MNI EUROPEAN OPEN: Japan Q1 GDP Contracts

EXECUTIVE SUMMARY

• BARR SEES INFLATION COMING DOWN TO FED TARGET - MNI BRIEF 
• TRUMP TO KEEP 30% CHINA TARIFFS TILL LATE 2025, ANALYSTS SAY - BBG 
• A EU BUSINESS LEADER GIVES INSIGHT INTO A POTENTIAL RESTART OF TRADE TALKS WITH BEIJING - MNI 
• JAPAN Q1 GDP POSTS 1ST CONTRACTION IN 4 QTRS - MNI BRIEF 
• MNI DISCUSSES THE RBNZ’S FUTURE MOVES - MNI 

Fig 1: Japan GDP - Consumption & Business Spending Diverging 

Source: MNI - Market News/Bloomberg/Refinitiv. 

UK

BOE (MNI BRIEF): Global and supply side factors are been key drivers of recent inflation but monetary policy has typically focused on domestic and demand price dynamics and it has been almost impossible to accurately trace supply-chains, Bank of England Monetary Policy Committee member Swati Dhingra said Thursday.

FISCAL (BBG): “Britain may be able to squeeze more out of its richest 1% despite them already paying a quarter of all personal tax revenues, according to the UK spending watchdog.”

EU

TRADE (MNI): The European Commission is preparing a new trade proposal to the U.S., with more details on ways to lower trade and non-tariff barriers and on how to boost investments within the U.S. as well as purchases of U.S. goods such as liquified natural gas and semiconductors for use in AI, a document obtained by MNI showed on Thursday.

EU/CHINA (MNI): A European business leader gives insight into a potential restart to trade agreement talks with Beijing.  On MNI Policy MainWire now, for more details please contact sales@marketnews.com.

UKRAINE (BBG): " Hopes faded for a Ukraine ceasefire after Vladimir Putin sent a low-level delegation to talks in Turkey, while attention shifted to bids on Capitol Hill for fresh sanctions to bring the Russian leader to the negotiating table."

US

FED (MNI BRIEF): Federal Reserve Governor Michael Barr on Thursday said the outlook is clouded by President Donald Trump's tariff policies, but inflation is continuing on a path to the central bank's target. 

JOBS (MNI BRIEF): U.S. purchasing and supply executives expect to shed jobs this year as tariffs, inflation and geopolitical uncertainty hold down growth, according to the Institute for Supply Management semiannual economic forecast released Thursday. 

INFLATION (MNI BRIEF): U.S. inflation expectations do not appear well anchored among businesses and consumers, and Federal Reserve policymakers must remain attuned to this risk as they weigh the path of monetary policy, San Francisco Fed visiting scholar Yuriy Gorodnichenko said Friday. 

US/CHINA (RTRS): “The U.S. Commerce Department is considering placing more Chinese companies, including ChangXin Memory (CXMT), on its restricted export list, a person familiar with the matter said. The Bureau of Industry and Security is also looking at adding subsidiaries of Semiconductor Manufacturing International Corporation and Yangtze Memory Technologies Co. to the "Entity List", the person said.”

TARIFFS (BBG): “ Donald Trump’s tariffs on China will likely remain at a level expected to severely curtail Chinese exports to the US after the 90-day truce, analysts and investors say, suggesting Beijing may have to endure further economic pain despite active talks.”

IRAN (RTRS): “President Donald Trump said on Thursday that the United States was getting very close to securing a nuclear deal with Iran, and Tehran had "sort of" agreed to the terms. "We're in very serious negotiations with Iran for long-term peace," Trump said on a tour of the Gulf, according to a shared pool report by AFP.

MIDDLE EAST (BBG): “US President Donald Trump has secured $200 billion in deals during a visit to the United Arab Emirates, according to the White House, including agreements involving artificial intelligence that will boost the Gulf nation’s technological ambitions.” 

OTHER 

CANADA (MNI INTERVIEW): Dodge Sees BOC Cutting To Low End Of Neutral

JAPAN (MNI BRIEF): Japan’s economy contracted 0.2% q/q, or an annualised 0.7%, over the first quarter, marking the first decline in four quarters, driven by weak private consumption and a sharp rise in imports, preliminary Cabinet Office data showed Friday. 

NEW ZEALAND (MNI): MNI discusses the RBNZ's future moves with former Reserve economists. On MNI Policy MainWire now, for more details please contact sales@marketnews.com. 

