Quiet May day in Asia with most countries on holiday

Asia Market Update: Quiet May Day in Asia with most countries on holiday; JP mulls tax breaks for yen repatriation; Focus on US Apr ISM Mnfg and FOMC tonight.

General trend

- May 1st in Asia saw a majority of countries on holiday: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Thailand, Taiwan, Vietnam. Leaving only Japan, Australia and New Zealand markets open.

- Reports from Japanese media that the govt is considering tax breaks for companies that repatriate and convert foreign profits back into Yen in order to support the currency.

- Nikkei opened down -0.8% following heavy losses on Wall St but by the afternoon had pared nearly all losses. Japanese chip-makers seemed impervious to the -10% A/H fall in Super Micro and AMD -7% A/H.

- More poor economic data out of New Zealand with unemployment at a three-year high, and employment change q/q turning negative (not expected). New Zealand MBIE noted that increasing unemployment and under-utilisation among young people in particular comprised over half the national increase. NZ 2-yr yield -3bps, Kiwi lost another 0.1% after losing a cent overnight.

- Australia and Japan manufacturing PMIs continued to track each other tick-for-tick during April, with final readings for both coming in below prelim and both still in contraction.

- South Korea’s export-led recovery continued, with the April Trade Balance beating expectations and April chip exports +56.1% y/y. Finance Minister Choi commented he expects exports to remain strong through Q2.

- China to finally hold its third plenary session of the 20th Party Congress in July – it was meant to be held last Fall (Nov 2023). This has been significant because the economic objectives announced at the annual Two Sessions of the National People's Congress (NPC) meetings from March 5th, 2024 were meant to have been first planned behind the scenes at the third plenary session. The reason for the delay has been conjectured as Pres Xi last November disagreeing with various demands by local governments for changes in economic policy – including his philosophy of "Xi Jinping Thought", expressed as "Socialism with Chinese characteristics". The policy has been pushed by Xi for more than a decade and is seen by many in China as not consistent with optimal economic growth.

- US equity FUTs held steady during Asian trading after heavy drops in NY trading overnight.

Looking ahead (Asian time zone)

- Wed May 1st (Wed night US Apr ISM Mnfg, Mar JOLTS and FOMC rate decision).

- Thu May 2nd AU Balance of Trade, JP Consumer Confidence, BOJ MoPo Minutes [2 mtgs ago, Mar 19th].

- Fri May 3rd AU Mar Home Loans & Investment (Fri night US Apr NFP, Apr ISM Services).

Holidays in Asia this week

- Wed May 1st China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Thailand, Taiwan, Vietnam.

- Thu May 2nd China.

- Fri May 3rd China, Japan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.2% at 7,646.

- Australia Apr Final PMI Manufacturing: 49.6 v 49.9 prelim (confirms 3rd month of contraction, but highest in 3 months)

- Australia Apr CoreLogic House Price Index M/M: 0.6% v 0.6% prior [overnight update].

- Australia sells A$800M v A$800M indicated in 3.75% May 2034 bonds; Avg Yield: 4.4681% v 4.1262% prior; bid-to-cover 3.98x v 3.64x prior.

- New Zealand Q1 Unemployment Rate: 4.3% v 4.2%e (three year high).

- RBNZ Dep Gov Hawkesby: Today's unemployment data indicates risk of job insecurity - New Zealand press.

- Reserve Bank of New Zealand (RBNZ) bi-annual Financial Stability Report.

- New Zealand Apr CoreLogic House Prices Y/Y: -0.1% v 0.1% prior [overnight update].

- New Zealand LGFA sells NZ$190M bonds with total auction bids NZ$565M.

China/Hong Kong

- Hang Seng closed for holiday; Shanghai Composite closed for holiday.

- More press reports that China caps private funds' 'snowball' derivatives exposure - press [**Note: Snowball products are similar to the index-linked products sold in the 2008 financial crisis] [overnight update].

- China Foreign Ministry: Hamas and Fatah met for talks in Beijing [overnight update].

- China Politburo: China CPC to hold the third plenary meeting this July; Urges sales of ultra-long SCGBs at early date; Economy is improving, but facing challenges; Will flexibly use policy tools, including RRR and interest rates [overnight update].

