Asia market update: Subdued markets during US holiday; Focus on CN rates management; NZ exits technical recession; Focus on flash PMIs tomorrow.

General trend

- US markets were closed for the Juneteenth national holiday, creating light trading conditions and little movement in FX or bonds around the world. Despite the US holiday Asian trading today saw Nasdaq futures continued up to fresh highs, +0.6% to 20,330, with fresh highs for the S&P as well. Gold and Silver also saw spikes to levels not see in over 2 weeks, with Silver trading well over $30/oz again.

- Political tensions are still weighing on European assets but much calmer than last week’s trading. However, the European Commission putting France and Italy on EDP watch (Excessive Deficit Procedure) keeps fiscal risks front and center in Europe.

- The focus during the prior EU session was UK CPI being back to target (2%), but services still hot, a concern for the BOE, which meets tonight for its rate decision.

- New Zealand exited its technical recession, with Q1 GDP growth slightly above estimates and showing tepid growth. Kiwi dollar received a slight upwards nudge, and 10-yr bonds were similarly tepid in response, +2bps. Later NZ had a very weakly supported bond auction, with the bid-to-cover across all three tenors only 1.2x, 1.5x and 1.9x. 10-yr yields rose +6bps for the day and yet the Kiwi dollar gave up its earlier gains. (It should be noted that earlier today the New Zealand Regulator said that it had received complaints about traders at a NZ banking institution manipulating the Government Bonds in 2023).

- China PBOC left its LPR setting unchanged, although the markets are beginning to focus in on yesterday’s comments by PBOC Gov Pan, who in addition to officially opening the door for PBOC trading in treasury bonds moving forward, said that it is particularly important to pay attention to the risks of holding a large amount of long-term govt bonds and maintain a normal upward sloping yield curve.

- US equity FUTs up 0.3% to 0.6% to fresh highs during Asian trading.

Looking ahead (Asian time zone)

- Thu 20th Jun: (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 -0.1% at 7,768.

- Australia RBA sets new standards for for Securities Settlement Facilities - press.

- New Zeland Q1 GDP Q/Q: 0.2% V 0.1%E; Y/Y: +0.3% V 0.2%E (Exits technical recession).

- *New Zealand sells total NZ$500M vs. NZ$500M indicated in 2031, 2034 and 2054 bonds (poorly supported Bid-to-cover across all three tenors, well less than 2x).

China/Hong Kong

- Hang Seng opens +0.1% at 18,453; Shanghai Composite opens -0.1% at 3,015.

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

- China May Swift Global Payments (CNY): 4.5% v 4.5% prior.

- China PBOC is selling more bills in Hong Kong in order to keep the yuan stable - Press.

- Follow up: PBOC paper appears to focus on using short-term rate as the benchmark (backing up remarks made by PBOC Gov Pan yesterday) - Chinese media.

- China said to have no favorite in Biden-Trump election race - financial press, citing "US spies".

- (US) US House panel said to examine China’s efforts to dominate key industries including semiconductors, shipbuilding, and drones during a hearing next Wed, June 26th – Semafor [overnight update].

- China Cabinet: Issuing measures for high quality development of venture capital [overnight update].

- China Pres Xi: Military faces complex political tests – CCTV [overnight update].

- China Securities Regulator (CSRC): Will speed up filing process of Chinese companies listing overseas [overnight update].

- China Commerce Ministry (MOFCOM): Vow to defend Chinese firms legal rights; Urge UK to correct mistakes on sanctions [overnight update].

- China Industry Ministry: Revising guidelines for lithium-ion battery industry regulations [overnight update].

- China PBOC sets Yuan reference rate: 7.1192 v 7.1159 prior (lowest Yuan fix since Nov, 2023).

- China PBOC Open Market Operation (OMO): Sells CNY20B in 7-day reverse repos; Net injects CNY18B v net injects CNY276B prior.


- Nikkei opens -0.4% at 38,410.

- Japan releases weekly flows data [period ended Jun 14th]: Foreign buying of Japan equities: +¥80.0B v -¥346.2B prior; Japan buying of foreign bonds: +¥653.6B v -¥2.65T prior.

