From Marc Chandler at Bannockburn Global Forex:
Overview: Macron's victory in the first round of the French presidential contest lifted the euro, which is resilient to the broader greenback gains scored on the back of the continued rise in yields. The US 10-year yield is up around five basis points to 2.75% after increasing by more than 30 bp last week. European yields are higher, but the euro-sensitive Germany-Italy spread has narrowed by almost seven basis points. Japan's benchmark is nearing the 0.25% cap and China's premium briefly switched to a discount for the first time since 2010. The dollar rose to new highs against the yen, reaching almost JPY125.45. Central European currencies are being pulled higher by the euro, but most emerging market currencies are weaker. Equities are heavy. In the Asia Pacific, the Hang Seng and China's CSI 300 is off 3% in a sea of red. Australia was a notable exception, eking out a small gain for the second consecutive session. Europe's Stoxx 600 is giving back half of last week's 0.6% gain, while US futures are softer.
The rising yields have not sapped gold, which is knocking on $1960. Concerns about weakening Chinese demand as it struggled to get the pandemic under control are keeping oil on the defensive. May WTI is off 2.5% near $95.75 It remains in the range set last Thursday roughly $94-$99. OPEC and the IEA update their forecasts tomorrow and Wednesday. US natgas is higher. Last week, it gained nearly 9.8%, in its fourth weekly advance for a cumulative increase of about 33%. European natgas benchmark is lower after falling 6.6% last week. Iron ore is off for a fifth session. It is down 2% after falling almost 4% last week. May copper is paring last week's 1% gain. July wheat is extending the pre-weekend gain of 3.2% and is at its highest level in around two and a half weeks.
Asia Pacific
Shanghai's lockdown and economic disruption overshadows much of China's economic news. Still, it reported a rise in March CPI to 1.5% from 0.9%. A surge in the price of vegetables narrowed the drop in food prices to -1.5% from -3.9%. Non-food prices rose by 2%. Excluding food and energy prices, China's core CPI was steady at 1.1%. China reported the fifth consecutive monthly slowing of PPI. It eased to 8.3% from 8.8%, a little less than expected.
Separately, China reported a surge in lending last month. New yuan loans from the banks rose CNY3.13 trillion, well above expected, and a multiple of the CNY1.23 trillion in February. Aggregate financing, which includes shadow banking activity, jumped by CNY4.65 trillion from CNY1.19 trillion. This was about a third more than expected. The three-month average of CNY4.0 trillion may be the largest on record. Unlike in the US and Europe in the Great Financial Crisis, Chinese bank lending has continued, which is seen as a cushion for the economy.Before the weekend, India's central bank signaled a shift in priorities that could lead to a rate hike later this year. First, it dropped the reference to maintaining an accommodative stance. Second, it lifted the floor of its liquidity adjustment facility to the standing deposit facility of 3.75% rather than the reverse repo rate of 3.35%. Third, the RBI lifted its CPI forecast to 5.7% from 4.5%. It shaved its GDP forecast to a still robust 7.2% from 7.8%. India reports March CPI tomorrow. The median forecast in Bloomberg's survey calls for an acceleration to 6.35% from 6.07% in February. Biden and Modi hold a video call today ahead of high-level meeting later between the US Secretaries of State and Defense and their Indian counterparts. India is part of the Quad and an important bulwark against the expansion of China. However, it also has had longstanding military ties with Russia and has been cautioned about helping Russia evade the sanctions....
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