Focus on ECB rate decision – TSMC earnings beat

EU mid-market update: Focus on ECB rate decision; TSMC earnings beat; New OpenAI models deliver unprecedented. 

Notes/observations

- Trade jitters persist as a drag on risk appetite, even after President Trump hailed “big progress” in Tokyo talks – granting Japan’s Economy Minister Akazawa a 50-minute tête-à-tête before a 75-minute full-team session and penciling in an April follow-up. UK and South Korea are next in the White House crosshairs, with India and the UK (deal possible “in three weeks”) also high on the agenda.

- Fed Chair Powell’s hawkish tone yesterday added to investor caution, noting inflationary effects of tariffs may be more persistent and so far, larger-than-expected tariffs likely mean higher inflation with slower growth.

- All eyes now turn to today’s ECB rate decision, Lagarde’s press conference and Italian PM Meloni visit to White House to meet with Trump.

- Euro under slight pressure amid recent rally and dovish ECB tilt. Commerzbank flags further cuts as likely, given subdued inflation and cheap-goods inflows. Spot gold lower as traders locking in profits ahead of the long Easter break.

- TSMC Q1 results beat estimates, with Q2 guidance well above consensus. Notes sticking with FY25 guidance ‘despite’ tariffs; Key European earnings from Hermes, Siemens Energy, Sainsburys and Pernod Ricard.

- Asia closed higher with Hang Seng outperforming +1.8%. EU indices -0.3% to -0.8%. US futures +0.7-0.9%. Gold -0.7%, DXY +0.2%; Commodity: Brent +0.8%, WTI +0.9%; Crypto: BTC +0.9%, ETH +1.6%.

Asia

- Bank of Korea (BOK) left the 7-day Repo Rate unchanged at 2.75% (as expected).

- BOK Gov Rhee post-rate decision press conference noted that the decision to keep policy steady was not unanimous (dissenter sought 25bps cut). All of the 6 board members are open to rate cut in the next 3 months.

- Australia Mar Employment Change: +32.2K v +40.0Ke; Unemployment Rate: 4.1% v 4.2%e.

- New Zealand Q1 CPI Q/Q: 0.9% v 0.8%e; Y/Y: 2.5% v 2.4%e.

- Japan Mar Trade Balance: ¥544.1B v ¥464.9Be; Exports Y/Y: 3.9% v 4.4%e; Imports Y/Y: 2.0% v 3.1%e.

- Singapore Mar Non-Oil Domestic Exports Y/Y: 5.4% v 11.9%e; Electronic Exports Y/Y: 11.9% v 6.9% prior.

- China Mar Swift Global Payments (CNY): 4.1% v 4.3% prior.

- Japan PM Ishiba noted that Econ Min Akazawa reported to him regarding 'constructive talks' held with the US. Japan urged a swift mutual trade solution during talks and sought the best solution ASAP for both countries. PM added that talks would not be easy going forward. Agreed to hold 2nd meeting this month.

- Japan's Econ Revitalization Min Akazawa stated that had trade talks with Pres Trump, Bessent, Lutnick, Greer. US side wants a deal within the 90 day period. Confirmed did not discuss Forex at the meeting; Reiterated FX should reflect fundamentals.

- China NDRC cuts retail fuel prices for both gasoline and diesel by most since Nov 2018.

Americas

- Fed Chair Powell noted that inflationary effects of tariffs might be more persistent. Larger-than-expected tariffs likely means higher inflation and slower growth. Policies were still evolving, and their effects on the economy remained highly uncertain. As we learn more, we would continue to update our assessment.

- Fed's Schmid stated that needed to be patient in regard to outlook of interest rates and would react to disruptions that might affect mandates.

- US Feb Total Net TIC Flows: +$284.7B v -$46.6 prior; Net Long-term TIC Flows: +$112.0B v -$42.2B prior (**Note: Foreign Holdings of Treasuries rose by $290B to $8.82T in Feb).

Energy

- US Treasury issued new Iran-related sanctions targeting oil tankers; Added seven entities to sanction list. US placed sanctions on Chinese refinery over Iran oil purchases, Shandong Shengxing Chemical accused of buying crude.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 -0.56% at 504.26, FTSE -0.78% at 8,210.90, DAX -0.32% at 21,248.00, CAC-40 -0.40% at 7,293.44, IBEX-35 -0.45% at 12,878.02, FTSE MIB -0.40% at 35,922.00, SMI -0.18% at 11,541.30, S&P 500 Futures +0.78%].

Market focal points/key themes: European indices opened generally lower and remained in the red through the early part of the session; lack of progress in trade negotiations seen weighing on risk appetite; most nordic bourses closed for holidays; among sectors managing gains are energy and industrials; sectors inclined to te downside include consumer discretionary and materials; luxury subsector dragged after Hermes sales miss; industrials and DAX seeing some support after Siemens raised guidance; focus on ECB rate decision later in the day; earnings expected in the upcoming US session include UnitedHealth, KeyCorp, Netflix and L’Oreal.

Equities

- Consumer discretionary: Hermes [RMS.FR] -2.0% (Q1 results; April trends), Moncler [MONC.IT] -2.0% (Q1 results), Deliveroo [ROO.UK] +1.5% (Q1 results).

- Consumer staples: J.Sainsbury [SBRY.UK] +3.5% (earnings), Pernod Ricard [RI.FR] -0.5% (Q3 results; earnings call comments) - Energy: Siemens Energy [ENR.DE] +11.5% (prelim Q2 results - post close).

