MNI EUROPEAN OPEN: Risk Off Amid Tariff Concerns

Mar-31 05:16By: Jonathan Cavenagh

Europe

EXECUTIVE SUMMARY

TRUMP TEAM WEIGHS BROADER, HIGHER TARIFFS - WSJ
TRUMP ‘VERY ANGRY’ WITH PUTIN OVER CEASEFIRE NEGOTIATIONS - BBC
TRUMP THREATENS BOMBING IF IRAN DOES NOT MAKE NUCLEAR DEAL - RTRS
STARMER AND TRUMP DISCUSS ‘PRODUCTIVE NEGOTIATIONS’ ON ECONOMIC DEAL - BBC
JAPAN FEB FACTORY OUTPUT POSTS 1ST RISE IN 4 MONTHS - MNI BRIEF

Fig 1: USD/JPY Versus 1 month USD/JPY Risk Reversal

Source: MNI - Market News/Bloomberg/Refinitiv.

POLITICS (BBC): “Sir Keir Starmer and Donald Trump have agreed "productive negotiations" about an economic deal between the UK and US will "continue at pace", Downing Street has said, ahead of a looming deadline on US tariffs.”

TRADE (BBC): “The UK would not hesitate to retaliate against US tariffs if needed, according to Downing Street sources.”

IMMIGRATION (BBC): “The UK is hosting a two-day international meeting to tackle what it calls the global threat of illegal migration. Prime Minister Sir Keir Starmer is expected to urge the summit, which will welcome representatives from more than 40 countries, to disrupt the "vile trade" of people-smuggling gangs and avoid pitting "nations against one another".”

RUSSIA (BBC): “In an NBC News interview, the US president said he was angry with Putin for attacking Ukrainian President Volodymyr Zelensky's credibility, and threatened to impose a 50% tariff on countries buying Russian oil if he did not agree to a ceasefire.”

UKRAINE (POLITICO): “Ukraine will not accept a minerals agreement with the United States that would jeopardize its accession to the European Union, Ukrainian President Volodymyr Zelenskyy said on Friday.”

GERMANY (POLITICO): “Germany’s incoming government says it will press the European Union to finally add some bite to its bark over misbehaving countries ― in a thinly veiled reference to Viktor Orbán’s Hungary.”

FRANCE (BBC): “France's Marine Le Pen faces a make-or-break moment on Monday, as a judge rules on whether she should be banned from the next presidential election. The hard-right leader, who is ahead of all her rivals in the 2027 race, will be in court at 10:00 local time (09:00 BST) for the verdict of a party-funding trial targeting her National Rally (RN) party.”

FINLAND (POLITICO): “Finnish President Alexander Stubb played golf with U.S. President Donald Trump on Saturday during a surprise, unofficial trip to Florida that included discussions about Ukraine and icebreaker ships.”

TURKEY (BBC): “Hundreds of thousands of pro-democracy demonstrators have returned to the streets of Istanbul, Turkey, to show support for the city's jailed mayor. Ekrem Imamoglu, who is seen as the main rival of President Recep Tayyip Erdogan, was arrested on corruption charges last week, sparking mass protests.”

GREENLAND (POLITICO): “Greenland’s new leader has responded to further belligerent rhetoric from Donald Trump by telling the American president there’s no way the country will become part of the United States.”

GREENLAND (POLITICO): “The Prime Minister of Denmark will visit Greenland next week, taking a trip to the self-ruled Danish territory just days after Vice President JD Vance’s own visit and the formation of a new broad coalition in Greenland’s government.”

TARIFFS (WSJ): “The Trump administration is scrambling to determine the specifics of its new tariff agenda ahead of its self-imposed deadline of Wednesday, weighing options as the president has promised to remake the American economy with a swath of new levies.”

AUTOS (RTRS): “U.S. President Donald Trump said on Saturday he did not warn car industry executives against raising prices as tariffs on foreign-made autos come into force, telling NBC News he "couldn't care less" if they do.”

IRAN (RTRS): “U.S. President Donald Trump threatened Iran on Sunday with bombing and secondary tariffs if Tehran did not come to an agreement with Washington over its nuclear program. In Trump's first remarks since Iran rejected direct negotiations with Washington last week, he told NBC News that U.S. and Iranian officials were talking, but did not elaborate.”

