Newsquawk

Euro Market Open: EUR fades initial French election strength while APAC trade was cautious

11 Apr 2022, 06:54 by Newsquawk Desk

APAC stocks were mostly cautious amid the higher yield environment and COVID-19 woes in China with a fresh record number of daily infections in Shanghai.
Russian President Putin is believed to have given himself four weeks to achieve some sort of a victory.
French President Macron (27.6%) and far-right Le Pen (23.4%) are set for a run-off in the presidential election on April 24th.
European equity futures are indicative of a softer open with the Euro Stoxx 50 future -0.8% after the cash market closed higher by 1.5% on Friday.
DXY was choppy below 100, EUR/USD faded opening gains post-election as traders eye the second round.
Looking ahead, highlights include Chinese Aggregate Financing and M2, UK GDP, Speeches from Fed’s Williams, Bostic and Evans.

US TRADE

US stocks finished mixed on Friday in quiet newsflow in which the Dow Jones closed up, while S&P and Russell were lower with the Nasdaq underperforming while Growth (IVW) names lost 1% and Value (IVE) stocks were bid.
SPX -0.20% at 4,491, NDX -1.41% at 14,327, DJIA +0.40% at 34,721, R2K -0.82% at 1,993.

Click here for a detailed summary.

NOTABLE US HEADLINES

Fed’s Mester (2022, 2024 voter) said it will take some time to reduce inflation and that inflation will likely remain above 2% in 2023, but the trajectory will be lower. Mester added that she is optimistic the Fed can remove emergency levels of accommodation and reduce excess demand without triggering a recession, while she noted there is an increased risk of a recession, but the modal forecast is for the expansion to continue, according to a CBS interview.

FRENCH ELECTION

French President Macron (27.6%) and far-right Le Pen (23.4%) are set for a run-off in the presidential election on April 24th and all major candidates aside from far-right candidate Zemmour have called for a vote against Le Pen. Furthermore, an IFOP poll showed that Macron would win the second round with 51% of the vote, while Ipsos and Opinionway polls showed Macron would win with 54% vs Le Pen at 46% in the second round, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

Ukrainian President Zelensky said they should not lose the possibility of a diplomatic solution to the war, while Zelensky separately commented that he is not confident that Ukraine forces will receive what they need from the US to succeed in the war against Russia, according to a CBS ’60 Minutes’ interview.
Ukraine conducted a prisoner exchange with Russia on Saturday which was the third such swap since the start of the war. It was also reported that there were nine trains available for use for evacuation from the Luhansk region on Sunday, according to the regional governor, who added that more evacuations of people from settlements are needed, according to Reuters.
Austrian Chancellor Nehammer will travel to Russia on Monday to meet with Russian President Putin following the Austrian Chancellor’s visit to Ukraine over the weekend where he met with Ukrainian President Zelensky, according to Reuters.
Ukrainian minister Stefanishyna expects Ukraine to be given EU candidate country status in June and said that Ukraine is “ready to move fast” with its application to join the EU, according to REPUBLICWORLD.COM.

