MNI US OPEN - BOJ on Hold, Yen Turbulent as Intervention Speculation Lingers
EXECUTIVE SUMMARY:
- BOJ ON HOLD, KEEPS POLICY RATE AT 0-0.1%
- UEDA SAYS YEN NOT AFFECTING UNDERLYING INFLATION
- US TOP DIPLOMAT MEETS XI IN BEIJING
- EUROZONE ONE-YEAR CONSUMER PRICE INFLATION EXPECTATIONS SLOW
Figure 1: German IFO Employment Barometer Softer Overall, But Services Stronger
Source: IFO/MNI
NEWS
US/CHINA (MNI): Xi to Blinken - US & China "Should Be Partners Rather Than Rivals"
MNI (London) Chinese state media carrying comments from President Xi Jinping at his meeting in Beijing with US Secretary of State Antony Blinken. Says that "The two countries should be partners rather than rivals." Xi: "Both countries should seek common ground while reserving differences instead of vicious competition....Both sides should keep their word instead of saying one thing and doing another." Xi: "China is happy to see self-confident, open, prosperous and developing United States...It is hoped that the US will also take a positive view of China's development."
BOJ (MNI): BOJ on Hold, Keeps Policy Rate at 0-0.1%
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. The board's hold was largely anticipated.
BOJ (MNI): BOJ Sees Risks to Prices in FY25, FY26 Balanced
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%."With regard to the risk balance, risks to economic activity are generally balanced for fiscal 2024 onward," the BOJ noted. "Risks to prices are skewed to the upside for fiscal 2024 but are generally balanced thereafter."
BOJ (MNI): Yen Not Affecting Underlying Inflation - BOJ's Ueda
Bank of Japan Governor Kazuo Ueda said on Friday the yen's recent weakness has not affected underling inflation, which the Bank continued to watch closely. “The BOJ isn’t targeting foreign exchange rates but we are closely watching developments of forex rates and their impact on economic activity and prices,” Ueda told reporters. Should the underlying trend change as a result of the weak yen, the BOJ will change monetary policy, he added without elaborating on timing. While Ueda ruled out an imminent sharp rise in inflation caused by the weak yen, he voiced concern over the risk of a sharp increase in prices.
JAPAN (BBG): Japan Tightens Export Controls on More Chip and Quantum Tech
Japan said it plans to expand restrictions on exports of four technologies related to semiconductors or quantum computing, the latest in a global push to control the flow of strategic tech. Tokyo’s new measures will affect scanning electron microscopes, used to analyze nanoparticle images, and gate-all-around transistors, a technology embraced by Samsung Electronics Co. to improve semiconductor design. Japan will also require licenses for shipments of cryogenic CMOS circuits used in quantum computers, as well as for quantum computers themselves.
ECB (MNI): One-Year Consumer Inflation Expectations Slow - ECB
Eurozone one-year consumer price inflation expectations slowed for a sixth straight month in March, to 3.0% from 3.1%, the lowest since December 2021, while the outlook for the three-year horizon was unchanged at 2.5% for a fourth consecutive month, an ECB survey showed, in data likely to reinforce expectations for a June rate cut. Inflation expectations over the one-year and three-year horizons remained well below the perceived past inflation rate, which was 5.0%, down from 5.5% in February. Uncertainty about inflation expectations over the next 12 months edged down to the lowest level since the start of Russia’s invasion of Ukraine in February 2022.
SNB (MNI): Jordan Reiterates SNB Risk Management Approach at Annual General Assembly
SNB President Jordan struck a similar tone to earlier speeches and gave no commentary on potential further rate cuts later this year in his talk at the SNB's annual general assembly. He does reiterate elevated ongoing uncertainty, as well as the SNB's risk management approach. "Inflation has now been back below 2% for several months and, according to our latest forecast, is likely to remain stable over the next few years. Of course there is no guarantee for that."
