MNI EUROPEAN OPEN: Risk Firmer On Tariff/Trade Deal Hopes

EXECUTIVE SUMMARY

• FED’S WALLER SEES CUTS SOONER IF UNEMPLOYMENT JUMPS - MNI BRIEF
• FED’S KASHKARI WORRIED ABOUT UNCERTAINTY, LAYOFFS - MNI BRIEF
• TRUMP POISED TO OFFER SAUDI ARABIA OVER $100 BILLION ARMS PACKAGE, SOURCES SAY - RTRS
• CHINA WEIGHS EXEMPTING SOME US GOODS FROM TARIFFS AS COSTS RISE - BBG
• JAPAN APR TOKYO CORE CPI RISES 3.4% VS MAR 2.4% - MNI BRIEF 

Fig 1: US Equity Futures Continue To Recover 

Source: MNI - Market News/Bloomberg/Refinitiv. 

UK 

TRADE (BBG): “The US is right that global trade imbalances need to be addressed but President Donald Trump is going about it the wrong way, UK Chancellor of the Exchequer Rachel Reeves said.” 

CONSUMER CONFIDENCE (BBG): “Donald Trump’s tariffs and a barrage of rising domestic bills sent UK household confidence to its lowest level since the Labour government came to power. GfK’s consumer confidence index dropped four points to minus 23 in April, the weakest in 17 months and worse than the fall to minus 21 expected by economists.

EU

INFLATION (MNI BRIEF): Medium-term euro area inflation may be below target , with trade tensions dampening inflation in the short term and the likely scenario that more Chinese goods will be arriving to European markets, Bank of Finland Governor Olli Rehn said on Thursday.

ECB (MNI BRIEF): The European Central Bank's reassessment of its Strategy Review should underline the symmetrical nature of its 2% inflation target, ECB executive board member Phillip Lane said Thursday.

ECB (BBG): "European Central Bank Chief Economist Philip Lane said trade tensions are unlikely to result in a recession for the euro zone. While the fallout from President Donald Trump’s tariffs looks set to curb economic expansion, the 20-nation bloc has other trading partners and won’t automatically fall into a downturn, Lane said.

GERMANY (BBG): “Merck KGaA is nearing a deal to acquire SpringWorks Therapeutics Inc., people familiar with the matter said.” 

US/RUSSIA (RTRS): “Russia pounded Kyiv with missiles and drones, killing at least 12 people, in the biggest attack on the Ukrainian capital this year and drawing a rare rebuke from U.S. President Donald Trump on Thursday, who told Vladimir Putin: "Vladimir, STOP!"” 

US

FED (MNI BRIEF): Minneapolis Fed President Neel Kashkari said Thursday he is worried that a prolonging of trade uncertainty from Washington could result in layoffs from businesses, but he is not seeing an uptick in firing notices yet. 

FED (MNI BRIEF): Employment could deteriorate quickly as inflation rises in the second half of the year if President Trump's April 2 reciprocal tariffs do end up going into effect, potentially leading to "more rate cuts and sooner," Federal Reserve Governor Chris Waller said Thursday, saying the tariff price increases are likely to be transitory. 

TECH (BBG): “Google parent Alphabet Inc. reported first-quarter revenue and profit that exceeded analysts’ expectations, buoyed by continued strength in its search advertising business.” 

MIDDLE EAST (RTRS): “The United States is poised to offer Saudi Arabia an arms package worth well over $100 billion, six sources with direct knowledge of the issue told Reuters, saying the proposal was being lined up for announcement during U.S. President Donald Trump's visit to the kingdom in May.” 

OTHER 

JAPAN (MNI BRIEF): The Tokyo core inflation rate accelerated to 3.4% y/y in April from March’s 2.4%, above the Bank of Japan's 2% target for the sixth straight month, data from the Ministry of Internal Affairs and Communications showed on Friday.

SOUTH KOREA/US (BBG): “The US and South Korea could reach an “agreement of understanding” on trade as soon as next week, Treasury Secretary Scott Bessent said Thursday, following talks between the two nations.” 

CANADA (MNI BRIEF): Liberal Party Prime Minister Mark Carney on Thursday turned around Donald Trump's argument about lax border security by pointing to a flow of illegal guns entering Canada, seeking to close out a win in Monday's election where negotiating free trade with the President has become a top issue. 

CANADA (MNI INTERVIEW): BOC Seen On Hold For Rest Of This Year- Stillo 

CHINA 

TARIFFS (BBG): "China’s government is considering suspending its 125% tariff on some US imports, people familiar with the matter said, as the economic costs of the tit-for-tat trade war weigh heavily on certain industries." 

MONETARY POLICY (BBG): “China’s economy began the year well and is continuing an upward trend, the central bank’s head said at the Group of 20 meeting in Washington, repeating earlier promises to implement a moderately loose monetary policy to support growth.” 

GDP (YICAI): "China saw eight out of 11 major provinces record GDP growth above 5.4% in Q1, Yicai reports, noting that nine regions saw increases faster than their annual target.

