MNI US OPEN - Lane, Kazimir Make Case For Further Hikes

NEWS

ECB (RTRS): ECB's Lane Says Rates Must Rise if Banking Tensions Ease

The recent turmoil in the euro zone bank sector is likely to dissipate and European Central Bank interest rates will then have to keep rising to contain inflation, ECB chief economist Philip Lane told a German newspaper. Lane said that banks were well capitalised with ample liquidity so there is no direct read-across from U.S. and Swiss banking tensions to the 20 nation currency bloc. "Under our baseline scenario, in order to make sure inflation comes down to 2%, more hikes will be needed," Die Zeit quoted Lane as saying on Wednesday. "If the financial stress we see is non-zero, but turns out to be still fairly limited, interest rates will still need to go up."

ECB (BBG): ECB’s Kazimir Says Hikes Should Persist But Maybe at Slower Pace

The European Central Bank should push on with interest-rate increases despite the turbulence around the financial industry, though the pace of hikes may need to slow, according to Governing Council member Peter Kazimir. Kazimir warned on Wednesday that there’s a “real risk” of banks curbing lending in the wake of the recent turmoil. When tracking inflation, core price pressures will be a key determinant in future rate decisions, he said.

US/CHINA (MNI): Taiwan President-US House Speaker Meeting Would Be a Severe Provocation

Headlines have crossed from China's Taiwan Affairs Office that any meeting between Taiwan President Tsai Ing-wen and US House Speaker McCarthy would be a severe provocation and represent a violation of the one-China principle. Spokesperson Zhu Fenglian added that China would definitely respond if such a meeting occurred.

US/CHINA (BBG): Biden Aide Speaks With China Counterpart as Tension Spikes

White House National Security Advisor Jake Sullivan spoke with China’s top diplomat Wang Yi on Friday, people familiar with the matter said, as the two sides look to ease tensions that have continued to build in recent months. Sullivan’s previously unreported call took place days before Taiwan’s President Tsai Ing-wen is scheduled to stop in the US en route to Central America, a trip that’s likely to further inflame Beijing’s ire. In a sign of the fraught state of US-China ties, neither side opted to publicize the call between Sullivan and Wang.

ISRAEL/US (MNI): Biden & Netanyahu Trade Barbs Over Judicial Overhaul

Israeli Prime Minister Benjamin Netanyahu declared that his government will not make political decisions based on overseas pressure, even from "the best of friends," after U.S. President Joe Biden last night slammed him for putting the health of Israel's democracy at risk. Speaking to reporters, Biden called on Netanyahu to "walk away" from his judicial reform plans and seek "genuine compromise." The POTUS noted that the Israeli leader "cannot continue down this road," adding that he has "sort of made that clear."

JAPAN (MNI): BOJ Faces JPY50Trln Loss If 10-Yr Hits 2% - Uchida

Bank of Japan Deputy Governor Shinichi Uchida said on Wednesday the central bank would face an unrealised loss of JPY50 trillion on government bonds it held if the 10-year interest rate rose to 2% from the 0.5% it traded at in February. Uchida also told lawmakers it would be difficult for the BOJ to pre-emptively make market players incorporate policy changes into market pricing of bonds.

CHINA (MNI): China's Outbound Tourism to Recover By 2024

China’s USD250 billion outbound tourism industry is set to fully recover by 2024 as air fares drop and Covid requirements are eased for Chinese travellers, former State Council adviser Henry Wang told MNI. Wang expects outbound tourism to reach two-thirds of its pre-pandemic levels by the end of the year, marking a healthy rebound in Chinese travellers who accounted for around 20% of the international tourism market before Covid.

CHINA (MNI): PBOC to Boost Green Finance: Yi Gang

China's central bank will use targeted tools to boost green lending and debt issuance to help reduce carbon emissions, according to Yi Gang, governor of the People’s Bank of China (PBOC). In a speech at Boao Forum for Asia on Wednesday, Yi called on the international community to unify standards for green finance to promote the products globally.

CHINA (MNI): China to Limit Coal, Build New Power Network - NDRC

China will strictly control growth in coal consumption and the efficiency of its use as policymakers target a peak in carbon emissions, Zhao Chenxin, deputy director at the National Development and Reform Commission told the Boao Forum for Asia on Wednesday.

