Futures Trade In Narrow Range As Attention Turns To PPI, Jobless Claims

For the fourth day in a row, US equity futures are effectively unchanged in the overnight action, as the April doldrums continue, and as shown below spoos have traded in a narrow 80 points range all month.

Zooming in on today, we see that S&P futures edged fractionally higher as investors weighed the possibility of a pivot in Federal Reserve policy against increasing expectations of a recession. S&P 500 futures were up 0.2% as of 7:40 am ET while Nasdaq 100 futures gained 0.3%. On Wednesday The S&P 500 cash index dropped on Wednesday after minutes from the Fed’s last meeting showed policy makers expect a mild recession later this year. Both European and Asian stocks edged higher. Treasury yields stayed in a narrow range, with the rate-sensitive two-year holding below 4%. The Bloomberg dollar index dropped for a 3rd day and traded near the lowest level since the start of February.

Among notable movers in premarket trading, US-listed Chinese stocks gained after the Nasdaq Golden Dragon China Index posted its biggest single-day drop in a month. BigBear.ai Holdings Inc. dropped after the software company filed a shelf registration statement for the resale of up to about 113.3m shares of common stock from time to time. Cryptocurrency-exposed stocks climbed in US premarket trading on Thursday as Bitcoin hovers around the closely watched $30,000 level for a third session. Strategists at Bank of America said the rally may have room to run if flows between cryptocurrency exchanges and personal digital wallets are any guide. Riot Platforms +2.5%, Marathon Digital +3.1% and Coinbase  +2.3%. Here are some other notable premarket movers:

  • Delta Air Lines (DAL) gains as much as 4.1% in premarket trading after the company forecast adjusted earnings per share for the second quarter that beat the average analyst estimate.
  • Exxon Mobil Corp. (XOM) shares are down 0.5% in premarket trading, after Scotiabank downgraded the energy giant to sector perform from sector outperform.
  • Fastenal (FAST) falls 3.2% in premarket trading after reporting March daily sales growth of 6.8% that is “weaker than previous months”. Its 1Q EPS beats analysts’ expectation.
  • LSB Industries (LXU) is cut to hold from buy and its PT halved at Jefferies, with the broker anticipating challenges facing the chemicals firm will continue for several quarters. Shares fall 2.5%.
  • LyondellBasell Industries (LYB) is downgraded to hold from buy at Jefferies, with the broker flagging rising risks over US demand for the chemicals company amid growing pressure on consumers. Shares rise 2.7%.
  • Precious metals miners rally in US premarket trading as the price of gold gains for a third day and holds above the $2,000/ounce level amid hopes over easier monetary policy by the end of the year.
  • Rent the Runway (RENT) falls 4.1% in premarket trading after the fashion rental company’s annual revenue forecast disappointed. The company also said that Chief Financial Officer Scarlett O’Sullivan will transition out of her role.
  • Sportsman’s Warehouse (SPWH) tumbles 20% in premarket trading after the sporting-goods retailer provided a weaker- than-expected net sales and profit outlook for the current period, calling out weather-related disruptions.
  • Steven Madden (SHOO) is raised to buy from neutral at Citi on the expectation that executives at the shoe company will talk more optimistically about wholesale trends when it reports first- quarter results later this month. Shares rise 2.7% in light premarket trading.

A rally in US stocks faltered this month as mixed economic data as well as the latest FOMC Minutes signaled a recession is inevitable this year, yet stubbornly strong (and manipulated) labor market data has thrown the bears for a loop. But with inflation continuing to cool, investors are now betting the central bank could cut rates before the end of the year.

The latest US inflation report offered evidence for both bond bulls and bears. While the year-on-year headline figure fell, core prices edged higher. Swaps markets still favor a quarter-point hike by the Federal Reserve in May, even as traders added to wagers that the Fed will cut interest rates before the end of this year at a faster pace than anticipated earlier in the week.