 CHINA MARKETS 

MNI: PBOC Net Drains CNY91 Bln via OMO Friday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY159.5 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY91 billion after offsetting the maturities of CNY250.5 billion reverse repos today, according to Wind Information. 

• The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.6045% at 09:28 am local time from the close of 1.7199% on Thursday.
• The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 47 on Thursday, compared with the close of 51 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Lower At 7.2066 Fri; -1.09% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.2066 on Friday, compared with 7.2098 set on Thursday. The fixing was estimated at 7.2911 by Bloomberg survey today.

MARKET DATA

JAPAN APRIL TOKYO CPI Y/Y 3.5%; MEDIAN 3.3%; PRIOR 2.9% 
JAPAN APRIL TOKYO CPI EX-FRESH FOOD Y/Y 3.4%; MEDIAN 3.2%; PRIOR 2.4%
JAPAN APRIL TOKYO CPI EX-FRESH FOOD, ENERGY Y/Y 3.1%; MEDIAN 2.8%; PRIOR 2.2%

UK APRIL GFK CONSUMER CONFIDENCE -23; MEDIAN -21; PRIOR -19

MARKETS

US TSYS: Yields Edge Lower As Trade-Deal Optimism Sustains Risk-On Mood

TYM5 is trading at 111-07, unchanged from closing levels in today's Asia-Pac session.

• According to MNI's technicals team, the next resistance to watch for TYM5 is at 111-25, 50.0% of the Apr 7 - 11 bear leg sell-off. Clearance of this level would undermine the bearish theme.
• Cash US tsys are dealing ~1bp richer in today's Asia session after reversing the slight cheapening earlier. Yesterday, US tsys saw a solid session, led by the belly. The 5-year yield is 0.9bp lower today at 3.925%, after dropping by 9bps yesterday.
• US tsys found support on Thursday from comments by Cleveland Fed's Hammack, who noted the Fed could act as soon as June if incoming data proves "convincing." Meanwhile, Fed Governor Waller expressed concern over the potential drag of tariffs on economic growth, suggesting their inflationary impact would likely be transitory.
• Yesterday’s risk-on sentiment sparked by trade "negotiations" headlines with India and South Korea has extended into today’s Asia session. US equity futures are ~0.5% higher.
• “Any u-turn on tariffs by the Trump administration would help market sentiment, Kelvin Tay, regional CIO for UBS Global Wealth Management, says in an interview on Bloomberg TV.” (per BBG)

JGBS: Modest Bear-Steepener, BoJ Policy Decision Next Week

JGB futures are holding weaker, -29 compared to the settlement levels, following higher than expected Tokyo CPI for April, across all measures.

• Next week the BoJ meets, with little changed expected, but today's reading should still add to further tightening expectations for this year (particularly signs of further services related inflation).
• BoJ Governor Ueda hinted as much in earlier remarks, although tariff uncertainty continues to leave a cloud over the outlook.
• “Governor Kazuo Ueda will emphasize that the central bank will continue to raise rates as underlying inflation approaches its 2% target, which will help to strengthen the yen. The BoJ's quarterly report will likely show lower growth and inflation forecasts, but the key message that underlying inflation is approaching 2% will remain unchanged.” (per BBG Economics)
• Cash US tsys are dealing ~1bp richer in today's Asia session after reversing the slight cheapening earlier. Yesterday, US tsys saw a solid session, led by the belly. The 5-year yield is 0.9bp lower today at 3.925%, after dropping by 9bps yesterday.
• Cash JGBs are 1-3bps cheaper across benchmarks, with a steepening bias.
• Swap rates are 2-4bps higher, with the belly leading. Swap spreads are wider.
• On Monday, the local calendar will see Industrial Production and Capacity Utilisation data alongside 20-year supply.

FOREX: USD Outperforms Safe Havens, With Up Equities On Tariff/Trade Hopes

The USD BBDXY index has risen in the first part of Friday trade, up 0.30%, last near 1228. We are just of recent highs and a further extension higher could see the 1234/1235 region targeted. Safe havens are underperforming today, with yen down 0.70% and to fresh lows for the week versus the USD. The dollar is benefiting from a firmer US equity futures backdrop, amid hopes of tariff de-escalation. 

• US Eminis are up close to 0.45% in latest dealings, near 5535/40, earlier we made fresh highs in the index back to early April. Positive trade talk headlines from Thursday in the US around potential deals with India and positive groundwork for US- South Korea discussions has been cited, while today BBG reported that China is considering lowering tariffs on some US imports to combat rising costs. Regional Asia Pac equities are all a sea of green, with tech related countries outperforming.  
• Risk sentiment remains very sensitive to any potentially positive tariff/trade related developments. US Tsy yields are little changed so far today.  
• USD/JPY got to 143.80, but sits slightly lower now, last 143.60, still off 0.70% in yen terms for the session. Note the 20-day EMA rests at 144.76, in terms of further upside targets. Earlier we had a solid beat from the Tokyo April CPI, but this didn't benefit yen.
• USD/CHF is back above 0.8300, off 0.60% in CHF terms, while EUR/USD is down to 1.1330, off 0.50%.
• AUD/USD is relatively steady, last near 0.6405/10. Liquidity may be lighter today given Australian markets are out for ANZAC day. Still, the A$ is being aided by the better equity tone. NZD/USD is down slightly, last near 0.5980/85 (NZ markets are also out).
• Later on we UK retail sales, Canadian retail sales print. In the US focus will be on the final U. of Mich. sentiment reading for April. 

