MNI EUROPEAN MARKETS ANALYSIS: Hong Kong Equities Falter

• Focus today has been on the spike higher in USD/IDR to levels last seen in the 1998 Asian Financial Crisis. Multiple factors appear to be weighing on Indonesian sentiment. G10 FX moves have been fairly muted. USD/JPY has been unable to push above the 50-day EMA resistance point.  
• Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session after yesterday's heavy session. Hong Kong equities are lower amid tech bubble concerns.
• Today in Australia we will see the Federal Budget presented around 1930 AEDT. A Federal Election is likely to be called soon after. The Budget is expected to show deficits across the forecast horizon with additional expenditure likely in an attempt to win votes.
• Later the Fed’s Kugler and Williams speak and US January/February housing data, March consumer confidence & Richmond Fed business conditions and March German Ifo survey are released.

MARKETS

US TSYS: Slightly Richer After Yesterday’s Heavy Session

In today's Asia-Pac session, TYM5 is 110-19, +0-01+ from closing levels.

• Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session after yesterday's heavy session.
• Today's US calendar will see Philadelphia Fed Non-Manufacturing, Richmond Fed Mfg, House Prices, New Home Sales and Building Permits data, as well as, Fedspeak from Kugler and Williams.
• Yesterday, concession building ahead of the $183bn in auctions this week added to the selloff, as did the somewhat hawkish comments from the Fed's Bostic.
• Atlanta Fed Pres Bostic (non-2025 FOMC voter) said in a Bloomberg interview that he has reduced his 2025 rate cut expectations to 1 in March's economic projections versus 2 previously, "because I think we will see inflation be very bumpy", and delayed inflation progress warranted pushing back the path to neutral rates.

GLOBAL MACRO: Global Inflation Pressures Contained As Uncertainty Rises

G20 inflation moderated around 2pp over the 12months to January and it now stands at 4.8%. Concerns are growing over the inflationary impact of US tariffs but that remains highly uncertain as it is not yet clear whether they will be imposed broadly across countries and sectors, size of second round effects and what retaliation there will be. Developments in other global prices so far this year are mixed but are unlikely to cause concern.

• The NY Fed’s global supply chain pressure index has been fairly stable since mid-2024. It rose slightly in February but remained marginally negative signalling that supply chain pressures are close to neutral. However, it is no longer putting downward pressure on global inflation.
• Shipping rates have been mixed in March with the Baltic Freight Index sharply higher, which may reflect contract renewals, but still down 30.5%y/y but the FBX global container index is significantly weaker and down 22.9% y/y with rates from China to both the Mediterranean and North American east coast lower. 

G20 CPI y/y% vs container rate

• After a prolonged period of deflation, the annual rate in FAO food prices turned positive in September and has trended higher since. In February, it rose 1.6% m/m and 8.2% y/y, highest since August 2022. The monthly increase was broad-based but annual strength is concentrated in dairy and oils. Cereals rose 0.7% m/m but were still down 1.1% y/y in February and they could fall in March with rice prices down on the month. They are down around 25% y/y helping to reduce Asian headline inflation.
• Industrial commodities are mixed with metal prices higher rising 3.4% m/m in March to be up 12% y/y but iron ore down 4.2% m/m and 6% y/y. After being weak for some time, wool is recovering up 3.1% m/m, sixth straight rise, to be up 7% y/y, but remains well below pre-Covid levels.

G20 CPI y/y% vs food & oil prices

Source: MNI - Market News/Refinitiv

JGBS: Cheaper, Gov Ueda Discusses BoJ Asset Holdings

JGB futures are weaker and hovering near session lows, -34 compared to settlement levels.

• * (MNI) BoJ board members expressed caution at the January 23-24 meeting, which saw the policy rate increase 25 basis points to 0.50%, with gradual hikes touted as the most preferred path, the published minutes showed Tuesday.
• “BoJ Governor Ueda says the central bank will take into account market conditions and assess appropriate pricing when it creates a plan for how to divest its holdings of ETFs and J-REITs. The decline in the BoJ’s JGB holdings has been extremely gradual, Ueda said when asked about the impact on bond yields stemming from the BoJ’s efforts to reduce such holdings.” (per BBG)
• “Japanese Prime Minister Shigeru Ishiba plans to draw up “powerful” measures to mitigate the impact of inflation.” (per Kyodo via BBG)
• Cash US tsys are slightly richer in today's Asia-Pac session after yesterday's heavy session.
• Cash JGBs are flat to 3bps cheaper across benchmarks, with the belly underperforming. The benchmark 10-year yield is 2.8bps higher at 1.573% and just shy of the cycle high of 1.584%.
• Swap rates are 1-2bps higher, with swap spreads mixed.
• Tomorrow, the local calendar will see PPI Services and Coincident/leading Indices data.

