MNI US OPEN: EU, US Seek Stable China Relations

NEWS

G7 (BBG): G7 to Back Ukraine Indefinitely, Seeks Stability With China

The Group of Seven nations vowed to support Ukraine for “as long as it takes” in its fight against Russian forces, while also calling for greater engagement with China to stabilize relations with the world’s second-biggest economy. In a communique released Tuesday after top G-7 diplomats met in Japan, the bloc condemned Russia’s war against Ukraine “in the strongest possible terms.” The nations reiterated support for Ukrainian leader Volodymyr Zelenskiy’s peace plan, while slamming Russia’s “irresponsible nuclear rhetoric.”

US/CHINA (BBG): China Must Show Intention to Keep Engaging US, Blinken Says

China must make clear its intentions to keep engaging with the US, Secretary of State Antony Blinken said, as the world’s biggest economies struggle to move past a spat over the shooting down of an alleged Chinese spy balloon in February. “Countries around the world expect us to manage the relationship with China responsibly,” Blinken told reporters on Tuesday at the close of the Group of Seven foreign ministers’ meeting at a mountain resort northwest of Tokyo. “And that starts with engagement, with having lines of communication.”

US/CHINA (BBG): US Charges 44 Over Chinese Harassment of Dissidents Overseas

The US charged 44 defendants over an alleged Chinese campaign to harass its citizens in New York and around the country who espoused anti-government views, part of a broader effort to push back on Beijing’s efforts to target dissidents beyond its borders.

US (BBG): Republicans Say They Won’t Help Democrats Replace Feinstein

Top Senate Republicans said they won’t vote in favor of replacing absent Senator Dianne Feinstein with another Democrat on the Judiciary Committee, signaling a continued halt on most of President Joe Biden’s judicial nominees. Senate Majority Leader Chuck Schumer intends to offer a resolution this week to temporarily swap in another senator to replace the 89-year-old Feinstein, who has been at home in California fighting shingles for nearly two months, but GOP Senator John Cornyn of Texas said Schumer shouldn’t expect a single Republican vote in favor.

EU/CHINA (MNI): EU Commission Outlines China Views as Beijing Blasts G7 Communique

Leaders of the European Commission are outlining their views on EU-China relations presently, delivering statements to the plenary session of the European Parliament in Strasbourg. High Representative for Foreign Affairs and Security Policy Josep Borrell has just finished and Commission President Ursula von der Leyen now speaking, the latter after travelling to China last week.

FRANCE/CHINA (BBG): Macron Wants China’s Help to Bring Russia, Ukraine to the Table

French President Emmanuel Macron is looking to reverse a string of disappointing diplomatic forays by approaching China with a plan that he believes could potentially lead to talks between Russia and Ukraine. Macron has tasked his foreign policy adviser Emmanuel Bonne to work with China’s top diplomat, Wang Yi, to establish a framework that could be used as a basis for future negotiations, according to people familiar with the plans.

RUSSIA (MNI): Putin Makes Surprise Visit to Annexed Regions

President Putin visited two occupied regions of Ukraine in an unexpected visit, a video released by the Kremlin today revealed. Putin heard reports from military commanders at the Vostok National Guard in the eastern Ukrainian region of Luhansk and at the headquarters of the Dnepr grouping of troops in the southern Kherson region. “It’s important for me to hear your opinion about the situation,” he told officers in video released by the Kremlin.

NETHERLANDS/CHINA (BBG): Dutch Say Russia, China Are Top Threats to National Security

Russia and China pose the greatest threats to the national security of the Netherlands, according to Dutch intelligence agency. Beijing is an important trading partner of the Netherlands, but it “poses the greatest threat to the Dutch economic security,” the General Intelligence and Security Service, known by its Dutch initials AIVD, said in its annual report published on Monday. The agency said China targets Dutch high-tech companies and institutions through “corporate takeovers, academic cooperation, as well as illegitimate (digital) espionage, insiders, covert investments and illegal exports.”

CHINA (MNI): China Exports Face Difficult Year - NBS

China’s export industry will face challenges for the remainder of the year, despite strong Q1 results, according to Fu Linghui, spokesperson for the National Bureau of Statistics (NBS). Responding directly to a question from MNI on Tuesday, Fu said global uncertainty related to inflation, geopolitics and banking turmoil will negatively impact exports, which grew 8.4% in Q1.

CHINA (MNI): China to Push Issue of Local Gov Debt for Growth

Chinese authorities will accelerate issuance of local government special-purpose bonds to expand investment and strengthen tax preferences for key sectors, such as technological innovation, Ministry of Finance officials told reporters Tuesday.

JAPAN (MNI): BOJ Board’s FY25 Core CPI Outlook Near 2%

The Bank of Japan’s first median core inflation forecast for fiscal 2025 is likely to place it near its 2% target, feeding into its considerations as new Governor Kazuo Ueda examines the possibility of tweaking yield curve control policy but not making any immediate move more likely, MNI understands.

