MNI US OPEN - Japan’s Kanda Warns Against Speculative FX Moves

NEWS

US/ISRAEL (BBG): US Says Major Israel Attack on Rafah Would Be ‘Huge Mistake’

US Vice President Kamala Harris warned Israel against a major attack on the Gazan city of Rafah, where more than a million Palestinians have sought refuge as the war against Hamas continues. While broadly in line with the Biden administration’s repeated cautions to Israel, Harris’ comments on Sunday went beyond remarks by Secretary of State Antony Blinken during his trip to the region last week. “I am ruling out nothing,” Harris said to ABC when asked whether there would be consequences for a military assault on Rafah, which borders Egypt.

JAPAN (BBG): Japan’s Currency Chief Delivers Most Robust FX Warning in Months

Japan’s top currency official delivered his most robust salvo of warnings in months against speculative moves in the foreign exchange market as the yen continues to hover near a 2022 intervention level. “The current weakening of the yen is not in line with fundamentals and is clearly driven by speculation,” vice finance minister for international affairs Masato Kanda told reporters Monday. “We will take appropriate action against excessive fluctuations, without ruling out any options.” “We are always prepared,” Kanda said when asked about a possible direct intervention in the currency market.

BOJ (MNI): A Few Members See 2% Price Target - BOJ Jan Minutes

A few Bank of Japan board members believed the sustainable and stable achievement of the bank's 2% price target was in sight at the January 22-23 meeting, the minutes released on Monday showed. One of these members judged the possibility to normalise monetary policy would increase once the bank assessed the degree of macroeconomic impact of the recent earthquake was not significant, the minutes showed. The BOJ last week decided to terminate its negative interest rate and yield curve control policy.

UK (BBG): Tories to Make Pension Triple Lock a Manifesto Pledge, Hunt Says

Britain’s ruling Conservative party will promise to keep the generous “triple lock” on state pensions in the upcoming election despite the spiraling cost of the commitment, Chancellor of the Exchequer Jeremy Hunt said. Speaking to UK broadcasters on Sunday, Hunt said the triple lock — a guarantee that the state pension for the country’s 12 million retirees rises by the highest of inflation, average earnings, or 2.5% — would be a manifesto pledge.

CHINA (MNI): PBOC Sets Yuan Parity Lower at 7.0996 Monday

MNI (Beijing) The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.0996 on Monday, compared with 7.1004 set on Friday. The fixing was estimated at 7.2222 by Bloomberg survey today. USD/CNY spot quickly gapped lower at the open, following the stronger than expected CNY fixing. Per Bloomberg, onshore spot hit a low of 7.2040, before stabilising briefly, but the pair is now back sub the 7.2000 level.

CHINA (BBG): China Uses Surprise Data Announcements to Counter Economic Gloom

Chinese officials are using a new strategy to help shape a positive narrative on their nation’s slowdown: Making early disclosures on flattering economic news in a bid to boost markets. The latest example came Thursday, when Vice Finance Minister Liao Min highlighted bright spots in the budget data at a press briefing in Beijing. His comments beat the monthly statement which normally provides that information, without commentary, by one hour.

CHINA (MNI): China to Boost Consumption with Lower Mortgage Rate

MNI (Beijing) China will further reduce mortgage loan rates, relax restrictions on house and automobile buying and increase employment to boost consumption, said Yang Weimin, former vice minister at the Office of the Central Leading Group on Financial and Economic Affairs, during the China Development Forum 2024 on Monday. Consumption after the Covid pandemic had weakened, he said, noting China's macro policy will work to boost domestic demand while deepening supply-side reform in the future. The country will further lower household sector taxes in the new round of reform to increase resident income.

CHINA (MNI): China's CPI Pork Prices to Rise in H2

MNI (Beijing) Pork prices, a major CPI driver in China, will rise steadily in H2 as government policy to reduce breeding sow population reasonably using market mechanisms to deal with excessive supply takes effect, an agricultural policy advisor has told MNI. Officials have reduced the target for breeding sow population from 42 million to 39 million, which will help cut excess supply using market mechanisms and push prices up gradually in H2, said Zhu Zengyong, a leading pork industry advisor to the Ministry of Agriculture and Rural Affairs.

AUSTRALIA (MNI): Next Federal Election Looking Close According to Latest Newspoll

The latest Newspoll from The Australian is currently signalling that the next Federal election due by May next year is shaping up to be a close one. The survey taken between March 18 and 22 showed that the two-party preferred breakdown had narrowed 2pp to 51:49% in favour of the government but it is its worst result since before the 2022 election where the breakdown was 52.1 to47.9. It is currently pointing to a minority government.

