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MNI EUROPEAN OPEN: USD/JPY To Fresh Highs Post Unchanged BoJ

EXECUTIVE SUMMARY

Fig. 1: USD/JPY To Fresh Cycle Highs


Source: MNI - Market News/Bloomberg

U.K.

UK DATA (MNI): UK GfK Consumer Confidence rose more than expected by 2 points to -19 (vs -20 consensus, -21 prior) in April, and rose 11 points on a year-on-year basis.

EUROPE

ECB (BBG): European Central Bank Governing Council member Fabio Panetta warned that a return to ultra-low interest rates may be required if cuts aren’t made soon. The Italian central-bank chief said the euro-zone economy needs fresh impetus from monetary-policy easing, which would also temper the risk of undershooting the 2% inflation target. A lack of loosening by the Federal Reserve should pose no obstacle to the ECB, he said.

U.S.

FED (WSJ): WASHINGTON -- Donald Trump's allies are quietly drafting proposals that would attempt to erode the Federal Reserve's independence if the former president wins a second term, in the midst of a deepening divide among his advisers over how aggressively to challenge the central bank's authority.

DOLLAR (BBG): Former President Donald Trump’s economic advisers are considering ways to actively stop nations from shifting away from using the dollar — an effort to counter budding moves among key emerging markets to reduce exposure to the US currency, according to people familiar with the matter.

ECONOMY (MNI BRIEF): U.S. GDP grew at an annual rate of 1.6% in the first quarter, slowing from 3.4% in the fourth quarter and well below Wall Street expectations for a 2.5% increase, while inflation picked up by more than expected, the Bureau of Economic Analysis said Thursday. Traders priced in slightly less easing by the Federal Reserve after the data, now expecting just 36 bps of cuts through the end of the year.

TECH (BBG): Microsoft Corp. and Google owner Alphabet Inc. sent a clear message to investors on Thursday: Our spending on artificial intelligence and cloud computing is paying off. The companies trounced Wall Street estimates with their latest quarterly results, lifted by a surge in cloud revenue — fueled in part by booming use of AI services. That sent shares of the companies up in late trading, with Alphabet soaring as much as 17% and Microsoft gaining 6.3%.

OTHER

JAPAN (MNI BRIEF): The Bank of Japan board on Friday decided to keep its policy interest rate at about zero percent to 0.1%. “Regarding purchases of Japanese government bonds, CP and corporate bonds, the BOJ will conduct the purchases in accordance with the decisions made at the March policy meeting,” the BOJ board said in a notice. This means the BOJ will continue its JGB purchases with broadly the same amount as before, which is currently about JPY6 trillion a month.

JAPAN (MNI BRIEF): The year-on-year rise in the Tokyo core inflation rate decelerated to 1.6% in April from March's 2.4% for the second straight slow down, below 2% for the first time in three months and lower than the market's 2.2% expectation, data from the Ministry of Internal Affairs and Communications showed on Friday.

JAPAN (MNI BRIEF): The Bank of Japan board predicted the core consumer price index and core-core CPI in fiscal 2026 will rise 1.9% and 2.1%, indicating the probability of achieving the 2% target will increase. The BOJ board’s forecast for core CPI in fiscal 2025 was revised up to 1.9% from January’s 1.8% and the price view this fiscal year was revised up to 2.8% from January's 2.4%.

NEW ZEALAND (BBG): New Zealand’s consumer confidence index fell to 82.1 in April from 86.4 in March, according to ANZ Bank.

AUSTRALIA (BBG): The underlying cash deficit for the fiscal year to March 31 was A$1.8 billion, according to the government’s financial statements released on Friday.

CHINA

FX (MNI): China’s yuan will likely test 7.30 against the greenback in the short term should the U.S. dollar index move toward 107, but continue to depreciate more slowly than other currencies as the People’s Bank of China sets relatively strong fixings and tight offshore liquidity shores up the CNH rate outside the mainland, policy advisors and traders told MNI.

CHINA/US (BBG): China’s top diplomat Wang Yi warned his American counterpart that problems are mounting between the world’s largest economies, as the US threatens Beijing with sanctions for its support of Russia.

PBOC (SECURITIES DAILY): The chance is small for China’s central bank to buy government bonds in the short term, and it still has ample room to cut interest rates and reserve requirement ratio (RRR) to boost liquidity, Securities Daily reports, citing analysts.

PBOC (PEOPLE’S DAILY): PBOC vows to promote legislation in key and emerging areas of the financial industry, step up enforcement, and bring all financial activities under supervision, according to a commentary by the Communist Party theory study group of the Chinese central bank published in People’s Daily.

TECH (RTRS): ByteDance would prefer to shut TikTok rather than sell it to a potential US buyer, Reuters reports, citing four unidentified people close to ByteDance.

FX (PEOPLE’S DAILY): The People's Bank of China will effectively maintain currency stability and financial stability, while coordinating security with development and opening up, as well as balancing stabilising growth and preventing risks, according to an article by the Party Committee of the PBOC published on the party-run People’s Daily.

TRADE (21ST CENTURY BUSINESS HERALD): Authorities expect Guangdong’s foreign trade to maintain growth in H1 following Q1’s import and exports reaching CNY2.04 trillion, up 12% y/y, the best performance in 11 quarters, according to Zhang Ke, deputy director of the Guangdong General Administration of Customs.

CHINA MARKETS

MNI: PBOC Conducts CNY2 Bln Via OMO Fri; Liquidity Unchanged

The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repo on Friday, with the rates unchanged at 1.80%. The operation has led to no change to the liquidity after offsetting the maturity of CNY2 billion today, according to Wind Information.

