MNI EUROPEAN OPEN: USD/JPY Breaks Above 160.00 Before Retracing Sharply

US TSYS: Treasury Futures Steady, Off Earlier Highs

• Jun'24 10Y futures edged higher this morning, reaching 107-23+. The contract has sold of since and now trades just 01+ higher at 107-20, while 2Y futures are unchanged from NY closing levels.
• The trend outlook in Treasuries is unchanged and the direction is down. The 10Y contract traded to a fresh cycle low Thursday Initial resistance is 108-13 (20-day EMA), while to the downside, initial support is at 107-04+ (Apr 25 low).
• Yields and the USD may continue their move higher after PCE has confirmed inflation remains sticky, the upcoming FOMC decision on Wednesday is anticipated to emphasize the importance of exercising patience.
• Across local rates markets; NZGB yields are 1.5-3bps lower & ACGBs 2-4bps lower with curves flatter.
• Looking ahead: US to Sell 140b of 13 & 26 week Bills, focus will be on FOMC policy announcement on Wednesday.

AUSSIE BONDS: Richer, Cautious Dealing, Retail Sales Tomorrow, FOMC Policy Decision On Wednesday

ACGBs (YM +2.0 & XM +3.5) are holding stronger but in the middle of today’s Sydney session ranges. Local market participants have been cautious with no domestic data released today and no cash US tsy trading due to a public holiday in Japan. This caution may stem from lingering concerns following last week's unexpectedly high Q1 CPI figures.

• Cash ACGBs are 4bps richer.
• Swap rates are 4-5bps lower.
• The bills strip has bull-flattened, with pricing flat to +3.
• RBA-dated OIS pricing is slightly softer across meetings. A cumulative 4bps of easing is priced by year-end from an expected terminal rate of 4.46% (Sep-24).
• (AFR) The Reserve Bank of Australia board will almost certainly leave the policy rate unchanged when it meets next week. But given the higher-than-anticipated price pressures evident in the March quarter consumer price index and evidence of ongoing labour market resilience, do not expect Governor Michele Bullock to abandon her circumspection regarding the next move in the policy rate. (See link)
• The local calendar will see Private Sector Credit and Retail Sales data tomorrow.
• On Wednesday, the AOFM plans to sell A$800mn of 3.75% the May-34 bond.

NZGBS: Richer, Subdued Dealings, Q1 Employment Report On Wednesday

NZGBs closed in the middle of today’s trading range, 2-4bps richer. With a light domestic calendar and no cash US tsys trading due to a public holiday in Japan, local participants have largely sat on the sidelines.

• Tomorrow the local calendar will see ANZ Business Confidence & Activity Outlook, ahead of the Q1 Employment Report on Wednesday. The FOMC’s Policy Decision is due Thursday morning local time.
• Swap rates are 2-3bps lower, with the 2s10s curve steeper.
• RBNZ dated OIS pricing is 1-2bps firmer for meetings out to Oct-24. A cumulative 26bps of easing is priced by year-end.
• (Bloomberg) NZ house-price inflation will be weaker than previously expected in the 1H before a recovery in the 2H, ANZ Bank NZ economists say in an emailed report containing fresh forecasts. (See link)
• The RBNZ will close its offer to repurchase NZGBs maturing May 2024 on May 1 at 4pm, according to a notice. RBNZ repurchased NZ$1.28bn of the May 2024 bond.

FOREX: USD/JPY Prints Above 160.00, But Sees 400pip Retracement, A$ & NZD Outperform

The BBDXY sits 0.30% lower, the USD index last near 1259.3. The USD has seen broad based weakness against the majors so far today, while sharp yen swings have been the other standout.

• USD/JPY rallied above 160.00 in early trade (fresh highs back to 1990 of 160.17). From there we consolidated in the 159.00/50 region before pulling back sharply this afternoon. Lows were seen near the 156.00 level, so more than 400pips off earlier highs.
• The afternoon moves will likely raise questions around whether intervention has taken place or not. We haven't seen confirmation or hints that this has taken place. Note post BoJ lows in USD/JPY came in around 155.00. With Japan markets out, liquidity has no doubt been lighter.
• Broader USD sentiment is also softer, as the equity mood has generally been a positive one. The regional markets are firmer, with Hong Kong and China performing strongly, led by property and tech names.
• AUD is the best performer, last near 0.6580, up 0.75% for the session. NZD/USD is trailing slightly in percentage terms, last around 0.5980.
• EUR/USD is up around 0.3%, last near 1.0730.
• Looking ahead, German and Spanish CPI data kick off this week’s economic data calendar for the EU. In the US we have the April Dallas Fed manufacturing.

ASIA EQUITIES: China & Hong Kong Equities Are Higher, Property and Tech Leading The Way

Hong Kong and China equities are higher today, the property sector has surged on CIFI holdings after the company announced an agreement with a group of bondholders regarding its offshore liquidity situation, with property indices now in bull market territory, Germany may reconsider plans to tighten screening o of Chinese investments. It is a quiet day for economic data, locally this week we have China PMI on Tuesday and Hong Kong GDP on Thursday, while the Fed reverse decision on Thursday will also be closely watched