SCOTLAND (MNI): First Min. to Face Confidence Vote Next Week, No Guarantee of Success
Scotland's First Minister Humza Yousaf will face a vote of no confidence in the Scottish Parliament next week (likely Tue 30 or Wed 1 May) following the collapse of the governing agreement between his populist pro-independence Scottish National Party (SNP) and the left-wing environmentalist Scottish Greens on 25 April. The scrapping of climate change targets led to the Greens organising an internal party vote on continuing in gov't, a move pre-empted by Yousaf who dismissed the two Greens in cabinet on Wednesday. This ended the so-called Bute House Agreement left the SNP as a minority administration.
CHINA (MNI): China Yuan Seen Breaching 7.3, Strengthening Against Basket
MNI (Beijing) 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. The strong fix has managed to curb onshore CNY depreciation and drive the currency to close near its upper limit on consecutive days this month, a forex trader from a commercial bank based in Shanghai told MNI, though he added that he expected the fix to edge up if the dollar rises further, pushing the yuan towards 7.30.
SECURITY (MNI): Russian Def Min - US Trying to Remake Pacific Security System
State-run Interfax, RIA and Tass reporting comments from Defence Minister Sergei Shoigu speaking at a meeting of Shanghai Cooperation Organisation (SCO) defence ministers in Astana, Kazakhstan. Says that 'Russia has neither geopolitical nor military interests to attack NATO countries'. States that 'any US or allied placement of military infrastructure on territory of the SCO is unacceptable." Shoigu: 'Quad, AUKUS, and other US-led blocs [are attempting] to remake the security structure in the Pacific and make it America-focused'. Shoigu urges SCO members to 'expand the geography of military drills and their variety.'
CORPORATE (BBG): Anglo Rejects BHP Takeover Bid as Significantly Undervalued
Anglo American Plc has rejected a $39 billion takeover proposal from BHP Group, saying it significantly undervalues the company. Under the proposed all-share deal, Anglo would first spin off controlling stakes in South African platinum and iron ore companies to its shareholders before being acquired by BHP. The total per-share value of the non-binding proposal was about £25.08, BHP said Thursday. Anglo’s rejection was widely expected. Analysts and some Anglo investors had seen BHP’s proposal as well below the sort of price that would bring the 107-year-old miner to the table. BHP will now have to improve its offer if it wants to start talks.
DATA
UK DATA (MNI): Upbeat UK Confidence Read Grounds for Optimism
- UK APR GFK CONSUMER CONFIDENCE INDEX -19
A strong set of UK consumer confidence data provides grounds for optimism, with many households now less downbeat than in recent months, the head of a leading survey told MNI. "While the Overall Index Score remains negative, all of the underlying five measures this April are significantly better than they were last April," Joe Staton, Strategy Director at GfK, said in an interview. The Overall Index Score increased two points to -19 in April. Four measures were up and one stayed the same from last month’s announcement.
GERMANY DATA (MNI): IFO Employment Softer Overall, Services Stronger
The April IFO Employment Barometer fell slightly after two consecutive upticks, coming in at 96.0 (vs 96.3 prior). Overall, the report showed some dichotomy and suggests that employment perspectives in the services sector are improving, while in manufacturing, employment sentiment gets slightly worse. Looking at the details of the report, the manufacturing and trade sectors printed declines but remained above levels seen at the beginning of this year, printing at -12.2 and -11.8, respectively, in April (-2.8p and -2.0p vs March). The services and construction sectors were only partially able to make up for this, while services remained the only sector in expansionary territory (+0.5p to 5.7; construction +1.7p to -6.8).
FRANCE DATA (MNI): Consumer Sentiment Remains in Recent Range
- FRANCE APR CONSUMER SENTIMENT 90
France Consumer Sentiment printed slightly lower than expected at +90 (vs 92consensus, +91 prior), but have remained in a range between 88-91 since November 2023. The long-term average is 100 (between January 1987 and December 2023), whereas the 2023 average was 85, so we are slightly above last year's levels but below the long-run average still.
JAPAN DATA (MNI): Japan April Tokyo CPI Rises 1.6% vs. March's 2.4%
- JAPAN APRIL TOKYO CORE CPI +1.6% Y/Y; MARCH +2.4%
- JAPAN APRIL TOKYO CORE-CORE CPI +1.8% Y/Y; MARCH +2.9%
- JAPAN APRIL SERVICES PRICE +0.8% Y/Y; MARCH +2.0%
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. The slower core CPI was within forecasts by Bank of Japan officials which expected the inflation data to decelerate as the impact of the pass-through of cost increases weakened.