  • The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8593% at 09:28 am local time from the close of 1.9161% on Thursday.
  • The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 45 on Thursday, the same as the close on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1056 on Friday, compared with 7.1058 set on Thursday. The fixing was estimated at 7.2460 by Bloomberg survey today.

MARKET DATA

NEW ZEALAND APRIL ANZ CONSUMER CONFIDENCE M/M -5.0%; PRIOR -8.6%
NEW ZEALAND APRIL ANZ CONSUMER CONFIDENCE INDEX 82.1; PRIOR 86.4

AUSTRALIA Q1 PPI Q/Q 0.9%; PRIOR 0.9%
AUSTRALIA Q1 PPI Y/Y 4.3%; PRIOR 4.1%
AUSTRALIA Q1 IMPORT PRICE Q/Q -1.8%; MEDIAN 0.1%; PRIOR 1.1%
AUSTRALIA Q1 EXPORT PRICE Q/Q -2.1%; MEDIAN -0.6%; PRIOR 5.6%

JAPAN TOKYO APRIL CPI Y/Y 1.8%; MEDIAN 2.5%; PRIOR 2.6%
JAPAN TOKYO APRIL CPI EX-FRESH FOOD Y/Y 1.6%; MEDIAN 2.2%; PRIOR 2.4%
JAPAN TOKYO APRIL CPI EX-FRESH FOOD, ENERGY Y/Y 1.8%; MEDIAN 2.7%; PRIOR 2.9%

UK APRIL GfK CONSUMER CONFIDENCE -19; MEDIAN -20; PRIOR -21

MARKETS

UK DATA: UK GfK Returns to Jan-24 High

UK GfK Consumer Confidence rose more than expected by 2 points to -19 (vs -20 consensus, -21 prior) in April, and rose 11 points on a year-on-year basis.

  • In particular, 4 of 5 subcomponents improved. The 'General Economic Situation over last 12 months' rose 4 points, whilst 'Personal Financial Situation over the next 12 months', 'General Economic Situation over the next 12 months' and 'Major Purchase Index' all rose 2 points. 'Personal Financial Situation over next 12 months' remained unchanged at +2 , although 15 points higher than it was a year ago, in April 2023.
  • While the overall index remains negative, it is comfortably above the 2023 average of -29, and all subcomponents have improved since April last year.
  • The GfK Client Strategy Director highlights the improvements are reflecting "the impact on household budgets of lower inflation and the anticipation of further tax cuts" - although the Savings Index (which is not included in the overall measure) has increased to 26 in April, a 7 point rise compared to April 2023.
  • The chart below shows, as inflation has begun to approach more 'normal' levels, the relationship between consumer confidence and inflation is weakening, as price increases become less dominant in consumers' minds, but more recently shows that as inflation has began to plateau so has confidence.
  • April's survey was conducted among a sample of 2009 individuals from April 2nd to April 15th 2024.


US TSYS: Treasury Futures Little Changed, Personal Income & Spending Later

  • Treasury futures are little changed today. The 2Y is trading up 0.25 to 101-13.875, 10Y is +01 higher at 107-12+ while Initial supports holds at 107-07+ (76.4% of the Oct - Dec ‘23 bull leg (cont)), a break back above 108-22+ would be needed to break the trend lower.
  • Cash Treasury yields are 0.5bp lower with the 2Y yield -0.6bps to 4.993%, 10Y -0.8bp to 4.700%, while the 2y10y is unchanged at -29.771
  • Across local rate markets, NZGBs yields are 6-8bps higher, ACGBs are 11-14bps higher with yields now at the highest point for the year while JGBs yields are 0.5-2bps higher
  • Projected rate cut pricing vs. pre-data levels: May 2024 -2.6% w/ cumulative -2.6bp at 5.322%; June 2024 at -8.9% from -16.2% earlier w/ cumulative rate cut -2.9bp at 5.300%. July'24 cumulative at -8.6bp from -12.1bp, Sep'24 cumulative -18.6bp from -24.4bp.
  • Looking ahead: Personal Income/Spending, UofM Sentiment, while May Treasury options expire.

JGBS: Rates Unchanged, Upside Inflation Risks, Growth Lower, Bond Purchases Remain

JGB futures are exhibiting weakness, -16 compared to settlement levels, but are sitting higher than the morning’s range.

  • The BoJ kept its interest rates unchanged, which was widely expected. Focus largely rested on the forecast outlook, references to the weaker yen and planned bond purchases.
  • The bank said it would buy government bonds in line with its March decision but dropped a footnote saying it had purchased about 6 trillion yen per month in the past.
  • On the forecast side, for inflation the 2024 FY core CPI forecast was kept at 1.9%, but with upside risks. 2025 was nudged up to 1.9% (from 1.8% prior). The first 2026 forecast was at 2.1%.
  • On growth, the 2024 FY forecast was nudged down to 0.8% from 1.2% prior. 2025 was kept at 1.0%, while 2026 is also seen at 1.0%.
  • The cash curve bear-steepening has remained but has been pared. Yields are flat to 1bp higher versus 1-3bps higher at the lunch break. The benchmark 10-year yield is 1.5bps higher at 0.914% versus the fresh YTD yield high of 0933%, set this morning.
  • The swaps curve is holding a twist-steepener, pivoting at the 40s, with rates -5bps to +2bps. Swap spreads are tighter out to the 30-year.
  • The local market is closed on Monday.

