Weak Asian equities

Asia market update: Eyes on JP FX and MoPo moving forward; Weak Asian equities; Trump's "big, beautiful" tax bill in with a shot by Memorial Day; Focus on JP Apr CPI.

General trend

- Yen shot up one Big Figure after US Treas Sec (later confirmed by Fin Min Kato) that US-JP agreed FX levels should be ‘determined by the market’. However, within a couple of hours thereafter Yen proceeded to take back all the losses to again trade at two-week lows.

- BOJ board member Noguchi kept up his dovish and cautious tone, saying the BOJ should spend time considering risks before making policy adjustments. Also doesn’t personally believe a need to make big changes to the existing BOJ tapering plan of JBG purchases.

- Two thirds of Japanese companies reported to want BOJ to pause rate hikes due to US tariffs, while the Japan FSA continues to study risk of regional bank outflow.

- Japan May prelim PMI Manufacturing recorded its 11th month of contraction. Services also down but still in expansion.

- Australia May prelim PMI figures all stayed in expansion.

- Asian equities followed US equities down, with the Kospi underperforming -1.3%.

- USD/KRW +0.5%, JPY/KRW +0.8%; Came amid a North Korea "serious accident" at a navy ship launch. North Korea said to have fired multiple cruise missiles after the warship launch failure.

- Singapore Final Q1 GDP confirmed contraction; Ministry of Trade and Industry reiterated recession is possible, but not likely “full-blown recession”.

- New Zealand delivered its annual budget, forecasting slightly lower debt issuance in the near term, but more in aggregate over the next few years; Also forecast slightly lower budget deficits and a slightly lower debt to GDP ratio. NZD fell slightly further post-release as NZ bond yields fell. S&P warned NZ could be in for a downgrade of its Sovereign rating due to current account and fiscal deficits.

- US Republicans may achieve their ambitious goal of signing Pres Trump’s “Big, beautiful” tax bill by Memorial Day, as US House Republicans released text of the bill (with a larger SALT cap), which was then approved by the crucial US House Rules Committee and the bill will now be voted on the floor of the House pre-dawn on Thursday.

- Bitcoin up another 3.5% to hit fresh all time high just shy of $112K.

- US equity FUTs slightly up during Asian trading.

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

- Fri May 23rd Japan Apr CPI.

Holidays in Asia this week

- No holidays in Asia this week.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 8,377.

- Australia May preliminary PMI Manufacturing: 51.7 V 51.7 PRIOR (5th month of expansion).

- Australia sells A$100M of indexed Aug 2035 bonds; Avg Yield: 2.3924% v 2.1328% prior; bid to cover 3.55x v 3.41x prior.

- New Zealand 2025 Budget: Sees budget deficit NZ$12.1B in 2026; To increase 2024-25 bond program by NZ$3.0B - Fin Min Willis presentation in parliament.

- S&P Bulletin: New Zealand's 'budget repair' begins to stall; Current account and fiscal deficits "could weigh" on rating.

China/Hong Kong

- Hang Seng opens -0.3% at 23,748; Shanghai Composite opens -0.2% at 3,381.

- China Apr Swift Global Payments (CNY): 3.5% v 4.1% prior.

- HKD gains 0.2% to 7.82, most since April in partial retracement of recent USD/HKD rebound after testing lower trading band of HK$7.75 earlier in May.

- (CN) US Dept of Commerce confirmed battery raw materials imported from China receive unfair subsidies; Cites the agency's preliminary determination. The Commerce Dept found China producers benefit from subsidies worth up to 721%.

- China Commerce Ministry (MOFCOM): Continues to urge BRICS to safeguard the multilateral trade system - financial press.

- China Apr Swift Global Payments (CNY): 3.5% v 4.1% prior

- China PBOC sets Yuan reference rate: 7.1903 v 7.1937 prior.

- China PBOC Open Market Operation (OMO): Injects CNY155B in 7-day reverse repos; Net injects CNY90B v injects CNY65B prior.

