MNI EUROPEAN MARKETS ANALYSIS: US PPI, Claims Later

• Equity sentiment has turned more risk averse as the Thursday Asia Pac session unfolded. Eminis are back under 5600, while Hong Kong markets are tracking lower for the 5th straight session.
• Yen has outperformed in the G10 FX space. US cash bonds are 1-2bps richer.  JGB futures are lower though, with comments from BoJ Governor Ueda in parliament a factor.
• Later US February PPI and jobless claims print. The ECB’s Lagarde and de Guindos appear and January euro area IP is released.

MARKETS

US TSYS: Cash Bonds Slightly Richer, PPI & Claims Data Later

In today's Asia-Pac session, TYM5 is 110-25, 04+ from closing levels. 

• Cash bonds are 1-2bps richer in today’s Asia-Pac session as Asian investors digest yesterday's lower-than-expected CPI data.
• Yesterday, Headline CPI inflation data came out lower than expected (0.2% vs. 0.3% est, 0.5% prior). However, focus quickly turned to Core & Supercore CPI - while lower than expected - remained hot: Core CPI surprisingly eased to 3.12% Y/Y in February (cons 3.2) from what had been a surprisingly strong 3.26% in January.
• Supercore (core services ex-housing) inflation pulled back more than expected on the month, although as noted above, it was dragged lower by softer-than-expected airfares and vehicle insurance (for which PPI and not CPI feed into PCE).
• This afternoon we saw "block of 15,000 contracts in five-year bond June futures traded at a price of 107-26+ on CBOT," along with " A block of 10,000 contracts in 10-year bond June futures traded at a price of 110-25 on CBOT." per BBG.
• Today’s calendar will see PPI and Jobless Claims data.

JGBS: Futures Lower, Bear Trend Intact, Ueda Expects Improvement In Real Wages

JGB futures sit up slightly from session lows (137.83), last near 137.87, -.11 versus settlement levels for the June contract. JGBs have underperformed the more positive bias seen in US Tsy futures so far in Thursday trade. 

• Remarks from BoJ Governor, who is before parliament, have been attributed to the weakness since the lunchtime break. Ueda stated that real wages and consumption should improve, while noting the shift in believe around wage-inflation is important (per BBG). He stated though the price trend is still below the 2% target.
• Earlier he commented on food price strength and that it would take time to find the right balance sheet size.
• JGB futures remain in a downtrend. Sights are on 136.57, a Fibonacci projection. For bulls, a show through 140.33 resistance would signal a possible reversal, and open early December highs should the pace be maintained. 144.48 is the medium-term target on any recovery.
• Cash JGB yields have ticked up, albeit more so at the front end. The 5yr is back above 1.14%, after being sub 1.12% earlier. Longer dated tenors are lower in yield terms though, the 20yr back under 2.24%. Swap rates are higher in yield terms across the board.
• The JGB cash 2/10s curve has moved off recent highs (+70bps), back to +67bps today.
• Tomorrow, the local calendar will be empty apart from Auction for Enhanced-Liquidity 1-5 years.

JAPAN DATA: Offshore Investors Continue To Sell Equities, But Buying Local Bonds

Offshore investors continued to sell local stocks last week. The pace was more modest compared to the prior week's outflow, see the table below. Still, we have now seen a 6 week consecutive run of net selling from offshore investors. This stretches back to the end of Jan. Over this period we have seen cumulative outflows of just over ¥3trln. Japan's tech/trade sensitive equity bourses have been under pressure, particularly through end Feb and the first part of March. We have seen some stability in recent sessions, but it is arguably too early to call a bottom in these markets. 

• In the bond space, offshore investors added further to their local debt holdings. This marked the fourth straight week of inflows into this space. JGB yields continue to track higher, but may also be attracting some safe haven related flows given global/US growth concerns.
• In terms of Japan outflows, we saw net selling of offshore bonds, but this only partially reversed the prior week's purchases.
• Local investors continued to buy offshore equities, with positive net flows into this space in 12 out of the last 13 weeks.  

Table 1: Weekly Offshore Investment Flows 

Source: MNI - Market News/Bloomberg 

AUSSIE BONDS: Mixed Ahead Of US PPI & Claims Data, Light Calendar Tomorrow

ACGBs (YM -1.0 & XM +1.5) sit slightly mixed. That said, both contracts are dealing near Sydney session highs after today’s consumer inflation expectations data. 

