- Asian equities traded somewhat indecisive as the region failed to take full impetus from the rebound on Wall St.
- The greenback weakened against its major counterparts overnight amid US trade policy concerns
- Looking ahead, highlights include Eurozone CPI, US ADP, ISM non-MFG, Factory Orders, DoEs, Fed’s Bullard and Mester
US issued a list of products from China proposed for tariffs with the list covering around 1300 tariff lines and which will undergo further review. Furthermore, reports also noted that US tariff list on China products include aerospace, marine parts, telecoms equipment and medical devices. (Newswires)
US President Trump estimated that the cost of intellectual property theft to the US amounts to between USD 200bln-300bln per year, and said that he has respect for China President Xi but has a problem with the US trade deficit with China. (Newswires)
China strongly condemns and firmly opposes US tariffs, while it is also planning reciprocal tariffs of equal scale and strength, according to reports citing the Chinese Ambassador to the US who later commented that China will take measures to fight back very soon. (Newswires)
China Ministry of Commerce said it is to adjust tariffs on ethylene glycol and diethylene glycol sold by firms including Dow Chemical (DOW), Ineos and BASF (BAS GY) among others. (Newswires)
China is to conduct a briefing today on China-US trade at 0930BST. (Newswires)
Taiwan is said to demand permit for steel imports from China. (Newswires)
Asia traded somewhat indecisive as the region failed to take full impetus from the rebound on Wall St, where all major indices recovered lost ground and reprieve for tech stocks pushed the Nasdaq back into the green YTD. ASX 200 (Unch) and Nikkei 225 (+0.1%) initially caught a tail wind from the momentum stateside and both opened higher, but then failed to hold on to the gains as trade concerns lingered after the US announced its proposed China tariff list. This was met by condemnation from China which is also said to be planning reciprocal tariffs of equal scale and strength. Conversely, Hang Seng (-0.1%) was choppy and Shanghai Comp. (+0.8%) shrugged-off the trade tensions and disappointing Caixin PMI data, to trade with a positive tone ahead of the extended weekend for the mainland and following reports of a USD 9.7bln bailout for Chinese conglomerate Anbang Insurance. Finally, 10yr JGBs were uneventful amid the indecisive risk tone in the region and as JGBs took a breather from yesterday’s gains which saw the 20yr yield drop to its lowest since late 2016. The BoJ were also present in the market under its bond buying program for 1yr-10yr JGBs, although it maintained the purchase amounts in line with the prior.
Chinese Caixin Services PMI (Mar) 52.3 vs. Exp. 54.5 (Prev. 54.2). (Newswires)
Chinese Caixin Composite PMI (Mar) 51.8 (Prev. 53.3)
UK BRC Shop Price Index (Mar) Y/Y -1.0% (Prev. -0.8%); largest contraction since February 2017. (Newswires)
Italian 5SM Chairman Di Maio has ruled out entering into a coalition with Forza Italia ahead of today’s consultations with President Mattarella. (Newswires)
The greenback weakened against its major counterparts overnight amid US trade policy concerns which helped EUR/USD nurse some of the prior day’s losses, while GBP/USD rose to just shy of the 1.4100 handle. CNH was another fallout from the trade tensions and underperformed against USD as some continue to speculate currency devaluation may be a possible retaliatory option in the event of a full-on escalation into a trade war. Elsewhere, USD/JPY and JPY crosses remained elevated following the risk-related flows seen during US hours, while antipodeans also gained with AUD/USD underpinned by better than expected Retail Sales data to break back above 0.7700.
Australian Retail Sales (Feb) M/M 0.6% vs. Exp. 0.3% (Prev. 0.1%). (Newswires)
Australian Building Approvals (Feb) M/M -6.2% vs. Exp. -5.0% (Prev. 17.1%)
Commodity prices were lacklustre overnight in reflection of the overall indecisive risk tone. WTI crude futures are lower after they failed to sustain the initial upside from a surprise drawdown in headline API crude stockpiles, as the other product components all showed inventory builds. Elsewhere, gold saw mild upside amid a softer greenback, while copper was subdued alongside pressure in Shanghai metals prices amid ongoing trade tensions.
US API Weekly Crude Inventories (29 Mar) -3.280M vs. Exp. 0.200M (Prev. 5.321M). (Newswires)
Yields along the Treasury curve are higher on Tuesday by between 3.5bps and 5bps, with most of the moves being seen in the belly of the curve. Major curve spreads only saw modest steepening, however, remain only slightly of recent narrows. Volume was slightly better on Tuesday’s subdued showing. Most of the action was centred around the European and US opens, where large block trades in TYM8 catalysed selling pressures, while sellers were also encouraged by better risk sentiment, equities rebounding, and a few chunky corporate issuance announcements, while vehicle sales beats from the Big Three manufacturers also was being cited. Some note that the TPLEX will take its cue from inflation headlines in the weeks/months ahead (absent any haven bid), and as such, attention moves towards NFP data at the end of the week (specifically wages) as well as comments due from Fed Chair Powell on Friday. US T-Notes (June) settled 13+ ticks lower at 120-27.
Fed’s Brainard (Voter, Dove) said financial asset valuations are stretched with cyclical pressures building and noted that asset prices may be vulnerable to outside economic shock. Brainard further commented that US trade policy is a material uncertainty for the economic outlook, while she added that gradual rate hikes are appropriate and that US fiscal stimulus as well as other tailwinds could help to re-anchor inflation at 2%. (Newswires)
New York Fed has selected San Francisco Fed President John Williams to be next president and succeed William Dudley on June 18th. (Newswires)
US President Trump is said to discuss reducing part of the spending deal, according to Twitter sources citing CNBC. (Twitter/CNBC)
US President Trump’s infrastructure policy adviser Gribbin is to leave the White House. (Newswires)