RBNZ rate decision tomorrow

Asia market update: JP & CN news dominates relatively slow news day amid US holiday; CN & EU welcome currency strength; RBNZ Rate Decision tomorrow.

General trend

- Japan PPI was a touch above estimates, as 40-year, 30-year and 20-year JGB yields fell a further 12-17bps to now be well below the 3.5%, 3.0% and 2.5% marks respectively. Came as BOJ Gov Ueda said that the 2% inflation target is closer than at any time in more than 3 decades, but still ‘not quite there’. Further bond yield drop later assisted by reports the MOF will "trim" issuance of ultra-long bonds. Nevertheless JPY/USD gains steepened as Ueda spoke, as much as +0.5%, not far away from a multi-week high of beyond 142. However, USD later gained back one Big Figure on the Yen. Finance Fin Min Kato showed some concern on yields but said that yields are Not impeding stable sale of JGBs.

- Late yesterday, Japanese insurers Sumitomo Life and Meiji Yasuda both publicly stated they were Not worried about unrealized bond losses, with both also indirectly stating their concern about the high rate of ultra-long yields. Today Nippon Life CEO added, “Just because unrealized losses are growing, that doesn’t mean something terrible will happen all of a sudden.”

- In trade updates, Japan’s top trade rep Akazawa promised Not to sacrifice agriculture in US trade talks.

- Mixed and quiet Asian equities today with no stand outs up or down.

- Overnight Moody’s reaffirmed China’s A1 sovereign rating but kept the outlook negative.

- Chinese media see recent Yuan strength as supporting the appeal of China assets.

- Similar sentiment out of ECB’s Largarde. welcoming the strong Euro as helping counter Trump tariffs.

- Also China, undeterred by US calls to re-balance, reportedly quietly drafting a fresh “Made in China” master plan to supercharge domestic high-end tech output; In other news, China has also reportedly relaxed export restrictions on rare earth elements crucial for drone manufacturing after the controls threatened to derail the industry's growth.

- HKD showing volatility during May, having started the month testing the strong end of its trading band (7.75), and now near end-May approaching the weak end of its trading band (7.85), being the weakest since Sept 2023.

- China MOFCOM reported to be summoning China automakers incl. BYD and Dongfeng to "discuss emergence of used cars that have never been driven on the market” (** Note: This is a problem long reported on Chinese social media showing dumped new cars in vast lots out in the countryside, with car construction subsidies said to aggregate in total more than the cost to produce a car.] China EV makers down a further approx -2.5% today on top of -4% to -6% losses yesterday.

- South Korea May Consumer Confidence over 100 again for first time since Nov 2024.

- UK BRC shop prices stayed in negative territory overall for May, but food price increases hit a one-year-high.

- Tourist travel to US continues to slump, particularly among countries hit by US tariffs.

- Tesla suffered a massive -53% fall y/y in the April Euro Zone New Car Registrations.

- US equity FUTs -0.4% during Asian trading (after yesterday's +1.0% to +1.3% FUTs gain, with no cash trading to reset overall % change since Fri due to US holiday on Monday).

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

- Tue May 27th (Tue night US Apr Durable Goods).

- Wed May 28th KR Business Confidence, AU Apr CPI, NZ RBNZ Rate Decision, (Wed night FOMC Minutes).

- Thu May 29th NZ May Business Confidence, JP May Consumer Confidence, KR BOK Rate Decision, (Thu night US Q1 GDP 2nd Est).

- Fri May 30th JP Industrial Production & Retail Sales, AU Retail Sales, IN Q1 GDP, (Fri night US Apr Core PCE).

Holidays in Asia this week

- Mon May 26th (US Memorial Day).

- Thu May 29th Indonesia.

- Fri May 30th Indonesia, Taiwan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 8,360.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 87.0 v 88.8 prior.

- Australia sells A$400M vs. A$400M indicated in 4.25% Jun 2034 bonds; Avg Yield: 4.2162% v 4.1725% prior; bid-to-cover: 5.16x v 4.89x prior.

- New Zealand Treasury: Soft labour market will mean a "weaker economy" - fortnightly update.

China/Hong Kong

- Hang Seng opens -0.3% at 23,216; Shanghai Composite opens flat at 3,346.

- China Apr YTD Industrial Profits Y/Y: +1.4% v +0.8% prior.

- Yuan strength seen supporting the appeal of China assets, CNY is expected to be traded with 'moderate strength' in the short-term; cites analysts- China Securities Journal.

- HKD continues to weaken to 7.837, nearly at weak end of trading band and weakest since Sept 2023, after having traded at strong end of trading band in just early May [** Note: current trading band between HK$7.75-7.85].

- China Public Security Bureau: Recent Guangzhou cyber attack was by a foreign hacker organization 'supported by Taiwan DPP' - China state media.

- China Steel Association Official: China is attempting to resolve mismatch in steel demand and supply by controlling steel capacity - financial press.

