Market waits to see if US inflation remains resistant above target, ahead of priced in June Fed rate cut

Notes/observations

- Equities cautiously advance while bond and FX market remains flat ahead of key data with US CPI at 08:30 ET (12:30 GMT). Ahead of the release, Fed futures are pricing 55% chance for a cut at June 12th meeting.

-TSMC released its sales numbers for March jumping over 30% m/m and proving its Q1 revenue recorded the fastest Y/Y growth since 2022 amid AI-related products demand.

- Major UK grocer Tesco prelim FY results noted consumer habits are stabilizing while still seeing persisting inflation in certain products like cocoa, coffee and potatoes.

- Asia closed mixed with Hang Seng outperforming at +1.9%. EU indices are +0.1-0.8%. US futures are +0.2%. Gold +0.1%, DXY -0.1%; Commodity: Brent +0.3%, WTI +0.3%; Crypto: BTC -2.2%, ETH -3.2%.

Asia

- Reserve Bank of New Zealand (RBNZ) left Official Cash Rate (OCR) unchanged at 5.50% (as expected) for its 6th straight pause in the current tightening cycle. Statement stressed that interest rates needed to remain at a restrictive level for a sustained period to ensure annual CPI returns to the 1.0-3.0%target range. (**Note: statement was a bit more hawkish than the market priced in).

- Japan Mar PPI (Domestic CGPI) M/M: 0.2% v 0.3%e; Y/Y: 0.8% v 0.8%e.

- Fitch cut China Sovereign Outlook to Negative from Stable citing a deteriorating fiscal position; Affirmed China's IDR (Issuer Default Rating) at A+.

- China Finance Ministry responded to Fitch and noted that China's debt defusing work was progressing in an order.

- China’s Yuan continued to trade near the bottom limit of its 2% trading band, with the PBOC on a 7-day streak of keeping open market operations’ liquidity neutral and a strong Yuan fix consistently in the 7.09 handle since Mar 22nd.

- Japan BOJ Gov Ueda appeared again in Parliament and reiterated stance that trend inflation had yet to reach 2%, so needed to maintain accommodative monetary conditions.

Europe

SNB's Schlegel: Central Bank only uses forex interventions when necessary; Forex interventions complement interest rate policy.

Americas

- Fed’s Bostic (hawk, voter): Always possible Fed's growth forecast could rise. CPI coming in at consensus would be a welcome development. Could not eliminate the possibility that rate cuts move even further out.

Energy

- Weekly API Crude Oil Inventories: +3.0M v -2.3M prior.

Speakers/fixed income/FX/commodities/erratum

Indices [Stoxx600 +0.61% at 508.92, FTSE +0.52% at 7,975.90, DAX +0.69% at 18,201.75, CAC-40 +0.43% at 8,083.69, IBEX-35 +0.30% at 10,848.50, FTSE MIB +0.57% at 34,139.00, SMI +0.05% at 11,512.10, S&P 500 Futures +0.11%].

Market focal points/key themes: European indices open higher across the board and remained upbeat through the early part of the session; improved performance attributed to positive analyst outlook for European stocks; all sectors start the day in the green; among sectors leading the way higher are industrials and technology; lagging sectors include consumer discretionary and materials; reportedly Italgas submits bid for 21 Rete gas; focus on US CPI, FOMC minutes to be released later in the day; earnings expected in the upcoming US session include Delta Airlines.

Equities

- Consumer discretionary: Barry Callebaut [BARN.CH] +8.5% (H1 earnings), THG Holdings [THG.UK] -2.0% (earnings), Dustin Group [DUST.SE] +1.5% (Q2 earnings).

- Consumer staples: Tesco [TSCO.UK] +0.5% (prelim FY earnings and outlook).

- Healthcare: Philips [PHIA.NL] +2.5% (Philips Respironics reaches agreement with US government on a consent decree), Novartis [NOVN.CH] -0.5% (pauses enrollment in one study), Transgene [TNG.FR] +3.5% (trial data on cancer vaccine).

- Industrials: BASF [BAS.DE] -0.5% (analyst downgrade), SMT Scharf [S4A.DE] -1.0% (final FY earnings).

- Technology: ASML [ASML.NL] +2.0% (TSMC monthly sales).

Speakers

- Thailand Central Bank Policy Statement noted that the vote to keep policy steady was 5-2 (dissenters sought 25bps cut). Reiterated stance that current policy interest rate was conducive to safeguarding macro-financial stability. Economic growth was supported by consumption and tourism and public spending.

