MNI EUROPEAN OPEN: US Recessions Fears Weigh On Risk Appetite

Mar-10 05:45By: Jonathan Cavenagh

Europe

EXECUTIVE SUMMARY

TRUMP SAYS US ECONOMY FACES ‘TRANSITION,’ AVOIDS RECESSION CALL - BBG
FED: POWELL - FED DOESN'T NEED TO HURRY, WAITING FOR GREATER CLARITY - MNI
CARNEY WINS LIBERAL CONTEXT TO REPLACE PM TRUDEAU - MNI BRIEF
JAPAN JAN REAL WAGE TURNS NEGATIVE - MNI BRIEF
CHINA FEB CPI TURNS NEGATIVE ON SEASONAL FACTORS - MNI BRIEF
NEW RBA BOARD TO PUSH FOR GREATER TRANSPARENCY- MNI

Fig 1: US Recession Probability - US 3m/10yr Curve (BBG)

Source: MNI - Market News/Bloomberg

LABOUR MARKET (MNI): The KPMG-REC Report on Jobs for February continued to signal warning signs regarding the state of the UK labour market. Permanent salary growth posted its lowest seasonally-adjusted reading for four years according to the press release, with "weaker demand for staff, improved candidate numbers and tighter budgets" all cited as reasons. Hiring continued to decline, albeit at a slower pace than in January with the press release citing that "recruiters frequently commenting that redundancies had expanded the pool of available workers."

DEFENCE(MNI): European Union finance ministers will discuss the possibility of extending the proposed four-year exemption for defence spending from the bloc’s fiscal rules to 10 years when they meet in Brussels on Tuesday morning, according to a Polish Presidency paper.

UKRAINE (BBG): “President Donald Trump said Volodymyr Zelenskiy will eventually make a natural-resources deal with the US, while accusing the Ukrainian president of “taking candy from a baby” in maximizing US military aid during the Biden years.”

GEOPOLITICS (BBG): “Billionaire Elon Musk threw his weight behind a US exit from NATO, saying on his social media platform that it “doesn’t make sense for America to pay for the defense of Europe.” The senior adviser to US President Donald Trump was responding to a post on X early Sunday that asserted the US should “Exit NATO *now*!”

ECONOMY (BBG): “ President Donald Trump said the US economy faces “a period of transition,” deflecting concerns about the risks of a slowdown as his early focus on tariffs and federal job cuts causes market turmoil. Asked on Fox News’ Sunday Morning Futures whether he’s expecting a recession this year, Trump said, “I hate to predict things like that. There is a period of transition, because what we’re doing is very big.”

FED (MNI): Federal Reserve Chair Jerome Powell said Friday the central bank can take its time before considering any further changes to interest rates as inflation is still above target and policy uncertainty out of Washington remains high. "We are focused on separating the signal from the noise as the outlook evolves. We do not need to be in a hurry, and are well positioned to wait for greater clarity," Powell told an annual monetary policy conference sponsored by Chicago Booth, according to prepared remarks.

FED (MNI BRIEF): San Francisco Fed President Mary Daly said Friday uncertainty surrounding the economy and economic policy is elevated and it is a reason to keep interest rates on hold.

FED (MNI BRIEF): Federal Reserve Governor Adriana Kugler said Friday she expects the impacts from new policies in Washington to raise prices before there is an impact on economic growth, underpinning her argument for a hold on interest rates for some time.

OTHER

CANADA (MNI BRIEF): Mark Carney won the contest to become Canada’s next Liberal Party leader and replace Justin Trudeau as prime minister, and the former BOE and BOC governor will soon be thrust into negotiations with Donald Trump and an election where polls show he's erasing a deficit with the Conservatives.

JAPAN (MNI BRIEF): Japan’s inflation-adjusted real wages, a barometer of household purchasing power, declined 1.8% in January, following 0.3% growth in December and marking the first negative reading in three months, preliminary data released by the Ministry of Health, Labour and Welfare on Monday showed.

AUSTRALIA (MNI): The RBA's new board will thrash out its functions this month. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.

CHINA

INFLATION (MNI BRIEF): China's Consumer Price Index fell 0.7% y/y in February, marking the first contraction in 13 months, following January's 0.5% growth and missing the expected -0.4%, data from the National Bureau of Statistics showed on Sunday. The CPI rose by 0.1% y/y when accounting for this year’s Spring Festival disruption, which occurred earlier than in 2024.

