MNI EUROPEAN OPEN: The Caps Are (Almost) Set

EXECUTIVE SUMMARY

• FED TO AIM FOR USD95B CAP TO SHRINK BALANCE SHEET (MNI)
• ECB TO TAKE NEW DECISIONS ON POLICY PATH IN JUNE, NAGEL SAYS (BBG)
• SCHUMER: THURSDAY VOTE EXPECTED ON RUSSIA OIL BAN (BBG)
• UKRAINE URGES CIVILIANS TO FLEE LOOMING RUSSIAN OFFENSIVE IN EASTERN REGIONS (WSJ)
• RUSSIA GOVT SEES WEST CLOSING ROUTE TO AVOID DEFAULT (VEDOMOSTI)
• CHINA MARKET LIQUIDITY SEEN STABLE IN APRIL (SEC. DAILY)

Fig. 1: U.S. 2-/10-Year Tsy Yield Spread (bp)

Source: MNI - Market News/Bloomberg

UK

ECONOMY: UK households are draining their savings at the fastest rate for nine years as the cost-of-living squeeze bites. About 40 per cent of households built up their savings during lockdown but 60 per cent did not, according to the Scottish Widows Household Finance Index. It found that the amount of cash left for discretionary spending after living expenses has fallen by the sharpest amount since 2013. The measure of people’s perceptions of financial wellbeing fell to 38.5 per cent in the first quarter of this year, its lowest since the start of the pandemic two years ago. A score of 50 per cent indicates no change on the previous quarter. (The Times)

EUROPE

ECB: The European Central Bank will decide on the next monetary-policy steps before the summer, and an interest-rate increase could be on the cards soon, according to Bundesbank President Joachim Nagel. “We’ll take new decisions on the basis of numbers that we’ll see in June,” Nagel told German public broadcaster ARD in an interview. “What we’re seeing at the moment suggests that savers could potentially enjoy higher rates soon.” The Bundesbank president also said inflation could average 6% this year, driven in part by a range of special factors. He said this level of price increases “mustn’t become entrenched, which will surely be a task for us in the eurosystem this year.” (BBG)

FISCAL: Ukraine needs a new version of the Marshall plan to rebuild the country in the aftermath of Russia’s invasion, a senior EU official said. EU budget chief Johannes Hahn told reporters Wednesday that a loan program under conditions would help Kyiv to recover quickly and “it might lead to a faster approximation to the EU.” The bloc is assessing Ukraine’s request to join the club. Hahn said that some of the conditions imposed by the EU could be addressed with this new instrument “provided it is well-designed”. (BBG)

ITALY: Italy on Wednesday slashed its gross domestic product (GDP) growth forecast for this year and next year, with the Russia-Ukraine conflict acting as a drag on economic growth. The country's economy is expected to grow 3.1 percent in 2022, compared to 4.7 percent based on previous estimate, according to a press briefing from Italian Prime Minister Mario Draghi and Economy and Finance Minister Daniele Franco. For 2023, the government expects a growth rate of 2.4 percent, down from a previous target of 2.8 percent. According to Franco, the government expects the budget deficit to be 5.6 percent of the country's GDP this year, while government debt is targeted at 147 percent of GDP. Italy remains one of Europe's most indebted nations in GDP terms. (Xinhua)

U.S.

FED: MNI: Fed To Aim For USD95B Cap To Shrink Balance Sheet

• The Federal Reserve will begin rapidly shrinking its USD8.9 trillion balance sheet starting as early as May as part of a broader tightening campaign that has officials considering one or more 50BP rate hikes this year, minutes from the central bank's March meeting showed. "Participants generally agreed that monthly caps of about $60 billion for Treasury securities and about $35 billion for agency MBS would likely be appropriate. Participants also generally agreed that the caps could be phased in over a period of three months or modestly longer if market conditions warrant," the March FOMC minutes said - on MNI Policy MainWire now, for more details please contact sales@marketnews.com.

ECONOMY: MNI BRIEF: Atlanta Fed's Wage Growth Tracker Edges Up To 6.0%

• The Atlanta Fed's Wage Growth Tracker continued to edge up in March, with the 3-month moving average increasing to 6.0% from 5.8% in February, matching a high going back to August of 1990 - on MNI Policy MainWire now, for more details please contact sales@marketnews.com.

