MNI EUROPEAN OPEN: PBoC Eases To Support Economy
EXECUTIVE SUMMARY
- BESSENT, GREER TO MEET WITH CHINA ON TRADE - MNI BRIEF
- PBOC TO CUT 7-DAY REVERSE REPO RATE BY 10BP - MNI BRIEF
- PBOC TO CUT RRR BY 50BPS - MNI BRIEF
- PBOC TO SUPPORT STOCK MARKETS FURTHER - MNI BRIEF
- NZ UNEMPLOYMENT HOLDS AT 5.1% IN Q1 - MNI BRIEF
Fig 1: NZ - Labour Market Still Weak But Could Be Stabilising
Source: MNI - Market News/Bloomberg/Refinitiv.
UK
BOE (MNI BOE WATCH): The Bank of England is set to announce a 25-basis-point-cut to Bank Rate to 4.25% on Thursday, with any dissenting votes almost certainly in favour of a larger reduction.
EU
NORWAY (MNI NORGES WATCH): Norway’s central bank is set to leave rates on hold again this week, and, while there is a possibility that it could refine its guidance for a likely cut during the course of 2025 to something more specific, Governor Ida Wolden Bache may opt to again stress current economic uncertainty.
SWEDEN (MNI RIKSBANK WATCH): The Riksbank is widely expected to leave its policy rate on hold at 2.25% at its May meeting, while the economic analysis and press conference with Governor Erik Thedeen are likely to highlight both concerns over downside risks to growth and caution over the inflation outlook.
ENERGY (BBC): “The European Commission has published a "roadmap" outlining its plans to end Europe's reliance on Russian energy in the coming years. Under the plans, imports of all Russian gas and liquefied natural gas to European Union member states will be banned by the end of 2027.”
ENERGY (POLITICO): “An ambitious new strategy launched by the EU’s executive on Tuesday would, if implemented, effectively end Moscow's lucrative gas sales to the continent in 2027. That sets the stage for a major showdown between Brussels and the handful of leaders still pushing Russian energy. Questions instantly arose on Tuesday over the practicality of the proposal and whether countries would actually enforce it.”
GERMANY (POLITICO): “On Wednesday Merz plans to visit his counterparts in Warsaw and Paris in an effort to rejuvenate an informal alliance called the Weimar Triangle, which the new chancellor sees as a potential engine for shaping a more robust European defense strategy.”
US
US/CHINA (MNI BRIEF): US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will meet with China's "lead representative on economic matters" later this week in Switzerland, according to statements released Tuesday. The announcements signal a major step toward Washington and Beijing beginning negotiations amid an ongoing trade war. Both Bessent and Greer are set to meet with Swiss President Karin Ketter-Sutter during their visit, their offices said in separate press releases.
FED (MNI POLICY): The U.S. labor market encounters President Donald Trump's trade policy shocks on increasingly shaky ground, but it will take significant deterioration in employment conditions for the Federal Reserve to overcome inflation worries and resume interest rate cuts.
FED (MNI INTERVIEW): The Federal Reserve should ensure that inflation expectations remain well anchored before easing interest rates, possibly in the second half of the year, particularly as memories of the Covid inflation shock remain fresh, former director of the Fed Board's division of monetary affairs William English told MNI.
OTHER
CANADA (MNI BRIEF): Premier Danielle Smith on Tuesday continued pushing to give the province of Alberta more control over energy exports, saying that if talks with Canadian Prime Minister Mark Carney fail she will allow citizens to put a separation referendum on the ballot next year.
US/CANADA (MNI BRIEF): U.S. President Donald Trump stressed he wants friendship with Canada as they work together towards an improved North American free trade pact, calling new Prime Minister Mark Carney "very talented" before their first in-person meeting.
NEW ZEALAND (MNI BRIEF): New Zealand’s unemployment rate held steady at 5.1% over Q1, 10 basis points lower than expected, Stats NZ data showed Wednesday. The underutilisation rate was 12.3%, compared with 12.1%, while the employment rate was 67.2%, down from Q4’s 67.3%.
INDIA/PAKISTAN (BBG): " India conducted targeted military strikes against Pakistan, which said it retaliated in expected tit-for-tat blows after a militant attack last month in Kashmir that killed 26 people.