- China raises cross border Chinese yuan (CNY) use requirement for major banks; PBOC increased the floor ratio for yuan-denominated trade transactions from 25% to 40% as part of its recent adjustment – press [overnight update].

- China to encourage firms to focus on long-term value creation – press [overnight update].

- MOODY'S affirms China's A1/A+ RATINGS; KEEPS OUTLOOK NEGATIVE [overnight update].

- China pres XI reportedly mulls new made-in-China plan to boost production of high-end tech goods despite US call to rebalance – Press. [overnight update].

- China PBOC sets Yuan reference rate: 7.1876 v 7.1833 prior.

- China PBOC Open Market Operation (OMO): Injects CNY448B in 7-day reverse repos; Net injects CNY91B v injects CNY247B prior.

Japan

- Nikkei 225 opens -0.1% at 37,500.

- Japan Apr PPI Services Y/Y: 3.1% v 3.0%e.

- 40-year JGB yield falls a further 10bps to 3.435%; Japan 20-year JGB yields join 30-year and 40-year JGB yields, falling 10bps to 2.405%.

- Japan MOF to hold meeting with JGB primary dealers on June 20th - Nikkei.

- Bank of Japan BOJ Gov Ueda: Japan still grappling with achieving 2% inflation target, but closer than at any time in over 3 decades - opening remarks at BOJ-hosted conference "New Challenges for Monetary Policy".

- Japan Economic Revitalization Min and Top Trade Negotiator Akazawa: Will Not sacrifice agriculture in trade talks - financial press

- Follow up: Japan Fin Min Kato: Rising yields are Not impeding stable sale of JGBs; Approves ¥300B reserve funds for economic support; ¥288B to be used for gas, electricity subsidies - financial press.

- At the end of 2024, Japan net external assets hit ¥533.1T ($3.7T), +13% y/y – MOF report.

- Rakuten to partner with Japan Post to sell rice from the national government's emergency reserves as soon as early June - Nikkei.

- Reportedly Japan plans to spend ¥900B in state funds for US tariff emergency relief package - Japanese press [overnight update].

- Japan PM Ishiba: Hope new rice sales will relive consumer concerns [overnight update].

Korea

- Kospi opens -0.5% at 2,630.

- South Korea May Consumer Confidence: 101.8 v 93.8 prior (highest since Nov 2024).

Other Asia

- Malaysia Trade Ministry: To begin FTA negotiations with GCC countries (Gulf countries) - financial press.

- (TW) China reportedly increased its ability to launch a sudden attack on Taiwan with faster-paced air and operations, new artillery systems and more alert amphibious and air assault units, according to Taiwanese and US officials and experts - FT [overnight update].

- Thailand Commerce and Fin Min Pichai: Mulls easing institutions' stock investment limit [overnight update].

North America

- DJT (Trump Media): Plans to raise $3B to spend on cryptocurrencies - FT (update).

- (US) Pres Trump: Countries from all over the World want to make TRADE DEALS with us. IT IS A BEAUTIFUL THING TO SEE. The Good Ol’ USA will soon have tremendous growth, and be stronger than ever before!!! [overnight update].

Europe

- Euro Zone Apr EU27 New Car Registrations: +1.3% v -0.2% prior; Tesla -53% y/y.

- UK govt said to be shifting to shorter-term borrowing - FT, citing UK DMO Official Jessica Pulay.

- (UK) May BRC Shop Price Index Y/Y: -0.1% v -0.1% prior; Food prices Y/Y: 2.8% v 2.6% prior (one year high).

- (EU) Follow up: EU Trade Commissioner Sefcovic said had a 'good call' with US Commerce Sec Lutnick - Press [update].

- (EU) ECB Chief Lagarde said strong euro will help EU counter Trump tariffs - financial press [update].

- (IR) Iran Foreign Ministry Spokesman Baghaei: Iran will not accept temporarily suspending uranium enrichment to secure a nuclear deal with US [overnight update].

- (RU) Russia govt spokesperson Peskov on Trump saying Putin has gone 'absolutely crazy': We are grateful to Trump for assistance in launching the Ukraine peace negotiations [overnight update].

- (EU) ECB’s Nagel (Germany): Uncertainty will probably be new normal [overnight update].

- (IL) Israel central bank (BOI) leaves base rate unchanged at 4.50%; as expected.

Levels as of 01:20 ET

- Nikkei 225 +0.1%, ASX 200 +0.4%, Hang Seng -0.3%; Shanghai Composite -0.2%; Kospi -0.6%.

- Equity S&P500 Futures -0.4%; Nasdaq100 -0.4%; DAX -0.1%; FTSE100 +0.5%.

- EUR 1.1369-114.08; JPY 142.12-143.25; AUD 0.6462-0.6502; NZD 0.5973-0.6007.

- Gold -1.2% at $3,354/oz; Crude Oil -0.4% $61.25/bbl; Copper -1.3% at $4.7840/lb.