MNI US OPEN - First Republic Earnings Report Shakes Banking Confidence

NEWS

"The Bank of England (the Bank), the Bank of Japan, the European Central Bank and the Swiss National Bank, in consultation with the Federal Reserve, have jointly decided to revert from daily to weekly 7-day maturity operations, which provide liquidity via the standing U.S. dollar liquidity swap line arrangements." Operations to run on Wednesdays with the change effective from 1 May but usage has been very low.

ECB (MNI): May Not the Time to Stop Hikes, Data-Dependent Beyond There - ECB's Lane

Comments from ECB chief economist Lane, via an interview with le Monde, aren't a needle mover at first glance. Lane points to the need for a hike at next month's monetary policy meeting (without prescribing a specific increment), with that meeting not presenting the time to pause when it comes to rate hikes. He also reaffirmed that data-dependence will drive decisions beyond the May meeting, while playing down similarities to 1970's style inflation.

US (BBG): US Midsize Banks Drop as First Republic Results Shake Confidence

Shares in US regional lenders fall in premarket trading, after peer First Republic reported a slump in deposits that was worse than expected, sparking worries that the bank is still contending with challenges even after receiving $30 billion of support from some of the biggest lenders in the US. First Republic shares sink as much as 22% after customer deposits plunged 41% to $104.5 billion in the first quarter, with the bank planning to cut 25% of its workforce, lower outstanding loan balances and curb other non-essential activities

US (BBG): Biden Set to Launch $11 Billion Chips Program R&D Centerpiece

The Biden administration is setting up a network of advanced computer-chip design and engineering facilities, the focal point of plans to spend $11 billion on research and development to bolster US economic and national security. The Commerce Department envisions the National Semiconductor Technology Center involving a number of new technical sites around the country, working with academic and industry partners to drive innovations in products and workforce development. The goal is to have it up and running by the end of the year.

US (BBG): Biden’s 2024 Campaign Takes Shape Ahead of Official Announcement

Joe Biden’s long-awaited 2024 presidential reelection bid could land as soon as Tuesday morning through a video announcement, but already the notoriously deliberative president’s campaign is taking shape with several potential high-level hires. Julie Chavez Rodriguez, currently a senior adviser and director of the White House Office of Intergovernmental Affairs, is expected to become the campaign manager.

US (BBG): Biden, McCarthy Locked in Debt Standoff With New Deadline on Tap

President Joe Biden and House Speaker Kevin McCarthy are set to enter the next stage of the debt ceiling standoff, with a key vote and fresh Treasury data that could raise the urgency for a deal.The Treasury Department, based on fresh tax revenue data, is set to release an updated estimate of the so-called “X date” when extraordinary measures are exhausted and the US can no longer meet its obligations. The new estimate is expected this week or next.

GERMANY (MNI): Chancellor Invites Chinese Premier to Visit 20 June - BBG

Bloomberg reporting that German Chancellor Olaf Scholz has invited Chinese Premier Li Qiang for talks in Berlin on 20 June. Report states that "Scholz will aim to enlist Beijing as a key partner on challenges like peace and climate change while setting out red lines to any changes to the status quo in Taiwan, according to people familiar with the plans."

FRANCE (BBG): Villeroy Says French Inflation Has Likely Reached Its Peak

French inflation is probably at its peak today and should slow to about 4% by the end of 2023, according to Bank of France Governor Francois Villeroy de Galhau. Food price increases should start to slow in the second half of the year, given that, for example, global wheat prices have begun to ease since the end of last year, he told RTL in a radio interview Tuesday.

JAPAN (MNI): BOJ Aim for Review Flexibility in Policy Statement

The Bank of Japan could refrain from commenting on a future monetary policy review in its upcoming April statement, although new Governor Kazuo Ueda, if asked about it at the following news conference, will discuss it then, MNI understands. If policymakers mention the review in their statement, it will reduce policy flexibility and Ueda will face difficult questions, including time span of the view and whether the BOJ will act or not during the review period.

JAPAN (MNI): BOJ Sees Sentiment Boost but Weaker Spending Worry

Bank of Japan officials are upbeat following the consumer sentiment pick-up in government surveys but they are still eyeing whether private consumption will be weighed down by the ongoing high living costs, MNI understands. However, there are no expectations the consumer recovery will be to derailed anytime soon due to pent-up demand and hope for wage hikes, but an ongoing squeeze on household income, particularly for lower earners, could hit future consumption.

JAPAN (MNI): Continuing with YCC Appropriate Now - BOJ’s Ueda

It is appropriate for the Bank of Japan to continue with its current yield curve control, given current economic and price conditions, Governor Kazuo Ueda said on Tuesday. “The yield curve is smoothing now in the wake of the SLF (Securities Lending Facilities), widening the 10-year interest rate range (decided in December) and the drop of interest rates overseas,” Ueda told lawmakers.

