[True Zoom Finance] April 15 Market Morning Report: Middle East tensions trigger rise in USD and US Treasury bonds; oil and gold prices surge together; China's March exports decline exceeds expectations
"China's exports in March, denominated in US dollars, fell by 7.5% year-on-year, while imports dropped by 1.9%, both significantly worse than market expectations. Hopes that export growth would offset weak domestic demand and drive China's economic growth have been dashed."
Overnight Highlights
l Rising geopolitical risks drove US stocks lower, with the S&P 500 posting its biggest daily drop since late January, led by declines in banking and chip stocks. US Treasury prices rose, pushing yields lower. The US dollar index recorded its biggest weekly gain since September 2022, boosted by safe-haven demand. The euro fell for four consecutive days against the dollar, hitting its lowest level since November last year. Gold prices briefly rose above $2,400 per ounce, setting a new record high and marking the fourth consecutive weekly gain. Brent crude briefly surpassed $92 on Friday amid escalating Middle East tensions. $Hang Seng Index(00HSI.HK)
International News
l US consumer confidence in early April fell more than expected. The preliminary University of Michigan Consumer Sentiment Index dropped to 77.9 from 79.4, the highest level in nearly three years, with a median expectation of 79. Consumers' one-year inflation expectations rose to 3.1%, the highest level so far this year, up from 2.9% the previous month.
l San Francisco Fed President Mary Daly stated that given the strong labor market, robust consumer spending, and slower progress in reducing inflation in recent months, there is no urgency to adjust interest rates at present.
l Boston Fed President Susan Collins reiterated that due to high inflation and labor market resilience, she sees no urgency to cut rates in the near term. Collins noted that inflation data is at the "high end" of expectations and expects inflation to continue slowing, though it may take longer than previously anticipated.
l Kansas City Fed President Jeffrey Schmid said policymakers should wait for "clear and convincing" evidence that inflation will return to 2% before cutting rates, rather than acting preemptively. He added that the resilience of the US economy introduces uncertainty to the policy path and that he prefers patience regarding rate cuts.
l On Saturday night, Iran launched explosive drones and missiles at Israel, marking its first direct attack on Israeli territory. Following the attack, Israeli Prime Minister Netanyahu's war cabinet advocated for a retaliatory strike against Iran.
l Pimco warned that if US inflation rises, the Fed may pivot back to rate hikes. The asset manager favors bonds in other markets, particularly in the UK, Europe, Australia, and Canada, where central banks are more likely to ease policy this year.
l European Central Bank Governing Council member Robert Holzmann said that if price trends remain as they are, the ECB is likely to cut rates in June.
Greater China News
l The State Council issued the "Several Opinions on Strengthening Supervision, Preventing Risks, and Promoting High-Quality Development of the Capital Market," emphasizing strict scrutiny of IPO approvals, urging companies to improve corporate governance, and calling for increased participation of long-term funds in the market.
l China's credit expansion continued to slow in March. The stock of aggregate social financing grew by 8.7% year-on-year, the slowest pace since records began in 2017. New yuan loans in March totaled 3.1 trillion yuan, below economists' forecast of 3.6 trillion yuan, marking the lowest growth since data became available in 2003.
l China's exports in March, denominated in US dollars, fell by 7.5% year-on-year, while imports dropped by 1.9%, both significantly worse than market expectations. Hopes that export growth would offset weak domestic demand and drive China's economic growth have been dashed.
l The Financial Times, hosted by the People's Bank of China, cited unnamed experts on Friday, suggesting that the central bank may include buying and selling government bonds in its policy toolkit in the future.
l Bloomberg: In response to the government's call to support the struggling real estate market, some state-owned banks in China are making every effort to encourage credit managers to approve loans for developers.
l In the first quarter of this year, China's hiring salary levels reversed a three-quarter decline, signaling an improvement in the labor market that could positively impact consumer spending. According to Bloomberg-compiled data from Zhaopin, the average monthly hiring salary for companies in 38 major Chinese cities rose by 2.2% year-on-year to 10,323 yuan, the first increase since early 2023.
l According to Xinhua News Agency, the China Chamber of Commerce for Import and Export of Machinery and Electronic Products urged the European Commission to remain objective, fair, and transparent in its investigation of Chinese electric vehicles, warning that trade remedies would harm all parties. The German Association of the Automotive Industry (VDA) opposed EU tariffs on Chinese EVs, citing risks of a trade war and threats to German jobs.
l The Wall Street Journal: Chinese officials reportedly instructed major telecom operators earlier this year to phase out foreign chips from their network cores by 2027, a move that could impact US chip giants $Intel(INTC.US) and $AMD(AMD.US). Neither company responded.
Commodities and Forex Markets
l Gold rose as much as 1.2% to $2,400.67, while silver hit its highest level since February 2021. Gold prices have risen over 13% this year, surpassing last year's 13% gain. Philip Newman, Managing Director of Metals Focus, said the market feels overextended, which could lead to selling, but any pullback would be brief and a good buying opportunity.
l Due to a bleak economic outlook and the growing popularity of electric vehicles, the International Energy Agency (IEA) lowered its oil demand forecast for this year and expects slower growth in 2025. This contrasts with some global traders who argue that oil consumption is rising sharply. Strong demand is a key factor behind Brent crude's return above $90 per barrel, alongside heightened geopolitical risks and tightening supply.
Earnings and Economic Data Focus
l Eurozone February Industrial Production MoM (Forecast: 0.80%, Previous: -3.20%)
l US March Retail Sales MoM (Forecast: 0.3%, Previous: 0.60%)
l US April New York Fed Manufacturing Index (Forecast: -7.5, Previous: -20.9)
l US April NAHB Housing Market Index (Forecast: 51, Previous: 51)
l US February Business Inventories MoM (Forecast: 0.40%, Previous: 0.00%)
Source: Goldhorse Capital Extramile
Author: Terry Chow
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