MNI US OPEN - Aggressive Risk Sell-Off Continues

EXECUTIVE SUMMARY

• TRUMP REJECTS MARKET ROUT FEARS, SHOWS DEFIANCE ON TARIFFS
• EU FOREIGN AFFAIRS COUNCIL MEETS TO DISCUSS RESPONSE TO US TARIFFS
• JAPAN’S ISHIBA AIMS TO VISIT US TO PITCH BROAD TARIFF DEAL
• CHINA TO ADD POLICY EASING DUE TO TARIFF HEADWINDS

Figure 1: Vol markets see little respite for spot in near future

NEWS

EU (MNI): Foreign Affairs Council Meets to Discuss Response to US Tariffs

The Foreign Affairs Council meets in Luxembourg in its trade format, where ministers will discuss what the Union's response to US President Donald Trump's imposition of market-rattling tariffs on imports should be. Late on 4 April, Trade Commissioner Maros Sefcovic confirmed that he had held talks with US Commerce Secretary Howard Lutnick and USTR Jamieson Greer, posting on X: "A frank 2h exchange w Sec. [Lutnick] and Amb.[Greer]. I was clear: US tariffs are damaging, unjustified. The [EU-US] trade relationship needs a fresh approach. The EU's committed to meaningful negotiations but also prepared to defend our interests. We stay in touch."

EU (MNI): EU to Discuss New Body to Manage Defence Spending

European finance ministers will discuss whether a new intergovernmental institution is needed to coordinate defence spending in Europe when they meet in Warsaw this weekend, according to a letter from Polish Finance Minister Andrzej Domanski. In the letter, the minister said that this may be a more effective approach than the EU's current plan based on national escape clauses from the bloc's fiscal rules and the EUR150 billion SAFE lending facility. The EU-wide approach, he wrote, may fall "short in effectively addressing specific needs and therefore lacking in impact."

GERMANY (MNI): Merz Facing Pressure on Economy & Immigration in Coalition Talks

Reuters reporting comments from chancellor-in-waiting Friedrich Merz regarding the situation in financial markets, calls the situation "dramatic" and it "threatens to get worse, [it is] therefore more urgent than ever to restore international competitiveness...competitiveness must be at the centre of coalition talks." Talks between Merz's centre-right Christian Democratic Union (CDU), its Bavarian sister party the Christian Social Union (CSU), and the centre-left Social Democrats (SPD) on forming a governing coalition continue.

CHINA (MNI): China to Add Policy Easing Due to Tariff Headwinds

MNI (Beijing) China will enhance monetary and fiscal efforts to safeguard the economy from the additional U.S. tariffs that will intensify downward economic pressure, according to a commentary by the People’s Daily on Sunday. Authorities will deploy monetary policy tools, such as reserve requirement ratio (RRR) cuts and interest-rate reductions as needed, while fiscal policy will intensify expenditure and accelerate spending timelines, with fiscal deficits, special-purpose and special treasury bonds retaining flexibility for further expansion depending on circumstances, it reported.

CHINA (MNI): China Hopes American Firms Act Rationally

MNI (Beijing) China hopes American companies can take practical actions and jointly maintain the stability of global supply chains, said Vice Minister of Commerce Ling Ji at a roundtable meeting for U.S.-funded enterprises, according to a statement on the ministry website Monday. China's countermeasures will not only safeguard the legitimate rights and interests of companies, including American ones, but also push the U.S. back to the right track of the multilateral trading system, said Ling.

JAPAN (MNI): BOJ Sees Caution Among Smaller Firm on Wage Hikes

Some Bank of Japan branch managers noted that smaller firms remain cautious about raising wages due to challenging profit conditions, but many also reported plans to implement significant wage hikes more broadly, driven by the intensifying labour shortage, the BOJ's quarterly regional economic report released Monday showed. The report also indicated that price increases continued due to the earlier rise in import costs, with many firms raising retail prices in response to higher rice costs.