RUSSIA (BBG): Lavrov Sees No Progress on Russian Part of Black Sea Grain Deal

Russia sees no progress in meeting its demands regarding implementation of the Black sea grain initiative, said Foreign Minister Sergei Lavrov after his talks with United Nations Secretary General Antonio Guterres. “We don’t see a will from Western countries to implement what is necessary to achieve a successful realization” of the Secretary General’s initiative for a packaged approach to agricultural-product exports from Ukraine and Russia, Lavrov said after they met Monday to discuss the war and the Black Sea deal.

UKRAINE (MNI): EU Disburses Latest EUR1.5bn Tranche Of Macro-Financial Assistance

The European Union has disbursed the latest tranche of macro-financial assistance (MFA)to Ukraine totalling EUR1.5bn. European Commission President Ursula von der Leyen: "Today we are providing another €1.5 billion to Ukraine under our annual macro-financial assistance package. We will continue helping Ukraine resist Russia’s aggression, keep its institutions and infrastructure running, and conduct crucial reforms."

DATA

UK DATA (MNI): Highlights from the March Public Sector Finances Report

• UK MAR PSNB GBP+20.71 BN
• UK MAR PSNB-X GBP+21.53 BN
• UK MAR CGNCR GBP25.05 BN
• UK CGNCR fy 22/23 STG 111.3 BLN

Central government net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was 25.1bn in March, bringing the total for the FYE March 2023 to 111.3bn, 4.1bn less than forecast by OBR. PSNB-ex was 21.5bn, 16.3bn more than in March, second-highest March borrowing since monthly records began in 1993. PSNB-ex in FYE March 2023 was initially estimated at 139.2bn (5.5% of GDP), 18.1bn more than in the FYE March 2022 and the fourth-highest FY since records began in 1946.

SPAIN DATA (MNI): PPI Turns Negative as Energy Prices Fall

Spanish PPI declined -2.2% m/m and dropped 9pp to a contractionary -1.0% y/y in March, recording the first deflationary y/y reading since 2020. Falling energy prices accounted for the bulk of downwards pressure, declining -7.4% m/m and -15.9% y/y (the latter over 20pp below Feb). March data highlighted a marked divergence between PPI and PPI ex. energy in Spain. PPI ex. energy continued to slow in March, cooling by over two points to +7.3% y/y, despite standing over eight points above that of headline PPI.

JAPAN MAR SERVICES PPI +1.6% Y/Y; FEB REV +1.7%J
JAPAN MAR SERVICES PPI +0.7% M/M; FEB +0.2%

JAPAN DATA (MNI): Japan Trimmed Mean Inflation Rises To 2.9% - BOJ

Japan's trimmed mean underlying inflation accelerated to +2.9% y/y in March, up from February's 2.7% as cost increase pass-throughs continue, data released by the Bank of Japan on Tuesday showed. The acceleration in the trimmed mean comes as recent data showed Japan's annual core consumer inflation rate rose 3.1% y/y in March, unchanged from February’s 3.1%.

SOUTH KOREA (MNI): Recession Avoided, But Growth Momentum Still Eases

Q1 GDP printed a touch above market expectations, coming in at +0.3% q/q(+0.2%q/q expected). This allowed South Korea to avoid two-consecutive quartersof negative growth (Q4 was -0.4% q/q). Still, y/y momentum eased to +0.8%(slightly below +0.9% expected and versus 1.3% prior). This is the softest pace of y/y growth since the end of 2020.

FOREX: USD/CNH Touches Multi-Month Highs on Regional Equity Weakness

• Currency markets across Europe and the US are generally treading water ahead of Tuesday NY hours, with markets on pause ahead of the BoJ decision and key Eurozone data later this week. NOK has been more active, and remains toward the lowest levels of the year. The April high in EURNOK is at 11.6929, which was also the highest print since 22nd April. A clear break through the 11.7000 psychological level, would see next resistance at 11.8123.
• Following another negative regional close in China and Hong Kong, weakness across CNH and CNY persists into NY hours, tipping USD/CNH to the highest level since mid-March. Pair has now printed seven consecutive sessions of higher lows, and is narrowing the gap with 6.9506, the 200-dma.
• Progress through here would open 6.9971 over the medium-term, ahead of 7.0362 - the 50% retracement for the Oct - Jan downleg. Worsening trade tensions with the US remain a key driver - particularly following weekend reports that the US requested South Korean firms do not backfill chip orders to China should US-listed firms be barred access to China.
• Focus Tuesday turns to new home sales and consumer confidence data from the US, as well as further regional Fed releases: the Richmond Fed manufacturing index and Dallas Fed services activity. The speaker slate is light, with the Fed remaining inside the pre-FOMC media blackout period.

