Markets move post-US CPI and FOMC, China EV Co's brush-off EU tariffs

Asia Market Update: Markets move post-US CPI & FOMC; China EV Co's brush-off EU tariffs; Focus on US PPI tonight and JP BOJ tomorrow.

General trend

- A soft US CPI saw stocks rip and allowed the Fed to overall stay on course, although with a more hawkish tone and dot plot as most rate cuts are now projected for 2025. The S&P and NASDAQ broke out to fresh all-time highs on the CPI with the Nasdaq continuing higher post-FOMC as well. OTOH, the Dow proceeded to lose all of its CPI gains and small caps pared about half of their CPI gains.

- Asia markets initially followed suit, with Korea’s Kospi outperforming to surge to a new 2024 high. During Asian trading US equity FUTs also continued to press higher, with Nasdaq FUTs heading to fresh record highs. However the Nikkei lost its early gains to go negative during the session with the Shanghai Composite also struggling as USTs yields pushed back up slightly higher. (The Nikkei may be in risk-off mode ahead of the BOJ decision tomorrow).

- Shares of Chinese EV makers rose at the open today, in the face of the increased EU tariffs on EV imports announced yesterday. BYD, subject to only an additional 17.4% tariff, was up +5%, suggesting that the final tariff amounts had already been discounted. Yesterday a Tier 1 US broker said that anything less than 30% would still leave China EV makers competitive in Europe.

- JP 10-yr JGBs followed global yields lower by 2bps to the 0.97% handle, as the Yen gave up the big gains it saw on the soft US CPI (prior to the FOMC).

- As Japan’s BOJ gets ready for its rate decision tomorrow, with the market expecting at least some further reduction in bond buying to be announced, Japan’s weekly flows last week showed Japan sold the most amount of overseas debt in 9 years..

- Australia May employment gains came in higher than estimates, with an unchanged employment rate. Aussie dollar edged down slightly after the release.

- New Zealand economy sends further mixed signals with total card spending falling into negative territory compared to last month while job ads are the lowest since February 2016 (other than Covid lockdown periods). However, Primary exports are projected to rise 6% in 2024-25 following a ~5% decline in 2023-24.

- US equity FUTs were up further during Asian trading, in particular NASDAQ FUTs +0.7%.

Looking ahead (Asian time zone)

- Thu Jun 13th (Thu night US May PPI).

- Fri Jun 14th NZ May PMI, JP BOJ rate decision, (Fri night US Michigan June Consumer Sentiment).

- Weekend: CN May FDI YTD.

Holidays in Asia this week

- Monday June 10th Australia, China, Hong Kong, Taiwan.

- Wednesday June 12th Philippines.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 7,714.

- AUSTRALIA MAY EMPLOYMENT CHANGE: +39.7K V +30.0KE; UNEMPLOYMENT RATE: 4.0% V 4.0%E.

- Australia May CBA Household Spending M/M: +1.1% v -1.0% prior; Y/Y: 4.3% v 2.6% prior.

- Australia May Port Hedland Iron Ore Exports: 51.9Mts v 49.6Mts m/m.

- New Zealand May Total Card Spending M/M: -0.9% v +0.9% prior.

- New Zealand May BNZ Job Ads M/M: -4.8%; Y/Y -31.0%; Aside from pandemic lockdown periods, job ads are lowest since February 2016.

- China Premier Li (now visiting NZ): China stands ready to work with New Zealand towards upgraded version of Comprehensive Strategic Partnership - Chinese state media.

- New Zealand govt updates primary industries outlook: Primary exports projected to rise 6% in 2024-25 following ~5% decline in 2023-24.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2029, 2032 and 2037 bonds.

China/Hong Kong

- Hang Seng opens +0.9% at 18,104; Shanghai Composite opens flat at 3,038.

- Hong Kong Monetary Authority (HKMA) leaves Base Rate unchanged at 5.75% (as expected) [**Note: move follows Fed decision].

- China SAFE (FX regulator] Chief Zhu Hexin: To improve FX supervision methods; Will strengthen risk monitoring in FX.

- China brokerage sector to grow at CAGR 10% from 2023-2030 - Tier 1 global banking analyst.

- Chinese Pres XI: Vows to boost import from other developing countries - Chinese state media [overnight update].

- US Dep Sec of State Campbell: Believes China currently determined to work to stabilize US-China relations and not create frictions that can escalate in unpredictable and dangerous ways [overnight update].

- China Commerce Ministry (MOFCOM): EU moves disrupt and distort global supply chain [overnight update].

- China Commerce Chamber response to EV tariffs: Decision poses serious barrier to relations; Shocked and gravely disappointed [overnight update].

- EU COMMISSION CONFIRMS IMPOSING ADDITIONAL** TARIFFS ON IMPORTED CHINESE EVS; To impose 20% tariff on Geely Auto, 17.4% tariff on BYD, 38.1% on SAIC; Notes Tesla may receive an individually calculated duty rate at the definitive stage [overnight update].

- China PBOC holds meeting on govt-supported residential housing; Support state firms to buy existing homes – press [overnight update].

- China PBoC: Reiterates to continue to strengthen macro-economic policies; To gradually expand macro-prudential policy [overnight update].

