USD/Yen rebounds in Asia – Weak AU GDP continues

Asia market update: USD/Yen rebounds in Asia; Weak AU GDP continues; CN Caixin two handles higher than ests; JP base pay highest in 30 yrs; Indian equities struggle to recover; Focus on US ISM May Services PMI tonight.

General trend

- Today USD recovered about half of the losses seen yesterday after Yen saw significant strength overnight on all major crosses. First, Dep Gov Himano’s commented that monetary authorities should watch FX impact on prices, underscoring the political pressure recently put on the BOJ not to let the Yen weaken further due to its continued low/zero interest rate policy. Yen further appreciated a few hours later when the BOJ was reported to be considering further cutting bond purchases as early as June 13.

- Australia’s Q1 GDP figures came in a tick below expectations (although prior Q4 figures were upgraded slightly). The Aussie Stats Agency said the economy experienced its lowest through-the-year growth since December 2020. GDP per capita fell for the fifth consecutive quarter. (Note: GDP per capital fall has been earlier reported as largely due to high immigration figures). AU 3-yr bond yields -3bps.

- Indian stocks struggled to recover any ground in early trading against yesterday’s heavy falls as India’s opposition alliance did better than expected in national election vote counting compared to yesterday’s exit polls, which initially predicted a comfortable third-win for PM Modi’s alliance. Prices fell in stocks such as the Adani family of companies (-15% to -23%), by magnitudes not seen since March 2020 and September 2008.

- China Caixin Services and Composite PMI came in two handles higher than expected. Business activity and total new orders both grew for the 17th month in a row, increasing at the fastest pace since July and May last year, respectively.

- South Korea prelim GDP for Q1 largely inline.

- New Zealand Terms of Trade for Q1 came in higher than expected, while Auckland, the country’s biggest city, saw property prices fall for a second month.

- Japan’s labor earnings saw base pay rise 2.3% from a year ago in April, rising the most since 1994.

- Japanese 10-yr JBGs followed UST yields down (post-lower US JOLTS), by 4bps to below 1% (0.99%). Just last week 10-yr yields rose to a 2011-high of 1.10%.

- US equity FUTs up +0.2% to +0.3% during Asian trading.

Looking ahead (Asian time zone)

- Wed Jun 5th (Wed night BOC rate decision, US ISM May Services PMI).

- Thu Jun 6th AU Apr Balance of Trade, (Thu night ECB rate decision + presser).

- Fri Jun 7th CN Balance of Trade, (Thu night DE May Balance of Trade, US NFP jobs, ECB Lagarde speech).

Holidays in Asia this week

- Monday June 3rd, Malaysia, New Zealand, Thailand.

- Thursday June 6th South Korea.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 7,740.

- Australia Q1 GDP Q/Q: 0.1% V 0.2%E; Y/Y: 1.1% V 1.%E.

- Australia May Final PMI Services: 52.5 v 53.1 prelim (confirms 4th month of expansion).

- Reserve Bank of Australia (RBA) Gov Bullock: Expects Q1 growth to be 'quite low' - comments in Senate testimony.

- Follow up: Australia introduces Bill on 'Build-to-Rent' Sector tax incentives - statement from Treasurer Jim Chalmers.

- New Zealand Q1 Terms of Trade Q/Q: 5.1% v 3.2%e.

- Auckland May Avg House Prices -2.5% m/m [2nd straight decline] - Barfoot realtors.

- New Zealand 10-Month Financial Statements: Budget deficit (end-Apr) -NZ$6.51B (NZ$1.7B narrower than expected).

- Fonterra Global Dairy Trade Auction Dairy Trade price index: +1.7% v +3.3% prior.

China/Hong Kong

- Hang Seng opens +0.3% at 18,489; Shanghai Composite opens -0.2% at 3,086.

- China May CAIXIN PMI services: 54.0 V 52.5E (17th month of expansion, fastest since July 2023).

- Hong Kong May PMI (whole economy): 49.2 v 50.6 prior (falls into contraction after 2 months, lowest reading since Oct 2023).

- China MOF sells CNY11B v CNY11B indicated in 2-year, 3-year, 5-year and 10-year of additional Yuan Sovereign Bonds in Hong Kong.

- China's auditors should fulfill their gatekeeper role - China financial news media.

- Some China AI chip companies are designing less powerful processors in order to retain access to Taiwan Semi - US financial press.