• The Melbourne Institute’s consumer inflation expectations rose sharply by 0.6pp to 4.6% in February but more than reversed that in March with a 1pp decline to 3.6%. This was the lowest reading since Covid-impacted August 2021 and is now down around 3pp from June 2022’s peak.
• The move away from the session’s worst levels has also been assisted by US tsys. Cash US tsys are currently 1-2bps richer in today’s Asia-Pac session as Asian investors digest yesterday's lower-than-expected CPI data. Today’s US calendar will see PPI and Jobless Claims data.
• Cash ACGBs are 1bp cheaper to 1bp richer with a flatter curve and the AU-US 10-year yield differential at +12bps.
• Swap rates are flat to 3bps higher, with the 3s10s curve flatter.
• The bills strip is slightly weaker, with pricing -1 to -3.
• RBA-dated OIS pricing is 1-3bps firmer across meetings today. A 25bp rate cut in April is given a 6% probability, with a cumulative 63bps of easing priced by year-end.
• Tomorrow, the local calendar will be empty. 

Australia’s Disinflation As Good Or Better Than Others

The RBA began its easing cycle in February with a 25bp cut bringing the OCR to 4.1% as it had “more confidence that inflation is moving sustainably towards the midpoint” of the 2-3% target band. The trimmed mean, its preferred measure, eased to 3.2% in Q4 and was only 2.8% in January. In the past, it had cited sticky inflation, especially in services, in other OECD countries as something it was monitoring. The latest data show that while it remains stubborn in some place, Australian inflation is either in line or below other countries, which should make further easing possible if this is sustained and inflation continues heading lower.

• The RBA tightened monetary policy after and by less than other countries and as a result began its easing cycle later too. It has only cut by 25bp so far compared with the UK’s 75bp, US’ 100bp, NZ’s 175bp and euro area’s 185bp. The RBA remains cautious though noting that easing didn’t pre-commit it to further moves.
• Australia’s OCR is now below the US’, UK’s and Norway’s, which is consistent with recent inflation outcomes. Only Canada’s and the euro area’s measures of core inflation in January were below Australia’s monthly trimmed mean of 2.8% y/y. 

OECD underlying CPI y/y%

• Although still at 3.6% y/y, Australia’s January services inflation was below other major countries, especially the UK at 5.0% y/y where wage growth remains elevated. Canada is the outlier at only 2.8% y/y.
• NZ took a different approach to reigning in inflation hiking rates to 5.5%, 115bp above Australia’s peak, and then easing 175bp compared with Australia’s 25bp. NZ’s core inflation in Q4 was only 0.1pp lower though, while services were still 0.5pp higher at 4.8%. 

OECD services CPI y/y%

Source: MNI - Market News/Refinitiv/ABS

AUSTRALIA DATA: Inflation Expectations Lowest Since 2021

The Melbourne Institute’s consumer inflation expectations rose sharply by 0.6pp to 4.6% in February but more than reversed that in March with a 1pp decline to 3.6%. This was the lowest reading since Covid-impacted August 2021 and is now down around 3pp from June 2022’s peak. 

• With Westpac citing inflation as still the main news item recalled by respondents in its consumer confidence survey, cost-of-living issues remain a problem. Lower inflation combined with higher nominal disposable incomes should help support consumption going forward.
• The near-term downward revision in the RBA’s expectations for underlying inflation and its increased confidence that it is returning sustainably to the band likely helped to drive inflation expectations lower in March.
• Petrol prices are down this month to date and may have also helped to reduce inflation expectations.
• February CPI data is released on March 26. 

Australia underlying inflation %

BONDS: NZGBS: Closed Little Changed As Early Weakness Reversed

NZGBs closed 1bp cheaper to 2bp richer after being 2-3bps cheaper early in the session following the negative lead-in from US tsys after yesterday's NY session. 

