GERMAN DATA: VDMA Machinery Data Underpins Strong March Factory Orders Print
VDMA machinery orders printed +4% Y/Y in March, bringing in Q1 orders in the sector at +4% Y/Y, also. This was the first quarter since Q1'22 with an incline on the yearly rate. VDMA sees an inflection point for foreign orders but does flag uncertainty about the further trajectory there - "particularly with regard to the USA's tariff policy and possible countermeasures".
- "The weakening domestic business (minus 3 per cent) was offset by a 6 per cent increase in foreign orders", VDMA comments.
- The machinery print will have underpinned the overall factory orders print, which came in at +3.6% M/M this morning. Overall, the industrial sector in Germany appears to have seen a comparatively strong end of Q1.
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FOREX: Vols Show Markets See Little Respite for Spot in Near Future
- 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.
- The breakout in implied vols strongly suggests markets see little respite for spot forward. G10 3m vol is comfortably clearing to multi-year highs across many markets (see chart below) -
- While spot may have settled somewhat over the past hour or so, pre-market trade in single stocks is set to begin imminently - and another significant phase of weakness is expected for mega-cap names - which could keep risk on the backfoot.
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EGBS: 10-year BTP/Bund Spread On Track For Largst 1-day Rise Since SVB Collapse
The 10-year BTP/Bund spread is just off intraday widest levels as European equities find a short-term base, but remains almost 11bps wider today at ~130bps. Heavy risk-off price action following the US administration’s tough weekend tariff rhetoric has favoured the safe-haven of Bunds, with heightened uncertainty around the near-term outlook also disincentivising carry vehicles such as BTPs.
- A close at current levels for BTP/Bund would be the highest since the US election result in early November, with the spread on track for the largest 1-day increase since March 2023 (around the time of the SVB collapse).
- GGBs also widen ~11bps on the session to ~95bps, narrowing the gap to the psychological 100bp handle.
- Over the weekend, Politico reported that the Spanish and Italian economy ministers are pushing for a negotiation-centred EU response to US tariffs, but France and Germany continue to favour for a more forceful retaliation.
- A reminder that Spain announced a E14bln fiscal package to mitigate the impact of US tariffs last week. The 10-year SPGB/Bund spread is 7bps wider at 76bps at typing.
