MNI US OPEN - Eurozone PMIs Highlight Uneven Growth

NEWS

ECB (BBG): Euro-Area Core Inflation is ‘Very Sticky,’ ECB’s Guindos Says

Underlying inflation in the euro area is proving to be very strong, according to European Central Bank Vice President Luis de Guindos. “Core inflation remains very sticky,” Guindos said at an event in Madrid on Friday, adding that it may be more persistent than what markets had anticipated. The ECB is widely expected to increase its deposit rate at its next policy meeting on May 4, with the choice likely to be either a quarter- or half-point step.

ECB (BBG): ECB’s Vujcic Says Right Policy Calibration is Biggest Challenge

The European Central Bank’s biggest challenge is to decide how far to take their fight against inflation in the current environment, Governing Council member Boris Vujcic said. While the battle against surging prices isn’t over as underlying inflation remains at “too high levels,” officials must monitor to what extent the measure will be affected by a drop in commodity costs, according to the Croatian central-bank chief.

ECB (BBG): ECB Must Heed Contagion Risks and Credit Slowdown, Visco Says

The European Central Bank should proceed cautiously with any future interest-rate hike as credit growth slows and financial-stability risks persist, Governing Council member Ignazio Visco said.The Bank of Italy governor told Francine Lacqua on Bloomberg Television that policymakers should stick with their “meeting-by-meeting” approach as the impact of tightening until now seeps through into the economy.

UK (MNI): Deputy PM's Resignation Could Dent Sunak Momentum

Deputy Prime Minister and Justice Secretary Dominic Raab has resigned ahead of the publication of a report investigating claims of he bullied staff while at several ministerial departments. This is not a market-moving event, but could serve to dent some of the recent momentum gained by Prime Minister Rishi Sunak. Negative headlines around the conduct of Raab - a close ally of Sunak who spearheaded the now-PM's unsuccessful leadership campaign in summer 2022 - come less than two weeks ahead of local elections in England and could put the brakes on any positive momentum.

US (CNN): Plans Underway for Biden to Announce Bid for Second Term Next Week

Plans are in motion for President Joe Biden to formally announce his bid for a second term as soon as next week, with a campaign-style video set to be released to definitively answer the question of whether he will run again and igniting an aggressive fundraising effort to help Democrats hold the White House.

US (WSJ): Donald Trump Tops Ron DeSantis in Test of GOP Presidential Field, WSJ Poll Finds

Donald Trump has gained command of the GOP presidential-nomination race over Ron DeSantis, a new Wall Street Journal poll finds, with the former president building support across most parts of the primary electorate as the Florida governor has struggled on the national stage. Mr. DeSantis's 14-point advantage in December has fallen to a 13-point deficit, and he now trails Mr. Trump 51% to 38% among likely Republican primary voters in a hypothetical head-to-head matchup.

US/CHINA (BBG): Biden Seeks G-7 Backing for China Investment Curbs in AI, Chips

President Joe Biden aims to sign an executive order in the coming weeks that will limit investment in key parts of China’s economy by American businesses, people familiar with the internal deliberations said. The administration, which has been debating the measure for almost two years, plans to take action around the time of a summit of the Group of Seven advanced economies that’s due to start on May 19 in Japan.

CHINA (BBG): China Central Bank Hints It Will Dial Back Pandemic Stimulus

The People’s Bank of China signaled it may start gradually scaling back some of the stimulus measures implemented during the pandemic as the economy begins recovering and credit demand picks up. Most of the structural tools — increasingly used by the central bank since 2020 to target specific areas of the economy — were “temporary,” Zou Lan, head of the monetary policy department, told reporters in Beijing on Thursday.

RUSSIA/INDIA (MNI): Russian Weapon Sales to India Stall amid Risk of U.S. Sanctions - BBG

Bloomberg runs a source report noting that the deliveries of Russian military supplies to India have "ground to a halt" as the two sides are struggling to find a payment mechanism that would circumvent U.S. sanctions. The wire notes that Indian payments for around $2bn worth of weapons have been halted for about a year, while Russia has stopped supplying credit for about $10bn worth of spare parts and two yet undelivered S-400 missile-defence system batteries. "India is unable to settle the bill in U.S. dollars due to concerns about secondary sanctions, while Russia remains unwilling to accept rupees due to exchange-rate volatility."

