Newsquawk

Euro Market Open: Cautious trade into month-end though Europe points higher, crude pressured

31 Mar 2022, 06:55 by Newsquawk Desk

APAC stocks traded cautiously at month-end following the weak lead from the US; S&P 500 -0.6%.
Ukrainian negotiator said peace talks between Russia and Ukraine will resume online on April 1st.
DXY attempted to nurse losses but remains on a 97 handle, JPY lags in the G10 FX space as USD/JPY trims losses.
US President Biden's administration is considering a 'massive' release of oil to combat inflation, according to Bloomberg.
European equity futures are indicative of a higher open with the Euro Stoxx 50 future up 0.5% after the cash market closed lower by 1.1% yesterday.
Looking ahead, highlights include UK GDP, German Retail Sales & Unemployment, US IJC, PCE Price Index, OPEC+ Meeting, Speeches from Fed's Williams, ECB's Lane & de Guindos.

US TRADE

US stocks traded negative as doubts grew regarding the progress from Russia-Ukraine talks with Russian forces not showing signs of a withdrawal.
S&P500 -0.6% at 4,603, Nasdaq 100 -1.1% at 15,071, Dow Jones -0.2% at 35,228, Russell 2000 -2.0% at 2,091.

NOTABLE US HEADLINES

Fed's George (2022 voter) said the possibility for yield curve inversion should factor into Fed balance sheet chat and that Fed holdings should fall 'significantly', allowing longer-term rates to increase along with increases in short term policy rates. George added inversion has implications for financial stability and she is less concerned about its value as a predictor of a recession, while she also stated that the policy rate could be increased in a "steady, deliberate" manner as the Fed monitors the impact on the economy, inflation and demand, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

Ukrainian negotiator said peace talks between Russia and Ukraine will resume online on April 1st and Ukraine requested the countries' two leaders should meet in the latest round of talks, but Russia argued that additional work on a draft treaty was needed, according to Reuters.
Russia announced a ceasefire to evacuate residents of Mariupol in which a humanitarian corridor from Mariupol to Zaporizhzhia, via the Russian-controlled port of Berdiansk, will begin at 10:00 am local time today.
Ukrainian President Zelenskiy spoke to US President Biden and shared an assessment of the situation on the battlefield and at the negotiating table while they discussed specific defensive support, a new package of enhanced sanctions, macro-financial and humanitarian aid, according to Reuters.
Russian Foreign Minister Lavrov said Kyiv understands Crimea and Donbass issues are definitively resolved, while he noted the outcome of talks with Ukraine in Istanbul is positive progress but not yet a final outcome, according to Interfax.
Ukraine spokesperson tweeted that Russia's Foreign Minister Lavrov demonstrates a misunderstanding of the negotiation process and that the issues of Crimea and Donbas will be settled for good after Ukraine restores its sovereignty over them.
French Foreign Minister Le Drian said that negotiations between Russia and Ukraine have not advanced, according to Reuters.

DEFENCE/MILITARY

Ukrainian President Zelensky said they will not make any concessions and will fight for every part of their land and all their people, while a presidential adviser noted that guarantor states include the provision of military and humanitarian assistance within three days of any aggression, according to AJABreaking.
US Pentagon said the US expects Russia to refit and resupply troops to redeploy them into Ukraine and suggested it looks like Russian President Putin has not been 'fully' informed by MoD at every turn over the prior month, while it added that some Russian troops are going to Belarus, according to Reuters.
US official said "newly declassified intelligence finds Russia President Putin has felt misled by the Russian military, and there is now persistent tension between Putin and the MoD", according to Voice of America.
UK GCHQ Director Fleming is to say that it looks like Russian President Putin hugely misjudged the situation in Ukraine and that "Demoralised Russian soldiers in Ukraine have accidentally shot down their own aircraft, sabotaged their kit and refused to carry out orders". Furthermore, the GCHQ chief said some Russian soldiers in Ukraine have been short of weapons and morale is low, while Russia's choice to align with China after invading Ukraine has made Beijing more powerful and Russia could ultimately be squeezed out of the equation by China in the long-term on the global stage, according to Reuters.
Governor of Ukraine's Donetsk region said there is continued shelling of all settlements along the demarcation line and the evacuation of civilians from Mariupol likely failed on Wednesday.

ENERGY/ECONOMIC SANCTIONS

White House said the Biden admin continues to look at options for further Russian sanctions, according to Reuters.
US official said India should not 'significantly' increase Russian oil imports against prior years and that India will expose itself to a 'great risk' if it notably raises imports of Russian oil, although the US favours India purchasing Russian oil at discounts and is not against India settling trade with Russia in Rupees, according to Reuters. It was separately reported by Twitter sources including ET NOW that Russia is offering oil to India at a discount of around USD 35/bbl.
European Commission is readying new sanctions against the Kremlin over Russia's invasion of Ukraine which could be ready as early as next week and the size of new measures depends on Russia's stance on gas payments in Roubles, according to Reuters citing EU sources.
German government spokesperson said following a call between German Chancellor Scholz and Russian President Putin that the G7 agreement remains in which energy supplies from Russia will be paid in Euros or Dollars, as agreed in contracts. President Putin told Scholz payments would continue in Euros and go to Gazprom-bank which is not affected by sanctions where the bank would then convert money into roubles, while Scholz did not agree with this in the phone call and asked for a written explanation.
Dutch PM Rutte said a peace deal with loss of Ukrainian territory and sovereignty will not automatically end sanctions.
Australia is to apply a 35% tariff on all imports from Russia and Belarus, according to 10 News First.

