MNI US OPEN - Chinese Inflation Fades vs Forecast

NEWS

US/POLAND (BBG): Harris Will Meet With Polish Leader Morawiecki

Vice President Kamala Harris will meet with Polish Prime Minister Mateusz Morawiecki on Tuesday to discuss Russia’s invasion of Ukraine. The US Justice Department has opened a criminal investigation into the leak of highly classified Pentagon documents about how the US spies on foreign countries, including an assessment of weaknesses in Ukraine’s military.

CHINA/JAPAN (MNI): Beijing Pushes Back on Tokyo's Diplomatic Bluebook

The Chinese Foreign Ministry has pushed back on some comments in Japan's Diplomatic Bluebook, an annual report compiled by the country's Foreign Ministry and presented to Cabinet. In the bluebook, Japan says that China presents the "biggest strategic challenge" to the rules-based international order. Chinese FM states that 'Japan smears China with [an] old narrative, hypes up so-called China threat.' Adds that 'We call on Japan to stop provocation and the creation of opposing camps.'

CHINA (BBG): China Mandates Security Reviews for AI Services Like ChatGPT

China plans to require a security review of generative AI services before they’re allowed to operate, casting uncertainty over ChatGPT-like bots unveiled by the country’s largest tech companies including Baidu Inc. Providers of services must ensure content is accurate and respects intellectual property, and neither discriminates nor endangers security, the Cyberspace Administration of China said in draft guidelines published for public feedback. AI operators must also clearly label AI-generated content, the country’s internet overseer said in a statement posted on its website.

CHINA/TAIWAN (BBG): Taiwan's Tsai Says China Not Being 'Responsible' With Drills

Taiwan’s President Tsai Ing-wen has condemned China’s military drills in the Taiwan Strait, saying Tuesday that China did not demonstrate the “responsible” behavior of a major Asian nation. China's three-day, large-scale drills that ended Monday were retaliation for Tsai's meeting with United States House Speaker Kevin McCarthy in California last week on her tour of Taiwan's official and unofficial allies.

JAPAN (MNI): PM's LDP Performs Well In Local Polls, Could Spur Snap Election Call

Prime Minister Fumio Kishida's conservative Liberal Democratic Party (LDP) performed relatively well in the 9 April local and gubernatorial elections. There is now speculation that on the back of the better-than-expected results Kishida could seek an early general election to capitalise on the success. The next election to the House of Representatives is not due until October 2025 at the latest.

JAPAN (BBG): Buffett Says He’s Weighing More Japan Investments: Nikkei

Warren Buffett says he’s considering more investments in Japan in an interview with the Nikkei. Says he holds only shares of trading houses at the moment, but could consider other industries. Tells Nikkei his stake in Japan’s five main trading companies has risen to 7.4%

BOK (MNI): Rate Steady at 3.5%; Flags Further Hikes

As expected, the Bank of Korea Tuesday decided unanimously to keep its Base Rate unchanged at 3.5%, as its focus shifts to weakness in the economy amid slowing global conditions. BOK Governor Rhee Chang-yong did not rule out a further rate hike and indicated the Bank will cautiously consider raising the policy interest rate as inflation remains high.

INDIA (BBG): India Forecasts Normal Monsoon, Easing Concerns Over Growth

India, which relies on rain for the vast share of its water, forecast that the monsoon will be normal this year, potentially easing concerns over the impact on agriculture production and economic growth. Showers during the June-September rainy season is likely to be 96% of a long-term average, according to the official India Meteorological Department. The El Nino weather condition, normally triggered by warm water in the equatorial Pacific, could influence the monsoon in the second half of the season, it said.

DATA

EUROZONE DATA (MNI): Retail Sales Slump in February

• EUROZONE FEB RETAIL SALES -0.8% M/M (= FCST); JAN +0.8%r M/M
• EUROZONE FEB RETAIL SALES -3.0% Y/Y (FCST -3.5%); JAN -1.8%r Y/Y

Eurozone retail sales contracted by -0.8% m/m in the February data, in line with consensus expectations. Sales fell by -3.0% y/y, 0.5pp better than anticipated, albeit signalling five consecutive months of y/y contractions. Germany alone posted a substantial -7.0% y/y drop in sales. Automotive fuels fell by -1.8% m/m, whilst non-food products sales declined by -0.7% m/m. Looking forward, eurozone economic confidence edged down in March, with retail outlooks remaining broadly stable with again tentative signs of purchasing intentions improving.