AUSSIE BONDS: Heavy Session, Narrow Ranges, Retail Sales Next Tuesday

ACGBs (YM -10.0 & XM -9.0) are holding cheaper after dealing in narrow ranges during the Sydney session. There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Q1 PPI data.

  • Cash US tsys ~1bp richer in today’s Asia-Pac session after yesterday’s post-GDP cheapening. Today’s US data calendar shows Personal Income/Spending and UofM Sentiment.
  • Cash ACGBs are 12-13bps cheaper, with the AU-US 10-year yield differential 6bps higher than Wednesday's close at -16bps.
  • Swap rates are 13-14bps higher.
  • The bills strip has bear-steepened, with pricing -4 to -12.
  • RBA-dated OIS pricing is 6-15bps firmer than Wednesday’s closing levels for meetings beyond June. A cumulative 4bps of easing is priced by year-end as the December meeting shunts 28bps firmer versus pre-CPI levels.
  • (AFR Joye) This week we were presented with yet more powerful data demonstrating that central banks are repeating past mistakes by actively encouraging an acceleration in consumer price pressures through their dovish prognostications. Australia’s central bank could be forced to fall into line with peers and raise rates again. (See link)
  • Next week, the local calendar is empty on Monday ahead of Retail Sales and Private Sector Credit data on Tuesday.
  • On Wednesday, the AOFM plans to sell A$800mn of the 3.75% May-34 bond.

NZGBS: Closed On A Weak Note, Spillover Selling From ACGBs

NZGBs closed on a weak note, with benchmark yields 7-8bps higher. The NZGB 10-year rose 8bps to 5.0%, the highest level since November last year. With domestic drivers light on the ground, apart from the previously outlined Consumer Confidence, the local market drifted weaker in the close despite a slight richening in US tsys in today’s Asia-Pac session. Cash US tsys are ~1bp richer after cheapening 6-7bps in post-GDP dealings.

  • The ACGB market appears to have triggered some spill-over selling. ACGBs are 11-12bps cheaper after trading resumed after yesterday’s ANZAC Day holiday. NZ-AU 10-year yield differential closed 1bp tighter, while the NZ-US 10-year spread has widened 5bps versus Wednesday's close.
  • Swap rates closed 8-11bps higher, with the 2s10s curve steeper.
  • RBNZ dated OIS pricing closed 2-10bps firmer across meetings, with Feb-25 leading. A cumulative 46bps of easing is priced by year-end.
  • Next week, the local calendar will see Filled Jobs on Monday, ANZ Business Confidence on Tuesday, and the Q1 Employment Report, CoreLogic House Prices and the RBNZ Financial Stability Report on Wednesday.
  • Friday's US Data Calendar includes Personal Income/Spending and UofM Sentiment.

FOREX: USD/JPY Through 156.00 Post Unchanged BoJ, A$ & NZD Outperform

USD/JPY has risen above 156.00, fresh cycle highs post the unchanged BoJ decision. Elsewhere the A$ and NZD are slightly firmer. The BBDXY USD index sits a touch higher, last near 1261.

  • The BoJ delivered few surprises in its unchanged meeting outcome. The policy statement was very short, noting bond purchases would continue as per the March statement. Inflation forecasts for 2024 were unchanged but seen with upside risks, the 2025 forecast was nudged higher. The growth outlook for this year was revised lower.
  • Yen has continued to weaken, with USD/JPY currently in the 156.15/20 region, around session highs and down 0.30% for the session. FinMin Suzuki commented after the decision that they will deal with FX appropriately, but declined to say if recent moves are excessive (so in line with recent rhetoric). Upside targets could rest at 156.47, a technical projection off recent price swings.
  • AUD (0.6520/25) and NZD (0.5955/60) are up slightly against the USD. NZD is marginally outperforming but has been unable to convincingly break above the 20-day EMA (0.5959). Data outcomes in both economies haven't impacted sentiment today.
  • Aiding the risk on tone has been a surge in US equity futures post late earnings from Alphabet and Microsoft in Thursday US trade. Nasdaq futures are up +1.15% at this stage. US yields are down slightly at this stage, but losses are not much beyond 1bps.
  • Looking ahead, the US PCE Core Deflator crosses. UMich consumer sentiment and inflation expectations will round off the week’s data calendar.

ASIA EQUITIES: China & Hong Kong Equities Head Higher As Tech And Property Surge

Hong Kong and China equities are higher today following global markets higher after US Tech giants Alphabet and Microsoft reported strong earnings. Like other big techs, Alphabet has been plowing money into developing AI, a strategy that has helped drive demand for its cloud services. Property names have surged higher after Cifi reported they got government funding, while Iron Ore is near seven week highs on signs of economic recovery in top consumer China and a drop in export flows from Australian producers.