CHINA
POLICY RATE (MNI BRIEF): The People’s Bank of China will cut its seven-day reverse repurchase operation rate by 10 basis points, Governor Pan Gongsheng told reporters in a briefing on Wednesday.
RRR (MNI BRIEF): The People’s Bank of China will cut banks’ reserve requirement ratio by 50 bps, PBOC Governor Pan Gongsheng told a press conference on Wednesday.
INTEREST RATES (MNI BRIEF): The People’s Bank of China will cut the interest rate of its targeted tools to boost support for key sectors, PBOC Governor Pan Gongsheng told a press conference on Wednesday.
HOUSING (MNI BRIEF): China will cut the loan rates of the individual housing provident fund by 0.25 percentage points, in a bid to support home purchase demand and stabilise the property market, Pan Gongsheng, governor of the People's Bank of China told reporters on Wednesday.
STOCKS (MNI BRIEF): China will cut the loan rates of the individual housing provident fund by 0.25 percentage points, in a bid to support home purchase demand and stabilise the property market, Pan Gongsheng, governor of the People's Bank of China told reporters on Wednesday.
CHINA/US (MOFCOM): “China's Vice Premier He Lifeng will act as chief trade negotiator when talks begin with U.S. Treasury Secretary Scott Bessent during his visit to Switzerland over May 9-12, according to a statement on the Ministry of Commerce website Wednesday.”
MARCO POLICY (SECURITIES TIMES): “China will adopt more proactive macroeconomic policies and is confident of achieving its economic growth target of around 5% for 2025, said Finance Minister Lan Fo’an during the 58th Annual Meeting of the Board of Governors of the Asian Development Bank.”
LIQUIDITY (SECURITIES DAILY): “Analysts expect looser market liquidity in May, as authorities step up efforts to expand domestic demand, which will fully offset softer liquidity as government bond issuance peaks, Securities Daily reported.”
CHINA MARKETS
MNI: PBOC Net Drains CNY335.3 Bln via OMO Wednesday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY195.5 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY335.3 billion after offsetting the maturities of CNY530.8 billion reverse repos today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6180% at 10:06 am local time from the close of 1.7272% on Tuesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 49 on Tuesday, compared with the close of 50 before Labor Day holiday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.2005 Weds; +0.25% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.2005 on Wednesday, compared with 7.2008 set on Tuesday. The fixing was estimated at 7.2147 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND Q1 EMPLOYMENT +0.1% Q/Q; EST. +0.1%; Q4 -0.2%
NEW ZEALAND Q1 EMPLOYMENT -0.7% Y/Y; EST. -0.5%; Q4 -1.2%
NEW ZEALAND Q1 JOBLESS RATE 5.1%; EST. 5.3%; Q4 5.1%
NEW ZEALAND Q1 AVERAGE HOURLY EARNINGS +0.2% Q/Q; Q4 +1.3%
NEW ZEALAND Q1 PRIVATE WAGES INCLUDING OVERTIME +0.4% Q/Q; EST. +0.6%; Q4 0.6%
NEW ZEALAND Q1 PARTICIPATION RATE 70.8%; EST. 71.0%; Q4 70.9%
JAPAN JIBUN BANK APRIL SERVICES PMI 52.4; PRE. FLASH 52.2; MAR.
JAPAN JIBUN BANK APRIL COMPOSITE PMI 51.2; MAR. 48.9
JAPAN JIBUN BANK APRIL SERVICES PMI 52.4; PRE. 52.2; MAR. 50.0
MARKETS
US TSYS: Asia Wrap - Yields Edge Higher
TYM5 has traded lower within a range of 111-04 to 111-11 during the Asia-Pacific session. It last changed hands at 111-10, unchanged from the previous close.
- The US 10-year yield is a little higher, dealing around 4.31%, up 0.02 from its close.
- The US 2-year yield is a little higher, dealing around 3.80%, up 0.02 from its close.
- The People's Bank of China, announced today a cut to the seven-day reverse repurchase rate to 1.4% from 1.5%.
- The PBOC also announced a reduction in the amount banks must own in reserve (known as the RRR) by 0.5% which is expected to see CNY1tn of long term capital released into the market.
