Newsquawk

US Market Open: Equities modestly firmer, DXY lifted by broader G10 weakness and Bonds higher; ECB & Fed speak due

22 Mar 2024, 10:52 by Newsquawk Desk

Equities are modestly firmer; European sports retailers are hit post-Nike earnings
Dollar bid, largely a factor of broader G10 weakness, Antipodeans underperform following the glum mood in China overnight
Bonds continue their dovish price action, and little changed following positive German Ifo
Crude is modestly softer and base metals are entirely in the red, dragged down by Dollar strength
Looking ahead, Canadian Retail Sales, comments from ECB’s Lane, Fed’s Powell, Barr, Jefferson & Bostic

EUROPEAN TRADE

EQUITIES

European equities, Stoxx600 (+0.1%) are mostly modestly firmer; Eurostoxx 50 (-0.3%) is lower, with Luxury continuing yesterday's decline, coupled with a soured risk tone in China overnight.
European sectors are mostly firmer; Consumer Products and Services underperforms with sports brands Adidas (-0.4%), Puma (-1.9%) and JD Sports (-3.2%) all hampered by post-earning losses in Nike. Telecoms is found at the top of the pile.
US equity futures (ES +0.1%, NQ +0.1%, RTY +0.3%) are modestly in the green attempting to build on the prior day's strength; Nike (-6.6% pre-market) is lower after the Co. noted it had lost market share in the running shoes business and on was downbeat on its H1'25 revenue outlook. details below
Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

DXY now back above pre-FOMC levels (currently 104.40) despite dovish messaging from Powell. Upside likely in part due to softness elsewhere rather than outright chasing USD longs. Next target comes via the 16th Feb high at 104.67.
EUR is swept up by the broadly firmer USD as encouraging German IFO data was unable to provide support. EUR/USD down to a low of 1.0809 but yet to test 1.08.
JPY is marginally firmer vs. the USD after printing another YTD peak at 151.86 but stopping shy of the 2023 high at 151.94 and 2022 peak at 151.94. For context the pair started the week off at 149.33. A material turnaround in the pair requires a turnaround in the US rates space.
Antipodeans are both performing poorly vs. the USD alongside the downbeat mood surrounding China and Yuan depreciation. AUD/USD as low as 0.6511 with the weekly low just above the 0.65 mark at 0.6504.
CNH is swept up by the firmer USD with USD/CNH as its highest level since November 2023. Reports of Chinese state-owned selling has failed to stop the rot.
PBoC set USD/CNY mid-point at 7.1004 vs exp. 7.2147 (prev. 7.0942).
China's major state-owned banks were seen to be selling dollars for yuan in the onshore FX market to slow yuan declines, according to sources cited by Reuters.
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FIXED INCOME

USTs are firmer but shy of Thursday's 110-26+ WTD peak. Specifics light thus far but the docket picks up with Fed's Powell, Jefferson, Barr & Bostic due.
Bunds are in the green in a continuation of the week's overall dovish action for EGBs. Slightly off the session's fresh WTD high of 132.68, a modest pullback from this occurred after beats across the board to the latest German Ifo (albeit marginal).
Gilts are firmer though still around 30 ticks shy of Thursday's 99.91 WTD peak. Specifics light as participants digest the BoE and Bailey's subsequent press round which was on the dovish side.
Italy sells EUR 2.75bln vs exp. EUR 2.5-2.75bln 3.20% 2026 BTP Short Term: b/c 1.46x and gross yield 3.31%
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COMMODITIES

Crude is modestly weaker having pared much of the overnight weakness, sparked by broader weakness in the commodities complex amid the recovery in the Dollar and risk-off mood in China. WTI bounced off lows of around USD 80.50/bbl and now holds around USD 81/bbl.
Weakness across precious metals as the stronger Dollar exerted pressure while Friday newsflow remains quiet. XAU dipped under yesterday's low (2,166.45/oz).
Base metals are weaker across the board following the risk aversion from Chinese markets overnight coupled with the recovery in the Greenback.
US has reportedly urged Ukraine to halt strikes against Russian oil refineries, according to FT.
India stop taking Russia oil delivered on Sovcomflot tankers, via Bloomberg.
Pemex reportedly put off repairs at a Gulf of Mexico platform for a number of months, via Reuters citing sources; facility leaked vast volumes of methane due to faulty infrastructure
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NOTABLE EUROPEAN HEADLINES

BoE Governor Bailey said rate cuts were "in play" at future BoE meetings amid signs tighter policy quelled the risk of a wage-price spiral, according to FT.
ECB's Nagel says probability is rising that rates will be lowered ahead of the summer break, according to Reuters citing Market News.
ECB's Holzmann says investors should consider the risk that the ECB does not lower rates this year.
Russian Federation Central Bank Key Rate (Mar) 16.0% vs. Exp. 16.0% (Prev. 16.0%)