AUSTRALIA (BBG): “Australia’s “very large” fiscal stimulus at a time when monetary policy is around neutral — neither stimulating nor slowing economic activity — suggests the Reserve Bank should keep interest rates unchanged next week, former board member Warwick McKibbin said.” 

CHINA 

CONSUMPTION (CCTV): “China should prioritize growth driven by domestic consumption to tackle external uncertainties and promote economic development, state-run China Central Television reported.”

REGULATION (PEOPLE’S DAILY): “China will make efforts to stem “rat-race competition” among domestic companies and local governments as part of efforts to foster a fair market environment and accelerate the construction of a unified national market, Luo Wen, head of the State Administration for Market Regulation, wrote in an article published in People’s Daily on Friday.

HONG KONG (PBOC): “Mainland and Hong Kong authorities will further enrich Swap Connect products by extending the interest-rate swap contract period to 30 years, to meet the diversified risk management needs of market institutions, the People’s Bank of China has announced.” 

CHINA MARKETS 

MNI: PBOC Net Injects CNY29.5 Bln via OMO Friday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY106.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY29.5 billion after offsetting the maturities of CNY77.0 billion today, according to Wind Information.
 

• The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4814% at 09:51 am local time from the close of 1.5245% on Thursday.
• The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 53 on Thursday, compared with the close of 49 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Lower At 7.1938 Fri; +0.37% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1938 on Friday, compared with 7.1963 set on Thursday. The fixing was estimated at 7.2118 by Bloomberg survey today.

MARKET DATA

NEW ZEALAND APR BUSINESSNZ MANUFACTURING PMI 53.9; PRIOR 53.2
NEW ZEALAND APR NON RESIDENT BOND HOLDINGS 61.6%; PRIOR 61.9% 
NEW ZEALAND APR 2YR INFLATION EXPECTATIONS 2.29%; PRIOR 2.06% 

JAPAN Q1 P GDP Q/Q -0.2%; MEDIAN -0.1%; PRIOR 0.6%
JAPAN Q1 P GDP ANNUALIZED Q?Q -0.7%; MEDIAN -0.3%; PRIOR 2.4% 
JAPAN Q1 P GDP NOMINAL Q/Q 0.8%; MEDIAN 0.8%; PRIOR 1.2% 
JAPAN Q1 P PRIVATE CONSUMPTION Q/Q 0.0%; MEDIAN 0.1%; PRIOR 0.1% 
JAPAN Q1 P BUSINESS SPENDING Q/Q 1.4%; MEDIAN 0.6%; PRIOR 0.8%
JAPAN Q1 P INVENTORY CONTRIBUTION 0.3%; MEDIAN 0.2%; PRIOR -0.3%
JAPAN Q1 P NET EXPORTS CONTRIBUTION -0.8%; MEDIAN -0.5%; PRIOR 0.7% 

JAPAN MAR F INDUSTRIAL PRODUCTION M/M 0.2%; PRIOR -1.1%
JAPAN MAR CAPACITY UTILIZATION M/M -2.4%; PRIOR -1.1%  

SOUTH KOREA APR EXPORT PRICE Y/Y 0.7%; PRIOR 6.4%
SOUTH KOREA APR IMPORT PRICE Y/Y  -2.3%; PRIOR 3.4% 

MARKETS

US TSYS: Asia Wrap - Yields Extend Lower

TYM5 has traded higher within a range of 110-10 to 110-15 during the Asia-Pacific session. It last changed hands at 110-13+, up 0-05 from the previous close.

• The US 2-year yield has drifted lower, dealing around 3.946%, down 0.01 from its close.
• The US 10-year yield has drifted lower, dealing around 4.424%, down 0.01 from its close.
• In the US, softer-than-expected retail sales and PPI data yesterday outweighed slightly lower jobless claims, prompting a modest dovish reaction in Fed pricing. Earlier in the week, CPI data came in broadly in line with expectations and had limited impact on market re-pricing.
• MNI BRIEF: US Firms Expect To Shed Jobs In 2025: U.S. purchasing and supply executives expect to shed jobs this year as tariffs, inflation and geopolitical uncertainty hold down growth, according to the Institute for Supply Management semiannual economic forecast released Thursday.
• The 10-year Yield could not maintain its foothold above 4.5%. A sustained break above this level could see another round of selling targeting the 4.75% area. Support now seen back towards 4.35/40% where supply should now be seen.
• Data/Events :  Business Inventories, NAHB Housing Index, Housing Starts, Un of Mich sentiment

JGBS: Modest Twist-Steepener After 1st GDP Contraction Since Q1-24

JGB futures are stronger, +22 compared to the settlement levels, but hovering near session cheaps.

