MNI US OPEN - ECB Policy Expectations Tighten Further

NEWS:

ECB (Reuters): ECB's Lagarde asks policymakers to hold back criticism
European Central Bank President Christine Lagarde told policymakers to hold back on dissenting views on decisions for several days, a move critics say stymies their ability to present an honest view of the debate, sources said. Lagarde has now told policymakers to present the majority view to the public after the ECB's policy decisions, which are published on Thursdays, and hold back "personal" views until the Monday after, four sources with direct knowledge of the discussion said.

ECB (BBG): ECB’s Holzmann Calls for ‘Visible’ Rate Increases After APP End
ECB Governing Council member Robert Holzmann says it’s crucial that asset purchases come to an end as soon as possible in order to start “visible” interest rate increases, according to comments made to Die Presse newspaper.

EU (MNI): French EU Min-We Will Need To Protect Consumers From Russian Oil Embargo
Wires carrying comments from France's EU Affairs Minister Clement Beaune stating that 'France will need to protect its consumers from the effects of a Russian oil embargo'. There has been increasing talk of the impact of an oil embargo, and whether it would be more painful for the EU or Russia, with US Treasury Secretary Janet Yellen mentioning the conundrum in IMF presser on 21 April.

• Comes as the EU continues to work on a sixth package of sanctions against Russia.
• Politico reporting that a plan for sanctions on Russian oil could be presented as early as next week. Unlikely to be a full embargo, with differentiation between different grades of oil as well as by how the oil reaches the EU (pipeline or tanker).
• On 20 April, German Foreign Minister Annalena Baerbock stated that "Oil imports will be halved by the summer and will be at zero by the end of the year."

EU/RUSSIA (BBG): Scholz Warns of Nuclear War With Russia Over Ukraine Conflict
German Chancellor Olaf Scholz pledged to continue shipping weaponry to Ukraine, though insisted that he aimed to avoid an open conflict with Russia that could lead to nuclear war. Scholz has come under intense pressure to increase military support to Ukraine, including sending heavy weapons, and expand European Union sanctions against Russia to include oil and natural gas imports.

CHINA (BBG): China’s Oil Demand Is Tumbling the Most Since Wuhan Lockdown
China is heading for the largest oil demand shock since the early days of the pandemic as the nation’s efforts to tame a rapidly spreading virus hobbles vast swathes of the economy. Demand for gasoline, diesel and aviation fuel in April is expected to slide 20% from a year earlier, according to people with inside knowledge of the country’s energy industry. That’s equivalent to a drop in crude oil consumption of 1.2 million barrels a day, they said. It will be the largest hit to demand since the lockdown of Wuhan more than two years ago. The central Chinese city was the epicenter for the coronavirus pandemic.

CHINA (MNI) Inflation China's Top Policy Priority: PBOC's Yi
China's monetary policy priority is ensuring stable consumer prices given the rising global uncertainties and geopolitics that further added inflationary pressure, said People's Bank of China Governor Yi Gang at the Boao Forum. China's financial services will therefore highly prioritize supporting agricultural production and the production and imports of energy, so as to help maintain grain production and energy supply while keeping prices in a reasonable range, Yi said.

CHINA (MNI): Property Market Key To China's 2022 Growth Hopes-Advisors
Relaxing controls on China's faltering property market will be key if the country is to meet its annual growth target, as external demand weakens and a Covid lockdown hits activity in major centres including Shanghai, policy advisors and analysts told MNI, calling for more big cities to lower mortgage downpayments and interest rates.

DATA:

MNI: UK MAR RETAIL SALES -1.4% M/M, +0.9% Y/Y
*UK MAR RETAIL SALES EX-FUEL -1.1% M/M, -0.6% Y/Y
UK retail sales plunged by a far-greater-than-expected 1.4% between February and March, with supermarket sales accounting for much of the decline. Food store sales declined by 1.1%, the fifth straight drop, representing the longest consecutive fall since records began in 1988. That takes supermarket sales 1.4% below the level of February 2020. Total sales are up 2.2% from the pre-pandemic levels.

Despite the rise in prices over the previous month, retail sales by value declined by 0.3% over February. Overall petrol sales by volume plunged by 3.8%, with statisticians citing evidence of a decline in non-essential travel, due to the rise in petrol prices to record-high levels. That leaves petrol sales below pre-pandemic levels. Underlining the rising cost of fuel, the same sales by value rose 2.9% m/m.

