MNI US OPEN - Core CPI Seen Stubborn

NEWS

MNI US CPI PREVIEW - Core CPI Seen Holding Stubbornly High

Core CPI inflation is widely seen printing its fourth consecutive 0.4% handle after February’s 0.45% M/M. Monthly core CPI should be lifted by a large decline for used car prices dropping out whilst there is broader uncertainty for airfares after prior surprising strength. Core goods prices beyond used cars could offer some renewed disinflationary pressure after a recent improvement in supply chain pressures, but we suspect any continued stickiness in non-housing core services will dictate the market reaction ahead of the May FOMC, with an 18bp hike currently priced.

MNI FOMC MEETING MINUTES PREVIEW: MARCH 2023

The Minutes to the March 21-22 FOMC meeting are published Wednesday at1400ET/1900UK. See PDF for MNI's preview of "what to watch for", including analyst notes and our Instant Answers questions.

MNI BOC PREVIEW: APRIL 2023 - No Need to Change Guidance Yet

The BoC is unanimously expected to keep rates on hold at 4.5% on Wednesday and for the most part echo March’s continued guidance of a conditional pause whilst leaving the door open to further hikes to prevent an excessively large easing in financial conditions. The macro backdrop isn’t sufficiently different to warrant a change in guidance, although new forecasts could be used as a hawkish nuance if wanted, especially on the growth side. It’s not a base case but we don’t rule out a tweak higher in the annual neutral rate revision.

MNI WEBINAR: Webinar With BOE's Huw Pill

You are invited to listen to introductory remarks by Huw Pill, Chief Economist of the Bank of England & Member of the Monetary Policy Committee, followed by Q&A. This event is on the record and will run as a Zoom Webinar

• Topic of discussion: UK Economic & Monetary Policy Developments
• Date: Thursday 13th April
• Time: 9am-10:30am New York time, 2pm-3:30pm London time

US (WaPo): Biden to Remake U.S. Auto Industry With Toughest Emissions Limits Ever

As part of his fight against climate change, President Biden is attempting to transform the U.S. auto industry from Washington — first with carrots, now with sticks. On Tuesday, the Environmental Protection Agency proposed two sets of new rules limiting emissions for all vehicles, ranging from passenger cars to tractor-trailers. The most aggressive of several options the EPA will consider could lead to 67 percent of all new passenger car and light-duty truck sales being electric by 2032, the agency said.

CORPORATE (BBG): Big Banks That Shored Up First Republic Pushed to Boost Reserves

The biggest US banks are planning to bolster reserves in a move tied to their unusual effort to shore up ailing lender First Republic Bank last month. Some of the banks that contributed the largest chunk of the $30 billion in deposits are planning to set aside about $100 million each, according to people with knowledge of the matter. The group included JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Bank of America Corp., which each put up $5 billion.

EUROZONE (MNI): Recession Risk Remains Highest for H1 2023, Unlikely in H2

Despite the banking turmoil in March, which also reached Europe through Credit Suisse, the probability of a recession in 6-months time remained low and well below the benchmark 50%. Given that the estimates were above 50% through H2 2022, the biggest risk of a euro area recession remains in H1 of this year. The IMF doesn't expect in its April projections that the euro area as a whole will fall into recession but is forecasting negative growth in Germany.

UK (MNI): White House Official - No Discussion Of FTA Expected On Biden NI Trip

Special Assistant to the President and Senior Director for Europe at the National Security Council Amanda Sloat states that she does not expect that US President Joe Biden will discuss a free trade arrangement with the UK on his whistle-stop visit to Northern Ireland. Despite no FTA talk, Sloat states that, "We're continuously looking for ways to deepen economic engagement with the UK,' adding that "Biden's visit will underscore [the] readiness of the US to engage further in economic investment in Northern Ireland."

GERMANY/CHINA (MNI): German FM to Visit Beijing 13-15 Apr in Latest EU Diplomatic Trip

The Chinese foreign ministry has confirmed that German Foreign Minister Annalena Baerbock will travel to Beijing from 13-15 April for talks with her Chinese counterpart Qing Gang. The German minister's visit is the latest in a series of diplomatic trips to China by EU politicians, following on from the visits of Spanish PM Pedro Sanchez, French President Emmanuel Macron, and EU Commission President Ursula von der Leyen.