UKRAINE (MNI): NATO Sec Gen Says Members Support Membership, But No Timeline

US Secretary of Defense Lloyd Austin has just finished speaking at Ramstein air base in Germany ahead of the meeting of the Ukraine Contact Defense Group. States that the meeting is to focus on air defence and ammunition for Ukraine. Austin: "We reject Putin's efforts to declare spheres of influence at gunpoint. [...] We will support Ukraine for as long as it takes."

JAPAN (MNI): Banks Must Be Vigilant Against Tail Risks - BOJ

Financial institutions must be vigilant against tail risks amid global financial tightening, which will cause rises in input costs and an economic slowdown, according to the Bank of Japan’s Financial System Report published Friday. “Future developments remain highly uncertain as financial and capital markets have been nervous," the report said.

RBA (MNI): RBA Eyes Mid-25 Target Return, Unemployment 4-4.5%

The Reserve Bank of Australia would deem its monetary policy successful if inflation returns to its 2-3% target by mid-2025 and the unemployment rate holds between 4-4.5%, MNI understands. Overseas external factors have largely driven Australia’s elevated inflation and further interest-rate increases, while not off the RBA’s radar, would as conditions now stand do little to change the global situation, which has already begun easing, it considers.

PHILIPPINES (MNI): Chinese FM to Visit 21-23 April as Marcos Visit to US Announced

The Chinese Foreign Ministry has stated that State Councilor and Foreign Minister Qin Gang will visit the Philippines from April 21 to 23. This announcement comes shortly after the White House confirmed that Philippine President Ferdinand 'Bongbong' Marcos Jr. will visit the White House on 1 May for talks with US President Joe Biden on economic cooperation and the situation in the Indo-Pacific.

CORPORATE (BBG): Tesla Increases Price of Model S, X in US After Shares Slump

Tesla Inc. increased prices of its Model S and X vehicles in the US after steep markdowns early this year took a toll on profitability and the carmaker’s shares. Tesla bumped up each variant of its high-end models by $2,500, raising the cost of the sedan and sport utility vehicle by 2% to 3%, according to the company’s website.

DATA

EUROZONE DATA (MNI): PMI Data Highlights Uneven Growth as Service Sector Strengthens

• EUROZONE APR FLASH MANUF PMI 45.5 (FCST 48.0); MAR 47.3
• EUROZONE APR FLASH SERVICES PMI 56.6 (FCST 54.5); MAR 55.0

In line with French and German flash PMI data this morning, the eurozone aggregate manufacturing PMI slipped deeper into contractionary territory, (down 1.8 points to 45.5 - the lowest since May 2020), whilst services strengthened to a 12-month high of 56.6 (up 1.6 points). This is in contrast to consensus expectations of a moderate manufacturing uptick and services easing. Manufacturing output contracted at the sharpest rate since December as demand slumped, with current production relying on (falling) backlogs.

GERMAN DATA (MNI): Services PMI Strengthens, Manufacturing Signals Further Contraction

• GERMANY APR FLASH MANUF PMI 44.0 (FCST 45.7); MAR 44.7
• GERMANY APR FLASH SERVICES PMI 55.7 (FCST 53.4); MAR 53.7

The German services flash PMI improved by two points to a 12-month high of 55.7in April (vs a 0.3-point decline expected), whilst the manufacturing PMI declined 0.7 points to a May 2020 low of 44.0 (against expectations of a1-point uptick). In contrast, the manufacturing output PMI rose to 50.3 in April. The recent substantial improvements in supply chains, which saw a record improvement in delivery times in April, contribute negatively to the headline PMI as they signal slowing demand.

FRANCE DATA (MNI): Services Strengthen, Manufacturing Slips Further

• FRANCE APR FLASH MANUF PMI 45.5 (FCST 47.8); MAR 47.3
• FRANCE APR FLASH SERVICES PMI 56.3 (FCST 53.5); MAR 53.9

The April flash PMIs for France signalled continuing service sector strength, up 2.4 points at an eleven-month high of 56.3. Meanwhile manufacturing weakened for a third consecutive month, slipping 1.8 points to a third month of contraction at 45.5. This was the weakest manufacturing PMI since May 2020.

