MNI EUROPEAN MARKETS ANALYSIS: Gold At New High Post Fed

US TSYS: Tsys Futures Little Changed, Yield 1-2bps Lower, Job Claims & PMI Ahead

• Jun'24 10Y have had a fairly quiet session with range tight and well within Wednesday, we made earlier morning lows of 110-12+ before pushing higher to trade at 110-17 and currently trade just off these level to be + 01 for the day at 110-15, while the 5Y futures are largely mimicked the moves up + 00¾ to 106-30¾
• Looking at technical levels: The 10Y traded lower Monday piercing 109-25+, reinforcing a bearish theme. A clear break of this support would confirm a resumption of the downtrend that started late December levels to watch to the downside 109-24+ (Mar 18 low), further down 109-14+ (Nov 28 low), while to the upside initial resistance is seen at 110-24 (20-day EMA), while above here 111-02 (50-day EMA), a break above here would open a retest of 111-24 (Mar 12 high),
• Treasury curve are flatter today, with yields 1-2bps lower, the 2Y now -1.5bps to 4.587%, 10Y -0.8bps to 4.260%, while the 2y10y is +0.712 to -32.452.
• Yellen is to testify before senate panel on FY25 budget at 10am ET, while she is then testify before House Panel at 2.30pm ET.
• Looking ahead: focus turns to Thursday's Wkly Claims, S&P Global US PMIs, Home Sales. Fed VC Barr fireside chat "View from the Fed", Q&A at 1200ET.

STIR: $-Bloc Year-End Easing Expectations Are Sharply Softer, Except For AUS, After FOMC Meeting

Following yesterday's FOMC Decision, STIR markets across the $-bloc, except for Australia, have seen a notable reduction in official rate expectations for year-end over the past week.

• As anticipated, the Fed Funds rate target range remained unchanged at 5.25-5.5%. However, revisions to the Fed funds path, as well as on the economy and inflation, were all hawkish.
• Despite this, the dot plot still indicates three expected rate cuts this year, while the number of expected cuts for 2025 was reduced from four to three.
• Furthermore, Fed Chair Powell emphasised that "the story is the same one," suggesting that rate cuts are still on the table, and the Fed remains confident in achieving its objectives over time.
• In contrast, the Australian market stands out as an outlier, with expected official rates remaining virtually unchanged over the past week, following a much stronger-than-expected February Employment Report. RBA-dated OIS rates are 6-9 basis points firmer for meetings beyond August after the data and 4-5 basis points firmer on the day.
• December 2024 expectations and the cumulative easing across the $-bloc stand at: 4.47%, -86bps (FOMC); 4.25%, -75bps (BOC); 3.93%, -39bps (RBA); and 4.80%, -70bps (RBNZ).

Figure 1: $-Bloc STIR (%)

Source: MNI – Market News / Bloomberg

JGBS: Futures Holding Weaker, National CPI Data Tomorrow

In the Tokyo afternoon session, JGB futures are holding weaker, --21 compared to the settlement levels.

• There hasn’t been much in the way of domestic data drivers to flag, outside of the previously outlined Trade Balance and Jibun Bank PMIs. Tokyo Condominiums for Sale (Feb) data is due later, along with an Enhanced-Liquidity Auction for 5-15.5 year OTR JGBs.
• (Bloomberg) -- Governor Kazuo Ueda said the Bank of Japan saw the risk of potentially having to raise interest rates rapidly if it waited too long to end the bank’s massive easing program, a view that prompted the board to make that move on Tuesday. There was an option for the BOJ to wait much longer to completely confirm its stable inflation target had been achieved, but doing so would have greatly raised upside inflation risks, potentially forcing aggressive tightening, Ueda said Thursday in response to questions in parliament. (See link)
• The cash JGB curve has twist-flattened, pivoting at the 10s, with yields 1bp higher to 2bps lower. The benchmark 10-year yield is 0.1bp lower at 0.74% versus the YTD high of 0.801%.
• The swaps curve has bear-flattened, with rates 1-2bps higher. Swap spreads are wider.
• Tomorrow, the local calendar sees National CPI and Weekly International Investment Flow data, along with BoJ Rinban Operations covering 1-25-year JGBs.

