Markets digest previous day’s action as traders wonder where to from here?

Asia market update: Markets digest previous day’s action as traders wonder where to from here? Focus on the US Apr CPI.

General trend

- With mixed equities in Asia, the Nikkei led Asia +1.8% to trade back at Feb levels as last night’s US China trade deal bullishness finally moved into the Asian session. Australia ASX also retook Feb trading levels. Hang Seng underperformed -1.8% as it gave back 2/3 of its outsize gains yesterday.

- Elevated risk appetite levels held for the most part across asset classes although safe haven assets moved somewhat off their overnight lows [Silver and Copper notably improved]. Commodity currencies Kiwi and Aussie gained back about half yesterday's losses, while USD/JPY was -0.4% softer after outsize gains. Confidence returned to the markets, but perhaps now questions about where to from here? Market talk about how institutions have been largely on the sidelines since Apr 2nd, missing out on the current 20% rally in equities, perhaps providing yet more space for gains.

- On trade, a White House Exec Order clarified overnight that the US would cut the "de minimis" tariff on China shipments to 54% from 120%, with a minimum flat fee of $100 to remain starting from May 14th.

- Bank of Japan Summary of Opinions affirmed the cautious tone of the board at the May 1st meeting, but did say that the price target of 2% is likely to be realized and should not be too pessimistic.

- Amid generally higher global rates Australian 3-year yields up as much as 13bps, most in a month to 4.47%. Australian business confidence for April and consumer confidence for May both increased somewhat, with Australian election results and expectation of additional RBA rate cut said to boost Consumer Confidence.

- ANZ NZ Apr Heavy and Light Traffic gauges up m/m, with ANZ commenting that the trend higher suggests the NZ economic recovery continues.

- China PBOC set the Yuan rate at below 7.20 for its strongest fix since Apr 7th. Close to reaching Nov 2024 levels at 7.1850.

- US equity FUTs -0.4% to -0.5% during Asian trading.

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

- Tue May 13th (Tue night US Apr CPI).

- Wed May 14th KR jobs, AU Home Loans.

- Thu May 15th AU jobs, (Thu eve UK Q1 GDP, US Apr PPI, US Apr Retail Sales).

- Fri May 16th NZ Apr Business PMI, JP Q1 Adv GDP, (Fri night US prelim Apr Michigan Consumer Sentiment).

Holidays in Asia this week

- Mon May 12th Indonesia, Philippines, Singapore, Thailand.

- Tue May 13th Indonesia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 8,248.

- Australia Apr NAB Business Confidence: -1 v -3 prior.

- Australia May Westpac Consumer Confidence: 92.1 v 90.1 prior.

- ANZ New Zealand Apr Heavy Traffic Gauge M/M: +2.7%.

China/Hong Kong

- Hang Seng opens -0.2% at 23,494; Shanghai Composite opens +0.5 at 3,386.

- China PBOC: Continues to improve transparency of Monetary Policy – statement.

- China Pres Xi: China supports Latin America in safeguarding its sovereignty and independence and opposes external interference - comments at China-CELAC Forum.

- (US) Follow up: USTR Greer: Outcome of China tariff talks are 'pragmatic' - Fox News interview.

- CAICT: March Shipments of foreign branded phones [including Apple's iPhones] within China at 1.89M units -49.6% y/y [overnight update].

- China Ministries hold meeting on mineral export control; China to strengthen exports control of strategic minerals [overnight update].

- (US) Treasury Sec Bessent: Neither US not China want to decouple; Both sides showed great respect; We see possibility of purchasing agreements; Would like to see China open to more US goods [overnight update].

- TTN Note: De Minimis exception was Not mentioned in joint US-China tariff statement.

- US-China deal outline; US to cut tariffs on Chinese goods from 145% to 30% for 90 days; China to cut tariffs on US goods from 125% to 10% for 90 days - Joint statement [**Note: Last Friday, Trump said he saw 80% tariff on China as right one] [overnight update].

- China releases white paper on national security; notes China is capable of handling impact of US tariffs; vows to add more tools in trade retaliation policies [overnight update].

- China PBOC sets Yuan reference rate: 7.1991 v 7.2066 prior [strongest fix since Apr 7th].

- China PBOC Open Market Operation (OMO): Injects CNY180B in 7-day reverse repos; Net drains CNY225B v injects CNY43B prior.

Japan

- Nikkei 225 opens +1.3% at 38,149 (trading back at Feb levels).

- Bank of Japan (BoJ) summary of opinions for Apr 30th-May 1st policy meeting: Price stability target of 2% is likely to be realized; Should not be too pessimistic.

- Bank of Japan (BOJ) Dep Gov Uchida: Reiterates tariffs to put downward pressures on the economy; rapid FX moves increase uncertainty for outlook - Parliamentary testimony.

