Asia market update: Asia session kicks off with Israel-Iran headlines spiking WTI oil amid general risk-off; Session then settled into regular trade, bonds and currency considerations.
General trend
– Oil spiked 2% at the start of the Asia session on CNN reporting that Israel reportedly planning to strike Iranian nuclear facilities; US govt sources stressed it is Not clear that Israel has made a final decision. Gold retraced back to the $3300/oz level across the session. Bitcoin broke through its multi-month price ceiling to ~$107.5K [all time high in Jan of ~$110K.
– Japanese Yen kept up its now 8-day grind higher against the dollar (ever since the USD break out on the US-CN trade truce), breaking 143 against the dollar for the first time in 2 weeks. JPY/USD +0.4% with today’s move coming against broad dollar weakness as Swiss Franc outperformed +0.7%.
– 30 year US FUTS -0.4%, with all US assets weak; (bonds, stocks, USD); Comes amid further reporting that House Republicans are said to be closing in on a higher SALT Cap – perhaps as much as $40K.
– Nikkei underperformed, the only major Asian index to lose ground amid a stronger Yen. Kospi and Hang Seng +0.9%.
– With Japan facing lack of market demand at the long end of the yield issuance, the BOJ is still having to support the market. In the May 19th sale of ¥1T 20-year JGBs, the average yield jumped 15 basis points to 2.453%, its highest reading since 2000. At the same time, the 30-year yield climbed to its loftiest level since its 1999 debut, underlining that even the deepest segments of Japan’s curve are no longer immune to repricing. Half of long-term JGBs are owned by the BOJ, yet at its regular meeting with bond market participants, some urged the BOJ to buy yet more super-long JGBs.
– In closely watched Japan-US trade developments overnight, reports that Japan seriously considering accepting US tariff reduction rather than exceptions, as trade rep Akazawa gets ready to visit US again during May, potentially as soon as this Friday along with the ministerial delegation. Reports of Nissan & Ford collaboration, and Japan pension fund [GPIF] buying private equity stake in the US.
– Japanese April trade deficit worse than expected, both for nominal and adjusted basis. Similar to last month’s China trade figures, reductions in Japanese exports to China and US (likely due to US tariffs) were made up for by an increase in exports to Asia.
– New Zealand unexpectedly registered a large budget surplus for April – only the fourth monthly surplus over NZ$1B, with the NZ Stats Agency commenting the last two were in 2020 and two out of the four were also in April months, Dairy and fruit industry seasons contributed to this most recent high, with Milk powder the largest contributor, reaching $1.0B, +32% y/y.
– South Korea May 1-20 Days Exports were down y/y, led by reductions in autos -6.3% y/y, and auto parts -10.7% y/y.
– Taiwan April export orders also much better than expected.
– Japan’s Upper House approved ex-Mitsubishi Corp CFO Kazuyuki Masu to join the BOJ board (replacing dove Toyoaki Nakamura at end-Jun).
– Reminder Indonesia Rate Decision tonight.
– US equity FUTs -0.4% during Asian trading.
Looking ahead (Asian-weighted releases, using Asian time zone)
– Thu May 22nd Global Flash PMIs, NZ budget.
– Fri May 23rd Japan Apr CPI.
Holidays in Asia this week
– No holidays in Asia this week.
Headlines/economic data
Australia/New Zealand
– ASX 200 opens +0.2% at 8,362.
– Australia Apr Westpac Leading Index M/M: -0.01% v -0.15% prior.
– Australia sells A$1.2B vs. A$1.2B indicated in 4.25% Dec 2035 bonds; Avg Yield: 4.255% v 4.4535% prior; bid-to-cover: 3.10x v 3.53x prior.
– New Zealand Apr Trade Balance (NZD): 1.4B v 0.8B prior.
– Fonterra Global Dairy Trade Auction Dairy Trade price index: -0.9% v +4.6% prior [overnight update].
China/Hong Kong
– Hang Seng opens +0.2% at 23,736; Shanghai Composite opens flat at 3,380.
– Morgan Stanley raises China 2025 GDP forecast to 4.5%.
– China press sees additional cuts in the loan prime rates (LPRs) – US financial press.
– Huawei: Reports that China ‘threatening’ legal action against enforcers of US Huawei restrictions against the Co’s AI chips – financial press.
– US Dept of Commerce confirmed battery raw materials imported from China receive unfair subsidies – Press [update].
– China Commerce Ministry (MOFCOM): To strengthen oil and gas trade with Saudi Arabia [overnight update].
– China Pres Xi: Calls for stabilization to counter uncertainties; need to resolve risks in key areas [overnight update].
– Hong Kong Apr Unemployment Rate: 3.4% v 3.2%e [overnight update].
– China PBOC sets Yuan reference rate: 7.1937 v 7.1931 prior.
