Geopolitics takes center stage as Iran acquiesces to Trump pressure

Asia market update: Geopolitics takes center stage as Iran acquiesces to Trump pressure, but Putin pours cold water on UR-RU meet up; JP carmakers under home pressure from US; Focus on US Apr PPI & Retail Sales.

General trend

- WTI crude fell as much as -2.5% on a potential big foreign policy win for Pres Trump as his trip to the Middle East started to register political outcomes following extensive US business investment from Saudi Arabia and Qatar. A top Iranian official said that Iran was ready to sign a nuclear deal with the US in return for sanctions relief. This would include getting rid of enriched uranium stockpiles that could be used for nuclear weapons and allow international inspectors to monitor.

- Not such positive news for Ukraine-Russia tensions as Pres Putin confirmed Not to travel to Turkey today for peace talks with Ukraine. Instead Russia will only send a delegation. [Note that Ukraine’s Pres Zelenskiy had indicated earlier that he was only willing to negotiate directly with Putin himself, not other parties].

- Nikkei was down the most (-1.0%) amid a struggle session for most Asian equities with large Japan automakers lagging 3-4% as reports surfaced that as part of US trade talks Japan is willing to consider re-importation of US-made autos into the tightly controlled Japanese auto market.

- Follow-through good news for Korean shipbuilders as USTR Greer to meet with them at APEC to discuss assisting US shipbuilding recovery.

- US 10-year Treasuries hit a one month high of 4.55%, amid Taiwan reportedly reviewing its US Treasury bond holdings by state-backed banks.

- UnitedHealth woes continued, -8% after hours and as a heavy Dow component took Dow FUTs down -0.4% as the WSJ reported UNH was now under criminal investigation by the US DOJ for possible Medicare fraud (prior UNH story in Feb was only ‘being probed’).

- China continued to unwind its various export restrictions following the temporary US trade truce, today adding the relief of a suspended ban on dual-use items for both military and civil applications. Comes after overnight taking 17 US firms off its Unreliable Entity List measures – at least for 90 days from May 14th.

- Spot Gold fell more than 1% to levels not seen since first half of April, $3,138/oz.

- Australia still added jobs in April, and with a static unemployment rate AU 3-yr yields continued their march higher, +8bps.

- China’s Aggregate Financing and New Yuan Loans continue to accumulate below estimates as well as expectations of the Chinese govt, despite continued stimulus and financial institutions being ‘encouraged’ to lend.

- US equity FUTs slightly off their NY highs during Asian trading.

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

- Thu May 15th (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 +0.1% at 8,284.

- AUSTRALIA APR EMPLOYMENT CHANGE: +89.0K V +22.5KE; UNEMPLOYMENT RATE: 4.1% V 4.1%E.

- Australia May Consumer Inflation Expectations Survey: 4.1% v 4.2% prior.

- New Zealand Apr Food Prices M/M: 0.8% v 0.5% prior.

- New Zealand Apr REINZ House Sales Y/Y: +9.5% v -17.6% m/m (update).

- New Zealand sells total NZ$450M vs. NZ$450M indicated in 2030, 2036 and 2051 bonds.

China/Hong Kong

- Hang Seng opens flat at 23,644; Shanghai Composite opens -0.2% at 3,398.

- China analysts said to see "more space" for RRR cuts 'this year'; Perhaps by another 1% to 2% - China Securities Journal.

- Follow up: China has suspended ban related to exports of dual-use items, items with both military and civil applications; relates to the China/US ‘trade truce’.

- China suspends its Unreliable Entity List measures on 17 US firms; Also pauses export control measures against 28 US entities for 90 days from May 14 – press.

- CSRC (securities regulator) Vice Chair: China to continue policy support for the market - statement.

- (BR) Reportedly Brazil considers Chinese Yuan sovereign bond offering - press.

- (MX) China Foreign Min Wang Yi: China welcomes more Mexican products into Chinese market, will encourage Chinese businesses to invest in Mexico.

- China APR M2 money supply Y/Y: 8.0% V 7.3%E AND 7.0% PRIOR.

- China APR YTD new Yuan loans (CNY): 10.06T v 10.48TE v 9.78T prior; Apr at CNY280B v CNY700Be.

- China APR YTD aggregate financing (CNY): 16.3T V 16.6TE.

- Tencent [700.HK] Reports Q1 (CNY) adj Net 61.3B v 59.7Be, Op 57.8B v 59.2Be, Rev 180.0B v 175.6Be; Notes AI capabilities already contributed tangibly to business, stepped up spending on new AI opportunities [overnight update].

