MNI US OPEN - Netanyahu to Postpone Iran Strike Until After Passover

NEWS

FED (MNI): Mester Says Fed Well-Positioned to Wait, Gather Data

Cleveland Federal Reserve President Loretta Mester on Wednesday said she will be watchful and wait for more data to assess the economic outlook, noting that inflation this year has come in higher than expected. "My own forecast is that I still expect inflation to come down but I do think that we need to be watching and gathering more information before we take an action," she said at an event in Ohio. "Monetary policy and the economy are in good places," but "if it turned out that inflation isn't sort of moving down back to 2% we could hang where we are for a while longer than in my baseline," she said.

US/CHINA (BBG): Biden Calls China ‘Xenophobic,’ Ramping Up Campaign Rhetoric

President Joe Biden called China “xenophobic” while highlighting the Asian nation’s economic woes, as he sought to make the case for US economic strength during a campaign stop in the swing state of Pennsylvania. “They’ve got a population that is more people in retirement than working. They’re not importing anything. They’re xenophobic — nobody else coming in. They’ve got real problems,” Biden said of China in remarks to steel workers in Pittsburgh on Wednesday.

US/JAPAN/S.KOREA (BBG): Yellen’s Nod to Japan, Korea Adds Scope for Defending Yen, Won

US Treasury Secretary Janet Yellen acknowledged the concerns of Japan and South Korea over sharp declines in their currencies during a trilateral meeting of finance chiefs that may offer Tokyo and Seoul more scope to defend the yen and the won. Yellen, Japanese Finance Minister Shunichi Suzuki and South Korean Finance Minister Choi Sang-mok said in a statement that they will “continue to consult closely on foreign exchange market developments in line with our existing G-20 commitments, while acknowledging serious concerns of Japan and the Republic of Korea about the recent sharp depreciation of the Japanese yen and the Korean won.”

US (BBG): Iran Oil Sanctions Added to House Bill Tied to Ukraine Aid

New sanctions on Iranian oil were included as part of a foreign aid package released by House Republicans Wednesday that is slated for a floor vote later this week. The bill, part of a broader package providing billions of dollars to Ukraine and Israel, includes a provision to broaden sanctions against entities that ship or process Iranian crude, according to the text of the measure. China is currently the biggest buyer of oil from Iran, with Congress seeking to further target Tehran following last weekend’s unprecedented direct attack on Israel.

ISRAEL (MNI): Netanyahu to Postpone Iran Strike Until After Passover - Reports

Multiple reports suggesting that PM Benjamin Netanyahu is likely to postpone any retaliatory strike against Iran until after the Jewish holiday of Passover, which begins on 22 April and ends after sunset on 29 April (a number of outlets reporting 30 April, but in Israel for most sects Passover lasts seven days, rather than eight for many outside of Israel). With ABC reporting that according to three Israeli sources the gov't nearly launched strikes on two nights this week, only for them then to be aborted, a delay of nearly two weeks to any retaliatory strike could give further time for Israel's allies to urge caution and de-escalate the situation.

ECB (BBG): ECB’s Guindos Reiterates Inflation Trend May Allow for Rate Cut

European Central Bank Executive Board member Luis de Guindos reiterated that a continuation in the downward trend in inflation should allow interest rates to be lowered — backing expectations for a cut in June. Should officials’ confidence in meeting the 2% target for consumer-price growth increase, “it would be appropriate to reduce the current level of monetary policy restriction,” Guindos told European Union lawmakers Thursday in Brussels. “Inflation has fallen further this year and is expected to continue declining in the medium term, but at a slower pace,” he said, adding that the ECB isn’t “pre-committing to a particular rate path.”

ECB (BBG): ECB Rate-Cut Divergence From Fed Has Limits, Vasle Says

The European Central Bank can’t fully disregard inflation dynamics and monetary policy in the US when charting its own path, Governing Council member Bostjan Vasle said. Even if the conditions in both economies may call for different responses, there are linkages that officials in Frankfurt will take into account, the Slovenian central-bank governor said in an interview in Washington, where he’s attending the International Monetary Fund and World Bank spring meetings.

G7 (MNI): Russia and Middle East in Focus at G7 Foreign Ministers' Meeting

Russia and the Middle East will be in focus today as G7 foreign ministers meeting Capri, Italy. Finance ministers will meet in Stresa, May 23-25, and the Leaders' Summit will take place in Apulia, June 13-15. Shortly, the day's agenda will kick off with a general session on the situation in Middle East and a focused session on the, "Situation in the Red Sea." MidEast discussion is likely to focus on coordinated sanctions on Iran in response to their attack on Israel. Sanctions are likely to target Iranian military capabilities but expected to fall short of any meaningful action against the Iran's crude oil transactions with China.