CHINA (MNI): Low CPI Doesn't Increase Chances of LPR Cut - Analysts

Authorities will likely not cut China's LPR due to satisfactory Q1 GDP and credit growth, and subdued CPI, according to Yicai. Experts said the central bank has room to support the economy if needed, but will be more inclined to cut the reserve rate requirement (RRR) or increase its targeted lending, rather than launching a policy cut when rates are at historic lows due to concerns about financial risk.

TAIWAN (MNI): Transport Min-China Cuts Back No-Fly Restrictions To 27 Mins From 3 Days

The Taiwanese Transport Ministry has confirmed that China has reduced its no-fly zone flight control period to 27 minutes on the morning of 16 April. This is down from the initial three-day restrictions reported earlier this morning by Reuters. The significant reduction in timeframe would seem to confirm earlier indications that the restrictions are due to aerospace activities, possibly a satellite launch, rather than anything related to the Chinese military exercises that took place around Taiwan earlier this week.

JAPAN (MNI): Ueda Targets Easy Policy, Price Stability

Bank of Japan Governor Kazuo Ueda said Wednesday the Bank would continue easy policy settings to support price stability targets in a stable and sustainable manner together with wage hikes. “Japan’s economy is expected to continue recovering on the back of accommodative financial environment and the government’s economic stimulus measures,” Ueda said at the general meeting of the Trust Companies Association of Japan.

JAPAN (MNI): More Japanese Households Note Higher Prices - BOJ

More Japanese households are feeling pressure from higher prices, increasing concerns private consumption could lose momentum over the coming months, according to the Bank of Japan’s quarterly consumer survey. The proportion of respondents who claimed household circumstances worsened rose to 56% in March from 53% in December due to inflation. The number of people who said prices had risen increased to 90.4% from 88.4%.

RBA (BBG): RBA’s Bullock Says Job Gains, Not Bank Turmoil Drove Rate Pause

The Reserve Bank of Australia’s pause in interest-rate increases was about trying to preserve jobs and account for policy lags rather than a response to banking turmoil, Deputy Governor Michele Bullock said. At a panel discussion with fellow RBA board member Ian Harper in Melbourne on Wednesday, the duo pointed out the central bank had raised the possibility of taking a break well before Silicon Valley Bank collapsed. Bullock reiterated the RBA’s goal of slowing prices while keeping a strong labor market.

SOUTH AFRICA (MNI): Kganyago’s Call For Lower Inflation Target Likely to Fall on Deaf Ears

Comments from Kganyago have again raised speculation around the SARB’s mandate and the viability of a lower inflation target (currently a range of 3 – 6%). This topic was raised on multiple occasions last year, where the bank undertook a broad policy review and considered the implications of a 3% CPI goal. The SARB concluded that the case for a lower target was “strong”, leading the governor to state that the longer-term goal is to reduce the inflation target, and that “nothing is stopping” the SARB from tweaking policy goals. Nonetheless, Kganyago’s statements are unlikely to prompt any U-turn among politicians, who have been highly critical of the proposals.

DATA

NORWAY FEB MAINLAND GDP -0.2% M/M, AGG GDP -0.1% M/M (MNI)

JAPAN DATA (MNI): Japan March CGPI Rise Slows to 7.2% vs. Feb 8.3%

• JAPAN MAR CORP GOODS PRICE INDEX +7.2% Y/Y; FEB REV +8.3%
• JAPAN MAR CORP GOODS PRICE INDEX 0.0% M/M; FEB REV -0.3%

The y/y rise in Japan's corporate goods price index slowed to 7.2% in March from February’s revised 8.3%, indicating a peak in upstream cost increases, according to Bank of Japan data. Lower prices for beverages and foods, chemicals, and related products alongside government energy subsidies drove the lower March number, which was the 25th straight y/y rise. The data, however, showed pass-through of cost increases in the intermediate and downstream continue.

JAPAN DATA (MNI): Japan Feb Machine Orders -4.5% M/M On Non-Manufacturing

• JAPAN FEB CORE MACHINE ORDERS -4.5% M/M; JAN +9.5%

Japan's core machinery orders, excluding those for power generation equipment and ships, fell 4.5% m/m in February, plunged from last 9.5% m/m increase, posting the first drop in three months. Orders from manufacturing sectors, increased 10.2% m/m, largely up from last 2.6% m/m decrease in January. The outlook for the January-March period is for a rise of 2.9%, compared with the 4.7% decrease over the previous quarter.

