ASIA STOCKS: Key Bourses Deliver Strong Weekly Gains
Following the simmering of tensions in the Iran-Israel conflict, several key bourses in Asia are on track to deliver a positive week. As news circulates that a trade deal has been reached between the US and China coupled with renewed hope of cuts from the Federal Reserve, sentiment improved towards the end of the week and it will be interesting to see if it can extend into next week.
- China's Hang Seng did very little today yet is on track to finish the week up +3.3%. The CSI 300 was flat also yet remains up +2.5% for the week. The Shanghai Comp fell -0.20% but is up +2.4% for the week and the Shenzhen Comp is up +0.73% and over +4.6% for the week.
- In Taiwan, TAIEX is marginally softer but remains up +1.8% for the week buoyed by from strong inflows and a surging TWD.
- The KOSPI finished the week off with two consecutive days of near on -1% falls but is holding onto weekly gains of +0.94%
- The FTSE Straits Times in Singapore is up +0.64% today and over 2% for the week whilst the PSEi in the Philippines jumped +1.13% today and is just shy of +1% for the week.
- The NIFTY 50 has opened flat in morning trade having delivered a +1.2% gain yesterday. For the week currently it is up +1.7% for the week.
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JPY: Asia Wrap USD/JPY - A Whippy Session With An Underlying Bid
The Asia-Pac USD/JPY range has been 143.85 - 144.77, Asia is currently trading around 144.35. USD/JPY has had a very whippy session with a big spike seen into the Japanese Fix, it drifted lower from there but bounced again in our afternoon to make a new high around 144.77.
- " Regarding a recent spike in super-long yields on government debt, market participants cited the unwinding of existing positions and a drop in demand, Bank of Japan Governor Kazuo Ueda says. Moves in short- and long-term yields tend to affect the economy more than those in super long-term yields. Will monitor market developments closely along with their economic impact by keeping in mind that major moves in super long-term yields can affect shorter-term yields." (per BBG)
- "A Japanese government advisory panel is urging authorities to intensify fiscal consolidation efforts, according to Bloomberg News on Tuesday, citing a proposal submitted to Finance Minister Katsunobu Kato on the same day. This comes as the Bank of Japan's ongoing monetary tightening increases the risk of higher debt-servicing costs for the nation, said the news wire." (per MTN)
- (Bloomberg) - “The JGB 40-year sale has come in weak after all. The bid-to-cover dropped back to 2.21, the weakest since July. And the yield of 3.135% is above the poll estimate of 3.085%. That global bond bounce may fade.”
- This move yesterday would have caught out a few shorts, but we are approaching resistance back towards 145.00/146.00 which should see some sellers emerge.
- It is worth noting though we are heading into the corporate month-end and this could see some USD demand over the next day or 2 making it uncomfortable for the considerable JPY longs that have been built up.
- The market has been very confident of a move lower in USD/JPY but with positioning quite large now the risk of pullbacks does increase. Resistance is now back towards 145.00/146.00 area first up.
Options : Close significant option expiries for NY cut, based on DTCC data: 145.00($2.14b), 143.00($1.98b), 144.00($1.67b). Upcoming Close Strikes : 143.00($3.34b May 30), 140.00($2.78b May 30).
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg
STIR: RBNZ-Dated OIS Firmer After Today’s Policy Decision & Presser
RBNZ-dated OIS pricing closed 6-10bps firmer across meetings versus pre-RBNZ levels.
- Governor Hawkesby held his first press conference and noted that the vote on the direction of rates was the first in two years and usually occurs at inflexion points and also reflects the high degree of uncertainty at the moment. With rates now in the “neutral zone”, the MPC “can now respond to developments as they occur”, thus further easing isn’t a given and future decisions will remain data and outlook dependent.
- Markets had fully priced in today’s 25bp cut ahead of the decision, with a total of 64bps of easing expected by November 2025. That has now adjusted to 57bps, inclusive of today’s move.
Figure 1: RBNZ Dated OIS Today vs. Pre-RBNZ Levels (%)
Source: MNI - Market News / Bloomberg
GOLD: Stronger Greenback Continues To Pressure Gold
Gold prices are down slightly during today’s APAC trading after falling 1.3% on Tuesday. They are down 0.1% to $3296.60 as the strengthening US dollar continues to weigh (USD BBDXY +0.1%) while equity and commodity prices are mixed. Bullion rose to $3315.81 early in the session before falling to $3291.79.
- Gold is trading in a narrow range as markets wait for news on the progress of trade negotiations and key US data out on Friday, especially PCE prices. US April durable orders were better than expected and the Dallas Fed manufacturing index improved substantially. It is also sensitive to geopolitical developments that may shift safe-haven flows.
- Equities have been mixed with the S&P e-mini down 0.1% and Hang Seng -0.6% but Nikkei up 0.3% and Kospi +1.7%. Oil prices are higher with the WTI +0.6% to $61.24. Copper is down 0.6% though. Silver is little changed at around $33.26.
- Later the Fed’s Williams and Kashkari speak as well as the May FOMC meeting minutes are released. US May Richmond & Dallas Fed indices as well as German April unemployment and French April consumption are released. BoE’s Pill also speaks.
