MNI US MARKETS ANALYSIS - Equities Await Next Leg of Trade War

Highlights:

• Equities in holding pattern as markets await next leg of trade war
• UK pay data aligns with BoE easing cycle
• NZD/USD extends winning streak to 8%

US TSYS: Broad Consolidation Of Yesterday’s Large Rally

• Treasuries broadly consolidate yesterday’s large rally, albeit with a larger intraday sell-off for 30s as relative weakness remains in play.
• Today sees the Empire manufacturing report offer the first regional Fed survey for April business conditions amidst tariffs (although its volatile nature will cloud any surprises) whilst import prices will be watched for a final steer on core PCE estimates (unlikely to move more than a few bps from a ‘low’ rounded 0.1% M/M).
• President Trump’s reaction to China halting Boeing jet deliveries and purchases of aircraft-related equipment and parts from US companies – per Bloomberg reporting – will also be watched.
• With earnings season increasingly getting underway, Johnson & Johnson beat adjusted EPS estimates ($2.77 vs $2.60) for Q1.
• Cash yields are 1.5-2.5bp lower, with 5s again outperforming.
• TYM5 trades at 110-19 (-04+) after overnight modestly extending yesterday’s sizeable gains with a high of 110-27+. Volumes have seen a second more typical overnight session, currently at 310k.
• Resistance is seen at 111-00+ (20-day EMA) but a bear threat remains present with support at 109-08 (Apr 11 low).
• Data: International prices Mar (0830ET), Empire manufacturing Apr (0830ET)
• Fedspeak: Cook at alumni event (1910ET, text only) – see STIR bullet
• Bill issuance: US Tsy $48B 52W & $70B 6W bill sales (1130ET)

STIR: Fed Rates Within Monday Range, Next Cut Fully Priced For July

• Fed Funds implied rates are for the most part 2-2.5bp higher on the day for 2025 meetings but still within Monday’s range.
• Cumulative cuts from 4.33% effective: 5.5bp May, 20.5bp Jun, 39bp Jul, 56bp Sep and 84bp Dec.
• Rates for near-term meetings remain relatively sticky, awaiting a next key driver. Barring unpredictable headlines, that could come tomorrow with US retail sales for March before Fed Chair Powell on the economic outlook at 1330ET.
• Further out the curve, SOFR futures are up to 4.5 ticks lower on the day (largest declines in 1H26) as they underperform European rates which are closer to flat on the day.
• The terminal implied yield of ~3.30% in the U6 is 10bp below pre-Liberation Day levels.
• Fed Gov. Waller yesterday laid out two different scenarios for rate cuts depending on how tariff policy develops. So while he's clearly maintaining his easing bias, as one of the most dovish FOMC members, he delineates the two easing scenarios as "good news/lower tariff" and "bad news/large tariff" rate cuts. In the former, “rate cuts are very much on the table in the latter half of this year” rather than larger and earlier cuts in the latter.
• Today’s sole scheduled Fedspeak comes from Fed Gov. Cook at an alumni event after the close at 1910ET (text only) but with focus instead on Powell tomorrow. 

UK DATA: Revisions to UK AWE Wage Data are Substantial (1/2)

• There have been some revisions to parts of the AWE data due going back to October 2020 to "late and updated returns [the ONS] received from one business to be included and improve the quality of the estimates."
• The business was in the private sector and within the "wholesaling, retailing, hotels & restaurants" category. Due to the impact it had on the aggregate data it must have been a very large employer - possibly a supermarket, a large pub or very big retail chain.
• The peak impact on the sectoral level was seen in April 2022 when the category was revised up 1.69ppt from the prior estimate. More recently in September 2024 there was a 1.15ppt upside revision for this category.
• Looking at the impact on private AWE the upward revision to April 2022 was 0.40ppt while August 2024 is the recent peak in the revision - up 0.29ppt.
• This means that whereas previously there was a recent trough in the series of 4.84% in August 2024, that trough is now 5.13%.
• Revisions to the past couple of months of data have actually been to the downside (although this won't be solely due to this one employer, it will also be incorporating other late returns). The single month estimates in October and November were both revised down by 0.05ppt with December revised down 0.10ppt and January 0.29ppt. This means on aggregate there was a 0.15ppt downward revision to private sector regular AWE in the 3-months to January (from the previously reported 6.06%Y/Y to 5.92%Y/Y).
• The latest print of 5.89%Y/Y in the 3-months to February is 0.11ppt around a tenth below the median estimate of 6.0%Y/Y we saw in the previews that we read.

