MNI US MARKETS ANALYSIS - Stocks Bounce on Tariff Reprieve

Highlights:

• Stocks bounce as electronics get tariff reprieve, Apple shares surge pre-market
• GBP firms, with EUR/GBP showing reversal threat
• Fed implied rates remain sticky, leaving Harker and Waller in focus

US TSYS: Gains Led By The Belly, Waller Headlines Today’s Docket

• Treasuries are firmer across the board, led by the belly, with prospects that recent reciprocal tariff exemptions for electronic items could be short-lived and with Trump still considering semi-conductor tariffs.
• Treasuries underperform most EGBs and Gilts.
• Cash yields are 1.5-7bp lower from Friday’s close, with 5s leading declines and 30s lagging.
• It sees some renewed steepening for 5s30s (currently 76.7bps, +5.0bp) after last week’s wide ranges of 65-95bps with the 65bp seen after tariff pause announcements.
• TYM5 at 110-07 (+ 15+) is within a few ticks of session highs, on more typical overnight volumes of 340k after the huge sessions in recent weeks.
• It has remained within Friday’s range throughout. It maintains a bearish tone, with support at 109-08 (Apr 11 low) after which lies 108-26+ (Fibo retracement of Jan 13- Apr 7 bull cycle), whilst resistance is seen at 111-01+ (20-day EMA).  
• Another inflation expectations survey is the sole pick of today’s data before Fed Governor Waller speaks at 1300ET. The latter would likely be more of note after a raft of patient Fedspeak.
• Earnings also increasingly come into focus this week (starting with Goldman Sachs today but picking up from Tuesday).
• Data: NY Fed consumer inflation expectations Mar (1100ET)
• Fedspeak: Waller (1300ET, text + Q&A), Harker (1800ET, text + Q&A), Bostic fireside chat on policy (1940ET) – see STIR bullet for Waller. Harker (retiring in June) and Bostic (non-voter) speaking far after the close.
• Bill issuance: US Tsy $76B 13W, $68B 26W bill auctions (1130ET)

STIR: Fed Rates Sticky For Upcoming Meetings, Dovish Shift Beyond

• Fed Funds implied rates are little changed for meetings out to July but after that increasingly lower on the day with latest announcements of tariff exemptions for electronic items potentially short-lived.
• The Dec’25 implied rate is 6bp lower from Friday’s close.
• Further out the curve, the SOFR terminal implied yield is 8bp lower at 3.32%, pulling back having fully retraced a large drop seen after “Liberation Day” tariffs.
• Cumulative cuts from 4.33% effective: 6.5bp May, 22.5bp Jun, 41bp Jul and 84bp Dec.
• NY Fed consumer inflation expectations will again be of more note than normal after the continued ramping higher in the U.Mich equivalent.
• Focus is also likely on Fed Gov. Waller (permanent voter) speaking on the economic outlook at 1300ET (text and Q&A). It’s his first comments since last week's "pause" and various Treasury / swap market dislocations.
• He talked on balance sheet matters back on Mar 21 to explain his dissent at the Mar 18-19 meeting (balance sheet caution has gone too far, with no evidence reserves nearing an ample level). He had earlier in March said there was nothing wrong with the forecast of two rate cuts this year in a rowing back of particularly dovish comments from January when he noted potential for three or four cuts this year.

MNI US Inflation Insight: No Tariff Surge Realization In March

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• Core CPI inflation was markedly softer than expected in March at 0.06% M/M (MNI unrounded median 0.24) after 0.23% M/M.
• The main inflation aggregates all surprised lower, with supercore notably softer (-0.24% M/M after 0.22%).
• The miss was driven by volatile components, with a large decline in lodging away from home along with CPI-specific airfares and vehicle insurance.
• It meant a large miss for the Y/Y at 2.79% (consensus firmly centered on 3.0%) for the lowest since Mar 2021.
• Recent run rates remain hotter, suggesting some upward momentum ahead in the Y/Y, but by much less than was expected to have been the case: both three- and six-month rates eased to 3.0% annualized.
• Friday’s PPI release saw notably weaker than expected input cost pressures although core measures weren’t as weak. The PCE-relevant details were broadly neutral for March but implied a large upward revision to Feb.
• Core PCE estimates have coalesced at a ‘low’ rounded 0.1% M/M for March after a wide range following CPI. It implies a significant moderation from what is currently seen as a strong 0.365% M/M in February but likely one that has a good chance of rounding to 0.5% M/M in February after revisions.
• Both inflation releases saw a dovish reaction, with CPI’s larger and longer lasting, although they have been secondary to market sentiment driven by tariff alterations and exemptions.
• Putting politics aside (if possible), the solid payrolls report for March, a raft of Fedspeak calling for patience and some booming inflation expectation surveys has helped see pricing for a May cut fade to 6-7bp vs 15bp before payrolls on Apr 4.
• A next Fed cut is no longer fully priced in June but is seen as highly likely (21.5bp) as part of a path with 81bp of cuts for 2025. 

