MNI US OPEN: Strong Europe Data Renews Pressure On Bonds

NEWS

US (NYT): From President to Defendant: Trump Pleads Not Guilty to 34 Felonies

Donald J. Trump, who has weathered two impeachment trials, a special counsel inquiry and decades of investigations, was accused by Manhattan prosecutors on Tuesday of orchestrating a hush-money scheme to pave his path to the presidency and then covering it up from the White House. Mr. Trump pleaded not guilty in the case, which has far-reaching political consequences and opens a perilous chapter in the long public life of the real estate mogul and former president, who now faces the embarrassing prospect of a criminal trial.

EU/UK (MNI): Post-Brexit Checks On Goods Into UK To Be Streamlined: Sky News

Sky News Is reporting a new model of post-Brexit checks on goods arriving into the UK from the EU, intended to streamline the process of customs checks, is set to be announced by the gov't later today. Sky reports a Cabinet Office source claiming that the model will "reduce the need for checks for many types of goods". On 4 April, i News reported the announcement would be coming today, highlighting that the implementation of checks - required under the Brexit Withdrawal Agreement - have been postponed four times previously.

FRANCE (MNI): Union Head-Talks w/PM Borne Unsuccessful, 'We Will Keep Up Protests'

As was largely expected, France's major trade union federations have announced that talks with PM Elisabeth Borne and other Cabinet ministers have been unsuccessful, with protests and strikes set to continue. Unions stated that they urged Borne to drop the raising of the retirement age, but she refused. They stated that that would not return to the negotiating table unless this stance changed.

CHINA/EU (MNI): France's Macron Outlines Reasons For Xi Talks Ahead Of Trilateral Meet

French President Emmanuel Macron speaking in Beijing ahead of talks with Chinese President Xi Jinping. Macron: "There is more and more talk of tension between East and West" States that he "...doesn't want to believe in a scenario of unstoppable spiral of tension," and that "There is no reason to fall into the logic of two antagonistic bloc," but "That doesn't mean France should be equidistant between the US and China."

CORPORATE (BBG): UBS Chair Says Credit Suisse Integration Will Take Up to 4 Years

UBS Group AG Chairman Colm Kelleher said the integration of Credit Suisse Group AG will take three to four years, excluding the wind down of the investment bank. Even with downside protection in the form of government support, there’s a “huge amount of risk in integrating these businesses,” Kelleher said in prepared remarks for the bank’s annual general meeting on Wednesday.

JAPAN (MNI): BOJ Vigilant Despite Strong Planned Capex

Bank of Japan officials are concerned slower global demand and tighter financial conditions could negatively impact large and small company capital investment, despite both sectors reporting strong plans this fiscal year. The BOJ March Tankan showed capex plans at the beginning of the new fiscal year far above average historical levels. Companies sharply lowered capex last fiscal year due to high costs and a slower global economy.

RBA (MNI): Governor Lowe Will Hike If Needed, Rate Cut Talk "Way Too Early"

RBA Governor Lowe spoke before the National Press Club on "Monetary policy, demand and supply". At the beginning he made it clear that because the Board paused on April 4 it doesn't "imply that interest rate increases are over" but in the Q&A he said that it's not 100% certain that they will need to rise again. He made it very apparent that the RBA will increase rates again if it has to and that it's "way too early" to talk about cuts. The message was that decisions will be made each month and determined by the data.

RBA (MNI): RBA's Lowe Notes Supply Issues, Expects Further Hikes

Reserve Bank of Australia Governor Philip Lowe has pointed to population and housing, electricity price growth and productivity as key supply-side issues that will inform how the board makes future decisions, adding he expects further tightening "may well be needed". Speaking at the National Press Club today in Sydney, Lowe noted the complexity of inflation increases when supply-side issues are persistent, leading to stubborn price increases.

MNI RBA Review - April 2023: April Pause, Tightening Bias Intact

The RBA left rates unchanged at 3.6% at its April 4 meeting, after ten consecutive hikes worth 350bp. While it softened the tone of the statement, it retained its tightening bias. Future meeting outcomes are going to be extremely data dependent with May hinging on the Q1 CPI report (April 26) and updated RBA forecasts.