  • Hong Kong equities are surging higher today with the HSTech Index up 3.66%, and has now broken above the 200-day EMA for the first time since November, the 14-day RSI has ticked higher again to 63, the Mainland Property Index up 4.79% at 1,295.15 and is now above the 100-day EMA after Cifi reported they got government “white-list” funding support for 24 projects in 1Q, while the wider the HSI is up 1.98%, and has broken through the 200-day EMA something we have not traded above since July 2023. China Mainland equities are again underperforming this morning, with the CSI300 up 1%, the index has once again bounced straight off the 50 & 100-day EMAs. Small-cap indices are performing slightly better with the CSI1000 and CSI2000 both up 1.50% while the ChiNext is up 2.50%.
  • China Northbound had an inflow of 0.3b yuan on Thursday, momentum has picked up slightly from the week prior but still remains in the negative territory with the 5-day average at -0.62billion, while the 20-day average sits at -0.66billion yuan.
  • China plans to enhance informal guidance, termed as window guidance, among state-owned banks to stabilize credit growth and stimulate economic development, as per a State Council report. Deputy Finance Minister Liao Min presented a report on state-asset management in financial institutions to the National People’s Congress Standing Committee. The report also indicates China's backing for large state-owned banks to issue Total Loss-Absorbing Capacity (TLAC) bonds, although specific details were not provided.
  • Looking ahead, China PMI on Tuesday

ASIA PAC EQUITIES: Equities Mixed, Tech Higher After Strong Earnings, BoJ Unchanged

Asian markets are mixed today due to concerns about stagflation in the US economy, which expanded at its slowest rate in nearly two years while inflation surged. Wall Street initially saw a sharp decline in shares after official data revealed that US GDP growth in the first quarter was below expectations at 1.6%, compared to forecasts of 2.5%, although strong earnings from US tech names after hours caused a rally in US futures and have helped most local markets. Locally, major focus was on the BoJ where they kept rates on hold, the Yen continues to make new lows now trading above 156 vs the USD, Australia had PPI which increased from the last quarter, NZ consumer confidence fell to 82.1 from 86.4, while Japan's Tokyo CPI missed forecasts coming in at 1.8% vs 2.5% and well down from March numbers of 2.6%.

  • Japanese equities gapped higher after BoJ rate decision while earlier the year-on-year rise in the Tokyo core inflation rate decelerated to 1.6% in April from March's 2.4% for the second straight slow down, below 2% for the first time in three months and lower than the market's 2.2% expectation, data from the Ministry of Internal Affairs and Communications showed on Friday. Both the Topix and Nikkei 225 are up about 0.70% for the day.
  • South Korean equities are higher, with tech stocks leading the way. The Kospi is up about 1.10% and is now testing the 20 & 50-day EMA at 2660.
  • Taiwan equities are higher today, after US tech stocks rallied post the close on strong earnings from Alphabet and Microsoft. The Taiex is up 1.60%
  • Australian equities are lower today, returning from a break yesterday and is the worst performing market in the region after not benefitting from the tech rally post the US market close. All sectors are lower with miners the worst performing sector, BHP has contributed the most to the fall after proposing to buy rival Anglo American, the ASX200 is down 1.23%.
  • Elsewhere in SEA, New Zealand Equities are down 1% after consumer confidence fell to an 11 month low, Indonesia equities are down 0.50%, Thailand, Malaysia and Philippines equity markets are unchanged for the day.

OIL: Slightly Above Thursday Highs, Tracking Up For The Week

Brent crude has largely tracked sideways in the first part of Friday dealing. We were last around $89.35/bbl in terms of the front month contract, leaving us around 0.40% firmer versus end Thursday levels. This follows Thursday's +1.10% gain. WTI front month was last around $83.85/bbl. Both benchmarks are tracking higher for the week at this stage.

  • Thursday's rally was aided by a USD pull back, with oil markets not too concerned around higher US yields. Nor did the weaker than expected US Q1 GDP figures.
  • Reported lower US inventories from earlier in the week, coupled with timespreads, continue to point to a tight market, and offsetting demand/monetary policy concerns.
  • In terms of technicals for the WTI, futures have recovered from their recent lows and price remains above key short-term support at $81.03, the 50-day EMA. On the upside, key resistance and the bull trigger has been defined at $86.97, the Apr 12 high.
  • We have the US PCE Core Deflator latest in US trade, while Tuesday next week delivers the China official PMI update.

GOLD: Heading For A Weekly Decline Despite Thursday’s Gain

Gold is little changed in the Asia-Pac session, after closing 0.7% higher at $2332.46 on Thursday.

  • Nevertheless, bullion is on track for a weekly close as persistent inflationary pressures force a continued paring of market easing expectations for the US Fed.
  • Overnight, US Treasuries reacted negatively to the Q1 GDP report, with 2- and 10-year yields 6-7bps higher.
  • US GDP rose by an annualised 1.6%, below the 2.5% consensus, partially explained by a shortfall in private consumption (2.5% against 3.0% expected). The core PCE deflator was stronger than expected, running at an annualised 3.7% (3.4% expected).
  • Weekly claims were also lower than expected.
  • According to MNI’s technicals team, the precious metal has recently pierced the 20-day EMA and a continuation lower would signal scope for an extension towards $2229.4, the 50-day EMA. Key resistance and the bull trigger have been defined at $2431.5, the recent Apr 12 high.
  • Elsewhere, copper is up by 1.3% at $454.6/lb, having hit a near 23-month high of $458.6 earlier in the session. A bullish theme in copper futures remains intact, with attention on $460.76 next, a Fibonacci projection. Key support is seen at $415.53, the 50-day EMA, according to MNI’s technicals team.

UP TODAY (TIMES GMT/LOCAL)

DateGMT/LocalImpactFlagCountryEvent
26/04/20240645/0845**FR Consumer Sentiment
26/04/20240800/1000**EU M3
26/04/20240800/1000**EU ECB Consumer Expectations Survey
26/04/20240800/1000EU ECB's De Guindos at Academia Europea Leadership
26/04/20241230/0830**US Personal Income and Consumption
26/04/20241400/1000**US U. Mich. Survey of Consumers
26/04/20241500/1100CA Finance Dept monthly Fiscal Monitor (expected)
26/04/20241700/1300**US Baker Hughes Rig Count Overview - Weekly
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EXECUTIVE SUMMARY

Fig. 1: USD/JPY To Fresh Cycle Highs


Source: MNI - Market News/Bloomberg

U.K.

