MNI EUROPEAN MARKETS ANALYSIS: US CPI In Focus Later

• Risk appetite consolidated after Monday's surge. US equity futures are down modestly, while USD indices are also tracking lower at this stage, but by and large Monday gains are holding. US yields edged down as well.
• On the data front, we had Australian consumer and business sentiment readings today, but neither outcome shifted the macro needle.
• JGB futures are holding sharply weaker and near session lows, -86 compared to settlement levels, despite a solid post-auction rally at the long end of the curve.
• Looking ahead, UK Labor market data is due, but the main focus will be on the US CPI print.  

MARKETS 

US TSYS: Asia Wrap - Yields Drift Lower

TYM5 has traded slightly higher within a range of 110-02 to 110-08 during the Asia-Pacific session. It last changed hands at 110-07, up 0-02 from the previous close.

• The US 2-year yield has drifted lower, dealing around 3.983%, down 0.03 from its close.
• The US 10-year yield has drifted lower, dealing around 4.45%, down 0.02 from its close.
• “ The House tax committee released key details of the multi-trillion dollar tax-cut bill President Trump is seeking to enact as his signature legislative achievement this year.”(BBG) This would add to the easing if passed and provide another tailwind for risk.
• The 10-year Yield range seems to be 4.10% - 4.5%, price has bounced nicely off the 4.25/30 support, price is now testing the upper bound of the range around 4.45/50%. A sustained break above this level would see another round of selling targeting the 4.75% area.
• MNI US CPI Preview - The broad assumption is that April is too early to have seen the impact from sharp increases in tariffs in April, with summer months more likely as inventories are reduced after significant front-running.
• However, Monday’s significant cooling in US-China tensions - with US tariffs on China temporarily being cut from 145% to 30% and China tariffs on US from 125% to 10% for a 90-day period - will see this report viewed in a different light again.
• That said, while April’s data could be glossed over as unrepresentative of ongoing inflation dynamics, the risks to an outsized market reaction tilt to the hawkish side (albeit with Monday’s further hawkish readjustment likely limiting the magnitude). Weaker-than-expected data could be shrugged off as the calm before the storm. Stronger April inflation pressures could be a signal that firms are already raising prices.
• Data/Events :  US CPI 

JGBS: Twist-Flattener After Solid 30Y Auction, PPI Data Tomorrow

JGB futures are holding sharply weaker and near session lows, -86 compared to settlement levels, despite a solid post-auction rally at the long end of the curve.

• The 30-year JGB auction low price aligned with dealer expectations per a Bloomberg survey. Moreover, the cover ratio rose to 3.0739x from 2.9582x, and the auction tail narrowed significantly to 0.30 from 0.75 (the longest since 2023).
• (MNI, ICYMI) Several Bank of Japan's board members expressed caution about raising interest rates at the April 30-May 1 meeting. The summary did not offer any hint regarding the pace or timing of rate increases, reflecting the board's cautious stance at the meeting, which led to a hold on the 0.5% policy rate.
• BoJ Governor Uchida reiterated the central bank’s stance to raise interest rates once its economic outlook is realised in Parliament today.
• Cash US tsys are 1-2bps richer in today's Asia-Pac session after yesterday's heavy session sparked by news that the US and China agreed to pause their retaliatory reciprocal tariffs for 90 days.
• Cash JGBs are 1-2bps cheaper across benchmarks out to the 10-year but 7-8bps richer beyond.
• Swap curve has twist-flattened with rates 3bps higher to 5bps lower.
• Tomorrow, the local calendar will see PPI data alongside BoJ Rinban Operations covering 1-3-year and 5-25-year JGBs.

AUSSIE BONDS: Heavy Session As ACGBs Track Global Bonds

ACGBs (YM -11.0 & XM -7.5) are weaker and hovering near Sydney session lows. 