AUSSIE BONDS: Cheaper But At Session Bests Ahead Of Federal Budget

ACGBs (YM flat & XM -2.5) are slightly weaker but Sydney session highs on a data-light session.

• Today we will see the Federal Budget presented around 1930 AEDT. A Federal Election is likely to be called soon after. The Budget is expected to show deficits across the forecast horizon with additional expenditure likely in an attempt to win votes.
• Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session after yesterday's heavy session.
• Cash ACGBs are flat to 2bps cheaper with the AU-US 10-year yield differential at +9bps.
• Swap rates are 1-2bps higher.
• The bills strip is -1 to -2 across contracts.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in April is given a 3% probability, with a cumulative 66bps of easing priced by year-end (based on an effective cash rate of 4.09%).
• Tomorrow, the local calendar will see February CPI data.  It is the middle month of the quarter and so will include updates to services components. Headline is forecast to be steady at around 2.5%. The trimmed mean printed at 2.8% in January.
• The AOFM plans to sell A$800mn of the 3.50% 21 December 2034 bond tomorrow and A$700mn of the 1.25% 21 May 2032 bond on Friday.

AUSTRALIA: Budget Likely To Show Higher Deficit & Debt Ratios Beyond FY2025

The FY2026 budget is announced at 1930 AEDT today and is widely expected to show deficits across the forecast horizon and an upward revision to the debt ratio. With an election due by May 17 and 33 days needed between the announcement and the vote, this budget is likely to include numerous sweeteners for voters, with a 6-month extension to the electricity rebate already announced (costing $1.8bn). 

• The RBA will consider the details before next week’s meeting but they are unlikely to change the expected on hold outcome. It already revised up its public demand forecasts in February across the period to Q4 2026.
• Revised economic forecasts from Treasury will be included and are likely to include warnings that global uncertainty is particularly high at the moment and going forward.
• The government has also said that $2.1bn of spending will be either cut or reprioritised with $720mn of reduced spending on contractors contributing.
• The Australian notes that the opposition estimates that government spending announcements over the last three months amount to over $67bn. More than $9bn of increased funding for health including incentives for bulk billing and subsidies for cheaper medicines has been announced but spread over time to 2029. Cyclone Alfred relief will add to spending over the short-term.
• There is unlikely to be additional defence spending with around $1bn already planned to be brought forward.

BONDS: NZGBS: Closed Little Changed After Reversing Early Weakness

NZGBs closed on a strong note, reversing the negative spillover from yesterday’s heavy NY session for US tsys. NZ yields finished flat to 1bp richer after being 4bps cheaper across benchmarks early.  NZ-US 10-year yield differential finished 5bps lower at +21bps.

• The local calendar was empty today and will remain so until Friday’s release of ANZ Consumer Confidence and Filled Jobs data.
• Cash US tsys are slightly richer in today's Asia-Pac session after yesterday's heavy session. Today’s US calendar will see Philadelphia Fed Non-Manufacturing, Richmond Fed Mfg, House Prices, New Home Sales and Building Permits data, as well as, Fedspeak from Kugler and Williams.
• Swap rates closed 1bp lower.
• RBNZ dated OIS pricing closed flat to 3bps firmer across meetings, with late 2025 / early 2026 leading. 24bps of easing is priced for April, with a cumulative 65bps by November 2025.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 5.00% May-54 bond.

FOREX: USD Index Little Changed, USD/JPY Can't Test Above 151.00

Aggregate moves in G10 FX have been muted so far today. The BBDXY USD index was last down a touch to 1271.4. There has been very limited data out in the Asia Pac region, while the BoJ minutes signaled caution around further rate hikes, but didn't shift yen sentiment. BoJ Governor Ueda was also before parliament, which largely focused on balance sheet issues. 

• USD/JPY was last near 150.55/60, off earlier highs of 150.94. This was close to the 50-day EMA resistance point (151.01). Yen is now slightly firmer for the session. Board members expressed caution at the January 23-24 meeting, which saw the policy rate increase 25 basis points to 0.50%, with gradual hikes touted as the most preferred path, according to the minutes. Governor Ueda stated in parliament that that the stock effect stemming from the BOJ’s significant government bond holdings would contribute to lower long-term interest rates for the time being.
• NZD/USD is down slightly, last near 0.5720, but remains above recent lows. AUD/USD is little changed, last holding close to 0.6285/90. CNH has been a touch weaker, while IDR slumped to fresh lows since the Asian Financial Crisis in 1998. This didn't spill over negatively to AUD though. Likewise in terms of weaker Hong Kong equities, which are down on data center bubble concerns.  
• US equity futures sit down a touch, while US yields are off around 1bps.
• In Australia the FY2026 budget is announced at 1930 AEDT today and is widely expected to show deficits across the forecast horizon and an upward revision to the debt ratio.
• Later the Fed’s Kugler and Williams speak and US January/February housing data, March consumer confidence & Richmond Fed business conditions and March German Ifo survey are released.