AUSSIE BONDS: Yields Shunt Higher After Much Stronger Than Expected Jobs Report

ACGBs (YM -4.0 & XM -3.5) are 7-8bps cheaper after February’s Employment Reports printed way stronger than expectations: Total Employment change 116.5k (+40k est & +15.3k prior), Full-Time Employment change +78.2k (19.9k revised prior), Part-Time Employment change +38.3k (-4.6k revised prior) and the Unemployment Rate falls to 3.7% (4.0% est and 4.1% prior).

• February labour market data were expected to bounce given the ABS warned that data had been weak due to people taking time off between jobs over the holidays. But that bounce was a lot sharper than expected signalling that the labour market remains very tight.
• Given the noise, more months of labour data are needed to determine how tight market is easing plus it is also worth looking at averages.
• Cash ACGBs are 3-5bps cheaper after being 3-4bps richer earlier in the Sydney session. The AU-US 10-year yield differential is 5bps higher at -18bps after being at -25bps earlier.
• Swap rates are 5-6bps higher.
• The bills strip is cheaper, with pricing -3 to -6.
• RBA-dated OIS pricing is 6-9bps firmer for meetings beyond August. A cumulative 33bps of easing is priced by year-end versus 42bps before the release.
• Tomorrow, the local calendar will see the publication of the RBA Financial Stability Review.

AUSTRALIA DATA: Strong Post-Holiday Rebound In Jobs, RBA On Hold

February labour market data were expected to bounce given the ABS warned that data had been weak due to people taking time off between jobs over the holidays. But that bounce was a lot sharper than expected signalling that the labour market remains very tight. There were 116.5k new jobs in February with January revised up to 15.3k. Also, the unemployment rate fell 0.4pp to 3.7%. The RBA said this week that it isn’t “ruling anything in or out” and this data suggests that is an appropriate position and also that easing isn’t imminent.

• Given the noise, more months of labour data are needed to determine how tight market is easing plus it is also worth looking at averages.
• Total employment growth improved to a robust 3.2% y/y from 2.6%, the highest since June 2023. Looking through the noise, 6-month average job gains rose to 32.5k not too far below July’s 36.9k, but this is likely to fall further over the year as the economy is slowing.
• The ABS said that there were “larger-than-usual numbers of people in December and January who had a job that they were waiting to start”, more so than in February 2023. In 2023 around 4.3% of employed didn’t have a job in February, whereas in 2023 it was 4.7%. This is up from 3.9% over 2015-2020. Those waiting to start work in March are back to usual rates.

Source: MNI - Market News/ABS

AUSTRALIA DATA: Jobs Data Signal Labour Market Easing But Little Spare Capacity

Through the noise, the data continue to show “gradual” easing of the labour market with the unemployment/underemployment rates very gently trending higher, soft hours worked growth and annual part-time jobs growth outpacing full-time. But with jobs keeping up with labour force increases, there is little spare capacity in the labour market.

• Full time employment (FT) growth appears to have picked up again after underperforming part-time (PT) for most of H2 2023. FT jobs rose 78.2k in February after 19.9k and PT increased 38.3k after falling 4.6k and is now running at +7% y/y. On average the trend towards PT continues with FT up only 1.5% y/y.
• The unemployment rate unexpectedly fell below 4% to its lowest since June as the number of new jobs rose sharply while unemployed fell 52k, the first drop in five months. The economy has been struggling to provide enough jobs for those entering the labour market but now in the year to February employment was 1k higher than the increase in the labour force.
• Underemployment returned to the November/December average of 6.6% and underutilisation, which the RBA also monitors closely, fell 0.5pp to 10.3%, lowest since October. Hours worked rebounded 2.8% m/m, same as February 2023, but are still only 0.8% y/y reflecting the “gradual” easing of the labour market.

Source: MNI - Market News/ABS

NZGBS: Closed Richer But Well Off Best Levels, Negative Spillover From ACGBs Post-Jobs

NZGBs closed 1-4bps richer across benchmarks, but well off the session’s best levels after spillover from very strong Employment data in Australia. ACGBs currently sit 5-8bps cheaper than pre-jobs levels. NZGB benchmark yields were as much as 10-12bps lower early after the positive lead-in from US tsys following the FOMC meeting. Cash US tsys have extended the post-FOMC rally in today’s Asia-Pac session with the benchmarks dealing 1-2bps richer.