CORONAVIRUS: White House medical adviser Anthony Fauci said he expects the BA.2 omicron subvariant to fuel a U.S. increase in Covid-19 cases and that a more serious surge could arrive with cooler fall weather. While it’s difficult to predict the next significant wave, “I would not be surprised if we see an uptick in cases,” Fauci, who’s also the longtime director of U.S. National Institute of Allergy and Infectious Diseases, said in an interview on Bloomberg Television. (BBG)

OTHER

U.S./CHINA/TAIWAN: U.S. House of Representatives Speaker Nancy Pelosi is planning to visit Taiwan after her trip to Japan this weekend, in what would be the first visit to the self-governed island by the holder of the office in a quarter century, broadcaster FNN reports, citing an unidentified person. U.S. side hastily arranged the visit in order to show support for Taiwan amid growing military and economic pressure from China and Russia’s invasion of Ukraine. Planned stop in South Korea cancelled as a result. Pelosi is scheduled to arrive in Taiwan on April 10, Taipei-based United Daily News reports, citing people familiar with the matter. Pelosi’s office did not confirm or deny the trip in response to an inquiry from Bloomberg News. (BBG)

BOJ: Bank of Japan board member Asahi Noguchi said on Thursday the central bank must maintain ultra-easy monetary policy as it will take "significant" time to achieve its 2% inflation target. "Japan is not experiencing the kind of high inflation seen in many other countries," Noguchi told a speech, adding that policymakers must continue to focus on ending deflation rather than curbing inflation. (RTRS)

JAPAN: The International Monetary Fund (IMF) cut Japan's economic growth forecast on Thursday and urged policymakers to consider preparing a contingency plan in case the Ukraine crisis derails a fragile recovery. "Escalation of the Ukraine conflict poses significant downside risks to the Japanese economy," the IMF said in a staff report after its Article 4 policy consultation with Japan, pointing to rising commodity prices and the potential hit to trade. The IMF said it now expects Japan's economy to grow 2.4% this year, lower than a projection for 3.3% expansion made in January, due to an expected contraction in the first quarter and the spillover effects of the Ukraine war. (RTRS)

NORTH KOREA: North Korea might be considering conducting a nuclear test next week to coincide with national celebrations to mark the birthday of its deceased founder, the Biden administration’s point man for Pyongyang warned. Sung Kim, the U.S.’s special envoy for North Korea, told reporters Wednesday that Pyongyang might be looking at some sort of display of its military power in conjunction with the April 15 anniversary of the birth of the late Kim Il Sung. An atomic test would be the first globally in more than four years and add to concerns about the risks of nuclear brinkmanship amid Russia’s war in Ukraine. “I don’t want to speculate too much, but I think it could be another missile launch, it could be a nuclear test,” he said in a conference call. The holiday celebrating the grandfather of the current leader, Kim Jong Un, is one of the most important events on the North Korean calendar. (BBG)

CANADA: Canada will earmark C$15 billion ($12 billion) over five years for a Growth Fund to attract private investment in new and green technologies, a senior government source said on Wednesday, a day before this year's budget presentation. The money being set aside for the fund will come from the "existing fiscal framework" and the government will seek to attract C$3 of private investment for every C$1 of public funding, the source said. The finance ministry declined to comment. Finance Minister Chrystia Freeland is due to present the 2022 budget around 4 p.m. ET (2000 GMT) on Thursday. (RTRS)

CANADA: Canada will ban most foreigners from buying homes for two years and provide billions of dollars to spur construction activity in an attempt to cool off a surging real-estate market. The measures will be contained in Finance Minister Chrystia Freeland’s budget on Thursday, according to a person familiar with the matter, asking not to be named because the matter is private. The foreign-buyer ban won’t apply to students, foreign workers or foreign citizens who are permanent residents of Canada, the person said. (BBG)