JAPAN (MNI): No Imminent Need to Review Joint Statement - Ueda

Bank of Japan Governor Kazuo Ueda said on Tuesday that he does not see an imminent need to review a joint statement between the BOJ and the government made in 2013. “The economy and prices have improved steadily and Japan’s economy isn't in deflation anymore," Ueda said during his first testimony to lawmakers after taking office on April 10. He said Prime Minister Fumio Kishida agreed a review of the statement was not needed.

RBA (MNI): RBA Minutes Flag Wage, Population Risk

Population and wage growth data accumulated since March were two key factors that drove the Reserve Bank of Australia's April 4 decision to hold rates at 3.6% and will likely inform future decisions as the Bank monitors the "lag in the transmission" of its past hikes on the economy, according to the minutes of its latest meeting released Tuesday.

INDIA (BBG): Modi Eyes Income Tax Overhaul to Check Widening Inequality

India is preparing an overhaul of its direct tax laws to replace a byzantine matrix of rules and help Prime Minister Narendra Modi reduce widening income inequality if he returns to power next year, according to people with knowledge of the matter.At the heart of the rework is changes in capital gains taxes that Modi’s administration believes benefit the nation’s wealthy, the people said, asking not to be identified as the details are private.

INDONESIA (MNI): Bank Indonesia Keeps 7-Day Reverse Repo Rate Unchanged at 5.75%

Indonesia's central bank keeps its benchmark interest rate unchanged at 5.75%, matching a unanimous Bloomberg consensus call. Today's rate decision extends a pause since Bank Indonesia raised the 7-day reverse repo rate to its current level in January, brining the cumulative amount of tightening this cycle to 225bps. The central bank says that it is confident that its policy rate is sufficient to manage core CPI and notes that its decision is in line with its pre-emptive, forward-looking stance as it seeks to ensure lower inflation expectations.

DATA

UK DATA (MNI): UK Wage Growth Adds to Upwards Rate Pressure on BOE

• UK FEB ILO UNEMPLOYMENT RATE +3.8%
• UK MAR CLAIMANT RATE +3.9%
• UK MAR CLAIMANT CHG +28200
• UK FEB AVE WEEKLY EARNINGS +5.9% YY
• UK FEB AVE WEEKLY EARNINGS EX-BONUS +6.6% YY

Hawks at the Bank of England were given fresh ammunition on Tuesday, as UK wages rose at a faster than expected pace in the 3 months to February, data released by the Office for National Statistics showed. Average weekly wages rose 5.9% year-on-year, up modestly on the 5.7% recorded in January, but significantly higher than the 5.1% expected by City analysts. Real pay, reflecting the continued inflationary pressures in the UK, saw wages fall 4.1% y/y against CPI.

GERMAN DATA (MNI): Sliding ZEW Expectations Point Towards Stagnation

• GERMANY APR ZEW EXPECTATIONS 4.1 (FCST 15.6); MAR 13.0
• GERMANY APR ZEW CURRENT SITUATION -32.5 (FCST -40); MAR -46.5

ZEW German economic sentiment deteriorated for a second month in April, falling 8.9 points to +4.1, against consensus expectations of a 2.6-point uptick. Expectations took a substantial hit in April, implying that no significant improvement is anticipated for the German economy in the next six months. The survey of financial market experts found increased caution regarding lending, whilst high inflation rates and interest rates continue to weigh on growth.

CHINA DATA (MNI): China GDP Up 4.5% y/y in Q1

• CHINA Q1 2023 REAL GDP +4.5% Y/Y VS MEDIAN +3.8% Y/Y: NBS
• CHINA Q1 2023 REAL GDP +2.2% Q/Q VS MEDIAN +2.2% Q/Q: NBS
• CHINA Q1 FIXED-ASSET INVESTMENT +5.1% Y/Y VS MEDIAN +5.7% Y/Y
• CHINA MAR INDUSTRIAL OUTPUT +3.9% Y/Y VS MEDIAN +4.0% Y/Y: NBS
• CHINA Q1 INDUSTRIAL OUTPUT +3.0% Y/Y VS JAN-FEB +2.4% Y/Y

China's GDP increased 4.5% y/y in Q1, beating the market consensus of 3.8% y/y and marking the quickest growth within a year, data released by the National Bureau of Statistics on Tuesday showed. GDP grew 2.2% over the previous quarter, faster than Q4 2022's revised 0.6% q/q increase. The data illustrated the country's continued rapid recovery, with production and consumption rebounding and employment and prices stabilising, the NBS said.