- China PBOC sets Yuan reference rate: 7.1963 v 7.1956 prior.

- China PBOC Open Market Operation (OMO): Injects CNY65B in 7-day reverse repos; Net drains CNY95B v drains CNY103B prior.

Japan

- Nikkei 225 opens -0.8% at 37,813.

- Japan releases weekly flows data [period ended May 9th]: Foreign buying of Japan equities: ¥439.0B v ¥278.3B prior; Japan buying of foreign bonds: ¥1.92T v ¥435.2B prior.

- Japan said to 'consider' re-importation of US-made autos as part of trade talks - Japanese press.

- Japan Economic Revitalization Min Akazawa: To visit US next week for trade talks - Japanese press.

- Japan sells ¥2.4T VS. ¥2.4T indicated in 5-year JGB bonds; AVG YIELD: 0.9800% V 0.9380% PRIOR; BID-to-cover: 3.19X V 3.84X PRIOR.

- The top life insurers in Japan 'on guard' against rising ultralong bond yields - Nikkei [update].

- US trade deals with Japan and South Korea said to be close - Fox's Gasparino on X.

- Japan Economic Revitalization Min and Chief Trade Negotiator Akazawa: US-China deal can be positively assessed.

Korea

- Kospi opens -0.2% at 2,634.

- Follow up: USTR Greer to meet Korean shipbuilders HD Hyundai Heavy and Hanwha Ocean at APEC conference - financial press.

- South Korea confirms held FX talks with US - Sources say the discussion took place on May 5th in Milan, and US and Korea officials agreed to share a 'mutual understanding of the principles' they hold in operating foreign exchange markets as well as to continue discussions on FX policy [overnight update].

Other Asia

- Thailand Apr Consumer Confidence: 55.4 v 56.7 prior (falls for third straight month over US tariffs).

- Follow Up: Taiwan Finance Ministry said to find no 'major' issues with the exposure of state banks to US Treasuries [responds to earlier press report]

- US financial press.

- Taiwan said to review US Treasury bond holdings by state-backed banks - Taiwan press.

North America

- US expected to 'dial back' bank rules that were imposed during the 2008 global financial crisis; regulators are preparing to cut banks' capital requirements - FT.

- (US) Former NY Fed Pres Dudley: Fed will likely be 'late' in cutting rates due to tariffs - financial press OpEd (update).

- UNH Follow up: Co reportedly under criminal investigation by US DOJ for possible Medicare fraud; DOJ's healthcare fraud unit is overseeing probe - WSJ.

- (US) Fed’s Daly (non-voter for 2025): Monetary policy is well-positioned and moderately restrictive; Businesses are cautious amid uncertainty, but not stalling out.

- (US) MBA Mortgage Applications w/e May 9th: 1.1% v 11.0% prior.

- (US) Los Angeles Port Chief Gene Seroka: Repeats May port cargo traffic running down about 25%; June thus far looks down 14%.

- (US) US House Speaker Johnson: May take until the weekend to make a deal on the new SALT cap - press [**Note: prior Johnson's expectations were last night and then today].

- (US) House Majority Leader Scalise: Will get tax bill to Pres Trump's desk before July 4.

- (US) DOE CRUDE: +3.5M V -2ME; GASOLINE: -1.0M V -1.5ME; DISTILLATE: -3.2M V 0ME.

Europe

- (UR) Russia's Pres Putin confirmed not to attend today's Ukraine talks in Istanbul, Turkey - German press reporting Kremilin confirmation.

- (IR) Iran reportedly ready to sign nuclear deal with US Pres Trump 'with conditions', including US sanctions relief - NBC, citing top Iranian security official Ali Shamkhani.

- (PT) Portugal Q1 Labour Costs Y/Y: 4.0% v 10.1% prior.

Levels as of 01:20 ET

- Nikkei 225 -1.0%, ASX 200 +0.2%, Hang Seng -0.7%; Shanghai Composite -0.6%; Kospi -0.8%.

- Equity S&P500 Futures -0.2%; Nasdaq100 -0.1%; DAX -0.4%; FTSE100 -0.2%.

- EUR 1.1172-112.02; JPY 145.94-146.75; AUD 0.6422-0.6459; NZD 0.5890-0.5917.

- Gold -1.4% at $3,144/oz; Crude Oil -2.4% $61.64/bbl; Copper -0.8% at $4.6050/lb.