MNI US OPEN: Kazaks Makes Case For More Hikes

NEWS

ECB (MNI): ECB Should Hike As Market Fears Wane - Kazaks

The European Central Bank should keep to its baseline economic scenario and continue to raise rates to bring inflation back to target before 2025 as fears of a banking crisis recede, Bank of Latvia governor Martins Kazaks told MNI. "It's way too early - even with headline inflation starting to come down - to declare any kind of victory with respect to inflation," Kazaks said in an interview, though he noted that it is still hard to measure the extent of any slowdown in the flow of credit following the collapse of Silicon Valley Bank and the forced takeover of Credit Suisse, making it more difficult to assess how high the ECB will have to hike rates.

EU/CHINA (BBG): EU Warns on China’s Assertive Actions With Call for Open Dialog

The European Union’s Ursula von der Leyen warned of a deliberate toughening in China’s strategy, with a new era of security and control, but urged the bloc to respond by working to reduce risks rather than decouple from the Asian nation. Despite pressure from the US for a tougher EU position on China, the head of the European Commission, the bloc’s executive, argued in a speech in Brussels for ensuring “diplomatic stability and open communication lines with China.”

SECURITY (MNI): China Says AUKUS Nuclear Sub Cooperation 'May Spark Arms Race'

Comments from the Chinese Defence Ministry talking of heightened tensions in the Indo-Pacific, stating that the "Australia-Britain-US [AUKUS] nuclear submarine cooperation may spark [an] arms race." Adds that "Once 'Pandora's Box' [is] opened, regional strategic balance will be disrupted, regional security will be seriously threatened."

US/RUSSIA (BBG): Russia Detains US Reporter on Spying Charges, Interfax Reports

Russia’s Federal Security Service said it detained Wall Street Journal reporter Evan Gershkovich in Yekaterinburg on spying allegations, the Interfax news service reported Thursday. Gershkovich “is suspected of espionage in the interests of the American government,” the security service known as the FSB said in a statement, Interfax reported. The American reporter “collected information constituting a state secret about the activities of one of the enterprises of the Russian military-industrial complex.”

US (NYT): Debt Talks Are Frozen as House Republicans Splinter Over a Fiscal Plan

House Republicans who have said they will not vote to raise the national debt limit without deep spending cuts are backing away from their promise to balance the budget and struggling to unite their fractious majority behind a fiscal plan, paralyzing progress on talks to avert a catastrophic default as soon as this summer. Determined to use the coming confrontation over the national debt to extract sweeping spending concessions from Democrats, House G.O.P. leaders announced a series of lofty goals earlier this year — driven in large part by the demands of the hard-right faction of their party.

RUSSIA/UKRAINE (NYT): Soldiers Massing Near Ukrainian Nuclear Plant, U.N. Official Warns

Russia and Ukraine are ramping up their military forces in southern Ukraine amid signs that the fighting may soon escalate, a United Nations official said on Wednesday after crossing a front line held by the Ukrainian military to inspect a nuclear power plant seized by Moscow.

CHINA/RUSSIA (MNI): China Defence Ministry Speaks Of More Joint Military Exercises

Wires reporting comments from the Chinese Defence Ministry stating that the Chinese military is 'Willing to work together with [the] Russian military to strengthen strategic communication and coordination." The comments could be seen as a further sign of an increasingly aligned vision between Presidents Xi Jinping and Vladimir Putin looking to establish a counterbalance to the US and foster a 'multipolar world'.

CHINA (BBG): Xi’s New Vice Premier to Oversee Finance, Housing in Shake-Up

China has tasked its Vice Premier He Lifeng, a close confidante of President Xi Jinping, with the mandate of shoring up the nation’s embattled property industry as well as the $60 trillion financial sector, according to people familiar with the matter.

CHINA (MNI): China Banks Outlook "Isn’t Great" - Charlene Chu

China could cut its reserve requirement ratio (RRR) by another 50bp this year as banks remain at risk from the troubled property sector and a squeeze on net interest margins despite proving resilient against U.S. and European banking turmoil, leading China banking analyst Charlene Chu told MNI.

CHINA (MNI): A United Asia Needed Amid Uncertainty - Premier Li

Asian countries must jointly create a global growth center and strengthen regional connections to provide certainty for the changing world, China Premier Li Qiang said during Thursday's opening ceremony of the Boao Forum For Asia Annual Conference 2023.

JAPAN/THAILAND (MNI): BOJ Extends Bilateral Swap Agreement with Thailand

The Bank of Japan has extended the bilateral local currency swap agreement with the Bank of Thailand to enhance the financial stability between the two countries. The agreement, which extends the swap out to March 30 2026, will allow the exchange of local currencies between the two central banks up to THB240 billion, or JPY0.8 trillion.

DATA

SAXONY MAR CPI +0.9% M/M, +8.3% Y/Y (MNI)
BAVARIA MAR CPI +0.7% M/M, +7.2% Y/Y (MNI)
BADEN WUERT MAR CPI +0.9% M/M, +7.8% Y/Y (MNI)
HESSE MAR CPI +0.8% M/M; +7.1% Y/Y (MNI)
NRW MAR CPI +0.6% M/M; +6.9% Y/Y (MNI)

SPAIN DATA (MNI): Downside Surprise to HICP in March

• SPAIN MAR FLASH HICP +1.1% M/M (FCST +1.6%); FEB +0.9% M/M
• SPAIN MAR FLASH HICP +3.1% Y/Y (FCST +3.7%); FEB +6.0% Y/Y
• SPAIN MAR FLASH CORE CPI +7.5% Y/Y (FCST +7.6%); FEB +7.6% Y/Y

Spain kicked off this month's round of flash euro inflation data. HICP cooled by 2.9pp to +3.1% y/y; the lowest annualised rate since July 2021 and 0.6pp below consensus expectations. According to the Spanish Statistics Institute, easing energy and fuel prices accounted for the bulk of downwards inflationary pressure in March. Harmonised prices rose by +1.1% m/m, implying that short-term price pressures remain acute.