• After initially plunging on the lower-than-expected US CPI data yesterday, US yields quickly rebounded to session highs, ending higher levels on the day. The 2-year yield was up by 4bps to 3.99%, while the 10-year yield rose to 4.31%, up 3bps.
• However, cash US tsys are 1-2bps richer in today’s Asia-Pac session ahead of today’s PPI and Jobless Claims data.
• NZ-US 10-year yield differential is 4bps lower at +28bps. Nevertheless, it currently sits near its widest level since November.
• Today’s supply saw very strong demand across the lines, with cover ratios ranging from 4.90x to 5.05x.
• “Electricity generated in the 4q was the lowest since 2016 amid lower demand from industrial users including the Tiwai aluminum smelter.” (per BBG)
• Swap rates closed showing a twist-flattening, with rates 3bps higher to 2bps lower.
• RBNZ dated OIS pricing closed flat to 4bps firmer. 25bps of easing is priced for April, with a cumulative 70bps by November 2025.
• Tomorrow, the local calendar will see BusinessNZ Manufacturing PMI and Food Prices.

FOREX: Yen Firmer As US Equities Dip & JGB Yields Firm, Steady Elsewhere

USD indices are little changed in the first part of Thursday dealing, the BBDXY index last near 1266.30, which is where we ended Wednesday NY trade. USD/JPY has drifted a little lower, with fresh softness in US equity futures.  JGB futures are also lower as BoJ Governor Ueda appears before parliament. Elsewhere aggregate moves are not much beyond 0.10%. 

• USD/JPY has dipped under 148.00 this afternoon, session lows rest at 147.88 for the pair, which is where we track close to currently. US equity futures weren't to sustain earlier positive gains and sit back in negative territory with Eminis back under 5600. HK equities are also weaker to the lunchtime break.
• BoJ Governor Ueda is before parliament again today and stated that real wages and consumption should improve, while noting the shift in believe around wage-inflation is important (per BBG). He stated though the price trend is still below the 2% target.
• JGB futures are weaker post the lunchtime break, while some JGB yields have ticked higher, along with swap rates, providing some yen support. US Tsy yields are down a little over 1bps at this stage.
• AUD/USD is down a touch, last near 0.6315 and off earlier highs at 0.6334. NZD/USD is also off earlier highs, but is slightly outperforming AUD, last near 0.5730. Both currencies have broadly tracked risk appetite trends from the equity space.
• EUR/USD is little changed at 1.0885/90.
• Looking ahead, the main focus will be on US data, with PPI and jobless claims due. 

EQUITIES: Sentiment Deteriorates, HK Tech Weaker, US Futures Back In The Red

Asia Pac equity markets are mixed. Focus remains on the US equity market backdrop. Eminis have reversed earlier gains and sit modestly in the red, with the index back sub 5600. Recent lows are just under 5550 (currently at 5590). Nasdaq futures are off by slightly more, down close to 0.50% at this stage. 

• Hong Kong markets are in negative territory as we approach the lunchtime break. The HSI last off around 0.70%. The index remains within recent ranges though. The HSTECH is off over 2%, after falling by a similar amount yesterday.
• There doesn't appear a fresh catalyst for this weakness so far today, other than recurring drivers around trade conflict concerns with the US. Hong Kong is reportedly considering lowering the threshold to buy stocks, which could boost trading (see this BBG link).
• Mainland China markets are also down, but losses are modest at this stage, with the CSI 300 sitting off 0.20%.
• Tech plays in terms of the Kospi and Taiex have struggled to hold gains. Foreign investor outflows from Taiwan have been particularly strong this week. The negative lead from US tech futures has likely dampened risk appetite so far today. Japan markets are holding positive territory though, the Tpoix up around 0.60%.
• Australia's market has also struggled for upside momentum, with the correction off Feb highs now around 10%. NZ markets are also at risk of entering correction territory.
• In SEA, Malaysian markets are up strongly, last near +1.3%. Trends are much steadier elsewhere with a mixture of modest gains and losses. 

OIL: Crude Holds Onto Recent Gains, IEA Monthly Report Out Later

Oil prices have range traded through today’s APAC session holding onto Wednesday’s 2% gains driven by a better supply/demand outlook. There has been some pullback in risk today but it hasn’t pressured crude materially in the session. WTI is down 0.2% to $67.58/bbl after falling to $67.48 earlier. Brent is 0.1% lower at $70.90/bbl after a low of $70.79 followed by a high of $71.10. The USD index is flat. 

• The demand outlook was unrevised in OPEC’s March report but it showed that its February output exceeded targets due to Kazakhstan significantly exceeding its quota. It plans to reduce its production. On Tuesday, the US’ EIA cut back its forecasts for excess supply in 2025 and 2026 because of tighter sanctions on Iran and Venezuela. The IEA publishes its report later today.
• Europe and Canada retaliated for the US’s import duties on steel and aluminium. Oil markets have been worried about the impact of increased protectionism on global growth and Brent is down almost 10% since President Trump’s inauguration. It is also concerned about plans to increase US production, which was supported by the large US energy companies at this week’s CERAweek conference in Texas.
• Later US February PPI and jobless claims print. The ECB’s Lagarde and de Guindos appear and January euro area IP is released.