- Japan Apr M3 Money Supply Y/Y: 0.1% v 0.4% prior.

- Japan Fin Min Kato: To attend G7 Finance Ministers meeting in Banff, Canada; Hopes to meet with US Treas Sec Bessent to discuss FX - financial press.

- Japan Economic Revitalization Min Akazawa: Reiterates closely watching trade developments including the US and China.

- JAPAN SELLS ¥800B VS. ¥800B INDICATED IN 30-YEAR JGB BONDS; AVG YIELD: 2.9410% V 2.4140% PRIOR; BID-TO-COVER: 3.07X V 2.96X PRIOR.

Korea

- Kospi opens -0.2% at 2,601.

Other Asia

- Thailand PM Shinawatra; Have submitted tariff proposal to the US for negotiations; Thai cabinet also approves digital token initiaive - press.

- Malaysia Trade Ministry: To impose definitive anti-dumping duties on China, India, Japan and South Korea for imports of flat rolled product of iron alloy or non-alloy steel, plated or coated with tin - financial press.

- Taiwan's Pres Lai said to be seeking bilateral trade deal with Japan and the US - Nikkei.

North America

- (US) White House official Hassett: Bessent had a complete road map of what they wanted heading into China meeting; We have 24 (trade) deals lined up over the next few weeks - CNBC.

- (US) Pres Trump: Drug prices to be cut by 59%, PLUS! Gasoline, Energy, Groceries, and all other costs, down. no inflation!!! Love, DJT.

- (US) Treasury Sec Bessent: Current tariff level on China is a floor and Apr 2nd level is a ceiling (implies range between 30% and 54%) - media comments.

- (US) White House Press Sec Leavitt: Unfreezing rare earth was part of US-China talks.

- (US) White House official: HHS Sec Kennedy Jr to set clear targets for US drug price reductions within 30 days; Expect drug manufacturers to negotiate immediately.

- (US) Pres Trump: We achieved total reset with China; Maybe to speak to China Pres Xi maybe at end of week; China has agree to stop flow of fentanyl - comments to media.

- (US) Pres Trump: Big pharma must stop price gouging; Will no longer tolerate profiteering - comments at signing of drug-pricing executive order.

- (US) Fed's Kugler (voter): Trade policy is shifting, but it's still likely to lead to higher prices and slower growth; Uncertainty has already impacted the economy; Fed is in a good position to deal with changes in the macroeconomic outlook; The situation has muddled the Fed's ability to see what's ahead for growth and inflation

- (US) USDA world agricultural supply and demand estimates (WASDE) CROP report: End 2025/2026 US Stocks (M bu): Corn: 1,800; Soybeans: 295; Wheat: 923.

- (US) Apr Federal budget balance: $258.4B V $256Be.

- (US) House GOP releases full text of tax bill, which does include tax break on tips and overtime through 2028; Confirms to end EV tax credit early.

- (US) Fed Apr Senior Loan Officer Survey (SLOOS) on Bank Lending Practices: Tighter lending standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes.

- (US) Los Angeles Port Chief Gene Seroka: Not expecting surge in imports (from tariff reprieves); LA Port's import volume -25% y/y through end-May - press interview.

- Aple said to be weighing price increases for its fall iPhone lineup as India is not yet ready to produce high-end iPhones at same scale as China can deliver – WSJ; Apple will not attribute price increase to tariffs [overnight update].

Europe

- (IE) Ireland Apr Construction PMI: 52.4 v 53.9 prior (second month of expansion).

- (UK) Apr BRC LFL Sales Y/Y: 6.8% v 2.3%e [largest rise since early 2022].

- (DE) German Govt Spokesperson: If Russia does not acknowledge truce before end of day, Europeans will start preparing sanctions.

- (UK) BOE’s Greene: Disinflation process is underway; Slightly worried that medium-term inflation expectations starting to tick up.

- (DE) Germany Fin Min Klingbeil: Germany plans to pass budget 2025 in cabinet in June (as expected).

- (IN) India PM Modi: The April 22nd attack was aimed at disturbing communal harmony; We've only paused our military action against Pakistan; This is India's "Policy against terrorism;" We've drawn a new red line; Any nuclear blackmail will not be tolerated by India - National Address.

Levels as of 01:20 ET

- Nikkei 225 +1.8%, ASX 200 +0.4%, Hang Seng -1.6%; Shanghai Composite +0.2%; Kospi -0.2%.

- Equity S&P500 Futures -0.4%; Nasdaq100 -0.5%; DAX flat; FTSE100 -0.7%.

- EUR 1.1087-111.20; JPY 147.65-148.47; AUD 0.6362-0.6417; NZD 0.5847-0.5894.

- Gold +1.1% at $3,262/oz; Crude Oil -0.1% $61.88/bbl; Copper +0.4% at $4.6480/lb.