• Today’s weekly supply also potentially assisted the move cheaper through the session, after the cover ratios for the May-31 and Apr-33 bonds printed a relatively low 1.6x and 2.0x respectively.
• Spending on all cards rises 1.7% m/m (2.2% y/y) in February, according to the RBNZ.
• Swap rates closed 1-4bps lower, with the 2s10s curve steeper.
• RBNZ dated OIS has shunted lower with pricing 1-8bps softer across meetings. A cumulative 73bps of easing is priced by year-end.
• Tomorrow, the local calendar will see Trade Balance data for February.
• Before then, the market’s focus turns to Thursday's Weekly Claims, S&P Global US PMIs, Home Sales. Fed VC Barr fireside chat "View from the Fed", Q&A at 1200ET.

NEW ZEALAND: NZ Growth Close To RBNZ Forecasts, Unlikely To Shift Path

NZ production-based GDP fell 0.1% q/q in Q4 to be down 0.3% y/y after falling 0.3% q/q and 0.6% y/y in Q3 – meaning that the economy was in a technical recession in H2 2023 and slightly weaker than RBNZ and consensus projections. The expenditure measure was flat after falling 0.4% q/q in Q3 to be down 0.5% y/y. With GDP only 0.1pp softer than the RBNZ expected, this report is broadly in line with its thinking and unlikely to change its “high for longer” policy path.

• Economic growth slowed in 2023 to 0.6% from 2.4% in 2022 and 5.6% in 2021, which was needed to reduce inflationary pressures. Headline CPI was still well above the top of the band at 4.7% y/y in Q4. With GDP per person falling 0.7% in Q4, price pressures should continue to ease.

Source: MNI - Market News/Refinitiv

• The economy was supported by private consumption and exports in Q4. Consumption rose 0.5% q/q after falling the previous two quarters and is down 0.1% y/y. It contributed 0.3pp to quarterly growth. The increase was driven by an increase in services spending.
• Investment was soft falling 0.1% q/q due to a 1.7% q/q drop in residential construction.
• The 2.9% q/q drop in imports, fourth consecutive decline, drove a sharp rundown in inventories which resulted in a 2.8pp detraction from growth. Stocks made a negative contribution three of the four quarters in 2023 and reduced 2023’s growth of 0.6% by 1.1pp.
• Net exports contributed 1.7pp to Q4 growth as exports rose 3.2% q/q to be up 6% y/y.
• The fall in production GDP was driven by wholesale and retail trade, but 8 of the 16 sectors recorded a rise.

Source: MNI - Market News/Refinitiv

FOREX: Yen Off Lows, AUD Head Higher Post Strong Employment Data

• USD/JPY is now off multi-years highs made pre-FOMC of 151.82. We have traded lower all through the Thursday session after exports beat, and PMI increase from 50.6 to 52.3 prior. The pair now trades just of the earlier lows of 150.27 at 150.82.
• The yen is 0.29% higher for the day with focus now on initial support of 149.06/148.50 20- and 50-day EMA values, while initial resistance is 151.82 Mar 20 highs
• EUR/JPY is lower today tacking wider market moves lower, down 0.18% for the day at 164.92 while still up 1.90% for the past 5-days and just off levels not seen since Sept 2008. To the downside for the pair the next support level holds at 162.59 the 20-day EMA, while a reversal would be met with initial resistance from the overnight highs at 165.35, while above there the 166.00 round number resistance.
• NZD/USD has pushed higher throughout the day post FOMC and NZ GDP data, the pair now trades just below 0.6100 at 0.6092, a break and hold above 0.6100 would be needed to test the 200-day EMA at 0.6112, tomorrow NZ has Feb Trade Balance data
• AUD/USD similar to NZD has surged high post FOMC, while AU Employment smashed estimates earlier helping the currency push higher, the pair is now up 1.72% since the overnight lows of 0.6511 and now trades at 0.6623 with the next target now the March 14 highs of 0.6632. AUD/NZD is up 0.30% at 1.0865 as the pair looks to track the AU-NZ 2y swap higher.
• The main focus ahead will be US Current Account Balance & Job Claims, while Japan has CPI out On Friday.