THAILAND (BBG): Thailand Sticks to Quarter-Point Rate Move to Tame Inflation

Thailand’s central bank raised its benchmark interest rate for a fifth straight time, as policymakers prioritized inflation control amid a steady economic recovery. The Bank of Thailand’s monetary policy committee voted unanimously to raise the one-day repurchase rate by 25 basis points to 1.75% on Wednesday, as seen by 19 of 22 economists in a Bloomberg survey, with the remaining three predicting no change.

IRELAND (MNI): Government Set to Survive Confidence Vote as Some Indep TDs to Offer Support

The opposition is set to fall short in its efforts to oust the coalition gov't of Taoiseach (PM) Leo Varadkar, with the parties of gov't and a number of independent lawmakers (TDs) set to ensure that the majority threshold is not crossed. The centre-left Labour Party put forward the motion of no confidence over the gov'ts end to a ban on evictions of those in rental properties that was in place over the winter.

CORPORATE (BBG): Alibaba Leads China Tech Gains as Breakup Spurs Recovery Bets

Alibaba Group Holding Ltd.’s massive overhaul plan boosted Chinese tech stocks, with investors betting the sector is in for an overdue revaluation as the regulatory environment improves. Shares of Alibaba surged 12% in Hong Kong on Wednesday, the most since November and tracking gains in its American Depositary Receipts. Among its peers, Meituan rallied 4% while Tencent Holdings Ltd. and Baidu Inc. advanced slightly less than 2%.

DATA

GERMANY DATA (MNI): GfK Consumer Confidence Improves, Momentum Slows

• GERMANY APR GFK CONSUMER CONF -29.5 (FCST -30); MAR -30.6r

German consumer sentiment improved for a sixth consecutive month in GfK's forward-looking April index, increasing 1.1 points. Stronger income expectations rose to a ten-month high, largely accounting for the April headline uptick. The index nevertheless remains historically low. Economic expectations cooled in April, after four months of improvements, yet remaining above average.

FRANCE DATA (MNI): Consumer Sentiment Edges Down

• FRANCE MAR CONSUMER CONFIDENCE 81 (= FCST); FEB 82

French consumer confidence weakened for a second consecutive month in March, edging down by one point to 81, in line with consensus expectations. The index has remained in the 80s range since April 2022, markedly below the long-run average of 100. The weaker March indexed was in part driven by a small decrease across 12-month standard of living evaluation, likely linked to substantial strike action and civil unrest this month in France. An easing in propensity to save was also recorded.

SWEDEN DATA (MNI): Economic Tendency Improves, Feb Retail Data Contracts Further

• SWEDEN MAR ECONOMIC TENDENCY SURVEY 88.2 (FCST 85); FEB 86.2r
• SWEDEN FEB RETAIL SALES -9.4% Y/Y

Swedish economic sentiment surprised to the upside in March, with the Economic Tendency index rising for a second month, up two points to 88.2 on the back of a broad-based improvements across sectors. Manufacturing confidence rose as production expectations strengthened, and services ticked up albeit remaining weak. Consumer confidence improved by 1.7 points to 62.8, as pessimism regarding personal finance situations and the 12-month Swedish economy outlooks declined.

UK FEB M4 MONEY SUPPLY -0.4% M/M, +1% Y/Y (MNI)
UK BOE FEB MORTGAGE APPROVALS 43,536 (MNI)

AUSTRALIA DATA (MNI): Lower Feb CPI Print Adds to RBA Pause Case

• AUSTRALIA FEB CPI +6.8% Y/Y (FCST +7.2%); JAN +7.4%

Australian consumer inflation weakened in February, strengthening the case for the Reserve Bank of Australia (RBA) to hold off on further interest rate increases at the upcoming April 4 board meeting. The monthly Consumer Price Index fell to 6.8% y/y in February from January’s 7.4% – the second consecutive monthly fall, according to Australian Bureau of Statistics (ABS) data published Wednesday. The indicator peaked at 8.4% in December 2022. Housing rose 9.9%, food and non-alcoholic beverages increased 8%, while transport added 5.6%, the ABS said in a statement.

MNI CHINA LIQUIDITY INDEX: Liquidity Kept Ample In March

• MNI FEB CHINA LIQUIDITY CONDITION INDEX 37.5 VS FEB 35.7

Liquidity across China’s interbank market tightened in March but remained ample as the People’s Bank of China (PBOC) took measures to support economic recovery and insulate the financial sector from nerves over western banks, including an unexpected cut in banks’ Reserve Requirements Ratio (RRR), the latest MNI Liquidity Condition Index shows.

