• European Indices [Euro Stoxx 50 +0.3%] have gained some traction, diverging from the mostly negative performance seen in Asia – for reference, 2 of China’s Big 4 banks have now posted earnings
• US-China trade talks progress; IP and enforcement remain sticking points
• No majority for any Brexit indicative option & DUP are to oppose PM May’s deal
• Looking ahead, highlights include German National CPI (Prelim), US GDP (Final) & Initial Jobless Claims, Japanese Tokyo CPI & Retail Sales, Industrial Output & Unemployment Rate, Fed's Quarles, Clarida, Bostic, Williams & Bullard, ECB's Knot & Villeroy, RBNZ's Orr, Supply from the US

ASIA  

Asian equity markets traded mostly negative as the downbeat sentiment rolled over from US where all major indices finished lower amid lingering growth concerns and as the yield curve inversion deepened. As such, ASX 200 (+0.7%) opened subdued but with losses eventually pared by resilience across nearly all sectors, while Nikkei 225 (-1.6%) underperformed and briefly slipped below the 21000 level with selling exacerbated by a firmer currency and rotation into bonds. Elsewhere, Hang Seng (+0.2%) and Shanghai Comp. (-0.9%) were also cautious with weakness in financials due to earnings in which China’s 2nd largest lender China Construction Bank missed on FY net forecasts and posted its first quarterly Y/Y profit decline since 2015 which doesn’t bode well for the other Big 4 banks to report this week, while China Life Insurance also posted a near-65% drop in FY net. Nonetheless, sentiment in China slightly improved as US and China senior trade negotiators began the latest round of trade talks in Beijing and a Trump administration official suggested progress was made in all areas of trade talks but some sticking points remained. Finally, 10yr JGBs were supported by the negative risk tone in Japan and amid the recent bond market rally as global yields declined in which the US 10yr yield fell to a fresh 15-month low and the Aussie 3yr yield printed its lowest on record, while the results of today’s 2yr auction were also bullish as all metric improved from the prior month, albeit marginally.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.7263 (Prev. 6.7141)

Chinese Premier Li said world economy faces slower growth and increasing uncertainties, while he added that some fluctuation in quarterly economic growth this year cannot be ruled out. Chinese Premier Li further commented that China must achieve goal of tax and fee cuts this year, while it will also publish a revised negative list for foreign investors and will treat domestic and foreign companies equally.. Separately, adding that changes in their economy in March have exceeded expectations, adds that China's economic operations were steady in Q1. (Newswires)

US administration official said US and China made progress in all areas of trade talks but enforcement and intellectual property remain sticking points, while China was also said to have made proposals on trade including tech transfers that are more specific and with wider scope than ever before. However, the official added that there is no specific timeframe for a trade deal with talks to conclude anytime from April-June and whether to lift current US tariffs on China is a sticking point and will be worked out as part of a deal. Subsequently, Chinese Premier Li said China must protect IP to support China's transformation, adding that he does not think there is a trust deficit between US and China (Newswires)

China Commerce Ministry says both sides have made progress in talks but there is still work to do. Vice Premier Lui He, USTR Lighthizer and Treasury Secretary Mnuchin are to hold talks tonight followed by a full day of talks tomorrow. (Newswires)

US

Fed's George (Voter, Hawk) said Fed can take a wait-and-see approach on monetary policy given notable downside risks to the economy and that medium-term risks to the economy is from slower growth in China, EU and UK. Fed’s George also commented the Fed is not using balance sheet as a policy tool and does not discuss balance sheet run-off as ‘tightening policy’, while she expects a rebound in payrolls for March and added that US economic growth is likely to slow to 2.0% this year as fiscal and monetary stimulus fades and amid slower global growth. (Newswires)

UK/EU   

UK MPs voted (441 vs. 105) to approve the Statutory Instrument which amends the date of the UK’s withdrawal from the EU to May 22nd if PM May’s Brexit deal passes this week or to April 12th if deal is not approved.