OIL: Crude Buoyed By Rate Cut Prospects & US Inventory Drawdown

Oil prices have made up some of Wednesday’s losses during APAC trading. Technical selling had been triggered as crude flashed overbought but with the Fed not ruling out a cut in May/June and EIA data pointing to solid US fuel demand and lower inventories, fundamentals have driven crude higher again today. The USD index is down a further 0.2% today after -0.4% yesterday, which is supportive of dollar-denominated commodities.

• WTI is up 0.7% today to $81.81/bbl, close to the intraday high. It has been trending higher through the session. Brent is also 0.7% higher at $86.58.
• The Fed continues to expect three 25bp rate cuts this year which has helped risk appetite and improved the demand outlook for crude.
• EIA reported a US crude stock drawdown of 1.95mn barrels last week, more than expected and below the 5-year seasonal average. Gasoline inventories fell 3.31mn barrels while distillate rose 624k. Demand for fuel remains solid.
• Later the Fed’s Barr participates in a fireside chat and in terms of US data Q4 current account, jobless claims, preliminary March PMIs and Philly Fed are released. The ECB’s Buch appears and the BoE and SNB decisions are announced. European preliminary March PMIs print.

GOLD: Sharp Rise Post-FOMC To A New All-Time High

Gold jumped above $2200 for the first time after the FOMC meeting. The previous all-time cycle high of $2,195 was reached earlier this month.

• As expected, the Fed Funds rate target range was maintained at 5.25-5.5%. Revisions to the Fed funds path, as well as on the economy and inflation were all hawkish.
• However, the dot plot continued to show three expected rate cuts this year while for 2025 the number of cuts expected was reduced from four to three.
• Also, Fed Chair Powell said "the story is the same one," meaning rate cuts are still on the cards and the Fed is confident it will achieve its objectives over time.
• Currently, bullion is 0.8% higher in the Asia-Pac session at $2202.66, after closing 1.3% higher on Wednesday.
• The USD index reversed roughly 0.7% lower from its intra-day highs as a May/June Fed cut was not categorically ruled out.
• According to MNI’s technicals team, the trend condition in gold is bullish and having cleared previous resistance at $2135, sights are on $2206.6 next, a Fibonacci projection.

EQUITIES: Asian Equities Push Higher Post FOMC, Tech Surges

Regional Asian equities are higher today, reacting positively to the Fed Reserve's policy decision maintaining its outlook for three rate cuts this year. It's been a busy morning on the data front, with NZ GDP, Japan Trade Balance & PMI, Australia Employment Data, and South Korea Import/Export Data. Tech stocks are surging higher as a dovish FOMC and strong revenue forecast from Micron Technology help push stocks higher.

• Japan is back from their public holiday on Wednesday, and equities are surging higher up. The yen cheapened on Wednesday and with equites closed they are now playing catching up, exporters, especially autos are trading well with the lower yen, while data out earlier showed exports growing at 7.8% in Feb vs 5.1% expected marking the third straight month of growth. The Nikkei 225 is up 1.96% lead by Consumer Discretionary and Tech stocks, the Topix Bank Index is up 2.86% while the wider Topix Index is 1.58% higher
• South Korean trade data was out earlier showing exports had risen 11.2% in March up from -7.8% in Jan, while imports were -6.3% vs -19.2% in Jan. The Kospi is up 2.33% and now back at the highest levels in almost 2 years. Chip stocks are surging after Micron Technology surged overnight after giving a strong revenue forecast, while the FOMC decision was in line with expectations helping tech stocks.
• Taiwanese equities are also benefiting from the FOMC meeting and high global Chip stocks, the Taiex is up 1.93%. Late on Wednesday Taiwan Export orders missed expectations coming in at -10.4% vs 1.2% expected, export to China and the US were the biggest detractors although some of that can be put down to LNY, while more importantly to Taiwan demand for new tech applications continued to rise, offsetting part of the overall decreases.
• Australian equities closed up 1% today after employment data showed a massive beat verses expectation coming in at 116.5k vs 40k, with 78.2k of that in full-time work. Financials are the top-performing sector, while healthcare drags. The ASX200 %
• Elsewhere in SEA, New Zealand GDP missed, coming in at -0.3% vs 0.0% expected, equities are up 0.70%, while EM Asian equities surge higher on a dovish FOMC, Singapore Equities are up 1.10%, PSEi up 0.86%, Nifity 50 up 1%, Thailand equities have two their two largest days of net foreign sellers in what now seems likely that a Institutional Fund has left the market and a domestic accounts have easily absorbed the size as the SET trades up 1.00%, while Malaysian equities lag the market somewhat up just 0.24%

