Eyes also on UK Core CPI ahead of UK BOE rates
|Asia market update: Hang Seng again drops ~2% as CN stimulus continues to underwhelm; BOJ Minutes – business as usual; Quiet markets – perhaps waiting for US Fed Chair Powell House testimony tonight? Eyes also on UK Core CPI ahead of UK BOE rates.
General trend
- Following on from yesterday’s lesser than expected cut to China’s 5-yr LPR cut of 10bps (v 15bps expected) the Hang Seng opened down a further -1.5% at the open and kept dropping to over -2% an hour into trading; Largely mirroring a corresponding fall in the HSMPI (Mainland Property Index) as markets continue to wait for more meaningful stimulus measures.
- Alibaba opened 3.5% down following yesterday’s top management succession plan announcement.
- In Asia trading only the Nikkei could gain (+0.6%).
- Japan BOJ’s Monetary Policy Meeting Minutes for April (two decisions ago) delivered more of the “easy-monetary-policy-for-as-long-as-needed” theme, however in more detail they show that members are beginning to discuss the possibility that recent wage growth may be persistent.
- Next chance to examine this in detail will be Monday’s release of BOJ Summary of Opinions from the last MPM meeting on June 15.
- An interesting example of what China “de-risking” may look like in actuality: Today Korea reported June 1-20 Exports/Imports and within the figures were China exports -12.5% y/y, while US exports +18.4% y/y.
- The AUD/USD dropped even further overnight (>2% overall) since the release of yesterday’s more dovish than expected RBA Minutes. While AUD/USD has recovered some 40% of the drop during today’s session, Aussie 10-yr yields are down -5bps today.
- US Equity FUTs are slightly down.
- Fed futures currently price 74% chance for 25bps rate hike at July 26th's FOMC decision ahead of Powell's two-days testimony this week.
- Finally, tonight’s reading on UK Core CPI will be closely watched as last month Y/Y for Apr 6.8% v 6.2%e was the highest since early 1990s. To be followed the next day by UK BOE rate. decision.
Looking ahead
- This evening UK CPI.
- Wed night & Thu night– US Fed Chair Power House and then Senate testimonies.
- Thu UK BOE rate decision.
- Thu Jun 22 China, Hong Kong, Taiwan (Dragon Boat festival) – holiday, markets closed.
- Fri Jun 23 China, Taiwan (Dragon Boat festival) – holiday, markets closed.
- Fri JP CPI.
- Fri night US Prelim PMIs.
Headlines/economic data
Australia/New Zealand
- ASX 200 early trading -0.2% at 3,340.
- Australia May Westpac Leading Index M/M: -0.27 v -0.03% prior.
- New Zealand Fin Min Robertson: Economic environment remains challenging - Parliamentary Committee Hearing.
- Reserve Bank of New Zealand (RBNZ): research results indicate that using surveyed inflation expectations in forecasting models can improve forecasts of inflation.
- Fonterra Global Dairy Trade Auction Dairy Trade price index: 0.0% (flat).
China/Hong Kong
- Shanghai Composite opens -0.3% at 3,230.
- Hang Seng opens -1.5% at 19,305.
- Hong Kong May CPI Composite Y/Y: 1.8% v 1.9%e [overnight update].
- China PBOC Open Market Operation (OMO): Sells CNY145B in 7-day reverse repo; Net injects CNY143B v injects CNY180B prior.
- China PBOC sets Yuan reference rate: 7.1795 v 7.1596 prior (weakest CNY fix since Nov 29, 2022).
- China policy adviser Wang Huning [Politburo Standing Member] said to stress the need to revive consumption.
- China expected to see further rate cuts and RRR cuts this year - China Securities papers' front page news.
- China Fin Min: Confirms to extend purchase tax exemption on NEVs purchased between 2024-25; the tax exemption will reach CNY520B in 2024-2027.
- China Industry Ministry (MIIT) Vice Min Xin: Allow market mechanism to phase out uncompetitive car markers; to draft plans to push lithium mining.
Japan
- Nikkei 225 opens -0.6% at 33,200.
- Bank of Japan (BOJ) Apr Minutes (two decisions ago): Sees no need to revise the conduct of Yield Curve Control (YCC) at this time.
- Japan BOJ Board Member Adachi: Inflation increasing faster than I expected; (For now) it is appropriate to continue monetary easing with YCC framework.
- Japan PM Kishida eyes Cabinet reshuffle as soon as summer – Nikkei.
- Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 50bps; Opens window to buy unlimited amount of 10-year JGBs at 0.50% [as expected].
South Korea
- Kospi opens -0.2% at 2,599.
- South Korea June 1-20th Day Exports Y/Y: +5.3% v -16.1% prior; Imports Y/Y: -11.2% v -15.3% prior.
- South Korea Fin Min Choo: Sees some positive signs in exports – press.
- Bank of Korea (BoK) Financial Stability Board Meeting Minutes: Real Estate-related financial stability risks are at manageable level.
Other Asia
- Taiwan May Export Orders Y/Y: -17.6% v -21.4%e (9th straight decline, but notes AI helped to perform better than expected); Expects June Export Orders -21.0% to -17.6% y/y.
- China MOFA: US has distorted its political promise to China - comments on US's Taiwan position.
- Philippines Pres Marcos: Now have coordination on fishing bans with China.
- Vietnam Central Bank (SBV) Dep Gov: Monetary policies of trading partners have huge impact on domestic policies and reserves; monetary policies to remain cautious, flexible to stabilize interest rates and inflation.
- Singapore Central Bank (MAS): Proposes Standards for Digital Money.
North America
- US May housing starts: 1.631M V 1.400ME; building permits: 1.491M V 1.425ME; Single family starts: +18.5% m/m, Single family permits: +4.8% m/m.
- Jun Philadelphia Fed Non-Manufacturing Regional Index: -16.6 v -16.0 prior; New Orders: -16.2 v +2.7 prior.
- (CN) US said to have tracked workers at Huawei and ZTE at suspected Chinese spy sites in Cuba – WSJ.
- (CN) China officials said to be planning Pres Xi and US Pres Biden meeting at the upcoming APEC summit in US in Nov 2023 - US financial press [overnight update].
- US Pres Biden comments at California fundraiser: Says that Pres Xi of China is in a situation where he wants a US relationship again; Calls Pres Xi a dictator.
Europe
- (EU) ECB’s Vujcic (Croatia, hawk): Core inflation pressures remain in Euro Zone.
- (LT) ECB's Simkus (Lithuania): Will not be surprised to see ECB raise rates in Sept.
- (EU) ECB’s Villeroy (France): Most of ECB rate-hike path is complete.
- (CN) China Premier Li Qiang: Ready to move forward with Germany; to continue dialogue and engagement - joint press conference with Chancellor Scholz.
Levels as of 01:20 ET
- Nikkei 225, +0.8%, ASX 200 -0.4%, Hang Seng -2.2%; Shanghai Composite -0.7% ; Kospi -0.8%.
- Equity S&P500 Futures: flat; Nasdaq100 flat; Dax +0.2%; FTSE100 -0.2%.
- EUR 1.0911-1.0927 ; JPY 141.28-142.86 ; AUD 0.6777-0.6800 ; NZD 0.6158-0.6187.
- Gold -0.1% at $1,945/oz; Crude Oil +0.5% at $71.58/brl; Copper +0.4% at $3.8965/lb.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.