Equities rebound and currencies stem bleeding amid lower volatility

Asia Market Update: Equities rebound and currencies stem bleeding amid lower volatility; US threatens China with steel tariffs; Hints from JP of G-7 targeted currency intervention? CN PBOC joins Asian currency jawboning; JP National CPI tomorrow.

General trend

- Asian equities recovered as yields ease and temporary easing of Middle East geopolitical tensions.

- Aussie resources index +1.0% after BHP Q3 iron ore production up and affirmed FY24 guidance, with Santos also affirming FY24 guidance. Also helped by Chinese exchange iron ore prices up >7% over past 2 days.

- President Biden threatens higher tariffs on China Steel, saying that “China is cheating”, and US Trade Rep Tai confirmed that steel is among the goods being reviewed under Section 301 tariffs.

- Korean steelmaker Posco +5%, Hyundai Steel +4.6%, Nippon Steel +1.25%, Tata Steel +0.8%.

- China PBOC joined this week’s Asian currency jawboning, warning of currency ‘overshooting’, but also potentially further hinted at bond trading to inject liquidity into the economy (would be first time for over 20 years). PBOC maintained a steady fix today.

- Interesting comments out of Japan’s top FX Diplomat Kanda, who confirmed the earlier G-7 statement regarding commitment on FX among members; Also affirmed the comments from South Korea’s Finance Ministry yesterday that both countries face similar issues with currency weakness. Keep in mind that BOJ Gov Ueda and Fin Min Suzuki will attend G-20, G7, IMF and World Bank meetings in Washington. Given recent currency concerns against the strong dollar and today’s comments, is there the possibility for a repeat of 2011, when the last Japanese yen coordinated G7 intervention took place, in Mar 2011?

- Japan had a very strong 12-month bill auction, with a higher avge yield of 0.1657% and a bid-to-cover of 4.49x.

- BOJ’s Noguchi confirmed she was one of the two BOJ dissenters (out of 7 total) who voted to maintain negative rates at the last March meeting.

- US Fed’s Bowman said that time will tell if currently Fed rate is 'sufficiently' restrictive’.

- US equity FUTs +0.2 to 0.3% during Asian trading.

Looking ahead (Asian time zone)

- Thu Apr 18th (Thu night US jobless claims).

- Friday Apr 19th Japan National CPI, (Fri eve UK Retail Sales).

Holidays in Asia this week

- Thu Apr 18th Vietnam

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 7,619.

- AUSTRALIA MAR EMPLOYMENT CHANGE: -6.6K V +10.0KE; UNEMPLOYMENT RATE: 3.8% V 3.9%E.

- Australia Q1 NAB Business Confidence: -2 v -6 prior.

- Reserve Bank of Australia (RBA) Apr Bulletin released.

- BHP Reports Q3 WAIO Iron Ore production 68.1Mts v 66.2Mts y/y; Affirms FY24 iron ore production 254-264.5Mt.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2030, 2032 and 2051 bonds.

China/Hong Kong

- Hang Seng opens flat at 16,253; Shanghai Composite opens -0.4% at 3,060.

- (HK) Macau Tourism Office: Q1 visitor arrivals 88.8M, +79.6% y/y.

- China Mar Swift Global Payments (CNY): 4.7% v 4.0% prior.

- China PBOC to 'better use' low-efficiency financial resources; Also to prevent risks of exchange rate overshooting - statement via WeChat.

- S&P: China local govt stimulus is 'buying time'.

- US President Biden, regarding proposed China metals tariffs, says there is no trade war [overnight update].

- (US) President Biden: China is cheating and not competing in the steel market; I'm not looking for a fight with China, I want fair competition.

- (US) BIDEN ADMINISTRATION CALLS FOR HIGHER TARIFFS ON CHINA STEEL AND ALUMINUM; Biden later today expected to propose raising tariffs on Chinese steel and aluminum products to 25% from 7.5% imposed by Trump – press [overnight update].

- (CN) Trade Rep Tai: Soon expects to conclude review of section 301 tariffs on Chinese goods, which includes steel.

- China Premier Li: Vow to expand market access for foreign firms [overnight update].

- China NDRC (State Planner): To speed up issuance of ultra-long special bonds [overnight update].

- (RU) Reportedly since end-Mar, more major Chinese banks including Bank of China, ICBC, China Citic Bank, Industrial Bank and Bank of Taizhou stopped accepting payments from Russia in Chinese yuan (CNY) - Russian press [overnight update].

- China PBOC sets Yuan reference rate: 7.1020 v 7.1025 prior.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repos; Net CNY0B v net CNY0B prior.

Japan

- Nikkei 225 opens -0.6% at 37,745.

- Japan Feb Tertiary Industrial Index M/M: 1.5% v 0.5%e.

- Japan releases weekly flows data [period ended Apr 12th]: Foreign buying of Japan equities: ¥1.74T v ¥1.76T prior; Japan buying of foreign bonds: -¥1.0T v ¥347.9B prior.

- Japan Mar Tokyo Condominiums for Sale Y/Y: +0.5% v -27.6% prior.

