MNI EUROPEAN OPEN: China Trade Growth Rebounds, Led By Imports

US TSYS: Tsys Futures Edge Lower, Curve Steepens, Jobless Claims & 30Y Supply Later

• Treasury futures are weaker today, following moves overnight. The 10Y contract is down (- 03+) at 108-23, however still well above initial support at 108-15+ (20-day EMA), the front-end is holding up better with the 2Y contract is holding slightly better down (- 00+) at 101-21+.
• Treasuries maintain a firmer tone and are holding on to the bulk of their recent gains. Initial resistance is 109-06+/08+ (Channel top from Feb 1 high / 50-day EMA), while to the downside, initial support is at 108-15+ (20-day EMA).
• The cash treasury curve has continued it's bear-steepening moves, with yields 1-2bps higher, the 2Y is +1bp at 4.847%, while the 10Y is +1.6bps at 4.510%
• Focus in the APAC region today was on Japan where Labor Cash Earnings YoY missed estimates coming in at 0.6% vs 1.4% and down from 1.8% in Feb and the BoJ summaries of opinion with some notable headlines include one member stating that the rate path could be higher than expected while another stated discussions on rate hike timing should also deepen (BBG)
• FED INTERVIEW (MNI): Fed Will Cut Rates More Sparingly In '24-Weber (See link)
• Looking Ahead: Weekly jobless claims data, 30Y supply (after April saw the first tail since November) and then SF Fed’s Daly speaks.

JGBS: Futures Lower, But 10yr JGB Yield Unable To Break Above Late April Highs

JGB futures were heavy at the open but couldn't break sub 144.00. Lows were at 144.04, but we have recovered some ground since then, last 144.26, -.30.

• Early downside impetus reflected a softer US Tsy tone, coupled with some hawkish headlines from the BoJ Summary Of Opinions (April policy meeting). Risks that the rate hike path may be firmer than expected (as one member noted), could see focus of a follow up tightening in June rise.
• BoJ Governor Ueda was also before parliament today and noted the impact of the weaker yen will be monitored from a policy standpoint. Wages data was mixed but still showed a resilient trend on a same sample basis.
• On the supply front we had the 6 month bill sales. The bid to cover was 3.24, versus 4.20 prior. Tomorrow's 30yr bond auction will come under greater focus though.
• In terms of cash JGB yields, we are firmer across the curve, led by the belly. 5-7yr tenors are up a little 3bps. The 10yr is at 0.91%, up 3bps, but is still sub late April highs above 0.93%.

AUSSIE BONDS: ACGBs Cheaper, Curve Steepens, China Imports Grow

ACGBs (YM -6.0 & XM -6.5) are cheaper today, erasing moves made on Wednesday, there has been little in the way of local headlines and another empty calendar today. US tsys futures are trading near session lows, while most of today’s focus has been in Japan were there were some hawkish headlines from the BoJ Summary Of Opinions (April policy meeting).

• Cross-asset moves: US equity futures are slightly lower, there has been little movement in the G10 currency space, while global yields are higher.
• China trade figures for April saw export growth rise 1.5% y/y, close to expectations (1.3%), but comfortably above the prior month's -7.5% pace. Imports were stronger than forecast though, up 8.4% y/y (4.7% forecast and -1.9% prior), which should give some confidence that domestic demand remains strong.
• US Tsys curve has steepened yields are 1-2bps higher, with the 2Y yield +1bp at 4.847%, 10Y +1.8bps to 4.512%, while tsys futures trade at intraday lows.
• The ACGB curve has steepened today with yields are 4-58ps higher, the AU-US 10-year yield differential is 3bps higher, now -15bps.• Swap rates are 1-4bp higher.
• The bills strip is slightly richer with pricing 1-2bps lower.
• RBA-dated OIS pricing mixed into year-end, the market is pricing just 3bps of easing to a terminal rate of 4.32%.
• Looking ahead: NAB business surveys on Monday.

NZGBS: NZGBs Cheaper, Curve Bear-Flattens, Bond Auction Well Received

NZGBs are 7-9bps cheaper and closed near session lows, with the curve bear-flattening. Earlier NZ FinMin Nicola Willis delivered her pre-budget speech where see said the current economic situation is “challenging for the government books” and there was a 5yr, 10yr & 20yr bond auction which saw decent interest.