ASIA STOCKS: Sentiment Receives Further Support On China Tariff Headlines

Major Asia Pac indices were already tracking firmer following higher US markets, but received a further boost in latest trade on BBG headlines that China is weighing exempting some US imports from tariffs to temper rising costs (see this link). 

• This followed some positive tariff related news on Thursday, albeit still without concrete details on what trade deals/new tariff levels look like - first on second hand media comments that the White House is "nearing an agreement in principle on trade with India" according to a Fox reporter, followed by Tsy Sec Bessent on a trade "understanding" with South Korea was near as well.
• The market is running with these positives, which along with the China news above, (which is under consideration and reportedly not enacted yet) continues to show market sensitivity to tariff related developments.
• Eminis were last up +0.50%, close to 5535/40, with earlier highs at 5543 best levels since early April. An earnings beat from Alphabet, late on Thursday in the US, also helped sentiment. Nasdaq futures are outperforming up around +0.60%.
• The HSI is up +1.45%, and above 22200, just shy of session highs. China mainland bourses are also up, but still with a low beta with respect to broader risk shifts.
• Japan's Topix is up +1.5%, while the NKY 225 is slightly outperforming. The yen is modestly softer so far today, while government support details to combat the tariff impact are expected to be released. South Korea's Kospi is up close to 1%, with Donald Trump Jr to visit South Korea next week, along with the US Navy Secretary (which could benefit local shipbuilders depending on the outcome of the trip). The Taiex is +2.2%, the strongest performer so far today.  
• Australian and New Zealand markets are closed today for ANZAC day.
• In SEA markets, Philippine stocks are up +1.8%, the Thailand index is up over +1.1%, with other markets more muted in terms of gains. 

OIL: Higher, But Still Lower For The Week, Bearish Technicals Intact

Brent crude last tracked near $67/bbl, up a modest 0.60% in Friday trade so far. WTI was close to $63.15/bbl, with both benchmarks supported by the better risk tone seen so far today. The positive spill over from better equity sentiment in the region is a positive, with markets hopeful of tariff de-escalation over the coming weeks as trade negotiations continue

• Still, compared to levels at the end of last week, oil is still of around 1.5% for Brent, while WTI is still down nearly 2.4%.
• Crude was up on Thursday, after declines on Wednesday following uncertainty around Kazakhstan’s commitment to OPEC+ targets, potential June OPEC+ output increases, and ongoing US-Iran nuclear talks.
• Also note, oil prices may see further downside this year on rising production and with demand limited by China’s faltering growth, according to the IEA Executive Director Fatih Birol, cited by Bloomberg.
• A bearish theme in WTI futures remains intact and the recovery since Apr 9 is - for now - considered corrective.
• A resumption of the bear cycle would open $53.72, a Fibonacci projection. Resistance to watch is $65.84, the 50-day EMA.
• Oil prices may see further downside this year on rising production and with demand limited by China’s faltering growth, according to the IEA Executive Director Fatih Birol, cited by Bloomberg.

GOLD: Slightly Weaker After Yesterday’s Solid Rebound

Gold is 0.4% lower in today’s Asia-Pac session, after rebounding by 1.5% yesterday. This left the yellow metal broadly unchanged on the week but still more than 4.5% below Tuesday’s all-time high. 

• The trend needle in gold continues to point north and this week’s fresh cycle high reinforces bullish conditions, according to MNI technicals team. Moving average studies are unchanged and remain in a bull-mode position highlighting a dominant uptrend. The next objective is $3,547.9, a Fibonacci projection. Initial firm support to watch lies at 3,207.8, the 20-day EMA.
• It has been a volatile week for bullion, with investors assessing trade tensions and the possibility of US rate cuts. Lower rates are typically positive for gold, which doesn’t pay interest.
• Yesterday, Fed Governor Christopher Waller said he’d support monetary easing if the job market deteriorated due to the trade war. In a similar vein, Fed President Beth Hammack told CNBC policy makers may cut rates as early as June. 

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
25/04/2025	0600/0700	***	GB	Retail Sales
25/04/2025	0645/0845	**	FR	Manufacturing Sentiment
25/04/2025	1230/0830	**	CA	Retail Trade
25/04/2025	1230/0830	**	CA	Retail Trade
25/04/2025	1400/1000	***	US	U. Mich. Survey of Consumers
25/04/2025	1400/1000	**	US	University of Michigan Surveys of Consumers Inflation Expectation
25/04/2025	1500/1100		CA	Finance Dept monthly Fiscal Monitor (expected)
25/04/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
25/04/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
25/04/2025	1915/2015		GB	BOE's Greene on Inflation, growth and moentary policy
25/04/2025	2000/1600		US	Kevin Warsh