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COMMODITIES

Copper Hits 7-Week Lows As China Seen Curbing Prices

EQUITIES

Strong Start, With S&P Testing New Highs

EURIBOR

Latest Fix (Jun 15 2021)

GILT AUCTION RESULTS

DMO sells GBP2.75bln of the 0.125% Jan-28 gilt

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EXECUTIVE SUMMARY

  • YELLEN CLARIFIES INFLATION REMARK, SEES NO NEED FOR FED TO HIKE (BBG)
  • FED'S KASHKARI: FULL U.S. EMPLOYMENT 'MAY TAKE A FEW YEARS' (RTRS)
  • POLAND RATIFIES EU RECOVERY FUND IN PARLIAMENTARY VOTE (BBG)
  • EU DENIES IT HAS SUSPENDED EFFORTS TO RATIFY CHINA INVESTMENT DEAL (SCMP)
  • RBNZ PREPARED TO TIGHTEN LENDING FURTHER AS HOUSE PRICES SOAR (BBG)

Fig. 1: Bloomberg Commodity Index

Source: MNI - Market News/Bloomberg


UK

CORONAVIRUS: A third jab is to be offered to everyone over 50 in the autumn in an attempt to eradicate the threat from Covid-19 entirely by Christmas, The Times has been told. Trials of two options are under way, supervised by Chris Whitty, the chief medical officer for England. The first involves vaccines specifically modified to tackle new variants. The second is for a third shot of one of the three versions already in use: Pfizer-BioNTech, Oxford-AstraZeneca or Moderna. While the approved vaccines successfully tackle the Kent variant, the amount of protection they offer against others, such as that from South Africa, is weaker. (The Times)

CORONAVIRUS: The UK government is to step up its efforts to fight coronavirus variants by doubling the capacity of its Porton Down laboratories to test vaccines against new strains. The government announced on Wednesday a £30m investment in new labs that will assess the effectiveness of vaccines against so-called "variants of concern", underscoring worries that new strains of coronavirus pose the greatest threat to the UK's current success in controlling Covid-19's spread. While there are growing signs that hospitalisations and deaths from Covid-19 will fall further in the UK, concerns persist that a variant could render the current crop of vaccines ineffective. (FT)

CORONAVIRUS: Holidaymakers may have to use paper Covid certificates to prove they have been vaccinated when the foreign travel ban is lifted from May 17, it emerged on Tuesday. (Telegraph)

FISCAL: Rishi Sunak has suggested wealthy families will be spared from a US-style tax raid as he hailed the strength of Britain's surging economic recovery. (Telegraph)

BREXIT: The French maritime minister suggested that her government could cut off electricity supplies to the isle of Jersey, amid a deepening row between France and the U.K. over post-Brexit fishing rights. Annick Girardin said she was "revolted" when she found out that Britain had granted 41 fishing licenses that included conditions and specific criteria that were "decided unilaterally and without explanation." "It's unacceptable," she told lawmakers in the National Assembly on Tuesday. "We're ready to resort to retaliatory measures" that are in the Brexit accord. "Concerning Jersey, I'll remind you of the transport of electricity via submarine cables," she added. "I would regret it if we have to do it, but we'll do it if we have to." Girardin said she flagged the non-compliance with the Brexit deal to the European Commission, and posted a video clip of the comments to lawmakers on her Twitter account. There was no immediate comment from the U.K. (BBG)

POLITICS: Fewer than half of recent Labour voters in Hartlepool say they will back the party in Thursday's crucial byelection, according to internal data based on the canvassing of more than 10,000 people, leading activists to fear a historic Conservative victory. Labour insiders said polling from its ground campaign in the town showed only about 40% of the party's previous supporters had pledged to vote for its candidate, Paul Williams. Such an outcome would deal a significant blow to Keir Starmer's leadership and a decisive Conservative win in a north-east England seat that has elected a Labour MP at every parliamentary election since 1964. Labour sources said they were in "huge trouble" in Hartlepool and also in danger of losing control of Sunderland and Durham councils for the first time in half a century. Voters across England, Scotland and Wales will go to the polls on what has been dubbed "Super Thursday", in the biggest set of local and devolved parliament elections since 1973. (Guardian)

SCOTLAND: The SNP is set to secure a seven-seat majority the Holyrood elections tomorrow, the latest polling reveals, raising the prospect of a second independence referendum during the lifetime of the next parliament. YouGov's research for The Times suggests the SNP has rebounded on the constituency ballot but is shipping support to the Scottish Greens on the regional list with Patrick Harvie's party set to return 13 MSPs — by some margin its best ever result. The Scottish Greens would win just four fewer seats than Labour, who are struggling to convert the personal popularity of Anas Sarwar, the party leader, into votes. Under modelling by Professor Sir John Curtice, of Strathclyde University, the SNP would win 68 seats — a majority of seven. (The Times)

