MNI US OPEN - UK Inflation Slows, But Headline Slightly Above Expectations
EXECUTIVE SUMMARY:
- BIDEN TARGETS CHINA STEEL, SHIPMAKING IN PITCH TO STEELWORKERS
- ISRAEL’S WAR CABINET TO MEET TODAY ON IRAN ACTION FOLLOWING DELAY
- UK INFLATION SLOWS, BUT SERVICES SECTOR STICKY
- NZ Q1 INFLATION RISES 4%, HIGHER THAN RBNZ FORECAST
Figure 1: UK CPI slows in March, though a touch above expectations
Source: ONS
NEWS
US/CHINA (BBG): Biden Targets China Steel, Shipmaking in Pitch to Steelworkers
President Joe Biden is calling for higher tariffs on Chinese steel and aluminum, part of a series of steps to shore up the American steel sector and woo its workers in this year’s election. In a visit to Pittsburgh on Wednesday, Biden will propose new 25% tariffs on certain Chinese steel and aluminum products as part of an ongoing review, while the US also launches a formal probe into China’s shipbuilding industry. Biden will reiterate that United States Steel Corp., based in Pittsburgh, should remain American-owned.
US/CHINA (BBG): Austin Talks With China Counterpart as Nations’ Ties Improve
Secretary of Defense Lloyd Austin spoke with his Chinese counterpart as the two countries continue a push to stabilize ties. Austin and Chinese Defense Minister Dong Jun discussed freedom of navigation in the South China Sea, “provocations” by North Korea and Russia’s war in Ukraine, according to a statement from the Pentagon. Dong said the two nations’ militaries should cooperate and avoid confrontation in Beijing’s readout released Wednesday. He reiterated the Taiwan issue’s importance to China, which sees the self-ruled democracy as its territory, and called the South China Sea situation “generally stable.”
US/IRAN (BBG): Congressional Leaders Discussing Iran Oil Sanctions, Cardin Says
Congressional leaders are discussing how to push ahead with legislation that would place sanctions on importers of Iranian oil, with the issue gaining momentum after the nation’s direct attack on Israel, Senator Ben Cardin said Tuesday. The Stop Harboring Iranian Petroleum Act (S.1829) — which would broaden sanctions against entities that ship or process Iranian crude — passed out of committee Tuesday. The bill, by Florida Republican Senator Marco Rubio, sanctions refiners of Iranian oil and entities that illicitly trade the country’s crude through ship-to-ship transfers, according to a summary of the bill. A companion bill (H.R. 3774) passed the House on a 342-69 vote in November.
ISRAEL (MNI): War Cab to Meet on Iran Action Following Delay; UK FM-Clear Israel Will Act
Israel's war cabinet is set to meet today (17 Apr) to decide on a response to the drone/missile attack by Iran. The cabinet had been due to meet on Tuesday 16 April, but this was postponed at late notice. It comes as Israel's allies advocate sanctions on Iran in an effort to draw Israel back from launching a major retaliation. UK and German foreign ministers and have held talks with President Isaac Herzog. After the talks, UK's Lord Cameron stated that "It's clear the Israelis are making a decision to act. We hope they do so in a way that does as little to escalate this as possible."
ECB (MNI): ECB Unifies Interest on Non-Monetary Policy Deposits
The European Central Bank has set out a uniform remuneration rate for non-monetary policy deposits held in the range of ESTR minus a spread of 20 basis points, the ECB said in a statement on Wednesday. The rate will continue to apply as a ceiling for remunerating euro area government overnight deposits, it said, adding that most overnight deposits held with national central banks under the Eurosystem reserve management services framework are already remunerated at ESTR minus 20 basis points.
CANADA (BBG): Canada Hikes Capital Gains Tax to Raise Billions for Housing
Canada will raise capital gains taxes on businesses and wealthy individuals to help pay for tens of billions in new spending aimed at making housing more affordable and improving the lives of young people. Finance Minister Chrystia Freeland said the government will tax Canadian companies on two-thirds of their capital gains, up from half currently. That change will also apply to individual taxpayers when they have gains over C$250,000 ($181,000) in a year, though people will still be able to sell the homes they live in tax-free.
BOJ (BBG): BOJ Likely to Hike Interest Rates Next in September, Momma Says
The Bank of Japan will likely follow its March interest rate hike by increasing its policy rate to 0.25% in September, according to the central bank’s former executive director in charge of monetary policy. “It’s going to be the September meeting,” Kazuo Momma said Wednesday at a meeting in Tokyo of the International Swaps and Derivatives Association. Momma is currently executive economist at Mizuho Research & Technologies Ltd. “At this point I’m thinking they’ll raise the rate to 0.25%.”