“There is sufficient uncertainty for most people to see what they want to see,” said James Athey, investment director at Abrdn. “Equities are taking comfort from the lack of outright ‘bad news’ from the CPI print and the fact that the Fed is still sounding dovish relative to” February, when Fed Chair Jerome Powell suggested borrowing costs may reach a higher peak than traders and policymakers anticipate.

March PPI data is expected by Bloomberg economists to pick up following February’s downside surprise, although a modest rise in the monthly print is viewed as unlikely to change Fed’s course where markets continue to expect a 25bp rate hike.

“US markets are struggling to find a place to settle amid conflicting concerns,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown. “The Fed minutes show several members are concerned about recession risk. At the same time, we’ve seen recent market moves that seem to be in reaction to the idea that interest rates will be raised further than expected to bring inflation down. Ultimately, uncertainty is high and that will make it difficult for markets to land in any one given spot.”

Elsewhere, investors are set to get a first clue on the health of Corporate America when the big banks kick off the reporting season on Friday. Analysts expect S&P 500 earnings to have dropped 8% in the first quarter — the biggest year-over-year decline since 2020, according to data compiled by Bloomberg Intelligence. Strategists at UBS Global Wealth Management also said the outlook for stocks remains challenging in the absence of a Fed pivot and rising growth risks. They expect US corporate earnings to drop 4.5% in 2023.

European markets were solidly in the green; the Stoxx 600 rose 0.3% and on course for a fourth consecutive increase, with the DAX and FTSE 100 lagging. European luxury-goods stocks have rallied, led by LVMH whose shares rose to a record high after first-quarter sales topped estimates. Here are the biggest European movers:

  • LVMH shares rallied to a record high after the luxury retailer reported better-than-expected first-quarter sales, led by Fashion & Leather Goods. The company, the first of the big luxury names to report sales for the period, has set a high bar for rivals, analysts said.
  • Tesco shares gain as much as 2.6%, reaching the highest since May, after the UK’s biggest supermarket operator reported full-year adjusted operating profit that met estimates. Analysts liked the results overall, noting the firm’s strong free cash flow and safe-haven credentials.
  • Enel slumped after Italian Prime Minister Giorgia Meloni cut an eleventh-hour deal with coalition partners to name industry veteran Flavio Cattaneo to replace Francesco Starace as chief executive officer of the state-controlled company.
  • BayWa shares rise as much as 4.7% after M.M. Warburg Investment Research raised the recommendation on the stock to buy from hold on revised estimates from the trading and logistics company.
  • EssilorLuxottica shares rise as much as 2.2% as the eye- care group is started with an overweight rating and €215 PT at JPMorgan, with the broker confident the company can continue to outperform the market.

Earlier, Asian stocks edged higher, helped by a rebound in Chinese shares after surprisingly strong exports data. The MSCI Asia Pacific Index was 0.1% higher as of 5:02 p.m. in Hong Kong. A gauge of Chinese shares listed in Hong Kong rose after sliding as much as 2% as data showed the nation’s exports jumped 14.8% in US dollar terms last month, and as investors downplayed concerns over shareholder stake sales in tech firms. Alibaba was among the biggest drags and weighed on a gauge of Hong Kong-listed tech stocks after a Financial Times report that SoftBank is trimming its stake in the Chinese internet firm. That came close on the heels of Wednesday’s selloff in Tencent on news of major shareholder selling. “Reported plans to lower exposure to Alibaba by SoftBank may reiterate the prevailing loss of confidence in Chinese tech firms by foreign investors, giving rise to concerns that more may do the same,” Jun Rong Yeap, market strategist at IG, wrote in a note. US data showed inflation is moderating, but not enough to dissuade the Fed from raising rates again next month. Defensive sectors including health care rose. South Korea led gains among key national equity gauges, while stocks rose in Singapore as well as Hong Kong. Japanese benchmarks also rose during afternoon trading hours amid data showing foreign investors made their largest-ever net purchase of the nation’s stocks last week.