- Thailand Central Bank updated its Staff Projections which narrowed 2024 GDP growth forecast from 2.5-3.0% range to 2.6% and lowered the 2024 CPI forecast from ~1.0% to 0.6%.

- Japan, China and South Korea said to be planning a Trilateral Summit in late May.

Currencies/fixed income

- USD index holding steady amid caution ahead of the upcoming US CPI data. Dealers noted that hot inflation data on the heels of Friday's strong payrolls report could raise additional doubts about the need for the Fed to cut rates.

- EUR/USD stuck at the 1.0850 area ahead of Thursday’s ECB rate decision. Dealers note it was unlikely for ECB to deviate from its prior guidance of a rate cut in June.

Economic data

- (NL) Netherlands Feb Manufacturing Production M/M: +1.4% v -4.4% prior; Y/Y: -2.3% v -4.8% prior; Industrial Sales Y/Y: +1.3% v -7.5% prior.

- (FI) Finland Feb Industrial Production M/M: -0.3% v +4.0% prior; Y/Y: +1.3 v -0.7% prior.

- (NO) Norway Mar CPI M/M: 0.2% v 0.5%e; Y/Y: 3.9% v 4.2%e.

- (NO) Norway Mar CPI Underlying M/M: 0.2% v 0.4%e; Y/Y: 4.5% v 4.7%e.

- (NO) Norway Mar PPI M/M: +2.7% v -2.5% prior; Y/Y: -6.9% v -12.6% prior.

- (SE) Sweden Feb GDP Indicator M/M: +0.1% v -0.2%e; Y/Y: +0.3 v -0.5% prior.

- (SE) Sweden Feb Private Sector Production M/M: +0.3% v -0.6% prior; Y/Y: -0.8% v -1.7% prior.

- (SE) Sweden Feb Industrial Orders M/M: +4.6% v -9.6% prior; Y/Y: -3.5% v -5.9% prior.

- (SE) Sweden Feb Industry Production Value Y/Y: -1.5% v +0.9% prior; Service Production Value Y/Y: +0.4% v -1.3% prior.

- (SE) Sweden Feb Household Consumption M/M: -0.5% v -0.5% prior; Y/Y: -0.3% v -0.1% prior.

- (DK) Denmark Mar CPI M/M: 0.0%e v 0.5% prior; Y/Y: 0.9% v 0.8% prior.

- (DK) Denmark Mar CPI EU Harmonized M/M: 0.0% v 0.4% prior; Y/Y: 0.8% v 0.6% prior.

- (AT) Austria Feb Industrial Production M/M: +2.7% v -1.9% prior; Y/Y: -5.1% v -4.3% prior.

- (CZ) Czech Mar CPI M/M: 0.1% v 0.1%e; Y/Y: 2.0% v 2.0%e (2nd month at target).

- (CZ) Czech Feb Export Price Index Y/Y: +1.6% v -1.2% prior; Import Price Index Y/Y: -1.1% v -4.0% prior.

- (TH) Thailand Central Bank (BoT) left the Benchmark Interest Rate unchanged at 2.50% (as expected).

- (TW) Taiwan Mar Trade Balance: $8.7B v $7.5Be; Exports Y/Y: 18.9% v 7.5%e v 1.3% prior Imports Y/Y: +7.1% v -1.6%e.

- (IT) Italy Feb Retail Sales M/M: 0.1% v 0.2%e; Y/Y: 2.4% v 1.0% prior.

- (GR) Greece Feb Industrial Production Y/Y: 1.6% v 10.3% prior.

- (GR) Greece Mar CPI Y/Y: 3.2% v 2.9% prior; CPI EU Harmonized Y/Y: 3.4% v 3.1% prior.

Fixed income issuance

- (IN) India sold total INR270B vs. INR270B indicated in 3-month, 6-month and 12-month bills.

- (DK) Denmark sold total DKK180M in 3-month and 6-month bills.

- (UK) DMO sold £4.0B in 3.75% Mar 2027 Gilts; Avg Yield: 4.204% v 4.314% prior; bid-to-cover: 3.68x v 3.01x prior; Tail: 0.3bps v 0.5bps prior.

- (IT) Italy Debt Agency (Tesoro) sold €8.0B vs. €8.0B indicated in 12-month Bills; Avg Yield: 3.533% v 3.546% prior; Bid-to-cover: 1.33x v 1.33x prior.

- (SE) Sweden sold total SEK3.5B vs. SEK3.5B indicated in 2029 and 2033 Bonds.

- (NO) Norway sold total NOK4.0B in 2026 and 2034 bonds.

Looking ahead

- (MX) Mexico ANTAD Mar Same-Store Sales Y/Y: No est v 9.2% prior.