• The US Tsys curve is slightly steeper today, yields are 1-2bps higher while the 2y10y is unchanged at -34,488. Tsys futures are trading at intraday lows with the 10y contract down ( - 04+) at 108-22, we still trade comfortably above initial support at 108-13+ (20-day EMA)
• The NZGB curve has bear-flattened the 2Y is +8.2bps at 4.81%, 10Y is +7bps at 4.722%.
• Swap rates are 1-4.5bps higher across the curve
• RBNZ dated OIS has softens 2-5bps out past august with a cumulative 36bps of easing is priced by year-end
• Earlier, we had the 5yr, 10yr & 20yr bond, most demand was in the 5yr & 10yr lines printing NZ$250m and NZ$225m respectively.
• Earlier, FinMin Willis addressed the economic challenges ahead in her pre-budget speech, emphasizing the need for fiscal responsibility and modest spending, mentioning the economic situation is “challenging for the government books”. She mentioned that budget wouldn't be big-spending, but that it would deliver tax relief for middle and lower-income workers. The budget will be delivered May 30th.
• Looking Ahead: BusinessNZ Manufacturing PMI on Friday

FOREX: USD Steady Amid Mixed Cross-Asset Trends

The BBDXY USD Index sits little changed for Thursday trade to date, last near 1256.5. We firmed in earlier dealings but there was little follow through. Higher US yields have been offset at the margin by a better China/HK equity backdrop and firmer China import data, which has aided higher beta FX.

• USD/JPY fell to 155.17 in early dealings as hawkish headlines from the BoJ Summary Of Opinions (April meeting) crossed. Of note was one member stating that the rate path could be higher than expected. We also had fresh verbal FX intervention warnings from the authorities.
• BoJ Governor Ueda was also before parliament and stated the central bank will closely monitor the impact of the weak yen from a policy standpoint.
• Still, USD/JPY dips were supported, and we track near 155.55/60 in recent dealings. We made marginally fresh highs compared to Wednesday levels of 155.70.
• Japan data on wages was mixed with headline outcomes weaker than expected but on a same sample painted a more resilient picture. FX reserves data showed a drop in April, but this may have reflected valuation effects rather than intervention, which took place towards the end of the month and may not be reflected in today's data.
• AUD and NZD have tracked relatively tight ranges. Both currencies were weaker earlier, but sit slightly higher now, aided by the China import beat and better equity tone for China/HK markets. AUD/USD was last 0.6580/85, while NZD/USD was close to 0.6005.
• Later the Fed’s Daly appears and US jobless claims are released. The BoE decision is announced and the ECB’s de Guindos, Cipollone and McCaul speak as well as BoC’s Macklem and Rogers.

ASIA EQUITIES: China & HK Equities Higher As Tech & Property Gain

Hong Kong and China equities are higher today. Property names are benefitting from another city removing restrictions on home buying, following on from last week when Shenzhen relaxed rules, while Hong Kong markets have been supported after comments from HK Exchange CEO where he mentioned IPO's will be coming back and already have 100 applicants in the pipeline. Earlier we had China trade figures for April saw export growth rise 1.5% y/y, close to expectations (1.3%), but comfortably above the prior month's -7.5% pace.

• Hong Kong equities are higher today with the HSTech Index up 1.92%, the index is now up 31.26% from lows mad in Feb. The Mainland Property Index fell about 4% on Wednesday but has recovered most of that today, up 3.13%, the wider HS Index is up 1.23%. China onshore markets are also higher today with the CSI300 up 1%, while small-cap and growth indices outperform large-cap with the CSI1000 up 1.64% and the ChiNext up 1.85%.
• China Northbound saw a -4.0b yuan outflow on Wednesday Equity flow momentum has dropped over the past few days with 5-day average now at 1.08b, still slightly above the 20-day average at 0.65b and the 100-day average at 0.67b yuan.
• China trade figures for April saw export growth rise 1.5% y/y, close to expectations (1.3%), but comfortably above the prior month's -7.5% pace. Imports were stronger than forecast though, up 8.4% y/y (4.7% forecast and -1.9% prior). The trade surplus was below expectations, printing at $72.35bn, largely due to the import beat.
• In the property space, the city of Hangzhou has lifted all restrictions on residential property purchases, effective immediately, as announced by the local housing bureau. The city also plans to enhance credit support for the property sector, which includes offering reduced mortgage payments for select homebuyers. Additionally, Hangzhou will discontinue the practice of reviewing the qualifications of potential homebuyers.
• Looking forward, PPI & CPI on Saturday