Japanese equities closed slightly higher as data showing record foreign investment bolstered sentiment. Foreign investors bought a a net $18 billion worth of Japanese stocks last week, just before a media report that billionaire Warren Buffett is looking to increase his exposure to the nation’s equities. Foreign Buying of Japan’s Stocks Hits Record Amid Buffett Effect The Topix rose 0.1% to close at 2,007.93, while the Nikkei advanced 0.3% to 28,156.97. Keyence contributed the most to the Topix gain, increasing 2.5%. Out of 2,158 stocks in the index, 1,085 rose and 936 fell, while 137 were unchanged. The data on foreign investors “may have boosted appreciation of Japanese stocks and triggered domestic investors to buy,” said Ryuta Otsuka, strategist at Toyo Securities. “The news of Buffett’s investment in Japanese equities also continues to gain attention and it might encourage a reevaluation of the Japanese market.

In Australia, the S&P/ASX 200 index fell 0.3% to 7,324.10 as Australian employers added 53,000 jobs in March from the prior month, more than double economists’ forecasts, helping drive the Australian dollar higher. Australia’s employment growth surpassed expectations for a second straight month in March, underscoring the economy’s resilience and bolstering the case for the Reserve Bank to raise interest rates again.  Read: Australia’s Surge in Employment Opens Door to Further Rate Hike In New Zealand, the S&P/NZX 50 index rose 0.1% to 11,930.86.

Indian markets extended their winning run to the ninth day on Thursday, the longest streak since January 2021, as retail inflation eases, while corporate earnings come into focus.  The S&P BSE Sensex rose 0.1% to 60,431.00 in Mumbai, while the NSE Nifty 50 Index also rose by a similar margin to 17,828.00. Technology stocks were the biggest drag on the benchmarks. Tata Consultancy Services fell after missing street estimates for its 4Q earnings while Infosys slumped ahead of its results. ICICI Bank contributed the most to the Sensex’s gain, increasing 1%. Out of 30 shares in the Sensex index, 17 rose and 13 fell.

In FX, the Bloomberg Dollar Spot Index fell 0.3%, on track for a third straight day of losses while the Australian dollar and Swiss franc compete for top spot among the G-10 currencies. The euro approached its strongest level of the year against the dollar, which was weighed down by the growing conviction of investors that a 25 basis-point rate hike in May will be the last in the Fed’s current tightening cycle, and will be followed by cuts later this year; the pound rose to its highest level versus the US currency since June. Traders price in the possibility of roughly 65 basis point of cuts by year- end, little changed from Wednesday. The yen recovered from earlier losses versus the dollar after new Bank of Japan Governor Kazuo Ueda repeated plans to continue with monetary easing, pushing back against speculation that he’ll change the yield curve control policy.

In rates, treasuries are under pressure in early US session with yields cheaper by 2bp to 4bp across the curve as stock futures pare a portion of Wednesday’s drop. Losses broadly led by belly of the curve. US 10-year yields trade around 3.42%, while US 2-year yields edge up 2.5 basis points to 3.97%, having fallen sharply Wednesday after data showed a slowdown in US CPI. Bunds and gild are also falling; the 10Y Bund was at 2.377%, marginally cheaper on the day.  The latest Fed-dated OIS for the May meeting shows around 17bp of hike premium, unchanged on the day. US auction cycle concludes with $18b 30-year bond reopening at 1pm, following 2bp tail in Wednesday’s 10-year; WI 30-year yield around 3.65% is ~23bp richer than the March auction, which tailed by 0.7bp. IG issuance slate includes OMERS Finance Trust 5Y; Walmart was the only IG deal on Wednesday, pricing a 5-part $5b tranche, paying minimal new-issue concessions.

In commodities, crude futures are little changed with WTI trading near $83.30. Spot gold gains 0.6% to around $2,027. Bitcoin rises 1%. 