JAPAN (BBG): Japanese Executives Call for Government Steps to Bolster Yen
Japanese financial authorities should consider conducting coordinated currency intervention with other countries to support the yen, the head of the Tokyo Chamber of Commerce and Industry said. Small and mid-sized Japanese companies are suffering from the rising costs of imported materials as the yen trades near a 34-year low against the dollar, TCCI Chairman Ken Kobayashi said Wednesday in a press conference, Kyodo News reported.
S.KOREA/JAPAN (BBG): Korea Discusses Currency Concerns With Japan, Ramps Up Jawboning
South Korea discussed concerns about its currency with Japan after the won and yen slumped to multi-year lows this week amid a surge in the dollar that’s reverberating through global markets. The government released a statement outlining comments from Finance Minister Choi Sang-mok and his Japanese counterpart Shunichi Suzuki in which they expressed “serious concerns” over the recent weakening of their currencies and warned of taking appropriate steps to counter any drastic volatility. There was no immediate comment from Japanese officials.
COMMODITIES (BBG): Iron Ore Jumps on Signs Pace of Steel Mill Restarts Picking Up
Iron ore jumped as much as 6% on optimism that more Chinese steel mills would restart as demand picks up. There’s been a “notable rebound in steel demand for construction, particularly in China’s mid-west,” said Wei Ying, an analyst at China Industrial Futures Co. The steelmaking staple was also aided by comments from Rio Tinto Group, the world’s biggest iron ore miner, which said Chinese steel exports were “likely to remain historically elevated.” However, the country’s property sector remains weak, it said in its first-quarter production update.
DATA
UK DATA (MNI): UK Inflation Slows, But Services Sector Sticky
- UK MAR CPI +0.6% M/M, +3.2% Y/Y
- UK MAR CORE CPI +0.6% M/M, +4.2% Y/Y
- UK MAR OUTPUT PPI +0.2% M/M, +0.6% Y/Y
- UK MAR INPUT PPI -0.1% M/M, -2.5% Y/Y
UK CPI slowed in March with both headline and core year-on-year readings lower than the previous month, the Office for National Statistics said Wednesday, although both readings were a touch higher than expected by City analysts. CPI rose by 3.2% y/y, the lowest level since 3.1% in Sept 2021, down from 3.4% in February, while core CPI rose by 4.2% y/y, down from 4.5% in February. The CPI goods annual rate slowed from 1.1% to 0.8%, while the CPI services annual rate eased slightly from 6.1% to 6.0%.
Accommodation services contributed +0.03ppt to headline CPI with restaurants -0.05ppt in the annual contribution (but +0.08ppt to the M/M).There was a downside contribution from clothing (-0.05ppt contribution to headline CPI) and furniture (-0.07ppt contribution to headline CPI). Food prices fell while energy prices were higher due to petrol prices rising (both of those expected). Air fares contributed -0.03ppt to headline CPI (smaller than exp).
EUROZONE DATA (MNI): EZ Final Inflation Confirms Flash, But Services Contribution Up
Eurozone Final HICP confirmed the March flash print. Energy and Unprocessed food both saw Y/Y disinflation between February and March, whilst Processed food, alcohol & tobacco and NEIG continued to see Y/Y disinflation. The March prints were confirmed at +2.4% Y/Y (vs +2.6% Y/Y in February) and +0.8% M/M (vs +0.6% M/M in February). Similarly, core inflation on an annual basis printed in line with flash at +2.9% Y/Y (vs +3.1% Y/Y in February), although on a monthly basis it saw a rise to +1.1% M/M from +0.7% M/M in February.
JAPAN DATA (MNI): Japan March Exports Hit 4th Straight Rise
- JAPAN MARCH EXPORTS +7.3% Y/Y; FEB +7.8%
- JAPAN POSTS JPY366.5 BLN TRADE SURPLUS IN MARCH
Japan's exports posted their fourth straight y/y rise in March thanks to solid exports of automobiles and ships, data released by the Ministry of Finance showed on Wednesday. The data printed largely within the Bank of Japan's latest assessment which held exports had been affected by the developments in overseas economies but have been more or less flat. Exports of automobiles rose 7.1% in March following February's 19.8% gain while vessel shipments rose 36.0% vs. the prior month's 20.0%.Imports fell 4.9% y/y in March, reversing from 0.5% in February for the first drop in two months.