US TSYS: Wrightson ICAP Weigh In On Last Week's Selloff

Wrightson ICAP provide a few observations around last week’s UST selloff: 

• Basis trades: ICAP note that the latest CFTC report “did not provide any superficial evidence of large-scale basis trade liquidations as of Tuesday, April 8”. However, they note that “in a turbulent market, the aggregate data in the chart below can mask massive shifts in individual portfolios” and that “importantly, they also don’t tell us anything about deleveraging in other popular trades such as swaps-spread positions”.
• Congestion In the UST Market: “Trading volume in Treasury securities exploded in response to Wednesday’s tariff U-turn, with volume in on-the-run coupons surging to $1.8 trillion in the April 9 TRACE data – nearly three times the daily average volume in the first quarter”…”While this surge once again focused attention on concerns that the market’s intermediation capacity has not kept pace with the growth in the overall Treasury market, Fed officials noted that the market’s infrastructure was ”strained but functioning”".
• Signals from Buyback Results: “The results of last week’s Treasury buyback operations did not appear to indicate an urgent need for an official-sector buyer of last resort at this point”….” We’ll be especially interested to see the results of the Treasury liquidity support operation in the 5- to 7-year nominal sector that is scheduled for this Tuesday”.
• Morning SRF Operations:  “It probably would have been useful if that [morning SRF operations] option had been available to dealers last week – especially during the funding tightness on the morning of April 9. That said, we think the Fed was wise not to rush them back into place on an ad hoc basis last week”.  

FOREX: Broad Greenback Weakness Resumes Amid Equities Rally

• Carryover from the tariff reprieves for key tech products (released late on Friday) has aided sentiment to start the week, with the major equity benchmarks rallying and the greenback trading with an offered tone. This has allowed the USD index edge back below the 100.00 mark, narrowing the gap to Friday’s cycle low at 99.01. 10-year treasury yields are 4bps lower on the session, providing an additional dollar headwind.
• The key mover on the session is the Japanese yen once again. After gapping higher at the open to levels around 144.30, USDJPY has steady sold off, seeing the pair reach as low as 142.24 before stabilising. Price action fell just short of the 142.02 lows from last week. The trend condition remains bearish, and sights are on 141.65 next, the Sep 30 ‘24 low.
• Boosted risk sentiment has provided another boost for NZDUSD, which has risen ~1% Monday. The recovery seems to have boosted by further short covering above 0.5850 and returns to levels last seen in December, just below the 0.5900 mark.
• In tandem, GBP has been another beneficiary as cable approaches the 1.32 handle once more. Overall, with reciprocal tariffs delayed, GBP is rallying well - underscoring GBP's correlation with risk - which looks through only marginal tweaks to monetary policy pricing. Technically, moving average studies remain in a bull mode position that highlights a dominant uptrend. An extension higher would open key resistance and the bull trigger is 1.3207, the Apr 3 high.
• EURUSD has tracked back to the 1.14 handle, however, the pair remains comfortably off the 1.1473 cycle highs. As a reminder, most recent price action has seen EURUSD substantially narrow the gap to 1.1495, the Feb 10 2022 high and a key medium term technical point. Should the volatile price action continue, a Fibonacci projection level at 1.1555 is notable above here. Initial support lies at the 1.1144 breakout level.
• Highlights on Monday will be on central bank speakers, with Fed’s Waller and Harker scheduled.

GBP: Prolonged Tariff Reprieve and Stocks Strength Could See GBP Toward 1.34

• Following Liberation Day, GBP was a standout underperformer, as the UK economy signaled unique exposure to Trump's tariffs given the government's leniency toward countermeasures. The opposite is now true: with reciprocal tariffs delayed, GBP is now rallying well - underscoring GBP's correlation with risk - which looks through only marginal tweaks to monetary policy pricing.
• GBP strength today is accompanied by a further rally in the FTSE-100 (now ~7.5% off lows, but still ~9% off highs), despite the often observed inverse correlation between the two - which serves as a further signal that tariff reprieve and risk-on is the primary driver of this move, rather than a reorientation of BoE pricing for 2025.
• This makes EUR/GBP a key cross ahead. EUR's status as a quasi-safe haven through US-triggered volatility has seen the price hit near 18-month highs and the most technically overbought since 2022. As such, the cross could be subject to a sharper reversal should market jitters around tariffs further recede.
• Technically, moving average studies remain in a bull mode position that highlights a dominant uptrend. An extension higher would open key resistance and the bull trigger is 1.3207, the Apr 3 high.