- The PBOC also announced two new funding schemes of up to CNY800bn to support the stock market. These announcements aim to stabilize markets and expected to lower borrowing costs for those looking to invest in the stock market.
- Treasuries opened lower on the news of the US-China meeting but has since clawed back those losses during the session as the market awaits the FOMC later.
- The 10-year Yield range seems to be 4.10% - 4.45%, price has moved back to the 4.30% pivot and with more supply to come this week a good chance this level holds. Focus will be on the FOMC tonight and Powell's statement.
- Data/Events : US FOMC
JGBS: Bear-Steepener, BoJ Minutes (Mar) & 10Y Supply Tomorrow
JGB futures are weaker, -27 compared to settlement levels, as trading resumed after the extended long weekend.
- Outside of the previously outlined Jibun Bank PMIs, there hasn't been much by way of domestic drivers to flag.
- Cash US tsys have twist-flattened, pivoting at the 20-year, with benchmark yields 2bps higher to 1bp lower.
- The FOMC today will be watched closely, MNI Economist - "The FOMC will extend its series of rate holds to a third meeting in May, keeping the Fed funds target rate at 4.25-4.50% while maintaining its forward guidance in the Statement. As the FOMC awaits clarity in both government policy and the data on the degree to which one if not both dual mandate targets will be missed, most participants will continue to support a holding pattern until there is a clearer signal to act."
- The cash JGB curve has bear-steepened, with yields flat to 8bps higher. The benchmark 10-year yield is 2.8bps higher at 1.292% versus the cycle high of 1.596%.
- Swaps are flat to 3bps higher, with swap spreads tighter.
- Tomorrow, the local calendar will see BoJ Minutes of March Meeting and Tokyo Avg Office Vacancies data alongside 10-year supply.
AUSSIE BONDS: Richer Ahead Of FOMC Decision
ACGBs (YM +6.0 & XM +6.5) are stronger and near Sydney session bests on a local data-light session. The local calendar will be empty for the rest of the week.
- Cash US tsys have twist-flattened, pivoting at the 20-year, with benchmark yields 2bps higher to 1bp lower.
- The FOMC today will be watched closely, MNI Economist - "The FOMC will extend its series of rate holds to a third meeting in May, keeping the Fed funds target rate at 4.25-4.50% while maintaining its forward guidance in the Statement. As the FOMC awaits clarity in both government policy and the data on the degree to which one if not both dual mandate targets will be missed, most participants will continue to support a holding pattern until there is a clearer signal to act."
- Cash ACGBs are 6-7bps richer with the AU-US 10-year yield differential at -4bps.
- The bills strip has bull-flattened, with pricing flat to +8.
- RBA-dated OIS pricing is flat to 7bps softer across meetings today, with mid-2026 leading. A 50bp rate cut in May is given a 4% probability, with a cumulative 107bps of easing priced by year-end.
- The AOFM plans to sell A$700mn of the 2.75% 21 November 2029 bond on Friday.
BONDS: Bull-Steepener, UE Unchanged, RBNZ's FSR Published
NZGBs closed showing a bull-steepener, with benchmark yields 5-7bps lower, following today’s labour market data.
- However, with the NZ-US and NZ-AU 10-year yield differentials little changed on the day, the data's impact appears to have been limited.
- The Q1 labour market data shows some stabilisation, but at weak levels.
- While the unemployment rate was stable at 5.1%, better than the consensus, it appears that the rise in labour supply that was expected didn’t materialise. Thus, the data is close enough to what the RBNZ expected in February, and another 25bp rate cut on May 28 remains likely.
- The RBNZ warned that financial stability risks have risen over the past six months amid global uncertainties and said banks have enough buffers to cushion the economy should things get worse, according to its FSR report.
- Swap rates closed 4-5bps lower.
- RBNZ dated OIS pricing closed slightly softer across meetings. 26bps of easing is priced for May, with a cumulative 77bps by November 2025.
- Tomorrow, the local calendar will see the NZ Government's 9-Month Financial Statements.
- Tomorrow, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 4.25% May-36 bond and NZ$50mn of the 2.75% May-51 bond.
