JPY strength continues with BoJ speak in focus, ECB ahead - Newsquawk Europe Market Open

• APAC stocks were mixed as participants second-guessed central bank policies and digested Chinese trade data.
• Fed's Kashkari (non-voter) said he currently thinks there will be two rate cuts for 2024 which could potentially just be one.
• European equity futures indicate a contained open with the Euro Stoxx 50 future -0.1% after the cash market closed up 0.5% on Wednesday.
• In FX, DXY was contained after yesterday's selling, JPY strength has continued with USD/JPY on a 148 handle.
• Looking ahead, highlights include German Industrial Orders, US Challenger Layoffs, International Trade, Initial Jobless Claims, Canadian Trade, Japanese Household Spending, ECB Policy Announcement, BoE Monthly Decision Maker Panel, Comments from ECB President Lagarde, Fed’s Powell & Mester, Supply from Spain, France & US

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US TRADE

EQUITIES

• US stocks were firmer and bonds also gained after soft employment data releases although the major indices closed off their highs with some chunky selling seen in the NY afternoon. Focus was also on Fed Chair Powell's testimony in Congress where he gave the familiar rhetoric and expressed caution on cutting rates too early, but still thinks rates will likely be cut this year and that they are at the peak rate.
• SPX +0.51% at 5,105, NDX +0.67% at 18,018, DJI +0.20% at 38,661, RUT +0.70% at 2,068.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Daly (voter) said policy is in a good place and there is more work to do although she is encouraged that they have been able to bring inflation down with the labour market solid and they are on the path to bringing inflation down as gently as they can. Daly added the Fed is facing a calibration exercise on policy and holding on too long with rates could create an unforced error and hurt the economy, while she is waiting and watching the economy to finetune decision-making.
• Fed's Kashkari (non-voter) said the base case is for no more rate hikes and if inflation is more entrenched than we think, the first thing the Fed would do is hold for longer. Kashkari added that if inflation flares again, that could justify a rate hike and that he currently thinks there will be two rate cuts for 2024 which could potentially just be one.
• Fed Beige Book stated economic activity increased slightly, on balance, since early January as eight districts reported slight to modest growth in activity, while three others reported no change and one district noted a slight softening.
• US House voted 339 to 85 to approve the package of spending bills which extends funding for some federal agencies through to September, while the bill now heads to the Senate, according to CBS News.
• NYCB (NYCB) raised more than USD 1bln in equity in which investors included Liberty Strategic Capital, Hudson Bay Capital and Reverence Capital Partners, according to Bloomberg sources.

APAC TRADE

EQUITIES

• APAC stocks were mixed as participants second-guessed central bank policies and digested Chinese trade data.
• ASX 200 finished higher but with trade choppy after disappointing home loans and trade data from Australia.
• Nikkei 225 initially climbed to a fresh record high but then slumped amid increasing hawkish BoJ speculation.
• Hang Seng and Shanghai Comp. were subdued with heavy losses in WuXi Biologics and Wuxi Apptec after the US Senate's Homeland Security Committee voted to move forward with a bill that could restrict business with Chinese biotech companies, while the mainland was cautious despite the stronger-than-expected Chinese trade data, as the double-digit rise in exports had already been flagged by officials and with data likely to be influenced due to seasonality factors owing to the Lunar New Year holiday.
• US equity futures (ES -0.2%) continued to trickle lower following yesterday's fluctuations.
• European equity futures indicate a contained open with the Euro Stoxx 50 future -0.1% after the cash market closed up 0.5% on Wednesday.

FX

• DXY was rangebound after suffering from soft employment data, while Fed Chair Powell's testimony to Congress largely reiterated the cautious message regarding cutting rates too soon and Kashkari said he thinks there will be two rate cuts in 2024 or potentially just one.
• EUR/USD briefly dipped beneath 1.0900 but held on to most of the prior day's gains ahead of the ECB meeting.
• GBP/USD was choppy after recent indecision and with the Budget announcement ultimately having little sway.
• USD/JPY retreated below 149.00 amid narrower yield differentials, firmer wage data and recent source reports.
• Antipodeans gradually edged higher in the aftermath of the stronger-than-expected Chinese trade data.
• PBoC set USD/CNY mid-point at 7.1002 vs exp. 7.1898 (prev. 7.1016).
• BoC Governor Macklem said they are going to take rate decisions one at a time and the BoC will take their April decision in April when they will have the benefit of more data, according to a Reuters interview.

FIXED INCOME

• 10-year UST futures slightly pulled back following the prior day's bull flattening and recent Fed rhetoric.
• Bund futures remained subdued after recent indecision and briefly dipped below the 133.00 level.
• 10-year JGB futures declined after firmer-than-expected wage data in Japan and recent hawkish-leaning BoJ source reports, while mixed results at the 30yr JGB auction did little to support prices.