DATA RECAP

UK Retail Sales MM (Feb) 0.0% vs. Exp. -0.3% (Prev. 3.4%, Rev. 3.6%); Retail Sales YY (Feb) -0.4% vs. Exp. -0.7% (Prev. 0.7%, Rev. 0.5%); Retail Sales Ex-Fuel YY (Feb) -0.5% vs. Exp. -0.9% (Prev. 0.7%, Rev. 0.5%); Retail Sales Ex-Fuel MM (Feb) 0.2% vs. Exp. -0.1% (Prev. 3.2%, Rev. 3.4%)
UK GfK Consumer Confidence (Mar) -21.0 vs. Exp. -19.0 (Prev. -21.0)
German Ifo Current Conditions New (Mar) 88.1 vs. Exp. 86.8 (Prev. 86.9); Ifo Expectations New (Mar) 87.5 vs. Exp. 84.7 (Prev. 84.1, Rev. 84.4); Ifo Business Climate New (Mar) 87.8 vs. Exp. 86 (Prev. 85.5, 85.7).
German Import Prices MM (Jan) 0.0% vs. Exp. -0.3% (Prev. -1.1%); German Import Prices YY (Jan) -5.9% vs. Exp. -7.4% (Prev. -8.5%)

NOTABLE US HEADLINES

FedEx Corp (FDX) - Q3 2024 (USD): Adj. EPS 3.86 (exp. 3.45), Revenue 21.7bln (exp. 22.06bln); Authorises a new USD 5bln buyback programme. Narrows FY earnings outlook range; sees FY24 adj. EPS of 17.25-18.25 (prev. 17.00-18.50, exp. 17.40). Adj. OM 6.2% (exp. 5.63%). Reduces Capital spending forecast to USD 5.4bln from USD 5.7bln. Still sees a low-single-digit percentage drop in FY revenue. CFO says “DRIVE is having a real impact, supporting both operating income growth and margin expansion,”. Says if a new deal is not reached with USPS, the Co can't adjust FedEx express costs after expiration of contract (September 2024) and profitability could be negatively affected. Says will know in days or weeks if it has a new contact with the US Postal Service which is its biggest customer and with the current contract to expire September 29th. (Newswires) Shares +12.3% pre-market
Nike (NKE) - Although shares initially rallied after its earnings report was published, they slipped into the red during the conference call, ending the extended trading session down 5.7%. It reported Q3 EPS 0.77 (exp. 0.74), Q3 revenue USD 12.43bln (exp. 12.28bln). On call, execs acknowledged that the apparel maker had lost share in its running shoes category. NKE is prudently planning for revenue in the first half of the FY25 to be down low single digits. Shares -6.6% pre-market
Tesla (TSLA) reportedly trims Chinese output amid slow EV sales, according to Bloomberg. Shares -3.2% pre-market

GEOPOLITICS

MIDDLE-EAST

US will reportedly bring a resolution today calling for an immediate ceasefire in Gaza as part of a hostage deal for a vote in the UN Security Council, according to Reuters citing a spokesperson.
US military said it destroyed one unmanned surface vessel and two anti-ship ballistic missiles launched by Houthis in Yemen.

OTHER

Ballistic missiles were reportedly fired from Crimea towards Zaporizhzhia and explosions were heard, according to a source via social media platform X.
China's special envoy for Eurasian affairs said the Russian side appreciates the diplomacy efforts taken by the Chinese side and produced their own take on peace talks, while the side reiterated its willingness and position on holding serious talks on this crisis. China's envoy also stated that Russia and Ukraine are keeping to their positions and have huge differences when it comes to peace talks but both sides believe that this crisis will be solved through peace talks, according to Reuters.
China's embassy in the Philippines said the Taiwan question is not and should never become an issue between China and the Philippines, while it added any attempt to implicate the Taiwan question in maritime disputes between China and the Philippines is dangerous.
IAEA says Zaporizhzhia nuclear power plant has lost connection to main 750 kV off-site power line amid reports of military action in Ukraine; Back-up 330 kV power line at the nuclear power plant are still working.
Russia's Kremlin says Russia needs to fully "liberate" its "new regions" to ensure peoples' safety there, according to Tass; Russia regards itself in a state of war amid Western intervention on the Ukrainian side.

CRYPTO

Bitcoin (U/C) holds just shy of USD 65.5k, whilst Ethereum (-0.8%) falls back below USD 3.5k.

APAC TRADE

APAC stocks were ultimately mixed after momentum from the fresh record highs on Wall Street waned.
ASX 200 closed with mild losses with the index weighed on by underperformance in miners amid declines in underlying commodity prices, while the RBA's Financial Stability Review noted conditions are to remain challenging for households and businesses.
Nikkei 225 swung between gains and losses in which it initially climbed above 41,000 for the first time but then faltered and briefly wiped out all its gains as participants digested somewhat mixed inflation data which was mostly softer-than-expected but the Core reading matched estimates at a four-month high.
Hang Seng and Shanghai Comp. suffered amid weak earnings from the likes of CK Asset Holdings, CK Hutchison, CNOOC and Ping An, while tech slumped after a US Commerce Department official said SMIC may have violated US export controls to produce chips for Huawei.

NOTABLE ASIA-PAC HEADLINES

BoJ Governor Ueda reiterated that the BoJ's JGB holdings will remain at current levels for the time being and they would like to eventually decrease their JGB buying but will take a wait-and-see stance for the time being. Ueda added that the latest decision is based on the understanding that they will leave it to markets to determine long-term rate moves.

Japanese RENGO 2nd Tally: 5.25% (vs 5.28% in the first tally). Japan RENGO 1st Wage Tally: 5.28% (exp. 4.1%; 2023 final figure 3.6%).
Japan Government says BoJ will continue to work closely to conduct flexible policy and lead to an end of deflation.
RBA Financial Stability Review stated conditions are to remain challenging this year for households and businesses, as well as noted that households have trimmed spending and are underpinned by a strong jobs market and savings buffers.