- Japan sells ¥3.2T VS. ¥3.2T indicated in 5-year JGB bonds; AVG yield: 0.5120% V 0.5720% prior; bid-to-cover: 3.97X V 3.90X prior.

- FX interventions by Japan appear to be having ‘little’ impact on yen weakness against non-US currencies; notes the impact of carry trades – Nikkei [update].

- 61% of Japanese companies said to see no need for govt to take counter measures against China's excess production capacity - financial press, citing corporate survey.

- Japan Ex-BOJ Exec Dir Shimizu: BOJ Gov Ueda is apparently becoming more confident on the outlook for inflation based on his recent comments [overnight update].

- Japan PM Kishida responds to no-confidence motion: Not thinking about anything other than tackling Japan's problems [overnight update].

South Korea

- Kospi opens +0.2% at 2,802.

- South Korea to create SMR nuclear complex in Gyeongju - Korean press.

- South Korea ruling party panel said to meet with Bank of Korea (BOK) officials to hear opinions on interest rate issues - financial press.

- (RU) North Korea's leader Kim Jong Un: Russia Pres Putin's visit was a meaningful strategic step in developing bilateral ties, protecting world peace - North Korean state media.

- (RU) Russia Pres Putin: Russia and North Korea may cooperate in military sphere within new agreement; Agree on mutual assistance if attacked - comments from North Korea [overnight update].

Other Asia

- Thailand Fin Min Pichai: Will achieve 2024 GDP growth target of 3%.

North America

- Nasdaq said to 'ramp up' scrutinizing of small-cap IPOs from China and Hong Kong - financial press.

- BR) Brazil central bank (BCB) leaves selic target rate unchanged at 10.50%; as expected.

- (US) Jun NAHB housing market index: 43 V 46E.

- (CA) Bank of Canada (BOC) Summary of Deliberations; Considered waiting to cut rates till July, but there had been sufficient progress to warrant a first cut in the policy rate.

- (US) TTN Research Alert: Goldman Sachs sees US jobs market at a potential inflection point; Which CEOs have recently hinted that US economy might be slowing down ahead of Q2 earnings season next month?


- Swiss National Bank (SNB) Financial Stability Report.

- (FR) Pres Macron party's spending-power measures said to cost €12.2B - French press.

- (DE) Amazon plans to invest €10B into its cloud infrastructure and logistics network in Germany, on top of a previously announced €7.8B investment - press.

- (IL) Hezbollah Chief Nasrallah: If war imposed on Lebabon, group will fight with no rules and no ceilings.

- (DE) Germany sells €1.629B VS. €2.0B indicated in 2.50% AUG 2054 bunds; AVG yield: 2.54% V 2.62% PRIOR; prior; bid-to-cover: 1.61X V 3.07X prior.

- (FR) European commission confirms to propose putting France and Italy into excessive deficit procedure (EDP); Also wants start disciplinary budget steps against Belgium, Hungary, Malta, Poland and Slovakia as their budget deficits above the EU limit of 3% of GDP.

- (UK) BOE futures now price 40% chance (v 50% pre-CPI) for Aug rate cut as UK Services CPI missed; Price first full rate cut for Nov 2024.

- (UK) May CPI M/M: 0.3% V 0.4%E; Y/Y: 2.0% V 2.0%E (moves back to BOE target for 1st time in 3 years).

Levels as of 01:20 ET

- Nikkei 225 +0.1%, ASX 200 -0.1%, Hang Seng -0.7%, Shanghai Composite -0.4%; Kospi +0.6%.

- Equity S&P500 Futures +0.3%; Nasdaq100 +0.6%, Dax +0.2%; FTSE100 +0.3%.

- EUR 1.0739-1.0749; JPY 157.93-158.26; AUD 0.6667-0.6677; NZD 0.6125-0.6148.

- Gold +0.6% at $2,355/oz; Crude Oil -0.2% at $80.48/brl; Copper flat at $4.5098/lb.

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