EM ASIA CREDIT: Tata Steel (TATAIN, NR/BBB/NR) underperformance moderating
Mar-06 03:21
Tata Steel (TATAIN, NR/BBB/NR)
"X-S&PGR: Indian Steelmakers' Downside Scenarios Get Harsher" - BBG
- In summary, S&P is pointing out that U.S. Steel tariffs will divert regional output to India, pushing steel prices lower for Indian mills.
- There may be some offset from lower input costs (e.g. coking coal), but this will not counteract prices declines.
- In all, U.S. Tariffs (25% on Steel imports) starting 12th March, will drive leverage 45% higher in the S&P base case for Indian steel makers.
- We expect U.S. Tariffs will continue to be met with countermeasures from impacted countries, including reciprocal tariffs, and investments to support domestic industries. China stimulus announced yesterday a good example.
- In terms of valuations, we can see in the chart below that the underperformance of the $ TATA 1/28s versus UltraTech Cement 2/31s has somewhat abated in the last couple of days.
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CNH: USD/CNH Back Close To 20-day EMA Support Ahead Of Tariff Deadline
Feb-04 03:11
USD/CNH has been drifting lower, last back near recent lows close to 7.3000. The pair found selling interest above 7.3200 in earlier dealings. This also puts us back close to the 20-day EMA support zone for the pair. At the margin, CNH is outperforming slightly softer trends for the majors against the USD. Some support is likely from the strong Hong Kong equity rise, up close to 3% at this stage, while the HS China Enterprise index is up over 3.6%.
- Focus remains on the upcoming tariff deadline. On Monday, Trump stated talks between the two sides would take place over the next 24 hours, raising hopes of delay in implementation (like Mexico and Canada) received. Trump also remarked they have received great interest in TikTok, (which may also be a factor into part of any deal).
- If we see USD/CNH break down through 7.3000, we have the 50-day EMA in the 7.2860/65 region as the next potential downside target.
US TSY FLOWS: BLOCK - Likely TU/UXY Flattener
Feb-04 02:58
- -6,550 TU at 102-24 1/4
- +2,700 UXT at 111-14+
- Post time 13:16:49, DV01 $240k, flattener trade
JGBS AUCTION: Poll: 10-Year JGB Auction
Feb-04 02:55
*JAPAN 10Y GOVT BOND AUCTION MAY HAVE 99.42 LOWEST PRICE:POLL – BLOOMBERG