OTHER

US/CANADA (MNI BRIEF): Canadian Prime Minister Mark Carney said Friday he had a "very constructive" call with U.S. President Donald Trump though both leaders signaled more tariffs and counter-tariffs between two of the world's largest trade partners are coming next week.

JAPAN (BBG): “Japan’s Government Pension Investment Fund will announce its asset allocation for the next five years on Monday, with investors expecting one of the world’s largest managers of retirement funds to keep its assets evenly split between bonds and stocks.”

JAPAN (MNI BRIEF): Japan's industrial output rose 2.5% m/m in February for the first increase in four months following January's 1.1% decline due to higher production of machinery and electronic parts and devices, although the rise of automobile output was small, data released by the Ministry of Economy, Trade and Industry showed on Monday.

NEW ZEALAND (BBG): “The Reserve Bank Board “has agreed to undertake an evidence-based framework for a review of our capital regime, utilizing international experts and assessing it against the regimes in other countries”: Quigley”

THAILAND (BBG): “The deadly Myanmar earthquake is set to hurt foreign tourist arrivals to Thailand in the coming weeks, the latest blow to an industry already reeling from dwindling Chinese visitors worried about travel safety.”

CHINA

HOUSING (SECURITIES TIMES): “New home transactions will continue to recover moderately in Q2, with positive y/y and q/q growth, Securities Times reported, citing Yang Kewei, deputy general manager at the China Real Estate Information Corporation.”

BANKS (SHANGHAI SECURITIES): “China’s four major state-owned banks announced plans on Sunday to raise up to CNY520 billion via A-share placements to boost core tier-one capital, Shanghai Securities News reported. The Ministry of Finance will subscribe to CNY500 billion, with the remainder allocated to other state-owned entities, the newspaper noted.”

RATES (CSJ): Chinese banks, including China Merchants Bank and Bank of Beijing, have recently raised their consumer loan interest rates to at least 3%, China Securities Journal reported Monday, citing bank client managers."

CHINA MARKETS

MNI: PBOC Net Injects CNY31.7 Bln via OMO Monday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY166.7 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY31.7 billion after offsetting the maturity of CNY135 billion today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6804% at 09:24 am local time from the close of 2.0509% on Friday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 45 on Friday, compared with the close of 49 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1782 Mon; -0.39% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1782 on Monday, compared with 7.1752 set on Friday. The fixing was estimated at 7.2644 by Bloomberg survey today.

The CFETS Weekly RMB Index was 99.0 on Mar 28, up 0.22% compared with 98.78 as of Mar 21.

The gauge, which compares the yuan to a basket of currencies from China's 24 major trading partners, has decreased 2.43% this year, when compares with 101.47 on Dec. 31, 2024.

MARKET DATA

NEW ZEALAND MARCH ANZ BUSINESS CONFIDENCE INDEX 57.5; FEB. 58.4
NEW ZEALAND MARCH ANZ BUSINESS ACTIVITY OUTLOOK INDEX 48.6; FEB. 45.1

AUSTRALIA MI INFLATION GAUGE MAR. +0.7% M/M & 2.8% Y/Y; FEB. -0.2% & 2.2%

AUSTRALIA FEB. CREDIT TO BUSINESS, CONSUMERS +0.5% M/M & 6.5%; JAN. +0.5% & 6.5%

JAPAN FEB. P INDUSTRIAL PRODUCTION +2.5% M/M; EST. +2.0%; JAN. -1.1%
JAPAN FEB. P INDUSTRIAL PRODUCTION +0.3% Y/Y; EST. +1.2%; JAN. +2.2%

JAPAN FEB RETAIL SALES FEB. +0.5% M/M; EST. -0.2%; JAN. +1.2%
JAPAN FEB RETAIL SALES FEB. +1.4% Y/Y; EST. +2.5%; JAN. +4.4%

CHINA MAR. MANUFACTURING PMI MAR. 50.5; EST. 50.4; FEB. 50.2
CHINA MAR. NON-MANUFACTURING PMI MAR. 50.8; EST. 50.6; FEB. 50.4
CHINA MAR. COMPOSITE PMI MAR. 51.4; FEB. 51.1

SOUTH KOREA FEB. INDUSTRIAL OUTPUT +1% M/M; EST. +0.8%; JAN. -2.8%
SOUTH KOREA FEB. INDUSTRIAL OUTPUT +7% Y/Y; EST. +3.5%; JAN. -4.7%

SOUTH KOREA FEB. CYCLICAL LEADING INDEX +0.1 PT M/M; JAN. -0.4

MARKETS

US TSYS: Cash Bonds Richer As Equity Futures Extend Declines

TYM5 is 111-18, +0-11+ from closing levels in today's Asia-Pac session.