UK DATA (MNI): UK GfK Consumer Confidence rose more than expected by 2 points to -19 (vs -20 consensus, -21 prior) in April, and rose 11 points on a year-on-year basis.

EUROPE

ECB (BBG): European Central Bank Governing Council member Fabio Panetta warned that a return to ultra-low interest rates may be required if cuts aren’t made soon. The Italian central-bank chief said the euro-zone economy needs fresh impetus from monetary-policy easing, which would also temper the risk of undershooting the 2% inflation target. A lack of loosening by the Federal Reserve should pose no obstacle to the ECB, he said.

U.S.

FED (WSJ): WASHINGTON -- Donald Trump's allies are quietly drafting proposals that would attempt to erode the Federal Reserve's independence if the former president wins a second term, in the midst of a deepening divide among his advisers over how aggressively to challenge the central bank's authority.

DOLLAR (BBG): Former President Donald Trump’s economic advisers are considering ways to actively stop nations from shifting away from using the dollar — an effort to counter budding moves among key emerging markets to reduce exposure to the US currency, according to people familiar with the matter.

ECONOMY (MNI BRIEF): U.S. GDP grew at an annual rate of 1.6% in the first quarter, slowing from 3.4% in the fourth quarter and well below Wall Street expectations for a 2.5% increase, while inflation picked up by more than expected, the Bureau of Economic Analysis said Thursday. Traders priced in slightly less easing by the Federal Reserve after the data, now expecting just 36 bps of cuts through the end of the year.

TECH (BBG): Microsoft Corp. and Google owner Alphabet Inc. sent a clear message to investors on Thursday: Our spending on artificial intelligence and cloud computing is paying off. The companies trounced Wall Street estimates with their latest quarterly results, lifted by a surge in cloud revenue — fueled in part by booming use of AI services. That sent shares of the companies up in late trading, with Alphabet soaring as much as 17% and Microsoft gaining 6.3%.

OTHER

JAPAN (MNI BRIEF): The Bank of Japan board on Friday decided to keep its policy interest rate at about zero percent to 0.1%. “Regarding purchases of Japanese government bonds, CP and corporate bonds, the BOJ will conduct the purchases in accordance with the decisions made at the March policy meeting,” the BOJ board said in a notice. This means the BOJ will continue its JGB purchases with broadly the same amount as before, which is currently about JPY6 trillion a month.

JAPAN (MNI BRIEF): The year-on-year rise in the Tokyo core inflation rate decelerated to 1.6% in April from March's 2.4% for the second straight slow down, below 2% for the first time in three months and lower than the market's 2.2% expectation, data from the Ministry of Internal Affairs and Communications showed on Friday.

JAPAN (MNI BRIEF): The Bank of Japan board predicted the core consumer price index and core-core CPI in fiscal 2026 will rise 1.9% and 2.1%, indicating the probability of achieving the 2% target will increase. The BOJ board’s forecast for core CPI in fiscal 2025 was revised up to 1.9% from January’s 1.8% and the price view this fiscal year was revised up to 2.8% from January's 2.4%.

NEW ZEALAND (BBG): New Zealand’s consumer confidence index fell to 82.1 in April from 86.4 in March, according to ANZ Bank.

AUSTRALIA (BBG): The underlying cash deficit for the fiscal year to March 31 was A$1.8 billion, according to the government’s financial statements released on Friday.

CHINA

FX (MNI): China’s yuan will likely test 7.30 against the greenback in the short term should the U.S. dollar index move toward 107, but continue to depreciate more slowly than other currencies as the People’s Bank of China sets relatively strong fixings and tight offshore liquidity shores up the CNH rate outside the mainland, policy advisors and traders told MNI.

CHINA/US (BBG): China’s top diplomat Wang Yi warned his American counterpart that problems are mounting between the world’s largest economies, as the US threatens Beijing with sanctions for its support of Russia.

PBOC (SECURITIES DAILY): The chance is small for China’s central bank to buy government bonds in the short term, and it still has ample room to cut interest rates and reserve requirement ratio (RRR) to boost liquidity, Securities Daily reports, citing analysts.

PBOC (PEOPLE’S DAILY): PBOC vows to promote legislation in key and emerging areas of the financial industry, step up enforcement, and bring all financial activities under supervision, according to a commentary by the Communist Party theory study group of the Chinese central bank published in People’s Daily.

TECH (RTRS): ByteDance would prefer to shut TikTok rather than sell it to a potential US buyer, Reuters reports, citing four unidentified people close to ByteDance.

FX (PEOPLE’S DAILY): The People's Bank of China will effectively maintain currency stability and financial stability, while coordinating security with development and opening up, as well as balancing stabilising growth and preventing risks, according to an article by the Party Committee of the PBOC published on the party-run People’s Daily.

TRADE (21ST CENTURY BUSINESS HERALD): Authorities expect Guangdong’s foreign trade to maintain growth in H1 following Q1’s import and exports reaching CNY2.04 trillion, up 12% y/y, the best performance in 11 quarters, according to Zhang Ke, deputy director of the Guangdong General Administration of Customs.

CHINA MARKETS

MNI: PBOC Conducts CNY2 Bln Via OMO Fri; Liquidity Unchanged

The People's Bank of China (PBOC) conducted CNY2 billion via 7-day reverse repo on Friday, with the rates unchanged at 1.80%. The operation has led to no change to the liquidity after offsetting the maturity of CNY2 billion today, according to Wind Information.

