Markets overall positive but underlying unease over lingering liquidity concerns

Asia market update: Markets overall positive but underlying unease over lingering liquidity concerns; Focus on CN data dump tomorrow.

General trend

- Asian markets (ex-HK/CN) continued to respond positively to the weekend news that the Trump Administration was allowing temporary tariff exemptions for key electronics that use semiconductors. Korean auto stocks also welcomed Trump’s overnight announcement of help for US (based) auto-makers. Hyundai Motors +5%, Kia +4%. Tata also +5%, while in Japan Toyota +1.5%, Honda +2%.

- Another inside trading day for USD/JPY compared to last Friday as the pair consolidates. China offshore Yuan also stable with a slightly stronger PBOC fix today while Euro, Swissie and Pound also quiet.

- Commodity currencies Aussie and Kiwi keep climbing since mid-last week, with Kiwi to its highest vs AUD in a year, and +10% over the past week vs USD from 54.7 to just below 59.2 vs USD. (Note: NZ Q1 CPI on Thurs, with higher March food prices reported today).

- However, a spike in 30-yr JGB yields late Monday saw no meaningful offer/bids seen in the interdealer market with “very big gaps” reported between on-the-run and off-the-run issues. Reports of sometimes literally no bids on screens, amid elevated volatility. Comes as more Japanese companies (Yamaha Motors, Tepco unit) delay or cancel bond sales and Japan Fin Min Kato reiterated financial markets have been unstable recently. A Senior Japan BOJ Official said markets were showing volatile moves due to US tariff policy, and OIS showing only a 1% chance of a BOJ hike on May 1st. Japan 20-year JGB yield rose to 2.435%, highest since 2004 ahead of the 20-year JGB auction for April, with the actual auction seeing an increased tail of 34bps (weakest since Dec 2023). Nevertheless 20 yr JGB yield -9bps post-auction.

- Separately, US Treasury Sec Bessent also noted US Treasury Dept has a big toolkit, and could consider increasing buybacks.

- Also, reports that China markets face liquidity pressures, with >CNY570B in reverse repo and MLF funds maturing this week, however, Chinese press says that PBOC 'will help'.

- ADB President added that uncertainty is at an all-time-high in Asia.

- China political rhetoric steps up amid the US Trade War, with aggressive posturing released against the backdrop of the CCP replaying old clips of Mao ZeDong’s fiery speeches from the 1950’s and 60’s. A China Senior official for HK said the US’s goal is not to take Hong Kong's tariffs, "They want our life".

- UBS cuts China 2025 GDP to 3.4% (prior 4.0%) due to US tariffs; Lowest projection of major banks to date.

- Reports that Treas Sec Bessent has added Australia and UK alongside earlier suggestions of India, Japan and South Korea to the list of countries the US will prioritize deals with.

- RBA Minutes for March revealed the Board felt it premature to cut, and will seek Governing Board advice on scale and maturity of bond holdings. However, the ASX RBA tracker shows a 79% probability of a 50bps cut to 3.60% at the next meeting on May 20th.

- Ahead of a contentious election on Jun 3rd brought about by Pres Yoon’s impeachment, the China-friendly South Korea Opposition Party warned of a ‘hasty’ trade deal with the US, raising the wider issue of the future of South Korea economically and politically.

- US equity FUTs -0.1% to -0.2% during Asian trading.

Looking ahead (Asian-weighted news, using Asian time zone)

- Tue Apr 14th IN Mar CPI (Tue eve DE Apr ZEW Sentiment).

- Wed 15th NZ Mar Trade Balance, CN Mar ‘Data Dump’ (Wed eve US Mar Retail Sales, CA BOC Rate Decision).

- Thu 16th NZ Q1 CPI, JP Mar Trade Balance, KR Rate Decision, AU Jobs, (Thu eve ECB Rate Decision).

- Fri 17th JP Mar National CPI.

- Sat 18th CN Mar FDI.

Holidays in Asia this week

- Mon Apr 14th India, Thailand.

- The Apr 15th Thailand.

- Thu Apr 17th Philippines.

- Fri Apr 18th Australia, Hong Kong, India, Indonesia, New Zealand, Philippines, Singapore.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 7,752.

- RBA MAR MINUTES: Will seek governing board view on scale and maturity of bond holdings; premature to cut.

- (US) Treasury Sec Bessent said to prioritize deals with UK, Australia, India, Japan and South Korea – press.

- New Zealand Mar Food Prices M/M: +0.5% v -0.5% prior.

- RBNZ announces weekly GDP Nowcast, called "Kiwi-GDP", to be updated weekly on RBNZ website.

- RBNZ Chief Economist Conway: Tariff uncertainty means growth will likely be weaker; Will have scope to cut rates further once impacts are clearer.

China/Hong Kong

- Hang Seng opens +0.9% at 21,603; Shanghai Composite opens -0.1% at 3,260.

- China Senior Official for HK: US tariff war goal is not to take Hong Kong's tariffs, "They want our life" - financial press.

- UBS cuts China 2025 GDP to 3.4% (prior 4.0%) due to US tariffs; Lowest projection of major banks to date.

- China Harbin Public Security Bureau: US NSA agents on 'wanted list' over involvement in the cyber attack on the Asian Winter Games.

- >80% of 57 China economists surveyed said to 'urge' RRR cuts, at an appropriate time, in order to counter tariffs - Securities Times.

- China markets said to face liquidity pressures, however PBOC 'will help' - Shanghai Securities News.

