Newsquawk

Euro Market Open: Ongoing yield upside continues to impact equities, DXY holding above 100.00

12 Apr 2022, 06:54 by Newsquawk Desk

APAC stocks followed suit to the losses across global counterparts amid higher yields and inflationary concerns.
Ukraine’s Azov regiment reported the use of chemical weapons by Russian forces in Mariupol; reports are yet to be officially verified.
European equity futures are indicative of a weaker open with the Euro Stoxx 50 future -1.1% after the cash market closed lower by 0.5% yesterday.
DXY sits on a 100 handle, antipodeans lead in the G10 FX space, price action otherwise contained.
Looking ahead, highlights include German CPI & ZEW, UK Labour Market Report, US CPI, Speeches from Fed's Barkin & Brainard, Supply from Netherlands, UK, Germany & US, Earnings from LVMH.

US TRADE

US stocks declined on Monday with the NDX leading the losses amongst the major indices, weighed on by rising yields. Energy was the worst-performing sector as oil tumbled.
SPX -1.63% at 4,415, NDX -2.35% at 13,990, DJIA -1.19% at 34,308, R2K -0.75% at 1,980.

Click here for a detailed summary.

NOTABLE US HEADLINES

Fed's Evans (2023 voter) said high prices will persist longer than he thought but are not permanent and the Fed has to reposition itself in response. Evans noted the neutral setting for monetary policy is 2.25-2.50% and thought they would be at neutral by March 2023 but would be okay too if they got there by December. Evans stated that not going too far, too quickly is crucial for optionality, while he added that a 50bps rate hike is worthy of consideration and possibly highly likely, according to Reuters.
Former US Treasury official Michael Barr has reportedly emerged as the frontrunner for President Biden's pick for Vice-Chair of Supervision at the Fed, according to Politico.
White House Economic Adviser Deese is expecting elevated CPI on Tuesday and lower inflation at the end of this year and next, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

NEGOTIATIONS/TALKS

Austrian Chancellor Nehammer said he generally had no positive impression from talks with Russian President Putin, according to Reuters.

DEFENCE/MILITARY

Ukraine’s Azov regiment reported the use of chemical weapons by Russian forces in Mariupol, although an independent journalist tweeted that this was very difficult to verify and that the only source reporting this so far is the Azov regiment with no independent/credible journalists currently working in Mariupol.
Ukrainian President Zelensky said Russian forces could use chemical weapons and that Ukraine takes this threat seriously, while President Zelensky did not say chemical weapons have already been used in his nightly address, according to Reuters.
US Pentagon Press Secretary Kirby said they are aware of social media reports which claim Russian forces deployed a potential chemical munition in Mariupol, but added they cannot confirm it at this time and will continue to monitor the situation closely, according to Politico.
UK Foreign Secretary Truss tweeted "Reports that Russian forces may have used chemical agents in an attack on the people of Mariupol. We are working urgently with partners to verify details", while she added "Any use of such weapons would be a callous escalation in this conflict and we will hold Putin and his regime to account."
Governor of Ukraine's Luhansk region said Russia is moving military vehicles closer to front lines in apparent preparation for assault, according to Reuters.

ENERGY/SANCTIONS

EU's Borrell believes Russian oil sanctions will not stop Russia's army in Ukraine, according to Reuters.
White House said US President Biden made it clear to Indian PM Modi that the US would be happy to help India diversify its energy imports, while the White House didn’t disclose whether India made any commitments to President Biden on energy imports from Russia, according to Reuters.

OTHER

US assesses that Russian President Putin may boost efforts to interfere with US elections, according to CNN.

APAC TRADE

EQUITIES

APAC stocks followed suit to the losses across global counterparts amid higher yields and inflationary concerns.
ASX 200 was dragged lower by weakness across defensives and tech but with losses in the broader market somewhat contained amid the improvement in NAB Business Confidence and Conditions.
Nikkei 225 declined despite recent currency depreciation and the ruling LDP seeking to provide cash handouts.
Hang Seng and Shanghai Comp were indecisive with early support in the former as gaming and internet stocks were boosted by China’s resumption of videogame approvals following a 9-month suspension. However, the gains for the Hong Kong benchmark were later pared and the mainland bourse was also cautious amid ongoing COVID woes.
US equity futures extended on losses amid the higher yield environment and ahead of the US inflation data.
European equity futures are indicative of a weaker open with the Euro Stoxx 50 future -1.1% after the cash market closed lower by 0.5% yesterday.

FX

DXY reclaimed the 100 milestone amid firmer yields but with price action rangebound as participants brace for the incoming US inflation data which is expected to heat up from the prior month.
EUR/USD was subdued with the single currency not helped by the geopolitical situation in Ukraine where there were unconfirmed reports of Russian chemical weapon use.
GBP/USD traded rangebound on a 1.30 handle.
USD/JPY held on to the 125.00 handle but is off multi-year highs as Japanese officials continue their jawboning.
Antipodeans are flat with AUD/USD and NZD/USD kept afloat by support around 0.7400 and 0.6800, respectively.
Japanese Finance Minister Suzuki said FX stability is important but did not comment on FX levels, while he added they are watching closely with vigilance how FX moves could impact Japan's economy. Suzuki also noted that excess FX volatility and disorderly FX moves could have an adverse effect on Japan's economy, while they will respond to FX as appropriate while communicating with the US and other countries.

FIXED INCOME

10yr UST futures were pressured amid the higher yields and inflationary concerns, while Amazon's USD 12.75bln seven-part bond sale added to this week’s duration-heavy treasury supply.
Bund futures continued their recent downtrend with prices below 155.00 due to further upside in global yields.
10yr JGBs were lacklustre as the 10yr JGB yield sat near the BoJ’s cap and after mixed 5yr auction results.

COMMODITIES

Crude futures found reprieve from yesterday's losses with Brent crude back above the USD 100/bbl level.
OPEC Secretary-General Barkindo said they could potentially see the loss in excess of 7mln BPD of Russian oil and other liquid exports, due to current and future sanctions or other voluntary action, according to Reuters.
European Commission official said the EU repeated its call during a meeting with OPEC for oil producers to look at whether they can increase deliveries, according to Reuters.
Italian PM Draghi confirmed Italy signed an agreement on bilateral cooperation on energy with Algeria in which Eni (ENI IM) and Algeria's Sonotrach have reached a deal to raise Algerian gas exports to Italy, according to Reuters.
Spot gold eked marginal gains with the precious metal contained amid a steady greenback ahead of US CPI data.
Copper nursed some losses overnight after prices rebounded from a base at the USD 4.63/lb level.

CRYPTO

Bitcoin prices were subdued overnight after falling below the USD 40,000 level.

NOTABLE APAC HEADLINES

PBoC injected CNY 20bln via 7-day reverse repos with the rate at 2.10% for a CNY 20bln net injection.
PBoC set USD/CNY mid-point at 6.3795 vs exp. 6.3752 (prev. 6.3645)
US State Department ordered all non-emergency US government employees and family members to leave Shanghai amid a surge in COVID-19 cases and the impact of restrictions from China's response, according to Reuters.

DATA RECAP

Australian NAB Business Confidence* (Mar) 16 (Prev. 13)
Australian NAB Business Conditions* (Mar) 18 (Prev. 9)
New Zealand NZIER Business Confidence* (Q1) -40% (Prev. -28%)

EUROPE

NOTABLE EUROPEAN HEADLINES

UK ministers were warned that gas and electricity bills are likely to increase by a further GBP 500 this autumn amid the Ukraine war, according to The Times.