Metals extend rise amid focus on China property stimulus and Middle East political uncertainty

Asia market update: Metals extend rise amid focus on China property stimulus and Middle East political uncertainty; JP yields continue rise; Quiet week for macro.

General trend

- Metals continued upwards; LME Copper +3% to record high, Gold +1% to fresh record high of $2,445, Silver +3% breaking $32 (highest since 2011), Nickel +4.6%, Zinc +3%. Note that last Friday copper pushed up +3% on strong momentum on the back of the China property stimulus announcement (see below) and other metal prices followed later on Friday.

- In the Middle East, President Raisi of Iran, as well as the Foreign Minister and other officials were killed in a helicopter crash –apparently due to foggy conditions in mountainous terrain.

- Meanwhile Saudi’s Crown Prince (MBS) planned visit to Japan today was delayed, reportedly due to King Salman's ill health.

- Hang Seng Mainland Properties Index was down -2% in early trading, after China having announced fresh measures last Friday for the crisis-ridden property market. However, losses were pared during the day.

- China government late on Friday announced its biggest package of support measures yet for the crisis-ridden property market – with the timing coming just after China property prices registered their steepest month-on-month drops in a decade. The CCP’s ~$40B support package shows it is clearly concerned about the state of the property market in China. However, China analysts estimate the value of China’s unfinished housing inventories to be in the tens of trillions of Yuan. Nomura estimates at least 20-30 million unfinished homes and that it would cost the govt at least $440B to complete them. Goldman has estimated that there is $4T of residential housing inventory on a cost-basis at the end of 2023, with developers requiring between $400-600B of funding to return to normal operations. Will this latest package of support be enough to shift sentiment in the Chinese housing market?

- Yields on JP yields push higher again, with JGB 10-yrs +3bps to 0.976%, highest since May, 2013, with 30-yr yields at highest since Jul 2011 and 20-years at highest since 2013.

- At today’s inflation-linked 10-yr JGB auction the highest bid-to-cover was reached since 2007, despite a lower yield than the previous auction.

- A Japanese brokerage said that some market participants are expecting a BOJ rate hike at the Jun meeting – US financial press.

- US equity FUTs +0.1% to +0.2% during Asian trading.

Looking ahead (Asian time zone)

- (Note: CN Apr FDI YTD overdue).

- Tue May 21st AU May Consumer Conf, AU RBA May Minutes.

- Wed May 22nd JP Balance of Trade, RBNZ May OCR & Policy Statement, with likely updated forecasts, Media conf one hour later at 3pm NZT, (Wed eve UK CPI + Indonesia Central Bank (BI) Rate Decision + Wed night US FOMC May Minutes).

- Thu May 23rd AU & JP May flash PMIs, KR (BOK) Rate Decision, (Thu eve EU May flash PMIs + US May flash PMI)- Fri May 24th JP Apr CPI (National), (Fri night US Durable Goods).

Holidays in Asia this week

- Monday May 20th India.

- Wed May 22nd Singapore, Thailand.

- Thu May 23rd Indonesia.

- Fri May 24th Indonesia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.3% at 7,836.

- (NZ) RBNZ shadow board (NZIER) - Sees no change in RBNZ's OCR of 5.50% in May (RBNZ decision due Wed, May 22nd).

China/Hong Kong

- Hang Seng opens +0.3% at 19,621; Shanghai Composite opens +0.1% at 3,156.

- China PBOC monthly loan prime rate (LPR) setting: leaves both 1-year and 5-year rates unchanged; as expected.

- Boeing BA (CN) China adds Boeing Defense, Space & Security to unreliable list - press.

- China PBOC holds sells CNY4.05T in Chinese bonds at the end of April [weekend update].

- Hong Kong Q1 Final GDP Q/Q: 2.3% v 2.3% advance; Y/Y: 2.7% v 2.7% advance [weekend update].

