Inflation in Japan slowed to 2.6% y/y in March, down from 2.8% in February. Core inflation also decelerated, slowing to 2.9% y/y. The slump in the Japanese yen in the last few months is likely to keep the cost of imported goods high, particularly for imported food, but services costs rose by just 2.1% which the central bank has highlighted as a sector it wants to avoid seeing prices slow too much. The Bank of Japan has only just started its path to normalizing monetary policy, moving away from negative interest rates at its March meeting.
Initial jobless claims in the US rose by less than markets had been expecting in the week ending April 13. New unemployment insurance claims rose to 212k from 211k while continuing claims in the prior week dropped to 1.812m from 1.817m. Both metrics performed better than markets had been expecting. Elsewhere in the US, existing home sales dropped to 4.2m in March from 4.4m in February.
Today’s Economic Data and Events
- 10:00 UK retail sales Mar: forecast 0.3% m/m
Fixed Income
- US Treasuries were lower overnight but have surged higher in early trade today as markets respond to news that explosions have been reported at sites in Iran. Yields on the 2yr UST are down almost 10bps in trading today while the 10yr UST yield has fallen almost 12bps as investors seek haven assets. JGBs are also trading stronger in early trade today.
- Overnight, emerging market bonds had traded positively with a broad USD-index moving higher. In local currency markets, Turkey 10yr bonds traded a little softer while South African 10yrs.
FX
- The US dollar was stronger overnight despite no material data catalyst. The Euro dropped 0.3% to 1.0643 while GBPUSD fell by 0.1% to 1.2436. Japanese yen traded lower overnight but has since pulled those losses back and USDJPY is down about 0.6% this morning as investors seek out haven assets.
- Commodity currencies had a mixed close overnight with the Canadian dollar reporting some strength while both the Aussie and Kiwi were lower. However, all are selling off in early trading today.
Equities
- Equity markets closed mixed overnight with a moderate gain on the Dow Jones offset by declines in the S&P 500 and NASDAQ. European markets were positive across geographies with the FTSE up by 0.4% while the EuroStoxx added 0.5%.
- Asian markets have started to sell off substantially with the Nikkei down more than 3.3% and the Hang Seng lower by 1.5%.
- Equity markets in the UAE had a strong close yesterday with the DFM up 0.8% and the ADX rallying by 0.3%. The Tadawul also closed higher, up 0.3%.
Commodities
- Oil prices were relatively muted overnight but have surged in trading today on reports of explosions in Iran. Brent futures have added 3.7% to push back to USD 90/b while WTI is up nearly 4% to USD 85.93/b. Markets are responding to news flow, rather than any interruption to supply or production at this time.
- Gold prices have also popped higher, up more than 1% in trading so far today. Currently gold is trading near USD, 2,400/oz and is pulling the rest of the precious metals complex higher.