Quieter macro news day as Asian nations hustle for optimal US trade outcomes

Asia market update: Quieter macro news day as Asian nations hustle for optimal US trade outcomes, with market focus particularly on US-JP news; RBA cuts as expected.

General trend

- In Asia trade news India reportedly discussing a US trade deal structured in three tranches while Japan-US to meet at ministry level this Friday. Thailand offering to open up multiple sectors as Vietnam started their second round of talks in DC - and Taiwan says talks ‘going smoothly’.

- Markets particularly sensitive to Japan/US news, with USD/JPY fluctuating around 145 after Kato – Bessent meeting headlines and May 23rd JP-US ministerial meeting confirmation.

- Japan long-term issuance problems continued into the Japan 20-year auction today, with the weakest support since 2012 and with a super-wide 114bp tail (highest since 1987). Follows multi-year highs in 30 and 40 year yields in recent weeks. JP 20-yr yields up another +12bps and JP 10-years hit 1.5% for first time since Apr 2nd (Trump’s “Liberation Day”), while 40-years rose another 10bps higher.

- Note that the US Treasury reportedly not anticipating any trade deal announcement at G7 finance meeting in Canada this week.

- Meanwhile, General Motors also said it would cease exports to China.

- Hang Seng outperformed in otherwise uneventful trading.

- Australia's RBA cut policy rate as expected by 25bps, to a 2-year low. [**Note: Prior RBA statement: Sustainably returning inflation to target is the priority. vs [current statement]; Maintaining low and stable inflation is the priority.

- China banks cut deposit rates for the first time since Q4, as China PBOC shaved another 10bps off the LPR rate, as expected.

- US equity FUTs -0.3% to -0.4% during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Wed May 21st NZ Apr Trade Balance, JP Trade Balance, ID Rate Decision.

- Thu May 22nd Global Flash PMIs, NZ budget.

- Fri May 23rd Japan Apr CPI.

Holidays in Asia this week

- No holidays in Asia this week.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,304.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 88.8 v 88.3 prior.

- Australia National Party: Ending coalition with the Liberal Party; the party will sit alone on a principle basis.

China/Hong Kong

- Hang Seng opens +0.3% at 23,398.

- China PBOC monthly loan prime rate (LPR) setting: Cuts both 1-year and 5-year LPR by 10bps (as expected).

- China NDRC [China state planner]: For Jan-Apr approved 27 fixed asset investment projects worth a total of CNY573.7B.

- HK$ one-month HIBOR falls below 1.0% for first time since 2022 - financial press.

- China banks' wealth products said to see inflows during Q2 following rate cuts; total assets of fixed-income products rose by 8.4%, cash mgmt products +7.9% - Shanghai Securities News.

- China provinces 'step up' policy support for exporters - Chinese press.

- China Commerce Ministry (MOFCOM): China issues statement on US adjusting chip export controls; China vows to take measures if the US insists on going its own way; The US is undermining the consensus reached in Geneva talks; China will takes measures to safeguard rights if US insists on damaging Chinese interests.

- China Defense Min is not expected to attend forum in Singapore - FT.

- Reportedly China State banks to cut deposit interest rates on Tuesday – press.

- China PBOC sets Yuan reference rate: 7.1931 v 7.1916 prior.

- China PBOC Open Market Operation (OMO): Injects CNY357.0B in 7-day reverse repos; Net injects CNY177.0B v injects CNY92.0B prior.

Japan

- Nikkei 225 opens +0.7% at 37,750.

- Japan Apr Tokyo Condominiums for Sale Y/Y: +3.5% v -9.8% prior.

- Japan Economic Revitalization Min Akazawa: Confirms staff have conducted trade talks in the US this week.

- Japan and Japan reportedly planning Ministry-level trade talks for Fri, May 23rd - Japanese press.

- Japan Fin Min Kato: Confirms will attend G-7 meeting in Canada, arranging US Treasury Bessent meeting to discuss topics including FX.

- JSDA: Japan super-long bonds get record foreign inflow [¥2.29T] again.

- BOJ said to sound out market actors on amount of JGB buying - Nikkei.

- Japan reportedly plans to launch pilot fusion power plant next decade - Nikkei.

- BOJ May Bond Market Survey: notes JGB market functioning 'worsens sharply' in May [overnight update].

