Asia Summary and Highlights 7 April

Asia Session

A catastrophic start for the week with risk asset slumps on realization Trump isn't playing with his "penguin" tariffs. Japanese equity indexes hit a wall first after the circuit breaker is activated on a 7% drop. U.S. major equity indexes are down 3-4% while we wait the Chinese market to be back from holiday. USD/JPY opened sharply lower at 145.52 from Friday' close of 146.8, with a session low at 144.82 and is currently trading at 146.13, briefly closing the opening gap. Japan February labor Cash earning remain strong at 3.1% y/y but that does not seem to catch market participant's attention for now, given tariffs will be negatively affecting BoJ's plan in further tightening.

Major equity indexes are off session low as the Asia session progress. There has not been any positive headlines from the U.S. tariff, thus it only seems to be flow buying. Regional equities index in Hong Kong was once down more than 10% with the Japanese and Chinese equities doing slightly less worse. AUD/USD is down 0.32% from Friday's close but is actively seeking to close the gap at 0.6020, NZD/USD similarly down 0.36% from Friday's close while USD/CAD has closed the much smaller gap and is trading 0.03% lower at 1.4226. Else, EUR/USD have closed the gap and is trading 0.09% higher, GBP/USD still down 0.07%.

North American session

Early on China’s announcement of 34% retaliatory tariffs on the US saw USD/JPY plunge to near 144.50 from near 146.50, and EUR/USD saw a more modest rise back above 1.10. After that it was mostly a picture a rising USD while equities saw another steep plunge, with USD/JPY moving above 147. EUR/USD losses were modest, to near 1.0950, EUR holding up better than GBP. AUD/USD fell sharply, testing 0.60 while USD/CAD rose above 1.42. 

The main news items of the day, non-farm payrolls and a speech by Fed’s Powell, were USD supportive but did not trigger sharp responses. Payrolls were stronger than expected with a 228k increase but with 48k of net negative revisions, while unemployment rose to 4.2% from 4.1%. Average earnings rose by a modest 0.3%, and less before rounding. Powell stated that tariffs were greater than expected and saw risk that a boost to inflation could prove persistent, though the policy path was unclear. Canada saw a weak employment report, employment down 32.6k and unemployment up to 6.7% from 6.6%.