UK DATA (MNI): Services PMI Boost Signals No Relief for Sticky Services Inflation

• UK APR FLASH MANUF PMI 46.6 (FCST 48.4); MAR 47.9
• UK APR FLASH SERVICES PMI 54.9 (FCST 52.8); MAR 52.9

Similarly to the eurozone flash PMIs, the UK April PMI data signalled stronger service sector growth (up 2 points at 54.9) , whilst manufacturing weakened further (down 1.3 points at 46.6). This divergence represented a 12-month high for services, and a 4-month low in manufacturing. Services demand rose, with new orders reaching a 13-month high. Manufacturing demand declined, with firms destocking as they grappled with persistently high energy costs and soft consumer demand.

Figure 2: Flash UK PMI Composite Output Index

UK DATA (MNI): Retail Sales Slump in March, Yet Q1 GDP Contribution Positive

• UK MAR RETAIL SALES -0.9% M/M (FCST -0.5%); FEB +1.1%r M/M

UK retail sales contracted slightly more than anticipated in the March data, falling by -0.9% m/m and -1.0% m/m ex. fuel. Sales volumes were -3.1% below March 2022 levels, and -0.7% compared to pre-covid February 2020 levels, indicating total retail sales have not fully recovered since the pandemic onset.

UK DATA (MNI): Green Shoots for UK Consumer Despite Inflation

• UK APR GFK CONSUMER CONFIDENCE INDEX -30

UK consumer confidence bounced significantly in April, offering tentative signs of “green shoots”, although it still sits deep in negative territory, the head of a closely watched survey told MNI. "Consumers' brighter outlook for the economy as energy prices stabilise could even be seen as the proverbial green shoots of recovery, with April’s six-point rise cementing a near-20-point improvement in confidence since the autumn lows," Joe Staton, Client Strategy Director GfK, said.

JAPAN DATA (MNI): Japan Mar Core CPI Rises 3.1% Vs Feb 3.1%

• JAPAN MAR CORE CPI +3.1% Y/Y; FEB +3.1%
• JAPAN MAR CORE-CORE CPI +3.8% Y/Y; FEB +3.5%
• JAPAN MAR CPI ENERGY COST -3.8% Y/Y; FEB -0.7%
• JAPAN MAR CPI FOOD EX-PERISHABLES +8.2% Y/Y; FEB +7.8%

Japan's steady annual core consumer price index number, which held steady at 3.1% y/y in March, will surprise Bank of Japan officials who had expected a lower increase, MNI understands. March's core CPI print matched February's, Ministry of Internal Affairs and Communications data showed Friday, and could prompt the BOJ to review its price view that the y/y rise in core CPI will fall below 2% toward the middle of fiscal 2023.

RATINGS: Friday’s Rating Slate

Potential sovereign credit rating reviews of note scheduled for after hours on Friday include:

• Moody’s on France (current rating: Aa2; Outlook Stable), Ireland (current rating: A1; Outlook Positive) & the United Kingdom (current rating: Aa3; Outlook Negative)
• S&P on Greece (current rating: BB+; Outlook Stable), Italy (current rating: BBB; Outlook Stable), the Netherlands (current rating: AAA; Outlook Stable) & the United Kingdom (current rating: AA; Outlook Negative)

FOREX: Solid Services Compensate for Lagging Manufacturing

• Prelim PMI data from across the Eurozone and UK all painted a similar theme, with services proving resilient, but manufacturing lagging behind consensus. The data tilted most composite readings ahead of forecast, painting a slightly rosier economic picture ahead. Nonetheless, markets proved largely unreactive, as currency markets adopt a modest risk-off posture ahead of the final US session of the week.
• The JPY is the firmest currency in G10, gaining alongside shakier US equity trade, despite a Reuters report suggesting the BoJ will stick to their ultra-loose policy stance at next week's meeting.
• The greenback is slightly firmer in tandem, but the USD Index remains below yesterday's and the week's best levels at 102.126 and 102.228 respectively.
• The poorest performers are AUD, NZD across the European morning, undoing the late rally across AUD/USD and NZD/USD into the Thursday close. NZD/USD printed down at 0.6127 ahead of the NY crossover, the lowest level since early March, to narrow the gap with key support of 0.6085.
• Canadian retail sales and the prelim US PMI data are the highlights on the schedule going forward, with some focus on the speaker slate also: ECB's Elderson and de Guindos are on the docket, while Fed's Cook speaks after the close - providing the last look at FOMC comms ahead of the pre-meeting media blackout at the end of the day.