G7 (BBG): G7 Reaffirms View That Disorderly FX Moves Can Harm Economy

The Group of Seven nations renewed commitments on foreign exchange policy that refer to the potentially harmful effects of excessive market movements, pledges that offer member states including Japan some latitude to defend their currencies in the face of dollar strength. A G-7 statement released Wednesday in Washington that also condemned Iran’s attack on Israel and Russia’s ongoing war against Ukraine contained a line reaffirming the members’ currency commitments outlined in May 2017.

UK (MNI): UK Preparing "Inclusive" Productivity Measure

The UK’s Office for National Statistics has made about 60% progress on a new measure of public sector productivity which will better account for services delivered rather than simply assuming they equal the cost of the inputs, with the new data set to be ready by next year, the ONS’s deputy chief economist told MNI, pointing to projects which will help policymakers measure output at a time of straightened fiscal circumstances. The refined data will form part of an overall new “Inclusive Income” measure which will also capture work done at home such as child care, Richard Heys said in an interview.

BOJ (MNI): Slow Rate Hikes Expected - BoJ's Noguchi

Bank of Japan board member Asahi Noguchi said on Thursday that the pace of raising the policy interest rate will be very slow as it takes considerable time for inflation to continue increasing as a trend. Noguchi was against ending the negative interest rate and yield curve control policy simultaneously at the March meeting, he told business leaders in Saga City. Steady services price rises and the pass-through of wage hikes to sales prices are necessary to strengthen the wage-price virtuous cycle, he added.

BOJ (MNI): BoJ Urges Bank Vigilance Against Tail Risks

The Bank of Japan’s Financial System Report on Thursday urged commercial banks to remain vigilant against tail risks and warned of a period of prolonged stress which could continue due to global monetary tightening. “From a long-term perspective, a decline in banks’ loss-absorbing capacity could lead to a contraction of financial intermediation activities or an overheating, such as excessive search for yield,” the FSR noted. “With these in mind, it is necessary to address the potential vulnerabilities appropriately and ensure the stability of Japan’s financial system into the future.”

JAPAN (BBG): Japan Exchange Chief Sees Corporate Governance Reform Rolling On

Japan Exchange Group Inc. Chief Executive Officer Hiromi Yamaji said that the corporate governance reforms he’s championed are likely to be an “endless thing” that keep rolling on. Yamaji, who also likened his reform push to mountain climbing, said a new phase has begun that will include the quality of corporate disclosures in English and enhanced discussions at board meetings. Speaking in an interview on Wednesday, he also said that the record high set by the Nikkei 225 was “only a milestone and a passing point” rather than a destination.

CHINA (MNI): PBOC to Watch CNY Moves Closely - Vice Governor Zhu

MNI (Beijing) The People’s Bank of China will watch changes in the yuan closely and guard against any overshooting risks, implementing comprehensive measures to stabilise market sentiment and resolutely correct any pro-cyclical behaviors, said Zhu Hexin, vice governor of the PBOC and director of the State Administration of Foreign Exchange on Thursday in a briefing. The yuan has experienced volatility against the U.S. dollar due to market expectations regarding the shift in the U.S. Federal Reserve's policy stance which has exacerbated turmoil in international financial markets.

CHINA (MNI): M2 Growth to Slow on Weak Demand - PBOC's Zou

MNI (Beijing) China’s rapid M2 expansion will slow as credit demand weakens in line with the economy's transformation, while the central bank will promote a moderate rise in prices and prevent excessively low interest rates from worsening fund idleness, said Zou Lan, director of the monetary policy department at the People's Bank of China on Thursday in a briefing. The PBOC will tighten control on idle funds cycling inside the financial system, Zou added, warning some enterprises have used low-cost loans to invest in wealth management products and time deposits, exacerbating the issue.

CHINA (MNI): China Eyes Significant Special Treasury Issuance

MNI (Beijing) China will likely issue a significant volume of ultra long-term special treasury bonds with tenors of 30 years or greater to support government investment over the next few years, while the central bank aims to strengthen credit support for related projects, a prominent policy advisor told MNI in an interview, adding that the boost to fiscal revenues from additional economic growth would pay for the extra debt. Weak demand has dragged down China's economy over the last decade and remains the country's strongest headwind, noted Zhang Liqun, senior researcher of the macroeconomic research department at the Development Research Center of the State Council.

