Asian equites up after Wall St, AU yields rise after wage hike, US Fed pause expected

Asia Market Update: Asian Equites up after Wall St; AU yields rise after wage hike; US Fed pause expected; US Payrolls tonight.

General trend

- Risk-on sentiment seen in the US overnight carried into Asia, where equities were up strongly from the open.

- What appeared to be a relief rally spread to currencies that had suffered recent down moves; AUD and NZD each up early ~0.5%, USD/CNH nearly touched 7.14 overnight, but fell back today into the 7.08 handle.

- The AUD in particular surged even higher today to over 66.10 after the Australia Fair Work Commission’s minimum wage increase of +5.75% (including Awards). Some analysts have raised their expectations of further RBA rate hikes (see Australia section below). Aussie yields +6bps.

- China’s Dalian iron ore prices have risen >8% in two days, perhaps contributing to AU major miners Rio Tinto, Mineral Resources, Fortescue Metals and BHP all adding close to or over 2% today.

- China tech stocks snapped an 8-week losing streak. HK’s Hang Seng, after having touched bear market territory earlier in the week [-20% YTD] was up over 3.5% by lunch, with its Mainland Properties index +6%.

- Following on from yesterday, a financial press poll now sees Japan's Q1 GDP growth being revised up on Japan’s strong capex figures yesterday (fastest growth since 2015).

- US Equity FUTs have slightly extended US overnight gains.

- CME expectations of a US Fed rate pause now up to 74.9%.

- Oil recovered strongly, up from below $68 overnight to touch $71, ahead of this weekend’s OPEC meeting (June 4).

Looking today:

- Fast Retailing May SSS post Tokyo close today.

- Fri night US BLS non-farm payrolls and unemployment.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.4% at 7,142.

- Australia Fair Work Commission: FY24 National Awards Minimum Pay rate increase +5.75% from July 1, 2023, National Minimum Wage increase to A$22.61/hr [increase of NMW by +5.75%, effective July 1, 2023]; [Note: the National Minimum Awards Wage has a larger impact on CPI than the Minimum Wage].

- ANZ bank raises Australia's RBA terminal rate to 4.35% from 4.1% prior.

- RBC now sees Australia's RBA hiking 25bps in June and July; raises terminal rate forecast to 4.35% (prior 3.85%) - financial press.

- Australia Apr Home Loans Value M/M: -2.9% v 2.0%e.

- Australia sells A$500M v A$500M indicated in 4.25% Apr 2026 bonds: Avg Yield: 3.353%; bid-to-cover: 5.13x.

- New Zealand Q1 Terms of Trade Index Q/Q: -1.5% v 1.8% prior.

China/Hong Kong

- Hang Seng opens +1.9% at 18,566.

- Hong Kong Apr Retail Sales Value Y/Y: 15.0% v 13.8%e; Retail Sales Volume Y/Y: 13.3% v 9.5%e.

- Shanghai Composite opens +0.2% at 3,212.

- China PBOC sets Yuan reference rate: 7.0939 v 7.0965 prior.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repo; Net drains CNY3B v drains CNY5B prior.

- During May, China Commerce Ministry (MOFCOM) surveyed companies on the impact from the weaker yuan (CNY) - financial press [update].

Japan

- Nikkei 225 opens +0.5% at 31,300.

- Japan May Monetary Base Y/Y: -1.1% v -1.9% prior [9th straight decline].

- Japan Fin Min Suzuki: Reiterates a weak yen has both positive and negative aspects; will consider fiscal reforms toward year-end; Child care policy developments.

- Bank of Japan (BOJ) Gov Ueda; Want to help keep trust in yen by attaining price goal. One of the biggest factors that affects market trust in yen is price.

- Bank of Japan (BOJ) issued May Bond Market Survey – update.

South Korea

- Kospi opens +0.7% at 2,586.

-SOUTH KOREA MAY CPI M/M: 0.3% V 0.3%E; Y/Y: 3.3% V 3.4%E (slowest annualised rise since Oct 2021).

- South Korea Finance Minister: Exports likely to continue to improve going forward.

- South Korea Vice Fin Min: Uncertainties remain over future inflation path.

- Bank of Korea (BOK) board member Suh Young-kyung: USD/KRW unlikely to decline to pre-pandemic levels; Risks are not high for sudden halt of capital inflows despite won's weakness; h.

- Follow Up: South Korea and Japan tentatively agree on finance ministers meeting, the meeting might be held on Jun 29th.

Other Asia

- US, Taiwan cyber teams reportedly had a meeting focused on defense supply chain standards at California Consulate.

- Nvidia CEO: To meet with executives from Taiwan Semi and Foxconn on Fri; TSMC to make next-generation chips for Nvidia.

- JPMorgan CEO Dimon plans to visit Taiwan.

- Thailand May Business Sentiment Index: 49.7 v 50.1 prior.

North America

- US Senate passes the debt-ceiling bill (as expected).

- US Pres Biden: I look forward to signing the debt-ceiling limit bill into law ASAP.

- MAY ADP EMPLOYMENT CHANGE: +278K V +170KE; Pay growth slowing substantially.

- Q1 FINAL NONFARM PRODUCTIVITY: -2.1% V -2.4%E; UNIT LABOR COSTS: 4.2% V 6.0%E.

- INITIAL JOBLESS CLAIMS: 232K V 235KE; CONTINUING CLAIMS: 1.795MM V 1.80ME.

- MAY ISM MANUFACTURING: 46.9 V 47.0E; Prices Paid: 44.2 v 52.3e (lowest level of the year); New Orders Index: 42.6 v 45.7 prior; Backlog of Orders Index dropping to a level not seen since the Great Recession.

- Fed releases factors affecting reserve balances (H.4.1): Discount window borrowing fell/ to $3.97B v $4.2B w/w; Banks have borrowed $93.6B v $91.9B w/w from new BTFP facility.

- DELL Guides Q2 revenue $20.2-21.2B v $21.0Be, sees 2% sales impact from FX, Sales in client solutions group flat q/q, infrastructure unit sales will drop q/q - earnings call comments (-2.93% A/H).

Europe

- ECB Chief Lagarde: Reiterates there is still ground to cover on rates; not happy with inflation outlook.

- ECB MAY MEETING ACCOUNT (MINUTES): 25bps hike was warranted to move rates into sufficiently restrictive territory to ensure a timely return of inflation to target.

- ECB's Kazaks (hawk, Slovenia): Reiterates Council stance that rates will stay at peak for a while, hard to say where that peak will be.

- Bank of England (BoE) May Decision Maker Panel Survey: Raises 1-year ahead CPI from 5.6% to 5.9%.

Levels as of 01:20 ET

- ASX200 +0.5%; Hang Seng +3.5%; Shanghai Composite +0.6%; Nikkei 225 +1.1%; Kospi +1.1%.

- Equity S&P500 Futures +0.2%; Nasdaq100 +0.2%, DAX +0.5%; FTSE100 +0.6%.

- EUR 1.0758 – 1.0770; JPY 138.61 – 139.06 ; AUD 0.6565 – 0.6616 ; NZD 0.6026 – 0.6107.

- Gold flat at $1,996/oz; Crude Oil +0.4% at $70.42/brl; Copper +0.4% at $3.7252/lb.