JGBS: Futures Sharply Higher, Risk Off Following Trump Tariff Details
In post-Tokyo trade, JGB futures closed sharply higher, +33 compared to settlement levels, after the US 2- and 10-year yields finished 2bps and 4bps lower respectively following US President Trump’s announcement on reciprocal tariffs. US tsys had been grinding cheaper going into the announcement but reversed direction to finish modestly richer.
- As early Asia Pac trading gets underway there is a strong risk off tone, as markets digest the announcement. Broadly the universal tariff of 10% on all US imports was lower than feared, but the reciprocal tariff levels for some regions/countries were notably higher. For China it was 34%, which came on top of the existing 20% tariff level. The EU's reciprocal tariff was 20%, while Japan's was 24%.
- Treasury Secretary Bessent, in a Fox News interview, stated that the U.S. is on a stable trajectory and closely watching China's response to recent policies. He warned that retaliation from other countries could lead to escalation. Russia is excluded from the tariff list due to existing sanctions.
- US equity futures have slumped, with US Tsy futures (TYM5) spiking as high as 112-24+ in early Asia-Pac dealings. It is currently 112-16, +1-00 from closing levels on Wednesday.
- Today, the local calendar will see Weekly International Investment Flow and Jibun Bank Composite & Services PMIs data alongside 10-year supply.
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MNI: MNI JAPAN JAN JOBLESS RATE AT 2.5%, UNCHANGED FROM DEC
- MNI JAPAN JAN JOBLESS RATE AT 2.5%, UNCHANGED FROM DEC
LNG: European Gas Prices Rise On Fading Ukraine Peace Hopes
Natural gas prices were higher on Monday with Europe rising 3.3% to EUR 45.77 off the intraday low of EUR 44.50. The market rallied as peace in Ukraine and the resultant easing of sanctions against Russia became more elusive after the weekend’s developments. Europe is formulating a plan but a lasting truce appears a long way off with President Zelensky saying that the end to the war is “far away”. The outlook remains very uncertain.
- Europe has become more reliant on LNG imports since Russia invaded Ukraine in 2022 and while the US administration is considering ways to ease sanctions on Russia, Europe is only likely to tighten them. Pipeline flows through Ukraine will also remain halted. Thus Europe will continue to compete with other regions for global supplies. LNG imports rose 14% last month, according to Bloomberg.
- The weather had been milder in February but there could be a colder shift later in March.
- US natural gas rose 8.6% to $4.165 on forecasts for lower temperatures in the western US over the first half of March, while the east will generally have above-average temperatures.
- North Asian prices followed Europe higher as the two regions compete for supplies. However, demand from China appears softer.
AUSSIE 10-YEAR TECHS: (H5) Nears First Resistance
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.685/851 - High Feb 7 / High Dec 11
- PRICE: 95.655 @ 16:20 GMT Mar 3
- SUP 1: 95.300 - Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.549 - 1.0% 10-dma envelope
Aussie 10-yr futures are maintaining the bounce, pushing prices closer toward first resistance. For bulls, a confirmed reversal and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
