Important part of ECB decision is any signal of rate cut timing after US CPI shocks market

Notes/observations

- Hot US CPI reading may be in rear view mirror but effects persisting today as traders bet that the inflation fight is not over. Stronger US dollar and treasury yields weighing on global assets. However, despite equities declining in US session, trend remains bullish as expectations of interest rate cuts have been pared throughout 2024, seemingly accepting that equities can still be viable in a higher rate environment. Tier1 analysts think that unfavorable base effects on inflation in H2 2024 mean the Fed could be forced to delay the start of any easing cycle to Dec 2024 or Mar 2025.

- Focus turns to Europe, with ECB rate decision at 08:15 ET. Widely expected to leave policy unchanged. This is the last decision before June meeting, where it has been telegraphed by council members and priced in that they will begin cutting rates. Will a stubborn US CPI reading cause concern for ECB?

- Largest Nikkei constituent, Fast Retailing, reported H1 results, seen as mixed, with cut to FY rev but raising profit guidance.

- Asia closed mixed with ASX200 underperforming -0.4%. EU indices are -0.8% to +0.1%. US futures are -0.2% to -0.1%. Gold -0.2%, DXY -0.1%; Commodity: Brent +0.4%, WTI +0.4%; Crypto: BTC +2.8%, ETH +2.4%.

Asia

- China Mar CPI Y/Y: 0.1% v 0.4%e v 0.7% prior; PPI Y/Y: -2.8% v -2.8%e.

- Australia Apr Consumer Inflation Expectation Survey: 4.6% v 4.3% prior [highest since Nov].

- Australia Mar CBA Household Spending M/M: +0.2% v -0.4% prior; Y/Y: 3.4% v 3.4% prior.

- Japan top currency diplomat Kanda noted that recent yen moves were 'rapid' and would take necessary actions whenever possible. Noted that the benefits of a weak yen were decreasing.

Europe

- UK Mar RICS House Price Balance: -4% v -6%e.

- BOE’s Greene commented in the press that UK rate cuts should still be a way off. Markets participants were now expect the BOE would cut rates earlier and by more than the Fed. She cautioned that markets were moving rate cut bets in the wrong direction.

Americas

- FOMC Mar Meeting Minutes noted that participants generally noted their uncertainty about the persistence of high inflation and expressed the view that recent data had not increased their confidence that inflation was moving sustainably down to 2%.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.07% at 506.92, FTSE -0.11% at 7,952.75, DAX -0.09% at 18,078.95, CAC-40 +0.32% at 8,071.01, IBEX-35 -0.54% at 10,717.18, FTSE MIB -0.12% at 33,998.00, SMI +0.09% at 11,505.00, S&P 500 Futures -0.07%].

Market focal points/key themes: European indices open mixed with an upward bias and maintained the trend through the early part of the session; markets seen in holding pattern ahead of ECB rate decision; energy and consumer sectors among those leading the way higher; lagging sectors include telecom and real estate; oil & gas subsector supported after Brent returned above $90/bbl; Lok’nStore receives takeover offer from Shurgard; SocGen enteres agreement to sell its Equipment Finances unit to BPCE; focus on upcoming ECB meeting later in the day; earnings expected in the upcoming US session include Fastenal, CarMax and Constellation Brands.

Equities

- Consumer staples: Safilo [SFL.IT] +4.5% (renews global licensing pact with Marc Jacobs).

- Healthcare: AstraZeneca [AZN.UK] +1.5% (raises dividend), Roche [ROG.CH] +0.5% (granted FDA Breakthrough Device Designation for blood test to support earlier Alzheimer's disease diagnosis).

- Financials: Societe Generale [GLE.FR] +3.5% (divests unit), Lok'nStore [LOK.UK] +18.0% (to be acquired) - Materials: Givaudan [GIVN.CH] -1.0% (earnings) - Industrials: Thyssenkrupp [TKA.DE] -1.5% (reportedly unlikely to present overhaul plan today), Volvo AB [VOLVA.SE] -3.0% (analyst downgrade), Maire Tecnimont [MT.IT] -4.0% (analyst downgrade) - Technology: Darktrace [DARK.UK] +7.0% (raises FY24 guidance again with Q3 trading update) - Telecom: Publicis [PUB.FR] +1.5% (earnings).

Speakers

- Bank of England (BoE) Quarterly Bank Liabilities/Credit Conditions Surveys noted that lenders reported that the availability of secured credit to households increased in the three months to end-February 2024 and was expected to increase over the next three months to end-May 2024. Lenders reported that total funding volumes decreased in the three months to end-February 2024 and was expected to increase in the three months to end-May 2024.

- China Planning Agency NDRC Dep Director Zhao Chenxin commented that planned to strongly spur investment and consumption.

- Biden Administration said to be planning to close 'gun show loophole' and require more background checks.

Currencies/fixed income

- USD was holding onto its post US CPI gains. Wed’s hot inflation reading prompted market participants to scale back expectations for Fed rate cuts. Policy divergence back on the front burner.

- EUR/USD at 1.0750 area as dealers noted any signal from ECB that rates could be cut in June could add another leg lower for the pair. European Central Bank that rates could be cut in June on Thursday have been brought into sharp focus.

- USD/JPY was firmly in the 153 neighborhood as recent Japnese rhetoric and ‘treats’ on possible FX intervention failed to materialize yet. Yen weakness attributed to concerns that the Fed might postpone interest rate cuts longer than initially anticipated.

Economic data

- (SE) Sweden Mar PES Unemployment Rate: 3.4% v 3.5% prior.

- (NO) Norway Feb Overall GDP M/M: -0.9% v 0.0% prior; Mainland GDP M/M: -0.2% v +0.1%e.

