Stocks, Dollar and Bonds end the quarter on a high amid month-end flows

The text discusses inflation data from the US and Europe, and oil production data from Russia. The US data shows falling prices, while the European data shows slightly higher prices. The Russian data shows little change in production.


The dollar is up. Crude oil is up.


Fed's Williams prioritizes the fight against inflation; Fed's Collins states that a weaker NFP is unlikely to affect monpol outlook. Chicago PMI was above expectations, but still below average. Mixed Chinese PMIs. Chinese cybersecurity review of MU.


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As month-and-quarter-end flows took hold, stocks, bonds and the Dollar grew in volume as Friday's close approached. Fed pricing moved slightly more dovish following the Core PCE data for February coming in below street expectations. This added weight to the duration bid at month's end. The Chicago PMI data surprised with a rise. Meanwhile, the Uni of Michigan Consumer Survey was revised down, along with the short-term expectations of inflation (3.6%, from 3.8%). However, the longer-term measure showed a slight increase (2.9%, from 2.8%). Collins, a non-voter, said that the PCE data was in line with what the Fed had expected. Williams, a Fed vote, put greater emphasis on bringing inflation down rather than the recent bank turmoil. The disinflation story was reinforced by the EU's flash inflation figures coming in weak, and the Chinese PMIs showing disappointing manufacturing numbers, but solid services. Metals, precious and industrial, fell due to the Dollar's bid. Oil prices, however, managed to make a respectable gain ahead of OPEC, which is expected to be np.


Williams (voter).

In his first prepared remarks since mid-Feb he said that data would drive the monetary outlook, even though the economic outlook was uncertain. The NY Fed President is confident that the Fed can get inflation to 2% and expects it to drop to 3.25 percent this year. Williams believes that the unemployment rate will rise to about 4.5%. Williams stated in a Q&A that inflation was the Fed's biggest problem and the Fed must lower prices pressures. He also expressed his confidence in banking sector resilience. The NY Fed President concluded by saying that Fed rate increases have shifted monetary policy to a "slightly restricting" position.

Collins (non-voter).

She spoke again on Friday, after making extensive remarks on the previous day. While she reiterated much of her position, she told Bloomberg TV that she was not impressed with the PCE data for February, but she is still optimistic about the fight against inflation. Collins also said in separate remarks made to Reuters that a weaker jobs report for March is unlikely to affect monetary policy and welcomed the decline of stigma associated with using US central bank lending facilities.



Core PCE in the US rose by 4.6% YoY in February. This is a slight decrease from the +4.7% expected for January. The M/M data was also cool. It rose by 0.3%, compared to the 0.5% that had been revised downwards and less than the +0.4% expected. It is a good sign that the Fed's preferred inflation method shows signs of slowing down. The rise in personal income above expectations was primarily due to increased compensation, mostly wages and salaries. The report stated that both private wages and salary for service-producing industries as well as government wages and salary increased. Collins, Fed's Collins, said on Bloomberg, that the data was as she had expected and does not alter her view. Her view is in line with median expectations of one more rate hike this year, before rates are held through the end of the year. Markets are at odds against Fed guidance, pricing in c. 40bps cuts by year's end, despite FOMC looking to hike rates one more time this year.


The headline Uni of Michigan survey for March has been revised down to 62.0, from 63.4. This is below the consensus figure of 63.2 for the first four-month period. The current and forward-looking conditions have been revised down to 59.2 from 63.4 (previous). The 1yr expectation for inflation has been reduced to a more encouraging 3.6% (prev. Oxford Economics says, "while there isn't a strong correlation between consumer sentiments and consumer spending in the short-term, a pessimistic attitude by consumers is consistent with our belief that consumer spending momentum will soon lose its momentum." When the economy is nearing an inflection, confidence is key.


The headline for March is a small increase, but the rise in aircraft orders at the end of the year may have been the reason. Oxford Economics states that despite the fact that the headline is consistent with a manufacturing recession, there are few signs in the regional Fed surveys of a rebound in China's PMIs. It could be just a matter of lags but we are increasingly concerned that the impact on domestic capital spending due to tighter credit will counteract any external boost China's reopening may have. The consultancy expects a decline in the Manufacturing Index of the Institute for Supply Management and is preparing for a potentially grim few months.


