MNI EUROPEAN OPEN: ECB Split Remains Evident

EXECUTIVE SUMMARY

• COOK: FED'S PATH TO 2% INFLATION COULD BE LONG (MNI)
• US BANK DEPOSITS, LOANS TICKED DOWN IN LATEST WEEK, FED DATA SHOW (RTRS)
• US BANKS ON ALERT OVER FALLING COMMERCIAL REAL ESTATE VALUATIONS (FT)
• ECB’S WUNSCH: TO KEEP RAISING INTEREST RATES UNLESS WAGE GROWTH SLOWS (FT)
• ECB’S STOURNARAS SAYS RATES HAVE REACHED CLOSE TO MAXIMUM (BBG)
• PERSISTENT INFLATION A RISK TO UK, SAYS SIR DAVE RAMSDEN (TIMES)
• BOJ GOV UEDA: WILL CONTINUE MONETARY EASING FOR NOW, WITH INFLATION TO START SLOWING DOWN SOON (DJ)
• BOJ TO REVIEW A QUARTER CENTURY OF UNCONVENTIONAL EASING MEASURES (NIKKEI)
• RUSSIA’S MEDVEDEV SAYS G-7 EXPORT BAN TO TRIGGER GRAIN DEAL EXIT (BBG)

Fig. 1: Daily Net Hong Kong-China Northbound Stock Connect Flows (CNYbn)

Source: MNI - Market News/Bloomberg

UK

BOE: The Bank of England must stop the risk of high inflation becoming embedded in the economy, its deputy governor has warned after the latest data showed price growth was failing to come down as fast as expected. Sir Dave Ramsden, a member of the Bank’s monetary policy committee which sets interest rates, told The Times that there were still signs of stubbornly high inflation in the economy and the Bank must not get “knocked off course” in its 18-month battle to control prices by raising interest rates. (The Times)

INFLATION: The former chief economist of the Bank of England has predicted that inflation will fall rapidly in the coming months, and advised interest rate setters to consider pausing further increases in borrowing costs. (Guardian)

POLITICS: Rishi Sunak will hold the first of a series of summits with UK corporate leaders on Monday as his ruling Conservative party seeks to repair the damage done by the Brexit years and fend off Labour’s attempts to become the party of business. (FT)

EQUITIES: A surge in profit warnings by technology businesses drove a prolific first quarter for such announcements from UK-listed companies as economic uncertainty led to delayed and cancelled contracts. (FT)

RATINGS: Sovereign rating reviews of note from after hours on Friday included:

• S&P affirmed the United Kingdom at AA; Outlook revised to Stable

BANKS: Shares in British lenders gave up much of their 2023 gains in the recent upheaval that saw HSBC Holdings Plc rescue Silicon Valley Bank’s UK unit shortly before Credit Suisse Group AG was swallowed by UBS Group AG. Their first-quarter results will be scoured for signs of how the sector weathered the recent turmoil. (BBG)

EUROPE

ECB: Investors are underestimating how high eurozone borrowing costs will rise, the head of Belgium’s central bank has warned, insisting he will only agree to halt interest rate rises once wage growth starts to fall. (FT)

ECB: European Central Bank policymakers should be cautious and avoid making big or small moves in the next rate decisions, according to Governing Council member Yannis Stournaras. (BBG)

GERMANY: German public-sector workers struck a wage deal with employers, capping a confrontational series of negotiations that saw repeated strikes in Europe’s largest economy. (BBG)

FRANCE: Food inflation will continue to hit French consumers until the fall, President Emmanuel Macron said, as the government looks to crack down on big food companies’ high margins. (BBG)

FRANCE: French President Emmanuel Macron’s approval rating dropped to its lowest level in more than four years after signing into law controversial pension reform that sparked widespread protests. (BBG)

GREECE: Greece's president approved a request by Prime Minister Kyriakos Mitsotakis on Saturday to dissolve parliament and hold elections on May 21, as the country gears for a vote that is unlikely to produce an outright winner. (RTRS)

RATINGS: Sovereign rating reviews of note from after hours on Friday included:

• Moody's upgraded Ireland to Aa3, Outlook Stable
• S&P affirmed Greece at BB+; Outlook revised to Positive
• S&P affirmed Italy at BBB; Outlook Stable

BANKS: Credit Suisse said on Monday 61 billion Swiss francs ($68 billion) left the bank in the first quarter, shedding light on the scale of the bank run that caused the 167-year-old institution to crumble and forced its state-engineered rescue. (RTRS)

U.S.