According to MNI's technicals team, Jun'25 10Y futures have breached initial technical resistance at 110-26 (Mar 25 high). The medium-term trend condition is bullish, the first key resistance is located at 111-17+, the Mar 20 high.
Last week's strong risk-off tone has extended into today’s Asia-Pac session ahead of this week's Trump Tariff "Liberation Day" rollout on April 2 and Friday's employment data for March.
Stocks have dropped from Sydney to Hong Kong, with the Nikkei-225 sinking to the lowest level in over six months. Equity index futures for the US and Europe also weakened. Gold touched a fresh record high and US tsy yields declined.
Cash US tsys are 4-6bps richer across benchmarks, with a slight steepening bias, as concern over the health of the US economy fuels demand for haven assets.

JGBS: Belly Leads Market Richer, Labour Market Data Tomorrow

JGB futures are sharply higher and at session highs, +44 compared to settlement levels.

Outside of the previously outlined IP and Retail Sales, Housing Starts printed +2.4% y/y in February vs. est. -2.2%.
Cash US tsys are 4-6bps richer in today's Asia-Pac session as concern over the health of the US economy fuels demand for haven assets. On Friday, a strong risk-off tone pushed the US 10-year 11bp lower ahead of this week's Trump Tariff "Liberation Day" rollout on April 2, not to mention Friday's employment data for March.
Cash JGBs are flat to 4bps richer across benchmarks out to the 30-year, with the belly leading. The benchmark 10-year yield is 3.2bps lower at 1.511% versus the cycle high of 1.596%.
The 2-year yield is 1.8bps lower at 0.854% after today’s supply. The 2-year bond auction showed improved demand today. The low price came in slightly above the forecasted 100.055, according to a Bloomberg poll, while the cover ratio rose to 3.4085x from 3.1637x. The auction tail also shortened slightly compared to the previous month.
Swap rates are 1-32bps lower. Swap spreads are mixed.
Tomorrow, the local calendar will see the Jobless Rate, Job-To-Applicant Ratio, Tankan Survey and Jibun Bank PMI Mfg data.

AUSSIE BONDS: Richer Of Tomorrow’s RBA Policy Decision, No Change Expected

ACGBs (YM +8.0 & XM +9.5) are stronger but off session bests, aligning with a slight paring of early gains for US tsys in today’s Asia-Pac session. Currently, cash US tsys are 4-6bps richer after Friday’s strong risk-off-induced rally.

Outside of the previously outlined private sector credit and MI inflation gauge, there hasn't been much by way of domestic drivers to flag ahead of tomorrow’s RBA Policy Decision.
While a 25bp rate cut in April is given only a 5% probability, a cumulative 71bps of easing is priced by year-end. The market’s reluctance to price in a cut for tomorrow reflects the RBA’s cautiousness surrounding February's easing.
Cash ACGBs are 7-9bps richer with the AU-US 10-year yield differential at +17bps.
Swap rates are 6-7bps lower, after being 10-11bps lower early.
The bills strip has bull-flattened, with pricing +4 to +8.
Tomorrow, the local calendar will see Retail Sales ahead of the RBA Decision, with the market expecting a rise of 0.3% m/m in February after 0.3%.
After today’s May-28 supply, the AOFM plans to sell A$800mn of the 3.75% 21 May 2034 bond on Wednesday and A$600mn of the 1.00% 21 November 2031 bond on Friday.

BONDS: NZGBS: Richer But Off Bests, BC Eases But Price Component Higher

NZGBs closed richer, but well off session bests, with yields 4-7bps lower and the 2/10 curve flatter. Early in the session, NZGBs were richer by 9-12bps lower.

