Massive two-way vol continues on trade developments as Trump moves markets with his phone

Asia Market Update: Massive two-way Vol continues on trade developments as Trump moves markets with his phone; Focus on US Mar CPI.

General trend

- Overnight session in NY started badly with China escalating the trade war by raising tariffs on US goods from 35% to 84% from Apr 10th but around lunchtime Pres Trump announced a 90-day reciprocal tariff pause (ex-China), with all other countries’ tariffs set at the minimum 10% level, effective immediately; However, Trump simultaneously raised China tariffs to 125% from 104% after China’s retaliation. The markets exploded higher from near the day’s lows.

- NASDAQ +12%, S&P +9.8%, SMH +17% with Nvdia +19%, Tesla +22% and the rest of the Mag7 +10-16% as well. VIX volatility fell to 35 (spiked to near 60 at beginning of week); USD/JPY shot back up 4 big handles to 148. Bitcoin recovered to $84K and WTI Crude also shot back up to $62 after having collapsed to $55 earlier on the initial China tariff escalation. US 10-Year Treasury yields, which had been on a roller coaster the past few days plunging down to 3.80% then spiking to 4.50% yesterday, fell back to 4.35% during US trading and further down to 4.28% during Asian trading. Fed Fund FUTs now imply just 75bps in cuts this year vs 125bps yesterday.

- Somewhat surprisingly, considering the singling out of China for even higher US tariffs as the rest of the world caught a break, FXI +1% and EWH +3.9% in US after-hours trading prior to the Asian session. Shanghai and Hang Seng up +1% and +2% respectively during Asia cash trading.

- WTO projected that merchandise trade between the US and China could decrease by as much as 80%. [A reminder that 90 minutes ago at midnight ET China’s increased 85% reciprocal tariffs went into effect.]

- As the world watches to see whether the 90-day pause will lead to concrete trade deals, Vietnam confirmed it had started formal trade talks with the US, as Japan sent an initial delegation across to the US, to be followed by Trade Min Akazawa sometime “this month”. ASEAN countries and India also confirmed to engage.

- Nikkei outperformed +8%, most since Aug 6th, 2024, with ASX and Kospi ~+5%; Toyota +11%, Japanese megabanks +12-16% after recent heavy losses, Eurostocks and DAX FUTs +9%

- SK Hynix +13%, TSMC limit up +10%, Foxconn +9.8% with the Taiex index up a record 9.2% and as New Zealand stocks erased all losses since Trump unveiled the tariffs a week ago.

- JP yield curve normalizing at both ends after yesterday's extreme upward move in yields and Monday's move the other way, with Japan 2-year JGB yield +8bps to 0.685% (was 0.54% on Mon), while 30-year JGB yield came back the other way, falling 10.5bps to 2.595% (was 2.75% yesterday). However, note that 5-yr yield later up only 3.5bps after stronger demand at auction.

- Japan PPI outperformed estimates, with Y/Y reaching >4% handle, while China Mar CPI fell again into deflationary territory (food prices falling -1.4%) with China PPI recording its 30th month of negative readings.

- China PBOC set the Yuan reference rate at a weaker rate for the sixth straight session, however, offshore Yuan was steady at ~7.35, well off the record low of 1.43 earlier in the week.

- Japan’s PM nominated former Mitsubishi Corp CFO Kazuyuki Masu for the BOJ board to replace Toyoaki Nakamura (dove). Nakamura was a firm dove on the Board, opposed to the BOJ’s recent interest rate hikes and the end of negative interest rates, while Masu is a business exec and may be relatively hawkish in comparison.

- In the US, House Speaker Johnson (R) pulled any vote on the GOP budget resolution, making it impossible for any dissenter to file disapproval resolutions on tariffs through Sept 30.

- US equity FUTs -2.5% during Asian trading.

Looking ahead (Asian-weighted news, on Asian time zone)

- Thu Apr 10th (Thu night US Mar CPI).

- Fri Apr 11th NZ Mar Biz PMI, (Fri night CN Mar New Yuan Loans, US Mar PPI, US Apr Michigan Consumer Sentiment).

- Sat Apr 13th CN Trade Balance.

Holidays in Asia this week

- Mon Apr 7th Indonesia, Thailand, Vietnam.

- Wed Apr 9th Philippines.

- Thu Apr 10th India.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +1.3% at 7,474.

- New Zealand S&P50 index +3.8%, would be best day since late Mar 2020.

- Australia Apr Consumer Inflation Expectation Survey: 4.2% v 3.6% prior.

- Australia ‘snubs’ China call to unite against the Trump tariffs; cites comments made by the Australian Defense Min Marles - SCMP.

- Australia sells A$100M v A$100M indicated in 0.25% Nov 2032 Indexed Bonds: Avg Yield 2.1062% v 2.1017% prior: bid-to-cover: 3.20x v 3.87x prior.