• Japan Q1 GDP contracted for the first time since Q1 2024. Q/Q growth was -0.2% (-0.1% forecast and 0.6% prior), while in annualised terms we fell -0.7%, against a -0.3% forecast but Q4 revisions were higher to +2.4%.
• "With the economy already shrinking on the eve of the trade war, the Bank of Japan will probably wait even longer before resuming its tightening cycle than we had anticipated," said Marcel Thieliant, head of Asia-Pacific at Capital Economics.” (WSJ via BBG)
• For the BoJ/authorities, the rise in business spending will be encouraging but the flat consumption result will be a watch point. The policy aims remains for better spending outcomes boosted by positive real wages.
• BoJ Nakamura currently speaking.
• Cash JGBs have twist-steepened, pivoting at the 30-year, with yields 1bp lower to 1bp higher.
• In contrast, the swaps curve has twist-flattened with rates 1bp higher to 2bps lower.
• On Monday, the local calendar will see the Tertiary Industry Index alongside 1-year supply.
• The G7 will be holding a meeting from the 20th to the 22nd, there will be attention on any discussion between the US and Japan, particularly if foreign exchange rates are discussed concerning the tariffs.

AUSSIE BONDS: Richer But Off Bests, RBA Policy Decision On Tues

ACGBs (YM +3.0 & XM +5.5) are stronger but off the Sydney session's bests on a local data light session. 

• Cash US tsys are dealing flat to 2bps richer in today's Asia-Pac session after yesterday's solid rally. Friday's US data: Housing Starts, Building Permits, Import/Export Prices, U. of Mich. Sentiment and TIC Flow data.
• Cash ACGBs are 4-6bps richer with the AU-US 10-year yield differential at +5bps.
• The bills strip has bull-flattened, with pricing flat to +3.
• Interest rate expectations across the $-bloc firmed through December 2025 over the past week, led by Australia (+23bps). Broadly speaking, markets have been content to consolidate recent hawkish repricing, which has largely stemmed from a reduction in downside risks, particularly surrounding trade policy, as headlines around potential deals gained traction.
• RBA-dated OIS pricing is slightly mixed across meetings today. A 25bp rate cut in May is given a 94% probability, with a cumulative 77bps of easing priced by year-end.
• The local calendar will be empty until next Tuesday’s RBA Policy Decision.
• Next week, the AOFM plans to sell A$1200mn of the 4.25% 21 December 2035 bond on Wednesday and A$800mn of the 2.75% 21 November 2028 bond on Friday.

BONDS: NZGBS: Bull-Flattener After Higher Inflationary Expectations

NZGBs closed showing a bull-flattener, with benchmark yields flat to 4bps lower despite a rise in the RBNZ’s measure of inflationary expectations. 

• 2-year inflation expectations rose to 2.29% in Q2, highest since Q2 2024, from 2.06% in Q1. 1-year inflation expectation rises to 2.41% from 2.15%, also the highest since Q2 2024.
• “On average, respondents see the official cash rate declining to 3.2% by the end of the June quarter from the current 3.5%. The rate is expected to fall further to 2.91% by the end of the March 2026 quarter, according to the RBNZ.” (per MTN)
• NZGBs held by foreigners fell to 61.6% in April from 61.9% in March.
• Cash US tsys are dealing flat to 2bps richer in today’s Asia-Pac session after yesterday’s solid rally. Friday's US data: Housing Starts, Building Permits, Import/Export Prices at 0830ET; U. of Mich. Sentiment at 1000ET followed by TIC Flow data at 1600ET.
• Swap rates closed showing a twist-flattener, with leads 1bp higher to 4bps lower.
• RBNZ dated OIS pricing closed little changed across meetings. 25bps of easing is priced for May, with a cumulative 68bps by November 2025.
• On Monday, the local calendar will see Performance Services Index and PPI Input/Output data. 

FOREX: AUD Wrap - AUD Sees Demand In Asia

The AUD/USD had a range of 0.6395 - 0.6426 in the Asia- Pac session, it is going into London trading around 0.6420. AUD has found some demand sub 0.6400 in a relatively quiet trading day.