FOREX: USD Struggling To Bounce
The BBDXY has had an Asian range of 1217.76 - 1220.50, Asia is currently trading around 1219. The USD continues to be sold on any rallies, Asia has seen a small bounce on the news of a US-China meeting to be held in Switzerland. MNI - The People's Bank of China, announced today a cut to the seven-day reverse repurchase rate to 1.4% from 1.5%. The PBOC also announced a reduction in the amount banks must own in reserve (known as the RRR) by 0.5% which is expected to see CNY1tn of long term capital released into the market. The market's focus will turn to the FOMC later today.
- EUR/USD - Asian range 1.1326 - 1.1375, Asia is currently trading 1.1350. Intra-day support is around the 1.1250 area, should this area not hold demand should remerge on dips back to 1.1100.
- GBP/USD - Asian range 1.3333 - 1.3382, Asia is currently dealing around 1.3350. Intra-day support is around the 1.3250 area, then the pivotal 1.30/31 support is next.
- USD/JPY - Asian range 142.45 - 143.31, has held most of its early gains in the Asia session. Can the FOMC be the catalyst to test the 140.00 area again ?
- USD/CNH - Asian range 7.1892 - 7.2265, the USD/CNY fix printed 7.2005. The PBOC cut has seen USD/CNH bounce from below 7.2000, currently trading 7.2215. Sellers should return back towards 7.2500.
- Cross asset : SPX +0.68%, Gold $3385, US 10-Year 4.31%, BBDXY 1219, Crude oil $59.64.
- Data/Events : SW CPI, Ger Factory orders, IT Retail sales, US FOMC
Fig 1: GBP/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg
FOREX: Antipodean Wrap - AUD & NZD Give Back Early Gains
The Asian session started off on the front foot with US stocks bouncing on news that Scott Bessent and Jamieson Greer will hold trade talks with He Lifeng in Switzerland this week. Both the AUD and NZD have both given back their early gains over the Asian session to end smalls lower on the day. MNI Economist - NZ Labour : “There were some tentative signs in the Q1 labour market data that there is some stabilisation but at weak levels. While the unemployment rate was stable at 5.1%, better than consensus, it appears that the rise in labour supply that was expected didn’t materialise. Thus the data is close enough to what the RBNZ expected in February and another 25bp rate cut on May 28 remains likely.”
- AUD/USD - Asian range 0.6478 - 0.6515, the AUD is currently dealing around 0.6485. Support should be seen back towards 0.6350/6400, a break below 0.6300 needed to reverse direction.
- AUD/JPY - Asian range 92.45 - 93.33, price goes into London trading around 92.80. Price continues to stall back towards the resistance seen around 94.00. Support seen back towards the 91.50/92.00 area.
- NZDUSD - Asian range 0.5989 - 0.6023, going into London trading around 0.5995. The NZD continues to hold up well, given the NZD seems to find bids in all scenarios for risk at the moment watch for this to gain momentum.
- AUD/NZD - Asian range 1.0800 - 1.0832, the Asian session is currently trading 1.0805. Sellers have returned back towards the 1.0850 area.
Fig 1 : AUD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
ASIA STOCKS: Equities Bounce on PBOC Measures.
China began its economic support today with a range of various measures announced to support the economy, especially in the face of 145% tariffs from the US. The key PBOC announcement being a 0.10% in the interbank funding rate and a 0.50% reduction in the RRR. In September the concept of the "national team" was created which effectively is key asset management companies through which support for equity markets will occur. Today sees the addition of two more entities being China Chengtong Holdings, China Reform Holdings and Central Huijin Investment Ltd. The PBOC also announced two new funding schemes of up to CNY800bn to support the stock market also.
- Markets liked the news with the Hang Seng up +0.49%, CSI 300 +0.48%, Shanghai up +0.65% and Shenzhen up +0.47%.
- In the first day back post holidays, the KOSPI is up also by +0.33%.
- In Malaysia the FTSE Malay KLCI is up +0.42% whilst the Jakarta Composite continues its good run rising +0.90%.
- Singapore’s FTSE Straits Times is higher by just +0.07% and the PSEi in the Philippines is up +1.43% on improving local data.
- As news of the escalation of action between India and Pakistan filters through the market reaction in India has been somewhat muted. The NIFTY 50 is lower by -0.30%, having fallen -0.33% yesterday.
