MNI US MARKETS ANALYSIS - Equities Firmer on Targeted Tariffs

Highlights:

• Equities gap higher and remain firm on report that Trump could pursue more targeted tariffs
• Prelim PMIs see mixed signals for the Eurozone
• First funding tweaks for Germany in updated guidance, extra issuance likely in H2

US TSYS: TYM5 Draws Closer To Support, Against Trend Needle

• Treasuries have extended the gap lower seen at the open following the WSJ reporting over the weekend that the White House is narrowing its approach to tariffs set to take effect on April 2. It supposedly will likely omit a set of industry-specific tariffs while applying reciprocal levies on a targeted set of nations that account for the bulk of foreign trade with the U.S.
• Flash PMIs for March headline the US docket today, following mixed initial results for the Eurozone (mfg beat, services miss) and the UK (mfg miss, services beat). There is scope for heightened sensitivity here, with other notable US data more backloaded for the week (see the latest MNI US Macro Weekly for a review of latest macro developments plus what to watch this week).
• Cash yields are 3.5-4.5bp higher from Friday’s close, with 2s lagging increases.
• 10Y yields, an area of focus for the Trump administration wanting them lower, at 4.29% are up from a recent low of 4.17% from Thursday and have reversed most of the FOMC-induced decline vs 4.32% prior.  
• TYM5 has nudged to a session low of 110-26 (-09) with some limited fresh downward impetus as US desks filter in, but on modest cumulative volumes of 280k.
• Any further declines will be watched with support coming into view at 110-20+ (20-day EMA) after which lies 110-12+ (Mar 6/13 lows). The trend needle points north though, with resistance at 111-25 (Mar 11 high).
• Data: Chicago Fed national activity index Feb (0830ET), S&P Global US PMIs March flash (0945ET)
• Fedspeak: Bostic on BBG TV (1345ET), Barr on small business lending (1510ET) – see STIR bullet
• Bill issuance: US Tsy $76B 13W & $68B 26W Bill auctions

STIR: Bostic and Non-Supervision Barr To Add To Post-FOMC Fedspeak

• Fed Funds implied rates hold most of their push higher from Friday’s close on WSJ weekend reporting that the White House is narrowing its approach to tariffs set to take effect on April 2.
• They still however clearly see the dovish impact from last week’s FOMC decision and communications – see table for comparison.
• Cumulative cuts from 4.33% effective: 5.5bp May, 20bp Jun, 32bp Jul, 47bp Sep and 68bp Dec.
• Flash PMIs for March headline the US docket today, following mixed initial results for the Eurozone (mfg beat, services miss) and the UK (mfg miss, services beat).
• Post-FOMC Fedspeak slowly builds, with Atlanta Fed’s Bostic (non-voter) set to speak on BBG TV at 1345ET before Gov. Barr (permanent voter) on small business lending at 1510ET (text + Q&A).
• Released on the morning of last week’s FOMC decision, the Atlanta Fed’s BIE showed the highest year-ahead inflation expectations since Nov 2023 at 2.5% (+0.2pp from Feb, +0.5pp from the 2.0% low late last year). Bostic had previously stated his core view that the Fed would cut 50bp this year - in line with the median - but in February he also cited disinflationary progress in the BIE as a reason for optimism: "Taken as a whole, recent inflation data have supplied evidence for both optimism and   pessimism. On the positive side, longer-term inflation expectations, typically a guide to future inflation, are mostly at healthy levels. To cite one gauge, the Atlanta Fed Business Inflation Expectations survey from December found that, for the first time in four years, respondents on average expect unit costs will rise just 2 percent over the next 12 months. That is in line with where that measure hovered during the low-inflation years before the pandemic."
• We’ll watch to see if Bostic, who usually is quite forthcoming with his dot plot estimates, gives further color here after a hawkish tilt to the distribution of the dot plot even if medians were unchanged.
• Barr will also be watched for greater commentary around monetary policy matters, having stepped down as Vice Chair for Supervision on Feb 28. 

BOE: MNI BOE Review - March 2025

• There was a slight hawkish bias to Thursday’s MPC meeting from the 8-1 vote in favour of maintaining Bank Rate at 4.50%.
• The guidance was largely unchanged although there were some tweaks to the first guidance paragraph, however, with the main addition being a more explicit reference to potential second-round effects from near-term inflation increases.
• Perhaps the most significant thing to come out of the March MPC meeting was not an explicit view for now, but the lack of any discussion over the three cases that have previously been the bedrock of MPC communication for the past few months. Instead, the MPC outlined the intention for how its guidance would evolve under new scenarios.
• We note that Governor Bailey is due to deliver a speech on “growth in the UK economy” on Monday 24 March and it would be very possible that he could set out these new cases more granularly. If this was the case, we would expect other MPC members to stick to this new script and to move away from the old case 1/2/3 rhetoric.
• We have only seen one sellside forecast change following the March MPC meeting: All 24 analyst reviews that we read look for the next 25bp cut in May, 63% of analysts (15/24) expect a further 75bp of cuts across the year to 3.75% while over 3/5 of analysts (15/24, 63%) have their terminal rate base case in a 3.00-3.50% range.