• NAB business conditions fell 1 point from a month earlier to 2 in April, the lowest since August 2020.
• Cash US tsys are ~2bps richer in today's Asia-Pac session after yesterday's heavy session sparked by news that the US and China agreed to pause their retaliatory reciprocal tariffs for 90 days.
• Cash ACGBs are 7-10bps cheaper with the 3/10 curve flatter and the AU-US 10-year yield differential at -3bps.
• The bills strip has bear-steepened, with pricing -3 to -11.
• RBA-dated OIS pricing is 2-11bps firmer today with late 2025/early 2026 leading. This leaves meeting pricing 4-35bps firmer than levels before the release of Q1 CPI data on April 30. A 25bp rate cut in May is currently given a 96% probability, with a cumulative 82bps (117bps before the CPI data) of easing priced by year-end (based on an effective cash rate of 4.09%).
• Tomorrow, the local calendar will see Q1 Wage Price Index and Home Loans data.
• AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond tomorrow and A$800mn of the 2.50% 21 May 2030 bond on Friday.

AUSTRALIA DATA: NAB Bus Conditions Continue To Trend Lower, Labor Costs Steady

The NAB Australian business survey saw conditions ease to +2 from a revised +3 reach in March. On the confidence front, the reading edged up to -1 from -3 prior. These headline measures aren't suggesting a sharp turnaround in domestic economic growth momentum in the near term. 

• The first chart below plots NAB business conditions against GDP growth in y/y terms. Whilst the conditions measure is above the level of GDP growth, conditions have been trending lower since a cycle peak back in late 2022.  
• Business confidence has largely tracked sideways in recent years, and struggled above to sustain positive readings. 

Fig 1: NAB Australian Business Conditions Versus GDP Growth Y/Y 

Source: NAB/MNI - Market News/Bloomberg 

• In terms of the detail, trading conditions edged down to 5.2 from 5.7, while profitability fell to -4.2 from around flat prior. This is the weakest profit reading since 2020.
• The employment sub index edged down to 3.5, but has been fairly steady. The labour cost measure was unchanged at 1.6 and remains close to unchanged since late last year. The second chart below is of this metric versus the wage index published by the ABS (in y/y terms). This measure for Q1, prints tomorrow, with the y/y outcome projected unchanged at 3.2%y/y (which is consistent with recent NAB outcomes).
• The prices measure rose to 0.8 from 0.6 in March, but has been sub 1.0 since June last year. 

 Fig 2: NAB Australian Labour Costs Versus Wages Growth Y/Y 

Source: NAB/MNI - Market News/Bloomberg 

AUSTRALIA DATA: Westpac Consumer Sentiment Index Rises, But Still Sub 100 Level

The Westpac May consumer sentiment report for Australia rose 2.2%m/m to put the index back at 92.10. We remain sub recent highs, with 95.9 recorded back in March of this year. 2023 lows back under 80 are some distance away, but equally we haven't been above the 100 level since early 2022. 

• At face value, the headline result suggests a fairly moderate to flattish pace of consumer related spending. This is consistent with recent ABS reports on retail and household spending, which pointed to some moderating in spending trends after a bump higher in the H2 last year (aided by fiscal initiatives).
• The chart below plots the Westpac consumer sentiment index versus retail sales y/y (which is the orange line on the chart).
• There was a positive with time to buy a household item rising to 93.2, a 3.5% gain in the month. Again though this index remains off recent highs of 97.10, recorded in March of this year.
• Unemployment expectations fell 2.1% to 121.3 (for the 12 months ahead), suggesting that a tight labour market backdrop will still prevail. 

Fig 1: Westpac Consumer Sentiment Index Versus Retail Sales Y/Y

Source: Westpac/MNI - Market News/Bloomberg

STIR: RBA Dated OIS Dec Meeting Pricing 35bps Firmer Than Pre-CPI Level

RBA-dated OIS pricing is 2–11bps firmer today, led by the late 2025 to early 2026 contracts. Pricing for individual meetings is now 4–35bps higher than levels observed prior to the release of Q1 CPI data on April 30.

• Q1 headline and underlying inflation printed 0.1pp higher than expected but the trimmed mean at 2.9% y/y was below the top of the RBA’s 2-3% target band for the first time since Q4 2021.
• A 25bp rate cut in May is currently given a 96% probability, with a cumulative 82bps (117bps before the CPI data) of easing priced by year-end (based on an effective cash rate of 4.09%).

Figure 1: RBA-Dated OIS – Post-CPI Vs. Pre-CPI

Source: MNI - Market News / Bloomberg

BONDS: NZGBS: Closed Cheaper & Near Worst Levels, Tracking US Tsys

NZGBs closed near session cheaps, with benchmark yields 6-8bps higher and the 2/10 curve steeper. With the domestic calendar again empty, today’s local market price action reflected heavy trading in global bonds following yesterday’s news that the US and China agreed to pause their retaliatory reciprocal tariffs for 90 days.

