Inflation data in focus, US inflation continues slow decline

Asia Market Update: Inflation data in focus; US inflation continues slow decline; CN CPI moves toward deflation & PPI deflation worsens; Details revealed from BOJ Apr policy decision; Focus on BOE decision.

General trend

- All eyes were on US CPI last night where the softest headline number in two years fell below 5%.

- US markets now pricing in three rate cuts this year – maybe at odds with the Fed, but fits with the economic picture out of China today:

1) China’s CPI figures came out with the slowest pace since Feb 2021, while PPI had its biggest drop since May 2020.

2) It was also reported that China is asking banks to cut interest rate ceilings on some retail and corporate deposits.

- After recent volatility in China bank stocks, prices are flat today.

- Asian equities also flat, while US equity FUTs are slightly up.

- Currencies also showing little movement during the Asian session.

- Meanwhile out of Japan the BOJ Summary of Opinions showed that it is being careful to ensure that revision to the forward guidance will not be taken as its willingness to raise the policy interest rates.

- Of interesting note; two Japanese life insurance firms were reported by Japanese press to be cutting holdings of US Treasuries in favor of JGBs. (Expectations of positive nominal rates in Japan?).

Notable data points to watch out for today and tomorrow:

- G7 Fin Mins & Central Bankers in Japan started today.

- Today’s earnings in Japan include Nissan, Honda, Softbank (and Taiwan’s Foxconn).

- Tonight is the BOE rate decision (25bps hike expected) and Gov Bailey's guidance.

- For the weekend, keep an eye on the results of the dead-locked Turkish election.

Headlines/economic data

Australia/New Zealand

- (AU) ASX 200 opens -0.1% at 7,258.

- (AU) Australia Trade Minister Farrell said de-escalation will benefit exporters ahead of trade talks in China; Farrell is due to arrive in China on Thurs [May 11th] - Australian press.

- (AU) ASIC warns of increased focus on credit provider and debt manager misconduct.

- (AU) Australia RBA documents released under Bloomberg FOI request; Shows alternative paths considered.

- (AU) Australia May Consumer Inflation Expectation Survey: 5.0% v 4.6% prior.

- (NZ) New Zealand April REINZ House Sales Y/Y: -15.3% v -15% prior.

- (NZ) New Zealand Apr Food Prices M/M: 0.5% v 0.8% prior.

China/Hong Kong

- (HK) Hang Seng opens +0.4% to 19,842.

- (CN) Shanghai Composite opens +0.1% at 3,323.

- (CN) CHINA APR CPI M/M: -0.1% V -0.3% PRIOR [3rd straight decline]; Y/Y: +0.1% V 0.3%E (slowest pace since Feb 2021) - PPI Y/Y: -3.6% v -3.3%e (biggest drop since May 2020).

- (CN) China PBOC Open Market Operation (OMO): Sells CNY2.0B v CNY2.0B prior in 7-day reverse repo; Net drains CNY31.0B v injects CNY2.0B prior.

- (CN) China PBOC sets Yuan reference rate: 6.9101 v 6.9299 prior.

- (CN) China Foreign Min QIn Gang comments on meeting France's Foreign Minister.

- (CN) China said to be asking banks to cut interest rate ceilings on some retail and corporate deposits from May 15th - press.

Japan

- (JP) Nikkei 225 opens flat at 29,110.

- (JP) BANK OF JAPAN (BOJ) APR MEETING SUMMARY OF OPINIONS: Should be careful to ensure that revision to the forward guidance will not be taken as its willingness to raise the policy interest rates.

- (JP) Japan Apr Tokyo Avg Office Vacancies: 6.1% v 6.4% prior.

- (JP) 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].

- (JP) Japan releases weekly flows data [period ended Apr 28]: Japan buying of foreign bonds -¥635B v -¥1.1T prior; Foreign buying of Japan stocks: +¥373B v +¥343B prior.

- (JP) Japan Apr Bank Lending Y/Y: 3.2% v 3.0% prior.

- (JP) Japan Mar Current Account: ¥2.28T v ¥2.891Te.

- (JP) Reportedly two Japanese life insurance firms are cutting holdings of US Treasuries in favor of JGBs - Nikkei.

South Korea

- (KR) Kospi opens +0.4% at 2,505.

- (KR) South Korea May 1-10th Exports Y/Y: -10.1%.

Other Asia

- [Taiwan] (CN) China reportedly seeks to resume and expand its communications with Taiwan - Chinese state press.

- (PH) Philippines Q1 GDP Q/Q: +1.1% v 0.7%e; Y/Y: 6.4% v 6.2%e.

North America

- (US) BofA Institute: April credit & debit card spending per household -1.2% y/y (1st negative since Feb 2021) v +0.1% prior, +0.3% m/m; Notes broad signs of moderation in the labor market; Daily spending data following Easter looks softer.

- (US) APR CPI M/M: 0.4% V 0.4%E; Y/Y: 4.9% V 5.0%E (slowest annual pace since May 2021 and 10th consecutive deceleration); core M/M: 0.4% v 0.4%e; Y/Y: 5.5% v 5.5%e v 5.6% prior.

- (US) Senate Republican Leader McConnell: White House unilateral action on the debt ceiling without Congress is not an option.

- (US) Blackstone in talks with US regional banks over lending - FT.

Europe

- (EE) ECB's Muller (Estonia): Rates still need to be raised but not as fast as earlier to allow ECB to assess action so far.

- (EU) ECB's Centeno (Portugal): Monetary policy in terms of fixing key rates is at the maximum of this cycle; We must be approaching the terminal rate, could be there in June or July - press.

- (EU) Reportedly some ECB officials are starting to think Sep rate hike may be needed - press.

- (UK) Apr RICS House Price Balance: -39% v -40%e.

- (UK) UK NIESR sees UK CPI 7.4% in 2023 (prior Feb forecast 2023 at 8.3%, 2024 at 4.2%).

Levels as of 01:20 ET

- ASX200 0.1%; Hang Seng -0.4%; Shanghai Composite -0.2%; Nikkei 225 -0.1%; Kospi +0.1%.

- Equity S&P500 Futures +0.2%; Nasdaq100 +0.2%, DAX +0.2%; FTSE100 -0.3%.

- EUR 1.0941 - 1.1007 ; JPY 133.90 - 134.37 ; AUD 0.6767 - 0.6796 ; NZD 0.6353 - 0.6385.

- Gold +0.1% at $2,038/oz; Crude Oil +0.9% at $73.19/brl; Copper -0.3% at $3.8390/lb.