BRAZIL: A vacuum in the government’s political articulation motivated Viana’s appointment to the role, reports newspaper Estado based on confirmation by the senator himself. Position has been vacant since December 2021, after Fernando Bezerra resigned. Carlos Viana also changed parties, leaving the MDB towards the President Jair Bolsonaro’s PL. (BBG)

BRAZIL: Brazil's government appointed Jose Mauro Coelho on Wednesday to be the next chief executive of state-run oil company Petrobras (PETR4.SA), after a prior appointee declined to accept the offer. Coelho, a former deputy at Brazil's Mines and Energy Ministry, has more than 25 years of professional experience, working in the oil, natural gas and biofuels sectors. The government also appointed current board member Marcio Andrade Weber as Petrobras' next chairman. Weber initially joined Petrobras in 1976 where he worked for 16 years, being one of the pioneers in the development of the Campos Basin. (RTRS)

RUSSIA: Russia has withdrawn the forces — as many as 40,000 soldiers — it had arrayed around Kyiv and Chernihiv, two cities in the north, to rearm and resupply in Russia and neighboring Belarus before most likely repositioning them in eastern Ukraine in the next few weeks, U.S. officials say. (New York Times)

RUSSIA: Ukraine urged civilians to leave the eastern Donetsk, Luhansk and parts of the Kharkiv regions as it braced for a major new Russian offensive following Moscow’s withdrawal from the north of the country. “You need to evacuate now, while this possibility still exists,” Ukraine’s deputy prime minister and minister for occupied territories, Iryna Vereshchuk, said on Ukrainian TV on Wednesday. “Later, people will be under fire and under threat of death. We won’t be able to help because it will be practically impossible to cease fire.” (WSJ)

RUSSIA: Russia's defence ministry said on Wednesday that a Ukrainian fuel storage base was destroyed by Russian missiles in the Kharkiv region, the RIA news agency quoted it as saying. (RTRS)

RUSSIA: A small number of Ukrainians who were already in the U.S. for military education have been trained on how to use dive-bombing Switchblade drones and will soon return to their country with that expertise, a senior American defense official told reporters. The U.S. is sending Ukraine more than 100 of the armed drones, including 10 of the newest model equipped with tank-busting warheads. (BBG)

RUSSIA: British military chiefs are drawing up plans to send armoured vehicles to Ukraine, The Times has learnt. The UK is adding to its offer of lethal weapons in the belief that the next three weeks will be critical in determining the outcome of the war. Options under consideration in the Ministry of Defence include sending a protected patrol vehicle, such as the Mastiff, or a vehicle like the Jackal, which can be used as a reconnaissance or long-range patrol vehicle. These could enable Ukrainian forces to push further forward towards Russian lines. (The Times)

RUSSIA: Biden said that Russia has committed “major war crimes” in Ukraine and that U.S. sanctions are crushing its economy. “There’s nothing less happening than major war crimes. Responsible nations have to come together to hold these perpetrators responsible,” Biden said in a speech to a convention of construction unions in Washington on Wednesday. He said that sanctions already imposed by the U.S. and allies are predicted to shrink the Russian economy by “double digits this year alone” and added that “we’re going to stifle Russia’s ability to grow its economy for years to come.” (BBG)

RUSSIA: Secretary of State Antony Blinken said war crime probes just getting underway as Russian troops withdraw from parts of Ukraine could take years but added, “I can guarantee you there will be a relentless effort to make sure that those responsible for what we’re seeing are held accountable.” Blinken said in an interview with NBC News in Brussels that the scenes of civilian killings in Bucha and other areas where Russian troops have pulled back are worse than expected. Russia has denied committing atrocities. (BBG)

RUSSIA: The international community shouldn’t push for “peace at any price” with Vladimir Putin, Estonia Prime Minister Kaja Kallas told Axios in an interview on Tuesday. Estonia, like Latvia and Lithuania, is a member of NATO and the EU but also a neighbor to Russia. The Baltic states fear if Putin is not defeated in Ukraine he could become more aggressive. (Axios)