UK Parliamentary indicative votes results showed no majority was reached for any of the Brexit options, although (J)(234 For vs. 272 Against) which compels the government to negotiate for a permanent and comprehensive UK-wide customs union with the EU, and (M)(268 For vs. 295 Against) which called for a second ‘confirmatory’ referendum, were the options that lost by the narrowest margins. (Newswires)

ERG head Jacob Rees-Mogg initially said he will back PM May’s deal if the DUP abstain but later commented he would support the DUP if it continues to oppose the deal. (Newswires/Twitter)

DUP said it will not support the government on the Brexit deal if it tables a 3rd meaningful vote and that the party cannot agree to anything which threatens the union, while DUP's Dodds also said we will vote against PM May's deal and will not abstain when it comes to the union. Subsequetly, DUP Leader Foster has declined to rule out supporting a softer Brexit ahead of talks with the government today. (Newswires)

Former Brexit Secretary Raab said the UK government should return to the EU to seek legally binding changes, if not then UK should prepare for a no-deal Brexit. (Newswires)

Germany's BGA says they expect exports to grow by up to 3% in 2019 at a record high of EUR 1.4tln, imports expected to surpass exports with exp. growth of 5% in 2019; critiqus the shift towards a more interventionalist industrial strategy saying, ‘china light’ policies are not an option. (Newswires)

German Saxony State CPI YY Mar 1.4% (Prev. 1.4%)

German Saxony State CPI MM Mar 0.5% (Prev. 0.3%)

- Saxony State CPI’s came in broadly in-line with expecatiation, with the MM figure marginally higher than the prior. For reference, other German State’s CPI printed largely in-line/marginally below expectations; ahead of the German CPI (Prelim) figure today at 13:00GMT/09:00EDT, where expectations are for MM 0.6% vs. Prev. 0.4% & YY 1.6% vs. Prev. 1.5%.

EQUITIES

Major European indices have gained some traction following a subdued start to the session [Eurostoxx 50 +0.2%] as the region diverges from the downbeat sentiment experienced in Asia. UK’s FTSE 100 (+0.6%) outperforms its peers as the weaker domestic currency bolsters the export-heavy index. Sector-wise, material stocks lead the gains as base metals benefit from recent turnaround in the risk sentiment whilst utility names lag as investors move away from defensive sectors. In terms of notable movers, Swedbank (-3.7%) shares took another hit amid the slew of open investigations in relation to money laundering. As the bank’s AGM gets underway, it announced that CFO Anders Karlsson has replaced Birgitte Bonnesen as acting President and CEO.  Company shares are halted until further notice. Elsewhere, chip names remain pressured in a continuation of yesterday’s sell-off after DAX-listed Infineon (-1.1%) announced a profit warning due to rising global tensions.

China Construction Bank (939 HK) - Co. FY18 net rose 5.1% Y/Y to CNY 254.7bln vs. Exp. CNY 258.2bln, Q4 net CNY 40.55bln vs. Prev. CNY 41.02bln Y/Y which was its first decline in quarterly profit since 2015. (Newswires)

ICBC (1398 HK) 2018 net profiit CNY 297.68bln vs. Exp. CNY 300.4bln, Operating income CNY 725.1bln vs. Prev. CNY 675.7bln, NPL ratio 1.52%, capital adequacy ratio 12.98%, net interest margin 2.3% vs. Prev. 2.22%

FX

JPY/NZD - The best G10 performers, albeit off best levels as the Usd retains a firm underlying bid in its own right as a safe-haven amidst a tentative and intermittent revival in broad risk appetite. Usd/Jpy is holding above 110.00 within a 110.03-53 range having tested bids/support just ahead of the big figure where decent option expiry interest resides (1 bn) and is back above daily chart resistance between 110.07-12, while Eur/Jpy has also rebounded from sub-124.00 lows and heavy Japanese selling that pushed the cross down through a key Fib (123.81) at one stage. Meanwhile, the Kiwi has regained some composure after its post-RBNZ rout to reclaim 0.6800 status, but Nzd/Usd remains vulnerable following a marked deterioration in NZ business sentiment and expectations according to ANZ’s March survey, which provides more justification for the change in rate guidance towards an ease vs a neutral stance previously. Note, RBNZ Governor Orr is due to orate later on the new framework for monetary policy.