FOREX: JPY Backtracks Amid Positive Equity Picture

• The JPY is backtracking early Wednesday, taking the place as the weakest currency in G10. Equities are furtively higher, with strength in French stocks tipping the CAC-40 to a fresh alltime high. USD/JPY hit the week's best levels of Y134.05 in Asia-Pac trade and is holding in positive territory ahead of the NY crossover.
• Elsewhere, markets are more muted, with the EUR and USD putting in a mixed performance and largely treading water ahead of the key US inflation release.
• SEK trades firmer against most others in G10, absent any macro drivers, to keep NOK/SEK within range of key support at 0.9823 ahead of the YTD low and bear trigger of 0.9725.
• Focus rests on the US CPI release due at 1330BST/0730ET, with markets on watch for any confirmation that a May 25bps rate hike could be the last of the cycle. Consensus looks for Y/Y CPI to slow to 5.1% from 6.0%, although core is expected to tick higher to 5.6% from 5.5%.
• FOMC minutes are also on the docket, at which markets will look to gauge the impacts of recent banking instability on the potential Fed policy path.

BONDS: Curves Flattening Ahead of US CPI and FOMC Minutes

• Curves have been flattening this morning, with the biggest moves seen at the short-end while 10-year yields have remained more steady in comparison. Schatz yields are now at their highest since 3 April.
• The main focus for markets today will be the release of US CPI at 13:30BST / 8:30ET. We suspect any continued stickiness in non-housing core services will dictate the market reaction ahead of the May FOMC, with an 18bp hike currently priced. while the FOMC Minutes will also be watched closely.
• The Bank of Canada will announce its latest policy decision with rates expected to remain on hold at 4.50%.
• In addition we will also have a number of speeches scheduled: BOE's Bailey, ECB's de Cos and Villeroy, Fed's Barkin and Daly.
• TY1 futures are down -0-1 today at 115-11 with 10y UST yields up 1.0bp at 3.438% and 2y yields up 2.4bp at 4.049%.
• Bund futures are down -0.24 today at 135.63 with 10y Bund yields up 1.1bp at 2.318% and Schatz yields up 5.1bp at 2.746%.
• Gilt futures are up 0.02 today at 103.24 with 10y yields down -0.6bp at 3.533% and 2y yields up 0.4bp at 3.477%.

EQUITIES: Eurostoxx Futures Eye Gains Above 4300.00 Level After Trading to Fresh Trend High Tuesday

Eurostoxx 50 futures maintained a firmer tone Tuesday and the contract traded to a fresh trend high 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 gains above 4300.00. Moving average studies are in a bull-mode set-up and this highlights a broader uptrend. Initial firm support lies at 4190.60, the 20-day EMA. S&P E-minis remain in an uptrend and the contract is trading closer to its early April highs. Price has recently breached resistance at 4119.50, 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 to 4205.50, the Feb 16 high ahead of 4244.00, the Feb 2 high and a key M/T resistance. Firm support lies at 4053.89, the 50-day EMA.

• Japan's NIKKEI closed higher by 159.33 pts or +0.57% at 28082.7 and the TOPIX ended 15.07 pts higher or +0.76% at 2006.92.
• Elsewhere, in China the SHANGHAI closed higher by 13.611 pts or +0.41% at 3327.182 and the HANG SENG ended 190.75 pts lower or -0.93% at 20294.43.
• Across Europe, Germany's DAX trades higher by 40.64 pts or +0.26% at 15695.94, FTSE 100 higher by 31.37 pts or +0.4% at 7816.99, CAC 40 up 23.67 pts or +0.32% at 7413.95 and Euro Stoxx 50 up 3.11 pts or +0.07% at 4336.4.
• Dow Jones mini up 50 pts or +0.15% at 33905, S&P 500 mini up 2.5 pts or +0.06% at 4139.25, NASDAQ mini down 13 pts or -0.1% at 13062.25.

COMMODITIES: WTI Futures Briefly Test Above April Highs

WTI futures remain in a bull cycle and last week’s gain strengthened 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 $0.04 or +0.05% at $81.59
• Natural Gas down $0.01 or -0.23% at $2.183
• Gold spot up $7.1 or +0.35% at $2010.7
• Copper down $1.55 or -0.39% at $400.5
• Silver up $0.13 or +0.52% at $25.1981
• Platinum up $5.41 or +0.54% at $1004.01