Asia market update: Asia tech follows Nvidia higher; JP & CN each prepare for strategic changes in national bond buying and selling; Focus on UK May CPI.

General trend

- Asian equities opened higher with technology and chip-relateds doing well after Nvdia became the most valuable company in the world overnight, +3.5% to $135/shr. Australia and Shanghai markets later lagged, with Hang Seng outperforming +2.1%.

- Japan’s exports for May grew at their fastest pace since 2022, being boosted by the weak Yen.

- Japan’s BOJ Minutes for April (two meetings ago) showed that members debated the weak Yen’s impact on inflation, and that the BOJ might respond if the weak Yen alters the economic outlook.

- Potentially significant news in terms of bond selling and buying out of both Japan and China today:
1) A Japan MOF panel in a draft proposal urged the govt to issue shorter-duration debt to reduce interest rate risk, saying that Japan must create an environment where government bonds remain an attractive investment for financial institutions in an era of rising interest rates. Specifically, the report said there is scope for banks to increase their holdings of JGBs, and that private banks can play a "big role" to ensure Japan can keep selling debt smoothly in the market. [** Note: Private Japanese banks reduced their holdings of JGBs to 13.1% as at end-2023, down from 41.2% in 2012]
2) Out of China PBOC Gov Pan said that the conditions for the PBOC to trade treasury bonds in secondary markets to inject base money have “become gradually ripe”, backing up rumors in recent months of China Pres Xi calling for official national bond trading in China. Pan made it clear that such a move “would not be QE”.

- China's annual Lujiazui Forum (a major financial event for China each year) started today, with heads of many financial regulatory agencies speaking.

- US equity FUTs mostly flat during Asian trading.

Looking ahead (Asian time zone)

- Wed 19th Jun: (Wed eve UK May CPI).

- Thu 20th Jun: NZ Q1 GDP, CN LPR, (Thu eve UK rate decision, Thu night US May prelim Building Starts).

- Fri 21st Jun: AU Jun prelim PMI, JP Ntnl May CPI, JP Jun prelim Mnfg PMI, India PMI, (Fri eve UK May Retail Sales, DE & EU & UK prelim Mnfg PMI Flash. Fri night CA Apr Retail Sales, US S&P Jun prelim Mnfg PMI).

Holidays in Asia this week

- Monday June 17th India, Indonesia, Malaysia, Philippines, Singapore.

- Tuesday June 18th Indonesia.

- Wed June 19th (Note: Wed 19th US time is a US holiday).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 7,775.

- Australia opposition leader Peter Dutton: Announces two large-scale nuclear power stations by 2037 and seven nuclear sites, if his party wins the next general election - Australian media.

- Australia sells A$800M vs. A$800M indicated in 2.75% Jun 2035 bonds; Avg Yield: 4.1816% v 4.3516% prior; bid-to-cover: 2.21x v 2.92x prior.

- New Zealand Q1 Current Account (NZD): -4.4B v -4.7Be.

- New Zealand May Non Resident Bond Holdings: 61.5% v 62.2% prior.

- New Zealand RBNZ Chief Economist Conway: Inflation may be more sticky in the near term - prepared speech; The Road Back to 2%.

- New Zealand fails to sell carbon units at June auction.

- Fonterra Global Dairy Trade Auction Dairy Trade price index: -0.5% v +1.7% prior.

- Reserve Bank of Australia (RBA) Gov Bullock: Board discussed the case for a rate hike, but the case for a rate cut was NOT considered - comments post-rate decision [overnight update].

China/Hong Kong

- Hang Seng opens +0.8% at 18,056; Shanghai Composite opens flat at 3,029.

- IMF said to set up new regional center in Shanghai - Chinese state media.

- China and EU automakers reportedly held closed door meeting on Jun 18th - Chinese state media.

- China PBOC Gov Pan: Conditions for PBOC to trade treasury bonds in secondary market to inject base money have become gradually ripe - speaks at Lujiazui Forum.

- China SAFE (FX regulator] Chief Zhu Hexin: China's FX market operation is resilient - speaks at Lujiazui Forum.

- China Financial Regulator (NFRA) Chief Li: China economy's positive trend has not changed - speaks at Lujiazui Forum.

- China Securities Regulator (CSRC): Will make every effort to promote high-quality development of the capital market.

- China sells 20-year Special Bonds; Avg Yield: 2.3858% v 2.49% prior; bid-to-cover x v 4.34x prior.

- US govt is seeking help from allies in effort to curb China's progress on AI memory chips - press.

- China Securities Regulator (CSRC): Will prevent abnormal stock market volatility [overnight update].

- China PBOC sets Yuan reference rate: 7.1159 v 7.1148 prior.

- China PBOC Open Market Operation (OMO): Sells CNY278B in 7-day reverse repos; Net injects CNY276B v net injects CNY84B prior.

Japan

- Nikkei 225 opens +0.5% at 38,653.

- JAPAN MAY TRADE BALANCE: -¥1.221T V -¥1.280TE.

- Japan May Tokyo Condominiums for Sale Y/Y: +2.6% v -42.5% prior.

- Bank of Japan (BOJ) Apr Minutes (2 decisions ago): BOJ debated impact of weak Yen on inflation.

- Japan MOF panel to urge govt to issue shorter-duration debt to reduce interest rate risk - Japanese press, citing a draft proposal.

