Newsquawk

Euro Market Open: Softer open indicated after a mixed handover amid differing geopolitical updates

30 Mar 2022, 06:54 by Newsquawk Desk

APAC stocks traded mostly positive following the strong lead from the US which was spurred by Ukraine/Russia optimism.
A western official said they haven’t seen anything so far that has demonstrated Russia is particularly serious about peace talks.
The DXY remains subdued following yesterday's declines, USD/JPY has continued to fade recent gains.
European equity futures are indicative of a softer open with the Euro Stoxx 50 future down 0.4% after the cash market closed higher by 3.0% yesterday.
Looking ahead, highlights include German CPI Prelim, US ADP & GDP (Final/Q4), Speeches from Fed's Barkin, Bostic & George, ECB's Lagarde, BoE's Broadbent, Supply from Italy.

US TRADE

US stocks finished positive with risk appetite spurred by optimism post-Russia/Ukraine talks and after Russia suggested it would be withdrawing some troops, while both sides alluded to prospects of a Putin-Zelensky meeting.
S&P 500 +1.2% at 4,633, Nasdaq 100 +1.7% at 15,239, Dow Jones +1.0% at 35,294, Russell 2000 +2.7% at 2,133.

NOTABLE US HEADLINES

Fed's Bullard (2022 voter, 50bp dissenter) reiterated that he favours raising the FFR to 3% by year-end and is in favour of implementing a plan to quickly reduce the size of the Fed's balance sheet, while he added the extent and pace of these actions can be adjusted if macroeconomic conditions evolve differently than what they expect, according to the St Louis Fed.
Fed's Harker (temp voter) said the Fed 'collectively underestimated' impact fiscal spending would have on inflation and he would not take a 50bps rate hike off the table for the next meeting but is not committing to it either. Harker stated that developments in China is "another wrench" in the supply chain and could make a 50bps hike more likely appropriate, while he noted a balance sheet reduction could add the equivalent of two quarter-point rate increases and that they can move methodically to a neutral rate of around 2.5% then assess what more may be required, according to Reuters.
Fed's Bostic (2024 voter) said the Ukraine war is impacting inflation and increases uncertainty which is a risk for demand. Bostic stated the Fed is withdrawing policy support to allow the economy to stand on its own but added it could harm the economy if the Fed moves too quickly, while he reiterated that he favours six hikes for 2022.
US Senate voted to move the Fed nomination of Lisa Cook forward to a confirmation vote. (Newswires)

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

Ukrainian President Zelenskiy said signals from Russia talks could be called positive but do not drown out the explosions of Russian shells and they see no reason to trust words from "certain representatives of a power that continues to fight for our destruction". Zelensky also said they are not reducing defensive efforts as the Russian army still has significant potential to carry out attacks, according to Reuters.
US President Biden said "we'll see" about Russia's de-escalation statement and will have to see if Russia follows through but the US will continue to keep strong sanctions and help the Ukraine military, according to Reuters.
French President Macron discussed the Ukraine situation with Russian President Putin in a phone call and Macron told Putin paying gas contracts in Roubles was not possible, according to a French Presidency official. Furthermore, Macron brought up the topic of carrying out a humanitarian mission for Mariupol with Putin although conditions are not in place for now and Russia's position on a humanitarian mission for Mariupol remains tough but Putin told Macron he would think about it, according to Reuters.

DEFENCE/MILITARY

US Department of Defense confirmed there has been some movement by small amounts of Russian forces away from Kyiv but reiterated this is repositioning and not a withdrawal, while it added that Russia is spinning a lack of progress as the next steps and the threat to Kyiv isn't over despite Russian talk. Furthermore, it stated that Russian President Putin's goals still stretch beyond the Donbass and that a small number of Russian troops leaving Kyiv are moving north for now and are to be used elsewhere in Ukraine, according to Reuters.
US official said the US believes any movement of Russian forces from around Kyiv is a "redeployment, not a withdrawal" and said the world should be prepared for a continuation of major offensives in other areas in Ukraine as Russia is shifting gears, according to Reuters.
A western official said they haven’t seen anything so far that has demonstrated Russia is particularly serious about peace talks and seems to be more of a tactical exercise to play for time, according to Reuters.
US is mulling sending another USD 500mln of humanitarian aid to Ukraine which could be used for military purposes, according to Bloomberg.

ENERGY/ECONOMIC SANCTIONS

White House said they will continue to intensify sanctions on Russia and they are not going to run out of options anytime soon, according to Reuters.
Russia is studying the possibility of importing equipment for the fuel and energy complex through friendly countries, according to Interfax.

FUND/SOVEREIGN/OTHER NEWS

US State Department warned that Moscow may detain Americans in Russia, while it issued a Level 4 travel advisory for Ukraine and stated 'do not travel' to Ukraine, according to AFP.
Russian grain exporters reportedly may request payment in Roubles, according to Kommersant.

OTHER

Saudi-led coalition announced it is halting military operations in Yemen for the month of Ramadan to help negotiations succeed, with operations halted from this Wednesday, according to the Saudi state news agency.

