US stocks gained after weak PMI data spurred a dovish reaction - Newsquawk Asia-Pac Market Open

• US stocks continued their recovery from last week's slump with the upside spurred by soft US PMI data and some cautious commentary on the labour market which resulted in a broad dovish reaction in equities, while the dollar sold off and T-notes bull steepened. Furthermore, the 2-year auction was solid although it had little impact on the market as the PMI data drove the price action throughout the session.
• USD was pressured and the DXY slipped beneath 106.00 after weak manufacturing and services PMI data triggered a dovish reaction.
• Looking ahead, highlights include New Zealand Trade Data, Australian Quarterly & Monthly CPI, Japanese Services PPI, Supply from Australia.

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LOOKING AHEAD

• Highlights include New Zealand Trade Data, Australian Quarterly & Monthly CPI, Japanese Services PPI, Supply from Australia.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks continued their recovery from last week's slump with the upside spurred by soft US PMI data and some cautious commentary on the labour market which resulted in a broad dovish reaction in equities, while the dollar sold off and T-notes bull steepened. Furthermore, the 2yr auction was solid although it had little impact on the market as the PMI data drove the price action throughout the session.
• SPX +1.20% at 5,070, NDX +1.51% at 17,471, DJIA +0.69% at 38,503, RUT +1.79% at 2,002.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US President Biden's admin issued a rule extending overtime pay to 4mln salaried workers.

DATA RECAP

• US S&P Global Manufacturing Flash PMI (Apr) 49.9 vs. Exp. 52.0 (Prev. 51.9)
• US S&P Global Services Flash PMI (Apr) 50.9 vs. Exp. 52.0 (Prev. 51.7)
• US S&P Global Composite Flash PMI (Apr) 50.9 (Prev. 52.1)
• US Richmond Fed Composite Index (Apr) -7.0 (Prev. -11.0)
• US Richmond Fed Manufacturing Shipments (Apr) -10.0 (Prev. -14.0)
• US Richmond Fed Services Index (Apr) -13.0 (Prev. -7.0)
• US Philadelphia Fed Non-Manufacturing Survey (April) Regional Business Activity -12.4 (prev. -18.3 M/M)
• US New Home Sales-Units (Mar) 0.69M vs. Exp. 0.67M (Prev. 0.66M, Rev. 0.64M)

FX

• USD was pressured and the DXY slipped beneath 106.00 after weak manufacturing and services PMI data triggered a dovish reaction.
• EUR benefitted from the softer dollar which saw the single currency test the 1.0700 level to the upside, while there were also comments from ECB's Nagel who said the ECB needs evidence that inflation is heading to the target before rates can be cut.
• GBP outperformed following hawkish commentary from BoE's Chief Economist Pill who stated his outlook for UK monetary policy in the coming quarters has not changed substantially since the beginning of March and noted that he would err on the side of caution for cutting the Bank rate.
• JPY was ultimately flat on the day but did see some brief strength in the US session after a Nikkei sources article suggested the BoJ are to discuss the yen's slide at this week's BoJ meeting.

FIXED INCOME

• Treasuries bull-steepened after an ominous PMI report stoked labour market concerns.

COMMODITIES

• Oil prices rebounded from an early dip with the recovery aided by the weaker Dollar amid dovish US Flash PMIs.
• US Energy Inventory Data (bbls): Crude -3.2mln (exp. +1.8mln), Gasoline -0.6mln (exp. -1.4mln), Distillate +0.7mln (exp. -0.9mln), Cushing -0.9mln.
• Russia reaffirmed its 2024 oil output forecast of a decline by 1.25% to 523mln tons this year and sees crude exports nearly flat at 240mln tons this year which it expects to rise gradually to 270mln tons in 2027, according to Bloomberg.
• MMG (1208 HK) said the government-declared emergency has been extended for 30 days starting from April 5th at Las Bambas mine.
• Brazil is to establish quotas for imports of 11 steel products and impose a 25% fee when volumes have been exceeded, while import measures will be in place for 12 months, according to Valor.

GEOPOLITICAL

MIDDLE EAST

• Israel’s army is preparing to launch a military operation in Rafah very soon, according to Israeli Media cited by Al Arabiya.
• Israel ordered new evacuations in northern Gaza. It was also reported that Israeli forces launched a series of attacks in southern Lebanon in response to a drone attack by Hezbollah, while Lebanon's Hezbollah launched attacks targeting Israeli positions north of Acre.
• Iranian President Raisi said if Israel attacks Iranian territory, it is possible "there will be nothing left" of the Israeli regime, according to IRNA.
• IAEA chief said Iran has weeks, not months, to get enough enriched uranium to develop a nuclear bomb, according to Sky News Arabia.
• US designated two Iranian companies and four individuals under cyber sanctions for targeting US government agencies and companies.
• US Pentagon called on Iraq’s government to take all necessary steps to defend US forces.

