SOUTH KOREA: GDP Rebounds, Aided By Consumption/Exports, Investment Still Weak
Jul-23 23:50
South Korea's q/q growth of 0.6% was just above market forecasts (0.5%), but well above the Q1 contraction of -0.2%. Q2's rise was the strongest quarterly gain since Q1 2024. In y/y terms growth rose 0.5%, against a 0.4% forecast and flat outcome in Q1.
- In terms of the detail, Rtrs noted on the expenditure: "private consumption rose 0.5% over the quarter, while construction and facility investments each fell 1.5%, according to the Bank of Korea. Exports jumped 4.2%, led by semiconductors, after falling 0.6% in the previous quarter amid U.S. tariff uncertainty. It was the strongest quarterly performance since the third quarter of 2020."
- The chart below plots the various expenditure outcomes for Q2 versus Q1.
- Manufacturing rose 2.7%q/q after a 0.6% decline in Q1, but construction was down -4.4%q/q. Services rose 0.6%q/q, after falling 0.2% in Q1.
- The data is likely to add to the BoK's wait and see approach in terms of the rate outlook. The central bank has already revised down the growth outlook, while we also recently had fresh fiscal stimulus from the government.
- Earlier this week the consumer sentiment reading rebounded to multi year highs as well.
Fig 1: South Korean Q2 GDP Rebounds
Source: Bloomberg Finance L.P./MNI
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GOLD: Easing Of Geopolitical Tensions Drives Gold Lower
Jun-23 23:45
Gold prices are 0.5% lower at $3350.2/oz after US President Trump announced that there would be a ceasefire between Iran and Israel and an end to their war in 24 hours (0800 AEST Wed/2300 BST Tues/1800 EDT Tues). Gold was little changed on Monday finishing up 0.1% to $3368.48 after a high of $3395.07. It moderated from there following news of Iran’s muted response to US strikes on its nuclear facilities.
- Officially, Iran will begin the truce in 6 hours allowing all planned missions to take place followed by Israel “upon the 12th hour”.
- Iran responded to the US attacks on its nuclear facilities on the weekend by targeting its base in Qatar. It notified Qatar first though and the missiles were intercepted causing little damage. VP Vance said that the move was “symbolic”.
- Markets have responded to the ceasefire news with WTI down 5.0% to $65.13/bbl and the S&P e-mini up 0.5%. The BBDXY USD index is down 0.2% and US yields lower.
- Pullbacks in gold are still seen as corrective. It is holding today above initial support at $3338.8, 12 June low. Initial resistance is at $3451.3, 16 June high.
JGBS: Futures Weaker Overnight, Risk-On, Middle East Ceasefire
Jun-23 23:41
In post-Tokyo trade, JGB futures closed slightly lower, -5 compared to settlement levels, after US tsys finished Monday with modest gains.
- US tsys and US stocks rallied on an initially muted response by Iran to US bombing over the weekend. Stocks then extended gains even after Iran launched missiles at a US base in Qatar, a possible face-saving measure as Iran had warned the US prior, most, if not all, rockets were intercepted.
- Then, President Trump announced a ceasefire between Iran and Israel. "*TRUMP: ANNOUNCES 12-HOUR CEASEFIRE BETWEEN IRAN AND ISRAEL" - BBG. This has seen risk open very positively in Asia, building on its impressive overnight reversal.
- MNI Interview - "The Bank of Japan is likely to raise its policy rate by 25 basis points to 0.5% in January as confidence builds around sustained wage growth, though a December hike cannot be ruled out, former BOJ chief economist Seisaku Kameda told MNI on Friday."
- "Japan denied a report that the US directly asked Tokyo to raise its defence spending to a similar 3.5% level. A top official said the amount was less important than how Japan raises its military capabilities."(BBG).
- Today, the local calendar will see Nationwide Dept Sales alongside 20-year supply.
BONDS: NZGBS: Richer With US Tsys, Risk-On Extends After Middle East Cease Fire
Jun-23 23:15
In local morning trade, NZGBs are 3bps richer after US tsys finished Monday with modest gains.
- US tsys and US stocks rallied on an initially muted response by Iran to US bombing over the weekend. Stocks then extended gains even after Iran launched missiles at US base in Qatar, a possible face-saving measure as Iran had warned the US prior, most if not all rockets intercepted.
- Then, President Trump announced a ceasefire between Iran and Israel. "*TRUMP: ANNOUNCES 12 HOUR CEASEFIRE BETWEEN IRAN AND ISRAEL" - BBG. This has seen risk open very positively in Asia, building on its impressive overnight reversal.
- (Bloomberg) -- GDP growth surprised on the upside in the first three months of 2025, but “maintaining momentum could be challenging,” the Treasury Department says in the Fortnightly Economic Update.
- Swap rates are 1-2bps lower.
- RBNZ dated OIS pricing is little changed across meetings. 4bps of easing is priced for July, with a cumulative 29bps by November 2025.
- Today, the local calendar will be empty, ahead of trade balance data for May tomorrow.
- On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 1.75% May-41 bond.