APAC TRADE

EQUITIES

APAC stocks traded mostly positive amid optimism from Russia-Ukraine talks in which negotiators discussed a ceasefire and with Russia to scale down military activity in Kyiv and Chernihiv, although the US was unconvinced.
ASX 200 gained on continued tech strength and with consumer stocks helped on Budget support measures.
Nikkei 225 fell beneath the 28,000 level after weaker than expected Retail Sales and as the Yen nursed losses.
Hang Seng and Shanghai Comp. were underpinned after continued PBoC liquidity efforts and amid a deluge of earnings including from large banks in which Bank of China and China Construction Bank both topped estimates.
US equity futures took a breather following yesterday's advances.
European equity futures are indicative of a softer open with the Euro Stoxx 50 future down 0.4% after the cash market closed higher by 3.0% yesterday.

FX

DXY remained subdued after the prior day’s retreat beneath the 99.00 level as yields eased and with risk sentiment underpinned by hopes surrounding the Russia-Ukraine talks.
EUR/USD strengthened above 1.1100 amid hopes of a de-escalation in Ukraine.
GBP/USD lacked direction after yesterday’s choppy mood with the pair stuck around the 1.3100 level.
USD/JPY continued to fade recent advances with the pair slipping to a low of 121.31 overnight vs. 125.10 on Monday.
Antipodeans benefitted from the risk tone with NZD outperforming on cross-related flows and encouraging data which showed an improvement in Building Permits and Business Activity Outlook.
SNB's Vice Chair Zurbruegg said vulnerabilities have increased in the swiss real estate market and Swiss apartments are overvalued by 10-35%, while the SNB will monitor developments in the real estate market, according to Reuters.

FIXED INCOME

10yr USTs extended on the prior day’s gains as yields eased and with the recent declines in oil prices helping alleviate some of the inflationary concerns. 2s10s inverted (briefly) for the first time since 2019, whilst a mixed 7yr auction had little follow-through
Bunds continued to recoup recent losses to test the 158.00 level to the upside.
10yr JGBs were underpinned after the BoJ boosted today’s regular buying operations for various maturities and conducted a special operation for unlimited JGBs, while it later announced emergency purchases to cap yields.

COMMODITIES

WTI and Brent nursed the losses from yesterday's intraday drop after Ukraine/Russia optimism weighed heavily on oil, with prices well of their lows amid skepticism from the US on Russia scaling down operations.
US Energy Inventory Data (bbls): Crude -3.0mln (exp. -1.0mln), Gasoline -1.4mln (exp. -1.7mln), Distillate -0.2 (exp. -1.6mln), Cushing -1.1mln.
US House Energy and Commerce Committee is to hold a hearing next week with six oil company executives regarding rising gas prices, according to Reuters.
Spot gold traded sideways and only marginally benefitted from the weaker greenback.
Copper was higher amid the constructive risk tone.

CRYPTO

Bitcoin was choppy overnight with prices relatively flat heading into the European morning.

NOTABLE APAC HEADLINES

PBoC injected CNY 150bln via 7-day reverse repos with the rate at 2.10% for a CNY 130bln net injection.
PBoC set USD/CNY mid-point at 6.3566 vs exp. 6.3478 (prev. 6.3640)
Chinese city of Xuzhou has declared a three-day lockdown from Wednesday
BoJ Governor Kuroda said he discussed a post-COVID global economy, Russia and Ukraine with PM Kishida, as well as talked about the economy and financial markets in Japan and abroad with the PM. Kuroda told Kishida FX moves should reflect economic fundamentals but they did not discuss anything in particular on FX and don't think that a monetary adjustment would have a direct impact on currencies. Furthermore, Kuroda said the yen is weakening but is driven partly by buying the dollar for energy imports and with higher US rates also a factor.
BoJ announced to buy JPY 600bln in 3yr-5yr JGBs, JPY 725bln in 5yr-10yr JGBs, JPY 150bln in 10yr-25yr JGBs, JPY 100bln in 25yr+ JGBs and JPY 60bln in inflation-indexed JGBs, while it also offered to buy an unlimited amount of 10yr JGBs at a fixed rate of 0.25%. The BoJ later announced an emergency operation to buy JPY 500bln in 5yr-10yr JGBs, JPY 100bln in 10yr-25yr JGBs and JPY 50bln in 25yr+ JGBs, according to Reuters.

DATA RECAP

Japanese Retail Sales YY (Feb) -0.8% vs. Exp. -0.3% (Prev. 1.6%, Rev. 1.1%)
New Zealand Building Consents (Feb) 10.5% (Prev. -9.2%, Rev. -8.7%)
New Zealand NBNZ Business Outlook* (Mar) -41.9% (Prev. -51.8%)
New Zealand NBNZ Own Activity* (Mar) 3.3% (Prev. -2.2%)

EUROPE

NOTABLE EUROPEAN HEADLINES

UK ministers are reportedly mulling a fourth delay of the introduction of full checks on imports from the EU in a move to tackle trade friction and the cost of living crisis, according to FT citing officials briefed on talks.