NORWAY DATA (MNI): Upside Surprise to March Inflation Boosted by Goods

• NORWAY MAR CPI +0.8% M/M; +6.5% Y/Y (FCST +6.1%); FEB +6.3% Y/Y
• NORWAY MAR UNDERLYING CPI +0.6% M/M; +6.2% Y/Y (= FCST); FEB +5.9% Y/Y

Norwegian CPI surprised to the upside in the March data, accelerating by 0.2pp to +6.5% y/y against expectations of a 0.2pp slowdown. Month-on-month inflationary pressures strengthened at +0.8% m/m, quickening from +0.4% m/m in February. A +5.8% m/m jump in apparel helped drive consumer goods prices higher (+1.2% m/m), and service prices rose +0.5% m/m boosted by transport, restaurants and hotels.

CHINA DATA (MNI): China March CPI Softens, PPI Declines

• CHINA MAR CPI +0.7% Y/Y VS MEDIAN +1.0%; FEB +1.0% Y/Y
• CHINA MAR CPI -0.3% M/M VS -0.5% M/M FEB
• CHINA MAR FOOD PRICES +2.4% Y/Y VS +2.6% Y/Y FEB
• CHINA MAR PPI -2.5% Y/Y VS MEDIAN -2.5%; FEB -1.4% Y/Y
• CHINA MAR PPI 0.0% M/M VS 0.0% M/M FEB

China's Consumer Price Index rose 0.7% y/y in March, 1pp off market expectations and down from February’s 1% y/y change due to higher fresh produce supply and lower energy and automobile prices, according to data from the National Bureau of Statistics. Food costs increased 2.4% y/y, down 0.2pp from February as vegetable prices dropped by 11.1% y/y, 7.3pp lower than last month.

CHINA MAR NEW LOANS CNY 3.89. TRLN VS FEB CNY1.81 TRLN (MNI)
CHINA MAR TSF CNY5.38 TRLN VS FEB CNY3.16 TLN (MNI)
CHINA END-MAR M2 +12.7% Y/Y VS FEB +12.9% Y/Y (MNI)

AUSTRALIA DATA (MNI): Aussie Business Conditions Slide, Confidence Solid

The Reserve Bank of Australia will take note of rising Australian business confidence and eased costs, despite still deteriorating business conditions amid last week’s decision to stay rates at 3.6%. RBA Governor Philip Lowe previously stated business confidence was one important factor in last week’s interest rate decision, alongside jobs, retail sales and the monthly Consumer Price Index. Business conditions fell 2 points to 16 index points in March, while business confidence rose 3 points to -1 index point, according to the National Australia Bank Monthly Business Survey. Price and cost growth eased, with labour cost growth at 1.9%, down from February’s 2.6%.

FOREX: Greenback Steps Lower as Post-NFP Rally Fades

• The USD is comfortably the poorest performing currency in G10, stepping lower to wholly erase the post-NFP strength. The USD Index is close to 0.7% off the Friday high, with 101.987 the immediate support.
• Moves come as markets see relatively little read through from the jobs report to Fed monetary policy, with a 25bps step in early May likely marking the peak of this tightening cycle.
• NOK was in focus across early European hours, rallying on the back of a higher-than-expected CPI release, although an inline underlying inflation release reined in any broader rally and now the currency sits softer ahead of NY hours.
• CHF trades more firmly, keeping EUR/CHF within range of last week's lows at 0.9851. Slippage through here opens the 200-dma support at 0.9831.
• Focus for the week rests on tomorrow's inflation release, with markets coalescing around a step down for headline M/M and Y/Y releases, but persistent strength in ex-food and energy measures. Speakers today are made up of Fed's Goolsbee & Harker and ECB's Villeroy.