– China PBOC Open Market Operation (OMO): Injects CNY157B in 7-day reverse repos; Net injects CNY65B v injects CNY177B prior.
Japan
– Nikkei 225 opens +0.2% at 37,609.
– Japan Apr trade balance: -¥115.8B V ¥215.3BE.
– Follow up: (JP) Follow up: Japan Farm Min Eto tenders resignation following public backlash over rice comments; To be replaced by Shinjiro Koizumi as Japan Farm Minister – financial press.
– Follow up: Japan Upper House approves Kazuyuki Masu to join BOJ board; To replace Toyoaki Nakamura (dove); [term is due to end on Jun 30th, 2025].
– Japan Economic Revitalization Min and Top Trade Negotiator Akazawa said to visit US again in May after Friday’s US-Japan officials talks [overnight update].
– Japan reportedly considering accepting US tariff reduction and not complete exception – Japanese press [overnight update].
– BOJ releases briefing material used at its meeting with bond market participants; Some market players urge BOJ to buy more super-long JGBs [overnight update].
Korea
– Kospi opens +0.5% at 2,615.
– South Korea May 1-20 Days Exports Y/Y: -2.4% v -5.2% prior; Imports Y/Y: -2.5% v -11.8% prior.
– South Korea govt to prepare further measures for auto and pharma industries “if needed” – financial press.
Other Asia
– Taiwan said to be asking some exporters to cut their selling of US dollars – US financial press.
– Taiwan FSC Chair: Taiwanese life insurers hold ~$19B of US Treasuries – financial press.
– Taiwan Apr export orders Y/Y: 19.8% V 9.5%E [overnight update].
North America
– (US) Fed’s Daly, Hammack and Bostic (all Non-Voters); Fed policy is in a good place, highly sensitive to risk of inflation – Financial Markets Conference panel discussion.
– Mexico Economy Min: Cars assembled in country and exported to the US will pay an avg tariff of 15%, not 25%.
– (US) US lawmakers reportedly call for probe into Chinese EV charging firm Autel Energy; raise concerns about Autel Energy’s access to consumer data and critical grid infrastructure – press.
– (US) Punchbowl’s Sherman: Speaker Johnson reportedly met with the SALT Caucus late last night. Here’s the offer he privately made them on state and local deduction cap. $40,000 SALT deduction cap. NO marriage penalty. Capped at $751,000 income level. Snaps back to $30,000 after four years..
– (CA) Canada Apr CPI M/M: -0.1% V -0.2%E; Y/Y: 1.7% V 1.6%E.
– (US) May Philadelphia Fed Non-Manufacturing Activity: -41.9 v -42.7 prior.
– (US) US Pres Trump: Won’t be changing medicare, medicaid, and social security; Confident that the tax bill will pass.
– (US) Rep Westerman: US Pres Trump pushed back on SALT lawmakers in GOP meeting; Trump wants to leave SALT where it is.
– (US) Fed’s Hammack (non-voter for 2025): White House tax bill complicates forecast; A stagflationary outcome is a likely.
– (US) Fed’s Musalem (voter): Even after May 12th de-escalation, tariffs likely to lead to labor market softening and higher prices – speech text.
Europe
– (IL) Israel reportedly planning to strike Iranian nuclear facilities; Not clear that Israel has made a final decision; As of now, there remains a deep disagreement within the US government about the likelihood of an attack – CNN.
– (EU) EU approves 17th sanctions package against Russia (as expected).
– (UK) Govt and partners are working to tighten oil price cap on Russia.
– (EU) ECB’s Knot (Netherlands): Council faces complicated constellation of challenges; need to see updated Staff Projections in Jun.
– (DE) Germany Fin Min Klingbeil: Reiterates do not see the need for common EU borrowing at the moment; Investments booster needed before summer break amid trade uncertainty.
– (EU) ECB’s Escriva (Spain): See downward risks in coming quarters for Spain.
– (EU) EU said to consider imposing €2 flat tax on small items ordered online – FT.
– (EU) Eurozone May advance consumer confidence: -15.2 V -16.0E.
– (RU) EU said likely to impose quota for banning Russian gas imports by end-2027 – press.
Levels as of 01:20 ET
– Nikkei 225 -0.3%, ASX 200 +0.6%, Hang Seng +0.9%; Shanghai Composite +0.3%; Kospi +0.9%.
– Equity S&P500 Futures -0.4%; Nasdaq100 -0.4%; DAX +0.1%; FTSE100 flat.
– EUR 1.1281-113.40; JPY 143.65-144.62; AUD 0.6417-0.6455; NZD 0.5918-0.5953.
– Gold +0.5% at $3,301/oz; Crude Oil +1.7% $63.09/bbl; Copper +0.4% at $4.6920/lb.