ASIA STOCKS: China Stocks Down as Tech Stocks Stumble. 

Alibaba Chairman Joe Tsai has warned that a potential bubble is forming in the construction of data centres around the region to meet the expected demand for AI services. 

China’s DeepSeek released updates to its model with the promise of better programming capabilities and its desire to remain ahead of competitors. 

Hyundai Motors will invest USD$21bn in the US by 2028 with goals of reaching over 1m vehicles per year.  The move is hailed by President Trump as success that tariffs work. 

Whilst China fell, the rest of the region was mostly positive today as markets continue to assess the next phase in the tariff war. 

• China’s Hang Seng is leading the decline down -2.10% today, with the CS! 300 down -0.20%, Shanghai Comp -0.18% and Shenzhen down -0.83%
• The KOSPI followed suit to fall -0.6% marking two successive days of losses, following last week’s strong gains.
• Malaysia’s FTSE KLCI is up +0.70% following the Central Bank’s commitment to the forecast of 4.5%-5.5% GDP growth in 2025.
• Indonesia’s Jakarta Composite has bounced back from yesterday’s significant decline to be up +1.05% following the announcement of former President Jokowi as advisor to the new Sovereign Wealth Fund.
• Singapore’s FTSE Times is having a very strong day, rising +0.86%, Taiwan’s TAIEX is up +0.88% whilst Philippines is down -0.90%.
• India’s NIFTY 50 is having a very strong period as the RBI focuses on liquidity, with the index up +0.60% in this morning’s trade, following from yesterday’s close +1.3% higher. 

ASIA STOCKS: India Has Second Day of Big Inflow.  

Ongoing outflows from the Indian equity market took a temporary breather on Thursday yet then repeated Friday with one of the largest inflows since early February as regional neighbours all recorded outflows. 

• South Korea: Recorded outflows of -$17m yesterday, bringing the 5-day total to +$1,320m. 2025 to date flows are -$3,883m. The 5-day average is +$264m, the 20-day average is -$109m and the 100-day average of -$97m.
• Taiwan: Had outflows of -$345m yesterday, with total outflows of -$1160m over the past 5 days. YTD flows are negative at -$15,170. The 5-day average is -$232m, the 20-day average of -$657m and the 100-day average of -$231m.
• India: Saw inflows of +$610m as of the 21st, with a total inflow of +$515m over the previous 5 days. YTD outflows stand at -$15,417m. The 5-day average is  +$103m, the 20-day average of -$234m and the 100-day average of -$183m.
• Indonesia: Posted outflows of -$10m yesterday, bringing the 5-day total to -$388m. YTD flows are negative at -$2,035m. The 5-day average is -$78m, the 20-day average is -$55m the 100-day average of -$36m.
• Thailand: Recorded outflows of -$2m yesterday, totaling -$67m over the past 5 days. YTD flows are negative at -$1,009m. The 5-day average is -$13m, the 20-day average of -$37m the 100-day average of -$19m.
• Malaysia: Experienced outflows of -$64m yesterday, contributing to a 5-day outflow of -$347m. YTD flows stand at -$2,046m. The 5-day average is -$69m, the 20-day average of -$57m the 100-day average of -$36m.
• Philippines: Saw outflows of -$4m yesterday, with net inflows of +$30m over the past 5 days. YTD flows are negative at -$184m. The 5-day average is +$6m, the 20-day average of 0 the 100-day average of -$7m.

OIL: Crude In Narrow Range As Market Struggles With Direction Given Uncertainty

Oil is little changed during today’s APAC session as the market range trades given the highly uncertain outlook but holds onto Monday’s gains. While OPEC and the US plan to increase output, tighter sanctions on Iran and Venezuela could reduce it. Peace in Ukraine looks a long way off and with it an easing in restrictions on Russia. The market is concerned that increased protectionism will weigh on global demand but there is now talk that reciprocal tariffs will be targeted rather than broadly applied. 