  • The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.8593% at 09:28 am local time from the close of 1.9161% on Thursday.
  • The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 45 on Thursday, the same as the close on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1056 on Friday, compared with 7.1058 set on Thursday. The fixing was estimated at 7.2460 by Bloomberg survey today.

MARKET DATA

NEW ZEALAND APRIL ANZ CONSUMER CONFIDENCE M/M -5.0%; PRIOR -8.6%
NEW ZEALAND APRIL ANZ CONSUMER CONFIDENCE INDEX 82.1; PRIOR 86.4

AUSTRALIA Q1 PPI Q/Q 0.9%; PRIOR 0.9%
AUSTRALIA Q1 PPI Y/Y 4.3%; PRIOR 4.1%
AUSTRALIA Q1 IMPORT PRICE Q/Q -1.8%; MEDIAN 0.1%; PRIOR 1.1%
AUSTRALIA Q1 EXPORT PRICE Q/Q -2.1%; MEDIAN -0.6%; PRIOR 5.6%

JAPAN TOKYO APRIL CPI Y/Y 1.8%; MEDIAN 2.5%; PRIOR 2.6%
JAPAN TOKYO APRIL CPI EX-FRESH FOOD Y/Y 1.6%; MEDIAN 2.2%; PRIOR 2.4%
JAPAN TOKYO APRIL CPI EX-FRESH FOOD, ENERGY Y/Y 1.8%; MEDIAN 2.7%; PRIOR 2.9%

UK APRIL GfK CONSUMER CONFIDENCE -19; MEDIAN -20; PRIOR -21

MARKETS

UK DATA: UK GfK Returns to Jan-24 High

UK GfK Consumer Confidence rose more than expected by 2 points to -19 (vs -20 consensus, -21 prior) in April, and rose 11 points on a year-on-year basis.

  • In particular, 4 of 5 subcomponents improved. The 'General Economic Situation over last 12 months' rose 4 points, whilst 'Personal Financial Situation over the next 12 months', 'General Economic Situation over the next 12 months' and 'Major Purchase Index' all rose 2 points. 'Personal Financial Situation over next 12 months' remained unchanged at +2 , although 15 points higher than it was a year ago, in April 2023.
  • While the overall index remains negative, it is comfortably above the 2023 average of -29, and all subcomponents have improved since April last year.
  • The GfK Client Strategy Director highlights the improvements are reflecting "the impact on household budgets of lower inflation and the anticipation of further tax cuts" - although the Savings Index (which is not included in the overall measure) has increased to 26 in April, a 7 point rise compared to April 2023.
  • The chart below shows, as inflation has begun to approach more 'normal' levels, the relationship between consumer confidence and inflation is weakening, as price increases become less dominant in consumers' minds, but more recently shows that as inflation has began to plateau so has confidence.
  • April's survey was conducted among a sample of 2009 individuals from April 2nd to April 15th 2024.


US TSYS: Treasury Futures Little Changed, Personal Income & Spending Later

  • Treasury futures are little changed today. The 2Y is trading up 0.25 to 101-13.875, 10Y is +01 higher at 107-12+ while Initial supports holds at 107-07+ (76.4% of the Oct - Dec ‘23 bull leg (cont)), a break back above 108-22+ would be needed to break the trend lower.
  • Cash Treasury yields are 0.5bp lower with the 2Y yield -0.6bps to 4.993%, 10Y -0.8bp to 4.700%, while the 2y10y is unchanged at -29.771
  • Across local rate markets, NZGBs yields are 6-8bps higher, ACGBs are 11-14bps higher with yields now at the highest point for the year while JGBs yields are 0.5-2bps higher
  • Projected rate cut pricing vs. pre-data levels: May 2024 -2.6% w/ cumulative -2.6bp at 5.322%; June 2024 at -8.9% from -16.2% earlier w/ cumulative rate cut -2.9bp at 5.300%. July'24 cumulative at -8.6bp from -12.1bp, Sep'24 cumulative -18.6bp from -24.4bp.
  • Looking ahead: Personal Income/Spending, UofM Sentiment, while May Treasury options expire.

JGBS: Rates Unchanged, Upside Inflation Risks, Growth Lower, Bond Purchases Remain

JGB futures are exhibiting weakness, -16 compared to settlement levels, but are sitting higher than the morning’s range.

  • The BoJ kept its interest rates unchanged, which was widely expected. Focus largely rested on the forecast outlook, references to the weaker yen and planned bond purchases.
  • The bank said it would buy government bonds in line with its March decision but dropped a footnote saying it had purchased about 6 trillion yen per month in the past.
  • On the forecast side, for inflation the 2024 FY core CPI forecast was kept at 1.9%, but with upside risks. 2025 was nudged up to 1.9% (from 1.8% prior). The first 2026 forecast was at 2.1%.
  • On growth, the 2024 FY forecast was nudged down to 0.8% from 1.2% prior. 2025 was kept at 1.0%, while 2026 is also seen at 1.0%.
  • The cash curve bear-steepening has remained but has been pared. Yields are flat to 1bp higher versus 1-3bps higher at the lunch break. The benchmark 10-year yield is 1.5bps higher at 0.914% versus the fresh YTD yield high of 0933%, set this morning.
  • The swaps curve is holding a twist-steepener, pivoting at the 40s, with rates -5bps to +2bps. Swap spreads are tighter out to the 30-year.
  • The local market is closed on Monday.

