US stocks declined as treasures bear-steepened, while Tesla drove the losses in the Nasdaq on poor Q1 deliveries - Newsquawk Asia-Pac Market Open

• US stocks were pressured amid various micro factors in the backdrop of an aggressive Treasury bear-steepener following Europe's return and despite soft German inflation figures, as oil prices ripped and Europeans reacted to the long weekend's events. In terms of the headwinds for stocks, Tesla (TSLA) drove the losses in the Nasdaq after poor Q1 delivery figures and semiconductors were another pocket of weakness, while the apparel space was pressured after PVH's (PVH) awful guidance and health insurance names were also slammed after the final Medicare Advantage rate ignited margin concerns.
• USD was lower and DXY retreated beneath 105.00 despite slightly higher-than-expected JOLTS data and a monthly expansion in Factory Orders, while a slew of Fed comments failed to garner much reaction including from Mester who still expects the Fed can cut rates this year and doesn't see the case for cutting at the next meeting but didn't rule out a June cut and still sees three cuts this year as reasonable.
• Looking ahead, highlights include Australian AIG Manufacturing & Construction Indexes, Japanese Services & Composite PMI, Chinese Caixin Services & Composite PMIs, Supply from Australia.

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LOOKING AHEAD

• Highlights include Australian AIG Manufacturing & Construction Indexes, Japanese Services & Composite PMI, Chinese Caixin Services & Composite PMIs, Supply from Australia.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks were pressured amid various micro factors in the backdrop of an aggressive Treasury bear-steepener following Europe's return and despite soft German inflation figures, as oil prices ripped and Europeans reacted to the long weekend's events. In terms of the headwinds for stocks, Tesla (TSLA) drove the losses in the Nasdaq after poor Q1 delivery figures and semiconductors were another pocket of weakness, while the apparel space was pressured after PVH's (PVH) awful guidance and health insurance names were also slammed after the final Medicare Advantage rate ignited margin concerns.
• SPX -0.72% at 5,205, NDX -0.94% at 18,121, DJIA -1.00% at 39,170, RUT -1.80% at 2,065.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Daly (voter) said they need to see how long to leave rates where they are and inflation is coming down, bumpy and slowly, while there is no urgency to adjust the rate and standing pat is the right policy for the moment. Daly also said three rate cuts this year is a reasonable baseline and there's a real risk of cutting rates too soon but added there is more work to do before being confident inflation is on the right path.
• Fed's Mester (voter) said she still expects the Fed can cut rates later this year but doesn't see the case for cutting at the next meeting and noted that policy is in a good place to navigate risks to the economy, while her forecast is similar to the median. Mester said moving rates down too soon or too quickly without sufficient evidence would risk undoing the progress made which is the bigger risk at the moment, while she now sees the longer run funds rate at 3.0% versus prior 2.5% where it had been for some time. Mester also said she will not pre-judge meetings but will not rule out a June cut and said three cuts this year is still reasonable.
• WSJ's Timiraos noted "the sell-side bank and Fed forecaster consensus is now aligned in expecting the first rate cut in June".

DATA RECAP

• US Factory Orders MM (Feb) 1.4% vs. Exp. 1.0% (Prev. -3.6%, Rev. -3.8%)
• US JOLTS Job Openings (Feb) 8.756M vs. Exp. 8.75M (Prev. 8.863M, Rev. 8.748M), quits rate 2.2% (prev. 2.1%, Rev. 2.2%).

FX

• USD was lower and DXY retreated beneath 105.00 despite slightly higher-than-expected JOLTS data and a monthly expansion in Factory Orders, while a slew of Fed comments failed to garner much reaction including from Mester who still expects the Fed can cut rates this year and doesn't see the case for cutting at the next meeting but didn't rule out a June cut and still sees three cuts this year as reasonable.
• EUR benefitted from the weaker dollar and ultimately shrugged off the soft ECB consumer inflation expectations survey and German inflation data, while the focus turns to EU HICP and Unemployment data.
• GBP edged marginal gains but remained at the 1.2500 handle in relatively rangebound trade.
• JPY traded flat against the dollar amid a lack of pertinent drivers and with US yields mixed.

FIXED INCOME

• Treasuries saw large bear-steepening on Europe's return, despite soft German inflation figures, as oil prices ripped.