DEFENCE/MILITARY

Russian President Putin is believed to have set himself four weeks to achieve some sort of a victory in Ukraine before the big Russian “Victory Day” holiday on May 9th, according to The Times on Friday. There were also reports in Axios that the May 9th Russian holiday will be a pivotal and dangerous deadline.
Russian Ministry of Defence alleged that Kyiv is preparing a mass murder of civilians in Luhansk with support from the West, according to Sputnik.
Russian Republic of Chechnya head Kadyrov said there will be an offensive not only on Mariupol but on other Ukrainian cities including Kyiv, according to Reuters.
Ukrainian President Zelensky discussed with German Chancellor Scholz anti-Russian sanctions, as well as defence and financial support for Ukraine. German Chancellor Scholz called for Russia to immediately pull its troops back and said that European borders must remain untouched, while he added that those who committed war crimes must be held responsible and that it is right Germany supplies Ukraine with defence weapons which it will continue doing so, according to Reuters.
White House National Security Adviser Sullivan said Russia’s systematic targeting of civilians in Ukraine constitutes war crimes and that Russia’s new commander in charge of the Ukrainian invasion, General Dvornikov, will author crimes and brutality against Ukrainian civilians. Sullivan added that they will get Ukraine the weapons it needs and are in talks with European allies about reducing dependence on Russian oil, according to Reuters.
UK PM Johnson said during a surprise visit to Kyiv that they will intensify sanctions against Russia week by week, while the UK will send 120 armoured vehicles and anti-ship missile systems to Ukraine and will guarantee USD 500mln in World Bank lending to Ukraine, according to Reuters and AFP.
UK military intelligence said Russian armed forces are seeking to bolster troops with personnel discharged from service since 2012 in response to mounting losses and that efforts to generate more fighting power include trying to recruit from the unrecognised Transnistria region of Moldova. UK military intelligence also noted that Russia’s departure from northern Ukraine left evidence of disproportionate targeting of non-combatants and that Russian forces continue to attack infrastructure targets with a high risk of collateral harm to civilians, according to Reuters.
European Commission President von der Leyen said the EC wants to pledge EUR 1bln to support Ukraine, according to Reuters.
EU Foreign Policy Chief Borrell said the EU will soon convene a military committee to discuss the supply of weapons to Ukraine and that they will discuss further steps with EU ministers at the Foreign Affairs Council on Monday.
Slovakia’s Interior Minister said Slovakia is negotiating with Ukraine on the possible sale of self-propelled howitzers Zuzana and could also send MiG-19 fighter jets to Ukraine although this option is not yet in play, according to Interfax.

ENERGY/SANCTIONS

EU member states remain at loggerheads regarding a Russian energy ban with the Hungarian government noting that targeting Russia’s oil and gas exports is a red line, while it was also reported that discussion of a Russian oil ban will only be raised informally for broad discussion during the EU foreign ministers meeting on Monday, according to FT.
EU is banning tyre imports from Russia, according to Nokian Tyres.
EU added Sberbank chief Gref and other oligarchs to its sanctions list on Friday, while Russian President Putin's daughters have also been added to the sanctions list, according to Reuters.
BaFin ordered VTB Bank Europe not to take instructions from its Moscow-based parent and said VTB Bank no longer has control of its European arm, while savers with VTB Europe continue to have access to their funds, according to Reuters.
Huawei is reportedly suspending all orders in Russia due to fear of secondary sanctions by the US, according to Game News 24.

SOVEREIGN/FUND/OTHER

Russian Finance Minister said Russia has been fulfilling its foreign debt obligations, according to Sputnik.
Russia will boost its government reserve fund by RUB 273.4bln or around USD 3.4bln to “ensure the stability of the economy in the face of external sanctions”, according to a Bloomberg report citing the Kremlin.
CBR relaxed some FX regulation rules and individuals will be able to withdraw Euros from accounts from April 11th. The overall limit for withdrawing FX cash remains unchanged at USD 10,000 until September 9th and banks will be allowed to sell FX cash to individuals from April 18th, according to Reuters.
World Bank forecasts Ukraine GDP output to shrink by 45.1% this year amid high uncertainty regarding the duration and destruction of the war, while it sees Russia’s economy to contract 11.2% this year, according to Reuters.

OTHER

Iranian President Raisi said Iran will not back down one iota from asserting its nuclear rights which should be respected by all parties in Vienna talks and stated that Iran’s nuclear program is solely for peaceful purposes, according to Times of Israel.
Majority of Iranian parliamentarians in a letter to Iranian President Raisi, demanded legal assurances by Washington with Congress approval that the US will not exit the nuclear deal if it is revived, while they suggested that the trigger mechanism should be arranged to prevent the US from exiting the deal again. Furthermore, they said that Iran should be permitted to export oil to any country and receive money through the banking system, according to Reuters.
Finland’s Centre Party, which is part of the five-party ruling coalition, rallied around a potential NATO membership bid in what is another sign the country is nearing an application to join the alliance, according to Bloomberg.
China delivered HQ-22 surface-to-air missile systems to Russian ally Serbia in a semi-secret operation during the weekend which was being referred to as a veiled operation, according to the Independent.