NEW ZEALAND DATA (MNI): NZ Q1 Inflation Rises 4%, Higher Than RBNZ Forecast
Headline New Zealand inflation rose in line with expectation over Q1, printing at 4.0% y/y, or 0.6% q/q, down from Q4 2023’s 4.7%, according to data published today by Stats NZ. Non-tradable inflation grew 1.6% q/q, 30 basis points higher then expectations and up 50bp from Q4.The Reserve Bank of New Zealand’s February Monetary Policy Statement foretasted Q1 CPI at 0.4% q/q, or 3.8% y/y.
FOREX: Greenback Rally Stalls, UK CPI Provides GBP Relief
- The greenback rally has hit pause early Wednesday, allowing the rest of G10 to shake off a very small part of recent losses and stabilise above lows. This has kept the USD Index just below the cycle high printed yesterday at 106.517, but still comfortably firmer on the week (and month-to-date).
- GBP trades positively in response to higher-than-expected UK inflation data. Headline Y/Y CPI came in at 3.2% vs. Exp. 3.1%, with the whole series generally topping forecast by ~0.1ppts. This prompted a further backtrack in BoE rate cut expectations across the course of 2024, with markets now pricing around 40bps of cuts by year-end, a new series low. Salient options rolling off at the cut today include £1.1bln rolling off at 1.2390-00 and £586mln at 1.2450, while 0.8525-35 sees €585mln notional expiring in EUR/GBP.
- NZD is among the session's best performers, however the broader outlook remains soft. NZD/USD printed a new pullback and YTD low this week at 0.5861, but today's bounce has helped relieve AUD/NZD further off the April high, meeting first support at 1.0866, the 23.6% retracement for the February - April upleg.
- Focus for the duration of the Wednesday session remains on central bank rhetoric, with BoE's Bailey, Greene and Haskel due as well as ECB's Cipollone, de Cos, Schnabel and Lagarde. Fedspeak is thinner, with only Mester appearing after the close, with no scheduled text.
EGBS: Retrace UK CPI Inspired Weakness
Core/semi-core EGBs have retraced this morning’s UK inflation-inspired weakness to tilt slightly higher today.
- UK March inflation was higher-than-expected across headline, core and services categories.
- The Eurozone final March inflation print confirmed flash estimates (headline 2.4% Y/Y, core 2.9% Y/Y) and was not a market mover.
- The release indicated that services’ percentage point contribution to the 2.4% Y/Y annual rate increased relative to February. We will add more on the underlying details of the report in due course.
- Bunds are +8 ticks at 131.29, sitting comfortably within well-defined technical levels.
- The German and French cash curves have twist flattened, with the short-end underperforming.
- 10-year periphery spreads to Bunds are generally tighter except for Greece. The BTP/Bund spread is currently 2.3bps tighter at 143.6bps but remains above Monday’s narrowest levels.
- ECB-speak headlines the remainder of today’s calendar, with ECB’s Lagarde, Schnabel, Cipollone and de Cos all scheduled to speak.
GILTS: Off Lows Alongside Peers, BoE Pricing Back from Cycle Extremes
Gilts have moved away from session lows alongside global peers, after bears only forced a shallow look through year-to-date extremes in both futures and 10-Year yields following this morning’s firmer-than-expected UK CPI data.
- Relatively soft demand metrics at the latest 7-year gilt auction helps cap the recovery from lows.
- Futures last little changed on the day around 96.30.
- 96.00 held in the contract, with lows of 96.01 registered.
- Fresh weakness would allow bears to target the 1.764 projection of the Mar 12-15-22 price swing (95.96). A move beyond there would expose the 2.0% projection of the same move (95.41). Bulls need to force the contract back above the Feb 29 low (96.83), with the bearish impulse deepening in recent sessions.
- Yields are 2bp higher to 1bp lower as the curve twist flattens.
- 10s have pierced their November 24 high and a fresh move higher would target the Nov 13 high (4.365%).
- SONIA futures have also recovered from lows, last 0.5 to 4.0 lower through the blues.
- BoE-dated OIS shows ~39bp of ’24 cuts after an early foray below 35bp.
- Yesterday evening’s comments from BoE Governor Bailey, plus the broader bounce in core global FI markets and the low level of absolute cuts priced for ’24, probably factored into the recovery.
- Comments from BoE’s Bailey, Greene & Haskel provide the domestic focal points from here.
EQUITIES: Eurostoxx 50 Futures Continue Trading Close to Recent 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 has tested support at 4856.70, the 50-day EMA and a key pivot price point. A clear break of the 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. This week’s move lower reinforces the current condition - the contract has traded through support at the 50-day EMA, signalling scope for a continuation lower near-term. Sights are on 5070.36 next, a Fibonacci retracement. Clearance of this level would open 5018.00, the Feb 21 low. Firm resistance is seen at 5209.2, the 20-day EMA.
