Ahead Today
G3: Eurozone CPI
Asia: China monthly macro data
Market Highlights
Financial markets and risk assets remained buoyant, as markets continued to price in and expect the ceasefire to hold and talks between the US and Iran to resume. In particular, the US and Iran are considering a two-week ceasefire extension to allow more time to negotiate a peace deal, according to reporting by Bloomberg news. With the truce officially due to expire next week, negotiators from both sides are seeking technical talks to overcome the most contentious issues preventing a longer-term agreement, including the reopening of the Strait of Hormuz and the future of Iran’s nuclear program. Meanwhile, there were a number of diplomatic calls among foreign ministers, including a call between Chinese Foreign Minister Wang Yi with his Iranian counterpart Abbas Araghchi, with China calling for maintaining the momentum of ceasefire and negotiations in the Middle East. Overall, we take these developments as positive on the momentum to move towards a peaceful resolution, even as there remains significant left tail risks including how Israel may respond moving forward, and how Iran’s overall political decision making internally will affect the negotiations.
In Asia, the key data is China’s macro data for the month of March, together with 1Q GDP numbers. Consensus is expecting GDP to print at slightly below 55, while some modest softening in both retail sales and industrial production. Overall, we doubt these numbers will overall reinforce the broader market backdrop of outperformance in the Chinese Yuan, range-bound rates with lower near-term probability of PBoC rate cuts for now, coupled with a gradual grind higher in Chinese risk assets as investors and markets continue to price for structural transformation in the technology sector.
Meanwhile, India released its trade data for March which provided an interesting read on the impact of the Middle East conflict on the economy. While the overall trade deficit moderated to US$20bn, this was in part due to seasonal effects, but also driven by lower gold prices and imports. The details suggested an important hit to India’s growth already seen in the 1st month, both through lower imports of energy and petroleum volumes and in particular Liquified Petroleum Gas, while exports to some Middle East countries where we have data moderated meaningfully. In particular, India’s exports to Saudi Arabia fell 46%yoy while exports to the United Arab Emirates fell 62%yoy.