UK DATA: Pay momentum is slowing - shown by both AWE and PAYE data (2/2)

• February's private regular AWE momentum (annualised 3m/3m) is now down to 4.50% (from 4.93% in January which was revised down from 5.88% and from the recent peak of 6.46% in December which was revised down from 7.50%). With the revisions this puts momentum at the lowest level since January 2024 and does change the recent narrative somewhat (albeit it also underlines how unreliable ONS labour market has been recently).
• We continue to prefer the HMRC PAYE pay data (although always take the "flash" latest month with a grain of salt). The March flash estimate is 4.63%Y/Y, with February revised up to 5.20%Y/Y from 4.92%Y/Y (the revisions to non-flash months aren't usually as large in this dataset).
• How should the MPC interpret this? In isolation of the rest of the labour market report, less wage pressures do make it a little easier for the MPC to ease policy down the line. But there's probably not enough "signal" in this data to isolate the noise seen recently and to change the narrative substantially.
• It does, however, mean that the signal from the AWE data is now more consistent with that seen in other survey data and in the PAYE data, in that wage momentum is notably slowing.

US TSY FUTURES: Short Cover Dominated On Monday

OI data suggests that net short cover dominated during yesterday’s rally, with some of the fast money-type accounts perhaps exiting shorts set last week as markets started the week on a stabler footing.

• Only modest net long setting in UXY futures broke the wider theme.

STIR: Mix Of Positioning Swings In SOFR Futures On Monday

OI data suggests that net short cover in the reds and net long setting in the greens provided the most meaningful positioning swings of note during Monday’s twist flattening of the SOFR futures strip.

GERMAN DATA: US Tariff Policy Unsurprisingly Weighs On ZEW Expectations

The German April ZEW survey saw a much weaker-than-projected Expectations component at -14.0 (vs 10.0 cons, 51.6 prior). Unsurprisingly, the “erratic changes in the US trade policy are weighing heavily on expectations in Germany, which have sharply declined”. The DAX index – for which monthly changes closely correlate with ZEW Expectations – fell 20% between March 18 and April 7, but has since retraced around half of this pullback.  The survey was conducted between April 7 and April 14.

• The pullback in the Expectations component was the largest since the inception of the Russia/Ukraine war in 2022.
• The press release notes that “export-intensive sectors, such as the automobile and chemical industries as well as the metal, steel and mechanical engineering sectors, which recently enjoyed improved prospects, are affected”.
• The Current Situation component was slightly stronger-than-expected at -81.2 (vs -86.9 cons, -87.6 prior), continuing the recovery from cycle lows of -93.1 in December 2024.

FOREX: NZDUSD Extends Five-Day Bounce to 8%

• The more stable tone for risk this week continues to foster a more constructive backdrop for higher beta currencies in the G10 space. AUD and NZD have both risen the best part of half a percent on Tuesday. For NZDUSD specifically, the pair has rallied as high as 0.5928, perfectly matching initial resistance, at the late November highs. In just 5 sessions, NZDUSD has bounced 8% from its cycle lows.
• For AUDUSD, we are reapproaching the 0.6400 mark, and a break above 0.6409 would place the cross at the highest level since December, signalling scope for a stronger recovery towards 0.6550, the Nov 25 high.
• Following this morning’s mixed UK jobs data, GBPUSD stands 0.32% higher on the session and is notably above the bull trigger of 1.3207, fresh six-month highs for the cable. This confirms the end of the recent Apr 4 - 7 correction, and highlights a resumption of the medium-term uptrend. Sights are on 1.3274 next, the Oct 3 ‘24 high.
• Standing out amid the lower US yields this week is the Swiss Franc, which remains in close proximity to its recent cycle highs. For USDCHF, last week’s 0.8099 low matched perfectly with touted support, the 76.4% retracement of the Jan 15 '15 - Dec 15 '16 recovery. This remains the key short-term support. Additionally, EURCHF is trading within 30 pips of the major double bottom support around 0.9210. A break of which will be sure to have the attention of the SNB.
• There has been less emphasis on the major pairs Tuesday, as EURUSD and USDJPY trade close to unchanged levels at 1.1350 and 142.95 respectively. Canada CPI highlights the economic calendar, alongside releases of US Empire State Manufacturing and import prices for March.

