MNI EUROPEAN MARKETS ANALYSIS: Markets Muted, Equities Rally

• The China stimulus news has given equity markets in the region a boost, with most in the green today. The Hang Seng has led the day for China’s key bourses.
• The BBDXY USD index is moderately higher today after falling 0.2% on Friday. It has trended higher since its intraday low early in the session supported by a softer yen. While G10 moves have been muted, risk-sensitive Kiwi and Aussie have outperformed supported by stronger equities.
• Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest sell-off. Cash tsys finished Friday weaker amid a cautious rise in risk sentiment, with the 2-year yield 6bps higher at 4.02% and the 10-year 4bps higher at 4.31%. Fed remains in Blackout until after Wednesday's FOMC policy announcement.

MARKETS
US TSYS: Futures Give Early Strength Ahead Of Retail Sales

In today's Asia-Pac session, TYM5 is 110-20+, unchanged from closing levels, after giving up early strength. Today's high has so far been 110-26. 

• According to MNI’s technical team, initial technical support is at 110-12.5/110-00 (Low Mar 6 / High Feb 7).
• Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest sell-off. Cash tsys finished Friday weaker amid a cautious rise in risk sentiment, with the 2-year yield 6bps higher at 4.02% and the 10-year 4bps higher at 4.31%.
• Fed remains in Blackout until after Wednesday's FOMC policy announcement. Monday's US data focus is on Retail Sales, Empire Manufacturing and NAHB Housing Market Index measures.

JGBS: Twist-Steepener Ahead Of US Retail Sales, BoJ Decision On Wednesday

JGB futures are stronger, +16 compared to settlement levels, but off the session’s best level.

• The local data calendar has been empty today.
• The market’s focus is on Wednesday’s BoJ decision. The BoJ is widely expected to maintain its policy rate at 0.50%. The BoJ’s January rate hike marked a significant policy shift, bringing short-term rates to levels unseen since 2008. However, policymakers do not appear to see an urgent need for another increase at the March meeting.
• Market expectations point to a gradual path toward policy normalisation. The BoJ is projected to raise its policy rate to 0.75% by July or September and to reach 1.0% by the first quarter of 2026.
• Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest sell-off. The Fed remains in Blackout until after Wednesday's FOMC policy announcement. Monday's US data highlight is Retail Sales.
• Cash JGBs are 2bps richer to 7bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 0.2bps higher at 1.518% versus the cycle high of 1.58%.
• Swap rates are 1bp lower to 3bps higher. Swap spreads are mixed.
• Tomorrow, the local calendar will see the Tertiary Industry Index and Tokyo Condominiums for Sale data alongside 1-year note supply.

AUSSIE BONDS: Subdued Session Ahead Of US Retail Sales, Jobs Data On Thursday

ACGBs (YM flat & XM +1.0) are little changed.

• Today, the local calendar has been empty. The next event on the local calendar is Sarah Hunter's, Assistant Governor (Economic) speech at the AFR Banking Summit tomorrow.  
• However, the highlight of the week is likely to be Thursday’s jobs data for February. Jobs have consistently printed stronger than expected with January up 44k. Bloomberg consensus is forecasting a 30k rise in new jobs with the unemployment rate stable at 4.1% and the participation rate at 67.3%. It will also be important to monitor the underemployment, youth unemployment and hours worked. The RBA said that the strong labour market would have been the key reason to leave policy on hold in February.
• Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest sell-off.
• Cash ACGBs are 1bp richer, with the AU-US 10-year yield differential at +10bps.
• Swap rates are flat.
• The bills strip is modestly weaker, with pricing -1 to -2.
• RBA-dated OIS pricing is flat to 4bps firmer across meetings today. A 25bp rate cut in April is given a 7% probability, with a cumulative 65bps of easing priced by year-end (based on an effective cash rate of 4.09%). 

BONDS: NZGBS: Closed On A Weak Note, Q4 GDP On Thursday

NZGBs closed on a weak note, with benchmark yields 3-4bps cheaper. 

• Both the BNZ services and manufacturing performance indices in Q1 have improved compared to Q4 but the manufacturing sector is outperforming recording growth in both January and February leaving the Q1 average at 52.8 up from 45.9 in Q4. Services returned to contractionary territory in February falling to 49.1 from 50.4 leaving the Q1 average close to the breakeven-50 mark at 49.8 up from Q4’s 47.9. NZ growth remains weak but is gradually recovering. Q4 GDP prints on Thursday and is forecast to rise 0.4% q/q.
• Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after Friday’s modest sell-off.
• Swap rates closed 2-3bps higher.
• RBNZ dated OIS pricing closed flat to 3bps firmer, with November leading. 25bps of easing is priced for April, with a cumulative 65bps by November 2025.
• Tomorrow, the local calendar will see Non-Resident Bond Holdings data.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 5.0% May-54 bond.
• The RBNZ will start the repurchase program of the Sep-25 inflation-indexed bond on March 21. The operation has no implications for monetary policy stance. 

