CROSS ASSET: Equities are the early driver
Jun-14 07:38
- Equities are the driver here, provides some USD offers, and helping Gold to its session high.
- Bond are seeing some short cover, with Gilt finding some support at the 4.45% mark in Yield, while Bund and the 133.00 level still holds.
- Looking at volumes, contracts still trade below averages, which helps exacerbate some of the moves.
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EQUITIES: Rally In Financials Drives Afternoon Bid In China
May-15 07:37
Mainland Chinese & Hong Kong equities firmed notably during the second half of Monday’s session.
- Financials were touted as the driver of the move, with Chinese media outlets flagging news that an upcoming Shanghai Stock Exchange seminar that will touch on boosting the valuation of the country’s financial sector.
- That left the CSI 300 +1.6% better off at the close, with the Hang Seng up a similar amount in late dealing.
- Elsewhere, wires pointed to a social media post from the wife of a well-known fund manager, who outlined hopes for market stabilisation led by fresh gains in SOEs.
- Meanwhile, TenCent outperformed the broader tech sector for much of the day ahead of the company’s quarterly earnings report (due Wednesday).
- When it comes to cross-border flows, the Northbound legs of the Hong Kong-China Stock Connect schemes extended the recent run of (relatively contained) net daily inflows, with ~CNY4.1bn of net purchases registered via those channels on Monday.
JAPAN: Kishida-Timing Of Election Depends On 'Various Future Conditions': Jiji
May-15 07:26
Wires reporting Jiji Press relaying comments from Japanese Prime Minister Fumio Kishida stating that the "Timing of dissolving parliament to seek [a] public mandate would depend on various future conditions." Earlier today Japan Times also reported that Kishida could be considering calling a snap election following the G7 leaders summit taking place in Hiroshima at the end of the week.
- Any action now would be a significant gamble by Kishida, given that the next general election is not due until October 2025 at the latest. Before that, Kishida faces re-election as head of the governing conservative Liberal Democratic Party.
- Japan Times reports that Kishida could be considering pushing the election up based on a recovery of his approval ratings to around 50% and relatively strong performances for the LDP in recent by-elections. It also notes the sizeable risk of calling an election based solely on these factors.
GILTS: Looking ahead to labour market data tomorrow
May-15 07:15
- 10-year gilt yields have caught up with the moves seen in 10-year Bunds in early trading, with yields up 2.6bp at the time of writing. However, the gilt curve has seen more of a parallel shift, rather than the bear steepening seen in the German curve
- In terms of domestic focus on the UK, we have PM Sunak meeting Ukrainian President Zelensky with early headlines suggesting the UK will increase its military aid spending for Ukraine.
- The big event for UK markets this week, however, will be the release of labour market data tomorrow morning. Average earnings are expected to increase a little further on an ex bonus basis to 6.8%Y/Y (from 6.6% in the 3-months to February). We will have another print (on 13 June) ahead of the next MPC meeting - but nonetheless tomorrow's data will be important.
- In terms of what's priced in for the UK, there is around 20.5bp for the June meeting with a peak of 43bp priced by November. A first full cut isn't priced until March 2024, however.
- 2y yields up 2.6bp today at 3.814%, 5y yields up 2.7bp at 3.622%, 10y yields up 2.6bp at 3.801% and 30y yields up 2.6bp at 4.240%.
- 2s10s unch today at -0.13.bp and 10s30s down -0.1bp at 43.8bp.
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