The official NBS PMI data showed that the non-manufacturing indicator rose to its highest level since 2011, at 58.2 from 56.3, above the expected 55.0%. Manufacturing index eased to 51.9 (from 52.6), a little higher than the expected 51.5%. This helped the composite index rise to 57.0 (also highest since 2011) from 56.4. The weak global manufacturing environment weighed down the manufacturing index, analysts said. However, the consumer spending rebound in the services sector and fiscal policy helped to support the construction sector. Capital Economics stated that "this strength will not be sustained indefinitely." With the dismantling of virus restrictions already over and the policy likely to become less accommodating, the recovery may moderate in the coming months.

Fixed Income


Treasuries rose at month's end on the back of book squaring, which was further accentuated by Core PCE data that were softer.

At settlement, the 2s were -4.7bps, the 3s were -6.6bps, the 5s were -6.9bps, and 7s had a -6.6bps, while 10s, -7.4bps, were at 3.477%. The 20s, -8.5bps, at 3.805%; 30s, -7.9bps, at 3.667%.

Inflation breakevens

The 5yr BEI is flat at 2.385%. The 10yr BEI is down 1.0bps to 2.337%. And the 30yr BEI is down 3.4bps to 2.226%.


The T-Notes were slightly lower in the APAC morning and on Friday's European morning. Mixed Chinese PMIs (strong manufacturing, weak services) and strong UK GDP data have capped any initial strength before quarter-end. Before the EU's flash inflation data, which was softer than expected (HICP 6.9% vs. previous 8.5%), the contracts reached session lows. The government's buying spree was triggered by the 7.1% inflation rate and previous 8.5 percent. US Core PCE data showed a surprising fall (Y/Y from +4.7%). However, on an absolute level, inflation is still uncomfortably elevated. The UoM final reading was revised downward, which supported the bid for duration. However, the drop in consumer inflation expectations over the next year was offset by the slight increase in the longer term gauge. Treasury bids extended as Europe closed for the week. Month-end and quarter-end flows were the focus, with T-Notes gaining ground all the way to settlement.



SR3H3 -1bps at 95.125, M3 -2.5bps at 95.12, U3 -0.5bps at 95.395, Z3 +2bps at 95.70, H4 +5.5bps at 96.10, M4 +7bps at 96.445, U4 +7.5bps at 96.72, Z4 +8bps at 96.885, H5 +8bps at 96.975, H6 +8bps at 97.08.

As of 30 March, SOFR was at 4.82% (prev. Volumes at USD 1.319tln, SOFR 4.82% as of March 30th (prev. 1.287tln).

Demand for NY Fed RRP Ops at USD 2,375tln. (Prev. The NY Fed RRP op demand is USD 2.375tln (prev. 102).

US EFFR is 4.83% (prev. Volumes at USD 95bln, EFFR of the US at 4.83% (prev. 97bln).



The oil prices rose on Friday, in a session with little catalyst, and ended the week in positive territory, but not by enough to stop the 5th consecutive monthly loss.

Oil was not very reactive, but the Core PCE data, which showed a slight decline for both M/M as well as Y/Y was the main macro-event. Bloomberg reported that Russia's March oil data showed no sign of the promised output reduction. This led to a brief (but significant) dip in crude prices. On Wednesday, Reuters reported that Russian crude oil production had fallen by 300k BPD during the first three weeks of March, to 9.78mln BPD. This was part of Russia’s targeted production reductions of around 500k BPD per day on average until June. On Monday, OPEC's Joint Meeting of the Ministers of Petroleum (with no change expected) will be held. Manufacturing ISM and Services are also scheduled for later this week.


Reuters reports that Hungary's MOL will pay Ukrtransnafta from May for the Russian oil transit through Ukraine via section of Druzhba Pipeline. Ukrtransnaft will increase the Druzhba Oil Transit Fee via Ukraine in May.


