Nikkei tech stocks follow overnight US tech rally

Asia market update: AU CPI surprises to upside; Nikkei tech stocks follow overnight US tech rally; CN rates diverge from AU & JP, CNH hovers at 7.29.

General trend

- The Nikkei led Asia out the gate and it stayed that way as chip stocks and tech in general followed the US tech rally. Nikkei up to a 2-month high. Chip-related Advantest +7%

- Australia ASX lagged as May CPI came in at 4.0%, a six-month high and hotter than expected - putting a further rate hike by the RBA back on the table. AU 3-year yield rose >18bps to 4.11% after the data. Analysts increased their chances of an August hike by the RBA, depending on July 31st CPI data.

- AUD outperformed in an otherwise quiet day for currencies, +0.5% on the back of the CPI surprise.

- China 10-yr bond yields fell another 1bps to a 22-year low (2002) at 2.236%. Offshore Yuan hovered below the 7.29 level against USD, threatening to fall further beyond the lows of last week.

- US equity FUTs +0.1% during Asian trading.

Looking ahead (Asian time zone)

- Wed 26th Jun: (Wed eve DE May Cons Confidence).

- Thu 27th Jun: JP May Retail Sales (Thu night US Durable Goods & US Q1 Final GDP).

- Fri 28th Jun: JP Jun Tokyo Core CPI, JP May prelim Industrial Prod, AU May Housing Credit (Fri night US May Core PCE).

- Weekend: CN Jun National Mnfg PMI.

Holidays in Asia this week

- Fri Jun 28th New Zealand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.2% at 7,827.

- Australia May CPI Y/Y: 4.0% V 3.8%E (six-month high).

- Former RBA Manager Jonathan Kearns said to see 25% probability of an August rate hike - Australian press.

- Australia May Westpac Leading Index M/M: -0.01% v -0.03% prior.

- Australia sells A$600M vs. A$600M indicated in 3.50% Dec 2034 bonds; Avg Yield: 4.2235% v 3.979% prior; bid-to-cover: 4.22x v 3.11x.

- Reserve Bank of Australia (RBA) Asst Gov Kent: Reiterates RBA in no rush to ease - speech on Restrictive Financial Conditions in Australia at the ABA Banking Conference, Melbourne.

- New Zealand Treasury Sec: Reiterates recent data point to economic weakness, weak economy poses risks to Treasury's forecast.

China/Hong Kong

- Hang Seng opens -0.8% at 17,943; Shanghai Composite opens -0.2% at 2,943.

- China 10-yr bond yields fall another 1bps to 22-year low (2002) at 2.236%.

- China local government bond issuance might peak in Q3 [inline] – China Securities Journal.

- Chinese Fin Min: Will implement proactive fiscal policy, enhance effectiveness of macroeconomic regulation and control [overnight update].

- China's Foreign Min Wang WI held phone call with Hungarian counterpart to express hope that the EU will pursue a rational and pragmatic policy towards China [overnight update].

- China holds online meeting on homes delivery; To guide banks to support property financing – press [overnight update].

- Hong Kong May Trade Balance (HK$): -12.1B v -8.7Be [overnight update].

- China PBOC sets Yuan reference rate: 7.1248 v 7.1225 prior (weaker fix for sixth straight session).

- China PBOC Open Market Operation (OMO): Sells CNY250B in 7-day reverse repos; Net drains CNY28B v net injects CNY214B prior.

Japan

- Nikkei 225 opens +0.5% at 39,364.

- Reportedly a rate hike is on the table at each BOJ policy meeting, including at July's one; BOJ will likely announce a plan to trim monthly buying at a steady, set pace, while leaving some flexibility to adjust the speed as needed - press [overnight update].

- Japan Fin Min Suzuki: Shares serious concerns over weakness of yen (JPY) and won (KRW) with South Korea; Japan and South Korea to take appropriate steps against FX volatility [overnight update].

South Korea

- Kospi opens -0.3% at 2,767.

