MNI US OPEN - US to Pressure Chinese Economic Approach at G7

NEWS

TAIWAN (BBG): Taiwan Sees Chinese Economic Blockade More Likely Than War

Taiwan is working with friendly nations on how to respond to a possible economic blockade by China, a scenario that appears more likely than a direct military attack on the island, according to a senior Taiwanese diplomat. Chinese military exercises are increasingly aimed at “winning the war without an actual fight,” Taiwan’s deputy Foreign Minister Roy Chun Lee said in an interview.

US/CHINA (BBG): US to Push Against China Economic ‘Coercion’ at G-7 Meeting

The US is pressing the need for allies to coordinate against economic coercion, not just military threats, as Japan prepares to host top diplomats from the Group of Seven nations amid heightened tensions with China. “That coercion piece is important,” US Ambassador to Tokyo Rahm Emanuel said in an interview days before the ministerial meeting begins in the mountain resort of Karuizawa on Sunday.

US/JAPAN/PHILIPPINES (BBG): Japan, Philippines Visit to Promote US Indo-Pacific Trade Plan

US Trade Representative Katherine Tai will meet with leaders in the Philippines and Japan next week, as the Biden administration works to prove that its year-old trade framework is yielding results. President Joe Biden launched the Indo-Pacific Economic Framework last May, aiming to build US trading relationships overseas without the involvement of China. The framework includes multiple Southeast Asian nations, such as Japan and the Philippines, and sets rules and standards with foreign markets to smooth out supply lines.

CHINA/RUSSIA (MNI): Def Mins to Meet but FM Says No Weapons to Any Party in Ukraine

Chinese Defense Minister Li Shangfu's upcoming visit to Russia is likely to further raise concerns in Ukraine and the West about the increasingly close diplomatic and military relationship between the two nations.

CHINA (BBG): China Lays Out Three-Point Plan at Global Debt Relief Talks

China said it wants multilateral lenders to participate in the debt restructuring of poorer nations as part of a three-point plan put forward at talks with the World Bank and other creditors in Washington this week. Wang Wenbin, a spokesman for the Foreign Ministry, outlined proposals delivered at the Global Sovereign Debt Roundtable, providing fresh insight into China’s demands to find a solution to the debt crisis.

CHINA/AUSTRALIA (BBG): China to Review and Possibly Scrap Australia Barley Tariffs

The Chinese Ministry of Commerce has announced a review of its existing anti-dumping and anti-subsidy duties on barley imports from Australia, a major move toward reducing the ongoing trade tensions between the two nations. The ministry gave details of the barley tariff review in a statement on Friday, confirming an earlier announcement from the Australian government on Tuesday.

RUSSIA (MNI): Pacific Put Fleet on Alert for Inspection amid High Tensions in NE Asia

State-run RIA reporting that the Russian Defence Ministry has put the country's Pacific Fleet on high alert for a surprise inspection. The inspection is intended to build its defensive capabilities. Defence Minister Sergei Shoigu was reported by RIA saying "The main objective of this inspection is to increase the ability of the Armed Forces to repel the aggression of a probable enemy from the direction of ocean and sea".

FRANCE (MNI): Constitutional Council to Rule on Pension Reforms at 1800CET

The French Constitutional Court is set to issue its ruling on the controversial pension reforms pushed through parliament without a vote by the government at 1800CET (1200ET/1700BST). Labour unions have called for another 'show of force' on the streets of French cities ahead of the ruling following yesterday's widespread strike action.

GERMANY (BBG): German Minister Warns of Taiwan ‘Horror’ on Testy China Trip

Taiwan’s destabilization would be a “horror scenario,” German Foreign Minister Annalena Baerbock said in a testy public exchange with her Chinese counterpart. Speaking next to China’s Qin Gang in Beijing on Friday, Baerbock said a change in Taiwan’s status would be “unacceptable.” “We remain committed to our one China policy, but at the same moment we are concerned about the current situation in the strait of Taiwan,” Baerbock told reporters at a press briefing in China’s capital.