OPTIONS: Expiries for Apr15 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1250(E1.4bln)
• USD/JPY: Y144.00($1.4bln), Y145.00($1.9bln)
• EUR/GBP: Gbp0.8620(E682mln)
• AUD/USD: $0.6140-50(A$1.1bln), $0.6200(A$1.4bln)
• USD/CAD: C$1.4375($1.5bln)
• USD/CNY: Cny7.3600($607mln)

EQUITIES: Bounce in Stocks Allows Oversold Condition to Unwind

• A short-term reversal higher in S&P E-Minis last week highlights the start of a corrective cycle. The trend condition has been oversold following recent weakness and the move higher is allowing this set-up to unwind.
• Eurostoxx 50 futures continue to trade above their recent lows. The latest bounce highlights the start of a corrective cycle and if this is correct, marks an unwinding of the recent oversold trend condition.

COMMODITIES: Bearish WTI Theme Intact

• The trend condition in Gold remains bullish and price is trading at its recent highs. The yellow metal last week traded through $3167.8, the Apr 3 high, to resume the primary uptrend and trade to fresh all-time highs.
• A bearish theme in WTI futures remains intact and the rally last Wednesday is - for now - considered corrective. The move higher is allowing an oversold trend condition to unwind. Recent weakness has resulted in the breach of a number of important support levels.

Date	GMT/Local	Impact	Country	Event
15/04/2025	1215/0815	**	CA	CMHC Housing Starts
15/04/2025	1230/0830	***	CA	CPI
15/04/2025	1230/0830	**	CA	Monthly Survey of Manufacturing
15/04/2025	1230/0830	**	US	Import/Export Price Index
15/04/2025	1230/0830	**	US	Empire State Manufacturing Survey
15/04/2025	1255/0855	**	US	Redbook Retail Sales Index
15/04/2025	1300/0900	*	CA	CREA Existing Home Sales
15/04/2025	1530/1130	**	US	US Treasury Auction Result for 52 Week Bill
15/04/2025	2310/1910		US	Fed Governor Lisa Cook
16/04/2025	2350/0850	*	JP	Machinery orders
16/04/2025	0200/1000	***	CN	Fixed-Asset Investment
16/04/2025	0200/1000	***	CN	Retail Sales
16/04/2025	0200/1000	***	CN	Industrial Output
16/04/2025	0200/1000	***	CN	GDP
16/04/2025	0200/1000	**	CN	Surveyed Unemployment Rate M/M
16/04/2025	0600/0700	***	GB	Consumer inflation report
16/04/2025	0800/1000	**	EU	EZ Current Account
16/04/2025	0800/1000	**	IT	Italy Final HICP
16/04/2025	0900/1100	***	EU	HICP (f)
16/04/2025	1000/1100	**	GB	Gilt Outright Auction Result
16/04/2025	1100/0700	**	US	MBA Weekly Applications Index
16/04/2025	1230/0830	***	US	Retail Sales
16/04/2025	1315/0915	***	US	Industrial Production
16/04/2025	1345/0945	***	CA	Bank of Canada Policy Decision
16/04/2025	1400/1000	*	US	Business Inventories
16/04/2025	1400/1000	**	US	NAHB Home Builder Index
16/04/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
16/04/2025	1430/1030		CA	BOC press conference
16/04/2025	1600/1200		US	Cleveland Fed's Beth Hammack
16/04/2025	1700/1300	**	US	US Treasury Auction Result for 20 Year Bond
16/04/2025	1730/1330		US	Fed Chair Jerome Powell
16/04/2025	2000/1600	**	US	TICS
17/04/2025	2245/1045	***	NZ	CPI inflation quarterly