SOUTH KOREA: Country Wrap: Current A/C Surplus Weighed By Equity Dividends
Jun-10 05:34
- South Korea's April current account surplus narrowed sharply. From $9.145bn in March, we fell to $5.7bn in April. This largely reflected a sharp swing in the income balance, as net investment income swung from a surplus to a deficit. We printed -$648mn on net equity income, versus a +$2597mn in March. This swift likely reflected dividend related outflows to offshore investors in April. This is the seasonal norm, with the portfolio investment income balance returning to surplus in May in recent years. This often leads to improving current account trends as we progress through Q2, all else equal. The goods balance remained healthy, just short of $9bn for April. There weren't sharp shifts elsewhere in the current account position. (source MNI)
- Korea's economy continues to remain "weak" due to sluggish construction activity and deteriorating export conditions, driven by rising U.S. tariffs, a state-run think tank said Tuesday. "The domestic economy continues to show weak overall momentum, as construction investment remains subdued and export growth slows, particularly due to the impact of U.S. tariff hikes," the Korea Development Institute (KDI) said in its latest monthly economic assessment. The KDI noted that weak construction investment is weighing on domestic demand, while overall industrial output is showing signs of deceleration, particularly in the construction sector. (source Korea Times)
- The KOSPI is moderately higher by +0.22%, to be up over 6% in the last five trading sessions.
- The Won is down -0.77% today at 1,365.10
- Bonds: KTBs are mixed today the the 2YR lower by -2bps and the 10YR by -1bps and other maturities modestly higher in yield.
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MACRO OUTLOOK: US PPI/Retail Sales And Powell Follow On Thursday [2/2]
May-09 20:17
- Core PCE implications will then be watched closely in Thursday’s PPI report, and we expect with additional focus on portfolio management after last month’s huge upward revision to February.
- Retail sales, whilst only reported in nominal terms, will offer a keenly awaited look at consumer behavior.
- Real spending moderated to 1.8% annualized in Q1 after 4.0% in Q4 despite likely tariff front-running, with April a good test of how much discretionary spending was pulled forward.
- Finally, Powell provides “Opening Remarks” at the Second Thomas Laubach Research Conference, although he’s allotted twenty minutes so there is scope for more substantive remarks than you’d usually expect. His message at Wednesday’s FOMC press conference was one firmly of being in no hurry to cut rates amidst huge uncertainty. He also appeared to put more weight on hard data over soft indicators that appear more stagflationary in nature.
MACRO OUTLOOK: US CPI Offers Look At April Tariff Distortions on Tuesday [1/2]
May-09 20:15
- The week’s US data calendar is highlighted by CPI inflation on Tuesday although PPI inflation and retail sales reports on Thursday are in close second. All three releases are going to be important, offering further hard data for April in the first month under reciprocal tariffs. What’s more, PPI and retail sales are followed by Fed Chair Powell just ten minutes after their release (more on that below).
- Core CPI inflation is seen accelerating to 0.3% M/M in April, with six unrounded estimates we’ve seen to date averaging 0.27% M/M.
- A potential for a ‘low’ 0.3% aside, it’s still likely a swift acceleration from a particularly soft 0.06% M/M in March which was in large part down to surprisingly abrupt declines in lodging away from home (-3.5%) and airfare (-5.3%) prices.
- This lodging weakness carried over to core PCE inflation back in March, at just 0.03% M/M after a particularly strong 0.50% M/M in February in a large wedge with core CPI at 0.23% M/M.
- Markets currently price a next Fed cut with the September FOMC meeting.
USDCAD TECHS: Pressuring Resistance
May-09 20:00
- RES 4: 1.4296 High Apr 7
- RES 3: 1.4111 High Apr 4
- RES 2: 1.4041 50-day EMA
- RES 1: 1.3943 High May 9
- PRICE: 1.3930 @ 16:06 BST May 9
- SUP 1: 1.3751 Low May 6
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
USDCAD has recovered from its recent lows. Despite the recovery, the trend condition remains bearish and short-term gains are considered corrective. A fresh cycle low on Tuesday reinforces the bearish theme. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Note that moving average studies are in a bear mode position, highlighting a dominant downtrend. Key resistance is seen at 1.4041, the 50-day EMA.
