More BoJ indecision sees Yen weaken back to late April lows

Asia Market Update: More BOJ indecision sees Yen weaken back to late April lows; JGB FUTs rise; Asian equities mixed; BOJ Gov Ueda Presser to come.

General trend

- US markets looked like they would set the tone again for Asia with PPI backing up the prior day’s CPI to also come in soft, with US stocks responding positively - at least on the Nasdaq (Adobe +15% A/H post-earnings).

- However, Asian stocks opened up risk-averse across the board ahead of the BOJ decision. The Nikkei and Kospi gradually eked out morning gains.

- Prior to the BOJ decision, JGB Yields fell a further -2.5 bps to 0.940%, their lowest since May 17th after having hit 1.10% just two weeks ago. A Japanese brokerage firm said that a BOJ bond buying cut had already been ‘factored in’, the focal point to be on the amount of cuts. JPY weakened into the decision.

- When the BOJ decision came it was rather anticlimactic; Leaving rates on pause while putting off any the amount of any bond purchase cuts until the next meeting on July 31st. (i.e. the BOJ today decided only that it would cut bond purchases for the next 1-2 years, and put off announcing the amounts to the next meeting). In the meantime the BOJ will conduct the purchases in accordance with the decisions made until the March 2024 meeting.

- Markets reacted with the Nikkei gaining nearly +0.6%. while the Yen lost all of its overnight gains against USD, shooting back to its late April lows of ~158; looking dangerously close to the 160 low at that time (and subsequent MOF intervention). Pound Sterling also rose to a 16-yr high against JPY. JP 10-yr yields fell even further by another 2bps to 0.92%.

- China’s currency continued to weaken, with the offshore Yuan fixed at the weakest since Jan 19th, and the onshore Yuan declining to weakest level since Nov 16th 2023.

- New Zealand’s poor economic data continued with food prices for May falling into negative territory for the lowest annual increase in nearly six years. May Manufacturing PMI also registered its 15th straight contraction and the lowest since March. (Westpac cut Q2 inflation forecast to 0.6% q/q vs 0.8% prior).

- Elsewhere, the Indonesia Rupiah kept falling to new 2020 lows against USD, with more intervention from the BI central bank.

- US equity FUTs up slightly during Asian trading.

Looking ahead (Asian time zone)

- Fri Jun 14th (Fri night US Michigan Jun Consumer Sentiment).

- Weekend: CN May FDI YTD.

Holidays in Asia this week

- Monday June 10th Australia, China, Hong Kong, Taiwan.

- Wednesday June 12th Philippines.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 7,751.

- New Zealand May Food Prices M/M: -0.2% v 0.6% prior (lowest annual increase in nearly six years).

- New Zealand May Manufacturing PMI: 47.2 v 48.8 prior (15th straight contraction and lowest since Mar).

- New Zealand govt cancels 2023-24 Forestry ETS annual service charge – press.

- Westpac cuts Q2 inflation forecast for New Zealand to 0.6% q/q (prior: 0.8%) [data due on Jul 17th]; notes partial price data has been below ests – US financial press.

China/Hong Kong

- Hang Seng opens -0.5% at 18,028; Shanghai Composite opens -0.3% at 3,020.

- China Commerce Min: China reserves the right to file lawsuits at WTO over EU tariffs - Chinese state media.

- China sells 50 Year Bonds (ultra-long Special); Avg Yield: 2.53% v 2.58%e (first time offering); bid-to-cover: 5.38x.

- Follow up: Chinese firms apply for anti-dumping probe of EU pork imports - Chinese media.

- (G7) Pres Biden: G7 discussed concerns about China supplying Russia with materials for its war in Ukraine.

- US Treasury Sec Yellen: China's industry policy, overcapacity path may hurt efforts to build a healthy US-China economic relationship.

- EU Commission President Von Der Leyen: Global trade is distorted by China over capacity - Interview.

- China Commerce Ministry (MOFCOM): Reserve the right to file investigation application to maintain normal market competition (asked about European pork and diary import tariffs) [overnight update].