RBNZ (MNI): 50 Basis Point Hike Despite Slowing Economy

The Reserve Bank of New Zealand shocked markets with a 50bp hike in the official cash rate – bringing it to 5.25% – despite a raft of recent economic data suggesting the country's economy is slowing. The market had priced in a 25bp rise and the higher move, which brought the OCR to a level not seen since 2008, saw the NZD overnight index swap rate reprice sharply. OIS now implies a peak at the May 24 meeting with a 25bp hike to 5.5%, up from the 5.3% level recorded prior to today.

MNI RBI Preview - April 2023: 25bps Likely, Focus Again On RBI Policy Stance

The majority of economists expect the RBI to hike by 25bps when the policy outcome is announced tomorrow. Out of the 33 economists surveyed by Bloomberg, 7 look for no change in the policy rate, with the remainder forecasting a 25bps increase. If a 25bps hike is delivered, which is also our base line, it would take the policy rate to 6.75%.

DATA

EUROZONE DATA (MNI): Downward French PMI Revision Shouldn't Obscure Strong Month

• EUROZONE FINAL MAR SERVICES PMI 55.0 (FLASH 55.6); FEB 52.7 (MNI)
• GERMANY FINAL MAR SERVICES PMI 53.7 (FLASH 53.9); FEB 50.9 (MNI)
• FRANCE FINAL MAR SERVICES PMI 53.9 (FLASH 55.5); FEB 53.1 (MNI)
• ITALY MAR SERVICES PMI 55.7 (FCST 53.7); FEB 51.6 (MNI)

Not much info in the S&P Global release on why March's French Services PMI was revised down so much (by 1.6 points to 53.9). The last time the final Services PMI was revised down to such a degree was Feb 2022 when the final reading came after the Russia-Ukraine war began, and the flash came before (a -2.4 point revision). The best explanation is that it reflected nationwide labor strikes and protests at the end of the month. Overall though the downgrade only takes a bit of the sheen from the very strong Eurozone services performances in March, especially with the above-consensus Spain and Italy readings this morning.

UK FINAL MAR SERVICES 52.9 (FLASH 52.8); FEB 53.5 (MNI)

GERMAN DATA (MNI): Feb Factory Orders Rebound

• GERMANY FEB FACTORY ORDERS +4.8% M/M (FCST +0.3%); JAN +0.5% M/M
• GERMANY FEB FACTORY ORDERS -5.7% Y/Y (FCST -9.3%); JAN -12.0% Y/Y

German factory orders bounced back in February, jumping +4.8% m/m. This significantly outpaced the modest +0.3% m/m uptick expected, and implies three months now of m/m expansion after having contracted for eight out of 12 months in 2022. A rebound in intermediate and consumer goods drove the February boost and adds to optimism for German IP in the upcoming months.

FRANCE DATA (MNI): Transport and Auto Drive Feb IP Beat

• FRANCE FEB IND PROD +1.2% M/M (FCST +0.5%); JAN -1.4%r M/M
• FRANCE FEB IND PROD +1.3% Y/Y (FCST -0.1%); JAN -1.6%r Y/Y

French IP kicked off the February round of data with a +1.2% m/m and +1.3% y/y rebound, beating consensus expectations. Production was largely higher across all major sectors, bouncing back in transport equipment and to a lesser extent in autos. This strong headline print is despite contractive energy production in February. Easing supply chain restrictions and cooling energy prices are assisting French production levels, however, PMI data has continued to flag concerns of slowing demand.

FRANCE FEB MANUFACTURING OUTPUT +1.3% M/M, +2.2% Y/Y (MNI)

SPAIN DATA (MNI): Services PMI Growth Gains Momentum in March

• SPAIN MAR SERVICES PMI 59.4 (FCST 57.5); FEB 56.7

The Spanish services PMI gained 2.7 points in March, jumping to the strongest service sector growth since November '21. Strong demand spurred robust Q1 Spanish services growth and sustained employment growth. Inflationary pressures remained elevated, easing only slightly from February. Price growth was underpinned by high energy prices and wage pressures.

FOREX: USD is Back in the Green Against G10s

• After a steadier overnight session, the USD is in the green against most G10, and leads against the NOK and the AUD.
• AUD has been under pressure this morning in part following some decent selling against the NZD after the RNBZ hiked rates by 50bps vs the 25bps expected by Economists, and Risk tilted to the downside.
• EURAUD is in turn trading at its highest level since August 2021, with rnext resistance seen at 1.64372, the 2021 peak and highest print since November 2020.
• Final French, German, EU final services PMIs were revised lower, but had little impact in FX.
• EUR is similar to the Dollar in G10, and leads against the NOK and the AUD, up 1.02% and 0.98% respectively.
• As such EURUSD trades flat and in a tight 29 pips range.
• Note that there are really large option expiry for the pair set to expire today at 15.00BST, with 12.45bn between 1.0900 and 1.1000.
• Looking ahead, US final services PMI and US ADP/ISM services are the notable data releases.