INDONESIA: Indon Sov Debt Curve Bull-Steepens, BI In No Rush To Cut Rates

Indonesian USD sovereign debt curve has followed UST yields lower, although the front-end has continued to lag the move. INDON yields are 1-4bps lower. The FOMC meeting overnight has been the main driver for rates, while The Bank Indonesia held their interest rates on hold at 6.00% in what was widely expected with focus largely on FX stability after the IDR has fallen 2% against the USD so far this year. JPM expects the BI to cut twice this year, however this will be largely reliant on when the US cuts.

• The INDON sov curve has bull steepened post the FOMC overnight with front-end yields 2-4bps lower while the mid to longer end is 1-2.5bps lower, the 2Y yield is 4bp lower at 4.945%, 5Y yield is 4bps lower at 4.93%, the 10Y yield is 2.5bps lower at 5.025%, while the 5-year CDS moved almost 6bps higher on Wednesday but has reversed some of those moves to trade down 2bps from highs at 71.5bps
• The INDON to UST spread difference drifted wider on Wednesday, continuing the weekly theme, with the front-end underperforming moves in UST The 2yr is 35.5bps (+6bp), 5yr is 70bps (+1.5bps), while the 10yr is 76.5bps (-0.5bps).
• In cross-asset moves, the USD/IDR is 0.35% lower, the JCI is 0.60% higher, Palm Oil is pushing higher, up 0.33%, while US Tsys yields are 1-3bps lower.
• Foreign Investors sold bonds again on Tuesday now marking 9 of 10 day of net selling by foreign investors. The 5-day average is now -$63m, the 20-day average is -$53m while the longer term 200-day average is now just $0.03m
• Elsewhere, in what was widely expected Prabowo's Indonesian Election win has been question in court by rival. While Indonesian's economy will probably grow 4.7%-5.5% this year, while inflations outlook is 1.5%-3.5% for the year according to the BI.

PHILIPPINES: Philippines Sov Debt Curve Bull-Flattens, Central Bank To Cut RRR

The Philippines USD sovereign debt curve has bull-flattened post FOMC, with yields 2-6bps lower. Earlier Philippines NEDA Secretary mentioned the GDP growth target will be reviewed on Friday, while the Central Bank will look to lower RRR to decrease borrowing costs.

• Curves have bull-flatten post FOMC with yields 2-6bps lower. The 2Y yield is 3bps lower at 4.82%, 5Y yield is 3.5bp lower at 4.99%, the 10Y yield is 6bp lower at 5.01%, while 5yr CDS is 1.5bp lower at 58.5bps.
• The PHILIP to UST spread difference has significantly tighten over the past week especially in the 2-5yr part of the curve, however we have given back some of those moves over the past two days, while the longer end now out-performs UST curves, 2y is 21bps (3bps), the 5yr is 73bps (+2bp), while the 10yr is 76bps (-2.5bps)
• Cross-asset moves: the USD/PHP is 0.75% lower, PSEi Index is up 0.60%, Corporate Credit curve is 1-3bps higher over the past week, while US Tsys yields are 1-3bps lower.
• Philippines' NEDA Secretary Balisacan announced at a briefing that the country's GDP growth target will be reviewed on Friday, highlighting the continued impact of high rates on demand and investment, while also suggesting that March inflation is unlikely to surpass that of February.
• The Philippine central bank plans to lower lenders' reserve requirement ratio to decrease borrowing costs, with Governor Eli Remolona stating that while monetary policy remains hawkish, the ratio won't be cut immediately. Remolona emphasized that the country doesn't necessarily need to wait for the Federal Reserve to ease its policies before adjusting its own key rate, suggesting that significant market fluctuations might prompt a more decisive response.
• Looking Ahead: Calendar is light for the remainder of the week.