- Japan sells ¥1.00T VS. ¥1.00T indicated in 20-year JGB BONDS; AVG yield: 2.4530% V 2.3490% prior; bid-to-cover 2.50X V 2.96X prior (weakest since 2012); Tail: 114bps v 34bps prior (widest tail since 1987).

Korea

- Kospi opens +0.7% at 2,622.

- South Korea Q1 Household Credit (KRW): 1,928.7T v 1,927.3T prior (fastest growth rate since mid-2022).

- South Korea equity markets to close on Jun 3rd [Tues] due to the Presidential election.

- South Korea Trade officials to visit the US for 'working-level' talks between May 20-22nd.

Other Asia

- Vietnam: Started 2nd round of trade talks with the US in Washington DC.

- Thailand Fin Min Pichai: Expects more energy sector collaboration with the US; trade proposal submitted to the US address trade imbalance.

- Taiwan President Lai-Ching-Te: Tariff talks with the US are 'going smoothly'.

- Reportedly India is discussing trade deal structured in three tranches; Expects to reach an interim agreement before July – press.

- Indonesia Fin Min Indrawati: Sees 2026 CPI within 1.5-3.5% range.

North America

- GM To cease exports to China - press cites company.

- (US) Fed's Bostic (non-voter for 2025): Moody's downgrade will cut across economics and financial markets; number of rate cuts in 2025 depends on how things turn out; details of tariffs will matter.

- (US) White House official Hassett: Wouldn't be surprised it there were more trade deals this week - Fox Business interview.

- (US) Fed's Jefferson (voter): Currency and bank reserves are foundation of safe liquidity; Doesn't comment or economy or rates outlook.

- (US) Fed's Williams (voter): Recent economic data has been very good; Labor market pretty much in balance; Economy likely to slow this year - moderated Q&A.

- (BR) Brazil Central Bank (BCB) Gov Galipolo: Hard to estimate impact of tariffs on global economy; We've placed a condition of uncertainty: The tariffs greatly increase the tension that is already common in monetary authority communications; It's logical to keep rates at restrictive level for longer; We need to keep interest rates at a very restrictive level for a very long time.

- (US) Mid May Manheim wholesale used vehicle Index: 205.9 v 208.2 prior; -1.1% m/m; +4.4% y/y.

- (US) APR LEADING INDEX: -1.0% V -0.9%E.

- (BR) Brazil Fin Min raises 2025 CPI +5.0%; 2026 CPI +3.6% (prior: 4.9%, 3.5%); Raises GDP 2025 2.4%; Affirms 2026 GDP at +2.5% (prior: 2.3%, 2.5%).

- (US) Fed's Logan (non-voter): Treasury and money markets are strong, but not invulnerable; Leverage in treasury trades at non-banks cause for concerns.

- (UR) US Pres Trump: Call with Russia Pres Putin went very well; Russia and Ukraine to begin ceasefire negotiations.

- (US) House Speaker Johnson: Almost there on tax bill; 'Very confident' we'll get this done; Have a few issues on tax bill we need to resolve - comments to media.

- (US) US Treasury reportedly doesn't anticipate any trade deal announcement at G7 finance meeting in Canada this week - press.

Europe

- (EU) Fox's Gasparino: EU trade discussions are being complicated by an internal EU disagreement over the just how to approach any deal with the US, meaning this one APPEARS to have a long way to go before culmination, at least that's the assessment given by the White House to my sources.

- (UK) Chancellor (Fin Min) Reeves said to have signaled a willingness to overhaul the most significant regulatory measure imposed on Britain's biggest high street banks in the wake of the 2008 financial crisis - Sky News.

- (UK) PM Starmer: Deal reached with EU gives us unprecedented access to EU market; Deal to benefit steel and fish industries.

- (EU) ECB's Muller (Estonia): Not obvious that we must significantly cut rates, but can't rule out further cuts.

- (UR) US Pres Trump: US isn't stepping back from Russia-Ukraine negotiations.

Levels as of 01:20 ET

- Nikkei 225 +0.4%, ASX 200 +0.6%, Hang Seng +1.4%; Shanghai Composite +0.4%; Kospi +0.2%.

- Equity S&P500 Futures -0.3%; Nasdaq100 -0.4%; DAX +0.4%; FTSE100 -0.1%.

- EUR 1.1218-112.52; JPY 144.72-144.51; AUD 0.6424-0.6459; NZD 0.5913-0.5932.

- Gold -0.4% at $3,219/oz; Crude Oil -0.3% $61.95/bbl; Copper -0.3% at $4.6395/lb.