FED: Federal Reserve Governor Lisa Cook said Friday she's weighing the implications of recent bank turmoil against continued strength in the economy and recent evidence that suggest slower disinflation and a longer path to the Fed's 2% inflation goal. (MNI)

FISCAL: Speaker Kevin McCarthy said that the House will pass his $1.5 trillion debt-ceiling increase plan this week, but he dodged when asked if he has already secured the 218 Republican votes he needs. (BBG)

POLITICS: Americans are souring on the prospect of a 2024 election rematch between President Joe Biden and former President Donald Trump, even as that looks like the most likely scenario at this stage, according to an NBC News poll. (BBG)

BANKS: Deposits at all U.S. commercial banks dropped in the second week of April, though at smaller banks deposits held steady in a sign of stabilization in the financial institutions hardest hit by deposit outflows after last month's failure of two large regional banks. (RTRS)

BANKS: PacWest Bancorp, a regional bank left reeling following the collapse of two rival lenders last month, is exploring a sale of its lender finance arm, according to people familiar with the matter. (BBG)

BANKS: Silicon Valley Bank’s new owner is “fighting” to repair its damaged brand, stem deposit outflows and stop dozens more bankers quitting to join rivals as it attempts to rebuild the US technology bank that collapsed last month, according to one of its top executives. (FT)

BANKS: US banks are becoming increasingly worried about falling commercial property valuations and the risk they pose to lenders’ balance sheets, senior executives said this week. Office valuations in particular have been pummelled by rising interest rates and many employees’ preference for working from home since the coronavirus pandemic. (FT)

BANKS: The panic phase of the past month’s banking crisis may be ending. The big question now is how much of a hit the economy faces from any lending pullback. The answer may not be clear for months. (WSJ)

BANKS: Silicon Valley Bank's failure, along with the demise of Credit Suisse shortly thereafter, blindsided the global financial industry. Despite those shocks, the world is not in a banking crisis, Morgan Stanley Chairman and CEO James Gorman said in an interview. (Nikkei)

BANKS/RATINGS: Moody’s Investors Service downgraded 11 regional lenders Friday, suggesting higher interest rates and recent bank failures have ushered in greater instability. (WSJ)

FINANCIALS: The Biden administration is moving to make it easier to more closely regulate nonbank financial institutions such as hedge funds and money-market funds, Treasury Secretary Janet Yellen said, proposing a rollback of Trump-era procedures. (MNI)

EQUITIES/POLITICS: At least nine members of Congress sold banking stocks before and during market turmoil last month, including a member of the House financial services committee who sold Silicon Valley Bank stock before it failed. (FT)

EQUITIES: The British government is set to introduce legislation within days to establish a new regulator to police the growing dominance of big technology platforms, such as Google, Amazon and Facebook. (FT)

EQUITIES: Johnson & Johnson is poised to begin a roadshow to pitch shares of its consumer-healthcare business, the producer of household names such as Tylenol, in a test for an IPO market that has been in the doldrums for the past year. (WSJ)

EQUITIES: Bed Bath & Beyond Inc., the big-box retailer that for decades provided essential shopping for college dorms, wedding gifts and new homes, will close all of its stores and liquidate inventory over the next two months after its turnaround failed. (BBG)

MARKETS: The Vix — the volatility index popularly known as “Wall Street’s fear gauge” — is going through its biggest shake-up in years with the creation of a new version that will track expectations of short-term market swings. The 1-day Volatility Index — or Vix1d — which will be launched by exchange group Cboe on Monday, is a response to a recent transformation in derivatives markets that had sparked concerns about the effectiveness and relevance of the original Vix. (FT)

OTHER

GLOBAL TRADE: Arm is developing its own chip to showcase the capabilities of its designs, as the SoftBank-owned group seeks to attract new customers and fuel growth following a blockbuster IPO later this year. (FT)

GLOBAL TRADE: The Ministry of Economy, Trade and Industry will subsidize up to half the cost of mine development and smelting projects of important minerals by Japanese companies, Nikkei has learned. (Nikkei)