EUROPE

FISCAL: Poland ratified the European Union's pandemic stimulus package, overcoming a rift in the government to help open the taps for hundreds of billions of euros to flow to all member states. The approval banished worries that the bloc's largest eastern nation could torpedo the 800 billion-euro ($961 billion) package after Poland teamed up with Hungary in December to protest efforts by Brussels to attach strings to the money based on adherence to democratic rule of law. The vote also laid bare a dispute over the EU that threatened to break apart the three-party ruling alliance and potentially trigger early elections. Lawmakers from the opposition Left threw their support behind the government-leading Law & Justice Party and another junior partner to push the measure through on Tuesday. (BBG)

CORONAVIRUS: The European Commission will propose the joint procurement of Covid-19 treatments, as it seeks to secure supplies of potentially critical drugs for the period past the acute phase of the pandemic, according to a document seen by Bloomberg. The plan by the European Union's executive arm sets out the need for a common European framework for the development and deployment of targeted therapeutics for coronavirus patients and aims to avoid a patchwork of policies across the 27-nation bloc. The commission is due to adopt the proposal on Wednesday and unveil it on Thursday. (BBG)

GERMANY: German Finance Minister Olaf Scholz wants to extend economic aid introduced during the coronavirus crisis beyond the pandemic, he told the Handelsblatt business daily. "Even if the pandemic is largely over by the summer, many people will still need support this year. And they should get it," said Scholz, who is running as the left-leaning Social Democrats' chancellor candidate at September's federal election. However, Scholz rejected the idea of a further economic stimulus program, telling Handelsblatt: "Our policy is already very expansive. For this year, I expect good growth, perhaps even better than many believe." (RTRS)

ITALY: Prime Minister Mario Draghi urged foreigners on Tuesday to book their summer holidays in Italy, saying it was set to introduce travel passes from the middle of May, sooner than much of the rest of Europe. Speaking after a meeting of tourism ministers from the Group of 20 wealthy nations, Draghi said it was important to provide clear, simple rules to ensure that tourists can once again travel freely in the wake of the coronavirus pandemic. He said the European Union would introduce a health pass by the middle of June, allowing easy travel across the continent for those who had been vaccinated, had just tested negative or could prove they had recently recovered from COVID-19. But he said Italy, which generates some 13% of its economic output from tourism, would have its own green pass ready by the middle of this month. "Let us not wait until mid-June for the EU pass," Draghi said. "In mid-May tourists can have the Italian pass ... so the time has come to book your holidays in Italy," he added. (RTRS)

SPAIN: Isabel Diaz Ayuso, Madrid's combative conservative leader, won a second term as regional president, cementing her position as Prime Minister Pedro Sanchez's most powerful critic. Ayuso's People's Party claimed 65 seats in Tuesday's vote, more than doubling its representation in the regional assembly, with Sanchez's Socialists getting 24 and falling to third place in number of votes behind a rival left-wing group. Ciudadanos, Ayuso's center-right rival and former coalition partner, was wiped out. (BBG)

BELGIUM: The company providing internet services for Belgium's parliament, government agencies, universities and scientific institutions said Tuesday that its network was under cyberattack, with connections to several customers disrupted. Belnet said in a statement the attack "is still in progress and takes place in successive waves. Our teams are working hard to mitigate them." The company has around 200 customers. (AP)

U.S.

FED: MNI BRIEF: Fed is Far From Goals Needed to End QE, Daly Says

  • The U.S. economy remains far from full employment and inflation conditions needed to end bond purchases, and the Federal Reserve will telegraph any reduction of monetary stimulus well in advance, San Francisco President Mary Daly said Tuesday. "We are a long way from digging out of the hole that Covid caused," Daly said during a webinar with Minneapolis Fed President Neel Kashkari. Fears of rapid inflation are a bit overblown, she said, noting that tolerating a phase of inflation around 2.5% wouldn't be that different than when the Fed was coping with price gains around 1.5% - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FED: Dallas Federal Reserve President Robert Kaplan on Tuesday argued again, in an interview with MarketWatch, for beginning a conversation about the central bank's taking its foot off the gas in its support for the economy. Kaplan said he has greater confidence than he had three months ago that the economy is weathering the pandemic and is on track to meet the Fed's goals of full employment and price stability. (MarketWatch)

FED: Minneapolis Federal Reserve Bank President Neel Kashkari on Tuesday said that while the Fed plans to normalize monetary policy once the labor market is fully recovered and inflation is back to the Fed's target, about 8 million Americans who were working at the start of the pandemic are still out of work. "I assume that that folks want to work again," Kashkari told CNN in an interview. "How long is it going to take to bring all of those folks back into the labor market and really achieve full employment? We'll see, it may take a few years." (RTRS)