ANZ business confidence eased slightly in March to 57.5 from 58.4, while the activity outlook rose to 48.6, the highest since December. The series is off their Q4 highs but continues to signal that a gradual economic recovery continued in Q1. The price/cost components are trending higher, which will be monitored, but while inflation expectations ticked up they remain in the range seen since November.
On a relative basis, NZBGs underperformed, with the NZ-US and NZ-AU 10-year yield differentials 7bps and 2bps wider respectively.
Swap rates closed 5-7bps lower, with implied swap spreads slightly tighter.
RBNZ dated OIS pricing closed flat to 5bps softer across meetings, with late 2025 leading / early 2026. 24bps of easing is priced for April, with a cumulative 70bps by November 2025.
Tomorrow, the local calendar will be empty, ahead of Building Permits on Wednesday.
On Thursday, the NZ Treasury plans to sell NZ$250mn of the 0.25% May-28 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 5.00% May-54 bond.

FOREX: Safe Havens Outperform Amid Weaker Equities & Lower Yields

Yen gains have dominated the first part of Monday trade, up 0.50% versus the USD. CHF has also risen against the USD, ensuring lower USD index levels. The BBDXY was last near 12740.4, off a little over 0.1%. Higher beta plays have struggled although losses haven't been large.

The risk off tone in FX markets has been reflected in cross asset trends as well. Weekend news of Trump threatening Russia with tariffs (over the Ukraine peace deal), a potential strike on Iran and ahead of liberation day on Wednesday when reciprocal tariffs will be announced, is all contributing to the risk off move.
US equity futures are down sharply, following Friday cash losses. Eminis were last off 0.60%, Nasdaq futures were off 1.15% (up from session lows). US Tsy futures have risen, while cash Tsy yields are off more than 5bps for some part of the curve. Gold has hit fresh record highs above $3110.
Regional equities are down sharply, led by Japan and tech sensitive plays.
USD/JPY got to lows of 148.73, but sits slightly higher now (last near 149.10/15). USD/CHF was tracking close to 0.8790. We had Japan data earlier on IP and retail sales, but sentiment wasn't shifted.
AUD and NZD are ticking lower. NZD/USD was last near 0.5705/10, with dips under 0.5700 supported. AUD/USD was close to 0.6280, also near session lows. AUD/JPY was last near 93.60/65, just up from March 20 lows (near 93.15). NZD/JPY is back to 85.10/15, fresh lows since the middle of the month.
Looking ahead, German February retail sales and German/Italian March preliminary CPI are released. ECB’s Panetta and Villeroy speak. In the US the March MNI Chicago PMI and Dallas Fed manufacturing print.

ASIA STOCKS: Equity Markets Reel as Tariffs Loom.

China Resource’s Gas Group shares are down by the most in over a year as net income missed estimates by 26% as a result of the property market malaise.

Thailand’s markets have re-opened as investors are assured that damage is limited to key infrastructure.

As China’s banks are to be recapitalized, the stock prices are providing a mixed reaction to the news of the US$67bn capital injection.

CK Hutchison’s shares are down almost 5% on rumours its sale of its Panama Canal ports may be delayed.

China’s equity markets are down heavily today with the Hang Seng down -1.7%, CSI 300 down -1.00%, Shanghai down -0.95% and Shenzhen down -2.05%.
The KOSPI is one of the worst regional performers, falling by -2.9% marking a horror three days of losses.
Other markets in the region have no where to hide with the Taiwan’s TAIEX down -3.43% as outflows continue and Philippines down -0.47% with Malaysia, Singapore and Indonesia out.
India’s NIFTY 50 has had a very strong few weeks, but as it opens up this morning it is weaker by -0.30%

OIL: Crude Monitoring Tariff Landscape Carefully

Oil prices are moderately lower during APAC trading after a very short-lived jump at the start of the session in response to US President Trump’s threat to impose primary and secondary tariffs on Russian and Iranian oil. Crude has trended down since then in line with the deterioration in risk sentiment. WTI is 0.4% lower at $69.10/bbl after a low of $68.81 and Brent -0.4% to $72.46/bbl following a drop to $72.28.

