MNI: PBOC To Aim To Drive Inflation Higher- Advisors

MNI: China To Issue More Bonds As Stimulus Targets Consumption

MNI BRIEF: ECB Should Be Close To 2% In Next Quarters -Centeno

MNI: PBOC To Aim To Drive Inflation Higher- Advisors

MNI: China To Issue More Bonds As Stimulus Targets Consumption

MNI BRIEF: China Nov M1 Decline Narrows, M2 Slows

MNI: CANADA OCT WHOLESALE SALES +3.3%; EX-AUTOS +0.5%

MNI: US NOV IMPORT PRICES +0.1%

MNI: CANADA Q3 INDUSTRIAL CAPACITY UTILIZATION RATE 79.3%

MNI EXCLUSIVE: EU-Mercosur Deal Close, But Likely Short-Lived - Officials

AUSTRALIA: 2025 Election Outcome Looking More Uncertain According To Newspoll

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MNI EUROPEAN OPEN: NZ Labour Market Weakens, Wages Elevated

EXECUTIVE SUMMARY

Fig. 1: New Zealand Unemployment Rate

Source: MNI - Market News/Bloomberg

EU

SWITZERLAND (MNI INTERVIEW): The Swiss National Bank may further utilise its balance sheet if rate cuts fail to provide sufficient Swiss franc depreciation to offset the disinflationary effects on the domestic economy of a weaker euro, former Federal Reserve staffer, Gianluca Benigno told MNI.

US/RUSSIA (BBG): The Senate voted Tuesday evening to approve legislation banning the import of enriched uranium from Russia, sending the measure to the White House which has said it supports efforts to block the Kremlin’s shipments of the reactor fuel.

U.S.

POLITICS (RTRS): U.S. President Joe Biden holds a marginal lead over Donald Trump ahead of the November presidential election as the Republican candidate is mired in a state court fighting charges he falsified business records, according to a Reuters/Ipsos poll that closed on Tuesday. Some 40% of registered voters in the two-day poll said they would vote for Biden, a Democrat, if the election were held today, compared with 39% who picked former President Trump. That 1 point lead was down from a 4 point lead Biden had in a Reuters/Ipsos poll conducted April 4-8.

TREASURY (MNI): Treasury’s Quarterly Refunding process for the May-Jul quarter began with borrowing estimates released on Mon Apr 29, followed by the refunding announcement itself on Wed May 1 (0830ET). In this round, there is relatively little intrigue surrounding coupon auction sizes: Treasury has provided clear guidance that there will be no changes to nominal coupon or FRN auction sizes “for at least the next several quarters”, and analysts are unanimously agreed (outside of a potential tweak to TIPS).

CORPORATE (BBG): Amazon.com Inc.’s cloud unit posted the strongest sales growth in a year, a sign that the retailer’s most profitable unit is recovering from a slump as businesses resume spending on technology projects, including artificial intelligence services.

OTHER

MIDEAST (RTRS): U.S. Secretary of State Antony Blinken said on Tuesday he would discuss with Prime Minister Benjamin Netanyahu measures that Israel still needs to take to increase the flow of aid into Gaza during his planned talks in the country on Wednesday.

JAPAN (MNI BRIEF): Japan's economy over Q1 is expected to have shrunk by 0.4% q/q, or 1.6% annualised, the first contraction in two quarters in the wake of weaker private consumption, capital investment and net exports, private economists predicted.

SOUTH KOREA (RTRS): South Korea has held talks on joining a part of the AUKUS defence deal between the U.S., Britain and Australia, Defence Minister Shin Won-sik said on Wednesday, only weeks after the pact said it would hold formal talks on Japan's entry.

NEW ZEALAND (MNI BRIEF): New Zealand unemployment rose to 4.3% over Q1, 10 basis points higher than expected, and up from Q4’s 4%, according to Stats NZ data released Wednesday. The employment rate fell 0.6 percentage points over the quarter to 68.4%, while average ordinary time hourly earnings increased 5.2% in the year.

NEW ZEALAND (BBG): New Zealand house prices fell for the first time in eight months in April as high borrowing costs and a sluggish economy kept buyers on the sidelines, according to CoreLogic.