RUSSIA: Ukraine wants sanctions that are economically destructive enough for Russia to end its war after accusing some countries of still prioritising money over punishment for civilian killings that the West condemns as war crimes. The democratic world must reject Russian oil and completely block Russian banks from the international finance system, President Volodymyr Zelensky said, in his daily video address early on Thursday (April 7). After grisly images of dead civilians in the streets of Bucha sparked international condemnation, Zelensky said Kremlin forces were trying to cover up evidence of atrocities. "We have information that the Russian military has changed its tactics and is trying to remove people who have been killed from streets and basements... this is just an attempt to hide the evidence and nothing more," Zelensky said, but did not provide evidence. (RTRS)

RUSSIA: Ukrainian President Volodymyr Zelenskiy on Thursday urged the democratic world to reject Russian oil and said the failure to quickly agree to an embargo was costing Ukrainian lives. In an early morning video address, Zelinskiy also said he would continue to insist that Russian banks be completely blocked from the international finance system

RUSSIA: The United National General Assembly will vote Thursday on whether to suspend Russia from the UN’s Human Rights Council over accusations of atrocities that include the murder of unarmed civilians, AFP and the Associated Press reported, citing spokeswoman Paulina Kubiak. A two-thirds majority vote from the assembly would be needed to suspend a state from the council. (BBG)

RUSSIA: Senate Majority Leader Chuck Schumer, the top Democrat in the chamber, said President Putin must be held accountable for the “despicable war crimes he is committing against Ukraine.” “When we murder wantonly innocent civilians because of who they are, whether it be their religion, their race, or their nationality, that is genocide, and Mr. Putin is guilty of it,” Schumer said in remarks on the Senate floor Wednesday. The Senate will vote Thursday on measures to revoke normal trade relations with Russia and ban oil imports from the country. (BBG)

RUSSIA: The United States won't participate in G20 meetings that Russia is participating in, US Treasury Secretary Janet Yellen said Wednesday. Speaking at the House Financial Services Committee, Yellen said she'd made that position clear to other finance ministers in the group. (CNN)

RUSSIA: Japan’s government doesn’t plan to include a ban of imports of Russian coal as part of its latest round of sanctions in order to avoid further pushing up energy prices, Mainichi reports, without saying where it obtained the information. Japan gets ~15% of its coal imports from Russia. Yomiuri separately reports Japan is considering an asset freeze on Sberbank as well as a ban on Russian farm imports. (BBG)

RUSSIA: The Russian ruble's near complete recovery in recent weeks is not a signal that the Russian economy is weathering the sanctions Washington and its allies have imposed since Russia invaded Ukraine, U.S. Treasury Secretary Janet Yellen said on Wednesday. The Russian economy is "reeling" from the sanctions imposed after the late February invasion, Yellen told the House Financial Services Committee. The market for rubles has become so distorted by actions of the Russian government and its central bank to limit capital outflows that "you should not infer anything" from the value of the ruble, which fell to a record low against the U.S. dollar immediately after the invasion but has since retraced most of those losses. (RTRS)

RUSSIA: Russia’s government now views investors from “unfriendly” countries declaring that it has defaulted on its FX-denominated debt as the base case scenario, Vedomosti reports, citing three unidentified people close to the cabinet. (BBG)

IRAN: Secretary of State Antony Blinken said on Wednesday that he is not “overly optimistic” at the prospects of bringing the nuclear agreement with Iran to a conclusion. In an interview with MSNBC he said, “Despite all the efforts we put into it, we’re not there and time is getting extremely short, but this is something that we will be talking to our European partners about this afternoon and on the next day.” (Jerusalem Post)

MIDDLE EAST: Three missiles fell near an oil refinery in Iraq's Erbil on Wednesday without causing any damages or casualties, Kurdistan anti-terrorism authorities said in a statement. (RTRS)

EQUITIES: Samsung Electronics Co. reported preliminary earnings for the first quarter that beat analysts’ estimates on robust demand for new smartphone models and memory chips that go into servers. Operating profit increased 50% to 14.1 trillion won ($11.6 billion) for the three months ended March, South Korea’s biggest company said Thursday in a statement. Analysts estimated 13.4 trillion won on average. Sales advanced 18% to 77 trillion won, also higher than expected. Samsung will provide net income and divisional performance when it reports full earnings on Apr. 28. (BBG)