• Nevertheless, NZGBs underperformed the $-bloc slightly, with the NZ-US and NZ-AU 10-year yield differentials 1-2bps wider.
• “New Zealand will commit an extra NZ$100m to the Elevate venture capital fund in next week’s Budget, Finance Minister Nicola Willis said in a speech Tuesday in Wellington. Elevate began in 2020 to support high-growth tech-based startups by co-investing in private venture capital funds.” (per BBG)
• Swap rates closed 9-11bps higher.
• RBNZ dated OIS pricing closed 1-6bps firmer across meetings. 25ps of easing is priced for May, with a cumulative 70bps by November 2025.
• Tomorrow, the local calendar will see Card Spending and Net Migration.
• On Thursday, the NZ Treasury plans to sell NZ$200mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 1.75% May-41 bond.

FOREX: G10 Wrap - USD Breaks Resistance, Can it Extend ?

The BBDXY has had an Asian range of 1237.68 - 1240.11, Asia is currently trading around 1237. USD/JPY has edged lower after Japanese Finance Minister Kato said he will seek an opportunity to discuss currency matters with US Treasury Secretary Scott Bessent when the two are in Canada for a meeting of Group of Seven officials."*UCHIDA: WAGES EXPECTED TO KEEP RISING DUE TO TIGHT LABOR MARKET" - BBG. The USD/CNY fix was set at 7.1991. Today's fixing is sub the 7.2000 level for the first time since Apr 7. It comes despite the stronger USD index levels overnight, although some offset was from lower USD/CNY levels.

• EUR/USD -  Asian range 1.1085 - 1.1117, Asia is currently trading 1.1115. EUR/USD has had a quiet session as the market digests the overnight moves. The market is still expected to use dips as a buying opportunity and dips back towards 1.09/1.10 should see buyers remerge.
• GBP/USD - Asian range 1.3170 - 1.3200, Asia is currently dealing around 1.3195. GPB broke through its support around 1.3200, if this break can hold we could target a move back to 1.3000 where buyers should be expected to return.
• USD/JPY -  Asian range 147.73 - 148.48, the Asia session is currently dealing around 147.85. USD/JPY scythed through the 1.4700 area as shorts pared back some of their positioning. With stocks on a tear as momentum type funds are forced back into the market the USD will continue to benefit particularly against currencies like the JPY. This will now test the conviction of the USD bears short-term, but levels back towards 150/151 should offer good levels for those that want to express this view.
• USD/CNH - Asian range 7.1789 - 7.2045, the USD/CNY fix printed 7.1991. Asia is currently dealing around 7.1835. A lower fix even with the USD broadly higher across the board gave USD/CNH the impetus to extend lower, sellers should be found on any bounce back towards 7.24/25 again.
• Cross asset : SPX -0.38%, Gold $3236, US 10-Year 4.45%, BBDXY 1237, Crude oil $61.76

• Data/Events :Ger ZEW Survey, US CPI

  Fig 1: GBP/USD Spot Daily Chart

  

• Source: MNI - Market News/Bloomberg

FOREX: Antipodean Wrap - AUD & NZD Outperform Thanks To China

The S&P is down 0.39% this morning in the Asian session. Some intra-day retracement is to be expected but the broader risk-on move might still have a couple of days to play out as the price action shows the market was not expecting such a positive outcome so quickly. The Westpac May consumer sentiment report for Australia rose 2.2%m/m to put the index back at 92.10. We remain sub recent highs, with 95.9 recorded back in March of this year. The NAB Australian business survey saw conditions ease to +2 from a revised +3 reach in March. On the confidence front, the reading edged up to -1 from -3 prior. These headline measures aren't suggesting a sharp turnaround in domestic economic growth momentum in the near term. The USD/CNY fix was set at 7.1991. Today's fixing is sub the 7.2000 level for the first time since Apr 7. It comes despite the stronger USD index levels overnight, although some offset was from lower USD/CNY levels.

