• Equities are depressed across the board in a continuation of the US & APAC spillover with tech among the underperformers as inflationary concerns remain at the forefront
• US Senate Republicans reportedly signalled that they could increase the infrastructure counterproposal to President Biden, Politico
• Chinese CPI printed below forecast while PPI rose at its fastest pace since 2017
• DXY is off lows but remains pressured in-spite of yields erring higher with peers firmer across the board ex-JPY, CHF & CAD which fail to benefit
• Crude is softer and choppy but off worst levels with the Colonial pipeline expected to be back this week; OPEC MOMR due 12:20BST/07:20EDT
• Looking ahead, highlights include US JOLTS, OPEC MOMR, Fed's Williams, Brainard, Daly, Bostic, Harker, Kashkari, BoE's Bailey, supply from the 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)

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)

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)

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 (-3.1%) 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 (-2.0%) 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; though sentiment did recover marginally from lows at the tail-end of the session. 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)

US

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)

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)

UK/EU

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. Separately, Villeroy says PEPP will continue until at least March 2022, monetary policy will remain accommodative even if PEPP was to ease up (Newswires)

German ZEW Economic Sentiment (May) 84.4 vs. Exp. 72.0 (Prev. 70.7); Current Conditions (May) -40.1 vs. Exp. -41.3 (Prev. -48.8)

• EU ZEW Survey Expectations M/M 84.0 (Prev. 66.3)

GEOPOLITICAL

Russian Foreign Minister Lavrov said Russia has suggested discussing strategic stability at a potential meeting between Russian President Putin and US President Biden; separately, the US Disarmament Ambassador says Biden and Putin are making preparations for discussions on arms control and other emerging security issues. (Newswires)

US has reportedly caused the Vienna discussion re. reviving the Iranian nuclear deal to hit a deadlock by refusing to remove 500 individuals from their sanctions list, according to Press TV. Preventing Iran from benefitting from the economic privileges under the JCPOA and normalising trade relations globally. (Twitter)

EQUITIES

Stocks in Europe see hefty losses across the board (Euro Stoxx -2.0%) as the region plays catch-up to the sell-off seen on Wall Street yesterday and across APAC overnight. Markets are wobbling on inflationary concerns - stoked by the elevated post-NFP yields alongside the recent bull run across some commodities including copper, iron, and lumber to name a handful - with inflation being a key theme across the Q1 earnings. These inflation woes are reflected across US equity futures with the tech-laden NQ (-2.6%) weighed on heavily whilst the YM (-0.1%) remains cushioned ahead of the US CPI figures tomorrow. Back to Europe, major bourses are for the most part experiencing broad-based losses with the AEX (-2.3%) narrowly underperforming amid notable downside in some large-cap names including Shell (-2.8%), ING (-2.6%), and ASML (-2.4%). European sectors are in a sea of red with defensives faring marginally better than cyclicals as a whole. Delving deeper, Telecoms, Food & Beverage, Household Goods, and Healthcare are the "better" performers with Banks also at the top of the table amid the higher yield environment; though still very much negative on the session. Moving to the other end of the spectrum, Tech lags in a continuation of global sectoral underperformance whilst yields are an additional headwind. Travel & Leisure however, is the notable underperformer as tourist hotspots France, Spain, Greece and Italy will not likely be added to the UK travel "green list" anytime soon, whilst Lufthansa (-3.2%) is reportedly preparing for a EUR 3bln rights issue and Evolution Gaming (-8.6%) further pressures the sector following a share offering. Basic Resources kicked the day off as one of the laggards, but the sector has since trimmed losses with base metals remain elevated. Out of the handful of companies in the green across Europe, THG (+12%) tops the chart amid reports that Softbank will take a stake in the Co., Deutsche Bank (-2.3%) meanwhile fails to shrug off reports that the US DoJ has closed their probe into the Co. regarding their role in the 1MDB scandal.

Foxconn (2354 TT) production of Apple (AAPL) iPhones at India factory declines more than 50% amid surge in COVID-19 infections among workers, according to sources. (Newswires)

Tesla (TSLA) has halted plans to purchase land to expand its shanghai plant amid US-China tensions, according to sources; Co. had been looking a exporting Model 3 vehicles from China to the US. (Newswires)

China retail passenger vehicles sales (April) +12.4% YY; Tesla (TSLA) China April exports of 14.1k units, according to the PCA. (Newswires)

Please see the Daily European Equity Opening News and the Additional European Equity News headlines for the morning's European earnings

FX

DXY - Global bond yields are rising on renewed inflation vibes and debt and equities show little sign of resuming any real inverse correlation in the traditional manner associated with relatively pronounced bouts of risk aversion, or appetite for that matter, but the Dollar has gleaned some support from safe-haven demand along with technical encouragement after evading deeper losses vs major and EM counterparts. On that note, the index is looking a bit more comfortable on the 90.000 handle within a 90.359-089 range having recovered from a 90.032 low on Monday, albeit with the Buck still mixed against its G10 protagonists awaiting NFIB, JOLTS and another heavy slate of Fed speakers.

EUR - The Euro has recoiled into a slightly tighter band vs the Greenback from 1.2132 to 1.2170 and could be more inclined towards chart levels while monitoring EGB/UST differentials and some decent option expiry interest either side (1.5 bn at 1.2095-1.2100 and 1.2125 before 1.6 bn between 1.2185-90). However, Eur/Usd may get a belated boost from a much better than expected German ZEW survey, and the headline economic sentiment reading especially.

