RBA signals further rate hikes but not as market expects and questions use of YCC in the future

Asia Market Update: RBA signals further rate hikes but not as market expects and questions use of YCC in the future; BOK Gov leaves option of larger rate hikes.

General trend

- Markets off to a strong start with little fresh catalyst due to US markets being closed for holiday.

- US FUTs rising off Friday levels, general dollar softness across the majors.

- Macau casino names trade higher despite covid cases, talk of a quarantine free business travel corridor between Hong Kong and China.

- RBA Lowe, YCC report and June meeting minutes major focus of the session. Lowe tampered expectations of a larger then 50bps rate hike and warned the markets hikes may not follow projected path. Aussie yields fell.

- China covid cases noted to be cropping up in more southern region, while Beijing and Shanghai seem to remain under control.

- Crypto currencies continue decline, sparking fresh round of calls for more regulation.

- Prelim June trade data for South Korea showed weakening chip exports.

- Japan Fin Min notes inflation response undecided.

Headlines/Economic data

Australia/New Zealand

- ASX 200 opened +0.3%.

- (NZ) New Zealand Q2 Westpac consumer Confidence: 78.7 v 92.1 prior (record low).

- (AU) Reserve Bank of Australia (RBA) Issues Review of Yield Target: Yield targets was successful in reaching its objectives and reinforced bank's forward guidance about cash rate but in hindsight may not have extended YCC.

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence W/W: +1.6% v -7.6% prior.

- (AU) Reserve Bank of Australia (RBA) Gov Lowe: To do what's needed to return inflation to target range; Emphasizes that RBA is not on a preset path for rate hikes.

- (AU) Reserve Bank of Australia (RBA) Gov Lowe Q&A: Expects to discuss both a 25bps and 50bps hike in July; Rate Hike trajectory implied by market is not very likely.

- (AU) Reserve Bank of Australia (RBA) June meeting minutes: 25bps increase every meeting would be rapid tightening; agreed risk inflation would not return to 2-3% target if policy settings maintained.

Japan

- Nikkei 225 opened +1.2%.

- 6502.JP CEO Shimada: No plans to sell or restructure units other than those already announced - Japan press.

- (JP) Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 25bps; Opens window to buy unlimited amount of 10-year JGBs at 0.25% [as expected].

- (JP) Japan Fin Min Suzuki: Believe that current inflation is due to increases in commodity prices; Doesn't believe debate on fiscal health has receded.

- (JP) Japan MoF sells ¥2.5T v ¥2.5T indicated in 0.005% 5-year JGBs; Avg Yield: 0.0830% v 0.0170% prior, bid-to-cover: 3.17x v 3.40x prior.

Korea

- Kospi opened +0.5%.

- (KR) Bank of Korea (BOK): Cannot rule out posibility of CPI >4.7% for 2022 (v 4.5% guided); To be 'well above' 5.0% for a while after May reading came in at 5.4%.

- (KR) South Korea June 1-20 Exports Y/Y: -3.4% v +24.1% prior; Imports Y/Y: 21.1% v 37.8% prior; Chip Exports y/y: 1.9% v 13.5% prior.

- (KR) Bank of Korea (BOK) Gov Rhee: CPI situation is grave; To focus on CPI until situation changes.

China/Hong Kong

- Hang Seng opened +0.5%; Shanghai Composite opened 0.0%.

- (HK) Hong Kong Monetary Authority (HKMA) continues to defend the currency peg, buys approx HK$5.22B.

- (HK) Hong Kong to propose quarantine free business travel corridor with mainland China - SCMP.

- (CN) China PBOC sets Yuan reference rate: 6.6851 v 6.7120 prior.

- (CN) China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos v CNY10B prior; Net CNY0B v Net CNY0B prior.

- (CN) China National Development and Reform Commission (NDRC) investigation of deals made by power plants found contracts that exceeded reasonable levels and sellers were told to refund excess payments.

- (HK) Hong Kong Monetary Authority (HKMA) continues to defend the currency peg, sold HK$665M on June 20th; Sold $6.63B last week and $9.54B so far in 2022.

North America

- SAVE JetBlue improves offer to total consideration of all cash $33.50/shr (prior $31.50).

Europe

- (DE) Germany labor union, IG Metall, calling for up to 8% increases in wages - press.

- EZJ.UK Said to be planning to cut 10,000 flights that were on the schedule for this summer (July-Sept), destinations include Greece and Spain; expected to impact 1.5M fliers - UK press.

- (UK) Local Government Association: Cafford to pay a mandated increase in the legal minimum wage over the next year without a £400M cash injection from the national govt - press.

- (NL) Netherlands Energy Min Jetten: Gas storage in the Netherlands needs to be filled above levels set by EU.

Levels as of 01:00ET

- Hang Seng +1.5%; Shanghai Composite +0.2%; Kospi +0.9%; Nikkei225 +2.3%; ASX 200 +1.4%.

- Equity Futures: S&P500 +1.6%; Nasdaq100 +1.7%, Dax +0.6%; FTSE100 +0.5%.

- EUR 1.0543-1.0508; JPY 135.21-134.94; AUD 0.6983-0.6948; NZD 0.6349-0.6328.

- Commodity Futures: Gold 0.0% at $1,840/oz; Crude Oil +2.2% at $110.33/brl; Copper +0.1% at $4.01/lb.