China does not set numerical GDP target at NPC

Asia Market Update: Asian indices weighed down by US declines and political concerns related to HK; Hang Seng drops over 5.5%; China does not set numerical GDP target at NPC; BOJ disclosed details of new lending program, Alibaba to report later today.

General Trend:

- Property, energy and financial firms are among the biggest losers in Hong Kong; China Parliament plans to propose national security bill regarding Hong Kong at annual session (Chinese press)

- China NPC expected to vote on Hong Kong National Security Law on Thursday, May 28th
Highlights of China’s NPC Statement: Will not issue numerical growth target for 2020; Affirms Monetary Policy stance; Guiding money supply significantly higher y/y; Budget Deficit Target >3.6% GDP v 2.8% y/y; To proactively expand active investment; Will work with US to implement Phase 1 of trade deal; To establish sound legal system for national security in Hong Kong.

- Fitch became the second major ratings agency to cut Australia’s AAA rating outlook to Negative

- India Central Bank cut rates by 40bps (unscheduled move)

Headlines/Economic Data

Australia/New Zealand

- ASX 200 opened +0.1%

- (AU) Fitch cuts Australia sovereign Outlook to Negative from Stable, Affirms AAA rating; cites impact of coronavirus pandemic on economy and public finances

- (AU) Australia Treasury: JobKeeper Program expected to cost A$70B v A$130B prior; revises number of employees on Jobkeeper subsidy to 2.9M from 6.5M previous; Review found 1000 businesses made errors in JobKeeper Applications

- (AU) Australia sells A$2.0B v A$2.0B indicated in 0.25% 2024 bonds, avg yield 0.3576%, bid to cover 4.6X

- (AU) Australia to sell A$5B of treasury bonds next week; A$25B by June 30th; No new Syndication sales until after June; Total gross bond issuance for 2019/20 to be A$130B.

- (NZ) New Zealand Q1 Retail Sales ex-inflation Q/Q: -0.7% v -1.5%e (largest decline in 8 years)

- (NZ) New Zealand Fin Min Robertson: Helicopter money being discussed, but not on a level on details of how it will function; Keen to making sure fiscal policy remains with the Government, not central bank

- (NZ) Reserve Bank of New Zealand (RBNZ) Gov Orr: Reiterates more QE is the next option if additional stimulus is needed

- (NZ) Reserve Bank of New Zealand (RBNZ) buys NZ$450M v NZ$450M prior in government bonds as part of QE (NZ$450M sought)

- (NZ) Reserve Bank of New Zealand (RBNZ): Will seek to purchase NZ$1.18B in government bonds next week vs NZ$1.35B prior

China/Hong Kong

- Shanghai Composite opened -0.2%, Hang Seng -2.2%

- (CN) China Finance Ministry: To extend fiscal subsidies for new energy cars until end-2022, to extend coverage of unemployment insurance

- (CN) China Parliament plans to propose national security bill regarding Hong Kong at annual session - Chinese press

- (HK) China Hong Kong Security bill to allow China to establish an agency in Hong Kong to safeguard national security

- (CN) Pres Trump: US will address 'very strongly' any China crackdown in Hong Kong

- (CN) State Dept statement: Beijing's recent statements on potential national security legislation regarding Hong Kong undermines China's commitments and obligations

- (CN) China warns of 'countermeasures' over US coronavirus sanctions threat – AFP

- (CN) US Senate Majority Leader McConnell (R-KY): Further China crackdown on Hong Kong will intensify US Senate interest on re-examining US-China relationship

- (US) Sen Hawley (R-MO): to offer Senate resolution which condemns China's Hong Kong security law

- (CN) USDA and USTR announce additional progress in implementation of agriculture-related parts of US-China Phase 1 trade deal

- (US) White House econ adviser Kudlow: China commodity purchases are lagging a bit due to the current market; China has every intent to implement the deal; Lighthizer and I spoke with China's Liu He recently

- (CN) China National Health Commission Coronavirus Update for May 20th: 4 additional cases (2 imported v 1 prior) v 2 prior

- (CN) China PBOC sets Yuan reference rate: 7.0939 v 7.0868 prior

- (CN) China PBoC Open Market Operation (OMO): Skips Reserve Repo Operations for the 34th consecutive session; Net CNY0B v CNY0B prior

- (CN) China Ministry of Finance (MOF) sells 50-year bonds avg yield 3.73% v 3.60% expected (3.8418% prior); bid to cover 1.8x v 2.1x prior

Japan

- Nikkei 225 opened +0.2%

- *(JP) BANK OF JAPAN (BOJ) ANNOUNCES DETAILS OF MEASURES TO FUND BANKING SECTOR AT UNSCHEDULED MEETING: the new fund-provisioning measure is equal to about ¥30.0T; Left interest rate policy and JGB buying unchanged (as expected)

- *(JP) JAPAN APR NATIONAL CPI Y/Y: +0.1% V 0.2%E; CPI EX-FRESH FOOD (CORE) Y/Y: -0.2% V -0.1%E (First drop since Dec 2016)

- (JP) Japan PM Abe: Could life the State of Emergency for Tokyo on Monday, May 25th if current trend continues

Korea

- Kospi opened +0.2%

- (KR) South Korea confirms 20 additional coronavirus cases; 0 Additional deaths

- (KR) South Korea Vice Fin Min reiterates country may see worst economic decline in Q2 - Local press

- (KR) South Korea Ruling Party: Seeking KRW40T in 3rd extra budget [in line with prior speculation]

Other Asia

- (IN) INDIA CENTRAL BANK (RBI) CUTS REPURCHASE RATE BY 40BPS TO 4.00% - intra-policy move; Cuts Reverse Repo Rate by 40bps to 3.35%

North America

- (US) Treasury Sec Mnuchin: there is a strong chance we will need a new stimulus bill

- (US) Senate Majority Leader McConnell (R-KY): Highly likely there will be another rescue package; Important to incentivize people to return to work - Fox interview

- (US) Fed Total Balance Sheet Size as of May 20th: $7.09T (record) v $6.98T w/w; Net portfolio holdings of Corporate Credit Facility: $1.8B v $305M prior; Paycheck Protection Program Liquidity Facility: $45.1B v $40.6B prior

- (US) SEMI Apr North America-based Manufacturers of Semi Equipment Billings: $2.26B, +2.2% m/m and +17.2% y/y; April billings of North America-based semiconductor equipment manufacturers reflect healthy equipment demand

Europe

- (UK) UK PM Johnson: Reported to want to limit reliance on China for vital medical supplies and other strategic imports after the coronavirus pandemic - UK Press

- (UK) UK May Prelim GfK Consumer Confidence: -34 v -33 prior (Lowest since Feb 2009)

- (SA) Saudi Arabia reported to quarantine banknotes and metal coins- Local press

Levels as of 1:20 ET

- Nikkei 225, -1%, ASX 200 -1%, Hang Seng -5.5%; Shanghai Composite -1.9%; Kospi -1.7%

- Equity Futures: S&P500 -0.7%; Nasdaq100 -0.7%, Dax -1%; FTSE100 -1.1%

- EUR 1.0953-1.0927 ; JPY 107.76-107.43; AUD 0.6578-0.6527 ;NZD 0.6131-0.6092

- Gold +0.3% at $1,727/oz; Crude Oil -5.6% at $32.02/brl; Copper -1.1% at $2.397/lb