• AUD/USD - Asian range 0.6361 - 0.6393, the AUD is currently dealing around 0.6400. AUD has outperformed this morning benefitting from its close trading relationship with China. Good demand was seen again back towards the 0.6350 support area. A break below 0.6300 needed to reverse direction.
• AUD/JPY - Asian range 94.07 - 94.64, price goes into London trading around 94.60. While the support around 92.00 holds, price is likely to continue testing the Weekly resistance seen towards 96.00 where sellers should remerge.
• NZDUSD - Asian range 0.5847 - 0.5877, going into London trading around 0.5980. The NZD has found demand this morning after dipping overnight. Price is approaching the bigger support back towards 0.5800, this needs to hold for those who believe the USD is set to move lower.

• AUD/NZD - Asian range 1.0869 - 1.0888, the Asian session is currently trading 1.0880. The Cross has not backed off once since making a low of 1.0654 on the 23 April, it is now challenging the pivot around 1.0900 a sustained break above would turn the focus higher.

  Fig 1 : NZD/USD Spot Daily Chart

  

Source: MNI - Market News/Bloomberg

ASIA STOCKS: Optimism Dropping Off

Optimism may be dropping off throughout Asia with only some major bourses up again today as the trade truce remains at the forefront of investors minds.  Some investors are now turning their attention to whether the trade truce means no further stimulus is forthcoming in China and hence are likely to focus on the actual impact of tariffs on company’s profitability. 

• The Hang Seng was the regional outlier today, falling -1.67% whilst the CSI 300 and Shanghai were flat and Shenzhen following the lead from Hong Kong falling -0.30%.
• The KOSPI fell too by -0.15% after yesterday’s gain of +1.17%
• Malaysia was open again today after holidays but remained very quiet rising just +0.07% despite Singapore’s Straits Times being  up +0.43%.
• The Philippines PSEi continues its good run rising +1.45% today.
• India’ s NIFTY 50 is down by-0.85%, following yesterday's strong gains of +3.8%

Oil Backs Off From Strong Rally

• Oil gave back some overnight gains as the pace of the rally ran out of steam.
• WTI opened the trading day in Asia at US$62.00 bbl and has lost -0.18% to be at US$61.85
• Brent finished opened the Asia trading session at $64.93 and is lower by -0.20% at $64.83
• For both WTI and Brent the last three trading sessions has seen a more than 5% rise in prices.
• The gains sees WTI above the 20-day EMA of $61.17 with the next key technical level the 50-day EMA at $63.90
• Oil companies like Exxon Mobil Corp. and Chevron Corp. climbed on Monday with commodity related companies in general having a good day.
• President Trump campaigned on the promise of cheaper oil and despite the rally in recent days, WTI remains -12% lower year to date.

Gold Steadies from Last Night's Fall

• Gold steadied in Asia trading following  its second largest daily decline this year overnight and gained +0.10% to US$3,239.52 from where it opened trading in Asia this morning gold at US$3,236.27.
• From the high of $3,431.77 on May 06, gold is now down over 5%.
• Positioning from Hedge Funds is much more neutral with CFTC data showing that bullish bets have been scaled back to their lowest in more than a year.
• Gold is likely to return its attention back now to the FED and and the direction of interest rates as trade wars risks appear to have subsided, for now.
• Gold has now traded below the 20-day EMA of $3,276.66 with the next technical level the 50-day EMA at $3,164.09.

SOUTH KOREA:  Country Wrap: Pres Rivals Promote AI

• Promising to transform South Korea into a top artificial intelligence (AI) superpower, abolish regulatory hurdles and lure back overseas factories, key presidential hopefuls have made ambitious economic pledges the centrepiece of their campaigns, with the official election period having kicked off this week.  (source Yonhap)
• South Korea and Malaysia were set to hold their ninth round of negotiations for a bilateral free trade agreement (FTA) on Tuesday, as the two sides seek to broaden their trade portfolio and enhance cooperation, Seoul's industry ministry said. The latest round of talks for an FTA was scheduled to kick off in Kuala Lumpur for a three-day run, involving some 70 trade officials from the two countries, according to the Ministry of Trade, Industry and Energy. (source Yonhap)
• The KOSPI fell too by -0.15% after yesterday's gain of +1.17%
• The Won has had strong day rising +.44% to 1,413.77
• Bonds had a strong sell off with yields higher across the curve.  3YR +9bps to 2.42%, 10YR +3bps to 2.73%

ASIA FX: USD/CNH Touches Fresh YTD Low Before Support Emerges, TWD Lags

In North East Asia, FX trends have been mixed with CNH strengthening, which has seen some positive spill over to KRW, but TWD has been a laggard, losing ground versus the USD. 