DATA

EUROZONE DATA (MNI): EZ Retail Sales Index Slightly Higher Than Expected But M/M Miss

• EUROZONE FEB RETAIL SALES +0.3% M/M, +2.3% Y/Y

Eurozone retail trade volumes in February were two-tenths softer than consensus in M/M terms at 0.3% (vs 0.5% consensus), though January was revised up to flat from -0.3%. Overall these revisions saw the February 2025 index level at 101.7 (versus an unrevised 101.1 in January which was revised up to 101.4) so retail trade volumes were overall a little higher than imputed from both the M/M and Y/Y consensus data. These revisions saw Y/Y volume growth higher than expected at 2.3% Y/Y (vs 1.9% consensus), and above January's upwardly revised value of 1.8% from 1.5%.

GERMANY DATA (MNI): Trade Surplus as Rolling 12m of GDP Decreases in February

• GERMANY FEB TRADE BALANCE E17.7BLN; JAN E16.2BLN
• GERMANY FEB EXPORTS 1.8% M/M; JAN 0.0%
• GERMANY FEB IMPORTS 0.7% M/M; JAN 5.0%

The German trade balance underperformed expectations in February at E17.7bln (seasonally-adjusted, vs E18.5bln cons) but the surplus ticked higher from January (E16.2bln, revised from E16.0bln). The increase came as a 1.8% M/M increase in exports (1.5% cons; 0.0% prior, revised from -2.5%) outpaced a 0.7% M/M uptick in imports (-0.4% cons; 5.0% prior, revised from 1.2%). Revisions to the long-term historical data meant that while the nominal trade numbers appear lower now on the margin and individual M/M prints changed considerably, the overall relative trajectory of trade trends across countries appears little changed, leaving no materially different conclusion on the underlying conclusions from the data.

GERMANY FEB INDUSTRIAL PRODUCTION -1.3% M/M; JAN 2.0% (MNI)

UK DATA (FT): UK House Prices Fall Unexpectedly in March

UK house prices unexpectedly contracted in March as the stamp duty break came to an end, according to the lender Halifax. The average house price fell 0.5 per cent between February and March, following a 0.2 per cent fall in the previous month, taking the average cost to £296,699, data showed on Monday. House prices were up 2.8 per cent from March last year, unchanged from February.

JAPAN DATA (MNI): Japan Feb Real Wage Stays Negative

Japanese inflation-adjusted real wages, a barometer of households' purchasing power, stayed negative in February for the second straight month, down 1.2% vs. -2.8% in January, preliminary data released by the Ministry of Health, Labour and Welfare on Monday showed. The year-on-year rise in total CPI minus imputed rents slowed to 4.3% in February from 4.7% in January. Total cash earnings, or nominal wages, rose 3.1%, accelerating from 1.8% in the prior month, boosted by bonuses. Scheduled earnings rose 1.6% in February against 2.1%, the lowest level since January 2024.

RATINGS: Affirmations on Friday

Sovereign rating reviews of note from after hours on Friday include:

• Fitch affirmed Italy at BBB; Outlook Positive
• Fitch affirmed Slovenia at A; Outlook changed to Positive
• Morningstar DBRS confirmed the United States of America at AAA, Stable Trend