LABOR (YICAI): “Authorities will support labour-intensive industries to stabilise employment during periods of transformation and upgrading, said Wang Xiaoping, Minister of Human Resources and Social Security.”

EXPORTS (YICAI): “China’s slowdown in export growth to 2.3% y/y during January and February could indicate the surge of previous months has declined, according to Yang Chang, chief analyst at Zhongtai Securities Research Institute.”

CHINA MARKETS

MNI: PBOC Net Drains CNY0.5 Bln via OMO Monday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY96.5 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY0.5 billion after offsetting the maturity of CNY97 billion today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.7064% at 09:54 am local time from the close of 1.8066% on Friday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 50 on Friday, compared with the close of 51 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1733 Mon; -0.60% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1733 on Monday, compared with 7.1705 set on Friday. The fixing was estimated at 7.2408 by Bloomberg survey today.

MNI: China CFETS Yuan Index Down 0.85% In Week of Mar 7

The CFETS Weekly RMB Index was 99.05 on Mar 7, down 0.85% compared with 99.90 as of Feb 28.

MARKET DATA

JAPAN JAN LABOR CASH EARNINGS Y/Y 2.8%; MEDIAN 3.0%; PRIOR 4.4%
JAPAN JAN REAL CASH EARNINGS Y/Y -1.8%; MEDIAN 1.6%; PRIOR 0.3%
JAPAN JAN CASH EARNINGS - SAME SAMPLE BASE Y/Y 2.0%; MEDIAN 3.5%; PRIOR 5.3%
JAPAN JAN SCHEDULED FULL-TIME PAY - SAME BASE Y/Y 3.0%; MEDIAN 2.9%; PRIOR 2.8%
JAPAN JAN BOP CURRENT ACCOUNT ADJUSTED ¥1937.5bn; MEDIAN ¥1987.1bn; PRIOR ¥2731.6bn
JAPAN JAN TRADE BALANCE BOP BASIS -¥2937.9bn; MEDIAN -¥2454.7bn; PRIOR ¥62.3bn
JAPAN FEB BANK LENDING INCL TRUSTS Y/Y 3.1%; PRIOR 2.9%
JAPAN JAN P LEADING INDEX CI 108; MEDIAN 108.2; PRIOR 107.9
JAPAN JAN P COINCIDENT INDEX 116.2; MEDIAN 116.4; PRIOR 116.1

MARKETS

US TSYS: Cash Bonds Richer Across Benchmarks But Off Session Bests

TYM5 is 110-25+, +0-7+ from closing levels, but off the Asia-Pac session high of 111-00.

Focus on technical support at 110-12.5/110-00 (Intraday low / High Feb 7); resistance above at 111-15 (Wed's high) followed by 112-01/02 (High Mar 4 / 1.382 proj of Jan 13-Feb 7-12 swing).
Cash US tsys are 2-3bps richer across benchmarks in today’s Asia-Pac session as Asian traders digested Friday’s US jobs data and remarks from Federal Reserve Chair Jerome Powell.
US payrolls rose by 151k in February, trivially below the 160k consensus estimate. Net revisions to previous months were negligible. The unemployment rate increased to 4.1%, from 4.0% in January.
Fed Chair Powell said the central bank doesn’t need to hurry to ease policy further and the path to 2% inflation is expected to be bumpy. Fed governor Waller said he wouldn’t support a March cut but sees room to cut rates by two to three times this year.

JGBS: Sharply Weaker After Poor 5Y Auction, Q4 GDP Tomorrow

JGB futures are sharply weaker, -41 compared to settlement levels, after today’s 5-year auction result. The market opened stronger after weaker-than-expected Labor Earnings but that as quickly reversed.

