US stocks rallied amid strength in big tech and after PPI data helped eased some of the inflationary fears - Newsquawk Asia-Pac Market Open

• US stocks rallied in which big tech and NDX led the charge as participants geared up for earnings with notable strength in Apple amid reports about its new M4 chip products being in the works, while Nvidia (NVDA) also notched firm gains with overall risk sentiment helped by tailwinds from a dovish ECB, soft PPI data and with the latest Fed speak dismissive of recent CPI.
• USD was relatively flat with initial pressure in the DXY reversed after it found support around the 105.00 level and with participants digesting data releases including mixed jobless claims figures and softer-than-expected headline PPI which helped ease some of the post-CPI inflationary fears, while the latest Fed commentary continued to push back against immediate policy adjustments.
• Looking ahead, highlights include New Zealand PMI & Electronic Card Retail Sales, South Korea Unemployment, Singapore GDP, Chinese Trade Data, MAS & BoK Policy Decisions.

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LOOKING AHEAD

• Highlights include New Zealand PMI & Electronic Card Retail Sales, South Korea Unemployment, Singapore GDP, Chinese Trade Data, MAS & BoK Policy Decisions.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks rallied in which big tech and NDX led the charge as participants geared up for earnings with notable strength in Apple amid reports about its new M4 chip products being in the works, while Nvidia (NVDA) also notched firm gains with overall risk sentiment helped by tailwinds from a dovish ECB, soft PPI data and with the latest Fed speak dismissive of recent CPI.
• SPX +0.74% at 5,199, NDX +1.65% at 18,307, DJI -0.01% at 38,459, RUT +0.70% at 2,042.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (voter) said the latest inflation data did not increase confidence that disinflation is spreading within the economy and the Fed is not yet where it wants to be on inflation although is heading in the correct direction on a longer time frame. Barkin said it is smart to take their time and see if inflation slows and inflation data raises the question around if we are forecasting a shift.
• Fed's Williams (voter) said the outlook is uncertain and the Fed must be data dependent, as well as noted that the Fed sees rate cuts this year and monetary policy is well positioned to achieve the Fed's goals. Williams said no need to change monetary policy in the very near term and they eventually will need to cut rates, while he added that a rate hike is not part of the baseline view for outlook and recent inflation setbacks are not a surprise to the Fed.
• Fed's Collins (non-voter) said recent data argues against an imminent need to change rates and she still expects rate cuts this year but it may take more time for the economy to moderate as needed. Collins said the economic strength may argue fewer rate cuts and disinflation is likely to continue to be uneven, while recent inflation data hasn't changed the view about the outlook and the economy’s strength may mean Fed policy is not as restrictive as thought.
• BofA and Deutsche Bank expect only one interest rate cut by the Fed this year in December, while HSBC expects 75bps of rate cuts by the Fed in 2024 and for the Federal Reserve to start cutting interest rates by 25bps in June
• US Treasury's Shambaugh said they see trends toward disinflation, even if inflation has not come down quite as fast as expected.
• US President Biden’s administration is preparing to give a "sharper scalpel" to the committee that reviews foreign investments into the US which represents a broader effort to ensure that critical industries are protected from foreign interference, according to Axios.

DATA RECAP

• US PPI Final Demand YY (Mar) 2.1% vs. Exp. 2.2% (Prev. 1.6%)
• US PPI exFood/Energy YY (Mar) 2.4% vs. Exp. 2.3% (Prev. 2.0%)
• US Initial Jobless Claims w/e 211k vs. Exp. 215k (Prev. 221k, Rev. 222k)
• US Continued Jobless Claims w/e 1.817M vs. Exp. 1.800M (Prev. 1.791M, Rev. 1.789M)

FX

• USD was relatively flat with initial pressure in the DXY reversed after it found support around the 105.00 level and with participants digesting data releases including mixed jobless claims figures and softer-than-expected headline PPI which helped ease some of the post-CPI inflationary fears, while the latest Fed commentary continued to push back against immediate policy adjustments.
• EUR marginally softened in the aftermath of the ECB which kept rates unchanged as expected, while Lagarde noted they will have a lot more information by June and revealed some had been looking to cut at this meeting, but ultimately rallied around the consensus.
• GBP eked mild gains following a choppy session and with comments from BoE's Greene who stated that the UK has shown signs of coming out of a recession, while the attention now turns to Friday's GDP and activity data.
• JPY traded rangebound against the dollar in which USD/JPY remained above the 153.00 level for most of the session.
• Riksbank's Jansson said his view at the last monetary policy meeting in March was that the development of inflation looked so favourable that it might have been possible to cut the rate even at that stage, while he added it is important that the development of inflation does not deteriorate and if it does not happen as he sees it, the threat to being able to cut the rate in May will instead come mainly from the postponement of the rate cutting plans of other central banks.

FIXED INCOME

• Treasuries twist steepened amid soft-sided PPI data and dovish ECB, while there was also relaxed Fed commentary and a lacklustre 30yr auction.

COMMODITIES

• Oil prices were pressured amid the stronger dollar and despite the ongoing threat of Iran's retaliation against Israel.
• OPEC MOMR maintained the 2024 world oil demand growth forecast at 2.25mln BPD and kept the 2025 demand growth forecast unchanged at 1.85mln BPD.
• Production at Chile's Codelco fell 1.6% Y/Y in February to 103.7k tonnes.

