AU and JP Manufacturing PMIs nearly back to expansion – CN banks under US sanctions threat

Asia market update: AU & JP Mfg PMIs nearly back to expansion; CN banks under US sanctions threat; AU CPI tomorrow; Global “PMI week”.

General trend

- Hang Seng again led Asia, +1.7% at lunch, with only the Shanghai Composite lagging in Asia despite a further raft of govt support announcements.

- Recent reports of Chinese companies denying transactions with Russian companies further developed today with WSJ breaking news that the US is said to be drafting sanctions to "cut off some China banks from the global financial system".

- Japan April prelim PMI nearly back to expansion, at 49.9, after 11 months of contraction, JP prelim PMI Services also increased at its sharpest pace since May 2023).

- Australian April prelim PMI also nearly back at expansion at 49.9, with PMI Composite at a 24-month high.

- Japan Fin Min Suzuki confirmed that he “could not deny” last week's discussions in Washington have laid the groundwork for Japan to take appropriate FX action.

- China PBOC weakest Yuan fix since Mar 1st.

- US equity FUTs slightly negative during Asian trading.

Looking ahead (Asian time zone)

- Tue Apr 23rd (Tue eve DE & UK Apr PMI; Tue night US Apr PMI).

- Wed Apr 24th AU Q1 CPI, NZ Mar Balance of Trade, ID rate decision.

- Thu Apr 25th KR Q1 Adv GDP, (Thu eve DE Consumer Confidence, Thu night US Q1 Adv GDP).

- Fri Apr 26th JP BOJ rate decision, AU PPI, (Fri night US Mar PCE).

Holidays in Asia this week

- Thu Apr 25th Australia, New Zealand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 7,650.

- Australia Apr preliminary PMI Manufacturing: 49.9 V 47.3 PRIOR (3rd month of contraction, but highest in 3 months).

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 80.3 v 83.5 prior [2024 low].

- New Zealand RBNZ releases submission on draft Commerce Commission market study; Disagrees that bank capital settings need to be reviewed.

China/Hong Kong

- Hang Seng opens +1.0% at 16,679; Shanghai Composite opens -0.2% at 3,038.

- US said to be drafting sanctions that threaten to 'cut some China banks off from the global financial system' for helping Russia – WSJ.

- China submits accounting law revisions to the NPC, seeks to raise fines for illegal accounting behaviors - Chinese press.

- China said to have recently acquired banned chips from Nvidia in servers from Super Micro and Dell; cites tenders – financial press.

- China Finance Ministry reiterates calls for PBOC to trade bonds - financial press.

- China LGFV's borrowing costs said to have effectively halved over the past six months to a record low - Chinese press citing sources (update).

- US Indo-Pacific Commander Aquilino: China economy is 'failing'; 5.3% GDP Growth Is 'Not Real' - US financial press via Tokyo press briefing.

- China created 3.03M new urban jobs in Q1 - Human Resources Ministry.

- China may still cut MLF rate further to reduce funding costs - China Securities Journal (inline).

- China Finance Ministry (MOF): To support increase in purchase and sale of government bonds, increase cooperation between monetary policies and financial reforms; vows to improve tax system in capital markets - Chinese press.

- China Finance Ministry (MOF) Li Xianzhong: To study increasing offering of sovereign saving bonds [overnight update].

- China Premier Li Qiang: Look to deepen capital market reforms [overnight update].

- China Foreign Ministry: Confirms US Sec of State Blinken to visit China on Apr 24-26th [overnight update].

- China Vice Fin Min Wang Dongwei: Tax growth breakdown shows robust consumer spending; China to strengthen supervision of use of ultra-long govt bonds [overnight update].

- Russia Foreign Min Lavrov: Russia and China have distributed a draft agreement on preventing deployment of weapons in outer space [overnight update].

- China PBOC sets Yuan reference rate: 7.1059 v 7.1043 prior (weakest fix since Mar 1st).

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repos; Net CNY0B v net CNY0B prior.

Japan

- Nikkei 225 opens +1.0% at 37,797.

- Japan Apr preliminary PMI Manufacturing: 49.9 V 48.2 PRIOR (11th month of contraction, but highest in 10 months).

- Japan Fin Min Suzuki: To spend ¥138.9B in budget reserves for Noto earthquake; affirms US, South Korea and Japan acknowledged FX concerns, the recent FX agreement between the countries is a 'milestone'.

- Japan BOJ Gov Ueda: Reiterates monetary policy will be data dependent - Parliamentary testimony.

- Japan Economy Min Saito : Energy in Japan not currently being impacted by the Middle East.

- Japan sells ¥2.6T VS. ¥2.6T indicated in 2-year JGB bonds; AVG yield: 0.3030% V 0.1870% prior; bid-to-cover: 3.48X V 4.07X prior.

South Korea

- Kospi opens +0.1% at 2,632.

- South Korea Mar PPI Y/Y: 1.6% v 1.5% prior.

- South Korea Fin Min: Will closely monitor financial markets amid Middle East tensions - financial press.

- Fitch: Korean insurers will be resilient on their overseas commercial real estate (CRE) holdings.

- North Korea Leader Kim Jong Un is leading nuclear counterstrike drills; These drills are a clear warning to our enemies - KCNA state media.

- South Korea opposition leader Lee Jae-myung: More proactive measures are necessary to lower the burden of citizens in an era of high oil prices [overnight update].

Other Asia

- Thailand PM Srettha: Asks 4 'major' commercial banks to cut interest rates in order to help small businesses.

- Taiwan Mar Export Orders Y/Y: +1.2% v +4.0%e (**Note: Feb YoY was -10.4%); Sees April orders +1.2-5.9% y/y [overnight update].

North America

- UnitedHealthcare Updates on Change Healthcare cyberattack: Data breach "could cover a substantial proportion of people in America".

- (US) Mar Chicago Fed National Activity Index: 0.15 v 0.09e.

- (CA) Canada Mar Industrial Product Price MoM: 0.8% v 0.7% prior; Raw Materials Price Index M/M: 4.7% v 2.1% prior.

- (AR) Argentina posts Q1 fiscal surplus ($315.4M, or 0.2% of GDP) for first time since 2008 - financial press, citing Pres Milei in televised address.

Europe

- (EU) ECB's Patsalides (Cyprus): ECB decisions to hinge on data; There is no set path.

- (EU) ECB's Centeno (Portugal, dove): Rate cuts this year could exceed 100bps [**Note: 1st ECB member to mention more than four 25bps rate cuts possible in 2024] - press interview.

- (EU) ECB Chief Lagarde: Do not want to see the EU and US become engaged in subsidy race.

Levels as of 01:20 ET

- Nikkei 225 +0.2%; ASX 200 +0.4%; Hang Seng +1.7%; Shanghai Composite -0.5%; Kospi flat.

- Equity S&P500 Futures flat; Nasdaq100 -0.1%; Dax +0.1%; FTSE100 +0.3%.

- EUR 1.0650-1.0661; JPY 154.66-154.85; AUD 0.6446-0.6465; NZD 0.5912-0.5928.

- Gold -0.9% at $2,325/oz; Crude Oil +0.6% at $82.41/brl; Copper -1.0% at $4.4405/lb.