BONDS: Curves Trading Mixed on Flash PMI Day

Early trade Friday sees major curves mixed, with the US twist steepening, the UK bull flattening (and outperforming), and Germany's bear flattening.

• The major focus in the European morning has been on above-consensus composite flash PMIs, with the beats driven by strong services offsetting weak manufacturing.
• The data pushed yields to session highs, but faded quickly, leaving core FI closer to flat on the session.
• Gilts are marginally outperforming, after UK Retail sales missed consensus (though some mixed revisions are notable).
• The session's remaining data highlight is the US prelim PMIs.
• In terms of central bank communications, ECB's Elderson and Guindos speak later (the latter for the second time in the session; neither he nor Vujcic earlier moved the needle).
• And we get the final scheduled pre-FOMC blackout period appearance in the form of Gov Cook. There were no surprises from Bostic and Harker overnight.

Latest levels:

• Jun US 10Y futures (TY) up 3.5/32 at 114-24.5 (L: 114-18 / H: 114-26.5)
• Jun Bund futures (RX) up 4 ticks at 134.05 (L: 133.65 / H: 134.41)
• Jun Gilt futures (G) up 44 ticks at 101.11 (L: 100.71 / H: 101.19)
• Italy / German 10-Yr spread 0.6bps wider at 187.6bps

EQUITIES: E-Mini S&P Futures Trade Lower Friday, But Respects Recent Ranges

Eurostoxx 50 futures are consolidating. The uptrend remains intact and recent gains have reinforced the bullish significance of the break of 4268.00, the Mar 6 high and a former key resistance. The breach confirmed a resumption of the uptrend and maintains the bullish price sequence of higher highs and higher lows. Sights are on 4381.50, the Jan 5 2022 high (cont). Initial firm support lies at 4257.40, the 20-day EMA. The trend outlook in S&P E-minis remains bullish and the latest move lower (from Tuesday’s high) is considered corrective. Support to watch lies at 4119.30, the 20-day EMA where a break is required to suggest scope for a deeper pullback - this would expose 4077.86, the 50-day EMA. Attention is on the 4200.00 handle where a break would resume the uptrend and open 4205.50,Feb 16 high ahead of 4244.00, the Feb 2 high and key resistance.

• Japan's NIKKEI closed lower by 93.2 pts or -0.33% at 28564.37 and the TOPIX ended 4.67 pts lower or -0.23% at 2035.06.
• Elsewhere, in China the SHANGHAI closed lower by 65.773 pts or -1.95% at 3301.258 and the HANG SENG ended 321.24 pts lower or -1.57% at 20075.73.
• Across Europe, Germany's DAX trades lower by 42.8 pts or -0.27% at 15750.34, FTSE 100 higher by 7.42 pts or +0.09% at 7909.38, CAC 40 down 0.44 pts or -0.01% at 7537.98 and Euro Stoxx 50 down 4.17 pts or -0.1% at 4380.43.
• Dow Jones mini down 19 pts or -0.06% at 33892, S&P 500 mini down 1.25 pts or -0.03% at 4151.5, NASDAQ mini up 1.75 pts or +0.01% at 13076.5.

COMMODOTIES: WTI Futures Target $75.83 March 31 Support Level

WTI futures are trading lower this week. This has resulted in a breach of support at $79.04, the Apr 3 low and the gap high on the daily chart. The continuation lower has also resulted in a break of both the 20- and 50-day EMAs. This signals scope for a move to $75.83, the Mar 31 high and a gap low on the daily chart. On the upside, key short-term resistance has been defined at $83.38, the Apr 12 high. A break would resume the recent uptrend. Trend conditions in Gold remain bullish, however, the yellow metal has entered a short-term corrective cycle. Price has breached initial firm support at $1987.3, the 20-day EMA, highlighting potential for a deeper retracement. This has opened $1949.7, Apr 3 low. Key short-term resistance has been defined at $2048.7, the Apr 5 high. A break of this level would confirm a resumption of the uptrend.

• WTI Crude down $0.08 or -0.1% at $77.34
• Natural Gas down $0.03 or -1.38% at $2.218
• Gold spot down $16.83 or -0.84% at $1987.49
• Copper down $0.95 or -0.24% at $402.15
• Silver down $0.16 or -0.65% at $25.11
• Platinum down $1.08 or -0.1% at $1095.3