Futures Drop, Dollar Rises With Most Global Markets Still Closed

With much of Asia and Europe still closed for Easter Monday, US stock futures, already painfully illiquid, were trading in a narrow range for much of the session, before losing all of their post-payrolls gains as investors assessed the path of Federal Reserve monetary policy following Friday’s jobs report. Contracts on the S&P 500 dipped 0.2% at 7:30am while Nasdaq 100 futures dipped 0.4% as the dollar spiked to session highs on the back of yen weakness following the latest comments from the BOJ’s new head Ueda.

In premarket trading, Tesla edged lower after the electric car-maker again marked down all of its vehicles in the US as first-quarter price tweaks helped to yield an incremental sales gain.Pioneer Natural stock gained 7.2% in premarket trading after the Wall Street Journal reported that oil giant Exxon Mobil has held preliminary talks over a possible acquisition of the fracking company. Here are some other notable premarket movers:

• Tupperware shares decline 7.9% after the company said on Friday that it has engaged financial advisers to help improve its capital structure and remediate doubts about ability to continue as a going concern.
• Shares of Apple and its PC maker peers may be active after data from IDC show a tough start to the year for the industry that’s still grappling with a glut of unsold inventory. Watch Apple, HP and Dell.
• Micron Technology advanced 6.5% in US premarket trading after rival Samsung Electronics said Friday it would cut memory chip production.
• Capital One Financial Corp. shares are lower by 4.1% in premarket trading after Walmart Inc. sued to end their credit-card partnership, in a move that analysts said wouldn’t be likely to meaningfully impact COF’s earnings per share.
• Arrival surges as much as 80% premarket on Monday after announcing that it has entered into business combination agreement with Kensington Capital Acquisition to advance US commercialization plans.
• AudioCodes tumbles 15% in premarket trading after the communications equipment company said revenue for 1Q is anticipated to be lower than previously estimated internally when the company provided guidance for the year in February.
• Block slips 1.2% in premarket trading after Keefe, Bruyette & Woods analyst Steven Kwok cut the recommendation to market perform from outperform, citing a “growing number of risks” for the firm.

Last Friday, the BLS reported that US payrolls rose at a firm pace, just beating expectations, in March with the unemployment rate dropping again near record lows. Bond traders are betting that the Fed probably has one more interest-rate hike to go in this tightening cycle as the economy shows resilience, despite recent banking turmoil. Traders’ next focus will be on Wednesday’s consumer price index reading to assess whether the Fed is managing to tame inflation. Treasury Secretary Janet Yellen told AFP that she anticipates the US economy will growth and the labor market will remain strong as inflation comes down.

“The Fed will still see the need for further cooling in the labor market,” Win Thin, global head of currency strategy at Brown Brothers Harriman, wrote in a research note. “This week’s CPI and PPI data are likely to underscore the fact that inflation remains stubbornly high and so we look for the hawkish tilt in Fed comments to continue.”

Traders are also looking ahead to earnings season, which officially kicks off on Friday when JPMorgan Chase & Co. and Citigroup report results. “Stocks have benefited from expectations of an end of the hiking cycle and the advent of rapid rate cuts in the second half and into 2024, so they could be disappointed,” said Rajeev De Mello, a global macro portfolio manager at GAMA Asset Management SA. “However, investor positioning in stocks seem to be very cautious and while data has been weakening, it doesn’t signal a hard recession.”

With most European markets closed for Easter, attention instead turned to Asia where stocks edged higher in holiday-thinned trading as investors assessed the outlook for Federal Reserve policy in the wake of key US jobs data. The MSCI Asia Pacific Index rose 0.2%, driven by gains in materials and technology shares. South Korea’s Kospi was among the top-performing regional benchmarks, on the back of a rally in stocks tied to electric vehicles. China’s onshore equities edged lower, while Hong Kong and Australia were among markets shut for holidays.

Japanese stocks climbed, boosted by the marine transport sector and Nintendo shares.  The Topix Index rose 0.6% to close at 1,976.53, while the Nikkei advanced 0.4% to 27,633.66. Nintendo Co. contributed the most to the Topix Index gain, increasing 4% after The Super Mario Bros. Movie marked the biggest opening weekend for a film so far this year. Of 2,158 stocks in the index, 1,578 rose and 473 fell, while 107 were unchanged.

Stocks in Asia have traded in a narrow range so far this month as uncertainty over global interest rates, China’s economic recovery and possible recessions in advanced economies keeps risk appetite in check. US payrolls rose at a firm pace last month, data showed Friday, paving the way for the Fed to increase interest rates at its next meeting in early May. “For the Asian equity market, the direction searching journey won’t get any easier ahead,”  said Hebe Chen, a market analyst at IG. “Instead, the ‘glass half-full’ sentiment is poised to bake into more divided and fragile risk appetite.” Geopolitical issues are another reason for investor caution amid a technology trade standoff between Beijing and Washington. China held two days of military drills around Taiwan, with multiple exercises involving aircraft and ships on Sunday, after the island’s president, Tsai Ing-wen, returned from a visit to the US.