Angola, Iraq and Reuters OPEC survey show that oil production in March fell 70k BPD compared to February. Members bound by quotas met 173% of their pledged reductions in March (compared to 169% in Feb). In March, the output target was missed by 930k BPD (compared to 990k BPD).


The total number of rigs decreased by 3 in the week ended 31st march. This was due to a decline in oil rigs from 592 to 592, and a decrease in natgas from 160 to 160.



: SPX +1.44% at 4,109, NDX +1.68% at 13,181, DJIA +1.26% at 33,274, RUT +1.93% at 1,802.


Consumer discretionary +2.62%; Real Estate +2.18%; Communication Services +2.08%; Materials +1.57% Technology +1.47% Industrials +1.31% Financials +1.15% Health +1.112% Consumer Staples (+0.83%); Utilities (0.76%); Energy (0.63%).


: EURO STOXX 50 +0.69% at 4,315, FTSE 100 +0.15% at 7,631, DAX 40 +0.69% at 15,628, CAC 40 +0.81% at 7,322, FTSE MIB +0.34% at 27,113, IBEX 35 +0.28% at 9,232, SMI +0.58% at 11,095.


China's cyberspace regulator has implemented a review of cybersecurity on

Micron's (MU)

Products in China. In response, MU stated that it is committed to the security of its products. It is also aware of China's review and fully cooperating.

Virgin Orbit (VORB)

CNBC reported that the company will cease operations in the near future, after failing to secure funding. It will lay off about 85% of its employees.

Tesla (TSLA),

Musk is planning to visit China in April and his team is reportedly making preparations to meet Premier Li.

Nikola (NKLA).

The company announced that it would be issuing USD 100mln in common stocks. It intends to use net proceeds from the offering for working capital, and general corporate purposes.

Generac Holdings GNRC

Bank of America's guidance for FY23 is a bit off-target, given the pressure on its residential segment.

Apple (AAPL),

The company won an appeal against the decision of Britain's antitrust regulator to investigate its mobile browser.

Warner Bros. Discovery (WBD), Warner Bros.

According to the Financial Times, Sony Music has scaled back its music sales as bids have fallen short. (Had hoped to get as much as USD $2bln).

JetBlue (JBLU),

From acquiring

Spirit (SAVE).



Yen saves Dollar and SARB rescues Rand


The Yen may have been the only thing that stopped the Buck from going further down, but that's a fairly accurate assessment in DXY terms. The index was almost destined to continue its downward slide from the 105.880 y-t -d peak (set on March 8), through 102.000, to the m-t -d low of last week, just below the round number. However, it was held up by 102.040-103.230 as Usd/Jpy recovered from 129.65 on March 24, and a base around 130.40 this week, to 133.59 on Friday. The Yen's fortunes have changed dramatically since the start of the first quarter, when the demand for repatriation increases due to the fiscal year-end in Japan. Japanese importers, especially those who deal with Tokyo fixes, were more active than usual this time around. Other buy orders were referred to as "special" and attributed to M&A or funding to invest in US assets that will be used starting in early April. Jpy crosses have also risen, perhaps due to the perception that the BoJ is likely to remain the only major Central Bank in the world to pursue ultra-easy policies, while its peers pause or approach terminal rates. Fed Chair Powell referred to the latest dot plots, which indicated a final 25-bp hike, before peaking, at a meeting in private. The FOMC, now more dependent on data, may be convinced to stop tightening earlier rather than later, given that core PCE prices were lower than expected for February, and final UoM expectations of inflation over the next year have been revised downward. The current price for May is pointing towards a 1/4 point increase. However, there are still plenty of macro releases left, such as the ISMs, and the NFP in the next week.


  • The Euro's strength was bolstered by hawkish ECB sounds, as reported in source reports and via GC members, but also a deeper retracement of EGBs. This saw the German Bund yield for 10 years top 2.40%, while at the opposite end, it was just under 2.13%, as the conditions in the financial and banking sector stabilized. Five banks in Paris and the surrounding area were raided as part of an investigation into tax fraud. From a technical standpoint, Eur/Jpy gained were countered or capped by Eur/Usd, which formed a double top just a few pip below the apex on March 23 (1.0930). Eurozone data, meanwhile, was a mixed bag.