RUSSIA/UKRAINE (BBG): Ukraine Says Russia Barrage Aimed at Underground Gas Storage

Russia struck an underground gas storage facility in western Ukraine during Sunday’s missile and drone attack, underlining threats to the country’s energy system. The barrage damaged equipment on the ground, Oleksiy Chernyshov, chief executive officer of state-run Naftogaz Ukrainy, said on Facebook. The underground storage itself wasn’t damaged as it’s significantly below the surface, he said.

RATINGS: Some Sovereign Outlook Tweaks on Friday

Sovereign rating reviews of note from after hours on Friday include:

• Fitch affirmed Portugal at A-; Outlook Stable
• Fitch affirmed the United Kingdom at AA-; Outlook revised to Stable from Negative
• Moody's affirmed Poland at A2; Outlook Stable
• S&P affirmed Germany at AAA; Outlook Stable
• DBRS Morningstar confirmed Cyprus at BBB (high), Stable Trend
• DBRS Morningstar confirmed Finland at AA (high), Stable Trend
• DBRS Morningstar confirmed France at AA (high), Stable Trend
• DBRS Morningstar confirmed Ireland at AA (low), trend changed to Positive from Stable
• DBRS Morningstar confirmed Norway at AAA, Stable Trend
• Scope Ratings affirmed Japan at A; Outlook revised to Stable from Negative
• Scope Ratings affirmed Spain A-, Outlook revised to Positive from Neutral

FOREX: Currencies Generally Rangebound, CB Speak in Focus

• Markets are generally rangebound and trading on light volumes so far Monday, with CHF marginally the poorest performer and AUD, NZD the strongest.
• Early European trades see the USD recoup the (pretty minor) weakness across the early Asia-Pac session, putting EUR/USD back to flat and retaining the S/T bearish outlook for the pair. Continuation lower here would signal scope for 1.0796 first, the Feb29 low and open the bear trigger further out at 1.0695.
• AUD/USD is firmer off last week's pullback low, and tech traders will be watching for the imminent formation of a death cross in the pair (50-dma < 200-dma) - the first since April last year, which should indicate short-term momentum in the pair is pointed lower. Notably, the AUD net short position continues to swell - putting AUD net positioning at a % of open interest at the largest short on CFTC records stretching back to the early 90s.
• Focus for the session ahead rests on US new home sales data for February and the busier speaker slate. ECB's Holzmann is set to appear after last week's warning that markets should price in the risk of no rate cuts at all this year, while Fed's Bostic, Goolsbee and Cook also make appearances.
• BoE's arch-hawk Mann speaks in Belfast, and markets will be on watch for any mention of her decision to switch from a vote to hike, to a vote to hold rates at last week's BoE rate decision.

US TSYS: A Little Softer, Bostic Only Looks for 1 '24 Cut

TYM4 continues to move away from session highs after Friday’s high held in early Asia trade.

• Contract -0-02 at 110-22. Early range 110-21 to 110-30, sub-average volume of ~206K.
• Cash Tsy yields 2-3 bp higher across the curve.
• Late on Friday Goldman Sachs lifted their Tsy yield forecasts on expectations for slower Fed easing. They now see 10-Year yields at 4.25% at year-end (previously 4.00%), before a move to 4.10% by end-2025 (previously 4.00%).
• Fed implied rates edge higher vs. late Friday levels, but the moves are very modest. ~20.5bp of cuts priced through June & ~81bp of cuts priced through year end.
• Today’s Fedspeak will come from Cook, Goolsbee & Bostic.
• Late Friday saw Bostic reveal that he now looks for 1 cut in ’24 (previously 2). The comments may be adding some pressure to Tsys given that Bostic was on the dovish side of the Fed spectrum until the last few months.
• NY hours will also see the release of new home sales data, as well as activity data from the Chicago & Dallas Feds.
• 2-Year Tsy supply is also due.

EGBS: Softer After Strong Performance Last Week

Core/semi-core EGBs are a touch softer to begin the week after rising every day last week, with little in the way of notable headline flow or data to set the tone. Flash inflation releases in Spain, France and Italy highlight this week's regional calendar, with the German and Eurozone-wide figures due after the Easter Break.

