• FOMC minutes saw focus around a potential change to the Fed’s reinvestment policy and a split on whether hikes should be faster or more gradual
• Asia equities traded lower, following on from the US lead with the USD losing ground against major counterparts
• Looking ahead, highlights include ECB Minutes, US Weekly Jobs data, ECB’s Draghi, Praet and Constancio

FOMC MINUTES

• The FOMC minutes showed that a change to the Fed’s reinvestment policy would likely be appropriate at the end of 2017 but that it would depend on the evolution of the economy.
• On interest rates, the minutes said that officials were split on whether higher inflation warranted faster hikes now or a more gradual pace.
• The minutes also showed that some saw current stock prices as “quite high”.

ASIA

Asia equity markets trade negative following a similar downbeat US close amid weakness in the energy sector and in the wake of the Fed minutes, which showed that the Fed discussed normalization of the balance sheet and that some officials viewed stock prices as quite high. ASX 200 (-0.6%) suffered from losses in the financial sector, while Nikkei 225 (-1.5%) was the laggard in the region on JPY strength as USD/JPY failed to maintain 111.00. Hang Seng (-0.7%) and Shanghai Comp. (+0.1%) were mixed as participants digest the latest Chinese Caixin Services and Composite PMI figures which printed at 6-month lows, but remained in expansionary territory. 10yr JGBs traded marginally higher amid a subdued risk tone in stocks, while today’s enhanced liquidity auction super-long JGBs drew greater interest with the b/c increasing from prior.

Chinese Caixin Services PMI (Mar) 52.2 (Prev. 52.6); 6-month low. (Newswires)

Chinese Caixin Composite PMI (Mar) 52.1 (Prev. 52.6); 6-month low.

PBoC refrained from conducting open market operations for the 8^th consecutive day.

PBoC set CNY mid-point at 6.8930 (Prev. 6.8906)

EUROPE/UK

Latest IFOP French Presidential Election Poll showed second round with Macron at 59.5% vs. Le Pen at 40.5%. (Newswires)

Harris French Presidential Election Poll showed second round with Macron at 62% vs. Le Pen at 38% (Prev. 65% vs. 35%). (Newswires)

FX

USD-index languished near yesterday’s lows following the release of the FOMC minutes which stated that members were split over whether stronger inflation warranted faster hikes now or a more gradual pace. Elsewhere, USD/JPY and JPY-crosses remained pressured post-FOMC minutes which dampened risk sentiment to the benefit of safe-haven JPY, while AUD/USD declined after weaker Chinese PMI data and alongside outperformance in EUR/AUD which gained traction on a break above the 1.4100 level.

COMMODITIES

Gold (-0.2%) prices slightly pulled back from the highs seen following the FOMC minutes which cast some doubts regarding a faster pace of hikes and pressured USD. Elsewhere copper was weaker amid a cautious risk sentiment, while WTI crude futures extended on post-DoE inventory losses.

GEOPOLITICAL

South Korea successfully test launched a new 800km missile that can reach anywhere in North Korea. (Newswires)

US

US Treasuries moved higher after the release of the minutes, despite them showing the discussion on balance sheet normalisation took place in March. Treasuries had been marginally lower following the strong ADP report but rebounded after the minutes as equities sold off. Some focus was put on earlier comments from US House Speaker Ryan, who cautioned that there is still a way to go on tax reform. Jun’17 10y T-note futures settled at 125.01+, up half a tick.

Fed's Kaplan (Voter, Neutral) stated the Fed should be very gradual and patient on rate increases, while he added that 2017 will be a solid year for the economy but is more concerned regarding the following years. (Newswires)

US President Trump wants to see how healthcare proceeds in congress prior to settling on details of a tax reform bill and may include infrastructure plan in either healthcare or tax reform legislation, according to reports in NYT. (NYT)

US President Trump may redefine criteria for countries to be labelled as currency manipulators and is unlikely to label China as a currency manipulator, according to press reports. (Newswires)

US President Trump has condemned the chemical weapons attack in Syria saying ‘it has crossed a lot of lines for me’. (NY Times)

US House Speaker Ryan said that the House, Senate and White House are not on the same page yet on tax reform. (Newswires)

US House Majority Leader McCarthy stated he is highly confident Obamacare repeal will happen this year. (Newswires)