NEW ZEALAND (BBG): New Zealand’s central bank said there’s a risk that renewed inflation pressures could keep global interest rates high for longer. “Global inflation is declining from elevated levels and financial markets have priced in lower policy rates over the next year,” the Reserve Bank said in its semi-annual Financial Stability Report Wednesday in Wellington. “However, there remains a risk that new or persistent inflation pressures could mean global interest rates remain restrictive for longer, placing continued pressure on households, businesses and the financial system.”

AUSTRALIA (BBG): Australia will tighten scrutiny of foreign investment into mining and refining of critical minerals as part of an overhaul of its national regime, while speeding up approvals in low-risk areas to boost economic growth.

AUSTRALIA (BBG): Australia’s housing market climbed further in April, driven by a supply shortfall that’s increasing affordability challenges at a time when borrowing costs are at a 12-year high.

CANADA (MNI BRIEF): Canada's top opposition lawmaker was kicked out of the House of Commons by the Speaker on Tuesday for refusing to withdraw a comment calling Prime Minister Justin Trudeau "whacko," a move unseen in decades and underscoring tensions bubbling up before an election due by late next year.

PHILIPPINES (BBG): The U.S. and the Philippines are in discussions over ways to prevent China from dominating nickel processing in the Southeast Asian nation, a key supplier of the metal that’s crucial for electric vehicle batteries.

CHINA

US/CHINA (BBG): China’s new climate chief plans to visit the US in May for formal talks with his American counterpart, seeking to bolster one of the few bright spots in relations between the two global leaders.

MARKET DATA

NEW ZEALAND 1Q EMPLOYMENT FALLS 0.2% Q/Q; EST. +0.3%; PRIOR +0.4%
NEW ZEALAND 1Q EMPLOYMENT RISES 1.2% Y/Y; EST. +1.6%; PRIOR +2.7%
NEW ZEALAND 1Q JOBLESS RATE 4.3%; EST. 4.2%; PRIOR 4.0%
NEW ZEALAND 1Q PARTICIPATION RATE 71.5%; EST. 71.9%; PRIOR 71.9%
NEW ZEALAND 1Q NON-GOVT. ORDINARY TIME WAGES RISE 0.8% Q/Q; PRIOR +1.0%
NEW ZEALAND 1Q AVERAGE HOURLY EARNINGS RISE 0.3% Q/Q; PRIOR 0.5%

NEW ZEALAND APRIL CORELOGIC HOUSE PRICES FALL 0.1% M/M; PRIOR +0.5%

AUSTRALIA APRIL CORELOGIC HOUSE PRICE INDEX RISES 0.6% M/M; PRIOR 0.6%

AUSTRALIA JUDO BANK APRIL F MFG PMI 49.6 in April; PRE. 49.9; PRIOR 47.3

JAPAN JIBUN BANK APRIL MFG PMI 49.6; PRIOR 48.2

SOUTH KOREA APRIL TRADE SURPLUS $1.5B; EST. $1.0B; PRIOR $4.3B
SOUTH KOREA APRIL EXPORTS RISE 13.8% Y/Y; EST. 15.0%; PRIOR +3.1%
SOUTH KOREA APRIL IMPORTS RISE 5.4% Y/Y; EST. 6.8%; PRIOR -12.3%

MARKETS

US TSYS: Slightly Richer Ahead Of FOMC Policy Decision Later Today

TYM4 is at 107-16, +0-02 from NY closing levels, after dealing in a narrow range in today’s Asia-Pac session ahead of the FOMC Policy Decision later today.

  • Cash US tsys are dealing ~1bp richer in today’s Asia-Pac session after yesterday’s heavy session, where the 2-year yield closed above 5.0% for the first time since November.
  • Analysts generally look for a more hawkish message from the FOMC in May compared with March, in light of strong inflation and economic activity data.
  • Fed Chair Powell is expected to tilt more cautious on the inflation outlook than in previous appearances, with potential flashpoints for markets including whether he acknowledges that 3 cuts are less likely to be the base case for the FOMC in 2024, and/or whether June is too early for the first cut. (See MNI’s FOMC Preview here)

JGBS: Cheaper Ahead Of FOMC Decision Later Today, BoJ March Minutes Tomorrow

JGB futures are holding weaker in the Tokyo afternoon session, -24 compared to the settlement levels, after dealing in a relatively narrow range ahead of the FOMC Policy Decision later today.