BONDS: Bull Flattening As Bank Concerns Resurface

Core FI has strengthened in European trade Tuesday morning, with weaker equities overnight setting a risk-off tone.

• Bull flattening is evident across curves, with cash Bunds and Gilts marginally outperforming Treasuries.
• A sharp post-results drop for beleaguered First Republic shares have translated into bank weakness early Tuesday (eg Euro financials -1.3% vs -0.5% for Eurostoxx 600), dragging down risk appetite.
• Largely 2nd tier data this morning but it's had a bullish impact for bonds, particularly the first deflationary Spanish Y/Y PPI figure since 2020.
• BoE's Broadbent did not comment on current monetary policy in a speech this morning.
• A few US data points of interest later today, including new home sales, Conference Board consumer confidence, and Richmond Fed manufacturing.
• The US supply highlight is the $42B 2Y Note auction.

Latest levels:

• Jun US 10Y futures (TY) up 17/32 at 115-13 (L: 115-01 / H: 115-14)
• Jun Bund futures (RX) up 42 ticks at 134.11 (L: 133.51 / H: 134.4)
• Jun Gilt futures (G) up 29 ticks at 101.21 (L: 100.95 / H: 101.4)
• Italy / German 10-Yr spread 1.5bps wider at 188.7bps

EQUITIES: Equity Futures Trade Within Recent Ranges; Tech Earnings Reports Take Focus

MNI US EARNINGS SCHEDULE - The quarterly earnings cycle hits a crescendo this week, with 45% of the S&P500’s total market cap set to report. Reports are persistent across the week, but today is likely the most notable session for the index, as Alphabet, McDonald’s, Microsoft, PepsiCo and Visa are all due. Earnings season so far has been relatively solid, with the average firm tending to beat on EPS and revenues – although EPS metrics have held up well relative to sales.

The Eurostoxx 50 futures uptrend remains intact and the contract is trading at its recent highs. The recent extension reinforced the bullish significance of the break of 4268.00, Mar 6 high and a former key resistance. The move confirmed a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Sights are on 4381.50, Jan 5 2022 high (cont). Initial firm support lies at 4274.00, the 20-day EMA. The trend outlook in S&P E-minis remains bullish and the latest move lower, from the Apr 18 high, is considered corrective. Support to watch lies at 4128.95, the 20-day EMA where a break is required to suggest scope for a deeper pullback - this would expose 4086.73, the 50-day EMA. Attention is on the 4200.00 handle, clearance of this level would resume the uptrend and open 4205.50, Feb 16 high ahead of 4244.00, Feb 2 high and key resistance.

• Japan's NIKKEI closed higher by 26.55 pts or +0.09% at 28620.07 and the TOPIX ended 4.81 pts higher or +0.24% at 2042.15.
• Elsewhere, in China the SHANGHAI closed lower by 10.541 pts or -0.32% at 3264.872 and the HANG SENG ended 342.06 pts lower or -1.71% at 19617.88.
• Across Europe, Germany's DAX trades lower by 11.66 pts or -0.07% at 15853.18, FTSE 100 lower by 17.85 pts or -0.23% at 7894.7, CAC 40 down 43.84 pts or -0.58% at 7530.02 and Euro Stoxx 50 down 22.4 pts or -0.51% at 4379.4.
• Dow Jones mini down 137 pts or -0.4% at 33868, S&P 500 mini down 21 pts or -0.5% at 4139.25, NASDAQ mini down 56.5 pts or -0.43% at 13001.75.

COMMODITIES: WTI Futures Technically Bearish Despite Monday's Slight Uptick

WTI futures traded lower last week and the outlook remains bearish despite yesterday’s gains. Last week’s move lower resulted in a break of $79.04, the Apr 3 low and the gap high on the daily chart. The continuation lower has seen price breach the 20- and 50-day EMAs, exposing $75.83, the Mar 31 high and a gap low on the daily chart. Key short-term resistance has been defined at $83.38, the Apr 12 high. A break would resume the recent uptrend. Broader trend conditions in Gold remain bullish, however, the yellow metal has entered a short-term corrective cycle and is trading below recent highs. Price has traded below support at $1987.1, 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 up $0.27 or +0.34% at $79.03
• Natural Gas down $0.05 or -2.38% at $2.22
• Gold spot up $0.13 or +0.01% at $1988.64
• Copper down $4.95 or -1.25% at $391.5
• Silver down $0.14 or -0.55% at $25.0149
• Platinum down $7.88 or -0.72% at $1081.95