MNI ASIA MARKETS ANALYSIS - Stock Slide Extends, S&P500 Through 4,000

US TSYS SUMMARY: Bull Steepening As Growth Fears Come To The Fore

• Cash Tsys have seen a sizeable bull steepening today, with front-end yields down 11-13bps and the 5Y of note having earlier touched new highs since Sep-2008 prior to the US coming in and risk sentiment souring.
• Growth fears have dominated, with hiking expectations sliding accordingly – they keep to just over 50bps priced for the next FOMC in June but no longer fully price in 2x50bps come July (97.5bps) and are down 14bps over the five meetings to year-end with 185bps.
• 2YY -12.9bps at 2.604%, 5YY -11.1bps at 2.966%, 10YY -6.1bps at 3.065%, 30YY -3.5bps at 3.190%.
• TYM2 sits 16 ticks higher at 118-09+ on above average volumes for the day but with the pace slowing of late. Resistance is eyed at the 20-day EMA of 119-17 whilst support is seen at the early intraday and fresh cycle low of 117-08+.
• Data: The latest estimate for Atlanta Fed GDPNow was trimmed in Q2 from 2.16% to 1.85%, back closer to where it was in early indicators. Little of note on tomorrow’s docket before the event of the week on Wed with CPI for April.
• Issuance: Only bill issuance today with the 13-w seeing a high yield of 0.9% (b/c 3.18) and the 26-w seeing 1.385% and 2.72. Return to bond issuance tomorrow with the 3Y.

EGBs-GILTS CASH CLOSE: Risk-Off Rally Led By Short End

The UK and German curves bull steepened Monday as equities weakened sharply, while periphery spreads widened in a broad-based risk-off move.

• This marked a reversal of an initial yield rise just after the open, with the European bond rally accelerating as the US entered the fray in the afternoon.
• Fairly quiet on the data/speaker front, with BoE's Saunders the highlight, saying his hike choice was between 25 and 50bp, not 75bp.
• BTP and GGB spreads jumped at the open but steadied thereafter, though respective 10Ys ended at new post-May 2020 wides to Bunds.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

• Germany: The 2-Yr yield is down 8.9bps at 0.231%, 5-Yr is down 8.2bps at 0.769%, 10-Yr is down 3.7bps at 1.095%, and 30-Yr is down 0.5bps at 1.236%.
• UK: The 2-Yr yield is down 11.3bps at 1.393%, 5-Yr is down 8.2bps at 1.578%, 10-Yr is down 4bps at 1.955%, and 30-Yr is down 1.4bps at 2.159%.
• Italian BTP spread up 4.9bps at 205.3bps / Greek up 8.7bps at 253.1bps

EUROPE OPTION FLOW SUMMARY: Light Rates Flow To Start The Week

Monday's Europe rates / bond options flow included:

• ERZ2 99.62/99.75/99.875c fly, was sold at 0.75 in 3k
• SFIM2 98.55/98.70/98.85c fly, sold at 5.75 in 1k

FOREX: JPY Bounces Off Lows as US Yields Wane

• Global equity markets plumbed new lows on Monday, with the e-mini S&P extending the year-to-date pullback to over 15%. Concerns continue to swirl surrounding the direction of global monetary policy and the implications of a wave of stagflation across developed markets in H2 this year.
• Yields in the US initially rallied Monday, with the 5yr yield trading north of 2018 highs and briefly clearing 3.10%. This faded as US equities extended the pullback, prompting US 10y yields to shed over 10bps off the session highs.
• As a result, early greenback strength faded, putting USD/JPY back below the Y131.00 level, prompting the pair to close lower despite topping key resistance at the 131.25 April 28 highs at one point of the trading day.
• There have been further notable moves in Chinese currency markets, with USD/CNH surging to new cycle highs following downbeat comments from Chinese Premier Li on the domestic labour market. The uncharacteristically candid speech reverberated across Asia, with the offshore yuan offered, even as the PBOC continued to lean against its depreciation via the daily fixing of USD/CNY mid-point.
• Focus turns to Italian industrial production, Australian NAB Business Conditions data and Germany's ZEW Survey. There's a bevy of central bank speakers due Tuesday, with Williams, Barkin, Waller, Kashkari and Mester all on the docket as well as ECB's de Guindos, Nagel and Villeroy.