CHINA (MNI): China Aims to Digitalise 70% of Firms by 2025

MNI (Beijing) Authorities will provide support to ensure 70% of manufacturing firms are digitalised and open several smart factories by 2025, according to Shan Zhongde, vice minister of the Ministry of Industry and Information Technology. Speaking to reporters on Thursday, Shan said authorities will improve 5G infrastructure aimed at building several industrial internet platforms with industry and regional influence also by 2025.

S.KOREA (BBG): S.Korea Considers Extending Tax Break for Chip Investment: Maeil

South Korea’s finance ministry is considering extending the so-called “K-Chips Act” of providing tax break for investment in chips, batteries and EVs by 3 years, Maeil Business Newspaper says, citing the government. The act is set to be terminated at end-2024Also considering expanding loans through state-run banks including Korea Development Bank

ARGENTINA/BRAZIL (BBG): Milei Proposes Encounter With Lula After Mutual Insults

Argentina’s President Javier Milei has extended an olive branch to Brazil’s Luiz Inacio Lula da Silva, whom he has repeatedly called a “communist,” by proposing an encounter to thaw high-level relations between the neighboring countries. On a trip to Brasilia and Sao Paulo this week, Foreign Minister Diana Mondino hand-delivered a letter to Lula’s team with the invitation, which does not set a date or place for the informal meeting, according to officials from both governments familiar with the text. Lula intends to wait until a meeting happens naturally, the Brazilian official added. Both requested anonymity to disclose the letter’s content.

DATA

AUSTRALIA DATA (MNI): Aussie Employment Falls, Unemployment at 3.8%

• AUSTRALIA MAR UNEMPLOYMENT RATE +3.8%
• AUSTRALIA MAR EMPLOYED PERSONS CHANGE -6.6K
• AUSTRALIA MAR F-T EMPLOYED PERSONS CHANGE 27.9K
• AUSTRALIA MAR LABOR PARTICIPATION RATE +66.6%

The headline March jobs figure was weaker than expected showing employment down 6.6k but February was revised up 1.1k to 117.6k. Some payback was expected and given February's outsized reading, but it was relatively muted and importantly focused in part-time jobs with full-time continuing to rise. The unemployment rate rose 0.1pp to 3.8%. Data show that the labour market remains tight and so the RBA's stance is unlikely to change.

FOREX: USD Index Opens Gap With Cycle High, Aids Broader Rebound in G10

• The USD trades modestly softer, while antipodean currencies and commodity-tied FX extends a rebound off lows into the NY crossover. The USD Index is lower for a second session, opening a 0.6% gap with the cycle high posted earlier this week at 106.517.
• USD/JPY's consolidation just below the cycle highs in recent sessions has prompted a minor unwind of the severely overbought condition, as detailed by the 14-day RSI - which touched 80 at the last session high, putting prices at the most overbought in 18 months. While the technical trend condition in USD/JPY remains positive, the next phase of strength could be harder to come by without another major shift in Fed policy pricing, as positioning looks stretched and diplomatic blockers to potential intervention appear to peel away - evident in the G7 statement overnight.
• Australian jobs data overnight was mixed, as the unemployment rate rose at a slower pace than expected, however far fewer jobs were added over the period - sending mixed signals for RBA policy. AUD/NZD sits lower into the NY crossover, with yesterday's lows of 1.0861 acting as first support.
• The data focus rests on weekly jobless claims ahead of existing home sales numbers for March. Central bank speak picks up, with Fed's Bowman, Williams, Bostic and Collins all on the docket, alongside BoE's Greene and ECB's Centeno, Simkus and Vujcic.
• Policy divergence between the US and Europe/UK is likely to take the spotlight, as both the ECB and BoE look to prep markets for earlier local rate cuts relative to the Federal Reserve, which continues to push back on the timing of the first easing phase.

EGBS: Remain Firmer in Spite of Easing Geopolitical Angst

Core/semi-core EGBs remain firmer this morning, amid a modest pullback in market-based Euro inflation expectations (e.g. 5y5y inflation swaps) - in part due to softening energy prices.