BONDS: Strong European Data Unwinds Some of Yesterday’s Post-JOLTS Rally

• This morning core fixed income has come under a bit of pressure, partially reversing some of yesterday's JOLTS-inspired rally. We were already a little off the highs seen in late trading yesterday by the time Europeans got to their desks but the German curve took another leg lower (and bear flattened) on the back of stronger-than-expected German factory orders data, pulling other core FI lower with it. French IP data was also stronger-than-expected before the Spanish and Italian services PMI data both came in stronger-than-expected. Of the final service PMI releases only France saw a notable revision (lower) - although this could have potentially been skewed by the strikes.
• Looking ahead we will receive the ADP employment print and the final print of the US Markit services PMI ahead of the main release of the day - ISM services, where the employment and prices paid components will be in particular focus.
• TY1 futures are down -0-10 today at 115-30 with 10y UST yields up 2.8bp at 3.369% and 2y yields up 6.3bp at 3.891%.
• Bund futures are down -0.41 today at 135.88 with 10y Bund yields up 5.2bp at 2.298% and Schatz yields up 7.7bp at 2.665%.
• Gilt futures are down -0.75 today at 103.52 with 10y yields up 7.4bp at 3.505% and 2y yields up 7.3bp at 3.408%.

EQUITIES: E-Mini S&P Trend Conditions Remain Technically Bullish Despite Minor Correction

Eurostoxx 50 futures maintain a firmer tone. The contract traded higher last week and is holding on to its latest gain. Price has pierced resistance at 4268.00, the Mar 6 high and a key hurdle for bulls. A clear break of this level would strengthen bullish conditions and open 4300.00 next. Moving average studies are in a bull-mode set-up and this highlights a broader uptrend. Initial firm support lies at 4166.50, the 20-day EMA. S&P E-minis maintains a bullish tone. Price has recently breached resistance at 4119.50, reinforcing bullish conditions. The move higher has also resulted in a break of 4148.48, 76.4% of the Feb 2 - Mar 13 downleg. This signals scope for an extension towards 4205.50, the Feb 16 high ahead of 4244.00, the Feb 2 high and a key medium-term resistance. Firm support lies at 4036.58, the 50-day EMA.

• Japan's NIKKEI closed lower by 474.16 pts or -1.68% at 27813.26 and the TOPIX ended 38.92 pts lower or -1.92% at 1983.84.
• Across Europe, Germany's DAX trades lower by 26.1 pts or -0.17% at 15580.83, FTSE 100 higher by 10.59 pts or +0.14% at 7646.16, CAC 40 down 6.94 pts or -0.09% at 7339.38 and Euro Stoxx 50 down 6.72 pts or -0.16% at 4309.72.
• Dow Jones mini down 34 pts or -0.1% at 33536, S&P 500 mini down 5.25 pts or -0.13% at 4122.75, NASDAQ mini down 17.75 pts or -0.13% at 13199.5.

COMMODITIES: Gold Clears 2009.7 Resistance and Posts Fresh YTD High

WTI futures remain in a bull cycle and Monday’s gap higher strengthens this current condition. The contract has touched a high of $81.81, above key resistance at $81.04, the Mar 7 high. A clear break of $81.04 would signal scope for a continuation higher and open $83.04, the Jan 23 high. Key support is seen at $75.72, the Mar 31 high and the gap low on the daily chart. A pullback, if seen, would be considered corrective. Trend conditions in Gold remain bullish and Tuesday’s resumption of the uptrend reinforces current conditions. The yellow metal has cleared resistance at 2009.7, the Mar 20 high, to post fresh YTD highs and signal scope for a climb towards $2034.0 next, a Fibonacci projection. On the downside, key support has been defined at $1918.3, the Mar 17 low - a break would highlight a potential reversal.

• WTI Crude up $0.21 or +0.26% at $80.9
• Natural Gas down $0.03 or -1.28% at $2.077
• Gold spot up $5.27 or +0.26% at $2025.81
• Copper down $3.8 or -0.96% at $393.1
• Silver down $0.14 or -0.54% at $24.8568
• Platinum up $1.7 or +0.17% at $1023.38