ASIA STOCKS: Huge inflow for Taiwan 

The focus of the week is likely to be Wednesday’s April CPI which is forecast to moderate to2.3% y/y from 2.4%. The trimmed mean has been around 2.7% y/y for four consecutive months. There will be limited updates to the services components being the first month of the quarter. Some of the components of Q1 GDP are also released this week.

• Q1 construction is out on Wednesday and Bloomberg consensus expects it to rise in line with Q4 at +0.5% q/q. Private capex prints on Thursday and is forecast to rise 0.5% q/q after falling 0.2% in Q4.
• April retail sales print on Friday and are projected to rise 0.3% m/m after increasing the same amount in March. The series will be replaced by household consumption in July. The April data are out on June 5. The RBA noted this month that consumption growth has been slower than expected.
• Building approvals for April are also released on Friday and expected to rise 3.0% m/m after falling 8.8% in March. Private house approvals were down 4.5% m/m the previous month.
• The RBA’s private sector credit series for April are out Friday and consensus expects another 0.5% m/m increase.
• RBA Governor Bullock visits the bank’s China office this week.

In Tokyo morning trade, JGB futures remain stronger, 20 compared to settlement levels, but well below Friday’s closing level.

• US equity-index futures have climbed in early Asian trading after President Donald Trump extended a deadline on aggressive European tariffs. Trump agreed to delay the date for a 50% tariff on goods from the European Union to July 9 from June 1.
• US tsy futures (TYM5) have weakened in early Asia-Pac dealings, with TYM5 at 109-26+, -0-08 from closing levels. Cash US tsys are closed today for Memorial Day.
• Cash JGBs are little changed across benchmarks out to the 5-year but to 1-4bps richer beyond, with a flattening bias. The benchmark 30-year yield is 4.1bps lower at 3.012% versus the high of 3.204%.
• Swap rates are 2-4bps higher. Swap spreads are wider.

European natural gas prices fell sharply following US President Trump’s threat to impose 50% tariffs on US imports from the EU. They did recover to be up moderately on the day and following the call between EC President von der Leyen and Trump and an agreement to continue talks and delay any reciprocal tariffs until July 9 they may rise as oil and US gas prices have done. 

• European gas finished Friday up 0.5% to EUR 36.53 to be up 1.3% this month. It fell to a low of EUR 35.42 following the US trade warning. It has been able to make progress on storage refilling during the shoulder season but with scheduled maintenance and cooling demand likely to increase in the northern hemisphere, that could become more difficult.
• The EU is considering prohibiting the Nord Stream gas pipelines, barring 20 Russian banks from SWIFT, reducing the G7 oil price cap to $45 and EUR 2.5bn of new trade sanctions.
• US gas rose 1.9% to $3.31 to be down 0.4% in May but rose to $3.40 at the start of Monday’s trading. Friday’s rally was driven by rising expectations of increased cooling demand as warmer weather is forecast for much of the US at the end of May/start of June.
• US lower-48 gas output rose 4.8% y/y on Friday with demand up 2.3% y/y.