MNI US OPEN: R.B.A. Sets Hawkish Tone

MNI: GERMANY APR UE RATE (SA) 5.0%; MAR 5.0%

German Labour Market holds strong through April

GERMANY APR UNEMPLOYMENT RATE (SA) 5.0%; MAR 5.0%

GERMANY APR UNEMPLOYMENT NET CHANGE (SA) -13K; MAR -18K

• German unemployment data saw a fall of -13k of net unemployment in April, down 5k less than in March and a slightly more moderate reading than the 15k forecasted.
• This is the lowest reading in 12 months as the labour market becomes saturated, leaving the unemployment claims rate unchanged at 5.0%, on par with the pre-pandemic early 2020 level.
• In March, German employment exceeded the pre-crisis level by 0.1%. The April data highlights the strength of the German labour market despite new downside risks to growth associated with the onset of the Ukraine war.

UK FINAL APR MANUFACTURING PMI 55.8 (FLASH 55.3); MAR 55.2

Moderate Uptick in UK Manufacturing PMI

UK FINAL APR MANUFACTURING PMI 55.8 (FLASH 55.3); MAR 55.2

FINAL MFG PRINT 0.5 POINTS STRONGER THAN FLASH

• The April final print saw UK manufacturing growth improve more than expected to 55.8, picking up 0.8 points from March.
• Output growth increased from the 5-month low seen in March, with intermediate and investment good industries seeing solid growth.
• Increased new business, improved delivery and reduction of backlogs were underlying upwards growth drivers.
• Outlooks managed to remain in positive territory, albeit the lowest seen in 16 months.
• Cost inflation saw selling prices accelerate at new records, input costs were the second-highest in 30 years. Exports slumped due to weakened foreign demand, with the Ukraine war, China lockdown, Brexit and transportation dragging on business.

MNI: EUROZONE MAR PPI +5.3% M/M, +36.8% Y/Y, FEB +31.5%r Y/Y

Producer Prices at fresh highs, Energy up 11.1% compared to Feb

EUROZONE MAR PPI +5.3% M/M, +36.8% Y/Y, FEB +31.5%r Y/Y

EUROZONE MAR PPI EX. ENERGY +2.1% M/M, +13.6% Y/Y, FEB +12.3%r Y/Y

• Euro area industrial producer prices accelerated 5.3% m/m in March, rising to a new record high of +36.8% y/y.
• This data highlights the initial effects of the Russian invasion of Ukraine, where initial sanctions saw a spike in energy prices of +11.1% compared to the month prior.
• This compared to +1.3% m/m seen pre-invasion in February.
• Intermediate goods rose 2.8% m/m and non-durables by 2.4% m/m.

MNI: EUROZONE MAR UNEMPLOYMENT RATE 6.8%; FEB 6.9%r

FIXED INCOME: Hitting new cycle lows again

• Core fixed income hit new cycle lows across the board again this morning (with TY, Bund, gilt and BTP futures all hitting multiyear lows). There have been no real headline drivers of the moves, but the moves have been partially reversed over the minutes leading up to writing. The initial trigger was probably spillover from a more hawkish-than-expected RBA, which raised rates by 25bp to 0.35% (rather than the 15bp hike that had been expected). Gilts have been the underperformers across the curve, but there appears no headline drivers behind this, either.
• German and Eurozone unemployment data have come in largely in line with expectations while Eurozone PPI was a few tenths higher.
• Probably the data higlight of the day will be US JOLTs, due for release at 15:00BST ahead of tomorrow's FOMC policy decision (which is widely expected to confirm a 50bp hike). We also have the final print of US durable goods and factory orders (both due at 13:30BST).
• TY1 futures are down -0-23+ today at 118-13+ with 10y UST yields up 4.6bp at 2.983% and 2y yields up 4.4bp at 2.762%.
• Bund futures are down -0.43 today at 153.16 with 10y Bund yields up 4.2bp at 0.979% and Schatz yields up 1.6bp at 0.269%.
• Gilt futures are down -0.80 today at 117.64 with 10y yields up 9.0bp at 1.994% and 2y yields up 7.5bp at 1.654%.

FOREX: AUD on Top Following Chunkier Rate Hike

• AUD outperforms all others early Tuesday, with the RBA surprising markets overnight with a 25bps rate hike to 0.35% vs. Expectations of a 15bps tweak. In the subsequent press conference, governor Lowe flagged that the bank could raise rates as high as 1.5% by the end of 2022, and to 2.5% at a cyclical peak.
• In response, AUD/USD made light work of Monday's 0.7082, rallying to just shy of 0.7150 before the pair faded somewhat.
• NZD is softer in comparison, helping AUD/NZD surge well north of the 1.10 handle for the first time since August 2020. Strength north of 1.1065 would mark fresh four year highs.
• GBP is trading more solidly following the return of UK traders after Monday's bank holiday. GBP/USD is back above the 1.25 level for now, although the outlook remains bearish following last week's acceleration of the downtrend. Price has recently cleared 1.2974, Apr 13 low and 1.2676, last printed in September 2020. This has reinforced bearish conditions. The trend remains oversold, however, a reversal pattern is still required to signal a short-term base and a possible reversal.
• US factory orders and final March durables goods data cross alongside JOLTS at 1500BST/1000ET, with BoC's Rogers also on the docket. Members of both the Fed's FOMC and BoE's MPC remain in pre-meeting media blackout periods.

EQUITIES: Cyclical Stocks Lead Early European Gains

• European equities are mostly higher, led by Energy, Consumer Discretionary, and Financial stocks, with the German Dax up 80.61 pts or +0.58% at 14019.62, FTSE 100 down 24.21 pts or -0.32% at 7522.49, CAC 40 up 52.51 pts or +0.82% at 6485.26 and Euro Stoxx 50 up 25.71 pts or +0.69% at 3758.99.
• U.S. futures are flat, with the Dow Jones mini up 12 pts or +0.04% at 32994, S&P 500 mini up 2.75 pts or +0.07% at 4154, NASDAQ mini up 4.75 pts or +0.04% at 13077.75.
• Several Asian markets were closed for holidays.

COMMODITIES: Precious Metals Weaken As Rates Rise

• WTI Crude down $1.04 or -0.99% at $104.13
• Natural Gas up $0.2 or +2.72% at $7.678
• Gold spot down $8.84 or -0.47% at $1853.99
• Copper up $5.5 or +1.29% at $432.3
• Silver down $0.05 or -0.24% at $22.5858
• Platinum up $7.3 or +0.78% at $945.99