Oil is likely to see a volatile week as it worries about the global demand impact of reciprocal tariffs to be announced April 2 but also the effect on supply if the US follows through on threats to Russia and Iran. Trump is proposing “secondary” tariffs on those who buy oil from Russia and Iran, which would have a significant effect on China. This warning has already been made on those who buy from Venezuela.
Trump sounded more conciliatory earlier today though implying that measures against Russia weren’t imminent and that he trusted President Putin would not “go back on his word”, which brought oil prices off their intraday high. Trump and Putin are due to speak later this week.
India and China have been buying discounted Russian crude since it invaded Ukraine in 2022. It is the world’s third largest producer and so further restrictions on its exports would push prices higher. According to Bloomberg, they reached a 5-month high in March.
Later US March MNI Chicago PMI and Dallas Fed manufacturing print, as well as German February retail sales and German/Italian March preliminary CPI are released. ECB’s Panetta and Villeroy speak.

GOLD: Tariffs Drive Gold Through $3,100.

Gold touched new highs last week and had opened up strongly touching a new high again in Asia trading this morning at US$3,088.80, only to continue to rally through to $3,110.12
With all major moving averages upward sloping, gold remains above the 20-day EMA of $3,003.60
Equity markets are under pressure in Asia today with some major bourses down over 3%.
As we approach the deadline for tariffs, the markets will remain cautious, providing a good back drop for gold demand in the early part of the week.

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
31/03/2025	0600/0800	**	DE	Import/Export Prices
31/03/2025	0600/0800	**	DE	Retail Sales
31/03/2025	0800/1000	***	DE	Bavaria CPI
31/03/2025	0800/1000	***	DE	North Rhine Westphalia CPI
31/03/2025	0800/1000	***	DE	Baden Wuerttemberg CPI
31/03/2025	0830/0930	**	GB	BOE Lending to Individuals
31/03/2025	0830/0930	**	GB	BOE M4
31/03/2025	0900/1100	***	IT	HICP (p)
31/03/2025	-		GB	DMO Quarterly Investors/GEMM consultation
31/03/2025	1200/1400	***	DE	HICP (p)
31/03/2025	1342/0942	***	US	MNI Chicago PMI
31/03/2025	1430/1030	**	US	Dallas Fed manufacturing survey
31/03/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
31/03/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
31/03/2025	1600/1200	**	US	USDA GrainStock - NASS
31/03/2025	1600/1200	***	US	USDA PROSPECTIVE PLANTINGS - NASS
01/04/2025	2200/0900	**	AU	S&P Global Manufacturing PMI (f)
01/04/2025	2301/0001	*	GB	BRC Monthly Shop Price Index
01/04/2025	2330/0830	*	JP	Labor Force Survey
01/04/2025	2350/0850	***	JP	Tankan
01/04/2025	0030/1130	**	AU	Retail Trade
01/04/2025	0030/0930	**	JP	S&P Global Final Japan Manufacturing PMI
01/04/2025	0145/0945	**	CN	S&P Global Final China Manufacturing PMI
01/04/2025	0330/1430	***	AU	RBA Rate Decision
01/04/2025	0630/0830	**	CH	Retail Sales
01/04/2025	0715/0915	**	ES	S&P Global Manufacturing PMI (f)
01/04/2025	0745/0945	**	IT	S&P Global Manufacturing PMI (f)
01/04/2025	0750/0950	**	FR	S&P Global Manufacturing PMI (f)
01/04/2025	0755/0955	**	DE	S&P Global Manufacturing PMI (f)
01/04/2025	0800/1000	**	EU	S&P Global Manufacturing PMI (f)
01/04/2025	0815/0915		GB	BoE's Greene on ‘UK MP/macro conjuncture’
01/04/2025	0820/1020		EU	ECB's Cipollone At Croatian National Bank Meeting
01/04/2025	0830/0930	**	GB	S&P Global Manufacturing PMI (Final)
01/04/2025	0900/1100	***	EU	HICP (p)
01/04/2025	0900/1100	**	EU	Unemployment
01/04/2025	-	***	US	Domestic-Made Vehicle Sales
01/04/2025	1230/1430		EU	ECB's Lagarde At AI Conference
01/04/2025	1255/0855	**	US	Redbook Retail Sales Index
01/04/2025	1300/0900		US	Richmond Fed's Tom Barkin
01/04/2025	1345/0945	***	US	S&P Global Manufacturing Index (final)