Most stocks in India advanced on Monday, led by an extension of rally in real estate companies, buoyed by the local central bank’s surprise pause on rate hikes last week. The S&P BSE Sensex rose as much as 0.5% before closing little changed at 59,846.51 in Mumbai, while the NSE Nifty 50 Index advanced 0.1%. Gauges of small- and mid-sized companies gained 0.2% and 0.4%, respectively.  Broader markets in India have now gained for six consecutive sessions, helping trim their yearly losses. Investors will now be shifting focus to start of earnings season later this week.  Tata Consultancy Services contributed the most to the Sensex’s gain, increasing 1.3%. Out of 30 shares in the Sensex index, 17 rose, while 13 fell

In rates, treasuries hold small gains as trading resumes in US, with most European markets closed, erasing a portion of Friday’s curve-flattening selloff sparked by robust March jobs data during a shortened session.  Yields are lower led by 2-year, down ~4.5bp at 3.935%; it climbed 15bp Friday as swap contracts referencing Fed’s policy rate upgraded the odds of another quarter-point rate increase next month to about three in four.

In FX, the dollar gained after trading unchanged for much of the session; the yen came under mild selling pressure after Kazuo Ueda refrained from sending any hawkish signals in his first comments after taking over as governor of the Bank of Japan. In his inaugural speech, Ueda says he’ll do all he can to ensure stability in prices and the financial system and that the current monetary easing is very powerful; while the BOJ could review policy in the long term, it’s appropriate to continue with yield curve control framework for now. USD/JPY traded 0.5% higher at 132.85, versus 131.83-132.80 day range. The currency was initially lower versus the dollar on increased expectations for another Federal Reserve rate hike before erasing losses amid thin flows ahead of Ueda’s inaugural speech.

In commodities, oil was little changed while gold rebounded after dipping below $2,000 an ounce.

Monday’s event calendars are light, however this week includes March CPI report and minutes of the Fed’s March policy meeting on Wednesday, as well as auctions of 3- and 10-year notes and 30-year bonds over the next three days.

Market Wrap

• S&P 500 futures down 0.2% at 4,124
• MXAP up 0.2% to 161.71
• MXAPJ up 0.2% to 523.49
• Nikkei up 0.4% to 27,633.66
• Topix up 0.6% to 1,976.53
• Hang Seng Index up 0.3% to 20,331.20
• Shanghai Composite down 0.4% to 3,315.36
• Sensex up 0.1% to 59,904.57
• Australia S&P/ASX 200 down 0.3% to 7,218.98
• Kospi up 0.9% to 2,512.08
• Brent Futures little changed at $85.14/bbl
• Gold spot down 0.4% to $1,999.06
• US Dollar Index little changed at 102.02

Top Overnight News

• China’s financial sector is reeling from a series of new corruption probes and a surge in surprise audits of venture funds, as President Xi Jinping sharpens his focus on an industry he sees as failing to serve the broader economy. FT
• State oil giant Saudi Aramco will supply full crude contract volumes loading in May to several North Asian buyers despite its pledge to cut output by 500,000 barrels per day. RTRS
• A US Navy destroyer conducted “freedom of navigation” operations in the South China Sea near the Spratly Islands in a show of force as China holds military exercises around Taiwan. The drills are on par with the reaction last year after Nancy Pelosi visited the island, Taiwan said. BBG
• Apple PC shipments plunged 41% last quarter, an IDC tracker shows. Lenovo and Dell’s dropped more than 30% each. HP’s fell 24.2%. BBG
• Russia begins evacuating people from territory it controls in southern Ukraine ahead of a major offensive from the Ukraine army expected to start in the coming weeks. NYT
• Saudi Arabia’s production cut may not have as large an impact on markets as some think as countries outside OPEC+ ramp output. WSJ
• Food costs for households are surging despite a drop in food raw material expense as packaged goods firms aggressively hike prices. WSJ
• TSLA cut prices in the United States between 2% and nearly 6%, its website showed on Thursday, as the company extends a discount drive on its electric vehicles that analysts caution could hurt profitability. RTRS
• First Republic Bank, beset by concerns over loan values and deposit flight, said in a regulatory filing that it will suspend payments of quarterly cash dividends on its preferred stock. WSJ
• US bank lending contracted by the most on record in the last two weeks of March, indicating a tightening of credit conditions in the wake of several high-profile bank collapses that risks damaging the economy. Commercial bank lending dropped nearly $105 billion in the two weeks ended March 29, the most in Federal Reserve data back to 1973. The more than $45 billion decrease in the latest week was primarily due to a a drop in loans by small banks. BBG

US Event Calendar

• 10:00: Feb. Wholesale Trade Sales MoM, est. 0.6%, prior 1.0%, revised 0.9%
• 10:00: Feb. Wholesale Inventories MoM, est. 0.2%, prior 0.2%