MNI US OPEN - SNB Unexpectedly Deliver 25bp Rate Cut

NEWS

SNB (MNI): SNB Cuts to 1.5%, Inflation on Target "For Years"

The Swiss National Bank lowered its deposit rate by 25 basis points to 1.50% on Thursday, saying that "the fight against inflation over the past two-and-a-half years has been effective," after several months during which price increases fell within the price stability target zone of less than 2%.Inflation is now expected to remain within the desired range "over the next few years" the Swiss central bank said in a statement, adding that while it remains willing to be active in foreign exchange markets as necessary, "with its decision, the SNB is taking into account the reduced inflationary pressure as well as the appreciation of the Swiss franc in real terms over the past year.

NORGES BANK (MNI): Norges Bank Holds, Likely to Keep Policy Steady

Norges Bank left its key policy rate unchanged at 4.5% at its March meeting and made clear that it was likely to stay unchanged in coming months, with its rate projection showing the first cut not coming until the autumn at the earliest. The central bank's quarterly rate projection for the near-term was unchanged, with the policy rate shown falling to 4.29% in the fourth quarter, pointing to a single rate cut later this year. The path overall was a touch higher than in the previous forecast round, with the policy rate shown at 3.07% by the end of 2026, up from 2.97%,. and at 2.82% three years ahead.

US (NYT): Blinken Describes New US Push at the UN for Gaza Cease-Fire

In Saudi Arabia, the secretary of state described a U.S. draft resolution at the U.N. Security Council calling for “an immediate cease-fire tied to the release of hostages” in Gaza. The United States has submitted a draft resolution to the U.N. Security Council calling for “an immediate cease-fire tied to the release of hostages” in Gaza, Secretary of State Antony J. Blinken said on Wednesday in Saudi Arabia, during his latest trip to the region to broker a diplomatic resolution to the war between Israel and Hamas.

US (WaPo): Trump Lags Behind Biden in Campaign Cash Reserves While Legal Bills Mount

President Biden's campaign continues to boast a significant cash advantage over Donald Trump's, as the former president juggles the burdens of fundraising for his bid to return to office and paying his mounting legal bills seven months before the general election. Federal Election Commission reports filed on Wednesday did not offer a full picture of the comparative strength of the two campaigns, because several of the groups raising money for each presumptive nominee will not disclose their latest totals with the FEC until April.

US (BBG): Congress Unveils $1.2 Trillion Plan to Fund Agencies to Sept. 30

Congressional leaders released details of a $1.2 trillion deal to keep open most US government agencies through Sept. 30, acting just days before a Saturday deadline for a partial government shutdown. Defense spending rises more than 3% to $886 billion under the agreement while domestic spending remains largely flat. Border and immigration agencies would see a funding boost.

CHINA (MNI): China Fiscal Policy to Enhance Employment Support

MNI (Beijing) China fiscal authorities will allocate a budget of CNY66.7 billion this year for employment subsidies and support the implementation of policies to promote jobs and entrepreneurship, Deputy Minister of Finance Liao Min told reporters on Thursday. The government’s financing guarantees institutions will increase aid for labour-intensive enterprises, leveraging CNY1.3 trillion in new loans in 2024 and ensuring over 12 million job positions and the creation of over 600,000 jobs, Liao noted.

BOJ (MNI): Policy Change Due to Larger Hike Risk - BOJ's Ueda

Bank of Japan Governor Kazuo Ueda said on Thursday that Tuesday's decision to phase out easy policy before confirming the achievement of the 2% price target in a stable and sustainable manner was driven by desire to avoid a risk of rapid rate hikes. Ueda told lawmakers the Bank could have phased out easy policy after confirming the achievement of the 2% price target.

DATA

UK DATA (MNI): UK Borrowing Slows in February

• UK FEB PSNB-X GBP+8.4 BN
• UK FEB PSNB GBP+7.48 BN
• UK FEB PSNCR GBP3.02 BN
• UK FEB CGNCR GBP8.63 BN

UK borrowing fell to the lowest comparable year-to-date level for four years in nominal terms, the Office for National Statistics said Thursday, although overall borrowing was slightly higher than expected by financial markets. Public sector net borrowing excluding public sector banks (borrowing) was GBP8.4 billion in Feb, GBP3.4 billion less than in Feb. Borrowing in the financial year-to-Feb was GBP106.8 billion, GBP4.6 billion less than in the same eleven-month period a year ago.