FOREX: Bear Cycle Grips Markets, AUDJPY at a New Low

• The bear cycle for equities continues to grip markets, with no end in sight for the aggressive risk sell-off. European equity markets have dropped a further 5% from the open Monday, with Asia-Pac markets particularly weak. Hong Kong's Hang Seng Index stepped lower by 13% into the close, entering a bear market and shrugging off any support garnered from Chinese state-run institutions openly buying in mainland equity markets.
• With European equities gapping lower at the open, it's no surprise to see JPY getting further support through Asia-Pac trade and maintaining that poise into early Europe. There is little sign that the risk-off trade has bottomed, evident in the new pullback low for AUDJPY at Y86.15 overnight, the lowest print since Mar'23's Y86.06, and 2022 before that.
• NOK/CHF trades similarly, defining both ends of the G10 FX table today, making for a convincing break through the 8.00 handle at the open as the cross becomes another strong indicator of risk.
• Focus turns to the imminent meeting of European leaders in Poland, at which the EU are said to be open to all options for retaliation against Trump's trade measures detailed last week. Options include a raise on levies for US goods headed to Europe, as well as more stringent regulation on big tech firms, and profits earned by US firms on the continent.
• The US President's schedule today consists of a meeting with the Israeli Prime Minister, but any comments concerning tariffs and the sensitivity of global markets will be carefully watched. Fed's Kugler is set to be speaking, commenting on inflation dynamics and the Phillips curve at 1530BST/1030ET.

EGBS: Bunds Off Session Highs as Equities Find Short-term Base

Bund futures have moved away from session highs as European equities find a short-term base, but a risk-off theme remains dominant following US officials’ tough weekend tariff rhetoric.

• Bunds are +125 ticks at 131.77, having pushed through Friday’s 131.48 high. Next resistance is the March 3 high at 132.04, clearance of which would expose key resistance at the Feb 28 high of 132.56.
• Initial support is Friday’s low at 129.78, but pullbacks short of the 20-day EMA at 129.02 will be considered corrective.
• Dovish repricing in ECB rate cut expectations (OIS now price 87bps of easing through year-end) helps EGB curves bull steepen, with Schatz yields down 17bps at typing at 1.657%.
• Sour risk sentiment sees 10-year EGB spreads to Bunds widen notably, with BTPs and GGBs underperforming Bunds by over 10bps on the session.
• This morning’s regional data has not been market moving, with hard data already stale given US tariff developments (German Feb IP weaker than expected, German trade Feb balance narrower than expected, Euro area Feb M/M retail sales weaker than expected).
• However, the more timely April Sentix indicator was much weaker-than-expected at -19.5 (vs -9.0 cons, -2.9 prior).
• Further developments in the tariff complex are the primary focus for the rest of the session.

GILTS: Off Early Highs, Curve Twist Steepens

The pullback from early session highs extends a little further, with equities finding a bit of a base as the initial rounds of Monday risk-off flow linked to heightened trade war worry slow a little.

• Gilt futures printed as high as 94.50, piercing Friday’s peak, before fading back to ~93.50. The contract has since recovered to ~93.80.
• The short-term technical outlook now looks much more bullish.
• A break above session highs would expose the 76.4% retracement of the Dec 3-Jan 13 bear leg (94.75).
• Initial support of note at the Mar 20 high (93.01)
• Yields 8bp lower to 2bp higher, curve twist steepens.
• 2s10s and 5s30s have registered fresh multi-year highs.
• Gilt bulls managed to force a break below the Feb 2 lows in 10s, but the move hasn’t stuck, with the benchmark now ~7bp off session lows, last ~4.43%.
• GBP STIRs move off dovish session extremes.
• BoE-dated OIS now fully discounts a cut at the May meeting, while showing 38.5bp of easing through June, 58bp through August and 85.5bp through year-end.
• ’25 MPC contracts are 2.5-12bp more dovish through year-end. ~93bp of cuts were priced through December at one stage today.
• SONIA futures are off highs but still 1.0-9.5 firmer on the day after most contracts hit the highest levels seen since October.
• Expect macro cues to continue to dominate today, with no meaningful UK event risk scheduled.

EQUITIES: Eurostoxx 50 Sell-Off Deepens, Making Light Work of Technical Levels

Eurostoxx 50 futures remain in a bear cycle following the latest impulsive sell-off. Last week’s move down resulted in a break of 5229.00, the Mar 11 low. Today’s sell-off has resulted in a breach of a key support at 4699.00, the Nov 19 ‘24 low, as well as the 4600.00 handle and 4494.00, the Aug 5 ‘24 low. The contract is oversold, a recovery would allow this condition to unwind. Initial resistance is 4809.00, the Dec 20 ‘24 low (cont). S&P E-Minis continue to trade in a volatile manner and are once again lower, today. A bearish theme remains intact and the latest fresh cycle lows, strengthens current conditions. Scope is seen for an extension towards the 4800.00 handle next. Moving average studies are in a bear-mode position, highlighting a dominant downtrend. Key short-term resistance has been defined at 5837.25, the Mar 25 high.