ENERGY: Germany should explore its domestic oil and gas reserves in the North Sea, Finance Minister Christian Lindner was quoted as saying on Wednesday, as Europe's biggest economy looks for alternatives to cut its dependence on Russian fossil fuels. After years of prospering from Russian energy imports, Germany is convulsed by a debate over how to unwind a business relationship that critics say is financing Russia's invasion of Ukraine. Russia supplies 40% of Europe's gas needs. (RTRS)

ENERGY: Italian Prime Minister Mario Draghi said on Wednesday that halting gas imports from Russia is not being considered at the EU level, but if a consensus on the matter is reached Italy will willingly go along with it. (RTRS)

ENERGY: MNI: EU Officials See Ban On Russian Gas Closer

• The European Union could move closer to extending sanctions to Russian oil and even natural gas in coming weeks, EU officials told MNI, adding that German opposition to such a move is likely to eventually cede but that if there is to be an import ban on gas it would have to be in place before the summer - on MNI Policy MainWire now, for more details please contact sales@marketnews.com.

OIL: The International Energy Agency on Wednesday said its member countries had agreed to release 120 million barrels of oil, with the United States contributing half, in a bid to cool oil prices after Russia's invasion of Ukraine. "The @IEA is moving ahead with a collective oil stock release of 120 million barrels (including 60 million barrels contributed by the US as part of its overall draw from its Strategic Petroleum Reserve)," IEA Executive Director Fatih Birol tweeted. (RTRS)

OIL: U.S. Treasury Secretary Janet Yellen said on Wednesday that sanctions imposing a full ban on Russian oil exports would likely result in “skyrocketing” global prices that would hurt the United States and its democratic allies. Yellen told the U.S. House Financial Services Committee she hopes oil companies in the United States and elsewhere can ramp up production in the next six moths, enticed by higher prices, which may allow for tougher restrictions on Russian oil. (RTRS)

OIL: Tankers carrying 22 million barrels of Russian, Iranian and Venezuelan oil are piling up off China, according to Kpler, as the country battles a virus outbreak that’s sapping demand and causing logistics problems. China has been one of the only buyers of sanctioned Iranian and Venezuelan oil over the last few years. The world’s largest crude importer is also still taking Russian supplies that are being largely shunned since the invasion of Ukraine. The trade in the discounted oil is now being disrupted by the country’s worsening virus outbreak, with waiting times to unload ships increasing. Kpler estimates that daily oil demand will drop by at least 450,000 barrels in April, mainly due to falling consumption of gasoline and jet fuel, according to Jane Xie, a senior oil analyst at the data and analytics firm in Singapore. “The ongoing lockdowns in China are definitely having a massive impact on the country’s mobility and consequent oil demand,” she said. “There are also logistical bottlenecks.” (BBG)

OIL: The Canadian government on Wednesday approved a $12 billion offshore oil project proposed by Norway's Equinor ASA, after an environmental assessment concluded it would not cause significant adverse effects. The Bay du Nord project would involve building a floating platform to drill an estimated resource of 300 million barrels of light crude oil in the Atlantic Ocean, about 500 km (310 miles) off the coast of Canada's Newfoundland and Labrador province. (RTRS)

CHINA

POLICY: China’s economy faces greater downward pressure with complex uncertainties that are greater than expected, Xinhua News Agency said following a meeting of the State Council on Wednesday chaired by Premier Li Keqiang. China should flexibly use refinancing and other monetary tools at the right time to boost support for the real economy, including greater monetary policy impact, keeping liquidity reasonable and increasing loans to small businesses, Xinhua said. China will also increase support for those businesses in difficulty, such as those in retail and tourism, including postponing their endowment insurance payments in the second quarter, as well as increasing assistance for the unemployed, Xinhua said. (MNI)

POLICY: China's key to dealing with its economic headwinds is promoting large projects and vigorously helping enterprises in difficulties, China Securities Journal said citing policy intentions given by the National Development and Reform Commission. Q1 growth is likely to be dragged down by increasing internal and external risks and challenges, the newspaper said. Infrastructure investment, which will be the biggest growth driver this year, is expected to expand by 5-7%, the newspaper said citing analysts. The central bank is still likely to cut interest rates and inject more liquidity via medium-term lending facilities, the newspaper said. Real estate policies will also be optimized in accordance with different cities, it said. (MNI)