UK DATA (MNI): Continued Inflationary Concerns but Weakening Labour Market

• UK MAR FLASH MANUFACTURING PMI 49.9 (FCST 47.8); FEB 47.5
• UK MAR FLASH SERVICES PMI 53.4 (FCST 53.8); FEB 53.8

Small downside surprise for UK services PMI (53.4 versus consensus and prior at 53.8) while the manufacturing PMI surprised to the upside (49.9 versus 47.8 consensus and 47.5 prior). The composite output PMI was 0.2 points lower than consensus, falling 0.1 point to 52.9. The survey is likely to have been seen by the MPC (although we have no confirmation of that until we see the Minutes later). Looking at the details, inflationary pressures appear to still be a concern with input prices still high, particularly for manufacturers, while services output prices still seem sticky.

EUROZONE DATA (MNI): Rest of EZ Outperforms France and Germany

• EUROZONE MAR FLASH MANUFACTURING PMI 45.7 (FCST 47.0)
• EUROZONE MAR FLASH SERVICES PMI 51.1 (FCST 50.5); FEB 50.2

Eurozone services PMNI was higher than expected at 51.1 (50.5 cons, 50.2 prior) while manufacturing PMI was below consensus (as seen for both France and Germany) at 45.7 (47.0 cons, 46.5 prior). The composite output index was marginally higher than expected at 49.9 (49.7 cons, 49.2 prior). The report continues to point to underperformance in France and Germany relative to the rest of the EZ.

GERMANY DATA (MNI): Manufacturing Downtick Calls Bottoming Out Into Question

• GERMANY MAR FLASH MANUFACTURING PMI 41.6 (FCST 43.0); FEB
• GERMANY MAR FLASH SERVICES PMI 49.8 (FCST 48.8); FEB 48.3

The German flash March PMI showed mixed results, with manufacturing below expectations at 41.6 (43.0 cons, 42.5 prior) but services above consensus at49.8 (48.8 cons, 48.3 prior). The composite output index rose to 47.4 (47.0 cons, 46.3 prior). This calls into question whether the German manufacturing sector has indeed bottomed out, with the current reading now almost 4 points below the January print. The market reaction was likely contaminated by the SNB's unexpected cut in policy rates.

FRANCE DATA (MNI): Demand Weakness Reduces Inflationary Pressure

• FRANCE MAR FLASH MANUFACTURING PMI 45.8 (FCST 47.5); FEB
• FRANCE MAR FLASH SERVICES PMI 47.8 (FCST 48.8); FEB 48.4

The French March flash PMI was below consensus for both services (47.8 vs 48.8 cons, 48.4 prior) and manufacturing (45.8 vs 47.5 cons, 47.1 prior), prompting a 30 tick spike in Bund futures on release. The composite reading was 47.7, and has been in contractionary territory since May 2023. A deterioration of demand continued to push output lower, but also meant inflation pressured moderated.

FRANCE MAR MANUF SENTIMENT AT 102 (MNI)

JAPAN DATA (MNI): Japan Feb Exports Hit 3rd Straight Rise

• JAPAN POSTS JPY379.4 BLN TRADE DEFICIT IN FEB
• JAPAN FEB EXPORTS +7.8% Y/Y; JAN +11.9%

Japan's exports posted their third straight y/y rise in February, thanks to solid automobile and auto-part shipments, up 7.8% in February, data released by the Ministry of Finance showed on Thursday. Automobiles rose 19.8% in February down from January's 31.6%, while auto parts gained 22.6% vs. 22.1% the prior month. The data was largely within the Bank of Japan's forecast which held exports have been affected by slowing overseas economies, but remain more or less flat.

