence and Escondida mines will continue working during the remote operation guild's strike. (Newswires)

US

Treasuries were marginally weaker on Wednesday after a "sell the news" reaction post a solid 5yr auction reversed earlier strength on ECB dovishness. By settlement, 2s -0.5bps at 0.147%, 5s +0.5bps at 0.779%, 7s +0.8bps at 1.230%, 10s +1.0bps at 1.574%, 20s +0.6bps at 2.171%, 30s +0.1bps at 2.261%. 5yr TIPS -2.2bps at -1.824%, 10yr TIPS -0.2bps at -0.855%, and 30yr TIPS -2.3bps at -0.031%. SOFR and EFFR unchanged at 1bp and 6bps, respectively. Fresh record low at 13.5bps for 3m USD Libor. There was a bid for govvies extended into the US session, with yields hovering at lows into the 5-year auction, finding some tailwinds amid reports that China is halting some corn purchases from the US, buying angst ahead of the Phase 1 trade deal discussions. The 5yr auction was a solid one, for what it's worth, stopping through the WI by 0.6bps, covering more than average, and solid indirects participation (foreign demand proxy). However, there was little follow-through buying for USTs in wake of the offering, and soon enough the curve started selling, with one desk noting hedge funds soon hitting the bid, followed by real money accounts. It's possible we are seeing some profit-taking given the recent rally in bonds (10s has fallen over 10bps in five sessions for instance). But, be aware that analysts are generally favouring a long bias into next week given concerns over NFP and month-end duration extension, particularly as the commodity rally loses momentum amid China's clampdown. Otherwise, participants will be eyeing Thursday's April Durable Goods report for insight into Q2 GDP, while the 7-year auction is on deck, following solid 2s and 5s already. Furthermore, April PCE is on Friday, as is attention on month-end index duration extension (expected +0.12yr), with any other rebalancing expected to take place before next week given the US/UK holiday on Monday. T-note (M1) futures settled 2 ticks lower at 132-29; T-note (U1) futures settled 1+ ticks lower at 132-01

Fed's Quarles (voter) said more communications may be needed about what 'substantial further progress' toward employment goals means and that it will be important to begin discussing adjusting asset purchases at upcoming meetings, while he added that rate hikes are a long way off and that the time for discussing rate hikes is 'far in the future'. Quarles also noted that inflation is to meet the bar for tapering later this year but suggested that the labour market improvement is slower and that they need to remain patient as it would be unwise to slow recovery prematurely. Furthermore, Quarles said the Fed has not begun to quantify thresholds for 'substantial further progress' and can be patient, as well as allow employment to rise, while he added that tapering QE will happen before raising rates. (Newswires)

US President Biden's administration and other Democrats close to the infrastructure discussions are reportedly willing to allow discussions to extend past the Memorial Day deadline by a week or two although not too long. In other news, it was also reported that President Biden’s budget is to seek a boost to the military's cyber force. (Politico)