SCANDIS: Improved Global Risk Sentiment Lends Support To NOK and SEK

Scandi FX outperform the G10 basket this morning, with temporary US tariff reprieve for electronic imports lending support to broader risk sentiment. EURSEK and EURNOK are each ~0.8% lower at typing. 

• Following the recent US tariff inspired market volatility, SEB highlight that "NOK trades at higher implied vols than peers across the smile, with downside protection
  more priced". They go on to note that "risk reversals confirm this, showing a stronger call bias in EURNOK and USDNOK vs SEK pairs".
• In EURSEK, last week’s low at 10.8812 provides initial support, while a close above 11.2000 will be required to signal an extension of the corrective bull cycle that began on April 4.
• Swedish money market participant 5-year ahead CPIF inflation expectations (released this morning) were steady at 2.3% in April, with PES unemployment data due on Wednesday. Main focus will be on tomorrow’s Spring budget bill (0700BST/0800CET), for which SEK11.5bln of expansionary measures have already been announced.
• EURNOK hovers just above the 12.0000 handle, which provides initial support before the prior breakout level of 11.8371 (March 5 high). Last Friday’s high of 12.2223 provides initial resistance.
• Light Norwegian calendar this week, with domestic markets closed from Wednesday afternoon for Easter.

EQUITIES: Pre-Market Surge for Apple Follows Sectoral Reprieve

• Strength in US equity futures has fed well into outperformance for cash European indices this morning. The reprieve for electronics imports from China into the US is the driver here, evident in early strength in the likes of Apple - whose supply chain is now spared from not only the 145% tariffs on China, but also the 10% blanket tariff applied to all other territories.
• As a result, Apple's German listing has rallied near 9%, while their US shares are higher by over 6% pre-market. Similarly, NVIDIA are higher by 3%, Intel by 2.7% and Qualcomm by 2.1%.
• Naturally, the NASDAQ-100 future is leading the bounce - higher by 1.9% to extend the bounce off the low to over 15%. A further 3% rally in the index would erase the Liberation Day sell-off.
• Equity volatility now looks to earnings season this week - (our schedule here: https://mni.marketnews.com/4cnn1GO ). Highlights are:
• Monday: Goldman Sachs
• Tuesday: J&J, Bank of America, Citigroup
• Wednesday: Abbott Labs, Progressive Corp
• Thursday: American Express, Charles Schwab, UnitedHealth, Netflix

EQUITIES: Climb for EuroStoxx50 Highlights Start of Corrective Cycle

A short-term reversal in S&P E-Minis last week highlights the start of what appears to be 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 traded in an extremely volatile manner last week and rallied sharply higher from recent lows. The climb highlights the start of a corrective cycle.

COMMODITIES: Bearish WTI Theme Extends

The trend condition in Gold remains bullish and last week’s rally confirms and reinforces this condition. The yellow metal has 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 last Wednesday's rally is - for now - considered corrective. The move higher is allowing an oversold trend condition to unwind. Recent weakness has resulted in the breach of several important support levels.

Date	GMT/Local	Impact	Country	Event
14/04/2025	1230/0830	**	CA	Wholesale Trade
14/04/2025	1500/1100	**	US	NY Fed Survey of Consumer Expectations
14/04/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
14/04/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
14/04/2025	1700/1300		US	Fed Governor Christopher Waller
14/04/2025	2200/1800		US	Philly Fed's Pat Harker
15/04/2025	2301/0001	*	GB	BRC-KPMG Shop Sales Monitor
14/04/2025	2340/1940		US	Atlanta Fed's Raphael Bostic
15/04/2025	0130/1130		AU	RBA Meeting Minutes
15/04/2025	0600/0700	***	GB	Labour Market Survey
15/04/2025	0645/0845	***	FR	HICP (f)
15/04/2025	0800/1000	**	EU	ECB Bank Lending Survey
15/04/2025	0900/1100	**	EU	Industrial Production
15/04/2025	0900/1100	***	DE	ZEW Current Expectations Index
15/04/2025	0900/1000	**	GB	Gilt Outright Auction Result
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