BONDS: Off the Lows But EGBs/Gilts Play Catch Up With USTs on the Open

• Core fixed income hit its low point of the day shortly after the European/UK opens as local markets reacted to Friday's US employment print after being closed for the long Easter weekend. The German curve bear flattened while the gilt curve saw more of a parallel move.
• Some of the early move has since been retraced as SONIA/Euribor futures have also moved off their lows of the day, while Treasuries are also higher on the day.
• Markets already have one eye on tomorrow's US March CPI data.
• TY1 futures are up 0-6 today at 115-22+ with 10y UST yields down -2.8bp at 3.392% and 2y yields down -2.6bp at 3.986%.
• Bund futures are down -0.79 since Thursday at 136.51 with 10y Bund yields up 6.3bp at 2.244% and Schatz yields up 10.4bp at 2.650%.
• Gilt futures are down -0.73 since Thursday at 103.59 with 10y yields up 7.0bp at 3.498% and 2y yields up 7.2bp at 3.425%.
  

EQUITIES: E-Mini S&P, Eurostoxx 50 Futures Remain in Technical Uptrend

Eurostoxx 50 futures maintain a firmer tone and the contract has traded to a fresh trend high today of 4299.00. Price has recently breached resistance at 4268.00, the Mar 6 high and a key hurdle for bulls. The break of this level strengthens bullish conditions with sights on 4300.00. Moving average studies are in a bull-mode set-up and this highlights a broader uptrend. Initial firm support lies at 4180.90, the 20-day EMA. S&P E-minis remain in an uptrend and the latest pullback is considered corrective. Price has recently breached resistance at 4119.50, the Mar 6 high, reinforcing a bullish theme. The move higher has also resulted in a break of 4148.48, 76.4% of the Feb 2 - Mar 13 downleg. This signals scope for an extension towards 4205.50, the Feb 16 high ahead of 4244.00, the Feb 2 high and a key M/T resistance. Firm support lies at 4050.52, the 50-day EMA.

• Japan's NIKKEI closed higher by 289.71 pts or +1.05% at 27923.37 and the TOPIX ended 15.32 pts higher or +0.78% at 1991.85.
• Elsewhere, in China the SHANGHAI closed lower by 1.787 pts or -0.05% at 3313.571 and the HANG SENG ended 115.38 pts higher or +0.57% at 20446.58.
• Across Europe, Germany's DAX trades higher by 84.98 pts or +0.54% at 15683.11, FTSE 100 higher by 34.74 pts or +0.45% at 7775.96, CAC 40 up 57.89 pts or +0.79% at 7382.01 and Euro Stoxx 50 up 24.89 pts or +0.58% at 4333.91.
• Dow Jones mini up 11 pts or +0.03% at 33759, S&P 500 mini up 3.75 pts or +0.09% at 4140, NASDAQ mini up 18 pts or +0.14% at 13175.75.

COMMODITIES: WTI Futures Trade Close to Recent Highs

WTI futures remain in a bull cycle and last week’s gain strengthens this current condition. The contract touched a high of $81.81 on Apr 4, above key resistance at $81.04, the Mar 7 high. A clear break of $81.04 would signal scope for a continuation higher and open $83.04, the Jan 23 high. Key support is seen at $75.72, the Mar 31 high and a gap low on the daily chart. A pullback, if seen, would be considered corrective. Trend conditions in Gold remain bullish and last week’s resumption of the uptrend reinforces current conditions - the yellow metal cleared former resistance at 2009.7, the Mar 20 high, to post fresh YTD highs and signal scope for a climb towards $2034.0 next, a Fibonacci projection. On the downside, key support has been defined at $1934.3, the Mar 22 low - a break would highlight a potential reversal.

• WTI Crude up $0.59 or +0.74% at $80.29
• Natural Gas down $0.01 or -0.6% at $2.159
• Gold spot up $11.5 or +0.58% at $2003.24
• Copper up $3.5 or +0.88% at $401.1
• Silver up $0.16 or +0.64% at $25.0529
• Platinum up $12.58 or +1.26% at $1010.44