• WTI is steady at $69.08/bbl after falling to $69.02, while Brent is around $73.00/bbl following a low of $72.92. The USD index has also been range trading and is down slightly.
• US President Trump signed an order to charge importers of Venezuelan oil and gas a 25% “secondary” tariff from April 2, whether it comes indirectly or directly. This is likely to hit China and India significantly. The order gives Secretary of State Rubio discretion though. It accounts for just under 1% of global output, according to Bloomberg.
• The US itself buys Venezuelan heavy crude used in Gulf Coast refineries. The US’ Chevron has had its licence to produce there extended to give it more time to wind down its operations.
• Last week the market was reassured by another US product stock drawdown even though crude rose again, as it signalled solid demand. Today US industry-based inventory data is released.
• Later the Fed’s Kugler and Williams speak and US January/February housing data, March consumer confidence & Richmond Fed business conditions and March German Ifo survey are released. 

Gold Snaps Three Days of Losses as Prices Jump

• Markets appear to be adjusting on the idea that the next round of tariffs from the Trump administration may not be as harsh as the first.
• It now appears a more targeted approach may be coming with the President suggesting that he may give a lot of countries a ‘break on levies.’
• If gold's price action as a safe haven investment is anything to go by, the risk of tariffs and the ensuing trade war has seen a 15% gain year to date.
• Gold opened at US$3,011.04 and despite a lackluster start to the day, bounced in afternoon trade to reach $3016.00
• Gold remains trading above all major technical moving averages with the closest being the 20-day EMA at 2,969.25.
• All key moving averages remain upward sloping, a sign that the bullish sentiment still has some momentum.

SOUTH KOREA: Consumer Confidence Down in March

• Having spiked in February the hope was that the political storm was coming to and end and that consumers were looking forward with more positivity.
• This has come crashing down with March’s consumer confidence dipping back to +93.4 (from 95.2 prior)
• A reading below 100 indicates that consumers are more pessimistic, and this was the fourth successive sub 100 reading.
• The survey was conducted by the Bank of Korea and had 2,313 households respond.
• Households expect inflation to remain elevated at +2.7% for the next year, higher than the current CPI print of +2.2% y/y

INDONESIA: Multiple Factors Weighing On Indonesian Sentiment

• Indonesian markets continue to stumble despite the equity market today posting gains.
• After a moderately positive start to the year rising just on 2%, the Jakarta Composite began to stumble towards the end of January falling -14% since.
• As the policies from President Prabowo became clearer, it was evident that the state’s involvement in the economy could be negative.
• At first, the announcement of a Sovereign Wealth Fund (named Danantara) was greeted with optimism yet as the government began transferring ownership of state owned entities into the SWF, investors became wary.
• Equally, policies viewed as ‘populist’ are drawing questions about their affordability and the potential strains that could come on the government’s finances.
• The data show that Indonesian consumers are cautious and with CPI turning negative (the first deflationary print in 25 years) investors are nervous as consumer resilience has been a long run story for Indonesia.
• Since coming to power in October, Prabowo has launched a nationwide free meals programme for schoolchildren and pregnant women, a policy that is expected to cost $28bn a year.
• The plan has placed a strain on already stretched finances and prompted widespread austerity measures, hitting sectors including infrastructure at a time when employment is challenged already.
• State revenue for the first two months of the year fell by a fifth from the previous year, raising more questions about how Prabowo will fund his programmes.
• A delay of budget reporting generated fears of a budgetary black hole that at this stage have been played down and media reports that the popular finance Minister Indrawati is to step down have been denied.
• All in all it is a perfect storm for financial markets, despite economic growth forecasts remaining at 4.8%.
• The rupiah has hit its lowest level since the Asian financial crisis and risks pouring over into neighbouring countries' currencies.   
• The question is whether this has the hallmarks of a full blown emerging markets' crisis.
• The bond market isn’t helping either with the INDOGB 10YR up over 40bps since early February’s rally came to an abrupt end.   
• In the government’s favour for now is FX Reserves are near to all-time highs and can and have been utilized to defend the currency and to buy bonds. 

• Just last week the BI entered the market to buy government bonds to support liquidity yet the positive impact that came with that, evaporated yesterday with the Jakarta Composite down heavily in the morning.
• The market has sought some solace in the news that former President Jokowi is to be an advisor to the new SWF .  
• The onus is on the Central Bank here to maintain calm and whilst it has the reserves to do so, the level of government involvement will be heavily scrutinized. 

ASIA FX: USD/IDR To Fresh Highs Since 1998, Before BI Intervenes

Most focus has been on fresh highs in USD/IDR spot back to 1998. The pair has retraced somewhat but is still close to 16600. Other USD/Asia pairs in South East Asia have shown an upside bias, with USD/THB playing some catch up. Moves elsewhere have been more muted.

