BONDS: Recent Lows In Gilt/Bund Spread Remain Intact

Large expiry in USDJPY next Monday. 2.61bn are Calls, 1.85bn are Puts.

Of note:

EURUSD 3.02bn at 1.1745/1.1750 (could act as magnet).

USDJPY 1.58bn at 157.00 (wed).

USDCNY 1.24bn at 6.7930 (thu).

USDJPY 4.46bn at 159.00 (mon).

• EURUSD: 1.1700 (1.37bn), 1.1705 (231mln), 1.1715 (266mln), 1.1745 (1.13bn), 1.1750 (1.89bn), 1.1785 (1.5bn), 1.1800 (1.3bn).
• NZDUSD: 0.5950 (240mln).
• AUDNZD: 1.2168 (247mln).

Italian industrial production saw a second monthly increase in March and encouragingly was led by capital and intermediate goods whilst energy production saw a second consecutive fall. Prior weakness still saw soft production in Q1 as a whole albeit with improved momentum heading into Q2. 

• Industrial production saw a solid 0.7% M/M increase in March (0.2% cons) after 0.2% in February (revised up 0.1ppt).
• On monthly drivers, capital goods production increased a strong 2.1% M/M (1.1% Feb), rising further after the large -2.3% M/M drop in January. Intermediate goods saw more modest growth at 0.3% M/M (0.3% prior).
• Offsetting these, consumer goods dropped -0.4% M/M (-0.5% prior), a fourth straight decline, led by durables which saw another sharp drop at -4.2% M/M (-3.7% prior), while consumer nondurables rose slightly 0.1% M/M (-0.1% prior).
• Energy production also fell again at -1.2% M/M, continuing to dampen IP after a sharp -5.4% prior (revised down a notable 0.6ppt).
• Recent momentum remains fairly weak though with 3M/3M IP still down -0.2% 3M/3M (-0.5% prior, which followed threemonths positive, but has not been higher than 0.7% since mid-2022). Consumer goods, particularly durables, dragged down the rate here although weakness was fairly broad-based with only capital goods and energy showing modestly positive 3M/3M growth.
• On an annual basis, IP grew 1.5% Y/Y (WDA), up from 0.4% prior (revised down 0.1ppt). Here, the biggest drivers were transport equipment (11.2% Y/Y), mining and quarrying (6.7% Y/Y) and computers/electronics (6.1% Y/Y). Offsetting these were chemicals (-7.8% Y/Y), electricity/gas/steam/air conditioning (-4.0% Y/Y) and "other manufacturing" (-2.4% Y/Y).
• Eurozone-wide IP is due tomorrow (Wednesday), with consensus currently looking for 0.2% M/M (after 0.4% Feb).

Some cabinet ministers speaking to the press outside 10 Downing Street following a high-profile cabinet meeting. 

• Housing Secretary Steve Reed: "We all intend to get on with our jobs".
• Science, Innovation and Tech Sec Liz Kendall: "The PM has my full support...The Prime Minister talked about the challenges we faced as a country...This Government will do what we were elected to do, which is serving the British people...There is a process to challenge the leader. No one has made that challenge"
• Business and Trade Sec Peter Kyle: "We’ve had a very purposeful cabinet meeting...Nothing has been triggered...We are working hard on the big issues facing the country...Keir is showing steadfast leadership."
• Work and Pensions Secretary Pat McFadden: "The PM is continuing with his job as he should...No one challenged the PM....There were many messages of support."
• All of these ministers are seen as centrists and supporters of Starmer's continued leadership, rather than backers of Health Sec Wes Streeting, or soft left candidates.
• Separate, but clearly set to be of interest to Labour MPs, YouGov has released it first opinion poll carried out in the aftermath of the 7 May local elections:
  • Reform UK: 28% (+3), Conservative: 17% (=), Green: 16% (+1), Labour: 16% (-2), Lib Dem: 13% (-1), SNP: 3% (=), Restore Britain: 3% (-1), 10-11 May. Changes w/ 4-5 May.
• 11% lead for Nigel Farage's right-wing populist Reform UK (the clear 'winners' of the local elections in England) is the largest the party has ever recorded with YouGov.