MNI: UK FLASH APR SERVICES PMI 58.3 (FCST 60.0); MAR 62.6
- MANUFACTURING PMI 55.3 (FCST 54.0); MAR 55.2
- COMPOSITE PMI 57.6 (FCST 58.7); MAR 60.9

MNI: EUROZONE FLASH APR SERVICES PMI 57.7 (FCST 55.0);MAR 55.6
- MFG PMI 55.3 (FCST 54.9); MAR 56.5
- COMPOSITE PMI 55.8 (FCST 53.9); MAR 54.9

MNI: GERMANY FLASH APR SERVICES PMI 57.9 (FCST 55.3); MAR 56.1
- COMPOSITE PMI 54.5 (FCST 54.1); MAR 55.1
- MANUFACTURING PMI 54.1 (FCST 54.5); MAR 56.9

MNI: FRANCE FLASH APR SERVICES PMI 58.8; MAR 57.4
- COMPOSITE PMI 57.5; MAR 56.3
- MANUFACTURING PMI 55.4; MAR 54.7

FOREX: GBP Crumbles Through Support as Retail Sales Paint Bleak Picture

• GBP is comfortably the poorest performer so far on Friday, with March retail sales painting a particularly bleak picture for the consumer. Both figures including and excluding auto fuel were well below forecast, compounding the dire consumption outlook outlined by the drop in GfK Consumer Confidence overnight.
• The release triggered an aggressive sell-off in GBP, with GBP/USD breaching support and the bear trigger at 1.2974, Apr 13 low. The break of this level confirms a resumption of bearish activity and an extension of the primary downtrend. 1.2933, the Nov 5 2020 low, also gave way, opening losses toward 1.2901 and below. Moving average studies also point south, highlighting current market sentiment.
• The greenback trades more favourably, putting the USD Index through the week's best levels for the strongest dollar since late March 2020.
• AUD and NZD sit lower alongside GBP, with market sentiment pointing to risk-off. Equities are uniformly lower across Europe, with US futures similarly in the red and indicating a negative open on Wall Street later today.
• Preliminary April PMI data from the US is the data focus Friday, with Canadian retail sales also on the docket. The speaker slate could be of more interest, with ECB's Lagarde and BoE's Bailey both scheduled to speak.

BOND SUMMARY: Curve flattening

It has been a volatile session this morning this curve flattening the theme.

• The biggest moves since yesterday's close have been Treasuries, moving lower after Powell's hawkish comments yesterday. However, they are still above the levels seen overnight during Asian trading. The curve has bear flattened.
• There has been an even bigger bear flattening in the German curve with 10-year Bund yields only 0.4bp higher on the day but Schatz yields 7.0bp higher at the time of writing. This again is continuation after yesterday's hawkish comments from ECB's Wunsch and de Guindos as well as Fed's Powell and BOE's Mann.
• Gilts in contrast have seen a much more modest flattening of the curve. 2-year yields up just 1.4bp, but this is largely because the moves yesterday were so large.
• We have had PMI readings this morning that have largely seen services prints come in higher than expected but manufaturing prints have been more mixed (entering into contractionary terriotry in Germany). UK retail sales were also disappointing.
• Looking ahead the data calendar is relatively quiet with the US PMI the only real notable release. ECB's Lagarde and BOE's Bailey are both due to speak again following appearances yesterday, but neither are expected to say anything significant.
• TY1 futures are down -0-11+ today at 118-12+ with 10y UST yields up 3.1bp at 2.943% and 2y yields up 7.6bp at 2.761%.
• Bund futures are down -0.18 today at 153.62 with 10y Bund yields down -0.8bp at 0.937% and Schatz yields up 6.4bp at 0.252%.
• Gilt futures are down -0.18 today at 117.57 with 10y yields down -1.2bp at 1.999% and 2y yields up 0.8bp at 1.748%.

EQUITIES: Risk-off mood to equity markets this morning

• Japan's NIKKEI down 447.8 pts or -1.63% at 27105.26 and the TOPIX down 22.85 pts or -1.19% at 1905.15.
• China's SHANGHAI closed up 7.111 pts or +0.23% at 3086.919 and the HANG SENG ended 43.7 pts lower or -0.21% at 20638.52.
• German Dax down 184.41 pts or -1.27% at 14306.63, FTSE 100 down 35.14 pts or -0.46% at 7594.25, CAC 40 down 88.86 pts or -1.32% at 6623.82 and Euro Stoxx 50 down 51.35 pts or -1.31% at 3873.28.
• Dow Jones mini down 73 pts or -0.21% at 34647, S&P 500 mini down 5.75 pts or -0.13% at 4384, NASDAQ mini down 10 pts or -0.07% at 13716.5.

COMMODITIES: Commodities lower as USD strengthens and risk aversion rises

• WTI Crude down $2.00 or -1.93% at $101.81
• Natural Gas (NYM) down $0.03 or -0.4% at $6.922
• Natural Gas (ICE Dutch TTF) down $0.31 or -0.31% at $99.805
• Gold spot down $9.21 or -0.47% at $1942.26
• Copper down $4.1 or -0.87% at $468.1
• Silver down $0.48 or -1.93% at $24.1575
• Platinum down $10.87 or -1.12% at $959.17