GLOBAL TRADE: The White House has asked South Korea to urge its chipmakers not to fill any market gap in China if Beijing bans Idaho-based Micron from selling chips, as it tries to rally allies to counter Chinese economic influence. (FT)

GLOBAL TRADE: South Korea and the United States need to bolster corporate exchanges and cooperation in future industry fields and to make joint efforts to ensure stable global supply chains, Seoul's top trade official said Monday. (Yonhap)

GLOBAL TRADE: Companies are expanding production outside of China to reduce the risk from rising geopolitical tensions, but the country’s dominance in world trade makes cutting it out of global supply chains impossible, one of the world’s largest container shipping groups has said. (FT)

GLOBAL TRADE: Eastern Europe countries are looking to widen recently-imposed bans on the domestic sale of Ukraine’s grains to other agricultural products from their war-torn neighbor, including sunflower oil, meat, eggs, milk, and soft fruits. (BBG)

GLOBAL TRADE: Moscow may retaliate if Group of Seven countries proceed with a total ban on most exports to Russia by withdrawing from the safe-transit deal that allows Ukraine to ship grains from Black Sea ports, said Dmitry Medvedev, deputy chair of Russia’s Security Council. (BBG)

EU/CHINA: EU foreign policy chief Josep Borrell called on European navies to patrol the disputed Taiwan Strait, in an opinion piece in a French weekly published on Sunday. (SCMP)

GEOPOLITICS: Prime Minister Giorgia Meloni is getting dragged into the escalating tensions between Washington and Beijing as she tries to disentangle Italy from its close relationship with China. (BBG)

GEOPOLITICS: China's Vice Foreign Minister Sun Weidong has lodged solemn representations with the South Korean ambassador over "erroneous" remarks by the South Korean president about Taiwan, China's foreign ministry said on Sunday. (RTRS)

GEOPOLITICS: China has launched an urgent intervention against the Philippines’ growing military alliance with the US as Asian nations get dragged into the geopolitical rivalry between Beijing and Washington. (FT)

GEOPOLITICS: Australia will seek to project military power further from its shores after a review warned the Australian defence force was structured for “a bygone era” and the security environment was “radically different”. (Guardian)

GEOPOLITICS: China and Singapore will hold joint maritime military exercise from end-April to early-May, according to a statement from China’s Ministry of National Defense. (BBG)

BOJ: Bank of Japan Gov. Kazuo Ueda said Monday that he would continue monetary easing for the time being because he expects inflation to start slowing down soon. (Dow Jones)

BOJ: The Bank of Japan is gearing up for a comprehensive assessment of its monetary moves since 1999, with new Gov. Kazuo Ueda looking to prepare for the future by taking stock of how well its unconventional methods have worked in the past. (Nikkei)

BOJ: The Bank of Japan is planning to review and inspect policies taken over the past decades, kicking off discussions as soon as at a two-day meeting scheduled for April 27 and 28 under newly-appointed Governor Kazuo Ueda, the Sankei newspaper reported Sunday, without attribution. (BBG)

JAPAN: Prime Minister Fumio Kishida's ruling Liberal Democratic Party won four of the five seats contested in Diet by-elections on Sunday, a strong showing likely to lead to calls for him to dissolve the lower house soon. (Nikkei)

JAPAN: Japanese Prime Minister Fumio Kishida said Monday he is not thinking about dissolving the lower house and calling a snap election, a day after his Liberal Democratic Party won parliamentary by-elections in four of five seats. (Kyodo News)

RBA: The long-awaited review of the Reserve Bank, released to the public last Thursday, had few surprises yet had surprising omissions. For a report that recommended profound changes to the central bank, it lacked any evidence that these changes are, in fact, necessary – beyond that other countries do things differently and that Australia should follow suit. (AFR)

RBA: Almost none of the new and current Reserve Bank of Australia board members have the typical qualifications required to serve on a foreign central bank or to set interest rates, according to economists and former bank officials. (AFR)

AUSTRALIA: The finance minister says the government is looking seriously at a recommendation to expand the single-parenting payment to more mothers, acknowledging it is "hard" to live on the current JobSeeker rate. (ABC)

AUSTRALIA/CHINA: An industry delegation from Australia, consisting of about 15 senior business executives across a range of sectors including financial services, healthcare, mining, energy, telecommunication and technology, will head to China this week for a tour, the first of its kind in three years. (Global Times)