- China PBOC sets Yuan reference rate: 7.1122 v 7.1133 prior.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repos; Net CNY0B v net CNY0B prior.

Japan

- Nikkei 225 opens +0.8% at 39,182.

- JAPAN Q2 BSI LARGE ALL INDUSTRY Q/Q: 0.4 V 0.0 PRIOR.

- Japan releases weekly flows data [period ended Jun 7th]: Foreign buying of Japan equities: -¥346.6B v +¥282.0B prior; Japan buying of foreign bonds: -¥2.65T v +¥1.32T prior (most amount of overseas debt sold in 9 years).

- Japan sells ¥499B v ¥500B indicated in 20-yr, 30-yr, and 40-yr JGB's in liquidity enhancement auction: Avg accepted spread -0.024% v -0.022% prior, bid-to-cover: 2.95x v 2.27x prior.

- Japan sells ¥5.5T vs. ¥5.5T indicated in 3-Month Bills; Avg Yield: 0.0079% v 0.0172% prior; bid-to-cover: 3.81x v 3.89x.

South Korea

- Kospi opens +1.3% at 2,764.

- Korea Financial Services agency (FSS) calls for managing household debt at 'appropriate level' - statement.

- South Korea Fin Min & Central Bank (BOK): Reiterates aims to be included in WGBI index in Sept; Cannot rule out possibility of increased financial market volatility - statement.

Other Asia

- Philippines Finance Chief Recto: Can do 4 rate cuts in 2025.

- Thailand Central Bank Dep Gov Piti: Key Rate is not too high; Policy is neutral - post decision comments [overnight update].

- THAILAND CENTRAL BANK (BOT) LEAVES BENCHMARK INTEREST RATE AT 2.50%; AS EXPECTED.

- (IN) INDIA MAY CPI Y/Y: 4.8% V 4.9%E [overnight update].

North America

- CEO Musk says both Tesla shareholder resolutions are currently passing by wide margins; Third party source backs up that both Musk's pay package and move to Texas from Delaware are passing by wide margins - financial press.

- (AR) Argentina Senate approves Pres Milei's 'bases' Economic Reform Bill and Emergency Powers bill as VP Villarruel breaks 36-36 tie in omnibus vote - financial press.

- Apple and Open AI reportedly not paying each other a 'significant amount of money' in recently announced deal - financial press.

- (US) MAY CPI M/M: 0.0% V 0.1%E; Y/Y: 3.3% V 3.4%E (lowest annual pace since Feb 2024 and first flat M/M print since Oct 2023); (ex-food/energy) M/M: 0.2% v 0.3%e; Y/Y: 3.4% v 3.5%e (3-year low on annual pace).

- (US) May Real Avg Hourly Earning Y/Y: 0.8% v 0.5% prior; Avg Weekly Earnings Y/Y: 0.5% v 0.6% prior.

- (US) DOE CRUDE: +3.7M V -1ME; GASOLINE: 2.6M V 0ME; DISTILLATE: 0.9M V +1ME.

- (US) Atlanta May Sticky-CPI annualized 2.4% v 4.6% m/m, Core 2.2% v 4.6% m/m.

- (CN) US Dep Sec of State Campbell: Believes China currently determined to work to stabilize US-China relations and not create frictions that can escalate in unpredictable and dangerous ways.

- (US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 5.25-5.50%; AS EXPECTED; REITERATES RISKS TO ACHIEVING POLICY HAVE MOVED TOWARD BETTER BALANCE; SEEN MODEST FURTHER PROGRESS IN RECENT MONTHS TOWARDS INFLATION GOAL

- (US) FOMC SUMMARY OF ECONOMIC PROJECTIONS (SEP) FOR JUNE: Raises long run rate forecast for second consecutive time; Cuts median forecast projection to 25bps of rate cuts in 2024 (prior 75bps)

- (US) Fed Chair Powell: Today was certainly a better inflation report than most anyone expected; Hope we more like it - Q&A.

Europe

- (RU) US Treas Sec Yellen affirms to use Russian assets to support Ukraine - NYT.

- (RU) Russia Central Bank delays Thursday trading start after US sanctions on Moscow Exchange; trading to begin at 650 GMT; to also suspend trading in Hong Kong dollars (HKD) – Press.

- May RICS House Price Balance: -17% v -5%e [lowest since Jan].

- (IQ) Iraq Oil Ministry: Fully committed to 4.0M bpd in June; Agreement includes voluntary production cuts.

- (EU) ECB's De Guindos (Spain): Disinflationary process has been profound.

- (RU) US Treasury Official: Imposing sanctions on over 300 individuals and entities for aiding Russia's acquisition of goods.

Levels as of 01:20 ET

- Nikkei 225 -0.2%, ASX 200 +0.5%, Hang Seng +0.2%; Shanghai Composite -0.2%; Kospi +1.4%.

- Equity S&P500 Futures +0.2%; Nasdaq100 +0.7%, Dax -0.3%; FTSE100 -0.3%.

- EUR 1.0800-1.0816; JPY 156.59-157.20; AUD 0.6645-0.6668; NZD 0.6165-0.6191.

- Gold -1.2% at $2,325/oz; Crude Oil -0.3% at $78.26/brl; Copper -0.6% at $4.5080/lb.