OIL: Crude Rises Further As US-China Talks Follow Less Expected US Output
Oil prices continued rallying today after rising sharply on Tuesday following the EIA’s downward revision to its expectations for US shale production this year because of lower prices. Today’s increase in crude has been driven by news that US-China trade talks will occur this week with US Treasury Secretary Bessent and Trade Representative Greer meeting China’s Vice Premier Lifeng in Switzerland on the weekend. This has helped boost the US dollar (USD BBDXY index +0.3%).
- WTI is up 1.1% to $59.73, close to the intraday high, while Brent is 0.9% higher at $62.72. Both are currently around 2.4% higher this week. Benchmarks declined sharply over recent weeks on concerns that increased protectionism and current uncertainty would weigh on global energy demand.
- Bessent noted that current tariff levels are “unsustainable” and that de-escalation with China needs to occur before they “can move forward”.
- Meanwhile, China announced further stimulus and measures to support property & equities today. The PBoC cut the SLF rates used for financial institutions’ short-term funding, the 7-day reverse repo and reserve requirements. China is the world’s largest oil importer.
- Official EIA data are published later and with the EIA downward revision to US production and the industry-reported 4.49mn barrels stock drawdown last week, it is likely to continue to be monitored closely. Signs of a reduction in demand due to current uncertainty will also be considered.
- Later the focus will be on the Fed decision, which is widely expected to leave policy unchanged. March German factory orders and euro area retail sales print.
Gold Lower Again as Equities Strong
- As the PBOC announced stimulus measures today, equities got a boost and gold fell.
- Gold is down -1.3% in the Asia trading day at US$3,384.54, having opened at $3,431.60.
- The PBOC announced a range of measures with the key being a 0.10% in the interbank funding rate and a 0.50% reduction in the RRR.
- This comes after US President Trump suggested that China is eager to negotiate due to its 'struggling' economy but emphasized the talks would take place at the right time.
- Another Central Bank reported overnight that their gold reserves are on the increase with the Central Bank of Ghana's gold reserves up by 31 tonnes in March.
- As gold does not pay interest it can be highly sensitive to interest rates as that dictates the borrowing cost to buy gold. Gold markets will watch carefully tonight as the push pull on rates continues with the White House demanding a rate cut and the FED talking more neutral
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 07/05/2025 | 0600/0800 | ** |  DE | Manufacturing Orders |
| 07/05/2025 | 0600/0800 | *** |  SE | Flash Inflation Report |
| 07/05/2025 | 0645/0845 | * |  FR | Foreign Trade |
| 07/05/2025 | 0730/0930 | ** |  EU | S&P Global Final Eurozone Construction PMI |
| 07/05/2025 | 0800/1000 | * |  IT | Retail Sales |
| 07/05/2025 | 0830/0930 | ** |  GB | S&P Global/CIPS Construction PMI |
| 07/05/2025 | 0900/1100 | ** | EU | Retail Sales |
| 07/05/2025 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 07/05/2025 | 1100/0700 | ** |  US | MBA Weekly Applications Index |
| 07/05/2025 | 1400/1000 | US | Treasury Secretary Scott Bessent | |
| 07/05/2025 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 07/05/2025 | 1800/1400 | *** | US | FOMC Statement |
| 07/05/2025 | 1900/1500 | * | US | Consumer Credit |
| 08/05/2025 | - |  NO | NorgesBank Meeting | |
| 08/05/2025 | 0600/0800 | ** | DE | Trade Balance |
| 08/05/2025 | 0600/0800 | ** | DE | Industrial Production |
| 08/05/2025 | 0700/0900 | ** |  ES | Industrial Production |
| 08/05/2025 | 0730/0930 | *** | SE | Riksbank Interest Rate Decison |
| 08/05/2025 | 0800/1000 | *** | NO | Norges Bank Rate Decision |
| 08/05/2025 | 1102/1202 | *** | GB | Bank Of England Interest Rate |
| 08/05/2025 | 1102/1202 | *** | GB | Bank Of England Interest Rate |
| 08/05/2025 | 1130/1230 | GB | BOE Press Conference | |
| 08/05/2025 | 1230/0830 | *** | US | Jobless Claims |
| 08/05/2025 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 08/05/2025 | 1230/0830 | ** | US | Preliminary Non-Farm Productivity |
| 08/05/2025 | 1300/1400 | GB | Decision Maker Panel data |
