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Asian Equities Track US Declines

General Trend:

  • Trade and bond yields drive sector movements in Asia
  • Asian financials trade generally weaker as bond yields decline
  • Brokerage and electronics firms weigh on the Nikkei
  • Trade-related concerns continue to weigh on Japanese and South Korean chipmakers
  • Chinese mobile chipmaker Sanan Optoelectronics rises over 1%
  • Chinese rare earth firms gain, continued press speculation that China could use rare earth exports as trade weapon
  • China PBoC continues to step up cash injections after recent bank takeover; Chinese gov’t bond yields decline
  • China interbank market and NCDs remain in focus after takeover of Baoshang Bank
  • More analysts see risk of below 1% RBA cash rate; Aussie 10-year yield hits record low and moves below RBA’s 1.50% cash rate
  • US Treasury Semiannual Currency Report: Declines to name any country as manipulator; adds Italy, Ireland, Malaysia and Vietnam to watch list; Removes India and Switzerland from watch list
  • US Treasury also lowered 2 thresholds used to designate FX manipulators.
  • Korean Won (KRW) declines amid equity outflows, Bank of Korea rate decision seen on Friday
  • Brent Crude Futures decline as China oil product apparent consumption dropped in April
  • Huawei said its situation will not delay 5G rollout in China

Headlines/Economic Data

Australia/New Zealand

  • ASX 200 opened -0.1%
  • (NZ) New Zealand Central Bank (RBNZ) Financial Stability Report: Financial system remains resilient to broad range of economic risks, imperative to improve NZ financial system resilience while conditions are conductive
  • (NZ) Reserve Bank of New Zealand (RBNZ) Dep Gov Bascand: Banks are passing on about 150bps of recent rate cut, still working its way through the economy
  • (NZ) New Zealand Central Bank (RBNZ) Gov Orr: Open minded on any parameter of capital review
  • TLS.AU Raises FY19 restructuring costs to A$800M (prior A$600M); to record impairment and writedown value of legacy assets by ~A$500M; to reduce headcount by 6,000 by end of FY19
  • (AU) Australia sells A$3.0B v A$3.0B indicated in new 1.50% June 2031 bonds, avg yield 1.6073%, bid to cover 3.29x
  • (NZ) New Zealand May ANZ Business Confidence: -32.0 v -37.5 prior; Activity Outlook: 8.5 v 7.1 prior

Japan

  • Nikkei 225 opened -1.0%
  • TM Expected to make investment of ÂĄ50B in Didi Chuxing, the two companies will also create car leasing jv – Japanese Press (later says has no comment right now)
  • (JP) Bank of Japan (BOJ) Gov Kuroda: Continued low rates can change risk taking behavior of financial institutions, affect financial stability; no macro prudential tool kit is perfect
  • (JP) Japan Cabinet Secretary Suga: Unthinkable to call an arbitrary election, has never mentioned dissolving parliament
  • (JP) Former ECB chief Trichet: Nobody can say BOJ isn’t doing enough and did not do enough in monetary policy with its bold and audacious decisions

Korea

  • Kospi opened -0.1%
  • (KR) South Korea Jun Business Manufacturing Survey: 75 v 77 prior; Non-Manufacturing Survey: 72 v 77 prior
  • 005380.KR Hyundai Kia Apr YTD combined sales 396.8K vehicles, +3.7% y/y; Hyundai Kia Apr YTD combined China sales 286.3K vehicles, -18.0% y/y

China/Hong Kong

  • Hang Seng opened -0.6%; Shanghai Composite opened -0.5%
  • (CN) China PBoC Open Market Operation (OMO): Injects CNY270B in 7-day reverse repos v CNY150B injected prior; Net: CNY250B injection v CNY70B prior (largest injection since Jan 17)
  • (CN) China PBoC sets yuan reference rate: 6.8988 v 6.8973 prior
  • (CN) China National Development and Reform Commission (NDRC) Spokesperson: China will give priority to domestic needs for rare earth, not ruling out using rare earths in trade dispute with US – SCMP
  • (CN) China Banking and Insurance Regulatory Commission (CBIRC) chairman Guo Shuqing: China has sound economical fundamentals which mean yuan will not see continuous depreciation and speculative short yuan positions will surely lead to a huge loss – Xinhua
  • (CN) China PBOC Gov Yi Gang: Confident to keep CNY currency (Yuan) stable at reasonable and equilibrium level; Benchmark Deposit Rate will continue to play an important role in promoting market-based interest rate reform – financial press
  • HUAWEI.CN Files for motion for summary judgement asking US Federal Court in Texas to declare 2019 National Defense Authorization Act unconstitutional

Other Asia

  • (MY ) Malaysia Central Bank (BNM): Sees no economic impact from being included on US Treasury’s FX watchlist; Malaysia does not practice unfair currency practices

North America

  • (US) TREASURY DEPARTMENT SEMI-ANNUAL CURRENCY REPORT: NO MAJOR TRADING PARTNER A CURRENCY MANIPULATOR; DOES NOT NAME CHINA A MANIPULATOR
  • SPDR Gold Trust holdings -0.2% to 737.3 metric tons

Europe

  • (UK) Govt spokesperson: No deal Brexit has remained the legal default; have the responsibility to prepare for it
  • (UK) Labour’s Corbyn (opposition) said to be ready to back a second Brexit referendum, may announce it very soon – UK press
  • (UK) May BRC Shop Price Index: Y/Y 0.8% v 0.4% prior

Levels as of 1:20 ET

  • Nikkei 225, -1.3%%, ASX 200 -0.7%, Hang Seng -0.3%; Shanghai Composite -0.1%; Kospi -1.3%
  • Equity Futures: S&P500 -0.3%; Nasdaq100 -0.5%, Dax -0.3%; FTSE100 -0.5%
  • EUR 1.1174-1.1159 ; JPY 109.43-109.14 ; AUD 0.6931-0.6919 ;NZD 0.6553-0.6540
  • Gold +0.2% at $1,279/oz; Crude Oil -1.1% at $58.50/brl; Copper -0.4% at $2.685/lb
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