NEW ZEALAND: Services Activity Subdued But Q1 Overall Looking Better

Both the BNZ services and manufacturing performance indices in Q1 have improved compared to Q4 but the manufacturing sector is outperforming recording growth in both January and February leaving the Q1 average at 52.8 up from 45.9 in Q4. Services returned to contractionary territory in February falling to 49.1 from 50.4 leaving the Q1 average close to the breakeven-50 mark at 49.8 up from Q4’s 47.9. NZ growth remains weak but is gradually recovering and these indices are consistent with stronger growth in Q1. Q4 GDP prints on Wednesday and is forecast to rise 0.4% q/q.

• All the PSI components were below the 50-point in February but there was a rise in employment to 48.9 from 47.4 signalling that while labour demand continues to contract, it is at a slower rate. Activity/sales were the main drivers of February’s drop with the index down to 49.2 from 53.8 in January.
• The services sector is recovering but the path is bumpy. There was an improvement in the share of negative comments from respondents falling to 57.8% from 61.9% in January but slightly higher than December’s 57.5% with difficult economic conditions the main concern.
• The PMI rose to 53.9 in February from 51.7 to be at its highest since August 2022, the post-pandemic recovery. All components rose but there were sharp increases in jobs growth, delivery times and stocks of finished goods, implying increased demand and confidence in the outlook. New orders are growing but at around the same rate as January.
• Unlike services, there was an increase in the share of negative comments from manufacturers which focussed on subdued orders/sales growth.

NZ PMI vs PSI

FOREX: G10 FX Moves Limited As Equities Generally Stronger

The BBDXY USD index is moderately higher today after falling 0.2% on Friday. It has trended higher since its intraday low early in the session supported by a softer yen. USDJPY is 0.2% higher at 148.92, close to the intraday high of 149.07. 

• While G10 moves have been muted, risk-sensitive Kiwi has outperformed again today with NZDUSD up 0.2% to 0.5758 after a high of 0.5763. The NZ PSI for February printed below breakeven-50 again but the Q1 average is still above Q4’s.
• AUDUSD rose to 0.6338 and has trended down since to be moderately higher on the day at 0.6329 pressured by mixed China activity data and lower China equities. This has left AUDNZD down 0.1% to 1.0992.
• European currencies are little changed during the APAC session with EURUSD around 1.0878 and GBPUSD 1.2936. NOK has benefited from increased geopolitical tensions in the Middle East with US attacks on Houthi positions in Yemen. EURNOK is down 0.1% to 11.5745.
• Equities are mixed with the Hang Seng up 1.1% and ASX +0.8% but CSI 300 down 0.2% and S&P e-mini -0.5%. Oil prices are higher with WTI +0.7% to $67.67/bbl. Copper is down 0.1% and iron ore has been $102-103/t.
• Later US March Empire manufacturing and February retail sales print. ECB President Lagarde appears.  

ASIA STOCKS: Strong Day on China Stimulus

The China stimulus news has given equity markets in the region a boost, with most in the green today. 

• The Hang Seng has led the day for China’s key bourses up +1.05% with Shanghai up just +0.17% whilst the CSI 300 is down -0.22% and Shenzhen flat.
• In Korea the KOSPI having a very strong day after a slow end the last week and is up +1.50% today, making it one of the best regional performers.
• Malaysia’s FTSE KLCI continues its recent good run, rising +1.13%.
• Indonesia’s Jakarta Composite remains in a challenging period, having finished the end of last week with heavy losses, is weak again today down -1.00% one of the worst regional performers.
• Other key indices are positive with the FTSE Straits Times of Singapore +0.66% and Philippines +0.66%
• India’s NIFTY 50 is opening in positive territory also, up +0.35% in early trading. 

OIL: Crude Higher Boosted By Geopolitical Tensions & China Stimulus Hopes

Oil prices are off their intraday highs but are still moderately stronger on the session. They were boosted early in trading by news of intensive US strikes against Houthi positions in Yemen due to the resumption of their targeting of vessels in the Red Sea. WTI is 0.7% higher at $67.68/bbl after a peak of $68.37 where it found resistance (initial resistance at $68.36). Brent is up 0.7% to $71.10/bbl following a high of $71.80, still below resistance at $71.92. The USD index is little changed.