- Bank of Korea (BOK) Financial Stability Report: Difficult to rule out possibility of growing downward pressure on Korean Won (KRW).

- South Korea Fin Min: Exports expected to recover to record levels in H1 - financial press.

Other Asia

- Singapore May Industrial Production M/M: 1.1% v 1.8%e; Y/Y: 2.9% v 1.4%e.

- Philippines Econ Planning Chief Balisacan: Philippines is not restricting Chinese investments, nor tourists - comments at forum.

- Bank of Thailand (BOT) releases Jun minutes: Committee expressed concerns over the K-shaped economic recovery.

- (IN) India Central Bank Gov Das: Moving towards 8% growth on sustained basis; Confident in 7.2% growth for current year [overnight update].

North America

- (US) Follow up: Wikileaks' Assange plea deal hearing with US prosecutors begins in Saipan court, pleads guilty and flies home to Australia - financial press.

- Fedex +14% A/H; Reports Q4 $5.41 v $5.34e, Rev $22.1B v $22.1Be; Initial FY25 guidance largely in line with estimates; Expects to repurchase $2.5B of common stock with $1B coming in Q1.

- (US) Fed’s Bowman (voter, hawk): Not yet at point where it is appropriate to cut rates; Sees a number of upside risks to the inflation and still willing to raise rates again “should progress on inflation stall or even reverse”.

- (US) Fed’s Bowman (voter, hawk): Do not see any rate cuts for 2024, shifted timing to 2025 - Q&A in London.

- (BR) Brazil Fin Min Haddad: Central Bank minutes signaled halt to assess internal and external views.

- (CA) Canada May CPI M/M: 0.6% V 0.3%E; Y/Y: 2.9% V 2.6%E.

- (US) Jun Philadelphia Fed Non-Manufacturing Activity Regional Index: +2.9 v -0.6 prior; New Orders: +6.7 v -5.1 prior.

- (US) Apr FHFA House price index M/M: 0.2% V 0.3%E.

- (US) APR S&P CORELOGIC HOUSE PRICE INDEX (20-CITY) M/M: 0.38% V 0.30%E; Y/Y: 7.20% V 7.00%E.

- (US) Jun Consumer Confidence: 100.4 V 100.0E.

- (US) Jun Richmond Fed Manufacturing index: -10 V -3E; New orders -17 v -6 prior; Backlog of orders: -27 v -19 prior.

- (US) Jun Dallas Fed Services Activity: -4.1 v -12.1 prior.

- (US) Treasury $69B 2-year note auction draws 4.706% V 4.91% Prior; bid-to-cover ratio: 2.75 V 2.41 prior and 2.66 over the last 12.

- (US) Fed's Cook (voter): Rising delinquency rates 'bear watching;' Expects 12-month inflation will roughly move sideways for the rest of this year, with monthly data likely similar to the favorable readings during the second half of last year.

- CDK reportedly told dealers software outage will not be resolved before June 30th - press.

Europe

- (FI) ECB’s Rehn (Finland): Rate moves should be possible at any policy meeting - financial press.

- (RU) Russian Deputy Foreign Min Ryabkov: Our task is to stop the world from sliding into nuclear chaos.

- (RU) Italian Foreign Ministry: Italy strongly condemns Russian decision to ban EU media outlets including Italy's Rai, Repubblica, La Stampa and LA7.

Levels as of 01:20 ET

- Nikkei 225, +1.4%, ASX 200 -0.8% , Hang Seng +0.4%; Shanghai Composite -0.1%; Kospi +0.9%.

- Equity S&P500 Futures: +0.1%; Nasdaq100 +0.1%, Dax +0.2%; FTSE100 +0.2%.

- EUR 1.0705-1.0718; JPY 159.62-159.90; AUD 0.6636-0.6683 ;NZD 0.6111-0.6128.

- Gold -0.1% at $2,327/oz; Crude Oil +0.6% at $81.29/brl; Copper -0.2% at $4.3635/lb.