- (JP) Norinchukin Bank eyes assets including CLOs, stocks after bond loss; Also weighs local, overseas bonds, and project finance.

- Japan Chief Cab Sec Hayashi: Financial health of Norinchukin bank is sufficient, but watching closely potential impact of Norinchukin's management on affiliated financial institutions.

- Japan sells ¥3.2T vs. ¥3.2T indicated in 12-Month Bills; Avg Yield: 0.1391% v 0.2034% prior; bid-to-cover: 4.70x v 4.37x prior.

South Korea

- Kospi opens +0.8% at 2,786.

- South Korea govt: Chinese and South Korean officials agree to develop relations in a 'more mature, healthier way' - Korean press.

- South Korea FX authorities reportedly aimed to cap USD/KRW at 1,385 in May - financial press, citing sources.

- (RU) Official Ceremony for Russia Pres Putin and North Korea's Kim Jong Un starts - Russian pres.

Other Asia

- Follow up: Malaysia, China agree to visa-free travel between both countries - financial press.

- Reserve Bank of India (RBI) Gov Das: Optimistic that Q1 GDP projection of 7.3% will hold - speech.

- Philippines Navy: A navy officer has sustained a severe injury after actions from Chinese Coast Guard in South China Sea [overnight update].

North America

- (IL) Reportedly Biden Admin delays moving forward with F-15 sale to Israel - press.

- CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 25BPS TO 5.75%; AS EXPECTED.

- (US) Goldman Sachs: Our employment survey tracker has fallen to levels consistent with stagnation or slight contraction; The labor market stands at a potential inflection point.

- (US) MAY ADVANCE RETAIL SALES M/M: 0.1% V 0.3%E; RETAIL SALES (EX-AUTO) M/M: -0.1% V 0.2%E; Retail Sales (ex-auto/gas): 0.1% v 0.4%e; April revised lower.

- (US) Jun New York Fed Services Business Activity: -4.7 v +3.0 prior (2nd negative print in 3 months).

- (US) Fed's Williams (voter): Fed decisions will depend on data; Politics will not influence Fed rate decisions - Fox Business interview.

- (US) Mid-June Manheim wholesale used vehicle Index at 196.8; 0.3% m/m; -8.5% y/y.

- (US) MAY INDUSTRIAL PRODUCTION M/M: 0.9% V 0.3%E; CAPACITY UTILIZATION: 78.7% V 78.6%E.

- (US) APR BUSINESS INVENTORIES: 0.3% V 0.3%E.

- (US) Fed’s Barkin (voter): We're clearly on the backside of inflation; Headline inflation numbers are heading completely in the right direction.

- (US) Fed's Collins (non-voter): Appropriate for the Fed to stay patient on monetary policy.

- (US) Fed's Kugler (voter) Encouraged by overall inflation progress and trajectory; Watching for labor market deterioration.

- (US) TREASURY $13B 20-YEAR BOND REOPENING DRAWS 4.452% v 4.635% prior, BID-TO-COVER 2.74x v 2.51 prior and 2.70 over last 8.

- (US) Fed's Musalem (non-voter): Expect data to show some welcome downshift in May PCE; Not useful or timely to raise 2% inflation target - speech text.

- (US) Fed’s Logan (non-voter): Will take some time to know how AI will effect economy and monetary policy.

- (US) Congressional Budget Office (CBO): Raises FY24 deficit-to-GDP forecast to 6.7% from 5.5% prior; FY25-30 defeicit at $22.08T, +2.07T from Feb forecast.

- (US) APR NET LONG-TERM TIC FLOWS: $123.1B V $100.5B PRIOR; TOTAL NET TIC FLOWS: $66.2B V $102.1B PRIOR.

Europe

- (IT) European Union said to place infringement procedure on seven EU members for their excessive deficits during 2023 - financial press.

- (UK) Shadow MPC urge Bank of England (BOE) to keep interest rates unchanged at 5.25%.

- (IL) Reportedly Biden Admin delays moving forward with F-15 sale to Israel - press.

- (US) US and Israeli intelligence agencies reportedly looking into new information about computer modeling by Iranian scientists that could be used for research and development of nuclear weapons - press.

- (HU) HUNGARY CENTRAL BANK (MNB) CUTS BASE RATE BY 25BPS TO 7.00%; AS EXPECTED.

- (EU) ECB's Knot (Netherlands): Must base further decisions on incoming data; Should not pre-empt future rate developments.

- (IL) Israel PM Netanyahu: US has been withholding weapons and ammunition; Give us the tools and we'll finish the job faster.

- (IL) Israel Military: Operational plans for an offensive in Lebanon were approved and validated.

Levels as of 01:20 ET

- Nikkei 225 +0.3%, ASX 200 -0.3%, Hang Seng +2.2%, Shanghai Composite -0.4%; Kospi +1.3%.

- Equity S&P500 Futures flat; Nasdaq100 +0.1%, Dax -0.2%; FTSE100 -0.1%.

- EUR 1.0737-1.0743; JPY 157.72-157.93; AUD 0.6654-0.6670; NZD 0.6129-0.6146.

- Gold -0.2% at $2,343/oz; Crude Oil flat at $80.73/brl; Copper +0.5% at $4.5155/lb.

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