FED: MNI: Fed Willing To Risk Bubbles To Achieve Jobs, Price Goals

  • Federal Reserve officials recognize their policies may be helping to inflate asset bubbles, but view this as a risk worth taking for the sake of the broader economy and hope strong growth prospects will prevent a serious market crash, current Fed advisers and former officials told MNI - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FISCAL/FED: Treasury Secretary Janet Yellen said Tuesday afternoon she wasn't forecasting interest-rate increases to rein in any inflation spurred by President Joe Biden's proposed spending, clarifying comments that ruffled financial markets a few hours earlier. "It's not something I'm predicting or recommending," Yellen, a former Federal Reserve chair, said during an online event hosted by the Wall Street Journal. "If anyone appreciates the independence of the Federal Reserve, I think that person is me." Yellen said she didn't anticipate a bout of persistently higher inflation, but that if one occurred the central bank has the tools to deal with it. The Biden administration has proposed additional long-term spending packages totaling about $4 trillion on top of the $1.9 trillion it pumped into the economy beginning in March to combat the impact of the Covid-19 pandemic. Earlier in the day, Yellen caused a set of hiccups in financial markets when she said that "it may be that interest rates will have to rise somewhat to make sure our economy doesn't overheat." (BBG)

FISCAL/FED: President Biden agrees with Treasury Secretary Janet Yellen, White House Press Secretary Jen Psaki says at a briefing when asked about Yellen's comments that rates may need to rise. Psaki says the Biden administration takes "inflationary risk incredibly seriously." Yellen certainly understands the independence of the Federal Reserve. (BBG)

FISCAL: Treasury Secretary Janet Yellen will join White House briefing on Friday, spokeswoman Jen Psaki tells reporters. Jobs report is due on Friday and President Biden is scheduled to talk about the economy that day too. (BBG)

FISCAL: The U.S. is taking a two-pronged approach toward its goal of implementing a worldwide minimum tax for corporations as it progresses through negotiations with a global consortium, Treasury Secretary Janet Yellen said Tuesday. Getting countries around the world to implement a bottom level tax that all companies pay has been a goal the White House has set to stop firms from relocating their home operations to countries with cheaper rates. That objective has taken on greater urgency as the administration seeks to raise taxes on U.S. companies. Yellen said she's encouraged so far by developments in talks with other countries. (CNBC)

FISCAL: GOP Senator Marsha Blackburn said Tuesday she's hopeful there could be a deal with Democrats on pared-down, traditional infrastructure like roads, bridges, ports, water systems, the power grid and broadband, that doesn't rely on tax increases to pay for it. The basis for such an agreement, Blackburn said, is contained in the roughly $600 billion proposal from Republican Senator Shelley Moore Capito that she's offered to President Joe Biden. Whatever comes out of negotiations should be solely focused on traditional infrastructure projects, she said. "If you were to go out across the country, or come with me into Tennessee, and you talk to people about what they want to see in an infrastructure bill, that is what they're wanting to see," Blackburn, of Tennessee, said on Bloomberg's "Balance of Power" program. (BBG)

ECONOMY: MNI BRIEF: US Smallbiz Job Growth At Pre-Covid Pace-Paychex

  • U.S. small business job growth returned to pre-pandemic rates in April as more regular operations resumed and Covid-19 vaccines became available to all adults, payroll provider Paychex said Tuesday. Paychex's monthly index, produced with IHS Markit and reflecting data from 350,000 firms, increased 4.3% in April to 98.3. Each region, state, and metro area analyzed last month saw employment gains - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

CORONAVIRUS: President Joe Biden on Tuesday announced his administration's latest goals in the fight against the coronavirus: getting 70% of U.S. adults to receive at least one dose of a Covid vaccine and having 160 million adults fully vaccinated by July 4. The new vaccination targets came two months out from Independence Day, a date the White House hopes will mark a turning point in the pandemic. "If we succeed in this effort," Biden said at the White House, "then Americans will have taken a serious step toward a return to normal." (CNBC)

CORONAVIRUS: President Joe Biden's administration told governors Tuesday that it would begin reallocating vaccines that go unclaimed by states -- essentially clawing back unwanted doses from places where the pace of shots is lagging in order to steer them elsewhere, three people familiar with the call said. The White House told governors about the switch during a weekly call with the state leaders. Biden is due to speak Tuesday afternoon at the White House about the Covid response. (BBG)

CORONAVIRUS: High-risk groups such as the elderly and people with underlying medical conditions are expected to be the first in line to get booster shots of the Pfizer-BioNTech Covid-19 vaccine, Pfizer's chief scientific officer told investors Tuesday. The two-dose vaccine has been shown to be about 95% effective against Covid two weeks after the second dose, though researchers who helped develop the shot now say they are beginning to see that strong protection wane over time. (CNBC)

CORONAVIRUS: Rural clinics and hospitals in the U.S. will receive almost $1 billion from the Health and Human Services Department to improve Covid-19 testing and get more people vaccinated, the Biden administration announced Tuesday. (BBG)

CORONAVIRUS: Los Angeles and San Francisco entered California's least- restrictive tier for economic reopenings, increasing capacity for a wide range of businesses and private gatherings. Restaurants, gyms and movie theaters can expand to 50% of their regular occupancy. Bars will be able to open at 25% capacity indoors. Stadiums and other outdoor events may expand to as much as 67% of capacity. The new health orders will go into effect Thursday. "This new tier matches the sunny optimism of the season," Los Angeles County's board of supervisors said in a statement Tuesday. (BBG)