Looking at the day ahead now, and data releases include UK GDP and Euro Area industrial production for February, and in the US there’s the March PPI reading and the weekly initial jobless claims. From central banks, we’ll hear from Bundesbank President Nagel and BoE Chief Economist Pill. Finally, earnings releases include Delta Air Lines.

Market Snapshot

  • S&P 500 futures up 0.3% to 4130.25
  • STOXX Europe 600 up 0.2% to 463.29
  • MXAP up 0.2% to 162.63
  • MXAPJ up 0.2% to 525.64
  • Nikkei up 0.3% to 28,156.97
  • Topix little changed at 2,007.93
  • Hang Seng Index up 0.2% to 20,344.48
  • Shanghai Composite down 0.3% to 3,318.36
  • Sensex down 0.2% to 60,291.29
  • Australia S&P/ASX 200 down 0.3% to 7,324.12
  • Kospi up 0.4% to 2,561.66
  • German 10Y yield little changed at 2.38%
  • Euro up 0.2% to $1.1019
  • Brent Futures little changed at $87.27/bbl
  • Gold spot up 0.7% to $2,028.96
  • U.S. Dollar Index down 0.21% to 101.28

Top Overnight News

  • The export engine at the heart of the Chinese economy has roared back to life, defying expectations and bolstering hopes that Beijing will achieve its growth target this year. Customs data released on Thursday showed dollar-denominated exports expanded 14.8 percent compared with the same period a year earlier, after falling 6.8 per cent in January and February. Analysts polled by Reuters had forecast a contraction of 7 percent. FT
  • SoftBank has moved to sell almost all of its remaining shareholding in Alibaba, limiting its exposure to China and raising cash. Softbank has sold about $7.2bn worth of Alibaba shares this year through prepaid forward contracts, after a record $29bn selldown last year. The forward sales will eventually cut SoftBank’s stake in the $262bn Chinese ecommerce group to just 3.8 percent. FT
  • AAPL is in talks w/suppliers to make MacBooks in Thailand as the company continues to diversify its supply chain out of China. Nikkei
  • ECB policymakers are converging on a 25 basis point interest rate hike in May, even if other options remain on the table and the debate is not yet settled, according to five sources with direct knowledge of the discussion. RTRS
  • The Kremlin warned on Wednesday that the outlook for extending a deal beyond May 18 that allows the safe wartime export of grain and fertilizer from several Ukrainian Black Sea ports was not great as Russia’s own such exports still faced obstacles. RTRS
  • BlackRock CEO Larry Fink predicts inflation in the US, which has shown hints of moderating, will persist and likely won’t go below 4% anytime soon. BBG
  • Delta Air Lines reported a first-quarter loss, but said strong summer bookings are expected to boost profits in the coming months. Delta reported a net loss of $363 million during the first three months of the year. WSJ
  • US energy secretary Jennifer Granholm said on Wednesday that the federal government could begin buying oil to replenish an emergency stockpile later this year, “if it is advantageous to taxpayers”. FT
  • Manhattan apartment landlords are testing renters’ limits even before the market’s busiest season arrives. The median monthly rate rose to a record-high $4,175 in March, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. That’s up $25 from the previous peak, reached in July, and almost 13% more than a year ago. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks initially opened lower but eventually traded mixed as the region pondered over the latest US CPI report alongside Wall Street losses. ASX 200 remained in the red as gains in the Energy and Gold sectors failed to fully offset losses in Tech and Healthcare. Nikkei 225 briefly dipped under the 28k level before trimming losses, although the region was cautious as the Japanese government initially predicted the latest North Korean missile was in danger of landing in the Southwestern region of Hokkaido. Hang Seng and Shanghai Comp opened lower but then trimmed losses with Hong Kong heavily underperforming at the open as Alibaba slumped over 4.5% after the FT reported Softbank has reportedly moved to sell almost all of its remaining stake in Alibaba. Mainland China did not react to the Chinese March trade data beats across the board as China customs warned China’s trade development will face greater difficulties and challenges.