RATINGS: A Raft of Potential Ratings Updates After Hours, France Under Particular Scrutiny
Potential rating reviews of note scheduled for after hours on Friday include:
- Fitch on France (current rating: AA-; Outlook Stable), Sweden (current rating: AAA; Outlook Stable) & Switzerland (current rating: AAA; Outlook Stable)
- Moody’s on France (current rating: Aa2; Outlook Stable)
- S&P on Belgium (current rating: AA; Outlook Stable), Finland (current rating: AA+; Outlook Stable), Hungary (current rating: BBB-; Outlook Stable), Slovakia (current rating: A+; Outlook Stable) & Sweden (current rating: AAA; Outlook Stable)
- Morningstar DBRS on the European Union (current rating: AAA, Stable Trend) & Italy (current rating: BBB (high), Stable Trend)
- Scope Ratings on Austria (current rating: AAA; Outlook Negative), the Czech Republic (current rating: AA-; Outlook Stable), the European Union (current rating: AAA; Outlook Stable), the Netherlands (current rating: AAA; Outlook Stable) & the United Kingdom (current rating: AA; Outlook Stable)
FOREX: JPY Volatility in Focus Post-BOJ, USD Index at Fresh Two-Week Low
- Global focus has been on the Japanese Yen on Friday, as the dust settles from an unchanged Bank of Japan decision overnight. Governor Ueda stated the yen's recent weakness has not affected underling inflation, which the Bank continue to watch closely.
- Overall, this has paved the way for further JPY weakness on the session, with USDJPY printing a fresh multi-decade high of 156.82. There was a momentary sharp pullback to 154.99, with markets potentially getting spooked re MOF intervention but this move was quickly faded, with the pair tracking back above 156.50 as we approach the NY crossover.
- Firmer equities in Europe are moderately bolstering risk sentiment, with the likes of AUD and NZD outperforming and the USD index printing a fresh two-week low below 105.50.
- As such, AUDJPY is up 1% and EURJPY stand 0.70% in the green, with the latter piercing initial resistance at 168.25, the 1.50 projection of the Jan 1 - 19 - Feb 1 price swing.
- EURUSD has edged to fresh highs, briefly printing above 1.0750. The market will monitor a clear break of the 20-day EMA (1.0726), which would signal scope for a stronger technical recovery.
- US PCE Core Deflator crosses this afternoon, alongside personal income and spending figures. UMich consumer sentiment and inflation expectations round off the week’s data calendar. Potential for comments from ECB's Centeno, participating in a panel in Frankfurt.
BONDS: A Little Firmer as BOJ Holds the Line
Core global FI markets hold onto the bulk of their early Friday rally, although JPY FX activity has generated far greater interest.
- A lack of hawkish offerings from BoJ Governor Ueda helped bonds to rally around the European cash open.
- Steady to slightly lower inflation expectations in the ECB’s latest consumer expectations survey wouldn’t have harmed the bid.
- Bund futures are a little off session highs, last +20 or so at 130.00. The German cash curve has bull flattened, with yields 0.5-2.5bp lower.
- OATs are little changed to a touch tighter vs. German peers, as participants await potential French sovereign rating updates from Fitch & Moody’s. The recent French fiscal deterioration has fed into OATs, with the impending rating updates having the potential to move the market on Monday (we will provide more colour later).
- Peripheral paper is generally tighter to Bunds, with a light rally in EUR STIR markets, some tightening in benchmark credit spreads and the recovery in equities since yesterday’s European close feeding in.
- Gilt futures are +15 or so at 95.85. Bulls failed to force a break above 96.00, with the bearish technical backdrop intact.
- Cash gilt yields are 1-3bp lower across the curve, with some flattening seen.
- Light dovish moves are seen in GBP STIRs.
- The European & UK calendars are light from here, which will leave focus on cross-market spill over and macro headline flow.