Japan

- Nikkei 225 opens -1.1% at 36,893.

- Japan May preliminary PMI Manufacturing: 49.0 V 48.7 PRIOR (11th straight contraction).

- Japan Mar Core Machine Orders M/M: +13.0% v -1.6%e; Y/Y: +8.4% v -1.8%e.

- Japan releases weekly flows data [period ended May 16th]: Foreign buying of Japan equities: ¥714.9B v ¥439.4B prior; Japan buying of foreign bonds: ¥2.82T v ¥1.93T prior.

- BOJ Board member Noguchi (dove, 2024 dissenter): BOJ should not preset terminal rate in raising rates; BOJ should spend time before making policy adjustments - speech.

- Nippon Steel; US Steel X US CFIUS submits recommendation for US Steel-Nippon Steel deal to Pres Trump; Content as yet undetermined - financial press.

- Two thirds of Japanese companies reported to want BOJ to pause rate hikes due to US tariffs - financial press survey.

- Follow up: Japan FSA to study risk of regional bank outflow – Nikkei.

- Japan Fin Min Kato: Told G7 that US tariffs are creating uncertainties; Confirms No talk on FX levels - financial press.

- *(US) Treasury Sec Bessent met with Japanese Fin Min Kato at G7 meeting; Agreed exchange rates should be market determined; USD/Yen level reflects 'Fundamentals' - Treasury Dept statement.

- (US) Treasury Sec Bessent met with Japanese Finance Minister at G7 meeting, discussed currency and trade – press.

- Blackstone: Reportedly taps banks to broaden private-wealth business in Japan; Yen fund to invest in Japan assets expected to launch by the end of 2025 – Nikkei [overnight update].

- Japan govt said to loosen target for reaching primary balance, from FY25 to range of FY25-26 - Nikkei [overnight update].

Korea

- Kospi opens -0.4% at 2,614.

- "Serious accident" said to have occurred at launch of North Korean warship [timing uncertain] - Korean press.

- South Korea Finance Ministry: Currently in working level discussions on FX rates with US, but details have not been finalized [overnight update].

Other Asia

- Malaysia Apr CPI Y/Y: 1.4% v 1.4%e (9th month below target range).

- Follow up: Top insurers in Taiwan said to have applied for new FX volatility reserves - financial press.

- Sri Lanka Central Bank (CBSL) Cuts Overnight Policy Rate by 25 bps to 7.75%; not expected.

- Singapore MAS affirms current policy stance - financial press.

- Singapore Q1 Final GDP Q/Q: -0.6% v -0.8% prelim; Y/Y: 3.9% v 3.8% prelim.

- Indonesia central bank (BI) cuts bi-rate by 25BPS to 5.50%; As expected; Indonesia Central Bank (BI) Gov Warjiyo: Economy uncertainty has slightly receded due to recent trade deal between US and China - pre-rate decision press conference [overnight update].

- Taiwan Central Bank (CBC) Dep Gov Yen Tsung-ta said it allowed the Taiwan Dollar (TWD) to rise earlier in May in order to reduce market .expectations for a stronger TWD; notes the central bank has used such tactics in the past – US financial press [overnight update].

- Malaysia PM Anwar: Regarding US tariffs, Urges reforms, a closer ASEAN, and partner ties [overnight update].

North America

- Follow up: US House Rules Committee: Approves Pres Trump’s tax plan; Sets stage for full house floor vote - financial press.

- US House Republicans release text of Pres Trump's "big, beautiful" tax bill, with larger SALT cap, as expected - financial press.

- (US) Follow up: White House official Hassett: Tax bill will lead to 3% growth, will pay for itself; Way more spending cuts to come this year - financial press.

- US Pres Trump: Seriously considering to take Fannie Mae and Freddie Mac public; To make decision in 'very near future' - Truth Social post.

