US Market Open: Equities are negative across the board as yields climb while USD/JPY soars
- European bourses and futures are negative across the board, ES -0.3%, as initial contained trade gave way under further yield advances, NQ -0.4% lags as such
- DXY remains above 100.00 but has swung between gains & losses as peers, ex-JPY, saw a shortlived pickup across the board
- USD/JPY has continued to climb taking out multiple barriers and disregarding commentary from officials, peaking just shy of 128.50
- Fixed income is significantly hampered with yields gapping higher and nearing 1.0%, 2.0% and 3.0% for Bunds, Gilts and USTs respectively
- WTI and Brent are pressured, moving with broader price action, though currently reside just off session lows
- Russian Foreign Minister Lavrov said that another stage of their operations has now commenced
- Looking ahead, highlights include US Building Permits & Housing Starts, IMF World Economic Outlook, Speech from Fed's Evans. Earnings from L'Oreal, Halliburton, Johnson & Johnson, Netflix & IBM.
As of 11:15BST/06:15ET
- US Building Permits & Housing Starts, IMF World Economic Outlook, Speech from Fed's Evans. Earnings from L'Oreal, Halliburton, Johnson & Johnson, Netflix & IBM.
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- Ukraine Deputy PM says no humanitarian corridors agreed for Tuesday, via Reuters.
- Russia's Belgorod provincial Governor said a village near the Ukrainian border was struck by Ukraine, according to RIA. However, Sputnik noted that no casualties were reported.
- Russian Foreign Minister Lavrov says another stage of its operation is beginning
- Russian Defence Ministry is calling on Ukrainian and foreign fighters to leave the metallurgical plant in Mauripol without arms and ammunition today, via Reuters; adding, the US and other Western countries do everything to drag out the Ukrainian military operation.
ENERGY/ECONOMIC SANCTIONS & UPDATES
- White House said US President Biden will hold a call with allies and partners on Tuesday to discuss continued support for Ukraine and efforts to hold Russia accountable, according to Reuters.
- French Finance Minister Le Maire says an embargo on Russian oil is being worked on, adds that we have always said with President Macron that we want such an embargo, via Reuters; aims to convince the EU on such an embargo in the coming weeks.
- Russia's Gazprom has not booked gas transit capacity via Yamal-Europe pipeline for May.
- Israel Defense Forces conducted strikes on Gaza following earlier rocket fire, according to Aurora Intel.
- South Korean official said Russian and Chinese military aircrafts entered South Korea's air defence identification zone without prior notice last month ahead of North Korea's long-range missile launch, according to Yonhap. It was also reported that South Korea expects North Korea to test-fire a guided weapon 'soon', according to DONG-A.
- China's Vice Foreign Minister says we will continue to step up strategic coordination with Russia.
- European bourses are negative on the session but were choppy and rangebound for much of the morning before dropping further amid renewed yield upside, Euro Stoxx 50 -1.4%.
- Stateside, US futures have given up their initial positive performance and are now lower across the board, ES -0.3%, and the NQ -0.4% lags given yield action; session is focused on Fed speak and earnings with NFLX due.
- Truist Financial Corp (TFC) Q1 2022 (USD): Adj. EPS 1.23 (exp. 1.10), Revenue 5.32bln (exp. 5.47bln)
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- USD/JPY breezes through more option barriers and disregards more chat from Japanese officials about demerits of Yen weakness; pair pulls up just pips shy of 128.50.
- DXY tops 101.000 in response before pulling back as Europeans return from long Easter break.
- Aussie outperforms as RBA minutes highlight more recognition about inflationary environment externally and internally.
- Kiwi next best G10 currency as RBNZ Governor Orr underlines that policy is being weighted towards anchoring inflation expectations; AUD/USD hovers under 0.7400 and NZD/USD around 0.6750
- Euro trying to hold near 1.0800 where 1.3bln option expiry interest rolls off at the NY cut, Pound regains 1.3000 plus status and Loonie pivots 1.2600 on the eve of Canadian CPI.
- Yuan close to 6.4000 ahead of Chinese LPR rate verdict on Wednesday amidst heightened easing expectations.
- Eskom has implemented Stage Four loadshedding from 07:20, due to Majuba Unit Five and Tutuka Unit Four tripping.
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Notable FX Expiries, NY Cut:
- EUR/USD: 1.0800 (1.3BN), 1.0900 (1.2BN), 1.0930 (830M), 1.1000 (405M)
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- EU bonds correct lower after long Easter holiday weekend then pick up the baton to push US Treasuries even lower; Bunds giving up 154.00 and dropping to a 153.58 trough in short order and USTs lower to the tune of 7 ticks.