NEW ZEALAND: The country's banks are telling the Reserve Bank that they expect mortgage borrowing is going to remain "subdued" over the next six months. (Interest NZ)

SOUTH KOREA: Even after posting the biggest operating loss on record for a South Korean company, the state-owned Korea Electric Power Corp. cannot raise rates amid political pressure from the highest office. (Nikkei)

SOUTH KOREA: South Korea's central bank and financial regulator said Monday that they will conduct a stress test on local banks under the guidelines offered by global banking watchdogs. (Yonhap)

NORTH KOREA: Defense Minister Yasukazu Hamada ordered Japan's Self-Defense Forces Saturday to be at higher readiness for the possibility of a North Korean rocket falling over Japanese territory, with one set to be launched carrying Pyongyang's first reconnaissance satellite. (Kyodo)

NORTH KOREA: South Korea and US have been working on a joint document that outlines the conditions for the US to retaliate with nuclear weapons in the event of a nuclear attack on South Korean territory by North Korea or other countries, DongA Ilbo newspaper reports, without citing anyone. (BBG)

CANADA: Canada’s massive civil service strike is poised to drag into its second week as the federal government and the union representing more than 155,000 federal workers trade barbs amid tense and slow negotiations. (BBG)

MEXICO: Mexican central bank deputy governor Jonathan Heath wrote on Twitter on Friday that inflation in the country is expected to continue trending downward, but the road will be "winding." Mexico's national statistics agency will release data on inflation in the first half of April on Monday. (RTRS)

MEXICO: Mexico President Andres Manuel Lopez Obrador said on Sunday he tested positive for Covid-19 and that his case isn’t serious. AMLO, as the president is known, said on Twitter he suspended a tour in Mexico’s southeast where he was checking on advances on the Train Maya, one of his major infrastructure projects, and that he’d returned to Mexico City. (BBG)

RUSSIA: The European Union is set to propose a ban on many goods transiting through Russia as the bloc attempts to tighten the screws on the enforcement of sanctions imposed over the past year. (BBG)

RUSSIA: The US has warned four European countries about the methods Russia is using to evade sanctions and provided them with a detailed list of the high-value dual-use goods it is trying to acquire, as Washington steps up efforts to stop Moscow procuring weapons for the war in Ukraine. (FT)

RUSSIA: The Russian government is kicking several German diplomats out of the country in an alleged tit-for-tat move, its foreign ministry said on Saturday. (POLITICO)

RUSSIA: French President Emmanuel Macron’s diplomatic efforts to enlist China’s help to intervene in Russia’s war in Ukraine has suffered another blow. (BBG)

CHILE: Chile's central bank said on Friday it will start gradually reducing its forward dollar sales operations program as of next week. (RTRS)

ARGENTINA: Argentine Economy Minister Sergio Massa dedicated his Friday to denying market speculation about President Alberto Fernandez resigning and a currency devaluation, according to a candid audio message he sent on WhatsApp to a group chat as the peso hit record lows. (BBG)

ARGENTINA: Argentine brokerage Max Capital Valores said it “deeply regretted” spreading misinformation over a currency devaluation of the nation’s official exchange rate. (BBG)

BONDS: More countries are exploring issuing new innovative bonds that penalise them for failing to meet climate change targets, in an effort to win over investors wary of issuers’ commitment to sustainability. (FT)

EQUITIES: The global market for initial public offerings is showing signs of life as a rebound in the stock market has emboldened companies to test investor appetite for new listings, particularly in Asia. But a full-fledged recovery looks distant. (BBG)

METALS: China’s largest bank is being sued by Dutch lender ING for losses suffered in a batch of copper deals in a case that highlights the risks of servicing the scandal-plagued world of commodity trading. (FT)

METALS: Fortescue Metals Group shipped a record volume of iron ore in the nine months to the end of March, and is inching closer to achieving long-awaited first shipments from its multibillion-dollar Iron Bridge magnetite project. (AFR)

METALS: Australian diversified miner South32 Ltd on Monday cut output guidance for several operations hit by wet weather and other issues in the third quarter, which sent its shares down nearly 10%. (RTRS)

GOLD: Central bankers who manage trillions in foreign exchange reserves are loading up on gold as geopolitical tensions including the war in Ukraine force them to rethink their investment strategies. (FT)