• That dynamic has outweighed any pullback in safe haven demand that would be implied by reports that Israel will delay retaliation on Iran until after the Passover period.
• Bono/Obli and MT OAT supply was well digested, with a French linker auction due later this morning.
• Bunds are +17 at 131.62, but remain well short of last Friday’s highs. This week’s move lower reinforces current bearish technical conditions.
• The German and French cash curves have lightly bull flattened, while 10-year periphery spreads to Bunds are tighter (likely a function of easing geopolitical tensions).
• ECB Vice President Guindos re-iterated the Central Bank’s guidance re dialling back policy restriction, while comments from Nagel, Centeno, Simkus and Vujcic are still scheduled for today,

GILTS: Holding Firmer

Gilts remain underpinned as yesterday’s recovery extends, with bulls pushing the contract as high as 97.20, before a fade to 97.05.

• Yields are 3-5bp lower, bull steepening seen on the curve.
• Adjustments to late Wednesday developments in wider core global FI markets and lower benchmark energy prices dominate, even as geopolitical angst eases a little (granted, that is the driver of lower energy prices today).
• Futures have cleared initial technical resistance, with little in the way of meaningful upside technical levels seen until the April 12 high (98.23).
• Still, bears remain in technical control as long as the contract trades below the April 12 peak.
• SONIA futures hold firmer in the main, although sit a little shy of best levels, last flat to +6.5.
• BoE-dated OIS sits off the most dovish levels of the session, but are still comfortably off post-CPI extremes, showing ~45bp of ’24 cuts.
• Sell-side names continue to adjust BoE calls in lieu of the recent UK data.
• BoE’s Greene will speak again today, but we have heard from her on several occasions over the last week or so.
• That will likely leave focus on cross-market and macro matters.

EQUITIES: E-Mini S&P Recover from Wednesday's Lows

Eurostoxx 50 futures are trading at their recent lows. A bearish corrective cycle remains in play and the move down this month has allowed an overbought trend condition to unwind. The contract is testing support at 4857.50, the 50-day EMA and a key pivot price point. A clear break of this average would signal scope for a deeper retracement and open 4826.00, the Mar 5 low. Initial resistance to watch is 4990.00, the Apr 15 high. The short-term trend condition in S&P E-Minis is unchanged and remains bearish with price trading closer to this week’s lows. The contract has traded through support at the 50-day EMA, signalling scope for a continuation lower near-term. Sights are on 5018.00, the Feb 21 low, ahead of the 5000.00 handle. Firm resistance is seen at 5195.21, the 20-day EMA. A clear break of the average would signal a possible reversal.

• Japan's NIKKEI closed higher by 117.9 pts or +0.31% at 38079.7 and the TOPIX ended 14.3 pts higher or +0.54% at 2677.45.
• Elsewhere, in China the SHANGHAI closed higher by 2.844 pts or +0.09% at 3074.225 and the HANG SENG ended 134.03 pts higher or +0.82% at 16385.87.
• Across Europe, Germany's DAX trades higher by 18.45 pts or +0.1% at 17788.39, FTSE 100 higher by 40.36 pts or +0.51% at 7887.96, CAC 40 up 40.62 pts or +0.51% at 8022.13 and Euro Stoxx 50 up 21.74 pts or +0.44% at 4935.87.
• Dow Jones mini up 49 pts or +0.13% at 38039, S&P 500 mini up 14.25 pts or +0.28% at 5076.5, NASDAQ mini up 73.5 pts or +0.42% at 17731.5.

COMMODITIES: Move Lower in WTI Futures Signals Start of Bearish Corrective Cycle

A bull theme in WTI futures remains intact, however, yesterday’s move lower signals the start of a short-term bearish corrective cycle. The contract has traded through the 20-day EMA and this signals scope for an extension towards the 50-day EMA, at $81.12. A clear break of the 50-day EMA would signal a stronger bearish theme. On the upside, key resistance and the bull trigger has been defined at $87.67, the Apr 12 high. The trend condition in Gold is unchanged and the outlook remains bullish with price trading closer to its recent highs. The latest rally maintains the price sequence of higher highs and higher lows and note that moving average studies are in a bull-mode condition, reflecting positive market sentiment. The next objective is $2452.5, a Fibonacci projection. Initial firm support is at $2293.4, the 20-day EMA.

• WTI Crude down $0.31 or -0.37% at $82.32
• Natural Gas up $0.05 or +2.75% at $1.76
• Gold spot up $19.08 or +0.81% at $2380.34
• Copper up $9.1 or +2.09% at $445.55
• Silver up $0.27 or +0.96% at $28.507
• Platinum up $2.77 or +0.29% at $946.45