Unexpectedly robust US flash PMIs drag down equities and currencies in quiet day EOW

General trend

- USD has been stronger across the board since surprisingly healthy flash PMI figures in the NY morning, when the prior expectations had been tepid. JPY breached 157 level again, while pound sterling, euro and aussie dollar corrected sharply.

- The higher PMIs also sent US stocks lower, although Nasdaq fell the least, still buoyed by Nvidia’s run of success. Asian markets opened lower throughout the region with all major markets down by >-1% at lunch, with only the Shanghai spared somewhat, though still down -0.2%.

- Japan’s national Apr CPI slowed to 2.2%, with govt data pointing to falling gas bills as a primary contributor. Core CPI rose at the slowest pace since Jan of this year.

- New Zealand May ANZ Consumer Confidence was higher, a welcome development on top of yesterday’s unexpected increase in Q1 retail sales. NZ trade balance came in at a small surplus.

- Today the latest auction of China’s special ultra-long term bonds saw bid-to-cover well supported at >4.3x, in what has been a week of tepid demand in many parts of the global economy. New Zealand saw unusually low b-t-c in its weekly bond auction yesterday across all three tenors (<2.0x with a low of 1.3x, when usually between 2-3x). AU also weak today at 2.46x (recently 2.7-4.0x). Last night UST 10-yrs only 2.33x. This comes on top of volatility and some lack of liquidity in China’s new ultra-long bond issuance that started last Friday. Japan this week also saw only 2.21x for its 40 year JGB issuance, the lowest since Jan, 2024. Overnight Asia time UK’s BOE also allotted a record amount in its 7-day short-term repo operation.

- Nvidia said to cut China prices amid abundant supply particularly from Huawei, in what may be the first sign of chip oversupply seen to date for the company (although it is only for the company’s “China-approved” chips of mid-capacity such as the H20 chip, not the high-end H100).

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

Looking ahead (Asian time zone)

- (Note: CN Apr FDI YTD overdue).

- Fri May 24th (Fri night US Durable Goods, Michigan Consumer Sentiment).

Holidays in Asia this week

- Monday May 20th India.

- Wed May 22nd Singapore, Thailand.

- Thu May 23rd Indonesia.

- Fri May 24th Indonesia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.5% at 7,778.

- Australia sells A$900M v A$900M indicated in 2.75% Nov 2028 bonds; Avg Yield: 3.973% v 3.6847% prior; bid-to-cover: 2.46x v 3.37x prior.

- New Zealand Apr Trade Balance (NZD): 0.1B v 0.6B prior.

- New Zealand May ANZ Consumer Confidence: 84.9 v 82.1 prior.

- RBNZ Silk: Reiterates prepared to raise rates if needed.

- RBNZ Hawkesby: No single data point will cause rate hike, watching domestic inflation pressures and expectations.

China/Hong Kong

- Hang Seng opens -0.7% at 18,742; Shanghai Composite opens -0.2% at 3,110.

- Nvidia said to cut China prices amid abundant supply - US financial press.

- China MOF sells 20-year Special Bonds: Yield: 2.49%; bid-to-cover 4.34x.

- China MOF sells 20-year Special Bonds: Yield: 2.49%; bid-to-cover 4.34x.

- (HK) Macau Q1 GDP Y/Y: +25.7%; (Q/Q -0.8%).

- China Preliminary May Retail Passenger Vehicle Sales -5.3% y/y – PCA [overnight update].

- (US) Treasury Sec Yellen: FX intervention should not be routine; G7 finance ministers will discuss their concerns about China's excess industrial capacity and potential responses [overnight update].

- Hong Kong Apr CPI Composite Y/Y: 1.1% v 2.0%e [overnight update].

- China PBOC sets Yuan reference rate: 7.1102 v 7.1098 prior (weakest since Jan 23rd).

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

Japan

- Nikkei 225 opens -1.5% at 38,506;

- JAPAN APR NATIONAL CPI Y/Y: 2.5% V 2.4%E; CPI EX-FRESH FOOD (CORE) Y/Y: 2.2% V 2.2%E (Core CPI rises at slowest pace since Jam 2024).

- Japan sells ¥5.8T vs. ¥5.8T indicated in 3-Month Bills; Avg Yield: 0.0401% v 0.0413% prior; bid-to-cover: 3.81x v 3.62x prior.

- JAPAN'S 10-YEAR GOVERNMENT BOND YIELD RISES TO 1.05%, HIGHEST SINCE APRIL 2012.

- Japan reportedly to ease rules on stock grants to employees – Nikkei [overnight update].

South Korea

- Kospi opens -1.0% at 2,693.

- Samsung’s latest high bandwidth memory (HBM) chips said to have yet to pass Nvidia's tests due to heat and power consumption problems - South Korean press.

Other Asia

- Philippines Apr Overall Balance of Payments (BoP): -$0.6B v +$1.2B prior [overnight update].

North America

- House Speaker Johnson: We will soon host Israeli PM Netanyahu for a joint session of Congress - US press.

- CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 50BPS TO 6.00%; AS EXPECTED.

- (MX) Mexico Q1 Final GDP Q/Q: 0.3% v 0.2% prelim; Y/Y: 1.6% v 1.6% prelim.

- (US) INITIAL JOBLESS CLAIMS: 215K V 220KE; CONTINUING CLAIMS: 1.794M V 1.793ME.

- (US) Apr Chicago Fed National Activity Index: -0.23 v +0.13e.

- (US) MAY PRELIMINARY S&P MANUFACTURING PMI: 50.9 V 49.9E; PMI Services: 54.8 v 51.2e (16th month of expansion); PMI Composite: 54.4 v 51.0e (highest since Apr 2022); Input prices continued to rise sharply in May, the rate of inflation accelerating to register the second-largest monthly increase seen over the past eight months.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: 78 BCF VS. 78 BCF TO 91 BCF INDICATED RANGE.

- (US) APR NEW HOME SALES: 634K V 679KE; Months supply (seasonally adjusted): 9.1 v 8.3 prior.

- (US) TREASURY $16B 10-YEAR TIPS AUCTION DRAWS 2.184% V 1.810% PRIOR; BID TO COVER 2.33 V 2.62 PRIOR (2bps tail).

- (US) Doubleline's Gundlach: Triple C bonds shold be avoided, a lot of recessionary signals in the economy - Rosenberg Research webcast comments.

- (US) Fed’s Bostic (hawk, voter): Last couple of inflation numbers suggest it's going back to 2%, but it's going slow.

Europe

- (UK) BOE allots £16.2B in 7-day short-term repo operation vs £14.4B prior (record amount).

- (UK) May GfK Consumer Confidence: -17 v -18e.

- (TR) TURKEY CENTRAL BANK (CBRT) LEAVES ONE-WEEK REPO RATE UNCHANGED AT 50.00%; AS EXPECTED.

- (G7) BOJ Gov Ueda: US soft economic landing is key issue for global economy.

- (EU) EURO ZONE MAY ADVANCE CONSUMER CONFIDENCE: -14.3 V -14.2E.

- (EU) ECB Villeroy (France): Reiterates very likely to begin cutting rates in June; To bring back inflation toward 2% target by next year at latest.

Levels as of 01:20 ET

- Nikkei 225 -1.1%; ASX 200 -1.1%; Hang Seng -1.2%; Shanghai Composite -0.3%; Kospi -1.4%.

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

- EUR 1.0805-1.0816; JPY 156.89-157.15; AUD 0.6592-0.6607; NZD 0.6087-0.6101.

- Gold -0.1% at $2,344/oz; Crude Oil -0.1% at $76.82; Copper +0.7% at $4.8080/lb.