Top Asian News

  • Softbank (9984 JT) has reportedly moved to sell almost all of its remaining stake in Alibaba (9988 HK/BABA), according to the FT.
  • BoJ Governor Ueda said the BoJ will continue monetary easing until the price target is stably and sustainably achieved; domestic consumer inflation is currently around 3% but likely to slow ahead. Governor Ueda said they should pay more attention to the risk of failing to achieve the 2% inflation target with a premature end to easing rather than the risk of being behind the curve on inflation, according to Reuters.
  • China customs said China’s trade development will face greater difficulties and challenges, according to Reuters. China’s customs official said weakening external demand and geopolitical factors will test China’s trade development, and the export of NEVs, lithium batteries, and solar products, drove up China’s overall exports.
  • Industry experts believe the PBoC’s LPR will likely remain “unchanged” in April, according to Securities Daily.
  • Bank of Korea confirmed FX swap deal with National Pension Fund for a maximum of USD 35bln, according to Reuters.

European bourses are somewhat mixed, with heavyweight LVMH skewing performance to the upside after their Q1 report. Sectors are similarly skewed with Consumer Products & Services outperforming with LVMH inspiring gains in peers, next best are the Housebuilders after numerous upgrades via HSBC. Stateside, futures are in the green though only incrementally after Wednesday’s pressure, ES +0.2%, ahead of IJC and PPI before retail sales on Friday.

Top European News

  • Debate on the next ECB rate move is reportedly converging on a 25bp hike, via Reuters citing sources; debate not over, one small group still making case for 50bp in May, another group after Unch.; Uncertainty, proximity of terminal and delayed impact of past hikes support case for a slowdown, base line in March economic projections seen as largely intact.
  • ECB’s Nagel said the persistence of high core inflation showed the ECB has further to go in tightening monetary policy, via CNBC.
  • Slovak Court finds ECB’s Kazimir guilty of bribery, fines him EUR 100k.


  • Dollar extends retreat from NFP peak as DXY slips to 101.200 in wake of soft headline CPI and dovish-leaning FOMC minutes.
  • Greenback’s G10 peers clear or probe big figure levels, with Euro eyeing 1.1033 YTD high, Pound back on 1.2500 handle, Franc probing 0.8900 and Yen 133.00.
  • Aussie approaches 0.6750 in wake of upbeat jobs data.
  • PBoC sets USD/CNY mid-point at 6.8658 vs exp. 68672. (prev. 6.8854)

Fixed income

  • Bonds fade after pop on dovish-sounding ECB source report, Bunds hold just off new April low.
  • Gilts bounce a few ticks from 102.50 after a strong 10 year UK tap.
  • Treasuries essentially flat awaiting US producer prices, jobless claims and long bond supply after sloppy T-note sale.


  • Overall, a session without specific macro drivers with commodity action relatively contained and somewhat directionless aside from a very modest USD-induced upward bias.
  • Currently, WTI and Brent are pivoting the neutral point of a sub-USD 0.50/bbl range that is by extension well within, but at the top-end of, Wednesday’s much more pronounced boundaries.
  • PetroChina is close to announcing the award of a stake in QatarEnergy’s 32mln ton per year North Field East LNG expansion, Energy Intel reports.
  • Metals continue to grind higher owing to the softer USD and positive read on the Chinese consumer via European earnings.