AUD/EUR - Also weathering a bout of downside pressure relatively well, as the Aussie keeps tabs on the 0.7100 handle vs its US counterpart and remains above 1.0400 against the Nzd, however Aud/Usd could be hampered by a 1 bn expiry ahead of the NY cut along with dovish positioning for next week’s RBA on the notion that the balance of risks could shift towards cutting benchmark rates from a balanced prognosis at present, ala the RBNZ. Meanwhile, the single currency succumbed to spill-over Jpy cross sales vs the Usd that forced the headline pair through recent lows and chart support (at 1.1241), but not much further as it consolidates back above the 76.4% Fib retracement of the 1.1177-1.1448 move.

GBP/SEK/NOK/CAD/CHF - All lagging their major peers, and especially the Pound, Swedish and Norwegian Crowns. Cable has fallen below a fairly resilient 1.3150 mark following the latest UK Parliamentary votes on Brexit ended with no majority support for any of the 8 options tabled, and in fact resounding rejection in 6 instances, leaving the situation even more uncertain than it was before the HoC took the baton from PM May. Meanwhile, Eur/Nok and Eur/Sek have both bounced further in wake of yesterday’s worse than expected Norwegian jobs data and as Swedbank suffers more investor angst over money laundering allegations, with the former up to 9.7465 and latter at 10.4935 before easing back. The Loonie is also weaker post-data, between 1.3400-30 vs its US rival, with the Franc still somewhat mixed as it pivots 0.9950 vs the Greenback and 1.1200 against the Euro in advance of a speech from SNB’s Maechler that could fan speculation about intervention to curb excess Chf strength/demand.

DXY - The index has climbed into a higher range after recent declines amidst falling US Treasury yields and deeper curve inversion to probe above 97.000, and from a technical perspective the Buck may be able to overcome residual month end flows that are said to be mildly bearish.

Brazil’s Economy Minister Guedes said that if the pension reform bill of BRL 1tln passes, interest rates would naturally decline by 2 percentage points. (Newswires)

New Zealand ANZ Business Confidence (Mar) -38.0 (Prev. -30.9). (Newswires) New Zealand ANZ Activity Outlook (Mar) 6.3 (Prev. 10.5)

FIXED INCOME

The 10 year German debt future has seen more downside price action and bullish correction after its mid-week propulsion to new contract peaks and multi-year yield lows, with a pull-back to 166.28 effectively matching another near term chart support level at 166.31, but not triggering stops that might have resulted in a deeper retracement (to 166.19, which represents 50% of Wednesday’s rally). However, Bunds are still underperforming Gilts and US Treasuries as the UK benchmark rebounds firmly to eke out a marginal new Liffe high at 129.54 from a fresh base (129.18) and the latter trade just a fraction below par ahead of a busy data line up and the final leg of this week’s supply in the form of Usd32 bn 7 year notes. Back to Eurex, consolidation and unwinding some outperformance appears more evident than a decisive change of direction or trend, but a loss of momentum could also be attributed to the bulk of month end positioning already done (to recap, durations are said to be supportive for Eurozone bonds, and Gilts).

COMMODITIES

WTI (-0.6%) and Brent (-0.6%) futures languish following yesterday’s pullback, although the benchmarks remain off worst levels amid an improvement in market sentiment. Despite this week’s builds in API and DoE crude inventories (API +1.9mln, DoE +2.8mln), UBS analysts note that both weekly data and for the year thus far are more bullish than usual. Meanwhile, WSJ reported that Saudi Aramco plans to issue a USD 10bln bond, to be used as part of a payment for their 70% purchase of Sabic which is valued at USD 69.1bln, according to sources. On the OPEC+ front, Russian Energy Minister Novak told RIA newspaper that the OPEC+ Charter could be signed in either May or June. Elsewhere, precious metals are pressured by firmer buck with gold (-0.2%) hovering close to its 50 DMA at 1307/oz. Meanwhile, base metals are faring better, with risk-gauge copper bouncing off lows as the risk appetite supports the red metal.