- (US) Treasury Sec Yellen: We have seen an increase in exports to Russia from China, including dual-use goods that can be used to assist Russia's military - Capitol Hill testimony.

- (US) Dep Treasury Sec Adeyemo: Without China, Russia's military supply chain would grind to a halt - CNBC interview.

- China PBOC sets Yuan reference rate: 7.1097 v 7.1083 prior.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repos; Net drains CNY248B v net CNY0B prior.

Japan

- Nikkei 225 opens -0.5% at 38,654.

- Japan Apr labor cash earnings Y/Y: 2.1% V 1.8%E.

- Japan May Final PMI Services: 53.8 v 53.6 prelim (confirms 20th month of expansion).

- BoJ reportedly to consider cutting bond purchases as early as june 13-14th's meeting; to watch markets until the last moment before deciding on bond purchases - press.

- Bank of Japan (BOJ) Dep Gov Himino: Inappropriate for monetary policy to target FX levels; FX fluctuation has various impacts not just via import costs but on economic activity [overnight update].

South Korea

- Kospi opens +0.7% at 2,681.

- South Korea Q1 Preliminary GDP Q/Q: 1.3% v 1.3%e; Y/Y: 3.3% v 3.4%e.

- Samsung Electronics +3% as Nvidia CEO from Taiwan said that the Samsung’s HBM chips were in fact still being tested by Nvidia (earlier reporting in May had indicated the HBM chips were having problems getting certification from Nvidia).

- South Korea May Foreign Reserves: $412.8B v $413.3B prior (update).

Other Asia

- India Congress Party's Chakravarty: PM Modi and his party are 'alliance-unfriendly' - TV interview.

- India May Final PMI Services: 60.2 v 61.4 prelim (confirms 34th month of expansion, lowest since Dec 2023).

- Thailand govt reportedly looking to influence selection of future Central Bank of Thailand (BOT) governors - financial press.

- Philippines May CPI M/M: 0.1% v 0.2%e; Y/Y: 3.9% v 4.0%e.

- Philippines Central Bank (BSP): Affirms risks to the inflation outlook lean toward the upside; May CPI data consistent with expectations, data to be considered at upcoming policy meeting.

- Singapore Apr Retail Sales M/M: -2.7% v -0.8% prior; Y/Y: -1.2% v +1.9%e.

- Singapore May PMI (whole economy): 54.2 v 52.6 prior.

- (TW) US Pres Biden: Reiterates his stance will Not rule out using US forces to defend Taiwan; Peace looks like making sure Russia never, never, never, never occupies Ukraine - Time interview.

North America

- (US) Energy Sec Granholm: SPR work will be finished by end of 2024; US could boost rate of replenishing oil reserves.

- (US) Weekly Redbook LFL Sales w/e Jun 1st: +5.8% y/y; May YTD: +6.0% y/y.

- (US) Apr final Durable Goods Orders: 0.6% V 0.7%E; Durables (ex-transportation): 0.4% V 0.4%E.

- (US) Apr factory orders: 0.7% V 0.6%E.

- (US) Apr JOLTS Job openings: 8.060M V 8.360ME (lowest since Feb 2021); Ratio of job openings to unemployed workers at 1.24 v 1.32 prior (calc) (Note: pre-pandemic was around 1.2).

Europe

- US said to seek EU sanctions guarantee in order to back $50B Ukraine loan - FT.

- (US) NSA Advisor Jake Sullivan: CIA Dir Bill Burns to be in Doha to consult with Qataris on Gaza ceasefire proposal - US press.

- (IL) Qatar Foreign Ministry: We have received an Israeli proposal, and it reflects the positions stated by Pres Biden; The paper is now much closer to positions of both sides.

- (EU) ECB will demand more CRE loan provisions from some German banks - press.

- (IL) Hamas Official Hamdan: Israeli response doesn't respond to our demands.

Levels as of 01:20 ET

- Nikkei 225 -1.1%; ASX 200 +0.4%; Hang Seng +0.3%; Shanghai Composite -0.5%; Kospi +1.5%.

- Equity S&P500 Futures +0.2%; Nasdaq100 +0.3%; Dax +0.3%; FTSE100 +0.6%.

- EUR 1.0877-1.0886; JPY 154.75-155.66; AUD 0.6642-0.6665; NZD 0.6168-0.6192.

- Gold +0.6% at $2,360/oz; Crude Oil -0.1% at $73.19; Copper +0.1% at $4.5510/lb.