GOLD: Bullion Higher On Lower US Inflation & Softer Risk Sentiment

Gold prices are moderately higher during APAC trading today as US Treasury yields are down slightly and US equity futures and some Asian indices are lower signalling a pullback in risk as trade tensions rise. Bullion is up 0.3% to $2944.65/oz, close to the intraday high of $2946.11 and above initial resistance at $2930.3. They rose 0.6% yesterday supported by the lower-than-expected US February CPI reading and are up around 1.3% this week.  

• The trend condition for gold remains bullish and the break above initial resistance has opened up $2956.2, the bull trigger. Initial support is at $2880.3, 10 March low.
• It is unclear what the impact of increased US protectionism is likely to be for gold in the medium-term as it could increase inflation but could also weigh on global growth. Europe and Canada retaliated for the US’s duties on steel and aluminium.
• Ukraine said on Tuesday that it was ready to agree to the US’ proposal for a 30-day ceasefire. America is now taking the plan to Russia, which has said it will only accept on its own terms but Bloomberg reported that President Putin is considering it. The US is threatening more sanctions as well as tariffs if Russia is uncooperative, which would also likely drive gold prices higher.
• Later US February PPI and jobless claims print. The ECB’s Lagarde and de Guindos appear and January euro area IP is released.

ASIA: Inflation Contained, Some Special Factors In February

Non-Japan Asian inflation excluding China remained well contained in February with most countries seeing core and headline inflation within central bank target bands. Headline moderated to 2.4% y/y from 3.0%, the lowest since September 2019. Core was stable at 1.9% y/y for the fourth consecutive month and remains well below the 2023 peak of 4.2% y/y and the OECD aggregate.

• The decline in Asian inflation over the start of 2025 is likely to be reversed in March but lower oil and rice prices should provide a cap. Indonesian headline fell to -0.1% y/y in February from 0.8% y/y due to a temporary 50% discount on electricity rates for some consumers which should be unwound in March. Core continued its upward trend begun at the start of 2024 and is now at 2.5%, Bank Indonesia’s band mid-point.

Non-Japan Asia headline CPI y/y%

• Thailand also saw a modest pickup in core inflation to 1.0% y/y, the highest since June 2023 and the bottom of the Bank of Thailand’s corridor. Core inflation was lower though in other major Asian economies with Korea down 0.1pp to 1.9% y/y and the Philippines -0.2pp to 2.4% y/y, which should allow further monetary easing.
• China is excluded from our Asian inflation aggregate but it slipped back into deflation in February for the first time since the start of last year but it was due to base effects related to Chinese New Year. Weak food price inflation and household consumption also weighed on inflation with services inflation falling 0.4% y/y. Headline fell 0.7% y/y after +0.5% in January and core -0.1% y/y down from +0.6% y/y. With inflation remaining too low, the probability of further stimulus remains high. 

Non-Japan Asia core CPI y/y%

Source: MNI - Market News/Refinitiv/IMF

THAILAND: Trade Uncertainty Weighs On Consumer Confidence

February consumer confidence eased to 57.8 from 59.0 but the Q1 average remains above Q4 by 1.5 points at 58.4. The economic component was also lower last month falling to 51.5 from 52.6. The Q1 averages signal that private consumption growth should have continued around Q4’s 3.4% y/y pace or even picked up a bit supported by government policy. However, the outlook may not be as positive as it appears that global uncertainty driven by increased protectionism is weighing on sentiment and that trend is likely to continue for now given recent US steel and aluminium tariffs and counter measures. 

Thailand consumption

Source: MNI - Market News/Refinitiv

• Thailand is highly vulnerable to a global trade war with around 20% of its 2024 exports going to the US worth over 11% of GDP and 12.7% to China worth around 7% of GDP. It could also be a target of US reciprocal tariffs scheduled for April 2, as Thailand’s average MFN rate is over 6.5pp higher than the US’.
• The University of the Thai Chamber of Commerce also gave domestic political uncertainty as a reason for the first decline since September. But the government’s plans to hand out THB 10k to each of 2.7mn people between 16 and 20 years may offset this effect going forward.
• Despite heightened uncertainty, tourist arrivals have strengthened with the annual growth rate rising to 22.2% in January up from 11.2%. This should also support consumption. Tourism could increase further following the Thai PMs trip to China and the government’s plans to support the sector to achieve its goal of 3% growth. 