COMMODITIES

• Oil prices continued their bullish trend amid Ukraine drone strikes and broader commodity strength.
• US Energy Inventory Data (bbls): Crude -2.3mln (exp. -1.5mln), Gasoline -1.5mln (exp. -0.8mln), Distillate -2.5mln (exp. -0.6mln), Cushing -0.8mln.
• Russian Deputy PM Novak said gasoline and diesel fuel stocks remain high in Russia.
• Kazakhstan's March oil output reportedly exceeded the OPEC quota with 0.4% rise from February to 1.57mln BPD, according to sources and Reuters calculations.
• Kazakhstan is set to double its pipeline oil exports to China in April amid refinery maintenance, according to Kaztransoil.
• OPEC's JMMC will meet at 12:00GMT on April 3rd, according to Energy Intel's Bakr.

GEOPOLITICAL

• Israel reportedly showed flexibility on a number of points during the Cairo-negotiations, while Israeli media quoted an official who stated the atmosphere of truce talks in Cairo is positive and will continue, according to Al Arabiya.
• White House said the US is not involved in any way with Israeli air strike on Iran's embassy compound in Damascus and there is no evidence Israel hit aid workers deliberately, while it also stated that Iran continues to deliver drones to Russia for use in Ukraine.
• Ukrainian President Zelenskiy said after Tatarstan drone attack, that Ukraine is answering Russian strikes with longer-range responses.
• Ukrainian intelligence source said attacks on Russian refineries will continue in order to reduce Russia's oil revenue, according to Reuters.

ASIA-PAC

NOTABLE HEADLINES

• Chinese President Xi and US President Biden held phone talks and had a candid, in-depth discussion on China-relations and issues of common concerns, according to Xinhua. Xi said China-US relations show signs of stabilisation but negative factors in Sino-US relations are also increasing and Xi will not tolerate Taiwan independence with the Taiwan question the first red line that cannot be crossed. Xi hopes the US side will translate into actions the positive statement made by President Biden of not supporting Taiwan independence. It was also stated that US has suppressed China trade and technology, as well as created risks, while China will not sit by idly if the US insists on suppressing China's high-tech development.
• US senior administration official said US President Biden and Chinese President Xi discussed Taiwan, Ukraine and the South China Sea in which President Biden intended the talk to be a “check-in” rather than a summit with concrete outcomes. Furthermore, Biden had planned to raise two issues over China’s aggression in the Pacific which were Taiwan and the South China Sea, while the official added Biden wanted to stress to Xi that China must not continue helping Russia rebuild its military-industrial base and Biden wants Xi to help stop attacks on ships in the Red Sea by asking Iran to rein in Yemen's Houthis.
• US Treasury Secretary Yellen is to travel to China on April 3rd-9th to continue economic dialogue with top Chinese officials and is to meet with Vice Premier He Lifeng, the Guangdong province Governor and US business executives in Guangzhou. Furthermore, Yellen is to meet with PBoC's Governor Pan Gongsheng and former Vice President Liu He on April 8th, while she is to underscore global economic consequences of Chinese industrial overcapacity in meetings with Chinese officials.
• China's Commerce Ministry said it firmly opposes US listing China as a country of primary concern in its 2024 foreign trade barriers report.
• Japanese PM Kishida and US President Biden are to agree on subsidy rules for strategic products including chips and batteries, according to Nikkei.

EU/UK

NOTABLE HEADLINES

• ECB Consumer Inflation Expectations survey (Feb) 12-months ahead view is at 3.1% (prev. 3.3%), while the 3-year ahead view is at 2.5% (prev. 2.5%).

DATA RECAP

• UK S&P Global Manufacturing PMI (Mar) 50.3 vs. Exp. 49.9 (Prev. 49.9)
• German CPI Prelim MM (Mar) 0.4% vs. Exp. 0.6% (Prev. 0.4%)
• German CPI Prelim YY (Mar) 2.2% vs. Exp. 2.2% (Prev. 2.5%)
• German HICP Prelim MM (Mar) 0.6% vs. Exp. 0.7% (Prev. 0.6%)
• German HICP Prelim YY (Mar) 2.3% vs. Exp. 2.4% (Prev. 2.7%)
• German HCOB Manufacturing PMI (Mar) 41.9 vs. Exp. 41.6 (Prev. 41.6)
• EU HCOB Manufacturing Final PMI (Mar) 46.1 vs. Exp. 45.7 (Prev. 45.7)