US stocks were pressured by geopolitical headwinds amid Iran retaliatory concerns - Newsquawk Asia-Pac Market Open

• US stocks finished lower with heavy selling in late US trade as part of a broader haven influx amid concerns regarding Iran's response amid warnings of a potential retaliatory attack on Israel within 48 hours and with Israel raising its alert level at embassies worldwide. Participants also digested disappointing initial jobless claims and Challenger layoffs data earlier in the session, while there was a slew of Fed commentary which was hawkish-leaning as Goolsbee and Kashkari both cast some doubts regarding cuts this year.
• USD was initially pressured by higher-than-expected initial jobless claims and an increase in Challenger Layoffs although the DXY eventually returned to flat territory with support later in the session amid rising geopolitical concerns surrounding Iran's response to Israel. There were several Fed comments again including from Fed's Goolsbee and Kashkari who both suggested the potential for no cuts this year depending on inflation, while the focus now turns to the looming NFP report.
• Looking ahead, highlights include South Korean Current Account, Japanese Household Spending & Leading Index, Australian Trade Data & Retail Sales, Singapore Retail Sales, RBI Rate Decision, Supply from Australia, Holiday Closures in Mainland China and Taiwan.

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LOOKING AHEAD

• Highlights include South Korean Current Account, Japanese Household Spending & Leading Index, Australian Trade Data & Retail Sales, Singapore Retail Sales, RBI Rate Decision, Supply from Australia, Holiday Closures in Mainland China and Taiwan.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks finished lower with heavy selling in late US trade as part of a broader haven influx amid concerns regarding Iran's response amid warnings of a potential retaliatory attack on Israel within 48 hours and with Israel raising its alert level at embassies worldwide. Participants also digested disappointing initial jobless claims and Challenger layoffs data earlier in the session, while there was a slew of Fed commentary which was hawkish-leaning as Goolsbee and Kashkari both cast some doubts regarding cuts this year.
• SPX -1.23% at 5,147, NDX -1.55% at 17,878, DJIA -1.35% at 38,596, RUT -1.08% at 2,053.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (voter) said it is smart for the Fed to take its time on rate cuts and that early 2024 data is less encouraging which raises the issue of whether the outlook is shifting or just a "bump along the way". Barkin said there is no case to be made that 2% inflation is not achievable and adhering to that target has brought benefits, while he has no interest in backing off from the 2% target.
• Fed's Mester (voter) said she now thinks growth this year will be above trend and does not think the disinflation pace this year will match last year but does anticipate the Fed will be in a position to lower the FFR later this year. Mester said if the Fed slows the QT runoff, there is less likelihood of running into a September 2019 situation and she would be comfortable reducing the pace of the runoff soon.
• Fed's Goolsbee (non-voter) said the biggest danger to the inflation picture is continued high inflation in housing services, while he added housing inflation has to come down which he thinks will happen but added it is a threat to the economic Fed's 2% target if it doesn't. Furthermore, he said that he jotted down two rate cuts this year but if inflation continues to move sideways, it makes him wonder if they should cut rates at all this year.
• Fed's Harker (non-voter) said inflation is still too high and the jury is still out on whether AI will boost productivity.
• Fed's Kashkari (non-voter) said need to see some more inflation progress before a cut, while he said he wrote down two rate cuts this year in the March projection but said it is possible the Fed will not cut this year if inflation stalls. Furthermore, he does not see any reason why it cannot continue with the balance sheet plan when the Fed cuts FFR and he expects to see more mergers in the banking sector.

DATA RECAP

• US Initial Jobless Claims 221k vs. Exp. 214k (Prev. 210k, Rev. 212k)
• US Continued Jobless Claims 1.791M vs. Exp. 1.813M (Prev. 1.819M, Rev. 1.810M)
• US Challenger Layoffs (Mar) 90.309k (Prev. 84.638k)
• US International Trade (USD)(Feb) -68.9B vs. Exp. -67.3B (Prev. -67.4B, Rev. -67.6B)

FX

• USD was initially pressured by higher-than-expected initial jobless claims and an increase in Challenger Layoffs although the DXY eventually returned to flat territory with support later in the session amid rising geopolitical concerns surrounding Iran's response to Israel. There were several Fed comments again including from Fed's Goolsbee and Kashkari who both suggested the potential for no cuts this year depending on inflation, while the focus now turns to the looming NFP report.
• EUR was flat despite upward revisions in EU PMIs and after ECB Minutes provided little new.
• GBP marginally softened after slightly softer PMIs and inflation expectations.
• JPY strengthened but remained at the 151.00 handle against the dollar, while there were late comments from BoJ Ueda who kept the door open to further rate increases and responding to FX moves but had little effect on price action.
• Banxico Minutes stated that most board members highlighted the progress in disinflation in Mexico, while it noted that among upward risks, all members warned about the persistence of core inflation and particularly its services component.

FIXED INCOME

• Treasuries rallied as initial steepener unwinds were followed by haven demand on Iran uncertainty.