- Decent demand for German Bobls, but high price in terms of yield and a larger retention - limited relief seen in the benchmark, given broader action.
- Benchmark 10 year cash rates approaching new psychological marks of 1.0%, 2.0% and 3.0% in Bunds, Gilts and T-notes respectively.
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- Crude benchmarks are softer after yesterday's firmer session, which was driven by Libya supply concerns, currently moving in tandem with broader equity performance awaiting fresh geopolitical developments.
- Currently, WTI and Brent are modestly above session lows which reside sub USD 106/bbl and USD 111/bbl respectively.
- OPEC+ produced 1.45mln BPD below targets during March, via Reuters citing a report; compliance 157% (132% in February).
- Spot gold and silver are contained with the yellow metal pivoting USD 1975/oz while copper derives further impetus from Peru protest activity.
- MMG said protesters at the Las Bambas copper mine alleged a failure to comply with social investment commitments, while it rejected the allegations and noted that Las Bambas will be unable to continue copper output as of April 20th.
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NOTABLE US HEADLINES
- Fed's Bullard (2022 voter) said inflation is far too high for comfort and Fed has a good plan in place, while he added that market pricing based on anticipated Fed tightening is helping keep inflation under control and is hopeful the balance sheet runoff is to begin at the coming meeting. Bullard added they want to get to neutral rates expeditiously and should try to get above neutral as early as Q3, while the base case is not for more than 50bps at any meeting and they do not want to disrupt markets although need to move quickly and noted that he will not rule out a 75bps increase but it is not the base case. Furthermore, he would be open to a 'reverse twist' but is happy for now to go ahead with a passive runoff for the Fed's balance sheet and said they could reduce the balance sheet faster as a plan B if inflation doesn't decline as hoped, according to Reuters.
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- Bitcoin is essentially flat and holding steady at the bottom of the sessions USD 40.6-41.2k parameters.
- APAC stocks saw a mixed performance as more markets reopened and trade picked up from the holiday lull.
- ASX 200 gained on return from the extended weekend, led by strength in commodity-related sectors and top-weighted financials.
- Nikkei 225 briefly reclaimed the 27k level as continued currency depreciation underscored the Fed and BoJ policy divergence.
- Hang Seng was pressured as it took its first opportunity to react to the PBoC’s underwhelming policy decisions and with tech hit after Shanghai's market regulator summoned 12 e-commerce platforms including Meituan on price gouging during COVID outbreaks.
- Shanghai Comp was choppy as participants mulled over the latest virus-related developments including an increase in Shanghai deaths and the lockdown of five districts in the steel producing hub of Tangshan, although policy support pledges from the PBoC and NDRC ultimately provided a cushion.
NOTABLE APAC HEADLINES
- PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.10% for a CNY 10bln net neutral daily drain.
- PBoC set USD/CNY mid-point at 6.3720 vs exp. 6.3744 (prev. 6.3763)
- Shanghai reported 3,084 (prev. 2,417) new symptomatic cases, 17,332 (prev. 19,831) new local asymptomatic cases and 7 (prev. 3) deaths for April 18th, according to CCTV. China's steelmaking region of Tangshan locked down five districts due to COVID.
- China's NDRC said the economy will be back to normal after COVID-19 is controlled and it called for implementation of supportive policies in catering and retail, while it is to roll out measures in a timely way to keep economic operations within a reasonable range. Furthermore, it is to expand consumption in key sectors and continue to support NEV consumption, as well as step up support for market entities affected by COVID-19 outbreaks and will enhance tools to boost market confidence, according to Reuters.
- Chinese CDC expert says should not expect the COVID pandemic to be over soon, via Reuters; urges the removal of unreasonable checkpoints near Shanghai.
- BofA downgrades its 2022 China GDP growth forecast to 4.2% from 4.8%, via Reuters.
- RBA Minutes from the April meeting stated that inflation picked up and a further increase was expected with the measure of underlying inflation in the March quarter expected to be above 3%. RBA stated that wage growth also picked up but in aggregate terms, had been below a level likely to be consistent with inflation being sustainably at the target and said the strength of the Australian economy was evident in labour market, while it added that these developments brought forward the likely timing of the first rate increase.
- Japanese Finance Minister Suzuki said JPY weakening brings more demerits than merits under the current circumstances, while he reiterated that FX market stability is important and will continue monitoring FX with a sense of vigilance, according to Reuters.
- Japan's Chief Cabinet Secretary Matsuno provides no comment on FX levels, adds that stability is important; will take appropriate steps on FX policy whilst communicating closely with the US and other currency authorities.