- China unveils rules for fair competition reviews; effective from Aug 1st – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1151 v 7.1122 prior (weakest since Jan 19th).

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

Japan

- Nikkei 225 opens -0.3% at 38,587

- Bank of Japan (BOJ): Holding the "Bond Market Group" Meetings: Date To be announced.

- BANK OF JAPAN (BOJ) LEAVES TARGET RANGE UNCHANGED BETWEEN 0.0-0.10%; AS EXPECTED.

- BOJ ON GOVT BOND PURCHASES; TO BUY JGB's IN ACCORDANCE WITH MARCH 2024 DECISION UNTIL JULY MEETING (JULY 31st).

- Japan Chief Cab Sec Hayashi: Soon to officially announce sanctions package against Russia - Japanese press.

- Japan Fin Min Suzuki: Reaffirms continuing to work toward primary balance goal - Japanese press.

- Japanese Bankers Association Chair: BOJ will raise rates extremely gradually while ascertaining effect on the market [overnight update].

South Korea

- Kospi opens +0.2% at 2,759.

- South Korea Apr M2 Money Supply M/M: 0.4% v 1.7% prior;

- South Korea May Import Price Index M/M: -1.4% v 3.9% prior; Y/Y: 4.6% v 2.9% prior (update).

Other Asia

- Indonesia Central Bank (BI) Gov Warjiyo: Sees CPI remaining in target in 2024 and 2025; BI also seen intervening in FX market to maintain market confidence - financial press.

- Taiwan Central Bank (CBC) Gov Yang: Monetary policy stance is further tightening - post rate decision press conference.

- TAIWAN CENTRAL BANK (CBC) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 2.00%; AS EXPECTED; Raises RRR by 25bps.

North America

- (AR) IMF approves $800M Argentina deal; Says program remains "firmly on track" - financial press.

- (US) S&P Global: GEP Global Supply Chain Volatility Index breaks into positive territory for the first time in 14 months as global manufacturers report stretched capacity; Factory purchasing in Asia rising at the fastest rate since Dec 2021, driven by India, China and South Korea.

- (US) INITIAL JOBLESS CLAIMS: 242K V 225KE (highest since Aug 2023); CONTINUING CLAIMS: 1.820M V 1.795ME (highest since early Mar 2023).

- (US) MAY PPI FINAL DEMAND M/M: -0.2% V +0.1%E; Y/Y: 2.2% V 2.5%E (1st negative M/M print since Dec); PPI (ex-food/energy) M/M: 0.0% v 0.3%e; Y/Y: 2.3% v 2.5%e.

- PPI (ex-food/energy/trade) M/M: 0.0% v 0.3%e; Y/Y: 3.2% v 3.1% prior.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: +74 BCF VS. +70 BCF TO +76 BCF INDICATED RANGE.

- (US) TREASURY $22B 30-YEAR BOND REOPENING DRAWS 4.403% V 4.671% PRIOR; BID TO COVER 2.49 V 2.37 PRIOR AND 2.43 OVER LAST 8 REOPENINGS.

Europe

- German govt said to be trying to soften EU tariffs on China EVs - financial press.

- (IE) Ireland May CPI M/M: 0.5% v 0.2% prior; Y/Y: 2.6% v 2.6% prior.

- (RU) Russia Apr Trade Balance: $10.7B v $18.8B prior.

Levels as of 01:20 ET

- Nikkei 225 +0.4%, ASX 200 -0.3%, Hang Seng -0.8%; Shanghai Composite -0.3%; Kospi +0.4%.

- Equity S&P500 Futures flat; Nasdaq100 +0.2%, Dax +0.2%; FTSE100 +0.4%.

- EUR 1.0734-1.0745; JPY 156.87-158.01; AUD 0.6621-0.6642; NZD 0.6148-0.6172.

- Gold +0.2% at $2,321/oz; Crude Oil -0.6% at $78.18/brl; Copper +0.3% at $4.4968/lb.