COMMODITIES

• Oil prices shrugged off early weakness after Israel-Iran geopolitical headlines triggered a late surge.
• Qatar set May marine crude OSP at Oman/Dubai plus USD 0.65/bbl and land crude OSP at Oman/Dubai plus USD 0.40/bbl, according to a pricing document.
• Russia's Novatek is considering scaling back production trains at Arctic LNG 2 to two from three and is to use one train for Murmansk LNG, according to Reuters sources.
• NATO official said Ukraine strikes have probably disrupted 10% of Russian refinery capacity or maybe more than 15%.
• Chile Codelco's said Q1 copper output was near to 300k metric tons.

GEOPOLITICAL

MIDDLE EAST

• CIA reportedly warned Israel that Iran will attack the country in the next 48 hours, while Tehran is said to be planning a combined attack with a "rain" of drones and missiles fired from its bases at strategic locations inside Israel, according to a report in the Daily Express US citing Al Mayadeen.
• Israel raised the alert level at embassies worldwide to maximum and is evacuating missions in several countries, while it relocates representatives to secure locations due to the heightened Iranian response threat, according to Hebrew media reports.
• Israeli PM Netanyahu said Iran has been working against Israel for years and therefore, Israel is operating against Iran and its proxies. It was also reported that senior Israeli officials told Walla News that they made it clear to the US that if Iran attacks them from its territory, they will have to respond.
• White House said US President Biden emphasised to Israeli PM Netanyahu that the strikes on humanitarian workers and the overall humanitarian situation are unacceptable, while Biden made it clear Israel needs to announce and implement a series of specific, concrete, and measurable steps to address, civilian harm, humanitarian suffering, and the safety of aid workers. It was also stated that US policy with respect to Gaza will be determined by its assessment of Israel's immediate action of these steps.
• US President Biden’s administration recently authorised the transfer of over 1k 500-pound bombs and over 1k small-diameter bombs to Israel, despite US concerns over the country’s conduct in Gaza, according to CNN sources.
• Hamas leader said there is no progress in the negotiations and that they are stagnating, according to Sky News Arabia.
• Taliban clashed with Iran's border guards and captured Iranian military, according to Al Arabiya sources.
• US imposed fresh Iran-related sanctions and targets multiple oil tankers.
• Yemen Houthi leader said a total of 90 ships have been targeted in the Red Sea since Houthi attacks began.

OTHER

• Russian Foreign Minister Lavrov said China's peace plan on Ukraine is so far the most reasonable, according to RIA.
• Russia's Kremlin said relations with NATO have slid to the level of direct confrontation and NATO continues to move towards Russia’s borders.

ASIA-PAC

NOTABLE HEADLINES

• US President Biden’s administration plans to urge the Netherlands in a meeting next week to stop ASML (ASML NA) from servicing some tools in China, according to Reuters sources.
• BoJ Governor Ueda said the chance of sustainably and stably achieving the bank's 2% inflation target is in sight and likely to keep heightening, while he added the BoJ will adjust the level of interest rates in accordance to the distance towards sustainably and stably achieving 2% inflation, according to Asahi newspaper. Ueda said whether to raise interest rates again this year will be dependant on data and if the BoJ become more convinced that trend inflation will approach 2%, that will be one reason to adjust interest rates but also stated as long as trend inflation is below 2%, it is necessary to maintain accommodative monetary conditions. Furthermore, he said if FX moves appear to have an impact on the wage-inflation cycle in a way that is hard to ignore, they could respond via monetary policy.
• Indian PM Modi set an ambitious target of roughly doubling the economy and exports this decade in which he asked officials to finalise plans by around May to expand the economy to USD 6.69tln in nominal terms by 2030 from around 3.51tln currently, according to Reuters citing a government document.

EU/UK

NOTABLE HEADLINES

• BoE Monthly Decision Maker Panel one-year ahead CPI inflation expectations declined further to 3.2% in March from 3.3% in February, while three-year ahead CPI inflation expectations fell to 2.7% in the three months to March from 2.8% in the three months to February.
• ECB Minutes stated there had been further progress on all three elements which warranted increased confidence that inflation was on track to reach the ECB’s target in a timely and sustainable manner, while more evidence is needed for the Governing Council to be sufficiently confident of this.
• ECB's Kazimir said he opposed reviving any special tools of monetary policy and declined to comment on current monetary policy due to the ECB's quiet period ahead of next week's meeting.

DATA RECAP

• UK S&P Global Services PMI (Mar) 53.1 vs. Exp. 53.4 (Prev. 53.4)
• UK S&P Global Composite PMI (Mar) 52.8 vs. Exp. 52.9 (Prev. 52.9)
• German HCOB Services PMI (Mar) 50.1 vs. Exp. 49.8 (Prev. 49.8)
• German HCOB Composite Final PMI (Mar) 47.7 vs. Exp. 47.4 (Prev. 47.4)
• EU HCOB Services Final PMI (Mar) 51.5 vs. Exp. 51.1 (Prev. 51.1)
• EU HCOB Composite Final PMI (Mar) 50.3 vs. Exp. 49.9 (Prev. 49.9)
• EU Producer Prices MM (Feb) -1.0% vs. Exp. -0.7% (Prev. -0.9%)
• EU Producer Prices YY (Feb) -8.3% vs. Exp. -8.6% (Prev. -8.6%, Rev. -8.0%)