Eyes also on UK Core CPI ahead of UK BOE rates

Asia market update: Hang Seng again drops ~2% as CN stimulus continues to underwhelm; BOJ Minutes – business as usual; Quiet markets – perhaps waiting for US Fed Chair Powell House testimony tonight? Eyes also on UK Core CPI ahead of UK BOE rates.

General trend

- Following on from yesterday’s lesser than expected cut to China’s 5-yr LPR cut of 10bps (v 15bps expected) the Hang Seng opened down a further -1.5% at the open and kept dropping to over -2% an hour into trading; Largely mirroring a corresponding fall in the HSMPI (Mainland Property Index) as markets continue to wait for more meaningful stimulus measures.

- Alibaba opened 3.5% down following yesterday’s top management succession plan announcement.

- In Asia trading only the Nikkei could gain (+0.6%).

- Japan BOJ’s Monetary Policy Meeting Minutes for April (two decisions ago) delivered more of the “easy-monetary-policy-for-as-long-as-needed” theme, however in more detail they show that members are beginning to discuss the possibility that recent wage growth may be persistent.

- Next chance to examine this in detail will be Monday’s release of BOJ Summary of Opinions from the last MPM meeting on June 15.

- An interesting example of what China “de-risking” may look like in actuality: Today Korea reported June 1-20 Exports/Imports and within the figures were China exports -12.5% y/y, while US exports +18.4% y/y.

- The AUD/USD dropped even further overnight (>2% overall) since the release of yesterday’s more dovish than expected RBA Minutes. While AUD/USD has recovered some 40% of the drop during today’s session, Aussie 10-yr yields are down -5bps today.

- US Equity FUTs are slightly down.

- Fed futures currently price 74% chance for 25bps rate hike at July 26th's FOMC decision ahead of Powell's two-days testimony this week.

- Finally, tonight’s reading on UK Core CPI will be closely watched as last month Y/Y for Apr 6.8% v 6.2%e was the highest since early 1990s. To be followed the next day by UK BOE rate. decision.

Looking ahead

- This evening UK CPI.

- Wed night & Thu night– US Fed Chair Power House and then Senate testimonies.

- Thu UK BOE rate decision.

- Thu Jun 22 China, Hong Kong, Taiwan (Dragon Boat festival) – holiday, markets closed.

- Fri Jun 23 China, Taiwan (Dragon Boat festival) – holiday, markets closed.

- Fri JP CPI.

- Fri night US Prelim PMIs.

Headlines/economic data

Australia/New Zealand

- ASX 200 early trading -0.2% at 3,340.

- Australia May Westpac Leading Index M/M: -0.27 v -0.03% prior.

- New Zealand Fin Min Robertson: Economic environment remains challenging - Parliamentary Committee Hearing.

- Reserve Bank of New Zealand (RBNZ): research results indicate that using surveyed inflation expectations in forecasting models can improve forecasts of inflation.

- Fonterra Global Dairy Trade Auction Dairy Trade price index: 0.0% (flat).

China/Hong Kong

- Shanghai Composite opens -0.3% at 3,230.

- Hang Seng opens -1.5% at 19,305.

- Hong Kong May CPI Composite Y/Y: 1.8% v 1.9%e [overnight update].

- China PBOC Open Market Operation (OMO): Sells CNY145B in 7-day reverse repo; Net injects CNY143B v injects CNY180B prior.

- China PBOC sets Yuan reference rate: 7.1795 v 7.1596 prior (weakest CNY fix since Nov 29, 2022).

- China policy adviser Wang Huning [Politburo Standing Member] said to stress the need to revive consumption.

- China expected to see further rate cuts and RRR cuts this year - China Securities papers' front page news.

- China Fin Min: Confirms to extend purchase tax exemption on NEVs purchased between 2024-25; the tax exemption will reach CNY520B in 2024-2027.

- China Industry Ministry (MIIT) Vice Min Xin: Allow market mechanism to phase out uncompetitive car markers; to draft plans to push lithium mining.

Japan

- Nikkei 225 opens -0.6% at 33,200.

- Bank of Japan (BOJ) Apr Minutes (two decisions ago): Sees no need to revise the conduct of Yield Curve Control (YCC) at this time.

- Japan BOJ Board Member Adachi: Inflation increasing faster than I expected; (For now) it is appropriate to continue monetary easing with YCC framework.

- Japan PM Kishida eyes Cabinet reshuffle as soon as summer – Nikkei.

- Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 50bps; Opens window to buy unlimited amount of 10-year JGBs at 0.50% [as expected].

South Korea

- Kospi opens -0.2% at 2,599.

- South Korea June 1-20th Day Exports Y/Y: +5.3% v -16.1% prior; Imports Y/Y: -11.2% v -15.3% prior.

- South Korea Fin Min Choo: Sees some positive signs in exports – press.

- Bank of Korea (BoK) Financial Stability Board Meeting Minutes: Real Estate-related financial stability risks are at manageable level.

Other Asia

- Taiwan May Export Orders Y/Y: -17.6% v -21.4%e (9th straight decline, but notes AI helped to perform better than expected); Expects June Export Orders -21.0% to -17.6% y/y.

- China MOFA: US has distorted its political promise to China - comments on US's Taiwan position.

- Philippines Pres Marcos: Now have coordination on fishing bans with China.

- Vietnam Central Bank (SBV) Dep Gov: Monetary policies of trading partners have huge impact on domestic policies and reserves; monetary policies to remain cautious, flexible to stabilize interest rates and inflation.

- Singapore Central Bank (MAS): Proposes Standards for Digital Money.

North America

- US May housing starts: 1.631M V 1.400ME; building permits: 1.491M V 1.425ME; Single family starts: +18.5% m/m, Single family permits: +4.8% m/m.

- Jun Philadelphia Fed Non-Manufacturing Regional Index: -16.6 v -16.0 prior; New Orders: -16.2 v +2.7 prior.

- (CN) US said to have tracked workers at Huawei and ZTE at suspected Chinese spy sites in Cuba – WSJ.

- (CN) China officials said to be planning Pres Xi and US Pres Biden meeting at the upcoming APEC summit in US in Nov 2023 - US financial press [overnight update].

- US Pres Biden comments at California fundraiser: Says that Pres Xi of China is in a situation where he wants a US relationship again; Calls Pres Xi a dictator.

Europe

- (EU) ECB’s Vujcic (Croatia, hawk): Core inflation pressures remain in Euro Zone.

- (LT) ECB's Simkus (Lithuania): Will not be surprised to see ECB raise rates in Sept.

- (EU) ECB’s Villeroy (France): Most of ECB rate-hike path is complete.

- (CN) China Premier Li Qiang: Ready to move forward with Germany; to continue dialogue and engagement - joint press conference with Chancellor Scholz.

Levels as of 01:20 ET

- Nikkei 225, +0.8%, ASX 200 -0.4%, Hang Seng -2.2%; Shanghai Composite -0.7% ; Kospi -0.8%.

- Equity S&P500 Futures: flat; Nasdaq100 flat; Dax +0.2%; FTSE100 -0.2%.

- EUR 1.0911-1.0927 ; JPY 141.28-142.86 ; AUD 0.6777-0.6800 ; NZD 0.6158-0.6187.

- Gold -0.1% at $1,945/oz; Crude Oil +0.5% at $71.58/brl; Copper +0.4% at $3.8965/lb.