• The German and French cash curves have lightly bear steepened.
• Bunds are -22 ticks at 132.85 with cumulative volumes below average for this time of day. Technically. a short-term bull cycle remains in play, with key support defined at 131.23 (Feb 29 low).
• 10-year peripheral spreads to Bunds are generally little changed on the day, with Italian/Greek spreads a little wider and Spanish/Portuguese spreads a touch tighter.
• Friday's rating reviews saw Fitch affirm Portugal at A- (Outlook Stable), while Scope revised Spain's Outlook to Positive from Neutral, maintaining its rating at A-. See our earlier post for more details.
• Spanish February PPI was -8.2% Y/Y due to energy base effects, and was not a market mover.
• The remainder of today's regional calendar is light, with ECB hawk Holzmann scheduled to speak at 1030GMT/1130CET.

GILTS: Lower Alongside Peers

Weakness in Tsys weighs on gilts, with local headline flow limited.

• Bulls were once again unable to sustain a move above 100.00 in futures, with initial resistance at Friday’s high (100.05) intact.
• Contract last -16 at 99.66 (early range 99.64-100.02).
• Cash gilt yields are 1.5-2.0bp higher across the curve, with the early bull steepening unwound.
• SONIA futures give up early gains alongside gilts, last 0.5-2.5 lower.
• BoE-dated OIS shows ~78bp of ’24 cuts vs. ~82bp early today.
• A reminder that J.P.Morgan recommended entering a paid position in BoE May ’24 OIS at 5.12% late on Friday (~5.13% last).
• Domestic focus is centred on this afternoon’s comments from former BoE hawkish dissenter Mann. We will give a deeper preview of those comments in our upcoming Gilt Week Ahead publication.

EQUITIES: E-Mini S&P Bullish Following Last Week's Extension

A bullish trend condition in Eurostoxx 50 futures remains intact and last week’s gains reinforce current conditions. The move higher confirms once again a resumption of the uptrend and this has also resulted in a break of the 5000.00 handle. Moving average studies remain in a bull-mode position, highlighting positive market sentiment. Sights are on 5074.7, a Fibonacci projection. Initial firm support is at 4905.50, the 20-day EMA. The trend condition in S&P E-Minis remains bullish and last week’s extension reinforces this theme. The break of 5257.25, Mar 8 high, confirmed a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. MA studies remain in a bull-mode position reflecting positive market sentiment. Sights are on 5389.02, the top of a bull channel drawn from the Jan 17 low. Initial firm support is at 5206.16, the 20-day EMA.

• Japan's NIKKEI closed lower by 474.31 pts or -1.16% at 40414.12 and the TOPIX ended 35.58 pts lower or -1.26% at 2777.64.
• Elsewhere, in China the SHANGHAI closed lower by 21.729 pts or -0.71% at 3026.305 and the HANG SENG ended 25.83 pts lower or -0.16% at 16473.64.
• Across Europe, Germany's DAX trades higher by 14.24 pts or +0.08% at 18220.56, FTSE 100 higher by 1.21 pts or +0.02% at 7932.23, CAC 40 down 1.44 pts or -0.02% at 8150.48 and Euro Stoxx 50 up 2.4 pts or +0.05% at 5033.55.
• Dow Jones mini down 31 pts or -0.08% at 39835, S&P 500 mini down 3.75 pts or -0.07% at 5289.75, NASDAQ mini down 28 pts or -0.15% at 18548.

COMMODITIES: Latest Pullback in WTI Futures Considered Technically Corrective

WTI futures traded higher last week and a bull theme remains intact. The latest pullback is considered corrective. Recent gains resulted in a break of $79.87, Mar 1 high. The move higher confirms a resumption of the uptrend that has been in place since mid-December last year. Sights are on $83.87 next, the Oct 20 ‘23 high. A break of this level would open $84.87, the Sep 15 ‘23 high and a key resistance. Support to watch is $79.40, the 20-day EMA. The trend condition in Gold remains bullish and last week’s move higher reinforces this condition. The initial rally Thursday delivered another all-time high and confirmed a resumption of the primary uptrend. Moving average studies remain in a bull-mode condition, reflecting positive market sentiment. This signals scope for a climb towards $2230.1, a Fibonacci projection. Key short-term trend support has been defined at $2146.2, the Mar 18 low.

• WTI Crude up $0.26 or +0.32% at $80.9
• Natural Gas down $0.02 or -1.15% at $1.64
• Gold spot up $0.03 or +0% at $2165.91
• Copper up $1.5 or +0.37% at $402.15
• Silver down $0.01 or -0.02% at $24.676
• Platinum up $1.76 or +0.2% at $900.61