  • Ukraine’s Energoatom says Russian mine exploded near generator room of reactor at Zaparizhzhia nuclear plant.
  • North Korea fired an unspecified ballistic missile toward the East Sea, according to the South Korean military cited by Yonhap.
  • Japan issued an emergency warning following the North Korean missile launch. People in Hokkaido were told to seek shelter. This was later withdrawn.
  • Japan’s Defence Ministry said the North Korean missile may have been an Inter-continental Ballistic Missile (ICBM) type, according to Reuters.
  • North Korea seemingly tested a new weapon system, possibly solid-fuel ballistic missiles, according to Yonhap.
  • South Korea will hold a security meeting following North Korea’s missile launch, according to YTN.
  • White House “strongly condemns” what it calls a North Korean ICBM test, according to a statement.
  • US-Indo-Pacific Command statement said the North Korean missile launch does not pose an immediate threat to U.S. personnel or territory, or to allies.
  • Russian Defence Ministry said its SU-27 fighter aircraft escorted German Orion reconnaissance aircraft over the Baltic Sea, according to Reuters.
  • Taiwanese Defence Ministry said in the past 24 hours, 26 Chinese aircraft and seven ships were seen around Taiwan; 14 Chinese Air Force planes crossed the Taiwanese Strait Median line on Friday.
  • Japan, US, Australia, India “Quad” summit likely to be held on May 24th in Sydney, according to Japanese press.

US Event Calendar

  • 08:30: March PPI Final Demand MoM, est. 0%, prior -0.1%
  • 08:30: March PPI Ex Food and Energy YoY, est. 3.4%, prior 4.4%
  • 08:30: March PPI Ex Food, Energy, Trade YoY, est. 3.8%, prior 4.4%
  • 08:30: March PPI Ex Food, Energy, Trade MoM, est. 0.3%, prior 0.2%
  • 08:30: March PPI Final Demand YoY, est. 3.0%, prior 4.6%
  • 08:30: March PPI Ex Food and Energy MoM, est. 0.2%, prior 0%
  • 08:30: April Initial Jobless Claims, est. 235,000, prior 228,000
  • 08:30: April Continuing Claims, est. 1.84m, prior 1.82m

DB’s Jim Reid concludes the overnight wrap

Markets put in a see-saw performance yesterday after the US CPI print for March came in beneath expectations. Initially, the reaction was very positive as investors focused on whether the Fed might soon call it a day on rate hikes. In fact, 5 minutes after the release the 2yr Treasury yield was down by a sizeable -15.2bps on the day. However, as the focus turned to core inflation that remained resilient, most of those gains had unwound by the end of the session, and the 2yr Treasury yield ended the day “only” -6.5bps lower, whilst the S&P 500 reversed its opening gains to shed -0.41%.

In terms of the details, the inflation report showed that monthly CPI was at just +0.05% in March (vs. +0.2% expected), marking the weakest monthly inflation since July. Lower energy prices played a significant role in that, with a decline of -3.5% on the month, and there was a big decline in the housing components too, as monthly rent inflation fell to a one-year low of +0.49%. In turn, that all meant the year-on-year CPI rate was down to +5.0% (vs. +5.1% expected), which is the lowest since May 2021.

But even as the headline number surprised on the downside, the core CPI reading was very much as expected, coming in at a monthly +0.38% (vs. +0.4% expected). That’s equivalent to +4.7% on an annualised basis, and even if you smooth things out by looking at the last three months together, the annualised rate is still at +5.1%. So we still haven’t seen the sort of numbers where the Fed can relax about inflation just yet. In their recap (link here), our US economists reiterate their view that the Fed will deliver a final 25bps at the May 3 meeting, and then hold the policy rate steady though year-end.

Later in the session, Fed speakers themselves bolstered the view that they had at least a bit further to go. For instance, San Francisco Fed President Daly said that “the strength of the economy and the elevated readings on inflation suggest that there is more work to do”. And Richmond Fed President Barkin also said that there was “still more to do I think to get core inflation back down”.

This was followed later on by the FOMC minutes from the March meeting, which showed that policymakers had lowered their expectations for rate hikes this year following the banking crisis, with officials calling for more caution and a need to watch for a “credit crunch” in the upcoming data releases. One line of particular interest was that the staff were now forecasting a “mild recession starting later this year”. But overall, the minutes indicate that the committee sees the recent turmoil as contained to a “small number of banks with poor risk-management practices and that the banking system remained sound and resilient.” The upcoming loan officer data that is due to be released in May will be key to see how lending conditions evolved in the wake of the upheavals we saw in March.