AUD/NZD - Some retracement may have been in order anyway after yesterday’s extended gains against their US rival to circa 0.7891 and just over 0.7300 respectively, but consolidation off recent highs in base metals and other commodities allied to a downturn in risk sentiment has ensured that the Aussie and Kiwi have pulled back anyway. Note, very little reaction to the Australian Budget, thus far, as Aud/Usd continues to hover sub-0.7850 and the cross under 1.0800 on mixed revised deficits vs prior forecasts and Westpac expectations.

GBP/CAD/JPY/CHF - All narrowly divergent vs their US peer, as the Pound unwinds some of its all round appreciation, though keeps its head above 1.4100 and around 0.8600 against the Euro amidst robust UK consumption surveys and confirmation from PM Johnson that the 3rd phase of lifting lockdown restrictions will go ahead next Monday. Elsewhere, the Loonie has stalled into 1.2075 against the backdrop of waning oil prices pre-OPEC MOMR and API weekly inventories, the Yen is hovering just over 109.00 and Franc a similar distance below 0.9000 and under 1.0950 against the Euro.

SCANDI/EM - The Nok and Sek are both holding up quite well given the potentially bearish mix of retreating bonds and stocks as a mark of souring risk sentiment, with the latter possibly taking on board former 12 month Swedish money market inflation expectations on the eve of official CPI data. Meanwhile, strong Chinese PPI could be propping up the Cnh, but the Try is not getting much respite even though Turkish ip was considerably stronger than anticipated in March.

Australian Budget: 2020/21 deficit AUD 161bln (prev. AUD 197.7bln, Westpac exp. AUD 155bln) 2021/22 deficit AUD 106.6bln (prev. AUD 108.5bln, Westpac exp. AUD 84bln, incl. AUD 20bln of new policy initiatives) Link to release

S&P on Australia says downside risks remain after the budget, underpinning their negative outlook. Trade tensions and geopolitical risks likely to hinder areas of the economy. Revenue upturn will afford some headroom. (Newswires)

Notable FX Expiries, NY Cut:

• EUR/USD: 1.2095-1.2100 (1.5BLN), 1.2125 (1.5BLN), 1.2150 (253M), 1.2185-90 (1.6BLN), 1.2265-70 (466M)
• USD/JPY: 108.00 (1.6BLN), 108.25-35 (481M), 108.45-50 (665M), 109.00 (830M)

FIXED

Debt futures have fallen further into negative territory, but moves remain fairly measured rather than reminiscent of a rout, and the same can be said for stocks. However, Bunds have breached more chart supports in wake of a strong German ZEW survey on the way down to 169.52 and are getting closer to a more meaningful downside technical level in the form of the current May low from the 3rd of the month (169.47), while there could well be another sting in the tail for Gilts via long-dated DMO issuance following a well received 5 year tap, as the 10 year benchmark hovers above a new 127.77 Liffe base. Elsewhere, US Treasuries are also nearer overnight troughs than peaks with the curve fractionally flatter into the 1st Quarterly Refunding leg and a raft of Fed commentators that are likely to warrant more attention than JOLTs or a just released firmer NFIB business optimism index.

COMMODITIES

WTI and Brent front month futures are choppy but off worse levels with the former re-eying USD 64.50/bbl (vs low 64.09/bbl) and the latter inches back towards USD 68/bbl (vs low 67.50/bbl). The losses today seem to be stemming from the soured mood across stock coupled with some unwind of the Colonial Pipeline premium as it is expected to be largely online by the end of the week. Desks note that supply tightness to the US East Coast will likely be eased with increased flows of seaborne cargos. That being said, the longer the situation takes to resolve, the greater the likelihood refineries will need to start cutting run rates. Elsewhere in terms of geopolitics, tensions remain high in the Strait of Hormuz chokepoint as the US Navy stated that it had to fire warning shots as IRGC boats - whilst Press TV reports suggested that JCPOA talks hit a deadlock by its the US refusal to moved 500 individuals from its sanctions list. Elsewhere, Saudi and Iran have been sounding more sanguine in their separate negotiations which could see the simmering down of an ongoing spat between the countries on either side of the Persian Gulf. In terms of COVID, eyes remain on India's escalating situation with reports today suggesting that the Indian Oil Corp has cut operating rates at refineries to 85-88% (late-April 95%) due to high product stock with COVID-19 impacting demand, whilst BPCL cuts crude imports by 5% in May and 10% in June; expects May fuel consumption to decrease by 5% vs April. Onto metals, spot gold, and silver remain within a tight range and are supported by the suppressed Dollar, with the former comfortable north of USD 1,800/oz (1831-38 range) whilst the latter holds its USD 27/oz handle (27.13-47 range). Meanwhile, the base metals complex is back on the rise with LME copper back above USD 10,500/t with traders citing the mounting speculative bets on inflation and EV production, whilst overnight, Chinese stainless steel and iron ore rose near-10% apiece as production curbs also spurred supply woes.

OPEC MOMR due at 12:20BST/07:20EDT today. (OPEC)

Colonial Pipeline said it is manually operating the pipeline segment from North Carolina through to Maryland which will only run for a limited period. (Newswires)

Indian Oil Corp has cut operating rates at refineries to 85-88% (late-April 95%) due to high product stock with COVID-19 impacting demand; BPCL cuts crude imports by 5% in May and 10% in June; expects May fuel consumption to decrease by 5% vs April. (Newswires)