- (CO) Colombia Mar Consumer Confidence: -9.8e v -9.4 prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (CH) Switzerland to sell 2030 and 2035 Bonds.

- 05:30 (DE) Germany to sell €2.5B in new 2.6% May 2041 Bunds.

- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.25-1.5B in 2034, 2038 and 2045 OT bonds.

- 05:30 (PL) Poland to sell Bonds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (PT) Portugal Mar Final CPI M/M: No est v 2.0% prelim; Y/Y: No est v 2.3% prelim.

- 06:00 (PT) Portugal Mar Final CPI EU Harmonized M/M: No est v 2.3% prelim; Y/Y: No est v 2.6% prelim.

- 06:00 (RU) Russia to sell OFZ Bonds (2 tranches).

- 06:00 (CZ) Czech Republic to sell combined CZK7.0B in 2028, 2032 and 2040 bonds.

- 07:00 (US) MBA Mortgage Applications w/e Apr 5th: No est v -0.6% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 07:00 (CZ) Czech Central Bank to comment on CPI data.

- 07:00 (IS) Iceland to sell 2026 and 2035 RIKB Bonds.

- 08:00 (IS) Iceland Mar Unemployment Rate: No est v 3.9% prior.

- 08:00 (HU) Hungary Central Bank (MNB) Mar Minutes.

- 08:00 (BR) Brazil end-Mar IBGE Inflation IPCA M/M: 0.3%e v 0.8% prior; Y/Y: 4.0%e v 4.5% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Mar CPI M/M: 0.3%e v 0.4% prior; Y/Y: 3.4%e v 3.2% prior.

- 08:30 (US) Mar CPI (ex-food/energy) M/M: 0.3%e v 0.4% prior; Y/Y: 3.7%e v 3.8% prior.

- 08:30 (US) Mar CPI Index NSA: 312.073e v 310.326 prior; CPI Core Index: 316.558e v 315.565 prior.

- 08:30 (US) Mar Real Avg Hourly Earning Y/Y: No est v 1.1% prior; Avg Weekly Earnings Y/Y: No est v 0.5% prior.

- 08:30 (CA) Canada Feb Building Permits M/M: No est v 13.5% prior.

- 08:30 (CL) Chile Central Bank Economist Survey.

- 08:45 (US) Fed’s Bowman.

- 09:45 (CA) Bank of Canada (BoC) Interest Rate Decision: Expected to leave Interest Rates unchanged at 5.00%.

- 10:00 (US) Feb Final Wholesale Inventories M/M: 0.5%e v 0.5% prelim; Wholesale Trade Sales M/M: +0.8%e v -1.7% prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 12:00 (RU) Russia Mar CPI M/M: 0.4%e v 0.7% prior; Y/Y: 7.0%e v 7.7% prior.

- 12:00 (RU) Russia Mar CPI Core M/M: No est v 0.5% prior; Y/Y: No est v 7.6% prior.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:45 (US) Fed’s Goolsbee.

- 13:00 (US) Treasury to sell 10-Year Notes Reopening.

- 14:00 (US) FOMC Mar Meeting Minutes.

- 14:00 (US) Mar Monthly Budget Statement: -$223.0Be v -$296.3B prior.

- 19:00 (AU) Australia Mar CBA Household Spending M/M: No est v -0.3% prior; Y/Y: No est v 3.5% prior.

- 19:01 (UK) Mar RICS House Price Balance: -6%e v -10% prior.

- 19:50 (JP) Japan Mar M2 Money Supply Y/Y: No est v 2.5% prior; M3 Money Supply Y/Y: No est v 1.8% prior.

- 20:00 (NZ) New Zealand to sell combined NZ$500M in 2029, 2032 and 2051 bonds.

- 21:00 (AU) Australia Apr Consumer Inflation Expectation Survey: No est v 4.3% prior.

- 21:00 (PH) Philippines Feb Trade Balance: -$4.0Be v -$4.2B prior; Exports Y/Y: 9.8%e v 9.1% prior; Imports Y/Y: +3.5%e v -7.6% prior.

- 21:00 (PH) Philippines Feb Unemployment Rate: No est v 4.5% prior.

- 21:30 (CN) China Mar CPI Y/Y: 0.4%e v 0.7% prior; PPI Y/Y: -2.8%e v -2.7% prior- 22:00 (JP) Japan Mar Tokyo Avg Office Vacancies: No est v 5.9% prior.

- 23:00 (KR) South Korea Mar Total Bank Lending to Household (KRW): No est v 1100.3T prior.

- 23:35 JP) Japan to sell 20-Year JGB Bonds.