- (US) White House NEC Dir Hassett: President will decide on when and if to have talks with China - Fox Business interview.

- China PBOC allocated fresh gold import quotas for banks – press.

- China PBOC sets Yuan reference rate: 7.2096 v 7.2110 prior.

- China PBOC Open Market Operation (OMO): Injects CNY165B in 7-day reverse repos; Net drains CNY3B v drains CNY51B prior.

Japan

- Nikkei 225 opens +1.1% at 34,338.

- Senior Japan BOJ Official: Markets showing volatile moves due to US tariff policy - financial press.

- Former BOJ Official Kenzo Yamamoto: BOJ likely to put aside rate hike for now - press interview.

- Japan Chief Cabinet Sec Hayashi: Econ Revitalization Min Akazawa's trip to US not yet scheduled [contradicting earlier reports] - financial press.

- Japan Trade Min Muto: Japan must deepen relationship with US on semiconductors - financial press.

- Japan Fin Min Kato: Reiterates FX rates should be determined by markets, excessive volatility would negatively impact economic and financial stability.

- Japan 20-year JGB yield rises to 2.435%, highest since 2004 (ahead of today's 2-year JGB auction).

- JAPAN SELLS ¥1.0T VS. ¥1.0T INDICATED IN 20-YEAR JGB BONDS; ; AVG YIELD: 2.3490% V 2.2780% PRIOR; BID-TO-COVER: 2.96X V 3.46X PRIOR (weakest since Dec 2023).

- Japan govt to add undersea cables, satellites and rockets to the list of goods considered as critical for the nation's economic security – Nikkei.

Korea

- Kospi opens +0.4% at 2,464.

- South Korea Feb M2 Money Supply M/M: 0.6% v 0.5% prior.

- South Korea Fin Min Choi: Will actively consult with US over trade investigations in chips, biopharma sectors.

- South Korea Opposition Party warns of ‘hasty’ trade deal with the US - Press.

- South Korea Finance Ministry announces extra KRW12T budget proposal; KRW2T more than planned last week.

- South Korea to provide extra KRW7T won in support for chipmakers; Total now KRW33T v KRW26T prior - financial press.

- South Korea Acting Pres Han: Trump directed immediate tariff talks with South Korea, Japan, India [overnight update].

Other Asia

- Indonesia Mar Consumer Confidence: 121.1 v 126.4 prior.

- Vietnam and China sign 45 agreements during visit of China Pres Xi - Vietnamese state media.

North America

- (US) FCC Chair Carr said to tell the EU to 'pick us or China communications technology' - FT.

- (US) White House Envoy Vitkoff: Conservation with Iran will be about verification on the enrichment program and then ultimately verification on weaponization.

- (US) Fed's Bostic (non-voter for 2025): Currently the range of possible outcomes has 'multiplied'; The fog has gotten really thick.

- US Trade Rep Greer: Reiterates Trump expects talks with China, but not there yet; at some point we will have talks - Fox News interview.

- (MX) US to implement a 21% tariff on Mexico tomatoes, beginning July 14th.

- US Treasury Sec Bessent: Sometime in the fall will be the time to start discussing a new Fed Chair.

- (US) White House NEC Dir Hassett: President will decide on when and if to have talks with China; Making enormous progress on EU trade talks - Fox Business interview.

- (US) Pres Trump: 'War between Russia and Ukraine is Biden’s war, not mine... President Zelenskyy and Crooked Joe Biden did an absolutely horrible job in allowing this travesty to begin.' - Truth Social post.

- FHFA Director Pulte: News on Fannie is coming shortly.

- (MX) Mexico Pres Sheinbaum: Tasked Fin Min with speaking to commercial and development banks to lower interest rates.

- US) NY Fed Mar 1-year Inflation Expectations: 3.58% v 3.13% prior.

- (US) Pres Trump: Looking at helping car companies with tariffs; Car companies need a little bit of time - comments to press.

- (US) Fed's Waller (voter, dissenter): If there's small inflation effect, Fed could cut later this year; Sees two tariff scenarios in which inflation could peak at either 3% or 5% - speech text.

- (AR) US Treasury Sec Bessent: We don't have to be decoupling from China, but it could happen; Not seeing dumping of US treasuries; The VIX spiked and has likely peaked.

Europe

- (G7) Members said to be coordinating meeting with Finance Ministers and Central Bank Governors in Washington DC as early as April 23rd - Japanese press.

- (EU) Follow up: EU said to examine legal options for 'ending' gas deals with Russia - FT.

- (UK) Mar BRC LFL Sales Y/Y: 0.9% v 0.6%e.

- (EU) EU plans to unveil roadmap in May to phase out Russian fuels - press.

- OPEC monthly oil report (MOMR): Cuts oil demand forecast this year and next amid trade war.

- (EU) EU Foreign Policy Commissioner Kallas: EU officials working on 17th Russia sanctions package ahead of May meeting of EU foreign ministers.

Levels as of 00:20 ET

- Nikkei 225 +1.1%, ASX 200 +0.3%, Hang Seng flat; Shanghai Composite -0.3%; Kospi +1.1%.

- Equity S&P500 Futures -0.1%; Nasdaq100 -0.2%; DAX +0.3%; FTSE100 flat.

- EUR 112.96-1.1425; JPY 142.23-144.08; AUD 0.62.76-0.6378; NZD 0.5819-0.5928.

- Gold +0.5% at $3,241/oz; Crude Oil +0.5% $61.85/bbl; Copper -0.4% at $4.6440/lb.