• Japan's NIKKEI closed lower by 2644 pts or -7.83% at 31136.58 and the TOPIX ended 193.4 pts lower or -7.79% at 2288.66.
• Elsewhere, in China the SHANGHAI closed lower by 245.432 pts or -7.34% at 3096.576 and the HANG SENG ended 3021.51 pts lower or -13.22% at 19828.3.
• Across Europe, Germany's DAX trades lower by 1334.06 pts or -6.46% at 19317.23, FTSE 100 lower by 402.72 pts or -5% at 7653.53, CAC 40 down 462.98 pts or -6.36% at 6814.32 and Euro Stoxx 50 down 316.83 pts or -6.49% at 4564.15.
• Dow Jones mini down 1345 pts or -3.49% at 37202, S&P 500 mini down 185.75 pts or -3.63% at 4926, NASDAQ mini down 697.25 pts or -3.98% at 16846.5.

Time: 10:25 BST

COMMODITIES: Recent Pullback in Gold Considered Corrective For Now

The impulsive sell-off in WTI futures continues to accelerate and last week’s move down resulted in the breach of a number of important support levels. The break reinforces a bearish threat and, despite being in oversold territory, signals scope for a continuation of the bear leg. Sights are on $59.39 next, a Fibonacci projection (pierced). Initial resistance is seen at $64.85, the Mar 5 low and a recent breakout level. The trend condition in Gold remains bullish and the latest pull back - for now - appears corrective. Moving average studies are in a bull-mode position highlighting a dominant uptrend and positive market sentiment. Price has traded through the 20-day EMA. The next key support to watch lies at 2943.78, the 50-day EMA. A resumption of gains would refocus attention on $3196.2, a Fibonacci projection. The bull trigger is 3167.8, the Apr 3 high.

• WTI Crude down $2.54 or -4.1% at $59.5
• Natural Gas down $0.1 or -2.58% at $3.739
• Gold spot down $14.98 or -0.49% at $3023.57
• Copper down $7.65 or -1.74% at $433.5
• Silver up $0.47 or +1.58% at $30.0362
• Platinum down $1.6 or -0.17% at $920.82

Time: 10:25 BST

Date	GMT/Local	Impact	Country	Event
07/04/2025	1430/1030		US	Fed Governor Adriana Kugler
07/04/2025	1430/1030	**	CA	BOC Business Outlook Survey
07/04/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
07/04/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
07/04/2025	1700/1300	*	US	US Treasury Auction Result for Cash Management Bill
07/04/2025	1900/1500	*	US	Consumer Credit
08/04/2025	0500/1400		JP	Economy Watcher's Survey
08/04/2025	0645/0845	*	FR	Foreign Trade
08/04/2025	0900/1000	**	GB	Gilt Outright Auction Result
08/04/2025	0900/1100		EU	ECB's De Guindos At Spanish Banking Association Meeting
08/04/2025	1000/0600	**	US	NFIB Small Business Optimism Index
08/04/2025	1255/0855	**	US	Redbook Retail Sales Index
08/04/2025	1400/1000	*	CA	Ivey PMI
08/04/2025	1400/1600		EU	ECB's Cipollone at ECON Hearing On Digital Euro
08/04/2025	1600/1700		GB	BoE's Lombardelli on 'What can the UK learn from the US'
08/04/2025	1700/1300	***	US	US Note 03 Year Treasury Auction Result
08/04/2025	1800/1400		US	San Francisco Fed's Mary Daly