AUSTRALIA DATA (MNI): Aussie Unemployment at 3.7%, 30bp Tighter Than Survey

Australia’s unemployment rate fell 0.4 basis points to 3.7% in February, missing the market’s 4.0% expectation, while employment grew by 116,000, higher than the 40,000 forecasted, data from the Australian Bureau of Statistics showed Thursday. The Reserve Bank of Australia had expected unemployment to reach 4.2% by Q2 and peak at 4.4% by mid-2025. Governor Michele Bullock noted following the RBA Board’s decision to hold the cash rate at 4.35% this week that the non-accelerating inflation rate of unemployment is likely between 4-4.5%.

CENTRAL BANK PREVIEWS

MNI BOE PREVIEW - MARCH 2024: Vote and Guidance

The March MPC meeting will be in focus this week with two key aspects: first the vote split and second the guidance. The MNI Markets team, and the majority of analysts, expect an unchanged vote, although we do note the possibility that either Haskel, and also possibly Mann, could vote for unchanged Bank Rate at this meeting. We also expect no material change to guidance. We look at risks to both of these - as well as potential changes to the guidance.

MNI CBRT PREVIEW- MARCH 2024: Hold Likely But Hawkish Surprise Possible

The Central Bank of Turkey are broadly expected to keep the one-week repo rate on hold at 45%, having communicated previously that its hiking cycle is complete, though the recent acceleration in TRY depreciation and increasing pressure on Turkish FX reserves may prompt a hawkish surprise. But given the proximity to the local elections on March 31, the central bank may decide to postpone any rate decision while it awaits more clarity on the inflation outlook.

MNI BANXICO PREVIEW - MARCH 2024: Monetary Easing Expected to Commence

Most analysts are expecting Banxico to cut the overnight rate by 25bps to 11.00%.Declining inflation, the high level of the real ex-ante policy rate and the ongoing resilience of the Mexican peso all suggest conditions have been met to ease the monetary policy stance this week. However, the cautious rhetoric from committee members and the prolonged pause from the Fed, highlight that the decision is by no means set in stone and increases the likelihood of a split decision.

MNI COLOMBIA CENTRAL BANK PREVIEW - MARCH 2024: Easing Pace Likely to be Accelerated

Analysts expect the central bank to accelerate the pace of rate cuts this week, with a majority looking for a 50bp move to 12.25% and risks skewed towards a slightly larger cut. A further decline of inflation and inflation expectations means that real rates have risen since the last meeting, which along with weak activity supports the case for a larger rate move. The continued divergence of views among the committee, however, means that the decision is unlikely to be unanimous.

FOREX: CHF Slides as SNB Become First G10 to Trigger Easing Cycle

• The Greenback is recovering off post-Fed lows, putting the USD Index comfortably above the overnight and Wednesday worst levels. This keeps the USD Index inline with longer-running trends, as the 200-dma holds just above at 103.700. The European session so far has been active, with several rate decisions and key flash PMI releases to digest.
• The Swiss National Bank took markets by surprise in cutting rates by 25bps, putting the headline deposit rate at 1.50% to become the first G10 central bank globally to ease policy in this cycle. With only 7bps of easing priced via OIS markets ahead of the release, CHF corrected lower, tipping EUR/CHF to new cycle highs and narrow the gap with the 0.9800 handle. Resultingly, the CHF is comfortably the poorest performer in DM FX.
• The Norges Bank rate decision saw rates unchanged, but the policy path projections erred hawkishly, with markets expecting a larger downward revision due to recent developments in inflation and the NOK. As a result, NOK trades firmer tipping EUR/NOK to pullback lows of 11.4846.
• PMI data has generally fared lower-than-expected, with French and German flash PMI numbers weaker than market forecast. This took some wind out of the sails of the single currency, tipping EUR/USD lower by ~20 pips headed into the NY crossover.
• The Bank of England rate decision ahead takes focus - with the Bank seen keeping rates unchanged. The MPC vote split will be of particular focus, given the risks of a three-way split among the council. Weekly US jobless claims are also due, as well as the existing home sales release for February. Fed's Barr will be the first speaker following yesterday's FOMC

US TSYS: Firmer, Radiance Caps TY

Tsys underpinned by the SNB rate cut (only 7bp of easing was priced into CHF STIRs pre-decision) and Eurozone flash PMI data.