- Canada PM Carney: Trade Min LeBlanc to visit Washington DC to meet with Trump Admin officials [Comments also from Fin Min Champagne] - financial press.

- (US) House Majority Leader Scalise: House will vote on tax bill tonight.

- (BR) Brazil Central Bank (BCB) monetary policy director David: The base scenario is of economic slowdown; Uncertainty remains high in the global economy, with uncertainties remaining; All policymakers agree that rates must stay higher for longer.

- (US) MBA Mortgage Applications w/e May 16th: -5.1% v 1.1% prior.

- (US) Freedom Caucus Chair Harris: It appears we are further away from a reconciliation bill deal; In my opinion, tax bill got worse overnight.

- (US) House Speaker Johnson: Confirms agreement on $40K SALT deduction was reached.

- FDA Affirms taking steps to enhance state importation programs to help lower prescription drug prices under 804 import program.

- (US) White House official Hassett: If we get 3% growth, Trump's tax bill pays for itself; We are going to get 3% growth; CBO's 1.8% growth score is very conservative.

- (UR) Germany Chancellor Merz: There are signs the US could be interested in a deal with the EU on tariffs; When I visit (the US), will try to persuade Pres Trump that we should have no tariffs on either side.

- (US) DOE CRUDE: +1.3M V -0.8ME; GASOLINE: +0.8M V -1.1ME; DISTILLATE: +0.6M V-1.3 ME.

- (AR) Reportedly Argentina will announce Dollar use policy tomorrow - press.

- (US) President Trump: Feeling very good on tax bill in Congress; Very close on tax bill.

- AMAZON CEO Jassy: Tariffs haven't reduced customer demand and no significant price increases seen due to tariffs - comments at shareholder meeting.

- (US) Treasury $16B 20-year bond auction draws 5.047% V 4.830% prior, bid-to-cover 2.46 V 2.43 prior and 2.46 over last 4 auctions; Tails by 1.2 bps.

Europe

- EU said to be open to a lobster deal with the US; also considers more loose criteria to help nations meet climate targets - FT.

- EU Economy Commissioner Dombrovskis: Unified G7 communique is 'within reach'.

- (RU) US Pres Trump said to have told heads of EU in private that "Putin is not ready to end war" - WSJ.

- (UK) Follow up: UK said to have 'urged' G7 to price cap Russian oil - financial press.

- France Fin Min Lombard: Meeting with US Treas Sec Bessent 'went well', but we discussed 'non-tariff' topics - financial press.

- UK said to be ready to sign Chagos Islands deal as soon as today (Thursday) - FT.

- (US) Treasury Sec Bessent: Discussed German economic priorities with Chancellor Merz - X post.

- ECB’s Nagel (Germany): No G7 split into 6 countries against the US; Sees progress on the US tariff dispute, but notes there are more hurdles to overcome.

- (EU) ECB’s Centeno (Portugal, dove): Can’t answer if governorship will be renewed; Interest rate will prevent inflation from falling <2%, may have to come below neutral rate to 1.5-2.0% - comments to media.

- (EU) ECB de Guindos (Spain): 2% price target to be reached sooner rather than later aided by lower energy costs and stronger EUR currency.

- (EU) EU said to prepare trade proposal to steer momentum into talks - press.

- (ES) Spain and Portugal asks for EU assistance to advance interconnection projects following blackout - press cites letter.

Levels as of 01:20 ET

- Nikkei 225 -1.0%, ASX 200 -0.6%, Hang Seng -1.0%; Shanghai Composite -0.1%; Kospi -1.3%.

- Equity S&P500 Futures flat; Nasdaq100 +0.1%; DAX -0.7%; FTSE100 +0.1%.

- EUR 1.1311-113.45; JPY 143.15-144.40; AUD 0.6427-0.6454; NZD 0.5921-0.5947.

- Gold +0.7% at $3,337/oz; Crude Oil +0.2% $61.68/bbl; Copper +1.3% at $4.7182/lb.