Asia Market Update: Another red day for Asian equities; NZ 2024 budget holds few surprises; RBA's Hunter hints close to terminal rates; Focus on US Q1 GDP 2nd est. tonight.

General trend

- Asian equities continued the fall in US stocks overnight in another day of significant price drops with most indices down more than 1%.

- New Zealand’s new conservative coalition-government delivered its first budget for 2024. Some modest tax relief was offered as the government cut back on spending with the goal of returning to budget surplus by 2027. Govt also sees inflation falling back to below upper-target of 3% by Q3 of this year, and further down to mid-target of 2% by 2026. Kiwi dollar and yields unmoved by it all, with the Kiwi moving down slightly during the day in a continuation of a down-move started 2 days ago.

- RBA’s Chief Economist Hunter said some Australian households are struggling, hinting at limits to further rate increases. However, reiterated that the RBA is ‘absolutely focused on inflation, clearly still above target band’.

- Japanese benchmark 10-yr JGB yields continued this week’s rise, hitting 1.10% for the first time since July, 2011. However, later in the day bonds recovered ~3bps with yields dropping back to ~1.07%. Nevertheless Yen continued its steady gains during Asian trading, last up +0.3% back to 157.10.

- China PBOC announced various support measures for Yuan "market development", including supporting more institutions to issue "Panda bonds".

- US equity FUTs continued falling after steep falls overnight in NY, -0.5% to -0.6% during Asian trading.

Looking ahead (Asian time zone)

- Thu May 30th (Thu night US Q1 GDP 2nd est. + May 25th initial jobless).

- Fri May 31st JP Tokyo May CPI, Apr Ind Prod + Retail Sales, CN NBS May PMIs, (Fri eve EU May flash CPI, Fri night IN Q1 GDP, US Apr PCE, CA Q1 GDP).

Holidays in Asia this week

- Thursday May 30th Malaysia.

- Friday May 31st Malaysia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 7,661.

- AUSTRALIA Q1 PRIVATE CAPEX: 1.0% V 0.7%E.

- Australia Apr Building Approvals M/M: -0.3% v 1.8%e.

- Reserve Bank of Australia (RBA) Sarah Hunter (Chief Economist): We agree with the Treasury forecast on inflation.

- New Zealand Apr Building Permits M/M: -1.9% v -0.2% prior.

- New Zealand Treasury 2024/25 Budget Policy Statement: Forecasts budget deficit to widen to NZ$11.07B for Jun, 2024, from NZ$9.32B prior forecast; Sees tax cuts worth NZ$14.7B over four years.

- Australia Ag Min Watt: Australian beef exports to China can resume immediately – press.

China/Hong Kong

- Hang Seng opens -0.3% at 18,423; Shanghai Composite opens -0.2% at 3,103.

- China PBOC's Dep Gov Tao Ling: Announces support measures for Yuan market development.

- China said to ease rules related to solar and wind industry - Chinese press.

- Hong Kong Court find some democrats guilty of subversion in landmark test of new National Security Law - press.

- China to strictly control coal consumption; Aims for non-fossil energy consumption to account for 20% of total energy consumption – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1111 v 7.1106 prior (weakest since Jan 2023).

- China PBOC Open Market Operation (OMO): Sells CNY260B in 7-day reverse repos; Net injects CNY258B v net injects CNY248B prior.

Japan

- Nikkei 225 opens -1.2% at 38,112.

- Japan releases weekly flows data [period ended May 24th]: Foreign buying of Japan equities: ¥82.4B v ¥248.3B prior; Japan buying of foreign bonds: -¥297.9 v +¥2.2T prior.

- JAPAN SELLS ¥2.6T VS. ¥2.6T INDICATED IN 2-YEAR JGB BONDS; AVG YIELD: 0.4180% V 0.3030% PRIOR; BID-TO-COVER: 3.78X V 3.48X PRIOR.

- AAPL (JP) Japan Chief Cab Sec Hayashi: Japan to put troubled national ID "My Number" functions onto the iPhone next Spring - Japanese press.

- Toyota Reports Apr Group sales 835.8K units, -4.5% y/y.

South Korea

- Kospi opens -0.4% at 2,666.

- North Korea has fired another ballistic missile test – press [overnight update].

Other Asia

- Thailand Central Bank Dep Gov Alisara: Thai Q1 GDP growth better than Central Bank's expectations.

- Thailand Apr ISIC Manufacturing Production Y/Y: +3.4% v -1.3%e (First output increase in 19 months).

- US Indo-Pacific chief Paparo: China's drills appear to be rehearsal for Taiwan invasion – Nikkei [overnight update].

North America

- (US) Fed’s Bostic (hawk, voter): The fourth quarter may be the time when Fed can reduce rates.

- (US) MBA Mortgage Applications w/e May 24th: -5.7% v 1.9% prior.

- (US) MAY RICHMOND FED MANUFACTURING INDEX: 0 V -6E; Backlog of orders: -19 v -17 prior.

- (US) FDIC reports US Q1 bank profits rose 79.5% to $64.2B; Problem list rose to 63 from 52 firms.

- (US) May Dallas Fed Services Activity: -12.1 v -9.4e.

- (US) TREASURY $44B 7-YEAR NOTE AUCTION RESULTS: DRAWS 4.650% V 4.716% PRIOR, BID-TO-COVER RATIO: 2.43 V 2.48 PRIOR AND 2.56 OVER LAST 12 AUCTIONS.

-(US) FEDERAL RESERVE BEIGE BOOK BEIGE BOOK: ECONOMIC ACTIVITY CONTINUED TO EXPAND BUT CONDITIONS VARIED ACROSS DISTRICTS; PRICES INCREASED AT A MODEST PACE.

Europe

- (DE) GERMANY MAY PRELIMINARY CPI M/M: 0.1% V 0.2%E; Y/Y: 2.4% V 2.4%E.

- (EU) ECB to impose first ever fines on banks for failing to remedy their deficiencies around climate risk.

Levels as of 01:20 ET

- Nikkei 225 -1.4%; ASX 200 -0.4%; Hang Seng -1.5%; Shanghai Composite -0.5%; Kospi -1.5%.

- Equity S&P500 Futures -0.6; Nasdaq100 -0.7%; Dax -0.3%; FTSE100 -0.3%.

- EUR 1.0790-1.0809; JPY 157.05-157.68; AUD 0.6599-0.6621; NZD 0.6095-0.6120.

- Gold -0.4% at $2,331/oz; Crude Oil -0.2% at $79.11; Copper -1.5% at $4.7037/lb.

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