  • There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Jibun Bank PMI Mfg.
  • Cash US tsys are dealing little changed in the Asia-Pac session after yesterday's heavy session.
  • Cash JGBs are mostly cheaper, with yields flat to 3bps higher. The benchmark 10-year yield is 1.3bps higher at 0.892% versus the YTD high of 0.930%.
  • The swaps curve continues to twist-steepen, pivoting at the 20s, with rates -2bps to +3bps. Swap spreads are tighter out to the 10-year and wider beyond.
  • Tomorrow sees the BoJ Minutes of the March Meeting alongside Monetary Base and Consumer Confidence data.
  • The MoF will also conduct a Liquidity Enhancement Auction for 1-5-year OTR JGBs.

AUSSIE BONDS: Cheaper, Narrow Ranges Ahead Of FOMC Policy Decision

ACGBs (YM -6.0 & XM -6.5) are holding weaker after dealing in narrow ranges in today’s Sydney session. With the local calendar light and the FOMC Policy Decision due later today, local participants sat on the sidelines.

  • Cash US tsys are dealing ~1bp richer in today’s Asia-Pac session after yesterday’s heavy session.
  • Analysts generally look for a more hawkish message from the FOMC in May compared with March, in light of strong inflation and economic activity data.
  • (AFR) The US and Australian central banks are expected to take a tougher stance on tackling inflation at their upcoming meetings, cementing expectations that interest rates will have to stay high for longer and risking a further sell-off in the market. (See link)
  • Cash ACGBs are 5-6bps cheaper, with the AU-US 10-year yield differential at -19bps.
  • Today’s May-34 bond auction went smoothly with strong demand metrics, including a jump in the cover ratio to 3.9813x from 3.6437x at the March auction.
  • Swap rates are 4-5bps higher, with the 3s10s curve steeper.
  • The bills strip has bear-steepened, with pricing -2 to -6.
  • RBA-dated OIS pricing is 4-6bps firmer for late 2024/early 2025 meetings.
  • Tomorrow, the local calendar will see Building Approvals and Trade Balance data.

NZGBS: Closed Slightly Cheaper After A Post-Employment Data Rally

NZGBs closed flat to 2bps cheaper after today’s Q1 Employment Report printed weaker than expected. The local market had been as much as 5bps cheaper early after a negative lead-in from US tsys.

  • Q1 employment fell 0.2% q/q to be up only 1.2% y/y after rising 0.4% and 2.7% in Q4 respectively. The unemployment rate rose 0.3pp to 4.3%, its highest since Q4 2018. The labour market is softening as demand weakens and labour supply strengthens, which was also reflected in moderating wage growth.
  • The labour cost index rose 0.9% to be up 4.1% y/y, the lowest quarterly rate since Q1 2022. It remains elevated though and only 0.2pp lower than its 4.3% peak.
  • The progress should reassure the RBNZ but is unlikely to shift the MPC to an easing bias at its May 22 meeting.
  • Swap rates closed -1bp to +2bp., with the 2s10s curve steeper.
  • RBNZ dated OIS pricing closed 2-4bps softer for meetings beyond August. A cumulative 37bps of easing is priced by year-end.
  • RBNZ officials will appear in parliament to discuss the Financial Stability Report tomorrow. Building Permits for March are also due.
  • Tomorrow, the NZ Treasury plans to sell NZ$250mn of the 4.5% May-30 bond and NZ$250mn of the 3.5% Apr-33 bond.

FOREX: USD Grind Higher Continues As Fed Comes Into View

The USD has continued to edge higher through Asia Pac trade on Wednesday. We were last +0.10% firmer, with the BBDXY index up to 1267.1 This is fresh highs in the index back to Apr 19.