- Australia's CFR (coordinating financial regulator): Financial system seen as strong and resilient; monitoring developments in financial system [overnight update].

- New Zealand Fin Min Willis: RBNZ has 'plenty' of room to cut rates if needed - comments in parliament.

- New Zealand PM Luxon to visit UK for trade talks with Starmer later this month [overnight update].

China/Hong Kong

- Hang Seng opens +2.7% at 20,810; Shanghai Composite opens +1.3% at 3,227.

- CHINA MAR CPI Y/Y: -0.1% V 0.0%E; PPI Y/Y: -2.5% v -2.3%e (30th month of negative readings).

- China's leaders said to meet on 'stimulus' in response to Trump's tariff bump - financial press.

- People’s Daily: ‘Win-Win’ and mutually beneficial US trade ties cannot be ‘distorted’; trade and economic cooperation between the 2 countries has brought 'tremendous' economic benefits to both sides.

- China Securities Daily: "It’s time for China to cut RRR, Interest Rates".

- China Q1 demand 'rebounded' on investment and consumption - China Securities Times.

- (US) WTO on US and China trade tensions: Prelim projections suggest that merchandise trade between the economies could decrease by as much as 80% (overnight update).

- Bill Ackman: China is now 'isolated', the other US partners are 'lining up' to make deals - financial press.

- (UR) Reportedly more than 150 Chinese citizens have joined Russian army in Ukrainian conflict - WSJ citing Ukrainian intelligence report (overnight update).

- China PBoC said to ask State lenders to cut USD purchases for their proprietary accounts (overnight update).

- China releases white paper on US-China trade relations that reiterates stance about 'fighting to end' on tariffs; China has 'abundant' means for countermeasures against US [overnight update].

- China Premier Li: Reiterates desire to expand domestic demand.

- CHINA RAISES TARIFFS ON US GOODS FROM 34% TO 84%; Effective Apr 10th [00:01 ET April 9th / 04:01 GMT] [overnight update].

- China Mar Preliminary Retail Passenger Vehicle Sales M/M: +14.0% v -22.8% prior – PCA [overnight update].

- (US) US Pres Trump expected to sign EO on US shipbuilding to reduce China's dominance on the global shipping industry - press (overnight update).

- (PA) US Sec of Defense Hegseth: The Panama Canal is key terrain that must be secured by Panama with the US, not China; Canal will be 'first and free' for US and Panamanian vessels (overnight update).

- CHINA PBOC SETS YUAN REFERENCE RATE: 7.2092 V 7.2066 PRIOR (Sixth straight weaker fix, weakest since Sept 11th, 2023).

- China PBOC Open Market Operation (OMO): Injects CNY66B in 7-day reverse repos; Net drains CNY158B v drains CNY111B prior.

Japan

- Nikkei 225 opens +1.9% at 32,322.

- Japan Mar PPI (domestic CGPI) M/M: 0.4% v 0.2%e; Y/Y: 4.2% v 3.9%e.

- Japan Mar Bank Lending Y/Y: 2.8% v 3.0% prior.

- Japan Mar Tokyo Avg Office Vacancies: 3.9% v 3.9% prior.

- Japan releases weekly flows data [period ended Apr 4th]: Foreign buying of Japan equities: +¥1.81T v -¥449.8B prior; Japan buying of foreign bonds: -¥2.57T v -¥5.9B prior.

- Japan PM nominates former Mitsubishi Corp CFO Kazuyuki Masu for the BOJ board, would replace Toyoaki Nakamura (dove); [term is due to end on Jun 30th, 2025].

- Japan Trade Ministry Official: Will consider action on China steel imports, if any unfair practices are found under WTO rules.

- Japan 2-year JGB yield +8bps to 0.685% while 30-year JGB yield falls 10.5bps to 2.595%.

- Japan Fin Min Kato: Sees US tariff pause as a positive development - financial press.

- Japan Economy Minister Akazawa: To visit US 'this month' for US tariff talks [time frame uncertain].

- Japan Chief Cabinet Sec Hayashi: Reiterates to watch market moves with 'high sense of urgency'; affirms not true the government is drafting an extra budget.

- US Steel: Trump: Don't want US Steel to be sold to Japan (X shares -11% after hours).

- Japan Top FX Diplomat Mimura: Held 3-party talks in response to Trump tariffs; discussed unstable markets with BOJ and FSA [overnight update].

- Japan Govt reportedly considering cash handouts of ¥40-50K to cushion the blow from Trump tariffs – press [overnight update].

Korea

- Kospi opens +4.4% at 2,395.

- South Korea's Top Envoy met with USTR Greer to lower tariff rates on South Korea.

Other Asia

- (US) Philippine Cab Sec Go: ASEAN nations to engage in trade dialogue with US to 'explore solutions'; Each nation to also continue bilateral talks with the US - financial press.

