RBA again hikes unexpectedly

Asia market update: RBA again hikes unexpectedly; Will China’s expected stimulus eventuate – incl. cutting RRR?

General trend

- Australia RBA 25bps was modestly surprising against consensus. AUD gapped up +0.8% on the decision, with 3-yr yields jumping 10bps.

- Aussie financials fell -1.3%, consumer staples -1.0% consumer discretionary -2.0% and overall the ASX-200 was down 1.2% before recovering slightly to be -0.9% on the day.

- After speculative reports came in over the weekend of the China Govt reportedly working on a “basket of support measures” to stimulate property sector and economy, the Hang Seng Mainland Properties Index rose another 4%+ today.

- More concretely, the China Securities Journal said it is likely that China will cut RRR and interest rates this year. (Currently Chinese bank’s Reserve Requirement Ratio stands at 7.6% - with an all-time low of 6.0% in 2003 vs an all-time high of 21.0% in 2011).

- Today’s China yuan fix at less than 7.10 USD is the lowest since Dec 1 2022.

- Asian equities enjoyed another positive data today, with the above exception of the ASX-200.

- US equity FUTs are flat.

- Japan BOJ Gov Ueda due to speak at 05:25 GMT, and later today Japan’s Economy Ministry is expected to release an enhanced digital and chip strategy.

- RBA’s Gov Lowe and Dep Gov Bullock to speak tomorrow.

Looking forward this week

- Wed Aussie Q1 GDP.

- Wed China Trade balance.

- Wed night BoC rate decision.

- Fri China CPI, PPI and aggregate funding.

- No US-Fed speak this week, having entered the black-out period ahead of June 14 rate decision.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.2% at 7,204.

- Australia Q1 Current Account (A$): 12.3B v 15.0Be (16th straight quarter of a surplus).

- Australia ANZ/Roy Morgan Weekly Consumer Confidence: -0.4% v -1.1% prior.

- New Zealand May ANZ Commodity Price M/M: +0.3% v -1.7% prior.

- BNZ bank sees New Zealand house prices rising in 2H 2023 – press.

- Synlait (SML.NZ) Announces receiving of SAMR (market regulator) re-registration, securing China market access.

China/Hong Kong

- Hang Seng opens flat at 19,117.

- Shanghai Composite opens -0.1% at 3,228.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repo; Net drains CNY35B v drains CNY23B prior.

- China PBOC sets Yuan reference rate: 7.1075 v 7.0904 prior (weakest level since Dec 1, 2022).

- White House spokesperson: Seeing increased level of aggressiveness by China's military; US is prepared to address this aggressiveness.

- China likely to cut RRR, interest rates in 2H 2023 - China Securities Journal.

- China new yuan loans likely to show rise in May from April - China Securities Journal.

- Senior US State Dept Official: Cannot say what chances are of Pres Xi and Pres Biden meeting at APEC; Have nothing to announce about a Sec of State Blinken visit to China.

Japan

- Nikkei 225 opens -0.7% at 31,988.

- Japan Apr Household Spending Y/Y: -4.4% v -2.4%e.

- Japan Apr labor cash earnings Y/Y: 1.0% V 1.8%E.

- Japan sells ¥900B in 30-year JGB bonds; avg yield: 1.2570% V 1.2520% prior; bid-to-cover: 3.08X V 3.49X prior.

- Japan Fiscal Policy plans to focus on asset management reform - Japanese press.

- Japan Economy Minister: To release revised digital and chip strategy today (Tues).

- Japan Fin Min Suzuki: Continues to aim for FY25 primary balance, says "it will not be easy" to achieve primary budget surplus target.

- France objects to NATO plan for office in Tokyo - FT.

South Korea

- Kospi closed for holiday.

- Bank of Korea: More desirable to maintain dollar liquidity than increase gold holdings currently.

Other Asia

- US Defence Sec Austin: US has more desire to share defense tech with India; [India and the US have today concluded a roadmap for defence industrial cooperation] [Overnight update].

- Taiwan May Foreign Reserves: $562.9B v $561.1B prior.

- Philippines May CPI Y/Y: 6.1% v 6.1%e (13th month above target).

- Philippines Central Bank (BSP): Reiterates stance to continue to adjust monetary policy stance as necessary [follows inline May CPI data].

- Vietnam Ministry finds TikTok violations during inspection.

- Malaysia PM and Fin Min: Country's stance on raising interest rates is thorough, prudent.

- Singapore May PMI (whole economy): 54.5 v 55.3 prior (3rd straight expansion).

- Taiwan Semiconductor (TSM) CEO: affirms H1 Rev -10% y/y; guides 2023 sales to decline by mid-single-digits in USD terms (prior: FY23 Rev falling low-to-mid single digit percent range y/y).

- Foxconn (2317.TW) Reports May (NT$) Rev 450.7B -9.5% y/y; May YTD 2.34B v 2.39B y/y; Affirms Q2 outlook.

North America

- May final S&P/markit services PMI: 54.9 V 55.2E.

- Apr final durable goods orders: 1.1% V 1.1% prelim; durables (ex-transportation): -0.3% V 0.2% prelim.

- May ISM services index: 50.3 V 52.5E.

- Apr factory orders: 0.4% V 0.8%E.

Europe

- UK May BRC Sales LFL Y/Y: 3.7% v 5.2% prior [slowest rise since Oct 2022].

- Saudi Oil Min Abdulaziz: Saudi is fed up with OPEC members not meeting oil production goals - media interview.

- ECB Chief Lagarde: Price pressures remain strong, no clear evidence that underlying inflation has peaked.

- ECB's Nagel (Germany): Underlying price pressures are far too high; Several more rate hikes are necessary.

- Ukraine Foreign Min: Ukraine has enough weapons to begin its counter-offensive.

- Ukraine South Military Command: Nova Kakhovka Dam in Kherson region was ‘blown up’ by Russia forces.

Levels as of 01:20 ET

- ASX200 -1.0%; Hang Seng +0.9%; Shanghai Composite -0.1%; Nikkei 225 +0.8%; Kospi +0.3%.

- Equity S&P500 Futures flat; Nasdaq100 flat, DAX flat; FTSE100 -0.1%.

- EUR 1.0707 – 1.0732; JPY 139.32 – 139.66 ; AUD 0.66.10 – 0.6681 ; NZD 0.6064 – 0.6098.

- Gold +0.2% at $1,977/oz; Crude Oil -0.4% at $71.89/brl; Copper +0.3% at $3.775/lb.