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European natural gas fell 3.9% to EUR 35.55, close to the intraday low. Energy prices sold off following confirmation that the US would impose 104% tariffs on imports from China. Markets are worried that a trade war will reduce global demand and thus energy usage. This would help Europe refill storage before next winter though, something that has worried markets. 

• With storage levels falling to their lowest in four years at the end of winter, the summer/spring refilling has been a concern. EU countries are requesting an extra allowance of 5% deviation around goals. Currently they need to reach 90% by November 1. There are concerns that the regulation is adding to market speculation and prices for spring/summer contracts, but the premium for contracts at this time has narrowed significantly.
• US gas prices fell 4.5% on Tuesday to $3.58 after rising to $3.88 to be down 16% this month. Forecasts for cooler weather in the eastern US couldn’t offset the impact from US tariffs on gas.   
• Asian LNG prices also fell sharply due to jitters over a trade war. Ahead of summer, some may take advantage of the lower prices to build inventories. The commodity remains a way for Asian countries to negotiate with the US. Indonesia’s President Prabowo ordered an increase in imports of US LPG and LNG.
• Europe is considering its response to the proposed 20% US tariff and increased imports of US LNG are likely on the agenda. It is already Europe’s largest supplier.

A JP Morgan gauge that tracks the risk of recession moved up to 79%. The measure focuses on moves in small US companies whose fortunes are tied closely to the economy, the JPY will continue to be bought in this environment. Scott Bessent highlighted the potential for a series of deals with US trading partners, Japan will be hoping to be 1 of those. The Nikkei is sliding today as risk again breaks down, next support is 30000/31000 a break of which would target 24500/2500.

• EUR/JPY - Overnight range 160.03 - 162.05, Asia opens under pressure making news lows around 159.64 before stabilising.
• GBP/JPY - Overnight range 186.55 - 188.75, Asia makes new lows around 185.73 and has since bounced back to 186.80. Expect sellers on any bounce with the first target the 180.00 area.
• AUD/JPY - Breaks the overnight lows to print around 86.05 in early Asian trading, market has since bounced back to 87.00.
• CNH/JPY - Breaks overnight lows to print around 19.6200, it has since bounced back to 19.7000, USD/CNH has seen a retracement even though the Yuan fixing was higher for a 5th straight day implying more smoothing by officials. The market is looking for any confirmation that the PBOC is prepared to let the Yuan weaken and CNY/JPY is breaking some key support implying the move lower could gather momentum. First target 18.75/80. 

CNHJPY

Source: MNI - Market News/Bloomberg

• The PBOC issued CNY118.9b of 7-day reverse repo at 1.5% during this morning’s operations.
• Today’s maturities CNY229.9bn
• Net liquidity withdrawal of CNY111bn.
• The PBOC monitors and maintains liquidity in the interbank market through the issuance of reverse repo.
• The CFETS Pledged Repo Deposit Institutions 7 Day Weighted Average is at 1.59%, from yesterday’s close of 1.77%
• China’s overnight interbank repo rate is 1.76%, from yesterday’s close of 1.63%.
• China’s 7-day interbank repo rate is 1.75%, from yesterday’s close of 1.83%.