• Earlie USD/IDR got to highs of 16642, levels last seen in 1998 during the Asian financial crisis (2020 highs were at 16625). 1998 highs in the pair came in around 16950. Multiple factors are weighing on Indonesia sentiment. Populist policies from the new Prabowo government has raised concerns around the fiscal outlook, while at the same time, potential erosion of BI independence is a likely further concern.
• BI has a large stockpile of FX reserves, which they used today to stem IDR's decline. USD/IDR was last near 16600. Still, a lasting turnaround may need positive developments in terms of some the headwinds outlined above.
• USD/PHP is slightly higher, but at 57.35/40 is still reasonably close to recent lows (57.10). BSP Governor Remolona was on the wires earlier stating the central bank has been less active in FX markets in recent months, while also noting a 25bps cut at the April policy meeting is likely.
• USD/THB has pushed back to 34.00 (session highs at 34.05). Catch up to recent stronger USD index levels is likely in play. Note the 100-day EMA is near 34.03, which is a likely close by resistance point.
• USD/MYR is back towards 4.4400, keeping well within recent ranges.
• USD/INR is holding sub 86.00, last 85.75. The return of equity inflows from offshore investors a positive. We are sub all key EMAs except for the 200-day close to 85.10/15. 

ASIA FX: USD/CNH Tests Above 7.2700, USD/KRW Holding Near Recent Highs

In North Asia markets, the bias has been for higher USD levels, but aggregate moves are modest so far. There has been limited spillover from the weakness in IDR in SEA. 

• USD/CNH probed above 7.2700 in earlier dealings but found resistance and last tracked near 7.2660, little changed for the session. The near term trend in the pair still appears to the upside, with focus on whether we can close above the 7.2650 level, which markets the 50-day EMA. The onshore fixing in USD/CNY terms nudged a little higher. Onshore equities are down slightly, while Hong Kong markets have slumped more than 2%, as tech fell following comments from Alibaba around bubbles in AI data center buildouts (per BBG).
• Spot USD/KRW is close to unchanged, last in the 1469/70 region. Earlier highs were above 1471. Local equities have moved off earlier highs, the index back 2615. Earlier data showed softer consumer sentiment, which suggests that economic growth will remain fairly modest. Above 1470 may see intervention risks rise in USD/KRW, as this will be within striking distance of late 2024 highs above 1485.
• USD/TWD has edged above 33.05, which is fresh highs in the pair back to early Feb. Local equities are higher, but are struggling for meaningful upside momentum. Offshore investors remain net sellers of local equities. 

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
25/03/2025	0700/0800	**	SE	PPI
25/03/2025	0800/0900	**	ES	PPI
25/03/2025	0900/1000	***	DE	IFO Business Climate Index
25/03/2025	1000/1000	**	GB	Gilt Outright Auction Result
25/03/2025	1100/1100	**	GB	CBI Distributive Trades
25/03/2025	1230/0830	**	US	Philadelphia Fed Nonmanufacturing Index
25/03/2025	1240/0840		US	Fed Governor Adriana Kugler
25/03/2025	1255/0855	**	US	Redbook Retail Sales Index
25/03/2025	1300/0900	**	US	S&P Case-Shiller Home Price Index
25/03/2025	1300/0900	**	US	FHFA Home Price Index
25/03/2025	1300/0900	**	US	FHFA Home Price Index
25/03/2025	1305/0905		US	New York Fed's John Williams
25/03/2025	1400/1500	**	BE	BNB Business Confidence
25/03/2025	1400/1000	***	US	New Home Sales
25/03/2025	1400/1000	***	US	Conference Board Consumer Confidence
25/03/2025	1400/1000	**	US	Richmond Fed Survey
25/03/2025	1700/1300	*	US	US Treasury Auction Result for 2 Year Note
26/03/2025	0030/1130	***	AU	CPI Inflation Monthly
26/03/2025	0700/0700	***	GB	Consumer inflation report
26/03/2025	0700/1500	**	CN	MNI China Money Market Index (MMI)
26/03/2025	0745/0845	**	FR	Consumer Sentiment
26/03/2025	0800/0900	**	SE	Economic Tendency Indicator
26/03/2025	0800/0900	***	ES	GDP (f)
26/03/2025	1000/1000	**	GB	Gilt Outright Auction Result
26/03/2025	1100/0700	**	US	MBA Weekly Applications Index
26/03/2025	-		GB	OBR Spring Forecasts
26/03/2025	1230/0830	**	US	Durable Goods New Orders
26/03/2025	1230/1230		GB	Chancellor Reeves to deliver Spring Statement
26/03/2025	1330/1330		GB	DMO to announce FY25/26 financing remit (approx time)