AUSSIE BONDS: Richer Despite Risk-On, PBoC Eases, US-CH Trade Talks

Markets continue to be hit by the ongoing trade-related pullback in risk appetite, although some have begun to stabilise at lower levels due to selling fatigue and profit taking, including risk-sensitive AUD and oil prices. US equity futures are down sharply but also off their intraday lows and yields are trending higher. Some Asian countries have said today that they will take steps to stabilise markets if needed and Japan has said it will speak with the US.

• Equities are lower across the region with the TAIEX (-9.6%), it was closed Thursday/Friday, and Hang Seng underperforming (-8.6%). The KOSPI is down 4.6% but 1.6% off today’s low.
• The S&P e-mini is down 2.7% but earlier it was 5.4% lower. The Nasdaq is 3.5% weaker. following -6.2%.
• The USD index continues to benefit from risk aversion and is up 0.3% after 1.0% on Friday. While US Treasury yields are below Friday’s close, they have begun to trend higher again.
• AUDUSD fell to 0.5933 earlier but hasn’t been able to hold breaks below 60c and is currently around 0.6016 to be down 0.4% today. Australian bond yields are lower today but off today’s low.
• Risk-averse yen and Swiss franc continue to benefit from the current market mood with USDJPY down 0.2% to 146.65 and USDCHF -0.3% to 0.8578.
• Commodities are pressured by concerns that increased trade protectionism will weigh on global growth and thus demand. WTI crude is down 2.8% today to $60.26 but off the earlier low of $59.38. Copper is now 0.4% higher, while iron ore is approaching $101/t after falling briefly below $99/t.
• Later the Fed’s Kugler speaks on inflation and the ECB’s Cipollone appears. US February consumer credit, German February trade/IP, February euro area retail sales and Canadian BoC business survey print.

MNI discusses the impact of U.S. tariffs on the Australian economy. 
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Fossil fuel prices have been hit hard by the imposition of significant tariffs on US imports and China’s retaliation as concerns rise sharply that they will materially impact the global economy and demand for energy. The announcement has coincided with the end of the heating season and the start of the shoulder season before cooling demand increases.

• European gas prices fell 6.8% on Friday to EUR 36.55 off the intraday low of $35.15. They are down 10.1% so far in April.
• Regulations that European gas storage needs to be at 90% on November 1, introduced when Russia invaded Ukraine, are to be extended by two years. The EU parliament will vote on the extension in May. There has been speculation that some flexibility to this rule will be allowed in 2025 given the lower-than-usual level at the end of the heating season and higher futures prices over the spring/summer which penalises refilling purchases.
• European storage was at around 34% full last week, below the 5-year seasonal average of 45%, according to Bloomberg.
• US gas was down 7.6% to $3.94, close to the intraday low, on growth concerns following President Trump’s tariff announcement. It has started this week’s trading falling a further 1.6% to $3.88 but it is off its trough of $3.79 earlier. Below average storage levels and a forecasted cooler start to April have been unable to support prices.
• The US was the world’s largest LNG exporter in 2024 and so the impact of US protectionism and China’s retaliation on global energy demand is also pressuring US gas prices. China targeted US LNG imports with its response to the first 10% tariff earlier this year.
• Trade-related global growth concerns also weighed on Asian gas prices on Friday. Lower prices may attract bargain hunters though ahead of the northern summer. China’s gas use has been weak this year and it has increased its own production and pipeline flows from Russia.