- Philippines Econ Affairs Min: Reached out to USTR to discuss tariffs; Best possible outcome of negotiations is a Free Trade Agreement with the US - financial press.

- India Govt Official; Deadline to complete first segment of US trade talks remains Autumn 2025, but would want to do it quickly - financial press.

- Thailand Fin Min Pichai; Considering limiting the short selling of stocks on the SET100 index - financial press.

- Taiwan Central Bank (CBC) Gov Yang Chin-Long: Uncertainty for equity markets remain 'high' on Trump tariffs; We will continue to hold US Treasuries - commentary to Taiwan lawmakers.

- Vietnam confirms to launch trade agreement talks with the US - press.

- Thailand Dep Fin Min: Govt plans measures to help agricultural sector and those affected by US tariffs [overnight update].

- Taiwan Central Bank (CBC): US tariffs to limit GDP and export growth; will make timely adjustments to monetary policy [overnight update].

North America

- (US) House Speaker Johnson (R): Chamber is pulling vote on GOP budget resolution [ This makes it impossible for anyone to file disapproval resolutions on tariffs through Sept 30.].

- (US) Fed's Kashkari (non-voter): Things have changed dramatically this afternoon; There'll be a little less of an impact on inflation if the tariff pause endures; Uncertainty could still cause an economic downturn.

- (US) Fed's Bowman (voter, hawk): Will rely on tailored approach to bank regulation.

- *(US) US Pres Trump: Authorizes a 90 day reciprocal tariff pause (ex-China); Tariffs set to the minimum 10% level, effective immediately; Raises China tariffs to 125% from 104% after retaliation - Truth Social.

- (US) Treasury Sec Bessent: Countries who didn't retaliate against tariffs will be rewarded; Confirms tariff increase on China due to escalation; Mexico and Canada included in universal 10% tariff; April 2nd was ceiling for reciprocal tariffs, today represents the 10% floor.

- (US) Announcement may come as soon as today on formal US tariff negotiations with Japan, Vietnam and possibly UK - Fox's Gasparino in X post.

- (US) MBA Mortgage Applications w/e Apr 4th: +20.0% v -1.6% prior (1st rise in 4 weeks).

- (US) Treasury Sec Bessent: China's new 84% tariff is 'unfortunate'; Escalation is 'a loser for them'; Expect bond markets to calm down,seeing normal deleveraging in bond market; Seeing nothing systemic in markets - comments from Fox Business.

- (US) PRESIDENT TRUMP: THIS IS A GREAT TIME TO MOVE YOUR COMPANY INTO THE UNITED STATES OF AMERICA.

- (US) Pres Trump: 'Republicans, it is more important now, than ever, that we pass THE ONE, BIG, BEAUTIFUL BILL. The USA will Soar like never before!!!' - Truth Social post.

- (MX) Mexico Mar CPI M/M: 0.3% v 0.3%e; Y/Y: 3.8% v 3.8%e.

- (US) Fed's Daly: Have time and space to deliberate next moves - LinkedIn post.

- (US) DOE CRUDE: +2.5M V +2ME; GASOLINE: -1.6M V -1ME; DISTILLATE: -3.5M V +0.5ME.

- (US) US Pres Trump: BE COOL! Everything is going to work out well. The USA will be bigger and better than ever before! - Truth post.

- (US) Fed's Musalem (voter): Expect economic growth this year materially below estimated 2% trend; See higher inflation risk.

- (US) TREASURY'S $39B 10-YEAR NOTE REOPENING DRAWS 4.435% V 4.310% PRIOR; BID-TO-COVER RATIO: 2.67 V 2.59 PRIOR AND 2.57 OVER LAST 8 REOPENINGS.

Europe

- (UK) Mar RICS House Price Balance: 2% v 8%e.

- (EU) ECB's Holzmann (Austria): Do not see reason for rate cut at this time; best strategy waiting if uncertainty is this high.

-(EU) EU Trade Commissioner Sefcovic reportedly discussed parameters to lower tariffs with US - press.

-(EU) Germany CDU leader Merz: We need common EU response to US and China's tariff policies; Message to Pres Trump is that Germany will fulfill its obligations on defense and strengthen its competitiveness.

Levels as of 00:20 ET

- Nikkei 225 +8.5%, ASX 200 +4.6%, Hang Seng +2.4; Shanghai Composite +1.1%; Kospi +6.1%.

- Equity S&P500 Futures -0.7%; Nasdaq100 -1.3%; DAX +7.5%; FTSE100 +5.3%.

- EUR 1.0943-1.0989; JPY 146.50-147.82; AUD 0.6117-0.6188; NZD 0.5629-0.5697.

- Gold +2.1% at $3,144/oz; Crude Oil -1.0% at $61.77/bbl; Copper -0.8%% at $4.4343/lb.