COMMODITIES

• Crude futures traded rangebound after retreating from yesterday's peak despite bullish inventory data and a deadly attack by Houthis on a vessel in the Gulf of Aden.
• Spot gold gradually edged higher to extend on its record highs above the USD 2,150/oz level.
• Copper futures were kept afloat but with upside limited amid the mixed risk appetite and despite firmer Chinese trade data.

CRYPTO

• Bitcoin traded indecisively with prices oscillating back and forth of the USD 66,000 level.

NOTABLE ASIA-PAC HEADLINES

• Chinese Foreign Minister Wang Yi said China has maintained continuity and stability of its policy towards the US, while he added that only by respecting and recognising differences can exchanges continue. Wang said they have to point out that the US's wrong perception of China has continued and challenges facing the US are in itself not China, according to Reuters.
• HKMA advised banks to take extra care when lending to property speculators, according to SCMP.
• US Senate's Homeland Security Committee voted to move forward with a bill that could restrict business with Chinese biotech companies like BGI and WuXi AppTec (603259 CH) on national security grounds.
• BoJ Board Member Nakagawa said Japan's economy making steady progress towards the achievement of the price target and given the risks and uncertainties, she would like to gather information without any pre-set idea and make the appropriate monetary policy decision. Nakagawa said if they judge that sustained achievement of price goal foreseen, they will decide whether or not to tweak YCC, risky asset buying and other policy means, while she added the main scenario is that expectations of rising wages will underpin consumer sentiment, but there is risk that real income will undershoot and weigh on demand, economy and prices.
• BoJ Governor Ueda says fully possible to seek exit from stimulus while striving to achieve 2% target, says will mull adjusting easing if they can achieve price target and chance of reaching target is gradually rising. Will consider rolling back massive stimulus programme once positive cycle of wages and inflation is confirmed.

DATA RECAP

• Chinese Trade Balance (USD)(Feb) 125.16B vs. Exp. 103.7B (Prev. 75.34B)
• Chinese Exports YY (USD)(Feb) 7.1% vs. Exp. 1.9% (Prev. 2.3%)
• Chinese Imports YY (USD)(Feb) 3.5% vs. Exp. 1.5% (Prev. 0.2%)
• Chinese Trade Balance YTD (CNY)(Feb) 890.9B (Prev. 540.9B)
• Chinese Exports YTD YY (CNY)(Feb) 10.3% (Prev. 3.8%)
• Chinese Imports YTD YY (CNY)(Feb) 6.7% (Prev. 1.6%)
• Japanese Labour Cash Earnings YY (Jan) 2.0% vs Exp. 1.3% (Prev. 1.0%, Rev. 0.8%)
• Japanese Real Cash Earnings YY (Jan) -0.6% vs Exp. -1.5% (Prev. -1.9%, Rev. -2.0%)
• Australian Trade Balance (AUD)(Jan) 11.0B vs. Exp. 11.5B (Prev. 11.0B)
• Australian Exports MM (Jan) 1.60% (Prev. 1.80%)
• Australian Imports MM (Jan) 1.30% (Prev. 4.80%)
• Australian Home Loans MM (Jan) -3.9% vs Exp. 2.0% (Prev. -4.1%)

GEOPOLITICS

MIDDLE EAST

• Israel Broadcasting Corp. cited sources stating that Washington is pushing for an agreement on a hostage deal in the coming days, according to Al Jazeera. It was separately reported that the US State Department said it still believes that an agreement between Israel and Hamas is possible and obstacles can be overcome.
• US Central Command said an anti-ship ballistic missile was launched from Houthi-controlled areas in Yemen towards M/V True Confidence while transiting through the Gulf of Aden, while the multinational crew reported three fatalities, at least four injuries and significant damage to the ship, according to Reuters.
• US military said it conducted self-defence strikes against two unmanned aerial vehicles in Yemen, according to Reuters.

OTHER

• Chinese Foreign Minister Wang said they resolutely oppose all acts of power and bullying, while it will vigorously safeguard sovereignty, security, and development of the country. Wang commented that maintaining and developing Sino-Russian relations is a strategic choice based on the fundamental interests of both nations and China is willing to work with Russia to foster new drivers of cooperation and consolidate friendship. Furthermore, he stated that Taiwan election results cannot change the historical trend that it will return to the 'motherland' and pro-Taiwan independence forces are the biggest factors undermining peace and stability in the Taiwan Strait.
• North Korean leader Kim inspected military training and ordered an upgrading of war preparations, according to KCNA.