  • Overall moves have been contained though, with much of the region out for labor day holidays. We also have the Fed outcome later.
  • We started off with NZD on the back foot, which came after weaker Q1 employment data and a tick up in the unemployment rate. However, lows at 0.5875 saw support emerge, the pair last tracking close to 0.5885/90, little changed for the session.
  • Selling interest in the AUD/NZD cross above 1.1000 (highs of 1.1019) helped NZD at the margins. The cross is back to 1.0985/90 this afternoon.
  • AUD/USD is down 0.1% to 0.6467 after trading in a range of 0.6465-0.6485.
  • The S&P e-mini is slightly lower. Oil prices have continued sinking with WTI down 1% to $81.12/bbl. Copper is 0.8% lower and iron ore around $115.50/t.
  • US yields sit less than 1bp lower across the benchmarks, with Tsy futures off earlier highs.
  • USD/JPY is a touch higher, last near 157.85/90, a steady grind up, but we haven't recaptured the 158.00 handle yet. USD/CHF has seen more upside, the pair above 0.9210, +0.20% firmer for the session.
  • Later the Fed decision is announced (see MNI Fed Preview) and April ADP employment, ISM/PMI manufacturing and March JOLTS job openings print. UK April manufacturing PMI is released, while Europe ex UK is closed.

OIL: Crude Continues Slide Ahead Of Fed, Israel-US Meetings & EIA Data

Oil prices have continued to sink during APAC trading today ahead of the Fed decision later. Also US secretary of state Blinken is in Israel for discussions with Netanyahu and other government officials. There is hope that a Gaza ceasefire deal will be agreed, the prospect of which has eroded oil’s geopolitical risk premium this week. A rise in US crude stocks and stronger US inflation indicators have also pressured markets. The stronger USD is also weighing on prices with the index up another 0.1%.

  • WTI is down 1.0% today to $81.12/bbl after a low of $81.06. It has traded below support at $81.20 for most of the session. Brent is 0.9% lower at $85.57/bbl close to the low of $85.54 but it remains above support at $85.32. Volumes have been light given most of Asia is closed for holidays.
  • Bloomberg reported that US crude inventories rose 4.91mn barrels last week but gasoline fell 1.48mn and distillate -2.19mn, according to people familiar with the API data. The official EIA figures are released today.
  • Later the Fed decision is announced (see MNI Fed Preview) and April ADP employment, ISM/PMI manufacturing and March JOLTS job openings print. UK April manufacturing PMI is released, while Europe ex UK is closed.

GOLD: Steady After Yesterday’s Large Drop, Eyes On The FOMC

Gold is little changed in the Asia-Pac session, after closing 2.1% lower at $2286.25 on Tuesday.

  • Bullion's drop reflected a sharp rise in US Treasury yields after Q1 ECI printed hotter than expected. The employment cost index (ECI), which is closely monitored by the Federal Reserve, rose by 1.2% in Q1 versus +0.9% est.
  • The unexpected strength in inflation-related data added weight against any potential rate cuts ahead of the FOMC Policy Decision later today.
  • Analysts generally look for a more hawkish message from the FOMC in May compared with March, in light of strong inflation and economic activity data. Powell is expected to tilt more cautious on the inflation outlook than in previous appearances, with potential flashpoints for markets including whether he acknowledges that 3 cuts are less likely to be the base case for the FOMC in 2024, and/or whether June is too early for the first cut.
  • According to MNI’s technicals team, the 20-day EMA has given way, signalling scope for an extension towards the 50-day EMA at $2239.90.
  • ETF holdings continue to pull lower, with related participants continuing to trim exposure during the rally from the early October lows.

UP TODAY (TIMES GMT/LOCAL)

DateGMT/LocalImpactFlagCountryEvent
01/05/20240830/0930**UK S&P Global Manufacturing PMI (Final)
01/05/20240900/1000**UK Gilt Outright Auction Result
01/05/20241100/0700**US MBA Weekly Applications Index
01/05/2024-***US Domestic-Made Vehicle Sales
01/05/20241215/0815***US ADP Employment Report
01/05/20241230/0830***US Treasury Quarterly Refunding
01/05/20241345/0945***US IHS Markit Manufacturing Index (final)
01/05/20241400/1000***US ISM Manufacturing Index
01/05/20241400/1000*US Construction Spending
01/05/20241400/1000***US JOLTS jobs opening level
01/05/20241400/1000***US JOLTS quits Rate
01/05/20241430/1030**US DOE Weekly Crude Oil Stocks
01/05/20241800/1400***US FOMC Statement
01/05/20242015/1615CA BOC Governor at Senate Banking Committee

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