CORONAVIRUS: No county will move back — or forward — in the state's COVID-19 reopening plan for at least two weeks, Washington State Gov. Jay Inslee announced Tuesday. Pausing the Healthy Washington plan means all 39 counties will remain in their current phases, Inslee said. The counties' status will be reevaluated after the two-week break. Both King and Snohomish counties were at risk of moving to a more restrictive Phase 2 of the governor's reopening plan. (Seattle Times)

EQUITIES: U.S. air safety officials have asked Boeing Co to supply fresh analysis and documentation showing numerous 737 MAX subsystems would not be affected by electrical grounding issues first flagged in three areas of the jet in April, two people familiar with the matter told Reuters. The extra analysis injects new uncertainty over the timing of when Boeing's best-selling jetliner would be cleared to fly by the U.S. Federal Aviation Administration (FAA). The electrical problems have suspended nearly a quarter of its 737 MAX fleet. (RTRS)

EXCHANGE NEWS: CME Group, the world's leading and most diverse derivatives marketplace, today announced that it will not reopen its physical trading pits that were closed last March due to the outbreak of the COVID-19 pandemic. The Eurodollar options pit, which was reopened last August, will remain open, allowing these contracts to continue to trade in both open outcry and electronic venues. CME Group also announced that, subject to regulatory review, it will delist its full-size, floor-based S&P 500 futures and options contracts following the expiration of the September 2021 contracts on September 17, 2021. Open interest that remains after the delisting will be migrated into the E-mini S&P 500 futures and options contracts that are available electronically on CME Globex. All individual trading positions will be converted into the corresponding E-mini S&P 500 contracts with the matching expiration date and strike price for options at the current 1:5 ratio. (PR NewsWire)

OTHER

U.S./CHINA: America's top diplomat Antony Blinken has rejected claims the US is entering a cold war with China during a visit to London to discuss with G7 counterparts how best to respond to the challenges posed by Beijing. In an interview with Financial Times editor Roula Khalaf for The Global Boardroom, Blinken said he resisted "putting labels on most relationships including this one, because it's complex". "This is not about initiating a cold war, this is all about doing our part to make sure that democracy is strong, resilient, and meeting the needs of its people," he said, referring to Washington's intention to hold a "democracy summit" later in the year. (FT)

EU/CHINA: The European Union needs "intrusive" rules to prevent foreign state-funded firms -- such as those from China -- from undercutting EU rivals, the bloc's competition commissioner warned. Speaking the day ahead of proposals aimed at curbing potentially unfair competition, Margrethe Vestager said the measures needed to have a "sufficient deterrent effect" to serve their purpose. "We have seen examples of acquisitions, strong suspicions in giant tendering procedures where businesses who have to stand on their own feet and make the business case, they are undercut by businesses who get subsidies from foreign governments," Vestager told the online Wall Street Journal CEO Council conference on Tuesday. (BBG)

EU/CHINA: The fate of the European Union's investment deal with China fell further into doubt after an EU spokeswoman was forced to deny a report on Tuesday saying it had suspended the treaty's passage to ratification. The French news agency AFP quoted EU trade chief Valdis Dombrovskis as saying in an interview: "We have … for the moment suspended some efforts to raise political awareness on the part of the Commission because it is clear that in the current situation, with the EU sanctions against China and the Chinese counter-sanctions, including against members of the European Parliament, the environment is not conducive to the ratification of the agreement." (SCMP)

GEOPOLITICS: Boris Johnson and US Secretary of State Antony Blinken discussed the "close alignment" between foreign policy in London and Washington during their meeting earlier, No 10 has said. A No 10 spokeswoman said the PM and Mr Blinken agreed UK-US co-operation would be "instrumental" in tackling Covid-19. They also welcomed their nations' joint work on areas like trade and defence. It came as G7 powers met in London for their first face-to-face meetings in over two years. (BBC)

GEOPOLITICS: The Group of Seven nations is considering a U.S. proposal to counter what the White House sees as China's economic coercion. A paper was circulated before a two-day meeting of G-7 foreign ministers in London, according to officials, who were granted anonymity to discuss private talks. Officials meeting on Tuesday spent some 90 minutes discussing ways in which China tries to get nations and individuals to do what it wants via the Belt and Road initiative or by leveling economic threats, according to a senior State Department official who spoke on condition of anonymity. The U.S. wants a consultation mechanism that would involve the G-7 -- as well as other stakeholders -- to ensure a coordinated response to China's moves and with the aim of bolstering the resilience of G-7 nations, according to another diplomat. (BBG)

