ASIA STOCKS: Korea's KOSPI Leads Regional Falls
Plans in the US to seek to pass a bill focused on tax cuts drove bond yields higher and volatility throughout Asia's major bourses. Fears as to the sustainability of the already perilous US fiscal position created a risk off day with the KOSPI one of the biggest fallers. In what was a good day for most Asia FX, major bourses couldn't say the same as falls were experienced throughout the region.
- China's Hang Seng fell -0.55% today following over 2% gains in the prior two trading days as sentiment slipped. The CSI 300 eked out some minor gains of +0.13% whilst the Shanghai Composite was flat and Shenzhen fell -0.45%
- The KOSPI was down -1.20% and could present its first weekly loss since mid-April if there is no improvement tomorrow.
- The FTSE Bursa Malaysia's poor run continues, down for its sixth consecutive day, falling -0.87%.
- The Jakarta Composite's star continues to shine as it rallied again today by +0.56%. It has only recorded four down days in the last 27 trading days.
- In Singapore, the FTSE Straits Times fell -0.33% and the PSEi in the Philippines dropped -1.33%
- India's NIFTY 50 could not hide from the risk aversion and is down -0.80%, to be down over -1.5% so far this week.
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OIL: Crude Higher But Down Sharply In April, Fed Speak Later
Oil prices are off today’s peaks but remain moderately higher although are holding onto most of yesterday’s losses. Benchmarks fell around 2% due to concerns of political interference in US monetary policy, which drove a pullback in risk. WTI is up 0.7% to $62.85/bbl down from the intraday peak of $63.25. Brent is 0.6% higher at $66.65 after reaching $67.05 earlier. They are down around 11% in April. The USD index is down another 0.2% after falling 0.7% on Monday.
- Markets continue to worry about the outlook for energy demand given increased protectionism and escalating trade tensions between the US and China at a time of expected excess supply. OPEC+ went ahead with its planned output increase in April, which was greater than expected which may have been because of pressure from President Trump to bring prices down.
- Not only are demand prospects highly uncertain, so is supply with talks between the US and Iran scheduled to resume on Wednesday. An agreement on Iran’s nuclear programme may result in an easing of sanctions. There could also be negotiations on a Ukraine-Russia truce in the coming week.
- Later the Fed’s Jefferson, Harker, Kashkari, Barkin and Kugler appear with the focus likely to be on any comments related to central bank independence. April Philly/Richmond Fed indices and preliminary April euro area consumer confidence print. The ECB’s de Guindos speaks.
BUND TECHS: (M5) Bullish Trend Structure Intact
- RES 4: 133.00 round number resistance
- RES 3: 132.56 High Feb 28 and a key resistance
- RES 2: 132.03 High Apr 7 and the bull trigger
- RES 1: 131.83 High Apr 17
- PRICE: 131.65 @ 05:39 BST Apr 22
- SUP 1: 130.87/130.14 Low Apr 17 / 20-day EMA
- SUP 2: 129.02 Low Apr 10
- SUP 3: 128.60 Low Apr 9 and a key support
- SUP 4: 128.47 Low Mar 28
Bund futures are unchanged and continue to trade closer to their recent highs. A bull cycle remains in play and the pullback between Apr 7 - 9 is considered corrective. A fresh S/T cycle high on Apr 7 reinforces a bullish theme. The contract has recently cleared 131.14, 76.4% of the Feb 28 - Mar 11 bear leg. This opens 132.56 next, the Feb 28 high. Firm support lies at 128.60, the Apr 9 low. A break below this level would alter the picture.
BONDS: Modest Twist-Steepener To Start The Week
NZGBs closed showing a twist-steepener, with benchmark yields 2bps lower to 2bps higher.
- Cash US tsys are slightly cheaper, with a flattening bias, in today's Asia-Pac session after yesterday's long-end sell-off. Fed Vice Chair Philip Jefferson as well as regional Fed chiefs Tom Barkin (Richmond), Neel Kashkari (Minneapolis) and Patrick Harker (Philadelphia) are scheduled to speak later Tuesday.
- NZ recorded its third merchandise trade surplus in four months in March at $970mn up from $392mn. The YTD deficit narrowed to $6.13bn from $6.63bn. It has now declined around $11bn since the May 2023 peak. Both export and import growth were robust last month. Trade is a bright spot in NZ’s struggling economy but with a 10% tariff on goods to the US and an escalating US-China trade war the outlook is highly uncertain and likely to be negative.
- Swaps closed showing a bull-steepener, with rates 1-5bps lower.
- RBNZ dated OIS pricing closed flat to 3bps softer across meetings, with late 2025 / early 2026 leading. 27bps of easing is priced for May, with a cumulative 83bps by November 2025.
- Tomorrow, the local calendar will be empty.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$250mn of the 4.25% May-36 bond.