FUND/SOVEREIGN/OTHER NEWS

CBR lifted the ban on short-selling on the stock market for March 31st, according to RIA.
Russia and Belarus bonds are to be excluded from 11 S&P Dow Jones Indexes.
Russian hackers recently tried to penetrate the networks of NATO and eastern European militaries, according to Google's Threat Analysis Group cited by Reuters.

OTHER

White House said Iran-related sanctions announced on Wednesday will delay a nuclear deal and the sanctions will remain in place even if a nuclear deal is reached, according to Reuters.
Russian Foreign Minister Lavrov said Russia considers the presence of US and NATO military infrastructure in countries bordering Afghanistan as unacceptable, according to Tass.

APAC TRADE

EQUITIES

APAC stocks traded cautiously at month-end following the weak lead from the US due to increased Russia-Ukraine scepticism and as the region digested disappointing Chinese PMI data.
ASX 200 was kept afloat by outperformance in the mining and materials industries although upside was capped as the tech sector suffered from profit-taking and with energy hit by a drop in oil prices.
Nikkei 225 traded indecisively amid a choppy currency and after Industrial Production data missed forecasts.
Hang Seng and Shanghai Comp. were subdued following the weak Chinese PMI data and with the mood in stocks not helped by the US SEC chief casting doubt regarding an imminent deal to avert a delisting of Chinese stocks.
European equity futures are indicative of a higher open with the Euro Stoxx 50 future up 0.5% after the cash market closed lower by 1.1% yesterday.

FX

DXY attempted to nurse some of the prior day's losses but with upside capped amid slightly softer yields. DXY remains sub-98.00.
EUR/USD initially extended on the gains from the hot German CPI data but returned flat on late dollar reprieve.
GBP/USD continued to fade yesterday's gains after taking a backseat to recent euro strength.
USD/JPY has continued to pick-up from yesterday’s 121.31 low and is now back on a 122 handle.
Antipodeans were pressured in late trade amid the cautious mood and decline in oil prices.

FIXED INCOME

10yr USTs were underpinned as yields eased and with lower oil prices helping alleviate some inflationary woes.
Bunds remained subdued near the 157.00 level following the recent hot inflation data from Germany.
10yr JGBs were rangebound with only mild support following firmer demand at the 2yr auction.

COMMODITIES

WTI and Brent declined heavily on news of a potential US SPR release totalling 180mln bbls.
US President Biden's administration is considering a 'massive' release of oil to combat inflation and may release up to 1mln bpd for months from the strategic reserve in which the total release could be 180mln bbls, according to Bloomberg.
US President Biden will deliver remarks today at 13:30EDT/18:30BST regarding the administration's actions to reduce gas prices in the US, according to the White House. It was also reported that the US mulls permitting summertime sales of higher ethanol blends of gasoline to ease pump prices, according to Reuters sources.
IEA called an emergency ministerial meeting for Friday, according to the Australian Energy Minister's office. It was later reported that IEA countries are to decide on a collective oil release, according to New Zealand's Energy Minister's office
OPEC+ JTC replaced IEA reports with Wood Mackenzie and Rystad Energy as secondary sources to assess crude oil output and conformity, according to sources cited by Reuters.
Spot gold saw mild losses as the greenback found some relief from recent selling pressure.
Copper prices were weaker amid the cautious risk sentiment and disappointing Chinese PMI data.

CRYPTO

Bitcoin was indecisive with prices relatively unchanged 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 6.3482 vs exp. 6.3467 (prev. 6.3566)
US SEC chief cast doubt regarding an imminent deal to avert delisting of Chinese stocks from US exchanges, according to Bloomberg. However, CSRC said it is continuing its discussions with US SEC on the Holding Foreign Companies Accountable Act and that both sides are willing to solve the audit dispute in which the outcome depends on the wisdom of both parties.
Japanese Chief Cabinet Secretary Matsuno said sharp FX moves are not desirable, while they are closely watching how FX moves and recent JPY weakening could impact Japan's economy with a sense of urgency. Matsuno added the government will take appropriate steps on FX policies in close communication with the US and other currency authorities based on international agreements.

DATA RECAP

Chinese NBS Manufacturing PMI (Mar) 49.5 vs. Exp. 49.9 (Prev. 50.2)
Chinese NBS Non-Mfg PMI (Mar) 48.4 (Prev. 51.6)
Chinese Composite PMI (Mar) 48.8 (Prev. 51.2)
Japanese Industrial Production MM SA (Feb) 0.1% vs. Exp. 0.5% (Prev. -0.8%)
Australian Building Approvals (Feb) 43.5% vs. Exp. 10.0% (Prev. -27.9%, Rev. -27.1%)

EUROPE