For the full MNI BOE Review click here.

MNI SNB Review: March 2024 - Door Left Open

Download Full Report Here

Executive Summary:

• SNB cut its policy rate by 25bp, meeting market and analyst consensus
• It added a dovish reference to its policy statement, stressing downside risks to inflation
• Despite the door for further SNB cuts remaining open, markets only price in around 4bp of easing through December – differing views for the road ahead are also apparent among sellside analysts

US TSY FUTURES: Mix Of Positioning Swings Seen Friday

OI data points to a mix of net long setting (TU), short setting (UXY & US) and long cover (TY & WN) during Friday’s twist steepening of the Tsy futures curve.

• It is hard to give any real inference for positioning movement in FV futures, as the contract was unchanged on the day come settlement.

STIR: Net Long Setting Most Prominent In SOFR Futures On Friday

OI data points to net long setting providing the most prominent positioning swing on in SOFR futures on Friday, with only limited rounds of net short cover seen.

US TSY FUTURES: CFTC CoT Shows Funds Adding To Short, A Managers Adding To Long

The latest CFTC CoT report shows asset managers building on their overall net long position in Tsy futures, while leveraged funds added to their overall net short.

• Asset managers added to longs in TY, UXY & WN futures, while they trimmed net longs in TU, FV & US futures. The cohort remains net long across all contracts.
• Hedge funds added to net shorts in FV, TY, UXY and WN futures, while they trimmed net shorts in TU & US futures. The cohort remains net short across all contracts.
• Meanwhile, the non-commercial cohort added to net shorts in FV, TY & UXY futures, while trimming net shorts in TU, US & WN futures (further details in image below). The cohort remains net short across all contracts,

Source: MNI - Market News/CFTC/Bloomberg

EUROPE ISSUANCE UPDATE:

France 0.95% Jul-43 OATei tap mandate

• "The REPUBLIC OF FRANCE has mandated BNP PARIBAS, CITI, CREDIT AGRICOLE CIB, J.P. MORGAN, MORGAN STANLEY and SOCIETE GENERALE to act as Joint Lead Managers on an upcoming reopening of the FRTR 0.95 07/25/43 linked to the European harmonised index of consumer prices (excluding tobacco). The transaction will be launched by syndication in the near future, subject to market conditions." From market source
• The 0.95% Jul-43 OATei was launched via syndication in May 2024 for E4bln from books of E30bln, It was also reopened via auction last month. We look for a E3-4bln transaction size tomorrow. We also think that theis reduces the probability of a new OATei later this year, although a 30-year launch in H2 can't be ruled out.

EU-bond auction results
*E2.371bln of the 3.125% Dec-30 EU-bond. Avg yield 2.805% (bid-to-cover 1.09x).

• E2.373bln of the 4.00% Apr-44 EU-bond. Avg yield 3.786% (bid-to-cover 1.19x).

EGB FUNDING UPDATE: Germany planning to issue 7-year Bund in H2

• Despite announcing today that there are no changes to the Q2 outlook (outside the usual confirmation of one line for each of the 15/30-year auctions), the DFA has acknowledged that funding needs are likely to be higher than previously anticipated in H2 - due to the increase in defence and infrastructure spending.
• As we suspected, funding needs through the rest of Q2 are to be met via cash reserves (even if defence or infrastructure spending picks up ahead of Q3).
• The DFA also noted that it is planning to resume issuing in the 7-year segment in H2. The 7-year segment has been used on and off by the DFA over the past few years: between May-Sep 2020, Apr-Nov 2021, Oct 2022 - Sep 2024. E15bln was issued in the 7-year segment in 2024 and there had been no issuance planned in the segment this year.
• MNI estimates that there will be a new 7-year Bund maturing 15 November 2032 and pencil in a July launch with a E4bln launch auction and then reopenings of E3-4bln.
• We don't at this stage have a strong view on other changes to auction sizes / additional auctions from Q3 onwards. This will largely depend on how quickly additional spending is brought online.