FX OPTIONS: Expiries for May10 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0665-75(E716mln)
• AUD/USD: $0.7200(A$506mln)
• USD/CAD: C$1.2935($3.2bln)
• USD/CNY: Cny6.6440($650mln)

Price Signal Summary - USD Path Of Least Resistance Remains Up

• In the equity space, S&P E-Minis remain vulnerable following last week’s sharp reversal from 4303.00, the May 4 high. Today’s move lower has resulted in a probe of support at 4056.00, the May 2 low. A clear breach of this support would confirm a resumption of the underlying downtrend and open 4029.25, the May 13 2021 high. On the upside, key resistance has been defined at 4303.50, the Apr 26/28 high. EUROSTOXX 50 futures remain in a bear mode. The contract has traded lower today, extending last week's sell-off. This has resulted in a breach support at 3608.00, Apr 27 low and of 3551.60, 61.8% retracement of the Mar 7 - 29 rally. The move lower has exposed 3523.00 next, the Mar 11 low.
• In FX, EURUSD remains in a downtrend. Recent price action highlights a bear flag and a resumption of the downtrend would open 1.0454, the Jan 1 2017 low. Resistance is at 1.0681, the 20-day EMA. GBPUSD remains vulnerable following last Thursday’s sharp sell-off that confirmed a resumption of the primary downtrend. The focus is on 1.2252 next, the Jun 29 2020 low. The USDJPY primary uptrend remains intact and resistance at 131.25, the Apr 28 high, has been probed. Attention is on 131.96, the 1.00 projection of the Feb 24 - Mar 28 - 31 price swing. The USD has strengthened today against the AUD and CAD. Key support in AUDUSD is at 0.6968, the Jan 28 low and a bear trigger. Key resistance in USDCAD is at 1.2964, the Dec 20 2021 high and a key medium-term bull trigger.
• On the commodity front, Gold remains vulnerable. Attention is on $1848.8, 76.4% of the Jan 28 - Mar 8 rally. On the upside, $1909.8, the May 5 high is first resistance. In the Oil space, WTI futures breached its triangle resistance last week. This strengthens the short-term condition for bulls and attention is on resistance at $113.51, the Apr 18 high, that has been probed. The 20-day EMA at $104.05, is the first support to watch.
• The trend direction in the FI space remains down. Bund futures continue to deliver fresh cycle lows, as the downtrend extends. This signals scope for weakness towards 150.15 next, the 0.764 projection of the Mar 7 - 29 - Apr 4 price swing. The broader trend condition in Gilts remains bearish and price continues to trade below resistance at 119.79, the Apr 26 high. Attention is on the bear trigger at 117.22, Apr 22 low. This level has been probed. A clear break would confirm a resumption of the downtrend and open 116.35, Dec 30 2015 low (cont).

EQUITIES: Tech Remains the Underperformer as Stocks Extend YTD Downtick

• Equity markets headed into the Wall Street close, close to the lowest levels of the session, with the e-mini S&P briefly showing below 4,000 and the lowest levels since April last year. This extends the year-to-date losses for the S&P500 to over 15% (a 3845 print in the e-mini S&P would mark a 20% drop from the Jan highs, and a bear market for the index).
• Another dip lower 30 mins out from the close saw indices finish near the very lowest levels of the session. The catalyst for late leg lower looked to be programmatic selling at 1531ET - with just shy of 1,900 names on the downtick at that moment.
• Relative resilience for value names evident in the DJIA's losses this year being limited to 11%, while the NASDAQ-100 is off 25%.
• Energy names are offered, dropping over 6% as a sector on the back of the >4% drop for crude oil prices, while tech extends recent weakness. Consumer staples are the sole sector in the green - underpinning the outperformance of defensive stocks over cyclicals.
• Across Europe, sentiment is similarly negative, with the main indices off 2.2-2.8% apiece.

COMMODITIES: Demand Fears Dominate

• Oil prices have slumped as global risk assets selloff, starting with a continuation of increased China demand concerns amid lockdowns and sharply weaker China export data. It largely shook off Putin’s Victory Day Parade speech.
• Further, Saudi Arabia yesterday cut prices for Asian and European customers.
• WTI is -6.1% at $103.13, sharply going against the bullish tone seen in technicals. It clears first support at the 20-day EMA at $104.05 and opens $100.28 (May 2 low).
• Demonstrating the range to today’s moves, the most active strikes in the CLM2 contract have been $120/bbl calls followed by $105/bbl calls.
• Brent is -5.8% at $105.93, also through the 20-day EMA at $107.13, opening $103.1 (May 2 low).
• Gold is -1.5% at $1855.04 as dollar strength weighs on it, fulfilling the previously observed bearish threat. It sits just above support at $1850.5 (May 3 low) with a closely followed $1848.8 (76.4% retracement of Jan 28 – Mar 8 rally).