- Japan top FX Diplomat Kanda: Confirmed commitment on FX among G-7 members; reiterates excessive FX moves harm the economy.

- Bank of Japan (BOJ) Noguchi: Vital for BOJ to continue easing for labour market; Thought keeping negative rate was appropriate in March.

- Oracle (ORCL) Confirms to invest >$8B in Cloud Computing and AI in Japan over next 10 years.

- Japan Fin Min Suzuki: US, Japan share the same view on fast Yen, Won declines; FX should move stably reflecting fundamentals [overnight update].

- (JP) Japan sells ¥3.2T vs. ¥3.2T indicated in 12-Month Bills; Avg Yield: 0.1657% v 0.1051% prior; bid-to-cover: 4.49x v 3.35x prior.

- Japan sells ¥499.2B v ¥500B indicated in 20-yr, 30-yr, and 40-yr JGB's in liquidity enhancement auction: Avg accepted spread -0.022% v -0.001% prior, bid-to-cover: 2.27x v 3.13x prior.

- Nippon Steel / US Steel: (US) President Biden: Guaranteed I will keep US Steel American-owned [overnight update].

- Tokyo Chamber of Commerce and Industry head: Japanese financial authorities should consider conducting coordinated currency intervention with other countries to support the yen [overnight update].

- Japan largest opposition party [Constitutional Democratic Party of Japan (CDP)] said to propose using dividends related to the BOJ ETF holdings for childcare – Press [overnight update] **Insight: Japan’s depopulation crisis is accelerating, with the population dropping a record 837,000 in the 12 months to Oct, 2023, to just over 123M (having peaked ~128M around 2010).

South Korea

- Kospi opens +0.4% at 2,595.

Other Asia

- Thailand SEC reportedly revises securities offering rules for bankrupt firms; Aims at offering flexibility, protection– press [overnight update].

North America

- (US) White House said to renew internal talks on invoking climate emergency; the proclamation could be used to halt certain exports and drilling - US financial press.

- (US) Fed’s Bowman (voter, hawk): Progress on inflation has slowed and perhaps stalled.

- (US) Fed's Mester (voter): We want to get more information before we can say inflation is on a sustainable path to 2%.

- (US) Mid-April Manheim wholesale used vehicle Index at 199.2; -1.9% m/m; -13.7% y/y.

- (VE) US said to reimpose oil ban on Venezuela if Maduro does not act quickly - press.

- (US) DOE CRUDE: +2.7M V +0.5ME; GASOLINE: -1.2M V -1ME; DISTILLATE: -2.8M V -0.5ME.

- (US) Reportedly Biden Admin expected to remove tariff exemption for bifacial solar panels, but no timeline set for the change - press.

- (US) FEDERAL RESERVE BEIGE BOOK: OVERALL ECONOMIC ACTIVITY EXPANDED SLIGHTLY, ON BALANCE, SINCE LATE FEBRUARY.

Europe

- G7: Global economy has shown resilience to multiple shocks, but growth prospects remain below historic averages.

- (EU) ECB's Vasle (Slovenia, hawk): Forecasts deposit rate closer to 3% by year end provided disinflation goes to plan.

- (EU) EU will take further restrictive measures against Iran, in particular linked to drones and missiles - statement.

- (RU) Russia govt spokesperson Peskov: Confirm withdrawing peacekeeping troops from Karabakh [**Note: geographic region in present-day southwestern Azerbaijan and eastern Armenia].

- (EU) ECB's Holzmann (Austria) Biggest threat to inflation outlook is geopolitical.

- (EU) ECB's Centeno (Portugal, dove): Making significant progress on inflation; Jun meeting ill be a very important decision; Sees signs of decoupling between the Eurozone and US.

- (UK) BOE's Greene: Getting encouraging news on inflation but will be a bumpy ride back to target.

- (EU) ECB’s Cipollone (Italy): Seeing signs of recovery in EU area; Expect inflation for the rest of 2024 to be at this level more or less.

- (DE) German Fin Min Lindner: We need structural reforms to get out of the current economic slump.

- (EU) ECB's Nagel (hawk, Germany): Likelihood of June cut has increased.

- (DE) ECB’s Schnabel (Germany)Should be prudent to continue to consider the baseline forecast as just one input to policy decisions.

- (UK) BOE Gov Bailey: Our job is to hit inflation target sustainably.

- (EU) ECB Chief Lagarde: Reiterates Eurozone inflation is different from that in the US; European growth is mediocre and much slower than in the US.

Levels as of 01:20 ET

- Nikkei 225 +0.4%; ASX 200 +0.4%; Hang Seng +0.7; Shanghai Composite +0.5%; Kospi +1.7%.

- Equity S&P500 Futures: +0.2%; Nasdaq100 +0.3%, Dax +0.2% ; FTSE100 +0.1%.

- EUR 1.0664-1.0681; JPY 153.96-154.41 ; AUD 0.6430-0.6457 ; NZD 0.5906-0.5929.

- Gold +0.1% at $2,391/oz; Crude Oil +0.2% at $82.84/brl; Copper +0.5% at $4.3637/lb.