• USD/CNH got to fresh YTD lows of 7.1789, but sits slightly higher now, last around 7.1860, still +0.20% firmer in CNH terms versus end Monday levels. The USD/CNY fix was set sub 7.2000, along with a narrower fixing error, which spurred some CNH demand. The equity tone was positive initially onshore, but we now sit back closer to flat. Focus will now be on follow up US-China trade talks, with US President Trump stating he may speak with China President Xi Jinping this week. A clean break lower in the pair could see a move into the 7.10/7.15 targeted.
• Spot USD/KRW sits down around 0.25% from end Monday levels, but hasn't shown a strong downside bias. The pair was last near 1415, so very close to the 200-day EMA point. Highs for today rest at 1420.70. Onshore equities have struggled for further upside today, despite the strong offshore tech lead.
• Taiwan equities are higher, albeit off best levels for the session. This has done little to aid TWD sentiment though. We were last around 0.30% higher for spot USD/TWD, close to 30.40.  Still TWD remain +5% higher for the month, the pair was closer to 32.50 near end April. Some life insurance companies experienced losses in April (for some the largest in 1.5 yrs), as USD/TWD tumbled per BBG (see this link). 

CHINA: Country Wrap:  China and Brazil to Sign FTA

• Chinese President Xi Jinping vowed to deepen economic cooperation with Latin American and Caribbean nations and offered visa-free entry to some countries, as he seeks to position China as a better partner than the US.  China will provide a 66 billion yuan ($9.2 billion) credit line to support development in the region, known in short as LAC, Xi told the fourth ministerial meeting of the China-Community of Latin American and Caribbean States Forum in Beijing on Tuesday. Visa-free arrangement will also be extended to five countries from the group, Xi said, without naming them.  (source BBG)
• Brazil’s Luiz Inacio Lula da Silva insists he doesn’t want to pick between the US and China as his two largest trading partners wage a trade war. But it’s increasingly clear which side he’d choose if forced.  Lula and China’s Xi Jinping are set to ink new trade-related agreements in Beijing on Tuesday, with eyes on opening new markets for Brazilian agricultural goods and expanding Chinese investments into infrastructure projects meant to speed up the delivery of those products across the Pacific.   (source BBG)
• The Hang Seng was the regional outlier today, falling -1.67% whilst the CSI 300 and Shanghai were flat and Shenzhen following the lead from Hong Kong falling -0.30%.
• Yuan Reference Rate at 7.1991 Per USD; Estimate 7.2197
• A modestly better day for yields with CGB 10YR -1.5bp at 1.66%

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
13/05/2025	0600/0700	***	GB	Labour Market Survey
13/05/2025	0900/1100	***	DE	ZEW Current Expectations Index
13/05/2025	0900/1000	*	GB	Index Linked Gilt Outright Auction Result
13/05/2025	0900/1000	*	GB	Index Linked Gilt Outright Auction Result
13/05/2025	1000/0600	**	US	NFIB Small Business Optimism Index
13/05/2025	-		EU	ECB's De Guindos At ECOFIN Meeting
13/05/2025	1230/0830	***	US	CPI
13/05/2025	1255/0855	**	US	Redbook Retail Sales Index
13/05/2025	1530/1130	**	US	US Treasury Auction Result for 52 Week Bill
14/05/2025	0130/1130	***	AU	Quarterly wage price index
14/05/2025	0600/0800	***	SE	Final Inflation Report
14/05/2025	0600/0800	***	DE	HICP (f)
14/05/2025	0700/0900	***	ES	HICP (f)
14/05/2025	0715/0815		GB	BOE Breeden At ISDA Conference
14/05/2025	0900/1000	**	GB	Gilt Outright Auction Result
14/05/2025	0915/0515		US	Fed Governor Christopher Waller
14/05/2025	1100/0700	**	US	MBA Weekly Applications Index
14/05/2025	-	***	CN	Money Supply
14/05/2025	-	***	CN	New Loans
14/05/2025	-	***	CN	Social Financing
14/05/2025	1230/0830	*	CA	Building Permits
14/05/2025	1240/1440		EU	ECB's Cipollone On Liquidity Issues Panel
14/05/2025	1310/0910		US	Fed Vice Chair Philip Jefferson