RBNZ on hold, but higher path outlook sees Kiwi spike – Metals softer again

Asia market update: Quiet day ahead of Nvidia / FOMC tonight; RBNZ on hold, but higher path outlook sees Kiwi spike; Metals softer again.

General trend

- A generally quiet day in Asia ahead of tonight’s Nvidia earnings and FOMC May Minutes. Nikkei under-performed -0.6%, with most other markets flat to slightly up.

- New Zealand’s RBNZ kept rates on hold at 5.50%, but they did discuss the possibility of hiking rates and also raised the OCR peak rate from 5.60% to 5.62% (by Mar, 2025, up from 5.47% to the peak 5.62%). The rate path increase suggested that cuts may start later in 2025. Kiwi dollar spiked +1.0% on the more hawkish path outlook with NZ 2-yr yields +10bps; NZD and yields later pared some gains. RBNZ added they expect inflation to return to target band of 1-3% by end-2024.

- The Aussie dollar rose alongside the RBNZ decision, up +0.3%.

- Metals softer today, with copper -1.0% from its highs.

- Japan’s Balance of Trade deficit was worse than expected on the headline, but came in lower than forecast on an adjusted basis.

- Fed officials reiterated ‘higher for longer” messaging at a speaking panel (Collins, Mester, Bostic).

- Japanese yields kept creeping up, with JP 10-yr as high as 0.993%, highest since 2012. Meanwhile Japan’s 40-year bond auction had its lowest bid-to-cover since Jan 24th, 2024.

- An EU lobby group warned that China may raise temporary tariffs on large-engine cars, while the EU Commission still appears uncertain about approach to take regarding its own potential tariffs against China.

- US equity FUTs up slightly during Asian trading.

Looking ahead (Asian time zone)

- (Note: CN Apr FDI YTD overdue).

- Wed May 22nd (Wed eve UK CPI + Indonesia Central Bank (BI) Rate Decision + Wed night US FOMC May Minutes and Nvidia earnings).

- Thu May 23rd AU & JP May flash PMIs, KR (BOK) Rate Decision, (Thu eve EU May flash PMIs + US May flash PMI).

- Fri May 24th JP Apr CPI (National), (Fri night US Durable Goods).

Holidays in Asia this week

- Monday May 20th India.

- Wed May 22nd Singapore, Thailand.

- Thu May 23rd Indonesia.

- Fri May 24th Indonesia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 7,855.

- Australia sells A$300M v A$300M indicated in 4.75% Jun 2054 bonds: Avge Yield 4.5951%; bid-to-cover: 2.82x.

- Reserve Bank of New Zealand (RBNZ) leaves official cash rate (OCR) unchanged at 5.50%; as expected - Discussed the possibility of hiking.

- NZD/USD Rises on hawkish RBNZ rate path.

- RBNZ Gov Orr: Confident annual CPI will return to target 1-3% by end-2024 - post rate decision press conference.

- New Zealand Budget to fund 1,500 extra Social Housing places (Budget due May 30th).

- Fonterra Global Dairy Trade Auction Dairy Trade price index: +3.3% v +1.8% prior.

China/Hong Kong

- Hang Seng opens flat at 19,225; Shanghai Composite opens flat at 3,157.

- China Pres Xi welcomes US tourists to China - Chinese state media.

- EU Lobby Group: China may raise temporary tariffs on certain cars that are equipped with large-displacement engines – US financial press.

- EU Commission President Von Der Leyen: EU should have a tailored approach to trade measures against China.

- China PBOC issues CNY30B in 3-month and CNY20B in 1-year yuan denominated bills in Hong Kong.

- China Foreign Ministry Spokesperson Wang: China to deepen strategic cooperation with Iran - follows meeting with Iran Vice FM [overnight update].

- China Premier Li Qiang: To guard against systemic financial risk [overnight update].

- China Foreign Ministry Daily Briefing: Willing to work with US on AI [overnight update].

- China PBOC sets Yuan reference rate: 7.1077 v 7.1069 prior.

Japan

- Nikkei 225 opens -0.3% at 38,823.

- Japan Apr trade balance: -¥462.5B V -¥297.0BE.

- Japan Mar Core Machine Orders M/M: +2.9% v -2.0%e; Y/Y: 2.7% v 1.4%e.