GLOBAL TRADE: Commerce Secretary Gina Raimondo called for a major increase in U.S. production capacity for computer chips whose current shortages are causing global manufacturing bottlenecks, saying the push could create jobs and wean the nation off over-dependence on China and Taiwan. "Right now we make 0% of leading-edge chips in the United States. That's a problem," Raimondo said Tuesday in a virtual conference of the Council of the Americas, a business group. "We ought to be making 30%, because that matches our demand. So, we will promise to work hard every day, and in the short term also see if we can have more chips available so the automakers can reopen their factories." Reaching 30% would likely take decades of sustained investment. In the shorter term, the Biden administration is in talks with Taiwan and Taiwan Semiconductor Manufacturing Co. to prioritize the needs of American automakers to boost supply after a chip shortage led to closed factories and furloughed workers, Raimondo said. (BBG)

GLOBAL TRADE: Taiwan Semiconductor Manufacturing Co Ltd (TSMC), is planning to build several more chipmaking factories in the U.S. state of Arizona beyond the one currently planned, three people familiar with the matter told Reuters. (RTRS)

CORONAVIRUS: Joe Biden has not yet announced whether his administration will support a global push to waive intellectual property protections on Covid-19 vaccines, as the White House faces growing pressure from world leaders and US officials to waive those protections in the face of the crisis. "We're going to decide that as we go along," he told reporters following a White House briefing on vaccine distribution. "I haven't made that decision yet." (Independent)

CORONAVIRUS: Pfizer Inc. laid out a plan to turn its Covid-19 vaccine into a long-term business, clinching supply agreements that will yield $26 billion in sales this year while expanding the shot to children and developing new formulations that can combat variants and be stored more easily. The drugmaker's revenue forecast was an increase from $15 billion, reflecting the strong demand worldwide for a return to normalcy. Pfizer said it now expects to deliver 1.6 billion doses this year under contracts signed as of mid-April, with half the profits going to its partner in developing the shot, BioNTech SE. The company will add $500 million to its research and development spending this year to invest in Covid-19 treatments and other vaccines using the cutting-edge messenger RNA technology. That investment comes as Chief Executive Officer Albert Bourla bets Covid-19 will become endemic, requiring people to get regular shots for years to come. "Based on what we've seen, we believe that a durable demand for our Covid-19 vaccine -– similar to that of the flu vaccines –- is a likely outcome," Bourla said in remarks prepared for a Tuesday analyst call. (BBG)

HONG KONG: Hong Kong's government has required tenants at Royalton on Pok Fu Lam Road and Block N2 of Kornhill in Quarry Bay to stay at home Wednesday to undergo mandatory testing, according to statements. The government issued the orders after it found a preliminary Covid-19 test result that involved a mutant strain at each of the buildings on Hong Kong Island. (BBG)

JAPAN: Japan is looking to extend a state of emergency for Tokyo, Osaka and the prefectures of Kyoto and Hyogo amid continued increases in virus cases, the Yomiuri newspaper reported. The government is preparing to extend the emergency, currently set to end May 11, until the end of the month, according to the report. The government also plans to make virus control a priority for Hokkaido and Fukuoka, enabling the two prefectures to adopt stricter measures, the Yomiuri said. (BBG)

AUSTRALIA: NSW Premier Gladys Berejiklian says the state has recorded one new case of locally-acquired COVID-19. (ABC)

RBNZ: New Zealand's central bank said it's prepared to further tighten mortgage lending restrictions if needed to rein in the country's red-hot housing market. The Reserve Bank would use loan-to-value ratios or new tools currently under consideration to restrict the amount of money banks can lend for house purchases, the RBNZ said in its semi-annual Financial Stability Report Wednesday in Wellington. The bank will be watching how the property market reacts to recent government policy changes, it said. "If required, we are prepared to further tighten lending conditions for housing using LVR requirements or additional tools that we are assessing," RBNZ Deputy Governor Geoff Bascand said in a statement. "A high proportion of new lending has had high debt-to-income and loan-to-value ratios. (BBG)

NEW ZEALAND: New Zealand government has updated its guidance for public service pay over the next three years, Finance Minister Grant Robertson says in emailed statement. "The updated guidance will continue to mean no pay increases for those earning over NZ$100,000 and senior leaders within the public service." Says any increases will be targeted to lower-paid public servants -- largely those earning below NZ$60,000, who account for about 25% of the public sector. "We want to see those on lower wages be the focus of any increases in pay." "This is about prioritizing spending. The policy will also help protect jobs by taking financial pressure off the public wage bill." (BBG)

NEW ZEALAND: Barfoot & Thompson, which sells about a third of residential properties in New Zealand's largest city, comments in emailed statement. April average price rises 0.6% m/m to NZ$1,114,054. Median price gains 0.2% m/m to NZ$1,050,000. Average price rises 15.8% y/y; median gains 16.7% y/y. Sales fall 40% m/m to 1,107 -- best April for 19 years. New listings fall 22% m/m to 1,675. April trading was down on March reflecting a seasonal downturn seen for the past 10 years. April new listings down 7.9% on 1q average, suggesting "there was no major influx of new listings from investors abandoning the market." (BBG)