Today’s 5-year bond auction demonstrated weak demand metrics, with the auction price failing to meet expectations. Moreover, the cover ratio declined and the auction tail lengthened.
These results aligned with the poor demand metrics observed at this month’s 10-year auction and came despite offering a yield 15-20bps higher than last month, marking a cyclical peak.
“The US brokerage (JP Morgan) predicts BoJ rate hikes in June and December, but possible US moves may complicate the picture: if tariffs weigh on global economic growth, that might hinder the BOJ’s push to raise rates, but the central bank may have to rush a rate increase if Japan is accused of weakening the yen.” (per BBG)
Cash US tsys are 2-3bps richer across benchmarks in today’s Asia-Pac session.
Cash JGBs are 2-8bps cheaper across benchmarks. The benchmark 10-year yield is 5.5bps higher at 1.575%, just below the cycle high of 1.580% set today.
Swap rates are 2-4bps higher.
Tomorrow, the local calendar will see Q4 (F) GDP, Household Spending and Money Stock data, alongside BoJ Rinban Operations covering 1-3-year, 5-10-year and 25-year+ JGBs.

AUSSIE BONDS: Cheaper, Modest Ranges, Cons & Bus Confidence Tomorrow

ACGBs (YM -3.0 & XM -3.0) are cheaper and near the session’s worst levels on a data-light session.

Cash US tsys are 2-3bps richer across benchmarks in today’s Asia-Pac session as Asian traders digested Friday’s US jobs data and remarks from Federal Reserve Chair Jerome Powell.
Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at +15bps.
Swap rates are 1-2bps higher.
The bills strip is flat to -2 across contracts.
RBA-dated OIS pricing is little changed across meetings today.
Nevertheless, pricing remains mixed compared to February’s pre-RBA Decision levels—meetings through May are 3-4bps firmer, while those beyond are flat to 14bps softer. A 25bp rate cut in April is given a 9% probability, with a cumulative 64bps of easing priced by year-end (based on an effective cash rate of 4.09%).
Tomorrow, the local calendar will see Westpac Consumer and NAB Business Confidence data.
This week, the AOFM plans to sell A$300mn of the 2.75% 21 May 2041 bond tomorrow and A$800mn of the 3.50% 21 December 2034 bond on Wednesday.

BONDS: NZGBS: Modestly Richer, Middle Of Ranges, Light Local Calendar

NZGBs closed in the middle of the day’s ranges, with benchmark yields 1bp higher, on a local data light day.

“New Zealand banking leaders told a parliament committee that the Reserve Bank's capital requirements may be too onerous and have pushed up interest rates. The leaders suggested that the current capital settings, which are based on a one in 200 year expected event, may be too severe and that a more balanced approach is needed.” (per BBG)
Swap rates closed flat to 1bp lower, with the 2s10s curve modestly steeper.
RBNZ dated OIS pricing is flat to 3bps softer across meetings. 25bps of easing is priced for April, with a cumulative 72bps by November 2025.
Tomorrow, the local calendar will see Mfg Activity Volume, ahead of Card Spending on Wednesday.
On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-34 bond and NZ$50mn of the 5.00% May-54 bond.

FOREX: Recession Concerns Fuel Safe Haven Demand

The USD BBDXY index sits up from earlier lows, last near 1268.5. Earlier we got to 1265.28, as dollar sentiment was weighed by US growth/recession concerns. Safe havens JPY and CHF have been the outperformers, although sit away from best levels.

Weekend comments from US President Trump, which didn't appear to rule out a recession, given the large economic transitions the administration is embarking on, hurt US equity futures from the open. Eminis sunk more than 1%, but sit better now, last off -0.45%.
US Tsy futures spiked, but likewise, sit off highs. US 10yr yields opened near 4.255%, but sit back near 4.28% now.
USD/JPY got to lows of 147.09, but sits back at 147.60 in latest dealings, still 0.30% stronger in yen terms. USD/CHF was last near 0.8785, up around 0.15% in CHF terms.
We had Japan labor earnings data, where the headline figures were below expectations. Weaker bonus payments compared to Dec appeared to be in play. Underlying details on core pay was still firm.
AUD/USD and NZD/USD have been range bound. The A$ was last near 0.6305/10. Session lows were at 0.6296, with a weaker yuan/softer China/HK equity backdrop not helping sentiment. Weekend data on China inflation showed CPI and PPI in negative territory. NZD/USD was last at 0.5710/15.
USD/CAD has been relatively steady, last around the 1.4365 level. The new Prime Minister for Canada will be Mark Carney the former head of the BOC and BoE.
EUR/USD got to highs of 1.0871, but sits back in the 1.0830/35 region now, little changed. EU equity futures are up around 0.80%, continuing to highlight relative EU outperformance compared to the US.
Looking ahead, we have second tier EU data, while in the US it is just the NY Fed Survey of Consumer Expectations print on tap.