- Financials: UBS [UBSG.CH] +1.0% (Keefe Bruyette raised to market perform) - Healthcare: GSK [GSK.UK] +1.0% (5-in-1 meningococcal vaccine Penmenvy receives positive recommendation from US Advisory Committee on Immunization Practices), Evotec [EVT.DE] +6.5% (FY24 results), Novo Nordisk [NOVOB.DK] -1.0% (analyst downgrade), Biomerieux [BIM.FR] -6.5% (Q1 results).

- Industrials: ABB [ABBN.CH] +1.5% (to spin off unit), Forvia [EO.FR] +4.5% (Q1 results, affirms guidance).

- Technology: ASML [ASML.NL] -1.5% (TSMC earnings and guidance; Alphawave IP omits guidance due to tariff uncertainty).

- Materials: BHP Group [BHP.UK] +0.5% (production).

Speakers

- Bank of England Bank Quarterly Liabilites/Credit Conditions Surveys.

- China Commerce Ministry (MOFCOM) reiterated stance that was open to negotiations with US in economic and trade areas. Willing to expand 'mutual opening up' with Europe.

- Thailand Central Bank (BOT) Member Sakkapop stated that US tariff to hit Thai exports from sectoral shocks with impact seen in H2.

- Japan Fin Min Kato stated that Japan and US finance leaders would ‘closely communicate’ on FX; Shared common understanding on FX.

Currencies/fixed income

- USD price action was steady in quiet trade on Thursday. The Dollar recent spate of weakness took a pause as market participants weighed the latest US trade developments and remarks from Fed Chair Powell.

- EUR/USD steady around 1.1370 as focus was on the upcoming ECB rate decision. The central bank was widely anticipated to continue its easing and deliver a 25bps rate cut.

- GBP/USD probed the 1.3240 area.

- USD/JPY tested around 143.00.

- 10-year German Bund yield at 2.53% and 10-year Gilt yield at 4.62%. 10-year Treasury yield at 4.32%.

Economic data

- (NL) Netherlands Mar Unemployment Rate: 3.9% v 3.8%e.

- (DE) Germany Mar PPI M/M: -0.7% v -0.1%e; Y/Y: -0.2% v +0.4%e.

- (CH) Swiss Mar Trade Balance (CHF): 6.4B v 4.7B prior; Real Exports M/M: 3.2% v 3.9% prior; Real Imports M/M: 4.5% v 3.7% prior; Watch Exports Y/Y: +1.5% v -8.2% prior.

- (HU) Hungary Feb Average Gross Wages Y/Y: 9.2% v 10.2%e.

Fixed income issuance

- (FR) France Debt Agency (AFT) sold total €11.991B vs. €10.0-12.0B indicated range in 2028, 2031 and 2032 Bonds.

- Sold €3.596B in 2.40% Sept 2028 Oat; Avg Yield: 2.32% v 2.59% prior, bid-to-cover: 3.43x v 3.49x prior (Mar 20th 2025).

- Sold €4.396B in new 2.70% Feb 2031 Oat; Avg Yield: 2.73%; bid-to-cover: 3.15x.

- Sold €3.999B in 2.00% Nov 2032 Oat; Avg Yield: 2.98% v 2.77% prior; Bid-to-cover: 3.56x v 2.68x prior.

Looking ahead

- (EG) Egypt Central Bank (CBE) Interest Rate Decision: Expected to cut Deposit Rate by 75bps to 26.50%.

- (US) Early close for US markets.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (IN) India to sell combined INR300B in 2031, 2054, 2074 bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 05:50 (FR) France Debt Agency (AFT) to sell €1.5-2.0B in inflation-linked 2034, 2036, 2039 and 2053 Bonds (Oatei).

- 06:00 (PT) Portugal Mar PPI M/M: No est v 0.3% prior; Y/Y: No est v -0.4% prior.

- 06:00 (UK) DMO to sell £5.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £3.0B respectively).

- 6:00 (RO) Romania to sell RON800M in 12-month Bills.

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave One-Week Repo Rate unchanged at 42.50%.

- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to raise Key Rate by 50bps to 16.00%.

- 08:00 (BR) Brazil CONAB Sugarcane Production.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:15 (EU) ECB Interest Rate Decision: Expected to cut Key Rates by 25bps; Expected to cut Deposit Rate by 25bps to 2.25%; Expected to cut Main 7-Day Refinancing Rate by 25bps to 2.40%; Expected to cut Marginal Lending Facility by 25bps to 2.65%.

- 08:30 (US) Mar Housing Starts: 1.420Me v 1.501M prior; Building Permits: 1.450Me v 1.459M prior; Housing Starts M/M: -5.4%e v +11.2% prior; Preliminary Building Permits M/M: -0.6%e v -1.0% prior.

- 08:30 (US) Apr Philadelphia Fed Business Outlook: 2.2e v 12.5 prior.

- 08:30 (US) Initial Jobless Claims: 225Ke v 223K prior; Continuing Claims: 1.87Me v 1.850M prior.

- 08:30 (CA) Canada Feb Int'l Securities Transaction (CAD)s: No est v 7.91B prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:45 (EU) ECB Chief Lagarde post rate decision press conference.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 11th: No est v $658B prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 13:00 (US) Treasury to sell 5-year TIPS.

- 13:00 (US) Baker Hughes Rig Count.

- 19:30 (JP) Japan Mar National CPI Y/Y: 3.7%e v 3.7% prior; CPI (Ex Fresh Food) Y/Y: 3.2%e v 3.0% prior; CPI (Ex Fresh Food, Energy) Y/Y: 2.9%e v 2.6% prior.

- 22:00 (KR) South Korea to sell KRW1.6T in Bonds.

- 23:30 (JP) Japan to sell 3-Month Bills.