EQUITIES: Recovery in E-Mini S&P Appears Technically Corrective
Eurostoxx 50 futures are holding on to the bulk of the recovery from 4762.00, the Apr 19 low. The contract has breached the 20-day EMA and resistance at 4990.00, Apr 15 high. This highlights a potentially stronger reversal and signals the end of the correction between Apr 2 - 19. A continuation higher would expose the bull trigger at 5079.00, Apr 2 high. Key support lies at 4762.00. Initial support to watch is 4869.70, the 50-day EMA. The short-term trend condition in S&P E-Minis remains bearish and the latest recovery appears - for now - to be a correction. Last week’s bearish extension reinforced current short-term conditions. The contract has recently cleared the 50-day EMA, signalling scope for a continuation lower. Sights are on 4907.57 next, a Fibonacci retracement. Firm resistance is 5138.90, the 20-day EMA. A clear break of the average would signal a possible reversal.
- Japan's NIKKEI closed higher by 306.28 pts or +0.81% at 37934.76 and the TOPIX ended 22.95 pts higher or +0.86% at 2686.48.
- Elsewhere, in China the SHANGHAI closed higher by 35.736 pts or +1.17% at 3088.636 and the HANG SENG ended 366.61 pts higher or +2.12% at 17651.15.
- Across Europe, Germany's DAX trades higher by 130.9 pts or +0.73% at 18048.3, FTSE 100 higher by 28.04 pts or +0.35% at 8106.59, CAC 40 up 24.18 pts or +0.3% at 8040.83 and Euro Stoxx 50 up 32.07 pts or +0.65% at 4971.08.
- Dow Jones mini up 77 pts or +0.2% at 38366, S&P 500 mini up 39.25 pts or +0.77% at 5121.75, NASDAQ mini up 187 pts or +1.06% at 17757.
COMMODITIES: Gold Continues to Trade Close to Recent Lows Despite Moderate Recovery
WTI futures have recovered from their recent lows and price continues to trade above key short-term support at $81.03, the 50-day EMA. The recent move lower highlights a corrective phase and a clear break of the 50-day average would signal scope for a deeper retracement towards $76.07, the Mar 11 low. On the upside, key resistance and the bull trigger has been defined at $86.97, the Apr 12 high. A break would resume the uptrend. Gold is in consolidation mode and trading closer to its recent lows. The precious metal has this week pierced the 20-day EMA and this highlights the start of a possible corrective cycle. A continuation lower would signal scope for an extension towards $2229.4, the 50-day EMA. Note that a S/T bear cycle would allow a significant overbought condition to unwind. Key resistance and the bull trigger is at $2431.5, the recent Apr 12 high.
- WTI Crude up $0.22 or +0.26% at $83.8
- Natural Gas down $0.06 or -3.54% at $1.58
- Gold spot up $15.27 or +0.65% at $2348.84
- Copper up $7.25 or +1.6% at $461
- Silver up $0.25 or +0.92% at $27.704
- Platinum down $0.39 or -0.04% at $918.23
Date | GMT/Local | Impact | Flag | Country | Event |
26/04/2024 | 1230/0830 | ** | US | Personal Income and Consumption | |
26/04/2024 | 1400/1000 | ** | US | U. Mich. Survey of Consumers | |
26/04/2024 | 1500/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) | ||
26/04/2024 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly | |
29/04/2024 | 0600/0800 | ** | SE | Retail Sales | |
29/04/2024 | 0700/0900 | *** | ES | HICP (p) | |
29/04/2024 | 0800/1000 | *** | DE | North Rhine Westphalia CPI | |
29/04/2024 | 0800/1000 | *** | DE | Bavaria CPI | |
29/04/2024 | 0900/1100 | ** | EU | EZ Economic Sentiment Indicator | |
29/04/2024 | 0900/1100 | * | EU | Consumer Confidence, Industrial Sentiment | |
29/04/2024 | 1200/1400 | *** | DE | HICP (p) | |
29/04/2024 | 1430/1030 | ** | US | Dallas Fed manufacturing survey |