CANADA: The Canadian province of Alberta will increase restrictions aimed at limiting the spread of COVID-19 as a third wave of the pandemic threatens to overwhelm the hospital system within weeks, Premier Jason Kenney said on Tuesday. Stricter measures include confining schools to online learning, ordering workplaces with COVID-19 outbreaks to close for 10 days, closing salons, allowing restaurants to offer takeout service only and reducing the number of people allowed at funerals and religious services. Alberta, the center of Canada's energy industry, has the highest per capita rate of COVID-19 cases in the country and follows Ontario and Quebec in beefing up restrictions. (RTRS)

CANADA: Canada may require international travellers to prove they were vaccinated against COVID-19 before they can enter the country, Prime Minister Justin Trudeau said. Speaking at a news conference Tuesday, Trudeau said the federal government will align its policy on whether it will require travellers to provide a vaccine certification with its international allies. He said Canada is now discussing the issue with its partners in Europe, but it's up to each country to determine what requirements are expected from incoming travellers. (CTV)

BRAZIL: Brazil's cross-chamber congressional commission on tax reform has been disbanded and another path for restructuring and simplifying Brazil's complex tax system must be found, lower house speaker Arthur Lira said on Tuesday. Blaming "technical" issues, Lira's announcement on TV Camara came only hours after the tax reform bill's coordinator, Congressman Aguinaldo Ribeiro, had said lawmakers would be able to suggest amendments to the bill this week before its delivery to Congress next Tuesday. Economy Minister Paulo Guedes said on Tuesday that tax reform was one of the government's legislative priorities, but this would appear to be the latest setback that has stalled meaningful reform of Brazil's complex tax system for years. "The final text of the reform will undoubtedly incorporate some points from Aguinaldo's report, I have no doubt about it. If not a large part," Lira said. (RTRS)

BRAZIL: Brazilian economy minister Paulo Guedes said on Tuesday the government is considering a new program to help informal workers that are not receiving government payments during the COVID pandemic. Economy undersecretary Bruno Bianco had said last week the government is considering new work contracts adapted to informal service providers. (RTRS)

BRAZIL: A former Brazilian health minister set a harsh tone at the beginning of a congressional probe into Jair Bolsonaro's handling of the pandemic, accusing the president of fueling the coronavirus crisis and the economy minister of doing nothing to prevent it. Luiz Henrique Mandetta, the first of Bolsonaro's four health chiefs during the pandemic, mentioned a long list of mistakes he sees as committed by the president since the virus appeared in Brazil last year. He frequently repeated the mantra "I warned him" during more than six hours of testimony on Tuesday. (BBG)

BRAZIL: Brazil's real is poised to strengthen against the U.S. dollar, as the country emerges from the "difficult and turbulent" phase that has contributed to its recent weakness, Economy Minister Paulo Guedes said on Tuesday. (RTRS)

RUSSIA: President Joe Biden said his team is working to schedule a meeting with Russian President Vladimir Putin during his visit to Europe next month. A June meeting is "my hope and expectation," Biden told reporters at the White House on Tuesday. "We're working on it," he added. After the two leaders spoke last month, the White House said Biden had proposed a meeting in a third country in the coming months. Biden is set to travel in June to the U.K. and Belgium for summits with the leaders of the G-7, NATO and the European Union. (BBG)

SOUTH AFRICA: South Africa's main budget deficit for the 2020-21 fiscal year is smaller than the government projected after spending that undershot estimates and an upside revenue surprise. Africa's most-industrialized economy recorded a shortfall of 551.9 billion rand ($38.1 billion) or 11.2% of gross domestic product, on its main budget for the year through March 2021, the National Treasury said in an emailed response to questions. That compares with a revised estimate for a gap of 12.3% of GDP that Finance Minister Tito Mboweni presented on Feb. 24. The better-than-expected outcome means the deficit on the consolidated budget, which includes total spending by the provinces, social security funds and selected public entities, could be less than the Treasury's projection of 14% of GDP. (BBG)

SOUTH AFRICA: Eskom Holdings SOC Ltd. said the South African state utility is unable to agree to certain union demands over wage increases and declined to make an offer on basic salary until labor groups respond. The loss-making electricity provider "cannot afford" proposals such as an improvement in pay inequality, according to a May 4 letter reviewed by Bloomberg. A request by unions to raise worker housing allowance has "no justification" and the required funds aren't available in any case, the company said. Eskom has 464 billion rand ($32 billion) in debt and is the most prominent of the government-owned companies burdening state finances, while regularly resorting to power cuts to keep the grid from overloading. The utility bowed to pressure from labor in 2018 wage negotiations after strike action, agreeing to a one-time cash payment and annual increases of at least 7%. The utility "is not at this stage in a position to table a possible offer in terms of a percentage increase to basic salary, as this is dependent on the union responses to the above," it said. (BBG)

SOUTH AFRICA: South Africa's ruling African National Congress has set in motion the process of suspending officials who are facing criminal charges and have ignored a directive to step down, according to a senior ruling party official. Jessie Duarte, the ANC's deputy secretary-general, is drafting letters to those whose membership is being revoked and they could be served on Tuesday and Wednesday, said Fikile Mbalula, the party's head of elections and a member of its decision-making National Executive Committee. Those in the firing line include Ace Magashule, the ANC's secretary-general, and Bongani Bongo, a former state security minister, both of whom are being prosecuted for graft yet deny wrongdoing. (BBG)