JAPAN (MNI): BOJ Unlikely to Act Before Fed SVB Report

The Bank of Japan will not take further policy action until the U.S. Federal Reserve releases its report on the failure of Silicon Valley Bank (SVB) expected by May 1, MNI understands. BOJ officials will examine the Fed’s assessment of the financial system and the market's reaction to the report, which will inform the Bank's outlook for the U.S. economy and global financial markets – crucial issues for BOJ policy decisions.

JAPAN (MNI): US Recession Could Close BOJ Tweak Window

A U.S. recession could close or limit the Bank of Japan's chance to tweak policy or smooth its yield curve control mechanism. While the BOJ will likely not change its settings at the upcoming April 27-28 meeting, newly appointed Governor Kazuo Ueda will scrutinise the U.S. economy's future performance before tweaking the Bank's easy policy settings, MNI understands.

JAPAN (MNI): Debate Builds Over BOJ's 2% CPI Projection

Some Bank of Japan officials have challenged the Bank's view that the y/y core consumer price index (CPI) will fall below 2% toward the middle of the fiscal year, noting strong wage growth and ongoing cost pass-through could delay the reversion or soften its fall more than expected, MNI understands. While the BOJ's view that y/y rise in the core CPI will fall below 2% toward the middle of this fiscal year, some within the Bank believe the risk of stronger prices could delay the reversion.

OPEC+ (BBG): OPEC+ Cuts Intensify the ‘Siege’ on Oil Consumers, IEA Warns

OPEC+ production cuts are likely to drive up oil prices and inflict more pain on consumers already squeezed by high inflation, the International Energy Agency said. “Oil market balances were already set to tilt into a substantial deficit,” the Paris-based IEA said in its monthly report on Friday. “The latest cuts risk exacerbating those strains” and “consumers currently under siege from inflation will suffer even more from higher prices.”

DATA

FRANCE MAR CPI +0.9% M/M, +5.7% Y/Y (MNI)
FRANCE MAR HICP +1% M/M, +6.7% Y/Y (MNI)

SPAIN MAR HICP +1.1% M/M, +3.1% Y/Y (MNI)

SWEDEN (MNI): Inflation Slows, Core CPIF Eases from February High

• SWEDEN MAR CPIF +0.4% M/M (FCST +0.7%); FEB +0.9% M/M
• SWEDEN MAR CPIF +8.0% Y/Y (FCST +8.3%); FEB +9.4% Y/Y

Swedish headline inflation slowed more sharply than expected in March, easing by 1.4pp for both CPI and CPIF (fixed interest rate) to +10.6% y/y and +8.0% y/y respectively. Despite lower than market expectations, for CPIF this remains higher than the Riskbank's forecasts. Short-term price pressures were softer in March at +0.6% m/m (CPI) and +0.4% m/m (CPIF), albeit remaining expansive. Declining energy prices was the key downwards driver in March, whilst food, clothes and rents slowed on the month.

RATINGS: Friday’s Rating Slate

Potential rating reviews of note slated for after hours on Friday include:

• Fitch on Croatia (current rating: BBB+; Outlook Stable) & Portugal (current rating: BBB+; Outlook Stable)
• Moody’s on the European Union (current rating: Aaa; Outlook Stable)
• S&P on the Czech Republic (current rating: AA-; Outlook Stable)
• DBRS Morningstar on Malta (current rating: A (high), Stable Trend)

FOREX: EUR/USD Ekes Out a Fresh Cycle High in Late Asia

• The single currency fares better early Friday, creeping higher against most others in G10 - although market moves are more muted relative to Thursday trade. EUR/USD has printed a fresh weekly high at 1.1076 in late Asia hours, which remains the high watermark headed through to the NY crossover.
• GBP/USD traded well before meeting selling pressure across early Europe. Moves were order flow driven rather than headline driven, with futures markets showing evidence of sizeable selling helping push prices back to handle support of 1.2500.
• AUD is at the bottom of the G10 pile, partially reversing the solid rally posted during the Thursday session. 0.6755 Fib retracement provides first weak support ahead of the 50-, 200-dmas of 0.6749 and 0.6744 respectively. Note that the DMAs are on the cusp of printing a death cross (50-dma < 200-dma) for the first time since May 2022 - a bearish technical signal.
• Data highlights Friday include import/export price indices for March, as well as the monthly retail sales report. Consensus looks for retail sales to have dropped 0.4% - a similar pace to February - with the ex-auto and gas component seen particularly weak.
• Prelim University of Michigan Sentiment rounds off the week, which is expected to show further stickiness in inflation expectations last month. Fed's Goolsbee and Waller are the highlights of the speaker slate.