Thailand tourism

ASIA FX: NEA Equities Struggle, USD/CNH & USD/KRW Supported On Dips

USD/Asia Pairs are mixed in the first part of Thursday trade, Most USD pairs are up from lows, as risk appetite has softened in the equity space as the session has progressed. This has impacted HK/China and South Korea/Taiwan markets more so than those in South East Asia. This has reflected in relative FX trends to some degree as well. 

• USD/CNH sits slightly above 7.2400, little changed versus end Wednesday levels. Earlier lows were near 7.2300 though, but haven't been sustained. Weakness in HK equities, with the HSI tracking down for the 5th straight session, is not helping. Mainland equities are also down, last off 0.45%. These moves are helping keep USD/CNH dips supported, while CNH is underperforming the firmer yen track.
• Spot USD/KRW has gravitated higher, but at 1453/54, the pair remains within recent ranges. The softer backdrop for local equities, which have reversed earlier gains, now down -0.40% (US tech futures are off -0.85%) has been a won headwind.
• USD/TWD is little changed, last near 32.95, so close to recent highs. Local equities struggled despite positive leads from offshore markets. Equity outflows have been large this week, near $2.8bn. The CBC Governor stated rates could come down if inflation slips under 1.50% (currently 1.58%).
• USD/IDR is down slightly, but holding above 16400 at this stage. Comments have come out from both the Finance Minister and Deputy Finance Minister. They note local bonds remain attractive to offshore investors (net inflows are positive March to date), and spoke about the fiscal outlook, with lower commodity prices weighing on government revenues.
• USD/THB is down around 0.20%, last under 33.80, but remains within recent ranges. February consumer confidence eased to 57.8 from 59.0 but the Q1 average remains above Q4 by 1.5 points at 58.4. The economic component was also lower last month falling to 51.5 from 52.6.
• USD/PHP is near 57.30, so also remaining range bound, while USD/MYR is holding above 4.4300 at this stage. 

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
13/03/2025	0700/0800	***	SE	Inflation Report
13/03/2025	0950/1050		EU	de Guindos in fireside chat at EIOPA Sustainable Finance Conference
13/03/2025	1000/1100	**	EU	Industrial Production
13/03/2025	-	***	CN	New Loans
13/03/2025	-	***	CN	Money Supply
13/03/2025	-	***	CN	Social Financing
13/03/2025	1230/0830	*	CA	Building Permits
13/03/2025	1230/0830	*	CA	Household debt-to-income
13/03/2025	1230/0830	***	US	Jobless Claims
13/03/2025	1230/0830	**	US	WASDE Weekly Import/Export
13/03/2025	1230/0830	***	US	PPI
13/03/2025	1400/1000	*	US	Services Revenues
13/03/2025	1430/1030	**	US	Natural Gas Stocks
13/03/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
13/03/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
13/03/2025	1700/1300	***	US	US Treasury Auction Result for 30 Year Bond
14/03/2025	0700/0700	**	GB	UK Monthly GDP
14/03/2025	0700/0800	**	SE	Unemployment
14/03/2025	0700/0700	**	GB	Trade Balance
14/03/2025	0700/0700	**	GB	Index of Services
14/03/2025	0700/0700	***	GB	Index of Production
14/03/2025	0700/0800	***	DE	HICP (f)
14/03/2025	0700/0700	**	GB	Output in the Construction Industry
14/03/2025	0730/0730		GB	DMO calendar for first 3 weeks of FY 25/26 confirmed
14/03/2025	0745/0845	***	FR	HICP (f)
14/03/2025	0800/0900	***	ES	HICP (f)
14/03/2025	0900/1000	*	IT	Industrial Production
14/03/2025	0930/0930		GB	BoE/Ipsos Inflation Attitudes Survey
14/03/2025	1230/0830	**	CA	Monthly Survey of Manufacturing
14/03/2025	1230/0830	**	CA	Wholesale Trade
14/03/2025	1315/1415		EU	Cipollone in panel discussion at "Fifty years of Consob: present and future - Reflections in Bocconi" Milan