• TY futures manage a modest look above yesterday’s high before backing off a little.
• Contract last +0-07+ at 110-21+, range 110-12+ to 110-22+, volume running comfortably above average at 377K.
• The 20-day EMA (110-23) caps the rally for now.
• A break would expose the 50-day EMA (111-01+).
• Cash Tsy yields 2-4bp lower, 7s leading the rally.
• Digestion of yesterday’s FOMC continues. Expect our full review of that event later today.
• FOMC-dated OIS leans a little more dovish post-FOMC, showing ~83bp of ’24 cuts and ~20bp of cuts through June.
• Weekly jobless claims data, flash S&P global PMIs, existing home sales and the latest Philly Fed survey will cross in NY hours.
• Fed Vice Chair Barr will speak.
• 10-Year TIPS supply is also due.

BONDS: SNB & European Manufacturing PMIs Add to Fed-Driven Rally

Core global FI markets a little off session highs.

• Softer-than-expected Eurozone flash manufacturing PMI data and a rate cut from the SNB (only 7bp of easing was priced ahead of the decision) add to the Fed-driven rally in core global FI markets early today.
• Those inputs outweigh any worry re: today’s busy EGB supply slate.
• UK PMI data (firmer-than-expected manufacturing & slightly softer-than-expected services) had little net impact.
• Bund futures last +39 at 132.30, ~20 ticks off highs. The 20-day EMA (132.54) went untested).
• German cash yields are 1.5-5.5bp lower on the day, curve bull steepens.
• 10-Year peripherals little changed to tighter vs. Bunds on the bond supportive-backdrop and with ECB-dated OIS moving to price ~92bp of ’24 cuts.
• Gilt futures pierce initial resistance with bulls looking to 100.00 next. Contract off highs last +32 at 98.38.
• Cash gilt yields 0.5-5.0bp lower on the day, 5s outperform.
• BoE-dated OIS showing ~74bp of ’24 cuts vs. ~68bp late yesterday.
• The BoE decision, Fedspeak from Barr, U.S. data and aforementioned EGB supply provide the scheduled points of interest from here.

EQUITIES: E-Mini S&P Trading at Fresh Cycle High Following Fed

A bullish trend condition in Eurostoxx 50 futures remains intact and today’s gains reinforce current conditions. The contract has traded above its recent high to confirm 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 4884.30, the 20-day EMA. The trend condition in S&P E-Minis remains bullish and this week’s extension reinforces this theme. The break of 5257.25, Mar 8 high, confirms a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. MA studies are in a bull-mode position reflecting positive market sentiment. Sights are on 5370.81, the top of a bull channel drawn from the Jan 17 low. Initial firm support is at 5185.88, the 20-day EMA.

• Japan's NIKKEI closed higher by 812.06 pts or +2.03% at 40815.66 and the TOPIX ended 45.24 pts higher or +1.64% at 2796.21.
• Elsewhere, in China the SHANGHAI closed lower by 2.573 pts or -0.08% at 3077.113 and the HANG SENG ended 320.03 pts higher or +1.93% at 16863.1.
• Across Europe, Germany's DAX trades higher by 134.86 pts or +0.75% at 18148.78, FTSE 100 higher by 85.46 pts or +1.1% at 7822.59, CAC 40 up 36.6 pts or +0.45% at 8198.01 and Euro Stoxx 50 up 43.92 pts or +0.88% at 5044.23.
• Dow Jones mini up 117 pts or +0.29% at 40058, S&P 500 mini up 22.5 pts or +0.43% at 5309, NASDAQ mini up 143.25 pts or +0.78% at 18621.75.

COMMODITIES: Gold Narrows Gap to Resistance at $2230 Projection Level

WTI futures traded higher Tuesday and a bull theme remains intact. Last week’s 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 $79.08, the 20-day EMA. The trend condition in Gold is bullish and this week’s gains reinforce current conditions. The earlier rally today delivered another all-time high and confirms 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. On the downside, key short-term trend support has been defined at $2146.2, the Mar 18 low.

• WTI Crude up $0.37 or +0.46% at $81.64
• Natural Gas down $0 or -0.12% at $1.698
• Gold spot up $11.71 or +0.54% at $2197.81
• Copper up $3.9 or +0.96% at $409.05
• Silver down $0.13 or -0.51% at $25.4388
• Platinum down $0.12 or -0.01% at $908.52