- (RO) Romania Mar CPI M/M: 0.4% v 0.5%e; Y/Y: 6.6% v 6.8%e.

- (HU) Hungary Mar CPI M/M: 0.8% v 0.6%e; Y/Y: 3.6% v 3.5%e.

- (IT) Italy Feb Industrial Production M/M: 0.1% v 0.5%e; Y/Y: -3.1% v -2.7%e; Industrial Production NSA (unadj) Y/Y: +0.4% v -0.6% prior.

Fixed income issuance

- (IT) Italy Debt Agency (Tesoro) sold total €8.25B vs. €7.0-8.25B indicated range in 3-year, 7-year and 15-year BTP Bonds.

- Sold €3.0B vs. €2.75-3.0B indicated range in 2.95% Feb 2027 BTP bonds; Avg Yield: 3.32% v 3.06% prior; bid-to-cover: 1.45x v 1.39x prior.

- Sold €3.5B vs. €3.0-3.5B indicated range in 3.50% Feb 2031 BTP bonds; Avg Yield: 3.53% v 3.31% prior; bid-to-cover: 1.35x v 1.41x prior.

- Sells €1.75B vs. €1.25-1.75B indicated range in 4.15% Oct 2039 BTP bonds; Avg Yield: 4.16%; bid-to-cover: 1.42x (syndicated on Jan 31st 2024).

Looking ahead

- (DE) Germany Feb Current Account Balance: No est v €29.7B prior.

- (EU) European Finance Ministers (Eurogroup) in Luxembourg.

- OPEC Monthly Oil Report.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (ZA) South Africa Feb Total Mining Production M/M: No est v -0.8% prior; Y/Y: No est v -3.3% prior; Gold Production Y/Y: No est v -12.7% prior; Platinum Production Y/Y: No est v 3.3% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 06:40 (UK) BOE allotment in 7-day short-term repo operation.

- 06:00 (IE) Ireland Mar CPI M/M: No est v 1.0% prior; Y/Y: No est v 3.4% prior.

- 06:00 (IE) Ireland Mar CPI EU Harmonized M/M: No est v 1.1% prior; Y/Y (final): No est v 1.7% prelim.

- 06:00 (IL) Israel Mar Consumer Confidence: No est v 47.0 prior.

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 3-month Bills.

- 07:00 (ZA) South Africa Feb Manufacturing Production M/M: 0.7%e v 0.8% prior; Y/Y: 3.7%e v 2.6% prior.

- 07:00 (RO) Romania to sell RON400M in 7.35% Apr 2031 Bonds.

- 07:15 (SE) Sweden Central Bank (Riksbank) Jansson.

- OPEC Monthly Oil Report.

- 08:00 (BR) Brazil Feb Retail Sales M/M: -1.5%e v +2.5% prior; Y/Y: 3.5%e v 4.1% prior.

- 08:00 (BR) Brazil Feb Broad Retail Sales M/M: -1.0%e v +2.4% prior; Y/Y: 6.0%e v 6.8% prior.

- 08:00 (MX) Mexico Feb Industrial Production M/M: 0.2%e v 0.4% prior; Y/Y: 3.1%e v 2.9% prior; Manufacturing Production Y/Y: 1.4%e v 0.1% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:15 (EU) ECB Interest Rate Decision: Expected to leave Key Rates unchanged.

- 08:30 (US) Mar PPI Final Demand M/M: 0.3%e v 0.6% prior; Y/Y: 2.2%e v 1.6% prior.

- 08:30 (US) Mar PPI (ex-food/energy) M/M: 0.2%e v 0.3% prior; Y/Y: 2.3%e v 2.0% prior.

- 08:30 (US) Mar PPI (ex-food/energy/trade) M/M: 0.2%e v 0.4% prior; Y/Y: 2.3%e v 2.8% prior.

- 08:30 (US) Initial Jobless Claims: 215Ke v 221K prior; Continuing Claims: 1.80Me v 1.791M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:45 (EU) ECB Chief Lagarde post rate decision press conference.

- 08:45 (US) Fed’s Williams.

- 09:00 (RU) Russia Feb Trade Balance: No est v $7.8B prior; Exports: No est v $28.9B prior; Imports: No est v $21.0B prior.

- 09:00 (RU) Russia Q1 Preliminary Current Account Balance: $14.7Be v $11.5B prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 5th: No est v $589.4B prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (US) Fed’s Collins.

- 13:00 (US) Treasury to sell 30-Year Bond Reopening.

- 13:30 (US) Fed’s Bostic.

- 14:00 (UK) BOE’s Green.

- 18:30 (NZ) New Zealand Mar Manufacturing PMI: No est v 49.3 prior.

- 18:45 (NZ) New Zealand Mar Total Card Spending M/M: No est v -1.9% prior; Retail Card Spending M/M: No est v -1.8% prior.

- 18:45 (NZ) New Zealand Mar Food Prices M/M: No est v -0.6% prior.

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 6.25%.

- 19:00 (KR) South Korea Mar Unemployment Rate: 2.8%e v 2.6% prior.

- 20:00 (SG) Singapore Monetary Authority (MAS) Quarterly Monetary Policy Statement.

- 20;00 (SG) Singapore Q1 Advance GDP (1st of 3 readings) Q/Q: 0.6%e v 1.2% prior; Y/Y: 3.0%e v 2.2% prior.

- 20:00 (KR) Bank of Korea (BOK) Interest Rate Decision: Expected to leave 7-day Repo Rate unchanged at 3.50%.

- 21:10 (JP) BOJ bond buying operation.

- 23:30 (JP) Japan to sell 3-Month Bills.