FOREX: USD/JPY Either Side of Y132 as Risk Recovers

• JPY is backtracking against all others in G10, helping aide a solid bounce in USD/JPY to trade either side of Y132.00 at the NY crossover. The risk backdrop is generally improving, with US equity futures trending higher overnight and indicating a solid open on Wall Street later today. The underlying driver for equity strength remains the continued retrenchment of concerns over the global banking sector and a surge in equity prices in Asia, following a 10% rally in tech giant Alibaba shares as they outlined a restructure.
• At the other end of the table, CHF is outperforming, reversing a large part of the Tuesday weakness to keep EUR/CHF well off any material test of parity. The 50-dma of 0.9926 remains first support, a level that continues to provide a solid anchor for prices.
• The USD Index is slightly firmer, snapping back a small part of the week-to-date losses, although recent ranges are being largely respected.
• The data calendar is relatively light going forward, with focus on the pending home sales release for February. The central bank speaker slate is busier, with Fed's Barr, BoE's Mann, BoC's Gravelle due during market hours, while ECB's Schnabel follows after the US close.

BONDS: Back in the Green as the US Joins

• EGBs are mixed this morning, Bund is back in the green, while BTP, followed by OAT outperforms Germany.
• Bund initially ticked lower, but has since recovered to its intraday high at the time of typing.
• Peripheral spread are all tighter, with Italy leading by 2.6bps.
• BTP/Bund is testing the 21st March low at 181.49bps.
• Greek/Bund spread sees Monday's low at 182.78bps, which is also the tightest level since the 10th March as the next support.
• Gilt is mostly trading inline with Bund and the Gilt/Bund spread sits 0.5bp wider, at 116.4bps at the time of typing.
• US Treasuries are also underpinned as the US starts to join the session.
• There hasn't been any standout flow/orders, and the lack of liquidity is likely helping exacerbate the moves.
• This looks more likely order flow related, given the lack of clear traction in the moves.
• There's no tier 1 data for today, as desk await EU CPIs, starting tomorrow with the German Regional/National CPIs, and Spain prelim CPI.

EQUITIES: Eurostoxx Futures Consolidate Below 4164.00 Key Resistance Level

Eurostoxx 50 futures are consolidating. The contract remains below 4164.00, the Mar 22 high. The recent pullback threatens a bull theme and signals the end of what appears to have been a corrective bounce. A resumption of weakness would open 4009.50, 61.8% of the Mar 20 22 rally. A move below the 4000.00 handle would expose 3914.00, the Mar 21 low and a bear trigger. Key short-term resistance is 4164.00. A break of this level would be bullish. S&P E-Minis remain below last 4073.75. The pullback from last week’s high means that price has - so far - failed to remain above pivot resistance at the 50-day EMA - the average intersects at 4019.45. A clear break of the average is required to strengthen bullish conditions. Support lies at 3937.00, the Mar 24 low. A breach would instead open 3897.25 next, the Mar 20 low. 4073.75, the Mar 22 high, is the bull trigger.

• Japan's NIKKEI closed higher by 365.53 pts or +1.33% at 27883.78 and the TOPIX ended 28.81 pts higher or +1.46% at 1995.48.
• Elsewhere, in China the SHANGHAI closed lower by 5.319 pts or -0.16% at 3240.057 and the HANG SENG ended 373.73 pts higher or +1.89% at 20161.18.
• Across Europe, Germany's DAX trades higher by 82.59 pts or +0.55% at 15224.12, FTSE 100 higher by 31.82 pts or +0.43% at 7516.41, CAC 40 up 51.91 pts or +0.73% at 7140.05 and Euro Stoxx 50 up 29.81 pts or +0.72% at 4198.02.
• Dow Jones mini up 158 pts or +0.48% at 32747, S&P 500 mini up 30 pts or +0.75% at 4031.75, NASDAQ mini up 109.75 pts or +0.86% at 12842.5.

COMMODITIES: WTI Futures Extend Higher, Breaching Resistance at the 20-Day EMA

WTI futures have traded higher this week. Price has breached resistance at the 20-day EMA which intersects at $72.60. The break is a short-term bullish development and a continuation higher would expose the 50-day EMA, at $75.04. 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 $0.66 or +0.9% at $73.86
• Natural Gas down $0.02 or -1.08% at $2.008
• Gold spot down $11.05 or -0.56% at $1962.43
• Copper down $2.75 or -0.67% at $405.65
• Silver down $0.17 or -0.74% at $23.1616
• Platinum down $3.01 or -0.31% at $964.24