CHINA Q1 RETAIL SALES +5.8% Y/Y VS JAN-FEB +3.5% Y/Y
CHINA MAR UNEMPLOYMENT RATE +5.3% VS MEDIAN +5.5%

FOREX: AUD, NZD On Top as China GDP Ahead of Forecast

• The dollar is giving back a large part of the Monday gains ahead of the NY crossover, allowing EUR/USD to trade back to flat on the week and GBP/USD to climb through the Monday high. The later received a boost from pay and jobs data this morning, which showed average weekly earnings beating forecast on both a inc. and ex. bonus basis. Resultingly, GBP is close to the top-end of the G10 table.
• AUD and NZD are outperforming, putting AUD/USD back to cluster resistance at the 200- and 50-dmas of 0.6744 / 0.6739 following the China GDP data overnight: Q1 growth came in ahead of expectations at 4.5% Y/Y and 2.2% on a Q/Q basis. As a result, a number of sell-side outfits have upped their China growth views for 2023.
• Canadian CPI data takes focus going forward, with markets looking for CPI to slow to 4.3% from 5.2% on a Y/Y basis. US building permits and housing starts are also set for release. Nonetheless, more attention likely to be paid to the speaker slate today: ECB's Centeno, BoC's Macklem & Rogers and Fed's Bowman are all on the docket.

BONDS: Gilts Underperform After UK Labour Market Data

• Gilts have been the underperformers this morning with the curve bear flattening following the release of this morning's UK labour market report which showed private sector wage growth to be remaining persistently high, increasing the probability of a 25bp May hike and also seeing market price in a higher terminal rate.
• The German curve has also flattened a bit, albeit moves in Schatz and Bunds are much smaller than those in gilts, while USTs have largely flatlined through the European trading session so far.
• Looking ahead we will receive housing data in the US later today but markets also have one eye on tomorrow's UK inflation print.
• TY1 futures are down -0-1 today at 114-10+ with 10y UST yields down -0.3bp at 3.599% and 2y yields down -1.4bp at 4.182%.
• Bund futures are down -0.11 today at 133.57 with 10y Bund yields up 2.6bp at 2.496% and Schatz yields up 3.1bp at 2.898%.
• Gilt futures are down -0.54 today at 101.16 with 10y yields up 6.1bp at 3.749% and 2y yields up 8.1bp at 3.677%.

EQUITIES: Trend Condition in E-Mini S&P Unchanged and Bullish

Eurostoxx 50 futures remain in an uptrend and the contract continues to trade closer to its recent highs. Recent gains have strengthened the bullish significance of the break of 4268.00, the Mar 6 high and a former key resistance. Sights are on 4381.50, the Jan 5 2022 high (cont). Moving average studies are in a bull-mode set-up, highlighting a broader uptrend. Initial firm support lies at 4230.20, the 20-day EMA. The current trend condition in S&P E-minis is unchanged and remains bullish. Price has recently breached resistance at 4119.50, the Mar 6 high, reinforcing a positive 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 a climb to 4205.50, the Feb 16 high ahead of 4244.00, the Feb 2 high and a key medium-term resistance. Firm support lies at 4069.41, the 50-day EMA.

• Japan's NIKKEI closed higher by 144.05 pts or +0.51% at 28658.83 and the TOPIX ended 13.92 pts higher or +0.69% at 2040.89.
• Elsewhere, in China the SHANGHAI closed higher by 7.721 pts or +0.23% at 3393.331 and the HANG SENG ended 131.94 pts lower or -0.63% at 20650.51.
• Across Europe, Germany's DAX trades higher by 19.94 pts or +0.13% at 15810.03, FTSE 100 higher by 17.4 pts or +0.22% at 7897.19, CAC 40 up 23.21 pts or +0.31% at 7521.39 and Euro Stoxx 50 up 14.22 pts or +0.33% at 4381.83.
• Dow Jones mini up 11 pts or +0.03% at 34139, S&P 500 mini up 4.5 pts or +0.11% at 4181.25, NASDAQ mini up 38.25 pts or +0.29% at 13225.25.

COMMODITIES: WTI Futures Remain in Bull Cycle Despite Recent Pullback

WTI futures remain in a bull cycle despite the latest pullback. Last week’s gains resulted in a break of resistance at $81.81, the Apr 4 high. This confirmed a resumption of the current uptrend. Note that an important resistance at $83.04, the Jan 23 high, has also been breached. The focus is on $85.01, the Nov 14 high. On the downside, key short-term support is seen at $79.00, the Apr 3 low and the gap high on the daily chart. Trend conditions in Gold remain bullish and the latest pullback is considered corrective. Support to watch is $1982.3, the 20-day EMA. It has been pierced - a clear break would suggest scope for a deeper retracement and expose $1949.7, Apr 3 low. On the upside, the short-term bull trigger has been defined at $2048.7, Apr 13 high. A break would resume the uptrend and open $2070.4, Mar 8 2022 high. This is just ahead of the all-time high of $2075.5.

• WTI Crude down $0.21 or -0.26% at $80.67
• Natural Gas down $0.01 or -0.44% at $2.264
• Gold spot up $7.36 or +0.37% at $2002.62
• Copper up $1.2 or +0.29% at $408.3
• Silver up $0.09 or +0.37% at $25.1262
• Platinum up $5.9 or +0.56% at $1058.1