OVERNIGHT DATA

AUSTRALIA MAR BUILDING APPROVALS +17.4% M/M; MEDIAN +3.0%; FEB +20.1%
AUSTRALIA MAR PRIVATE SECTOR HOUSES +0.1% M/M; FEB +14.9%

AUSTRALIA APR AIG CONSTRUCTION PMI 59.1; MAR 61.8

The Australian Industry Group and HIA Australian Performance of Construction Index (Australian PCI®) fell by 2.7 points to 59.1 points in April 2021 (seasonally adjusted) after hitting a record high in March 2021 (highest since this survey commenced in 2005). The Australian PCI® continues to indicate a strong pace of recovery following 2020's recession and the successful HomeBuilder program (results above 50 points indicate expansion, with higher results indicating a stronger pace of expansion). All four components of activity expanded strongly in April 2021 (results well above 50 points, seasonally adjusted). The activity index jumped 5.1 points to a record high of 62.8 points, as home builders nationwide scrambled to commence new projects ahead of the HomeBuilder grant deadlines. The indexes for new orders, employment and supplier deliveries all eased from their record highs in March but remained elevated. Capacity utilisation inched up again, with many home builders reporting shortages of skilled labour, materials and inputs. The selling prices index hit a new record high, as more builders passed on the cost of input price increases and delivery delays to their customers. (AiG)

AUSTRALIA APR, F MARKIT SERVICES PMI 58.8; FLASH 58.6
AUSTRALIA APR, F MARKIT COMPOSITE PMI 58.9; FLASH 58.8

April PMI data signalled that business activity across the Australian service sector rose at the strongest pace since data collection began in May 2016, reflecting further moves towards recovery. This was aided by the further easing of COVID-19 restrictions which boosted customer confidence and demand alike. Service providers were enthused by the upturn in demand and expanding their workforce numbers at the joint-fastest pace on record. Nonetheless, strains on business capacity remained evident and intensified amid ongoing supplier delays. Overall, business confidence also improved as the vaccination program was extended and a travel bubble with New Zealand established. Keeping the COVID-19 situation in control is likely to enable the further resumption of services activities and will be key to extending the current moves towards recovery. Our 2021 GDP forecast for Australia currently stands at growth of 3.2%. (IHS Markit)

NEW ZEALAND Q1 UNEMPLOYMENT 4.7%; MEDIAN 4.9%; Q4 4.9%
NEW ZEALAND Q1 EMPLOYMENT CHANGE +0.3% Y/Y; MEDIAN -0.1%; Q4 +0.7%
NEW ZEALAND Q1 EMPLOYMENT CHANGE +0.6% Q/Q; MEDIAN +0.3%; Q4 +0.6%
NEW ZEALAND Q1 PARTICIPATION RATE 70.4%; MEDIAN 70.3%; Q4 70.2%

NEW ZEALAND Q1 PVT WAGES EX OVERTIME +0.4% Q/Q; MEDIAN +0.3%; Q4 +0.5%
NEW ZEALAND Q1 PVT WAGES INC OVERTIME +0.4% Q/Q; MEDIAN +0.4%; Q4 +0.5%
NEW ZEALAND Q1 AVERAGE HOURLY EARNINGS -0.1% Q/Q; MEDIAN +0.7%; Q4 +0.9%

NEW ZEALAND APR ANZ COMMODITY PRICE INDEX+2.3% M/M; MAR +6.1%

MARKETS

SNAPSHOT: Yellen Clarifies Her Comments

Below gives key levels of markets in the second half of the Asia-Pac session:

  • Nikkei 225 is closed
  • ASX 200 up 44.748 points at 7112.6
  • Shanghai Comp. is closed
  • JGBs are closed
  • Aussie 10-Yr future up 2.5 ticks at 98.315, yield down 2.9bp at 1.730%
  • US 10-Yr future -0-01 at 132-12+, cash Tsys are closed
  • WTI crude up $0.48 at $66.17, Gold up $2.33 at $1781.4
  • USD/JPY down 2 pips at Y109.31
  • YELLEN CLARIFIES INFLATION REMARK, SEES NO NEED FOR FED TO HIKE (BBG)
  • FED'S KASHKARI: FULL U.S. EMPLOYMENT 'MAY TAKE A FEW YEARS' (RTRS)
  • POLAND RATIFIES EU RECOVERY FUND IN PARLIAMENTARY VOTE (BBG)
  • EU DENIES IT HAS SUSPENDED EFFORTS TO RATIFY CHINA INVESTMENT DEAL (SCMP)
  • RBNZ PREPARED TO TIGHTEN LENDING FURTHER AS HOUSE PRICES SOAR (BBG)