- China PBOC adjusts interest rate for commercial housing loans; scraps nationwide interest rates floor for 1st and 2nd homes and announces CNY300B facility to buy unsold properties in regions – press [Late Friday update].

- China PBOC sets Yuan reference rate: 7.1042 v 7.1045 prior.

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

Japan

- Nikkei 225 opens -0.1% at 38,761.

- Japan Mar Tertiary Industrial Index M/M: -2.4% v -0.1%e.

- (JP) BOJ Survey: Large manufacturers see FX stability as the biggest factor they want out of BOJ monetary policy; Some firms said difficult to hire people, intensifying price competition.

- Japan sells ¥250B in 10-year inflation-linked JGB Bonds; Yield at lowest accepted price: -0.5450% v -0.4680% prior, bid-to-cover: 4.27x v 3.00x prior (Feb 4th) [highest bid-to-cover since 2007].

- Japan business lobby Keidanren: Prelim data shows avge wage increase of 5.58% this year for big companies - Japanese press.

- SMBC Nikko: Some market participants are expecting a BOJ rate hike at the Jun meeting – US financial press.

- Saudi Crown Prince (MBS) planned visit to Japan (from today) delayed due to King Salman's ill health - Japan Chief Cabinet Sec Hayashi.

- Saudi Arabia ETF funds to list in Tokyo - Nikkei.

- Japan and ASEAN nations are developing strategies to compete against Chinese EV makers - Nikkei.

- Nikkei: Potential for earlier BOJ rate hike rises amid hawkish signals and weak yen; some analysts expect BOJ to use bond yields to stop yen decline.

- X Nippon Steel stepping up efforts to win over US workers and politicians for US Steel deal – press [weekend update].

South Korea

- Kospi opens +0.6% at 2,741.

- South Korea FSS Gov Lee said to want a partial lift on ban of short sales - Korean press (update).

Other Asia

- Vietnam Dep PM: Economy facing mounting pressure, faces high inflationary pressure in 2024; challenging to reach 2024 targets.

- Malaysia Apr Trade Balance (MYR): 7.7B v 11.8Be.

- Indonesia Fin Min Indrawati: Indonesia cuts 2025 GDP growth to 5.1-5.5% (prior 5.3-5.6%).

- Thailand Q1 GDP Q/Q: 1.1% v 0.6%e; Y/Y: 1.5% v 0.8%e.

- Taiwan President: Calls on China to stop threatening Taiwan.

- Taiwan new Pres Lai Ching-te sworn in at inauguration - Taiwanese press.

- TSLA CEO Musk says focusing on Starlink first, during launch in Indonesia - press.

North America

- (MX) Mexico said to consider 'tax squeeze' on banks in order to raise revenue - FT.

- (US) Fed planning to lower proposed capital-hike requirements for big banks [inline] – WSJ [update].

Europe

- (IR) Follow Up: President Raisi, Foreign Min and all 9 passengers confirmed killed in helicopter crash - Iran state media.

- (UK) May Rightmove House Prices M/M: 0.8% v 1.1% prior; Y/Y: 0.6% v 1.7% prior.

- (IR) Iran's President Raisi, Foreign Minister and other officials reported to have been in helicopter crash in mountainous area – press.

- (IL) Israeli war cabinet minister Benny Gantz demands PM Netanyahu commit to a vision for post-conflict Gaza or he may withdraw his centrist party from the coalition – press [weekend update].

- (RU) Russian court seizes €700M of assets from UniCredit, Deutsche Bank, and Commerzbank - Russian press [weekend update].

Levels as of 01:20 ET

- Nikkei 225 +0.8%; ASX 200 +0.6%; Hang Seng +0.7%; Shanghai Composite +0.5%; Kospi +0.6%.

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

- EUR 1.0865-1.0883; JPY 155.53-155.94; AUD 0.6691-0.6710; NZD 0.6121-0.6138.

- Gold +1.0% at $2,441/oz; Crude Oil +0.1% at $79.64brl; Copper +1.3% at $5.1408/lb.