ASIA STOCKS: China’s Equity Markets Lower as Regional Markets Mixed.

Over the weekend, data out showed that the Chinese economy is mired in deflation with both the PPI and CPI now in negative territory. PPI has been stuck firmly negative for multiple years now, showing the challenges companies face after 29 consecutive months of decline. For CPI it was the first time it had fallen back into deflation in over a year.

China’s main indexes were all lower with the Hang Seng down the worst performer down -2.1%, CSI 300 down -0.83%, Shanghai down -0.59% and Shenzhen down -0.44%.
Korea’s KOSPI ignored the down day in China to post a +0.43% gain as it approaches key technical levels.
Malaysia’s FTSE Malay KLCI took the lead from China, falling -0.19% continuing last week’s trend that saw a decline of -1.74%.
Indonesia’s Jakarta Composite too was dragged lower by -0.54%, despite putting in one of the weeks in recent memory rising +5.8%.
Other key markets were mixed with Singapore’s FTSE Straits Times down -0.16%, Thailand’s SE Thai down -1.00% whilst The Philippine Stock Exchange Index is up 1.00%.
India’s NIFTY 50 is opening in a positive mood, up +0.33%, following on from last week’s gain of +1.93%.

Oil Markets Grasp With Deflation in China.

Oil markets are coming to grips with the realization that China is in the grips of deflation, according to data out over the weekend. Whilst PPI had been stuck in negative territory for some time, February’s CPI has now slipped negative, posing questions about the sustainability of China’s GDP 5% forecast.
WTI had opened at $67.11 this morning in Asia, trending lower at the open before stabilizing at $66.67.
Brent opened at $70.49 trending to a low of $69.84, before stabilizing at $70.01
It was reported that Russia is open to a pause in fighting which oil markets see as a pathway back for oil exports.
The USD softened into the back end of last week, also helping oil recover from losses last week but was overcome by the China news putting downward pressure in Asia.
US Energy Secretary Chris Wright is planning to seek US$20bn in funding to replenish the US strategic oil reserves according to reports, a move that was part of Trump’s campaign.
A major oil refinery near St. Petersburg was hit by drone causing significant damage and saw President Putin saying “The latest strikes by Ukraine show that Moscow’s intention in the country remain the same.”
Khazakstan has asked their oil companies to reduce output to ensure compliance with OPEC+ reduced production goals.
China’s import of energy fell in early 2025 with crude oil imports down 5% in January and February.

GOLD: Gold Prices Steady as Central Bank Buying Continues

Gold consolidated today with prices oscilating around where they started the trading day.
Opening at $2,912.42 gold did very little all day reaching a high of $2,917.33 before giving back those gains to $2,912.56.
The World’s largest gold-backed ETF, the SPDR Gold Trust, saw it holdings rise to a multi-month high and is reflective of the general level of demand currently for gold.
Jordan’s Central Bank has announced an increase in gold reserves by more than 10% year on year.
Data out from China shows the PBOC added to its gold reserves in February, marking four straight months of a rise in their gold reserves.

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
10/03/2025	0700/0800	***	NO	CPI Norway
10/03/2025	0700/0800	**	SE	Private Sector Production m/m
10/03/2025	0700/0800	**	DE	Trade Balance
10/03/2025	0700/0800	**	DE	Industrial Production
10/03/2025	0900/1000	**	IT	PPI
10/03/2025	-	***	CN	New Loans
10/03/2025	-	***	CN	Money Supply
10/03/2025	-	***	CN	Social Financing
10/03/2025	1500/1100	**	US	NY Fed Survey of Consumer Expectations
10/03/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
10/03/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
11/03/2025	2330/0830	**	JP	Household spending
11/03/2025	2350/0850	***	JP	GDP
11/03/2025	0001/0001	*	GB	BRC-KPMG Shop Sales Monitor
11/03/2025	1000/0600	**	US	NFIB Small Business Optimism Index
11/03/2025	1255/0855	**	US	Redbook Retail Sales Index