OTHER

• US Senate voted overwhelmingly to advance the aid package for Ukraine, Israel and Taiwan. It was also earlier reported that the US is preparing a USD 1bln weapons package for Ukraine once the aid bill is passed, according to Reuters citing two officials.
• Russia's Defence Minister said Russia is to intensify strikes on logistical centres and storages for Western weapons.

ASIA-PAC

NOTABLE HEADLINES

• PBoC official said long-term yields will operate within a reasonable range that matches long-term economic growth expectations and the central bank's buying and selling of bonds in the secondary market can be used as a form of liquidity management and a reserve of monetary policy instruments. Furthermore, the official said liquidity in China's bond market makes it possible for buying and selling of bonds, while Treasury bond issuance is expected to quicken and long-term bond yields are to rebound.
• Chinese regulators queried some asset managers on their exposure to offshore local government debt, indicating a ramp-up of efforts to contain financial risks in a loosely regulated part of the market, according to Reuters citing sources.
• Japan’s government said the Japanese economy is in a moderate recovery albeit with signs of pausing lately.
• Japanese ruling party senior official said recent JPY falls are excessive and out of line with fundamentals, as well as noted that Japanese authorities could intervene to prop up the JPY at any time.
• BoJ is to discuss the impact of yen's rapid slide at this week's policy meeting and further rate hikes are seen as unlikely as the Bank keeps a close eye on inflation, according to Nikkei. BoJ is closely watching core inflation as it weighs the timing of additional hikes and rather than rushing further tweaks, the BoJ aims to carefully monitor moves by smaller businesses to raise pay and pass along increased costs to customers. Furthermore, a BoJ source said they want to confirm that the cycle between wage and price growth is strengthening and many at the BoJ believe that the weak Yen is not currently adding to inflation, while the increase in long-term interest rates is helping to keep the yen from weakening further.

EU/UK

NOTABLE HEADLINES

• BoE's Chief Economist Pill said his outlook for UK monetary policy in the coming quarters has not changed substantially since the beginning of March. Pill said the BoE needs to maintain a restrictive stance until it is satisfied that the process of squeezing out the excessive persistent component of inflation is complete but not any longer, while he added that a cut in the Bank Rate from current levels would not entirely undo the restrictive policy stance. Furthermore, he said during the Q&A that they have seen good news on headline inflation and CPI is likely to fall to or below the 2% target in coming months but noted persistent inflation components mean there may be a bounce back up from 2% and he would err on the side of caution for cutting the Bank rate.
• BoE's Haskel said UK food price inflation is "unusually high" and the labour market is "extremely tight", while he said inflation will stay high unless the job market weakens and responded that they need to consider upside risks when asked on the possibility of inflation staying at 2%, according to Bloomberg.
• ECB's Nagel said the ECB needs evidence that inflation is heading to the target before rates can be cut and if the favourable outlook from March is confirmed in the June projections and incoming data supports this outlook, the ECB can consider a rate cut.

DATA RECAP

• UK Manufacturing Flash PMI (Apr) 48.7 vs. Exp. 50.4 (Prev. 50.3)
• UK Services Flash PMI (Apr) 54.9 vs. Exp. 53.0 (Prev. 53.1)
• UK Composite Flash PMI (Apr) 54.0 vs. Exp. 52.7 (Prev. 52.8)
• German HCOB Manufacturing Flash PMI (Apr) 42.2 vs. Exp. 42.9 (Prev. 41.9)
• German HCOB Services Flash PMI (Apr) 53.3 vs. Exp. 50.5 (Prev. 50.1)
• German HCOB Composite Flash PMI (Apr) 50.5 vs. Exp. 48.6 (Prev. 47.7)
• EU HCOB Manufacturing Flash PMI (Apr) 45.6 vs. Exp. 46.6 (Prev. 46.1)
• EU HCOB Services Flash PMI (Apr) 52.9 vs. Exp. 51.8 (Prev. 51.5)
• EU HCOB Composite Flash PMI (Apr) 51.4 vs. Exp. 50.8 (Prev. 50.3)