MNI US OPEN: European Gas Wars Flare Up

MNI China Liquidity Index™– Falls To 30.0 in April

Liquidity conditions across China’s interbank markets eased in April, boosted by the central bank cutting banks’ reserve requirement ratio in order to boost a slowing economy, the latest MNI Liquidity Condition Index shows.

The Liquidity Condition Index stood at 30.0 in April, easing from 63.3 in March, with 40.0% of traders reporting an improvement in conditions. The higher the index reading, the tighter liquidity appears to survey participants.

• The Economy Condition Index stood at 26.7, recovering from March's slide to 21.7, despite Covid concerns.
• The PBOC Policy Bias Index remained below 50 for an 10^th consecutive month.
• The Guidance Clarity Index was little changed, as respondents again claim to understand the signals from the PBOC.

The MNI survey collected the opinions of 30 traders with financial institutions operating in China's interbank market, the country's main platform for trading fixed income and currency instruments, and the main funding source for financial institutions.

Interviews were conducted April 11 – April 22.

Click below for the full press release:

MNI China Liquidity Index -2022-04 presser.pdf

For full database history and full report on the MNI China Liquidity Index™, please contact:sales@marketnews.com

MNI: FRANCE APR CONSUMER SENTIMENT 88 (FCST 92); MAR 90r

French Consumer Sentiment Dips Further

FRANCE APR CONSUMER SENTIMENT 88 (FCST 92); MAR 90r

• Consumer sentiment inched down by a further two points in April, to the lowest reading since December 2018 (movement of the yellow vests). The consensus was looking for a one-point recovery.
• This is well below the long-term average of 100, with consumers highlighting a stark decrease in the propensity to make large purchases, more so than the dip seen last month.
• Some recovery was seen in expectations of future household financial situations, albeit remaining low. The index of households expecting further acceleration of prices saw an optimistically sharp decline.

MNI: GERMANY MAY GFK CONSUMER CONFIDENCE  -26.5; APR -15.7r

GfK Consumer Confidence Dives to Historic Low

GERMANY MAY GFK CONSUMER CONFIDENCE -26.5; APR -15.7r

• German consumer sentiment deteriorated by 10.8 points to a historic all-time low of -26.5 in the May outlook, beating the previous Spring 2020 low at the pandemic onset.
• Economic and income expectations as well as propensity to buy saw stark declines. Both the Ukraine war and soaring inflation of 7.3% y/y in March have outweighed optimism from easing pandemic restrictions.
• Income expectations dropped to a 20-year low, with German consumers seeing the danger of recession as "high" as the economy continues to slow amidst soaring energy prices, ongoing supply chain issues and material shortages.
• Just under 2% economic growth is expected for 2022.
• German consumer confidence has been substantially harder hit than the eurozone aggregate, where April saw a slight uptick (albeit starkly pessimistic). The notable impact of the Ukraine war on Germany's energy-intensive manufacturing industry's growth outlook underpins this divergence.
• The April reading was revised down by 0.2 points.

MNI: SWEDEN MAR UNEMPLOYMENT 8.2%

MNI: SWEDEN MAR PPI +5.5% M/M, +24.5% Y/Y; FEB +19.3% Y/Y

FIXED INCOME: Off of yesterday's highs

• Treasuries have seen larger moves than Bunds or gilts this morning, reversing some of the rally seen earlier in the week.
• There haven't really been any headline drivers. The situation appears to be more that investors need to take a breather and there is little appetite to push prices higher, for now at least.
• However, this isn't the case with peripheral spreads which have widened this morning (albeit are now off their highs of the day). There has been focus on headlines this morning surrounding whether European countries are paying for Russian gas in euros or Rubles. Initial rumours that Austria had paid in RUB have been denied by the Chancellor and since then Bloomberg headlines have suggested that four European gas buyers have already paid in RUB (but it isn't clear if this is in violations of sanctions or not). The EU is meeting today to dicsuss gas supply, so there may be more headlines out later.
• It's a relatively light calendar today with US trade, inventory and pending home sales data due. Tomorrow the calendar heats up with Spanish and German inflation data and the first print of US Q1 GDP.
• TY1 futures are up 0-2 today at 120-03+ with 10y UST yields up 4.0bp at 2.763% and 2y yields up 7.0bp at 2.585%.
• Bund futures are up 0.02 today at 155.50 with 10y Bund yields down -1.1bp at 0.801% and Schatz yields down -1.9bp at 0.123%.
• Gilt futures are down -0.11 today at 119.56 with 10y yields up 0.7bp at 1.802% and 2y yields up 0.5bp at 1.497%.

FOREX: Gas Flow Fallout Contained to Regional FX So Far

• Gas flows across eastern Europe have been the focus of trade so far after reports late yesterday that Poland had been cut off from Russian gas supply proved true this morning, with Bulgarian access also being severed as the countries refused to pay RUB for Russian energy exports. The development has prompted an emergency meeting of EU energy ministers, who are set to debate the current sanctions rules that may prompt more nations to drop Russian supply entirely ahead of the next payment deadlines on May 15th.
• For now, the market response has been contained to regional currencies (PLN holds the bulk of yesterday's sharp losses), with AUD, NZD and SEK mildly firmer this morning, while JPY, EUR trade lower.
• GBPUSD traded to a fresh cycle low this morning, clearing 1.2974, Apr 13 low, as well as 1.2676 last printed in September 2020. The trend is in technically oversold territory: the 14d RSI is now at 22 - the lowest point since March 2020 and the initial wave of lockdowns that followed COVID.
• In a reversal of yesterday's outperformance, JPY is the poorest performing currency in G10, helping USD/JPY climb back toward the Y128.00 level. USDJPY remains in an overarching consolidation phase as bulls pause after the recent rally. This sideways activity highlights the formation of a bull flag, reinforcing bullish conditions with the uptrend still intact. The focus on 129.44 next, a Fibonacci projection.
• US trade balance data and pending home sales numbers for March are the data highlights Wednesday. Central bank speakers include ECB's Lagarde and Bank of Canada's Macklem after the market close.

EQUITIES: Limited Bounce After Tuesday's Rout

• Asian equities closed mixed: Japan's NIKKEI closed down 313.48 pts or -1.17% at 26386.63 and the TOPIX ended 17.75 pts lower or -0.94% at 1860.76. China's SHANGHAI closed up 71.856 pts or +2.49% at 2958.282 and the HANG SENG ended 11.65 pts higher or +0.06% at 19946.36
• European stocks are a little higher, with the German Dax up 32.86 pts or +0.24% at 13792.02, FTSE 100 up 17.92 pts or +0.24% at 7403.09, CAC 40 up 9.58 pts or +0.15% at 6421.85 and Euro Stoxx 50 up 12.25 pts or +0.33% at 3733.34.
• U.S. futures are a little higher but still well below Tuesday's open: Dow Jones mini up 324 pts or +0.98% at 33484, S&P 500 mini up 34.5 pts or +0.83% at 4205.25, NASDAQ mini up 110.5 pts or +0.85% at 13127.

COMMODITIES: Energy Prices Rise As Russia-EU Gas Tensions Flare

• WTI Crude up $0.7 or +0.69% at $102.4
• Natural Gas up $0.02 or +0.28% at $6.869
• Gold spot down $11.49 or -0.6% at $1893.78
• Copper up $4.6 or +1.03% at $451.1
• Silver up $0.01 or +0.04% at $23.4873
• Platinum down $7.42 or -0.8% at $916.73