- Hong Kong Mar Budget Balance (HKD): +18.1B v -22.5B prior [overnight update].

Japan

- Nikkei 225 opens -0.8% at 38,107

- Japan Apr Final Manufacturing PMI: 49.6 v 49.9 prelim (confirms 11th month of contraction).

- Japan said to be mulling tax breaks to spur repatriation into Yen - Japanese press (Sankei).

- Japan, France to start talks on reciprocal market access deal - Japanese press.

- Bank of Japan (BoJ) accounts data suggests ¥5.26-5.55T (~$37B) of FX intervention on Mon, Apr 29th – press [overnight update].

- Japan Former Top FX Diplomat Furusawa: Highly likely govt intervened on Apr 29th to support yen (JPY).

- BOJ leaves Q2 bond purchase and amount frequency unchanged – press [overnight update].

South Korea

- Kospi closed for holiday.

- South Korea Apr Trade Balance: $1.5B v $1.0Be (Apr chip exports +56.1% y/y).

- South Korea Fin Min Choi: April exports data to confirm economic recovery continuing in Q2 - financial press.

- Bank of Korea (BOK) Apr Minutes: Monitoring of FX flows needs to be bolstered [overnight update].

Other Asia

- MSFT CEO Nadella: To set up Asia regional Azure data center in Thailand, following $1.7B cloud and server investment announcement in Indonesia yesterday - Speaks at AI event in Bangkok.

- India cuts windfall tax on crude petroleum to INR8.4K/ton (prior INR9.6K/ton).

- Thailand Central Bank (BoT): Thai baht (THB) volatility has decreased [overnight update].

North America

- (US) Senator Wyden (D-OR): Statement on Reports that DEA will Reschedule Cannabis as a less dangerous category of drug (as a Schedule III controlled substance).

- US Treasury Sec Yellen: Concerned about where we are going with the US deficit; We need "significant steps" to reduce the budget deficit - Congressional testimony.

- (US) Q1 EMPLOYMENT COST INDEX (ECI): 1.2% V 1.0%E; Wages: +1.1% v 0.9% q/q.

- (US) APR CHICAGO PURCHASE MANAGER'S INDEX (PMI): 37.9 V 41.4 PRIOR.

- Citigroup CEO Fraser: Seeing more cautious consumer in US, spending shifting to credit from debit.

- (US) Apr Dallas Fed Services Activity: -10.6 v -5.5 prior.

Europe

- (IL) Israel reportedly ready to send a delegation to Cairo in the coming days to discuss ceasefire - US press.

- (IL) US Sec of State Blinken to meet Israeli PM Netanyahu in Jerusalem (10:45am local time) and Israeli President in Tel Aviv today - press.

- (IE) Ireland Apr PMI Manufacturing: 47.6 v 49.6 prior (second month of contraction).

- (EU) ECB's De Cos (Spain): Reiterates ECB should start cutting rates in June if inflation continues to slow down.

- (IT) Italy Mar Hourly Wages M/M: 0.3% v 5.1% prior; Y/Y: 3.0% v 7.9% prior.

- (JP) Bank of Japan (BoJ) accounts data suggests ¥5.26-5.55T (~$37B) of FX intervention on Mon, Apr 29th - press.

- (G7) Energy Ministers Statement: Agree to phase out coal by mid 2030's; To promote development of nuclear fusion.

- (EU) ECB's Holzmann (Austria): ECB should not cut rates in both June and July - press interview.

- (EU) ECB Villeroy (France): We got encouraging news from the economy this morning; Still believe ECB can start cutting rates in June.

Levels as of 01:20 ET

- Nikkei 225 -0.1%; ASX 200 -1.0%; Hang Seng closed; Shanghai Composite closed; Kospi closed.

- Equity S&P500 Futures flat; Nasdaq100 flat; Dax closed; FTSE100 -0.1%.

- EUR 1.0655-1.0674; JPY 157.65-157.93; AUD 0.6465-0.6482; NZD 0.5875-0.5897.

- Gold -0.3% at $2,295/oz; Crude Oil -1.0% at $81.14/brl; Copper -0.2% at $4.4535/lb.