As mentioned at the top, the 2yr yield saw an intraday increase of +15.2bps from the lows just after the CPI print to trade flat by the European close. However, rates rallied in the US afternoon following the FOMC minutes, and the 2yr yield closed -6.5bps lower at 3.96%. And the 10yr yield saw a similar pattern, where it recovered +12.0bps intraday from a -9.0bps decline before actually ending the day -3.6bps lower at 3.39%. They’ve since added +1.7bps overnight to reach 3.41%.

Against this backdrop, investors initially pared back the chances of a rate hike at the Fed’s next meeting in May, with the probability of a 25bp move falling to 67% after the CPI data before the chances actually ended +2pp higher on the day at 74% after the FOMC minutes. At the same time, the size of Fed cuts priced into this year rose with the policy rate expected after the December meeting falling -6.3bps to 4.32% – implying 67bps of cuts after hitting terminal next month.

When it comes to inflation, one factor that hasn’t been helping are the continued gains for oil prices over recent days, and yesterday saw Brent Crude close above $87/bbl for the first time since January. This continues the upward trend we’ve seen over the last month, particularly after the OPEC+ group decided to cut output. The effects have been filtering through to consumers as well, with US gasoline prices reaching a 4-month high of $3.62 on Tuesday, so that’ll exert some upward pressure on future inflation prints.

For equities, the S&P 500 (-0.41%) declined into the close as risk sentiment dropped following the FOMC minutes. The loses were led by cyclicals with autos (-2.9%), semiconductors (-1.9%), consumer discretionary (1.6%), and transportation (-1.0%) among the worst performing industries, whereas defensives rallied. American Airlines (-9.22%) and United Airlines (-6.50%) were among the 5 worst performers in the entire index, which came as the former’s preliminary earnings guidance was beneath estimates. Given the late dip in sentiment, Europe’s STOXX 600 (+0.13%) held onto its gains.

Speaking of Europe, sovereign bonds lost ground across the continent as investors moved to price in a more hawkish path of rate hikes from the ECB. That was particularly so after Austria’s Holzmann (one of the biggest hawks on the Governing Council) said in an interview that they should hike by another 50bps in May, and that the “danger of currently doing too little and to fan inflation is bigger than the risk of doing too much.” Separately, France’s Villeroy commented that core inflation “remains strong and is proving sticky.” With that in mind, yields on 10yr bunds (+5.9bps), OATs (+4.2bps) and BTPs (+4.3bps) all ended the day higher. It also meant that the spread of 10yr Treasuries over 10yr bunds had fallen down to 102bps by the close, which is the lowest since July 2020.

Overnight in Asia, equity markets are have put in a mixed performance this morning. The Hang Seng (-0.49%) is among the weaker performers, which follows an FT report that SoftBank Group has decided to sell most of its remaining stake in Alibaba. Otherwise, the CSI 300 (-0.36%) and the KOSPI (-0.02%) have both lost ground, whereas the Shanghai Comp (+0.05%) and the Nikkei (+0.14%) have posted a modest gain. In the meantime, Chinese trade data for March showed that exports in dollar terms were up +14.8% year-on-year (vs. -7.1% expected), which is the first time in six months that measure has been positive. That meant the trade surplus was at $88.2bn (vs. $40bn expected).

Elsewhere yesterday, the Bank of Canada left interest rates unchanged as expected, but warned that “demand is still exceeding supply and the labour market remains tight.” They also reiterated that they were prepared to hike rates further if needed, and Governor Macklem said that market expectations for rate cuts later this year “doesn’t look today like the most likely scenario to us”.

To the day ahead now, and data releases include UK GDP and Euro Area industrial production for February, and in the US there’s the March PPI reading and the weekly initial jobless claims. From central banks, we’ll hear from Bundesbank President Nagel and BoE Chief Economist Pill. Finally, earnings releases include Delta Air Lines.


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