BOND SUMMARY: Limited Trade In Asia, With Japan & China Still Out

T-Notes were happy to operate within the confines a 0-03+ range in Asia-Pac hours, last printing -0-01 at 132-12+, well within the boundaries of yesterday's range, with ~45K lots changing hands. E-minis have nudged higher, while EuroStoxx 50 futures are now ~0.9% above Tuesday's settlement levels. Cash Tsy markets are closed until London hours owing to the previously flagged Japanese holiday (with Japanese & Chinese markets set to return from their respective elongated weekends on Thursday). There has been little in the way of notable headline flow, outside of U.S. Tsy Secretary Yellen's clarifications in late NY hours (she pointed to Fed independence, looked to play down any worry re: inflation after her earlier comments and noted that she was not predicting/recommending a rate hike from the Fed). The quarterly refunding announcement from the Tsy, ISM services survey and monthly ADP employment reading headline locally on Wednesday. Elsewhere, Fedspeak from Mester, Evans & Rosengren is scheduled.

  • A solid round of ACGB Nov '31 supply was seen in Australia, with the weighted average yield printing 0.52bp through prevailing mids at the time of supply (per Yieldbroker pricing), with XM rallying after the auction. Futures continue observed relatively narrow ranges, with YM unch. and XM +3.0 on the day at typing.

AUSSIE BONDS: The AOFM sells A$1.2bn of the 1.00% 21 Nov '31 Bond, issue #TB163:

The Australian Office of Financial Management (AOFM) sells A$1.2bn of the 1.00% 21 November 2031 Bond, issue #TB163:

  • Average Yield: 1.7453% (prev. 1.8381%)
  • High Yield: 1.7475% (prev. 1.8400%)
  • Bid/Cover: 3.3542x (prev. 2.4675x)
  • Amount allotted at highest accepted yield as percentage of amount bid at that yield 35.3% (prev. 85.3%)
  • bidders 42 (prev. 43), successful 15 (prev. 23), allocated in full 8 (prev. 14)

EQUITIES: US Futures Rise After Yellen Clarification; Asia Stocks Mixed

Another mixed session for equities in the Asia-Pac timezone after a broadly negative lead from the US with tech shares bearing the brunt of the selling. Markets in Japan, mainland China and South Korea are closed which sapped liquidity from the region. Bourses in Hong Kong were flat, while the ASX 200 gained alongside a rise in oil, the Taiex managed some small gains after heavy selling yesterday. Chip producers are still coming under pressure after US Commerce Secretary Raimondo called for major production increases in the US in order to end reliance on overseas companies. US futures were higher, recovering some of yesterday's selloff while focusing on clarifying remarks from US Tsy Secretary Yellen that rate hikes were not on the cards any time soon, and similar comments from known Fed dove Kashkari.

OIL: Bullish Stockpile Data Helps Crude Futures Gain

Oil has made gains in the Asia-Pac session on Wednesday, WTI is $0.80 higher from settlement levels at $66.50/bbl while Brent is $0.85 higher at $69.73. Data after market from API yesterday showed US stockpiles fell 7.69m bbls, if this was followed up with a decline of the same magnitude at DoE stockpile data later today it would denote the biggest drop since January. Also aiding upside in oil is encouraging demand signals from the US where the vaccination drive is gathering steam amid a new target to vaccinate 70% of US adults with one dosage by July 4, while the UK is track to end lockdown measures in 7 weeks. The situation in India though has not shown signs of peaking and is tempering upside in oil.

GOLD: $1,800/oz Proving Tough To Crack

The $1,800/oz mark held firm on Tuesday, with a subsequent uptick in the USD helping bullion away from that psychological level. Spot last deals little changed, hovering around $1,780/oz, in what has been a limited Asia-Pac session. Bulls need to take out the Feb 25 high at $1,805.7/oz to open the next leg higher.

FOREX: NZD Gains On Upbeat Jobs Report, Risk-On Flows Underpin Commodity FX

Robust Q1 jobs data released out of New Zealand provided some early support to the kiwi, as the unemployment rate unexpectedly nudged lower, amid above-forecast employment growth & uptick in participation. Initial enthusiasm waned but NZD remained buoyant as the risk switch across the broader G10 FX space was flicked to on.

  • AUD gained alongside its cousin from across the Tasman, as the Antipodeans led commodity-tied FX higher. Firmer crude oil prices underpinned high-betas in the Asia-Pac session.
  • The DXY unwound some of yesterday's gains as participants moved on after U.S. Tsy Sec Yellen's comments re: potential for higher interest rates, while e-minis crept higher.
  • Liquidity in the region was limited by market holidays in mainland China, Japan & South Korea.
  • A number of Services PMIs from across the globe, U.S. ADP employment report take focus on the data front. Fed's Evans, Rosengren & Mester, BoC's Macklem and ECB's Lane will provide central bank speak.

FOREX OPTIONS: Expiries for May05 NY cut 1000ET (Source DTCC)

  • EUR/USD: $1.2025-30(E561mln), $1.2040-55(E1.4bln), $1.2120(E650mln)
  • AUD/USD: $0.7750(A$959mln)
  • USD/CAD: C$1.2300($1.1bln)

UP TODAY (Times GMT/Local)