SWISS KOF MAR ECONOMIC BAROMETER 98.2 (MNI)

FOREX: USD Sits Softer as German Regional CPIs Send Mixed Messages

• The greenback is softer headed through to the NY crossover, with the USD Index holding close to mid-March lows. German regional CPI data has been in focus, sending mixed signals over the sustainability of the decline in headline inflation.
• The weaker USD backdrop and softer EUR post-CPI data has helped GBP find favour in early trade, keeping GBP/USD within range of 1.2362 - the highest print since early Feb. Little options interest near current levels into month-end (nearest notable expiry rolls off tomorrow at 1.2100), but more significant interest next week noted at 1.2250, with $1.1bln rolling off on Apr04, which could anchor any near-term rally.
• CHF is the furtive outperformer, snapping weakness seen earlier in the week. The currency's safe haven status remains surpressed for now, with stronger equities doing little to pin back the currency.
• Focus turns to the confirmation for preliminary German CPI for March, as well as the weekly US jobless claims. Tertiary Q4 GDP from the US is unlikely to move the needle, but Fed speakers will be eyed. Fed's Barkin, Collins and Kashkari are on the docket just after the London close.

BONDS: Early Swings on European CPI

Gilts are leading early modest losses in global core FI, with European inflation data the key to price action in the early going.

• Global bonds led by Bunds soared in early European trade as Spanish CPI came in on the soft side, but an apparent rise in German state core (though not headline) inflation saw early gains fully reverse ahead of the national figure out later.
• The German curve has bull flattened, with the UK’s twist flattening and the US twist steepening.
• The constant throughout has been stronger equities with better risk appetite benefiting EGB peripheries, ignoring potential for greater ECB tightening expectations
• US data includes jobless claims and the final read of Q4 GDP.
• Attention later in the session turns to Fed speakers: Barkin, Collins and Kashkari are on the schedule.

Latest levels:

• Jun US 10-Yr futures (TY) down 2.5/32 at 114-14.5 (L: 114-09.5 / H: 114-23.5)
• Jun Bund futures (RX) down 6 ticks at 135.81 (L: 135.47 / H: 136.77)
• Jun Gilt futures (G) down 17 ticks at 103.79 (L: 103.48 / H: 104.47)
• Jun BTP futures (IK) up 6 ticks at 115.25 (L: 115.03 / H: 116.08)

EQUITIES: E-Mini S&P Futures Pierce 4073.75 Mar 22 Resistance Level

Eurostoxx 50 futures traded higher Wednesday. The contract has cleared resistance at 4164.00, the Mar 22 high. This cancels a recent bearish threat and confirms a resumption of the bull cycle that started Mar 20. A continuation higher would open key resistance at 4268.00, Mar 6 high. Moving average studies are in a bull-mode set-up and this suggests the broader uptrend is intact. Initial firm support lies at 4034.00, the Mar 24 low. S&P E-Minis traded higher Wednesday and the contract has once again moved to levels above the 50-day EMA. The average intersects at 4021.12. Attention is on resistance at 4073.75, the Mar 22 high. A break of this hurdle would strengthen bullish conditions and signal scope for a climb towards 4119.50, the Mar 6 high. On the downside, key short-term support lies at 3937.00, the Mar 24 low. A break of this support would be bearish.

• Japan's NIKKEI closed lower by 100.85 pts or -0.36% at 27782.93 and the TOPIX ended 12.16 pts lower or -0.61% at 1983.32.
• Elsewhere, in China the SHANGHAI closed higher by 21.192 pts or +0.65% at 3261.249 and the HANG SENG ended 116.73 pts higher or +0.58% at 20309.13.
• Across Europe, Germany's DAX trades higher by 156.95 pts or +1.02% at 15486.46, FTSE 100 higher by 32.26 pts or +0.43% at 7594.75, CAC 40 up 66.99 pts or +0.93% at 7254.4 and Euro Stoxx 50 up 42.52 pts or +1% at 4273.9.
• Dow Jones mini up 139 pts or +0.42% at 33046, S&P 500 mini up 16.75 pts or +0.41% at 4074.5, NASDAQ mini up 35 pts or +0.27% at 13001.5.

COMMODITIES: WTI Futures Trade Close to This Week's Highs, Exposing 74.96 50-Day EMA

WTI futures continue to trade closer to this week’s highs. Price has breached resistance at the 20-day EMA which intersects at $72.64. The break is a short-term bullish development and a continuation higher would expose the 50-day EMA, at $74.96. This average represents the next key resistance point. On the downside, initial firm support lies at $66.82, the Mar 24 low. A break of this level would be bearish. Trend conditions in Gold remain bullish and the recent short-term pullback is considered corrective. Note too that price action since Mar 20 appears to be a pennant - a continuation pattern. This reinforces bullish conditions and signals scope for an extension higher near-term. The recent test above $2000.0 opens $2034.0 next, a Fibonacci projection. $1918.3 marks a firm support, the Mar 17 low - a break would signal scope for a deeper pullback.

• WTI Crude up $0.64 or +0.88% at $73.6
• Natural Gas down $0.06 or -2.79% at $2.123
• Gold spot up $1.77 or +0.09% at $1966.39
• Copper up $3.05 or +0.75% at $411.65
• Silver up $0.26 or +1.12% at $23.5935
• Platinum up $0.93 or +0.1% at $971.8