Japan jobless rate remains at 23-year low but household spending remains soft

Politics

- (UK) According to Times/Survation Poll, support for UK Conservatives at 43% vs 37% for Labour - US financial press

- (UK) Opposition Labour Party leader Corbyn: Would be open to Scotland referendum talk with SNP if Labour party wins next month's elections - UK press

- (UK) PM May reiterates prepared to walk away from Brexit talks without a deal with the EU if the agreement was not good enough – UK Press

- (BR) Brazil President Temer: No parties informed him of plan to quit coalition; Still fully capable of governing

- (GR) Greece may opt out of next payment without a debt deal - German Press

Key economic data

- (JP) JAPAN APR RETAIL SALES M/M: +1.4% (6-month high) V -0.2%E; RETAIL TRADE Y/Y: 3.2% (2-year high) V 2.3%E

- (JP) JAPAN APR OVERALL HOUSEHOLD SPENDING Y/Y: -1.4% V -0.9%E; 14th consecutive month of decline

- (JP) JAPAN APR JOBLESS RATE: 2.8% V 2.8%E (matches lowest rate since Jun 1994)

- (AU) AUSTRALIA APR BUILDING APPROVALS M/M: +4.4% V +3.0%E; Y/Y: -17.2% (8th consecutive decline) V -18.1%E

- (NZ) NEW ZEALAND APR BUILDING PERMITS M/M: -7.6% V -1.2% PRIOR; 2nd straight decline and biggest decline in 5 months

Asia Session Notable Observations, Speakers and Press

- Asian indices are mixed as thin trading persists for the 2nd day of Dragon Boat Festival day, with Shanghai, Taiwan, and Hong Kong all joining US markets for holiday break. Korea's Kospi is seeing some profit taking from recent record highs, Australia is marginally higher, while Nikkei225 is dragged down by USD/JPY retreat below 111. Modest risk-off is playing out in FX space going into key US PCE inflation data and China manufacturing PMIs this week, both of which have shown underwhelming prints over the past 2 months. EUR/USD is also under pressure, falling for the 4th straight session to 1.1120. Dovish remarks from ECB head Draghi justifying the current easy stance were compounded by escalating standoff between Greece and negotiations, as German press reported Athens may opt out of next payment without a debt deal. GBP/USD was also down slightly to fall below $1.28, with another poll showing Labour gaining on Conservatives heading into elections in just 10 days.

- Economic data were also largely mixed. Japan jobless rate remains at 23-year low 2.8%, though household spending continues to falter with its 14th consecutive month of decline. Recall the latest Labor Cash earnings data out of Japan saw the biggest decline in nearly 2 years, suggesting that tight labor market is not producing wage inflation. Former BOJ member Shirai notes this is largely to the structural rigidity in Japan society. In Australia, building approvals rose m/m after a significant decline in the prior month, however economists with Westpac said the rebound is likely to be temporary, and housing investment will still enter into material decline later this year and becoming a drag on growth.

China

- (CN) PBOC denies press report it told banks to deposit in dollars, in order to meet liquidity needs - financial press

- (CN) Templeton's Mobius: Iron ore consumption in China likely to be sustained as infrastructure buildup continues - press

Japan

- (JP) Former BOJ member Shirai: Japan has a labor shortage but labor structure is not allowing wage inflation

Australia/New Zealand

- (AU) Westpac: Monthly update on Australia building approvals was more positive than expeted, but slowdown theme remains - press

- (NZ) Moody’s: Budget highlights fiscal flexibility and shock absorption capacity

Korea

- (KR) South Korea Financial Supervisory Service (FSS): Bad debt ratio for loans by local lenders in Q1 fell 0.04pts to 1.38%, lowest since Q4 of 2012 - Korean press

- (KR) South Korea conducted drills with US B-1B strategic bomber on Monday

Asian Equity Indices/Futures (00:00ET)

- Nikkei -0.3%, Hang Seng closed, Shanghai Composite closed, ASX200 +0.2%, Kospi -0.5%

- Equity Futures: S&P500 flat; Nasdaq flat, Dax flat, FTSE100 -0.1%

FX ranges/Commodities/Fixed Income (00:00ET)

- EUR 1.1120-1.1170; JPY 110.75-111.30; AUD 0.7415-0.7445; NZD 0.7035-0.7060

- June Gold flat at 1,268/oz; July Crude Oil +0.1% at $49.86/brl; July Copper -0.5% at $2.56/lb

- (JP) Japan MoF sells ¥1.99T v ¥2.2T indicated in 2-yr 0.1% (prior 0.1%) JGBs; Avg yield: -0.162% v -0.193% prior; bid to cover: 5.06x v 5.51x prior

- (AU) Australia MoF sells A$150M in 2.0% in 2035 bonds; bid-to-cover 2.36x

- (AU) Australia Office of Financial Management (AOFM) CEO: No plan to extend bond curve beyond 30 years - press

Asia equities notable movers

Australia

- Insurance Australia (IAG) +3.1%; Raised at Credit Suisse

- Sandfire Resources (SFR) +1.3%; Guides FY17 production

Japan

- Suzuki (7269) +0.5%; Apr production

- Panasonic (6752) +0.4%; To increase output at Tesla battery plant - comments from mid-term outlook

- Japan Airlines (9201) -0.5%; Cut at JPMorgan

- Toshiba (6502) -0.7%; INCJ to enter into negotiations with Western Digital regarding joint bid for chip unit - Japanese Press