AUSSIE BONDS: Heavy Session, Narrow Ranges, Retail Sales Next Tuesday

ACGBs (YM -10.0 & XM -9.0) are holding cheaper after dealing in narrow ranges during the Sydney session. There hasn’t been much in the way of domestic drivers to flag, outside of the previously outlined Q1 PPI data.

  • Cash US tsys ~1bp richer in today’s Asia-Pac session after yesterday’s post-GDP cheapening. Today’s US data calendar shows Personal Income/Spending and UofM Sentiment.
  • Cash ACGBs are 12-13bps cheaper, with the AU-US 10-year yield differential 6bps higher than Wednesday's close at -16bps.
  • Swap rates are 13-14bps higher.
  • The bills strip has bear-steepened, with pricing -4 to -12.
  • RBA-dated OIS pricing is 6-15bps firmer than Wednesday’s closing levels for meetings beyond June. A cumulative 4bps of easing is priced by year-end as the December meeting shunts 28bps firmer versus pre-CPI levels.
  • (AFR Joye) This week we were presented with yet more powerful data demonstrating that central banks are repeating past mistakes by actively encouraging an acceleration in consumer price pressures through their dovish prognostications. Australia’s central bank could be forced to fall into line with peers and raise rates again. (See link)
  • Next week, the local calendar is empty on Monday ahead of Retail Sales and Private Sector Credit data on Tuesday.
  • On Wednesday, the AOFM plans to sell A$800mn of the 3.75% May-34 bond.

NZGBS: Closed On A Weak Note, Spillover Selling From ACGBs

NZGBs closed on a weak note, with benchmark yields 7-8bps higher. The NZGB 10-year rose 8bps to 5.0%, the highest level since November last year. With domestic drivers light on the ground, apart from the previously outlined Consumer Confidence, the local market drifted weaker in the close despite a slight richening in US tsys in today’s Asia-Pac session. Cash US tsys are ~1bp richer after cheapening 6-7bps in post-GDP dealings.

  • The ACGB market appears to have triggered some spill-over selling. ACGBs are 11-12bps cheaper after trading resumed after yesterday’s ANZAC Day holiday. NZ-AU 10-year yield differential closed 1bp tighter, while the NZ-US 10-year spread has widened 5bps versus Wednesday's close.
  • Swap rates closed 8-11bps higher, with the 2s10s curve steeper.
  • RBNZ dated OIS pricing closed 2-10bps firmer across meetings, with Feb-25 leading. A cumulative 46bps of easing is priced by year-end.
  • Next week, the local calendar will see Filled Jobs on Monday, ANZ Business Confidence on Tuesday, and the Q1 Employment Report, CoreLogic House Prices and the RBNZ Financial Stability Report on Wednesday.
  • Friday's US Data Calendar includes Personal Income/Spending and UofM Sentiment.

FOREX: USD/JPY Through 156.00 Post Unchanged BoJ, A$ & NZD Outperform

USD/JPY has risen above 156.00, fresh cycle highs post the unchanged BoJ decision. Elsewhere the A$ and NZD are slightly firmer. The BBDXY USD index sits a touch higher, last near 1261.

  • The BoJ delivered few surprises in its unchanged meeting outcome. The policy statement was very short, noting bond purchases would continue as per the March statement. Inflation forecasts for 2024 were unchanged but seen with upside risks, the 2025 forecast was nudged higher. The growth outlook for this year was revised lower.
  • Yen has continued to weaken, with USD/JPY currently in the 156.15/20 region, around session highs and down 0.30% for the session. FinMin Suzuki commented after the decision that they will deal with FX appropriately, but declined to say if recent moves are excessive (so in line with recent rhetoric). Upside targets could rest at 156.47, a technical projection off recent price swings.
  • AUD (0.6520/25) and NZD (0.5955/60) are up slightly against the USD. NZD is marginally outperforming but has been unable to convincingly break above the 20-day EMA (0.5959). Data outcomes in both economies haven't impacted sentiment today.
  • Aiding the risk on tone has been a surge in US equity futures post late earnings from Alphabet and Microsoft in Thursday US trade. Nasdaq futures are up +1.15% at this stage. US yields are down slightly at this stage, but losses are not much beyond 1bps.
  • Looking ahead, the US PCE Core Deflator crosses. UMich consumer sentiment and inflation expectations will round off the week’s data calendar.

ASIA EQUITIES: China & Hong Kong Equities Head Higher As Tech And Property Surge

Hong Kong and China equities are higher today following global markets higher after US Tech giants Alphabet and Microsoft reported strong earnings. Like other big techs, Alphabet has been plowing money into developing AI, a strategy that has helped drive demand for its cloud services. Property names have surged higher after Cifi reported they got government funding, while Iron Ore is near seven week highs on signs of economic recovery in top consumer China and a drop in export flows from Australian producers.