ENERGY: Russian Deputy Prime Minister Alexander Novak said on Saturday that Russia will continue to accept more payments for energy exports in the country's rouble currency and China's yuan as Moscow works to ditch U.S. dollars and euros. (RTRS)

ENERGY: Germany is seeking to open by early 2024 a controversial LNG terminal linked to infrastructure from Russia’s now-defunct Nord Stream natural gas pipeline network. (BBG)

ENERGY: Ukraine’s state energy company has held talks with ExxonMobil, Halliburton and Chevron about projects in the war-torn country as Kyiv looks to lure back foreign investment into its energy sector. (FT)

OIL: Global oil traders are fixated on the next milestone in China’s economic recovery, when travelers pack their bags and head to the airport for the Golden Week holiday in early May. (BBG)

OIL: India's dependence on Russian oil has increased to account for 30% of its imported total in March, according to a Nikkei analysis of shipping data. (Nikkei)

OIL: US crude transferred from bigger to smaller tankers will contribute to pricing of the world’s most important oil benchmark, removing what traders saw as a stumbling block in a long-planned reform. (BBG)

OIL: Canada's TC Energy on Friday said a 14,000-barrel oil spill from its Keystone pipeline in rural Kansas in December was primarily due to a progressive fatigue crack, which originated during the construction of the pipeline. (RTRS)

CHINA

POLICY: The State Council, China's Cabinet, held its first-ever themed study session on Sunday, presided over by Premier Li Qiang, with the focus on new development philosophy and high-quality development. (China Daily)

POLICY: China will actively satisfy financing demand from small and medium-sized Chinese exporters and importers, Vice Commerce Minister Wang Shouwen said on Sunday. Uncertainty in external demand remains the biggest constraint on Chinese trade, Wang told a media briefing. (RTRS)

POLICY: China has moved to tighten the rules on declaring personal assets and business connections for officials as part of the ongoing battle against corruption. (SCMP)

ECONOMY/INFLATION: China’s economy will not fall into a deflationary spiral, despite recent subdued CPI numbers, as consumption and investment are still in the initial phase of recovery and will gather pace, according to Zhang Bin, deputy director at the Chinese Academy of Social Sciences. (MNI)

ECONOMY/INFLATION: China’s economy remains in early stage of recovery and is not facing any “systematic and sustainable” deflationary pressure, Shanghai Securities News reported on Monday, citing economists. (BBG)

ECONOMY: Guangdong’s GDP grew 4% in Q1 showing "challenges remain to meet annual targets," according to the Guangdong Statistics department. (MNI)

CHINA MARKETS

PBOC NET INJECTS CNY95 BILLION VIA OMOS MONDAY

The People's Bank of China (PBOC) conducted CNY115 billion via 7-day reverse repos on Monday, with the rates unchanged at 2.00%. The operation has led to a net injection of CNY95 billion after offsetting the maturity of CNY20 billion reverse repos today, according to Wind Information.

• The operation aims to keep banking system liquidity stable at month end, the PBOC said on its website.
• The 7-day weighted average interbank repo rate for depository institutions (DR007) fell to 2.0000% at 09:25 am local time from the close of 2.1688% on Friday.
• The CFETS-NEX money-market sentiment index closed at 45 on Friday, compared with the close of 53 on Thursday.

PBOC SETS YUAN CENTRAL PARITY AT 6.8835 MON VS 6.8752 FRI

The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 6.8835 on Monday, compared with 6.8752 set on Friday.

OVERNIGHT DATA

UK APR RIGHTMOVE HOUSE PRICE INDEX +0.2% M/M; MAR +0.8%
UK APR RIGHTMOVE HOUSE PRICE INDEX +1.7% Y/Y; MAR +3.0%

MARKETS

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Flag	Country	Event
24/04/2023	0800/1000	***		DE	IFO Business Climate Index
24/04/2023	0900/1100			EU	ECB Panetta Panels Event by Bruegel Think Tank
24/04/2023	1300/1500	**		BE	BNB Business Sentiment
24/04/2023	1330/1530			EU	ECB Panetta Into at ECON Hearing on Digital Euro
24/04/2023	1430/1030	**		US	Dallas Fed manufacturing survey
24/04/2023	1530/1130	*		US	US Treasury Auction Result for 26 Week Bill
24/04/2023	1530/1130	*		US	US Treasury Auction Result for 13 Week Bill