- Japan's NIKKEI closed lower by 509.4 pts or -1.32% at 37961.8 and the TOPIX ended 33.96 pts lower or -1.26% at 2663.15.
- Elsewhere, in China the SHANGHAI closed higher by 64.313 pts or +2.14% at 3071.381 and the HANG SENG ended 2.87 pts higher or +0.02% at 16251.84.
- Across Europe, Germany's DAX trades higher by 90.95 pts or +0.51% at 17858.78, FTSE 100 higher by 36.24 pts or +0.46% at 7857.88, CAC 40 up 88.85 pts or +1.12% at 8020.86 and Euro Stoxx 50 up 31.44 pts or +0.64% at 4948.35.
- Dow Jones mini up 154 pts or +0.4% at 38193, S&P 500 mini up 17 pts or +0.33% at 5109, NASDAQ mini up 32.75 pts or +0.18% at 17913.
COMMODITIES: Bull Theme in WTI Futures Intact Despite Recent Correction Lower
A bull theme in WTI futures remains intact and the latest move lower is considered corrective - for now. Recent gains reinforced current bullish conditions and confirmed a resumption of the uptrend. The contract has breached $84.87, the Sep 15 ‘23 high, paving the way for a climb towards the $90.00 handle further out. The next objective is $89.08, a Fibonacci projection. Initial firm support to watch lies at $84.01, the 20-day EMA. The trend condition in Gold is unchanged and remains bullish plus the yellow metal is 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 $2286.3, the 20-day EMA.
- WTI Crude down $0.48 or -0.56% at $84.91
- Natural Gas down $0.06 or -3.41% at $1.675
- Gold spot up $8.05 or +0.34% at $2391.44
- Copper up $2.75 or +0.63% at $435.85
- Silver up $0.42 or +1.48% at $28.5335
- Platinum down $1.48 or -0.15% at $957.65
Date | GMT/Local | Impact | Flag | Country | Event |
17/04/2024 | 1100/0700 | ** | US | MBA Weekly Applications Index | |
17/04/2024 | 1205/1305 | UK | BoE's Greene on IIF Panel | ||
17/04/2024 | 1230/0830 | * | CA | International Canadian Transaction in Securities | |
17/04/2024 | 1300/1500 | EU | ECB's Cipollone at IIF Global Outlook Forum | ||
17/04/2024 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks | |
17/04/2024 | 1545/1745 | EU | ECB's Schnabel Speaks At IRFMP | ||
17/04/2024 | 1600/1700 | UK | BoE's Bailey In IIF Fireside Chat | ||
17/04/2024 | 1700/1300 | ** | US | US Treasury Auction Result for 20 Year Bond | |
17/04/2024 | 1800/1400 | US | Fed Beige Book | ||
17/04/2024 | 1800/1900 | UK | BoE's Haskel At Kings College London Panel | ||
17/04/2024 | 2000/1600 | ** | US | TICS | |
17/04/2024 | 2130/1730 | US | Cleveland Fed's Loretta Mester | ||
17/04/2024 | 2315/1915 | US | Fed Governor Michelle Bowman | ||
18/04/2024 | 0130/1130 | *** | AU | Labor Force Survey | |
18/04/2024 | 0715/0915 | EU | ECB's De Guindos ECB Report Presentation | ||
18/04/2024 | 0800/1000 | ** | EU | Current Account | |
18/04/2024 | 0900/1100 | ** | EU | Construction Production | |
18/04/2024 | 1230/0830 | *** | US | Jobless Claims | |
18/04/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export | |
18/04/2024 | 1230/0830 | ** | US | Philadelphia Fed Manufacturing Index | |
18/04/2024 | 1305/0905 | US | Fed Governor Michelle Bowman | ||
18/04/2024 | 1315/0915 | US | New York Fed's John Williams | ||
18/04/2024 | 1315/0915 | US | Fed's Miki Bowman | ||
18/04/2024 | 1400/1000 | *** | US | NAR existing home sales | |
18/04/2024 | 1430/1030 | ** | US | Natural Gas Stocks | |
18/04/2024 | 1500/1100 | US | Atlanta Fed's Raphael Bostic | ||
18/04/2024 | 1500/1600 | UK | BOE's Greene with Atlantic Council GeoEconomics Center | ||
18/04/2024 | 1700/1300 | ** | US | US Treasury Auction Result for TIPS 5 Year Note | |
18/04/2024 | 1730/1930 | EU | ECB's Schnabel Speaks At 2024 EU-US Symposium | ||
18/04/2024 | 2145/1745 | US | Atlanta Fed's Raphael Bostic |