  • Hong Kong equities are surging higher today with the HSTech Index up 3.66%, and has now broken above the 200-day EMA for the first time since November, the 14-day RSI has ticked higher again to 63, the Mainland Property Index up 4.79% at 1,295.15 and is now above the 100-day EMA after Cifi reported they got government “white-list” funding support for 24 projects in 1Q, while the wider the HSI is up 1.98%, and has broken through the 200-day EMA something we have not traded above since July 2023. China Mainland equities are again underperforming this morning, with the CSI300 up 1%, the index has once again bounced straight off the 50 & 100-day EMAs. Small-cap indices are performing slightly better with the CSI1000 and CSI2000 both up 1.50% while the ChiNext is up 2.50%.
  • China Northbound had an inflow of 0.3b yuan on Thursday, momentum has picked up slightly from the week prior but still remains in the negative territory with the 5-day average at -0.62billion, while the 20-day average sits at -0.66billion yuan.
  • China plans to enhance informal guidance, termed as window guidance, among state-owned banks to stabilize credit growth and stimulate economic development, as per a State Council report. Deputy Finance Minister Liao Min presented a report on state-asset management in financial institutions to the National People’s Congress Standing Committee. The report also indicates China's backing for large state-owned banks to issue Total Loss-Absorbing Capacity (TLAC) bonds, although specific details were not provided.
  • Looking ahead, China PMI on Tuesday

ASIA PAC EQUITIES: Equities Mixed, Tech Higher After Strong Earnings, BoJ Unchanged

Asian markets are mixed today due to concerns about stagflation in the US economy, which expanded at its slowest rate in nearly two years while inflation surged. Wall Street initially saw a sharp decline in shares after official data revealed that US GDP growth in the first quarter was below expectations at 1.6%, compared to forecasts of 2.5%, although strong earnings from US tech names after hours caused a rally in US futures and have helped most local markets. Locally, major focus was on the BoJ where they kept rates on hold, the Yen continues to make new lows now trading above 156 vs the USD, Australia had PPI which increased from the last quarter, NZ consumer confidence fell to 82.1 from 86.4, while Japan's Tokyo CPI missed forecasts coming in at 1.8% vs 2.5% and well down from March numbers of 2.6%.

  • Japanese equities gapped higher after BoJ rate decision while earlier the year-on-year rise in the Tokyo core inflation rate decelerated to 1.6% in April from March's 2.4% for the second straight slow down, below 2% for the first time in three months and lower than the market's 2.2% expectation, data from the Ministry of Internal Affairs and Communications showed on Friday. Both the Topix and Nikkei 225 are up about 0.70% for the day.
  • South Korean equities are higher, with tech stocks leading the way. The Kospi is up about 1.10% and is now testing the 20 & 50-day EMA at 2660.
  • Taiwan equities are higher today, after US tech stocks rallied post the close on strong earnings from Alphabet and Microsoft. The Taiex is up 1.60%
  • Australian equities are lower today, returning from a break yesterday and is the worst performing market in the region after not benefitting from the tech rally post the US market close. All sectors are lower with miners the worst performing sector, BHP has contributed the most to the fall after proposing to buy rival Anglo American, the ASX200 is down 1.23%.
  • Elsewhere in SEA, New Zealand Equities are down 1% after consumer confidence fell to an 11 month low, Indonesia equities are down 0.50%, Thailand, Malaysia and Philippines equity markets are unchanged for the day.

OIL: Slightly Above Thursday Highs, Tracking Up For The Week

Brent crude has largely tracked sideways in the first part of Friday dealing. We were last around $89.35/bbl in terms of the front month contract, leaving us around 0.40% firmer versus end Thursday levels. This follows Thursday's +1.10% gain. WTI front month was last around $83.85/bbl. Both benchmarks are tracking higher for the week at this stage.

  • Thursday's rally was aided by a USD pull back, with oil markets not too concerned around higher US yields. Nor did the weaker than expected US Q1 GDP figures.
  • Reported lower US inventories from earlier in the week, coupled with timespreads, continue to point to a tight market, and offsetting demand/monetary policy concerns.
  • In terms of technicals for the WTI, futures have recovered from their recent lows and price remains above key short-term support at $81.03, the 50-day EMA. On the upside, key resistance and the bull trigger has been defined at $86.97, the Apr 12 high.
  • We have the US PCE Core Deflator latest in US trade, while Tuesday next week delivers the China official PMI update.

GOLD: Heading For A Weekly Decline Despite Thursday’s Gain

Gold is little changed in the Asia-Pac session, after closing 0.7% higher at $2332.46 on Thursday.

  • Nevertheless, bullion is on track for a weekly close as persistent inflationary pressures force a continued paring of market easing expectations for the US Fed.
  • Overnight, US Treasuries reacted negatively to the Q1 GDP report, with 2- and 10-year yields 6-7bps higher.
  • US GDP rose by an annualised 1.6%, below the 2.5% consensus, partially explained by a shortfall in private consumption (2.5% against 3.0% expected). The core PCE deflator was stronger than expected, running at an annualised 3.7% (3.4% expected).
  • Weekly claims were also lower than expected.
  • According to MNI’s technicals team, the precious metal has recently pierced the 20-day EMA and a continuation lower would signal scope for an extension towards $2229.4, the 50-day EMA. Key resistance and the bull trigger have been defined at $2431.5, the recent Apr 12 high.
  • Elsewhere, copper is up by 1.3% at $454.6/lb, having hit a near 23-month high of $458.6 earlier in the session. A bullish theme in copper futures remains intact, with attention on $460.76 next, a Fibonacci projection. Key support is seen at $415.53, the 50-day EMA, according to MNI’s technicals team.

UP TODAY (TIMES GMT/LOCAL)

DateGMT/LocalImpactFlagCountryEvent
26/04/20240645/0845**FR Consumer Sentiment
26/04/20240800/1000**EU M3
26/04/20240800/1000**EU ECB Consumer Expectations Survey
26/04/20240800/1000EU ECB's De Guindos at Academia Europea Leadership
26/04/20241230/0830**US Personal Income and Consumption
26/04/20241400/1000**US U. Mich. Survey of Consumers
26/04/20241500/1100CA Finance Dept monthly Fiscal Monitor (expected)
26/04/20241700/1300**US Baker Hughes Rig Count Overview - Weekly