• Hong Kong equities are surging higher today with the HSTech Index up 0.96% after breaking back above the 200-day EMA on Friday and is now up about 16% from lows on the Apr 19th. The Mainland Property Index up 4.72% at 1,375.84 and is now up 21.20% from lows on Apr 19th with resistance now at the 200-day EMA, a level we have not traded above since June 2021, while the wider the HSI is up 1.10%. China Mainland equities are again underperforming this morning, with the CSI300 up 1.33%, the index has finally broken above the 200-day EMA, a level we have failed to break 5 times over the past month, small-cap indices are performing slightly better with the CSI1000 and CSI2000 both up about 2% while the ChiNext has surged 3.60%.
• China Northbound had an inflow of 22.4b yuan on Friday the largest inflow on record. The past 5-day saw just a single day of outflows, with a total inflow of 25.8b yuan. The 5-day average at 5.15billion, while the 20-day average sits at 0.18billion yuan.
• In the property space, Chengdu, a major city in southwest China, has lifted home-buying restrictions to stimulate real estate demand and economic growth, removing qualification reviews for home buyers and aiming to meet financing needs for property companies. This move follows similar actions in other Chinese cities amid a prolonged real estate downturn, which has weighed on economic growth and prompted concerns from authorities about market stabilization. CIFI Holdings shares surged by up to 25% alongside other Chinese property shares after the company announced an agreement with a group of bondholders regarding its offshore liquidity situation. The agreement involves holders controlling approximately 43% of CIFI's senior notes, perpetual securities, and convertible bonds. Additionally, there are currently no ongoing legal proceedings against the company initiated by any creditors
• Germany is reportedly reconsidering plans to tighten screening of Chinese investments, with fears that such scrutiny could impede economic revitalization efforts; however, the economy ministry spokesman couldn't confirm these claims. The proposed bill aims to expand government powers to review foreign investments for security risks, including in advanced technology sectors, but discussions are ongoing about its provisions and the need to balance security concerns with openness to foreign investment, according to the WSJ.
• Looking ahead, China PMI on Tuesday and Hong Kong GDP on Thursday.

ASIA PAC EQUITIES: Asian Equities Head Higher As Tech Rallies, JPY Sees Sharp Reversal

Asian markets have tracked US markets higher, Japan is closed today for a public holiday. There has been very little in term of headlines over the weekend and a slow day for economic data today. Local market equity flows have been mixed recently, Taiwan and South Korean have seen a pick up late in the week as tech rallied on the back of strong earnings, while Indonesian equities continue to see outflows. Focus in the region today has largely been on the JPY with large moves taking place, the USDJPY is down 2%.

• South Korean equities are higher, tech stocks are the top performing sector. Nasdaq futures are also testing Friday highs, a break higher could help drag the local market up further. The Kospi is up 0.97% at 2,682.23, holding back above the 20-day EMA, we have ticked above 50 on the 14-day RSI, while decreasing red bars for the MACD indicating buyers are in control. Looking ahead this week on Tuesday we have Industrial Productions with consensus at 3.8% falling from 4.8% y/y, Wednesday we have Trade Balance data consensus is a drop to $600m from $4.28b in March and finally on Thursday CPI is expected with consensus at 3% falling from 3.1% in March.
• Taiwan equities are higher today, local markets have benefitted from strong US tech earnings last week with the Taiex trading back above the 20,000 mark, and has now bounced 5.20% from the lows made during the Israel/Iran conflict, the index now trades back above all moving averages, the RSI is back above 50 while the MACD indicator is around 50 and up 1.65% for the day.
• Australian equities are higher today, largely tracking global markets. Most sectors are in positive territory day, with financials leading the way. Looking ahead, Tuesday we have Private Sectors Credit and Retail Sales, Wednesday we have Trade Balance and Building Approval data. The ASX200 closed on the 100-day EMA on Friday and have this morning bounced right off it trading up 0.86% at 7,641. The 20 & 50-day EMAs trade at 7,680/7,690 and are initial resistance.
• Elsewhere in SEA, New Zealand Equities are up 0.40%, jobs filled data showed an increase from the prior month to 0.4% from 0.3% in Feb, Malaysian equities are up 0.42%, Philippines equities have surged 1.60%, Indonesian equities are up 1.90%, while Singapore Equities are down 0.23%.

Oil Prices Lower On Hopes Of Gaza Ceasefire

Increased pressure on Israel from the US for a truce in Gaza and hostage deal has seen oil prices fall during the session as the geopolitical risk premium unwinds. The stronger greenback also weighed on crude earlier but when the USD index came off its high oil prices troughed. The USD index is down 0.2% driven by the yen rebound.

• WTI is down 0.8% to $83.21/bbl above support at $81.03. It fell to a low of $82.96 but breaks below $83 have been short lived. Brent is 0.8% lower at $87.54/bbl after a low of $87.31, above support at $85.88.
• US secretary of state Blinken has just arrived in Saudi Arabia for Gaza ceasefire talks. The US has said that Israel will delay a Rafah offensive until it has met with Blinken.
• Today the April Dallas Fed manufacturing, European Commission April survey and preliminary April German CPI data print. The ECB’s de Guindos speaks later. The focus of the week will be on Wednesday Fed announcement and Friday’s April payrolls to gauge the rate outlook and thus oil demand prospects.

GOLD: First Weekly Decline In Six Ahead Of FOMC Decision

Gold is 0.5% lower in the Asia-Pacific session, after closing 0.2% higher at $2337.96 on Friday.

• Despite this, the price of gold closed approximately 2% lower for the week, marking its first weekly decline in six weeks.
• This occurred ahead of the FOMC’s Policy Decision scheduled for Wednesday, where policymakers are anticipated to reiterate their commitment to maintaining higher interest rates for an extended period.
• In the US short-term interest rate market, expectations have shifted, with projections now suggesting only one Federal Reserve rate cut for the year. This forecast is notably lower than the approximately six quarter-point cuts that were anticipated at the beginning of the year.
• Historically, gold tends to react negatively to higher interest rates due to its lack of yield-bearing characteristics.
• According to MNI’s technicals team, gold is in consolidation mode. The piercing of the 20-day EMA last week could be the start of a possible corrective cycle. A continuation lower would signal scope for an extension towards $2229.4, the 50-day EMA.