APAC TRADE

EQUITIES

APAC stocks were mostly cautious amid the higher yield environment and COVID-19 woes in China.
ASX 200 attempted to buck the trend helped by strength in gold-related stocks and the top-weighted financial sector, while M&A newsflow and campaigning ahead of the May 21st election provided mild tailwinds.
Nikkei 225 was subdued after failing to retain the 27,000 status despite the recent currency weakening.
Hang Seng and Shanghai Comp underperformed with Hong Kong pressured by weakness in tech and with the mainland suffering from COVID-19 concerns after a fresh record number of daily infections in Shanghai.
US equity futures remained subdued following last Friday’s negative bias as markets brace for US CPI data.
European equity futures are indicative of a softer open with the Euro Stoxx 50 future -0.8% after the cash market closed higher by 1.5% on Friday.

FX

DXY was choppy slightly below the 100 level, with early losses later reversed as yields continued to rise.
EUR/USD faded the opening gains from the first round of the French Presidential Election which was led by President Macron who is set to face Le Pen in the second round, while polls point to a Macron win at the run-off.
GBP/USD was subdued with focus on politics amid a tax row related to Chancellor Sunak’s wife.
USD/JPY resumed its advances and briefly tested the 125.00 level as the BoJ stuck with its dovish tone.
Antipodeans were lacklustre owing to the dollar strength, downside in oil prices and the risk averse mood.

FIXED INCOME

10yr UST futures fell beneath 120.00 as the US 10yr yield rose above 2.75% for the first time since 2019 and the 5yr yield printed its highest since May 2018 amid expectations for a hot CPI print on Tuesday.
Bund futures extended below the 156.00 level amid broad upside in global yields.
10yr JGBs were lacklustre as the 10yr yield remained near the BoJ’s cap but with downside in prices stemmed as the BoJ reiterated its dovish rhetoric.

COMMODITIES

Crude futures declined in which Brent crude briefly fell beneath USD 100/bbl amid China's COVID-19 woes.
US Baker Hughes Rig Count (w/e Apr 8th): Oil +13 at 546, Nat Gas +3 at 141, and Total +16 at 689.
White House Press Secretary said she is unaware of the US considering an easing of oil sanctions on Venezuela, while the White House said it is continuing to consider a gas tax holiday, according to Reuters.
Kuwait raised May crude prices to Asia to record levels, according to Reuters citing the pricing document.
Spot gold was rangebound with price action hampered by resistance at USD 1950/oz and a firmer dollar.
Copper weakened amid the risk-aversion and underperformance in China due to ongoing restrictions.

CRYPTO

Bitcoin prices were lacklustre overnight and briefly retreated beneath the 42,000 level.
Elon Musk tweeted that the Twitter Blue subscription price should probably be about USD 2/month and suggested "maybe even an option to pay in Doge?".

NOTABLE APAC HEADLINES

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.10% for a net neutral daily position.
PBoC set USD/CNY mid-point at 6.3645 vs exp. 6.3647 (prev. 6.3563)
Senior official in Beijing said overall monetary policy in April will be slightly looser than in the previous three months, according to SGH Macro Advisors.
China has reportedly accelerated its nuclear arsenal buildup due to a change in its assessment of the threat posed by the US, according to WSJ citing people with knowledge of the Chinese leadership’s thinking.
Shanghai reported 914 new symptomatic and 25,173 new asymptomatic cases for a new record of daily infections on April 10th, according to Reuters. It was separately reported that Shanghai and Guangzhou plan more mass COVID-19 testing, according to Bloomberg.
Australian PM Morrison called the federal election to be conducted on May 21st and warned voters not to risk a change to an “uncertain” future under the opposition, according to the Guardian.