PBOC: Market liquidity in China is expected to remain stable this month under fiscal policy effects and PBOC’s flexible operations, despite impact from bond issuance and MLF maturities, Zhou Maohua, a macro-economic analyst at China Everbright Bank, tells the Securities Daily in an interview. Bank of China analyst Liang Si expects PBOC to offer MLF with an amount larger than the maturities, report says. There’s still a possibility that PBOC may cut interest rate and RRR this month given increasing downward economic pressure, according to Everbright Bank’s Zhou. (BBG)

ECONOMY: China's economy is expected to grow 5% in 2022, according to an average of forecasts from 30 economists in a March survey by Nikkei and Nikkei Quick News. (Nikkei)

PROPERTY: Several Chinese lenders have been told they can file legal cases against China Evergrande Group in local courts, in an apparent easing of a restriction that required all such lawsuits to be handled in a single court, according to people familiar with the matter. The move may help onshore creditors gain control of assets ahead of a looming debt restructuring. At least three lenders in Zhejiang and Shandong province were told by courts last month that they can file the cases against the embattled developer in their own jurisdictions rather than to a court in Guangzhou, where Evergrande was based for decades, said the people, asking not to be identified discussing a private matter. Some cases have already been accepted, said the people. (BBG)

OVERNIGHT DATA

JAPAN MAR TOKYO AVG OFFICE VACANCIES 6.37; FEB 6.41

JAPAN FEB, P LEADING INDEX CI 100.9; MEDIAN 100.8; JAN 102.5
JAPAN FEB, P COINCIDENT INDEX 95.5; MEDIAN 95.5; JAN 95.6

AUSTRALIA FEB TRADE BALANCE A$7,457MN; A$11,650MN; JAN A$11,786MN
AUSTRALIA FEB EXPORTS +0% M/M; MEDIAN +0%; JAN +6%
AUSTRALIA FEB IMPORTS +12% M/M; MEDIAN +2%; JAN -2%

CHINA MARKETS

PBOC NET DRAINS CNY140 BILLION VIA OMOS THURSDAY

The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.10% on Thursday. The operation has led to a net drain of CNY140 billion after offsetting the maturity of CNY150 billion repos today, according to Wind Information.

• The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
• The 7-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.0589% at 09:32 am local time from the close of 1.9733% on Wednesday.
• The CFETS-NEX money-market sentiment index closed at 45 on Wednesday vs 41 on Saturday.

PBOC SETS YUAN CENTRAL PARITY AT 6.3659 THURS VS 6.3799

The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.3659 on Thursday, compared with 6.3799 set on Wednesday.

MARKETS

UP TODAY (Times GMT/Local)

Date	GMT/Local	Impact	Flag	Country	Event
07/04/2022	0545/0745	**		CH	unemployment
07/04/2022	0600/0800	**		DE	Industrial Production
07/04/2022	0600/0700	*		UK	Halifax House Price Index
07/04/2022	0900/1100	**		EU	retail sales
07/04/2022	1130/1330			EU	ECB March meet Accts published
07/04/2022	1215/1315			UK	BOE Pill Opening at BOE Sovereign Bond Market Conference
07/04/2022	1230/0830	**		US	Jobless Claims
07/04/2022	1230/0830	**		US	WASDE Weekly Import/Export
07/04/2022	1300/0900			US	St. Louis Fed's James Bullard
07/04/2022	1430/1030	**		US	Natural Gas Stocks
07/04/2022	1530/1130	**		US	NY Fed Weekly Economic Index
07/04/2022	1530/1130	*		US	US Bill 08 Week Treasury Auction Result
07/04/2022	1530/1130	**		US	US Bill 04 Week Treasury Auction Result
07/04/2022	1800/1400			US	Atlanta Fed's Raphael Bostic, Chicago Fed's Charles Evans
07/04/2022	1900/1500	*		US	Consumer Credit
07/04/2022	2005/1605			US	New York Fed's John Williams