BONDS: US Data in Focus Again

• Core fixed income markets have been relatively flat this morning with the German and UST curves flattening a little while the curve curve is a little steeper today.
• This morning French final inflation data for March was revised a tenth higher while Spanish final HICP data was unrevised from the flash. This afternoon will see US import/export/retail sales data at 8:30ET / 13:30BST followed by US IP data at 9:15ET/14:15BST and then Michigan confidence and inflation expectations data at 10:00ET/15:00BST.
• We are also due to hear from Fed's Goolsbee and Waller as well as the ECB's Nagel and BOE's Tenreyro.
• TY1 futures are up 0-4+ today at 115-19 with 10y UST yields down -0.9bp at 3.439% and 2y yields down -0.4bp at 3.966%.
• Bund futures are down -0.28 today at 134.84 with 10y Bund yields up 1.5bp at 2.384% and Schatz yields up 3.1bp at 2.800%.
• Gilt futures are down -0.43 today at 102.65 with 10y yields up 2.5bp at 3.594% and 2y yields up 1.9bp at 3.517%.

EQUITIES: March Highs Ahead of Best Level in a Year for EuroStoxx

Eurostoxx 50 futures remain firm and price is trading at this week’s highs. The continued appreciation strengthens the bullish significance of the recent break of 4268.00, the Mar 6 high and a key hurdle for bulls. Sights are on 4324.50, the Jan 13 2022 high (cont) and 4381.50, the Jan 5 2022 high (cont). Moving average studies are in a bull-mode set-up, highlighting a broader uptrend. Initial firm support lies at 4209.70, the 20-day EMA. The current trend condition in S&P E-minis remains bullish. Price has recently breached 4119.50, Mar 6 high, reinforcing a positive theme. 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 to 4205.50, the Feb 16 high ahead of 4244.00, the Feb 2 high and a key medium-term resistance. Firm support lies at 4061.00, the 50-day EMA.

• Japan's NIKKEI closed higher by 336.5 pts or +1.2% at 28493.47 and the TOPIX ended 10.79 pts higher or +0.54% at 2018.72.
• Elsewhere, in China the SHANGHAI closed higher by 19.789 pts or +0.6% at 3338.153 and the HANG SENG ended 65.05 pts higher or +0.32% at 20415.2.
• Across Europe, Germany's DAX trades higher by 63.48 pts or +0.4% at 15793.12, FTSE 100 higher by 16.97 pts or +0.22% at 7859.01, CAC 40 up 21.64 pts or +0.29% at 7502.19 and Euro Stoxx 50 up 14.02 pts or +0.32% at 4377.45.
• Dow Jones mini down 80 pts or -0.23% at 34112, S&P 500 mini down 1.75 pts or -0.04% at 4171, NASDAQ mini down 0.75 pts or -0.01% at 13209.5.

COMMODITIES: Gold Eyes $2070.40 Resistance Ahead of $2075.50 All-Time High

WTI futures remain in a bull cycle. This week’s gains resulted in a break of resistance at $81.81, the Apr 4 high. This confirms a resumption of the current uptrend and note that an important resistance at $83.04, the Jan 23 high, has also been breached. The focus is on $85.01, the Nov 14 high. On the downside, key short-term support is seen at $79.00, the Apr 3 low and the gap high on the daily chart. Trend conditions in Gold remain bullish and Thursday’s break of resistance at $2032.1, Apr 5 high, confirms a resumption of the current uptrend. The move higher maintains the positive price sequence of higher highs and higher lows and sights are set on the next key resistance at $2070.4, the Mar 8 2022 high. This is just ahead of the all-time high of $2075.5. Key short-term support has been defined at $1981.7, the Apr 10 low.

• WTI Crude down $0.22 or -0.27% at $81.95
• Natural Gas up $0 or +0.15% at $2.009
• Gold spot down $5.35 or -0.26% at $2037.8
• Copper up $1.55 or +0.38% at $414.05
• Silver up $0 or +0% at $25.863
• Platinum down $3.08 or -0.29% at $1051.13