FOREX: JPY Slipping as Tariffs Seen Targeted

• JPY is slipping against all others in G10 early Monday, with a more solid turn-out for European equities leading the JPY lower. USD/JPY attempted a break of the Y150.00 handle in Asia-Pac trade, but failed on the approach, with tariff tumult still the key underlying driver of markets.
• Reports over the weekend that the White House are aiming for a more targeted approach to reciprocal tariffs on next week's 'Liberation Day' has helped support risk, and the gap higher for US equity futures at the resumption of trade was followed by core US yields, although the US Dollar has failed to benefit headed into the NY crossover.
• Scandi currencies outperform, with NOK and SEK both again higher. USD/NOK's print down at 10.4739 today was the lowest since September last year, extending the losing streak for the pair and narrowing the gap with the bear trigger at 10..3916.  
• Preliminary PMI data from across Europe and the UK had relatively little impact on markets, with Eurozone data confirming the economy held just above a flatline across March - with the French contribution a particular weakpoint.
• Preliminary US PMI stats are the calendar highlight Monday, although central bank speakers are also in focus. Fed's Bostic & Barr are set to make appearances as well as BoE's Bailey, ECB's Escriva and RBA's Jones after-market.

OPTIONS: Expiries for Mar24 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0775(E706mln), $1.0800(771mln), $1.0850-60(E1.3bln), $1.0925(E1.1bln)
• USD/JPY: Y148.40-50($701mln), Y149.00-20($1.5bln)

EQUITIES: E-Mini S&P Starts the Week on a Firmer Note, But Trend Remains Bearish

• Eurostoxx 50 futures continue to trade above their recent lows. The medium-term trend direction is up and the recent pullback is considered corrective. Support to watch is the 50-day EMA, at 5285.44. It has recently been pierced. A clear break of it would highlight a stronger short-term bear threat and suggest scope for a retracement towards 5160.00, the Feb 4 low. The bull trigger is 5516.00, the Mar 3 high.
• The trend condition in S&P E-Minis is bearish and the latest recovery appears corrective. Moving average studies are unchanged -they remain in a bear-mode set-up, highlighting a dominant downtrend. Sights are on 5483.50, a Fibonacci projection. Note that the short-term trend condition is oversold. Recent gains are allowing this set-up to unwind. Initial firm resistance to watch is 5801.77, the 20-day EMA. The bear trigger is 5559.75, Mar 13 low.

COMMODITIES: Gold Holding Onto Recent Gains, Sights on $3079.20 Next

• Despite holding on to its recent gains, a bearish condition in WTI futures remains intact and the latest recovery appears corrective. Key pivot resistance to watch is $69.12, the 50-day EMA. A resumption of the downtrend would signal scope for an extension towards $63.73 next, the Oct 10 ‘24 low. Moving average studies are in a bear-mode position, highlighting a dominant downtrend.
• A clear uptrend in Gold is intact and last week’s resumption of the bull cycle reinforces current conditions. The yellow metal is holding on to the bulk of its recent gains. Last Thursday’s fresh trend high reinforces the bull theme and sights are on $3079.2 next, a Fibonacci projection. Note that moving average studies are in a bull-mode position, highlighting a dominant uptrend and positive market sentiment. Support is at $2962.0, the 20-day EMA.

Date	GMT/Local	Impact	Country	Event
24/03/2025	1345/0945	***	US	S&P Global Manufacturing Index (Flash)
24/03/2025	1345/0945	***	US	S&P Global Services Index (flash)
24/03/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
24/03/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
24/03/2025	1800/1800		GB	BOE's Bailey lecture on UK growth
24/03/2025	1910/1510		US	Fed Governor Michael Barr
25/03/2025	0700/0800	**	SE	PPI
25/03/2025	0800/0900	**	ES	PPI
25/03/2025	0900/1000	***	DE	IFO Business Climate Index
25/03/2025	1000/1000	**	GB	Gilt Outright Auction Result
25/03/2025	1100/1100	**	GB	CBI Distributive Trades
25/03/2025	1230/0830	**	US	Philadelphia Fed Nonmanufacturing Index
25/03/2025	1240/0840		US	Fed Governor Adriana Kugler
25/03/2025	1255/0855	**	US	Redbook Retail Sales Index
25/03/2025	1300/0900	**	US	S&P Case-Shiller Home Price Index
25/03/2025	1300/0900	**	US	FHFA Home Price Index
25/03/2025	1300/0900	**	US	FHFA Home Price Index
25/03/2025	1305/0905		US	New York Fed's John Williams
25/03/2025	1400/1500	**	BE	BNB Business Confidence
25/03/2025	1400/1000	***	US	New Home Sales
25/03/2025	1400/1000	***	US	Conference Board Consumer Confidence
25/03/2025	1400/1000	**	US	Richmond Fed Survey
25/03/2025	1700/1300	*	US	US Treasury Auction Result for 2 Year Note