- Japan sells ¥699.4B vs. ¥700B indicated in 40-Year JGB Bonds; Yield at Lowest Accepted Price: 2.270% v 1.905% prior; bid-to-cover: 2.21x v 2.49x prior (lowest btc since Jan 24th, 2024).

- Japan 10-year JGB yields rise to reach 1.000%, highest since 2012.

- Japan BOJ said to discuss changing inflation norms at second Review Workshop [May 21st] - financial press.

- Japan top currency diplomat Kanda expresses concern on Japan's falling competitiveness - Japanese press.

- Japan Chief Cabinet Sec Hayashi: To consider insurance coverage for childbirth costs.

South Korea

- Kospi opens flat at 2,723.

- South Korea Apr PPI Y/Y: 1.8% v 1.5% prior.

- South Korea Jun Business Manufacturing Survey: 76 v 74 prior.

- South Korea Q1 Short-Term External Debt: $141.0B v $140.7B prior (revised from $136.2B).

- South Korea has no plan to lift short-selling ban in Jun - South Korea press.

Other Asia

- Thailand Central Bank (BOT): Corporate and Mortgage loans lead increase in Thai bad loans - press.

- ASML.NL Notes they can disable chip-making machines if China invades Taiwan - follows meeting with Dutch Govt.

- China and Thailand Central Banks signs MOU on bilateral currency trading to boost local-currency trading – press [overnight update].

North America

- (US) Fed's Goolsbee (non-voter for 2024): Must take a longer look at inflation data, be patient - MSNBC interview.

- (US) Fed's Collins (non-voter), Bostic (hawk, voter), Mester (voter): Panel discussion comments in Florida.

- ETH/USD Follow Up: CBOE publishes amended Spot Ether filing as upcoming decision approaches - press.

- (CA) Canada APR CPI M/M: 0.5% V 0.5%E; Y/Y: 2.7% V 2.7%E (4th straight month with annual pace within target band).

- (US) May Philadelphia Fed Non-Manufacturing Activity Regional Index: -0.6 v -12.4 prior.

- (US) Fed’s Bostic (hawk, voter): Doesn't expect to cut rates before the fourth quarter; Expect inflation to decline but relatively slowly.

- (US) Fed's Waller (voter, hawk): Rate hikes are probably unnecessary; Needs to see several more months of good inflation data before being comfortable to support easing policy.

- (US) Fed Survey of Economic Well-Being finds 72% of US households say they were at least 'ok' financially in Oct 2023 (lowest % since 2016).

- (US) Energy Dept: To sell nearly 1M bbl of gasoline in the northeast gasoline supply reserve.

- (US) Fed's Barr (voter): Need to finish the job on inflation.

- (US) Fed's Waller (voter, hawk): Could consider rate cut at the end of 2024 if the data is warranted.

Europe

- (NL) Netherlands Apr House Price Index M/M: 1.0% v 0.7% prior; Y/Y: 7.5% v 5.4% prior.

- (UK) May CBI industrial trends total orders: -33 V -20E.

- (SE) Sweden Central Bank (Riksbank) Bunge: Domestic factors clearly in favor of easing.

- (UK) IMF raises 2024 GDP growth forecast from 0.5% to 0.7%.

- (UK) Chancellor of the Exchequer (Fin Min) Hunt: Priority is for economic growth not just stabilization.

- (HU) Hungary Central Bank (MNB) cuts base rate by 50bps to 7.25%; as expected.

- (EU) ECB’s Nagel (Germany): June rate cut does not mean the ECB will cut at subsequent meetings; Rates should not be cut hastily - press interview.

- (UK) BoE Gov Bailey: Central bank reserves play key role in policy; Reserves likely to settle at £345-490B.

Levels as of 01:20 ET

- Nikkei 225 -0.8%; ASX 200 flat; Hang Seng +0.5%; Shanghai Composite +0.1%; Kospi flat.

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

- EUR 1.0852-1.0864; JPY 156.12-156.40; AUD 0.6663-0.6686; NZD 0.6090-0.6152.

- Gold -0.4% at $2,417/oz; Crude Oil -0.8% at $78.01; Copper -1.1% at $5.0478/lb.