GEOPOLITICAL

MIDDLE EAST

• Israeli PM Netanyahu said they are in the middle of a war in Gaza but are also preparing for scenarios in other arenas. Netanyahu said Israel is preparing to meet its security needs both in defence and attack, while he warned they will hurt those that hurt them.
• Israeli Finance Minister said Rafah, Deir al-Balah and Nuseirat must be entered starting today and that the army is preparing to deepen operations in Rafah, according to Al Arabiya.
• Israeli Defence Minister Gallant told US Defense Secretary Austin that a direct Iranian attack on Israeli territory would compel Israel to respond in an appropriate way against Iran, according to Axios.
• Israeli army said Iran is preparing its proxies in the region to attack them, according to Al Arabiya.
• IsraelWarRoom posted on X that Iran postponed an attack against Israel at the last minute due to American warnings, but it is still expected.
• Iran’s permanent mission to the UN said if the UN Security Council had condemned the attack on the embassy compound, the imperative for Iran to retaliate might have been obviated.
• Iran reportedly signalled to Washington it will respond to Israel's attack on its Syrian embassy in a way that aims to avoid major escalation and it will not act hastily, according to Reuters citing Iranian sources. Furthermore, a source familiar with US intelligence was not aware of the message conveyed but said Iran has been very clear its response would be controlled and non-escalatory, and planned to use regional proxies to launch a number of attacks on Israel.
• White House said US support for Israel remains ironclad on threats from Iran and its proxies, while it communicated to Iran that the US had no involvement in the Damascus strike and said it does not want the conflict to spread.
• US State Department said that they continue to be concerned about the risk of escalation in the Middle East, specifically after the threats Iran made towards Israel. Furthermore, Secretary of State Blinken has spoken to foreign ministers of Turkey, China, and Saudi Arabia in the past 24 hours to make clear that escalation is not in anyone's interest.
• Hamas Leader Haniyeh denied that his sons who were killed in Israeli strikes were fighters, while he responded that he places the interests of the Palestinian people ahead of everything when asked if the killing of his sons will impact ceasefire and hostage talks, according to Reuters.

OTHER

• Russian President Putin told news agencies that Russia was obliged to strike Ukrainian energy sites in response to Kyiv's attacks on Russia's energy infrastructure.
• Russian Defence Ministry said their forces targeted energy facilities in Ukraine with high-precision weapons and drones, according to Sky News Arabia.
• Ukrainian President Zelenskiy said Ukraine and Latvia signed a security agreement, while it was separately reported that Polish President Duda said they are talking with Ukraine about supplying them with Soviet-era missiles.
• China's Foreign Ministry decided to take countermeasures against two US enterprises over arms sales to Taiwan, while the measures taken against General Atomics Aeronautical Systems and General Dynamics Land Systems are effective from April 11th. This includes freezing properties in China and not allowing senior managers visas to enter the country.

ASIA-PAC

NOTABLE HEADLINES

• China NDRC deputy head said the market potential of equipment upgrades, consumer good trade-ins and recycling will be huge, as well as noted that economic contributions from these moves will be self-evident.
• China's MOFCOM encourages the replacement of obsolete automobiles with new energy or energy-saving vehicles.
• US airlines and unions urge the Biden administration to pause approving additional flights to the US by Chinese airlines.
• Nomura said despite a notably tougher tone from officials since late March as the Yen hovered above the 152 mark, there is no sense that they're going to intervene anytime soon, according to Nikkei.

EU/UK

NOTABLE HEADLINES

• BoE's Greene said the UK has shown signs of coming out of recession, while she added that wage growth is still far too high and is an indication of second-round effects.
• BoE Bank Liabilities Survey for Q1 showed UK lenders expect secured credit supply to rise in the next three-month period.
• ECB kept rates unchanged, as expected, with the Marginal Lending Rate at 4.75%, Refinancing Rate at 4.5% and Deposit Rate at 4.0%. ECB reaffirmed that policy rates will stay sufficiently restrictive for as long as necessary and its future decisions will ensure that its policy rates will stay sufficiently restrictive for as long as necessary, while the Governing Council will continue to follow a data-dependent and meeting-by-meeting approach to determining the appropriate level and duration of restriction, and it is not pre-committing to a particular rate path. Furthermore, it stated if the Governing Council’s updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase its confidence that inflation is converging to the target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction.
• ECB President Lagarde said the economy remains weak and surveys point to a gradual recovery which will be supported by increasing real incomes, while she referred to the statement when questioned on a potential June policy adjustment but added that the ECB will have a lot more data by June and stressed data dependence. Lagarde responded that a few members felt sufficiently confident based on the data available when questioned if anyone wanted to alter policy today but dissenters ultimately rallied around the consensus and a very large majority wanted to wait until June for any adjustment.
• ECB sources said policymakers still expect to cut rates in June but some think the case for pausing at their following meeting is becoming stronger given a continued rebound in US inflation, according to Reuters. Sources stated that doves are looking for cuts in June and July amid a benign labour market and although the July decision was not explicitly debated, some policymakers argued that a delayed start to the Fed's own cutting cycle warranted caution from the ECB. Furthermore, policymakers said every wage indicator is pointing in the right direction, growth is weak, and inflation has clearly cooled, warranting a cut in the record-high 4% deposit rate.
• ECB sources said a handful of officials needed extra convincing to hold back, according to Bloomberg.
• German ministers reportedly have a new deadline of May 2nd (prev. April 19th) to outline spending ambitions and saving proposals for the 2025 budget, according to Reuters citing sources.