• There is significant uncertainty around both the demand and supply outlooks for oil with tariffs likely to weigh on the former and higher OPEC and US output increasing the latter. The degree additional supply will be offset by tighter sanctions on Iran and Russia is not yet known.
• Goldman Sachs has reduced its Brent forecast by $5 to $71/bbl for December 2025 for these reasons, according to Bloomberg. It expects Brent to trade between $65 and $80 and average $68 in 2026.
• China’s activity data for February was mixed but IP, investment and retail sales printed better than expected. Plans to stimulate consumption and stabilise the troubled property market have helped to support oil prices.
• The outlook for Russian sanctions is also unclear with talks regarding a ceasefire in Ukraine ongoing. US President Trump is due to speak to Russian President Putin on Tuesday.
• Later US March Empire manufacturing and February retail sales print. ECB President Lagarde appears.  

GOLD: Unable to Hold at New Highs.

• Gold opened Monday strongly initially touching $2,994.20 before lower at $2,987.25
• The Belgian government is considering the sale of a portion of its gold reserves (valued at €20bn) to bolster its defense budget, according to L’Echo newspaper.
• Ramelius Resources Ltd. will acquire Spartan Resources Ltd. in a deal valuing the latter at A$2.4 billion with the combined entity expected to become a leading Australian gold producer, with output exceeding 500,000 ounces a year by 2030.
• The relentless demand for gold ETF’s in India continued in February with net inflows of US$260m.  Whilst down from January it still represented the second highest total since records began.
• Gold finished Friday at US$2,984.16 up +2.5% for the week.
• Having reached a new high, trading through $3,000 briefly, gold’s retreat looks driven by profit taking rather than a change in its fortunes.  .
• Many strategists have revisited their gold forecasts for 2025 with some suggesting $3,500 as their target.

CHINA: Property Development Declines -9.8% y/y

• Any expectations for strength in the property sector were quickly diminished with the release of the February Property Development statistics.
• Declining -9.8% y/y this represented the 32nd consecutive month of declines.
• New home sales declined -0.4% y/y with the sales area declining -3.4% y/y.
• New property values declined -2.6% y/y with area sold down by -5.1%.
• New property construction declined materially by -29.6% y/y.
• Fixed asset investments were a bright light amongst the release, rising by +4.1% y/y from +3.2% y/y the month prior. 

CHINA: February Retail Sales Beat Expectations. 

• China’s retail sales for February expanded +4.0%, up from +3.8% prior.
• Retail sales in rural areas jumped significantly with the best performance in three months, despite the Lunar New Year holiday.
• Unsurprisingly, restaurants, food and consumer goods were strong over the reporting period whilst larger ticket items such as household electronics were much lower than the prior month.
• To some market watchers, the buoyancy of the retail sales has been surprising given the general malaise in the property sector that impacts all.
• China’s authorities have been clear in their focus on domestic consumption as measures to preserve their recently set growth target of 5% for 2025. 

CHINA: Industrial Production Strong in February 

• China’s February industrial production is showing signs that the interruption from the Lunar New Year break to the economy is fading.
• Rising +5.9% y/y this outpaced the January result of +5.3%.
• The result will be particularly pleasing to the authorities as the monthly data prior to the Lunar New Year holidays typically sees a ramp up in production ahead of the break.
• The +5.9% y/y result remains in line with the yearly average and the strongest expansion since July 2024. 

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
17/03/2025	0900/1000	**	IT	Italy Final HICP
17/03/2025	1215/0815	**	CA	CMHC Housing Starts
17/03/2025	1230/0830	*	CA	International Canadian Transaction in Securities
17/03/2025	1230/0830	***	US	Retail Sales
17/03/2025	1230/0830	**	US	Empire State Manufacturing Survey
17/03/2025	1300/0900	*	CA	CREA Existing Home Sales
17/03/2025	1400/1000	*	US	Business Inventories
17/03/2025	1400/1000	**	US	NAHB Home Builder Index
17/03/2025	1400/1500		EU	ECB's Lagarde awarding of diplomas at University Aix-Marselle
17/03/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
17/03/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
18/03/2025	-		JP	Bank of Japan Meeting
18/03/2025	0930/0930		GB	Consumer Price inflation weight update
18/03/2025	1000/1000	**	GB	Gilt Outright Auction Result
18/03/2025	1000/1100	*	EU	Trade Balance
18/03/2025	1000/1100	***	DE	ZEW Current Expectations Index
18/03/2025	-		US	FOMC Meetings with S.E.P.
18/03/2025	1230/0830	***	CA	CPI
18/03/2025	1230/0830	***	US	Housing Starts
18/03/2025	1230/0830	**	US	Import/Export Price Index
18/03/2025	1255/0855	**	US	Redbook Retail Sales Index
18/03/2025	1315/0915	***	US	Industrial Production