ASIA PAC EQUITIES: Regional Asian Equities Mixed, Japan The Top Performer

Asian equity markets are mixed today as US equities trade sideways for a second day. Japanese equities are the top performing in the region after a down day on Wednesday, while South Korea and Australia markets edge lower. There hasn't been much in the way of headlines, other than Japan's Suzuki warning about excessive FX moves again, while Japan also had some data out earlier with Labor cash earnings missing estimates, the BoJ statement of opinion with the Leading & Coincident Index's to come soon and in the EM space Philippines GDP was slightly lower than consensus and Malaysian CB policy rate is due out a bit later.

• Japanese equities are higher today, earlier labor cash earnings YoY missed estimates coming in at 0.6% vs 1.4% and down from 1.8% in Feb, while BoJ summaries of opinion, some notable headlines were one member stating that the rate path could be higher than expected while another stated discussions on rate hike timing should also deepen The JPY continues to be a focus with the USDJPY now trading at 155.56, vs 151.80 post what is speculated to be intervention last week, while government officials continued to issue warnings to the markets this morning. The Nikkei is 0.34% higher, while the Topix performers better up 0.70%
• South Korean equities are lower this morning, earlier we had BoP Current Account Balance which increased from the prior month to $6931.4m, from $6858.3m. The Kospi remains one of the top performing markets in the region and now eyes a test of recent highs, although is down 1.10% today.
• Taiwan equities are slightly lower today, late Wednesday we had trade balance data out which showed the exports to the US surge and shipments to China falling, while the trade surplus narrowed to $6.46b from $8.67b in March. The Taiex is currently down 0.12%
• Australian equities are lower today as Banks and health stocks drag on the benchmark. Energy shares advanced as oil ticked higher. There is very little on the local calendar until Monday when we have NAB business surveys. The ASX200 is down 1.10%.
• Elsewhere in SEA, New Zealand equities are down 0.50%, Singapore equities unchanged, Philippines equities are down 1.00% after 1Q GDP came in at 5.7% just below consensus of 5.9%, Indonesian equities continue to see foreign investors sell with 23 of the past 25 days seeing outflows the JCI trades down 0.50%, while Malaysian equities trade 00.24% ahead of the central bank decision later today.

OIL: Crude Continues Rise, China Imports Fall

Oil prices have continued Wednesday’s climb higher following the EIA reporting a US crude stock drawdown. WTI is up 0.6% to $79.43/bbl, off the intraday high of $79.48, and Brent 0.4% higher at $83.93 after $83.98. The two benchmarks faced resistance at $79.50 and $84. The USD index is flat and so not weighing on crude.

• The EIA reported a US crude stock drawdown of 1.36mn, close to expectations. Gasoline inventories rose 915k and distillate 560k. Refinery utilisation rose 1pp to 88.5%.
• China’s April trade data showed a drop in crude imports of 8.8% m/m due to significant seasonal maintenance outages. Demand is being impacted by tight refining margins, increased EV usage and natural gas consumption. Product exports fell 24% as new quotas are yet to be assigned.
• With less focus on geopolitics, attention has returned to supply/demand and OPEC+’s meeting on June 1. It is expected to extend current output curbs into H2 possibly to year end, but quota compliance is being monitored with Russia and Iraq producing above their allowances.
• Goldman Sachs now expects “lower OPEC+ supply for longer”, but sees excess capacity pushing an increase in flows, according to Bloomberg.
• Later the Fed’s Daly appears and US jobless claims are released. The BoE decision is announced and the ECB’s de Guindos, Cipollone and McCaul speak as well as BoC’s Macklem and Rogers.

GOLD: Ticks Up, But Remains Within Wednesday Ranges

Gold sits slightly above end NY levels from Wednesday, last near $2313.5. This puts us close to +0.2% firmer for the session so far, but we remain comfortably within recent ranges.

• Today has seen a further tick higher in US yields, with the benchmarks 1-2bps firmer. We saw some USD strength earlier but no follow through, the better China/HK equity tone, and firmer China import data, providing some support to higher beta currencies.
• Gold is just under the 20-day EMA, (near $2314). The May 3 low at $2277.4 remains a potential downside target. Late April highs sit back near $2352.6.