• Western Australian - “Australia’s biggest bank(CBA) believes the battle against inflation has been won, tipping mortgage holders to get back-to-back rate cuts.”
• “Despite national inflation figures coming in hotter than expected and a surge in Aussies employed in April, a Commonwealth Bank economist is “confident” the RBA will cut interest rates in May before leaving the “door ajar” for a second rate cut in July.”
• “We expected the RBA to commence normalising the cash rate in February with a 25bp rate cut, which was delivered, and we also forecast another 25bp rate decrease in May,” CBA head of Australian economics Gareth Aird said in an economic note.”
• The AUD/USD has found decent demand sub 0.6400 today, expect buyers to be around on dips while the support in the AUD holds. A close back below 0.6300/50 would start to challenge the newly formed uptrend.
• MNI FX OPTIONS: Expiries for May16NY cut 1000ET (Source DTCC) : AUD/USD: $0.6420(AUD683.4m), 0.6540(AUD625.4m), 0.6475(AUD603.9m). 

• AUD/JPY - Today's range 92.75 - 93.36, it is trading currently around 93.35. Decent demand seen first up as price tested below 93.00 this morning. There should be some demand around 92.00/93.00 but a sustained close back below 91.50/92.00 would turn the focus back towards the lows again.

  Fig 1: AUD/USD spot Hourly Chart

  

  Source: MNI - Market News/Bloomberg

NZD: Bounces On Higher Inflation Data

The NZD/USD had a range of 0.5861 - 0.5905 in the Asia-Pac session, going into the London open around 0.5902. The NZD has popped higher this morning on inflation expectations rising.

• New Zealand's inflation expectations edged up in Q2, per the RBNZ survey. The 2yr ahead expectations rose to 2.29%, from 2.06% in Q1. Expectations had been near 2.0% (the mid point of the RBNZ band) since Q3 last year. We are still well off late 2022 cycle highs of 3.62%, but at face value this isn't a welcome development from an RBNZ standpoint, as it waits to see greater economic traction from its easing efforts.
• The NZD now seems to be comfortable in a 0.5800/0.6050 range and awaits a catalyst to provide the impetus to break-out.
• The support back towards 0.5800 has held very well, and while this continues to hold expect buyers to be around on dips. The first target is the highs just above 0.6000, a break above here is needed to regain momentum.
• MNI FX OPTIONS: Expiries for May16 NY cut 1000ET (Source DTCC): NZD/USD: 0.5875(NZD446m), Notable upcoming strikes: 0.5915(NZD1.05bln May 19), 0.5875(NZD349.6m May 21)

• AUD/NZD has turned lower today after stalling just above 1.0900, with the inflation data giving it the push it needed to top out. Support should now be seen back towards 1.0800 again.

  Fig 1: NZD/USD Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

JPY Wrap - GDP Sees A Test Of 145.00

The Asia- Pac range has been 144.97 - 145.72, Asia is currently trading around 145.35. USD/JPY has extended lower for most of our session on the back of some poor data before finding some buyers back towards the pivotal 145.00 area.

• Dow Jones via BBG – “Japan's economy shrank in the first quarter of 2025 for the first time in a year, and faces a bumpy road ahead due to the impact of U.S. trade policy.”
• “Japan's real gross domestic product decreased 0.2% in the January-March period from the previous quarter, preliminary government data showed Friday, putting the risk of a technical recession in play.”
• "It is likely inevitable that exports and domestic production will be significantly pushed down in the April-June quarter due to higher U.S. tariffs," Taro Saito, an economist at NLI Research Institute, said in a research note published ahead of Friday's release.
• “He expects the economy to contract again in the second quarter due to weakening exports and sluggish domestic demand.”
• "JAPAN AKAZAWA:  GOVT HAS NO PLAN NOW TO COMPILE FRESH STIMULUS PACKAGE BUT WILL COORDINATE APPROPRIATELY WITH RULING COALITION - [RTRS]"
• *KATO: ALSO CONFIRMED WITH US FX SHOULD BE DETERMINED BY MARKET, PLANS TO TALK WITH BESSENT ON FX IN LINE WITH AGREEMENT" - BBG
• USD/JPY is consolidating after a powerful break higher, support is now around 145.00. Stocks had a positive close but it seems USD/JPY is taking its cues from US yields which have backed off from some pretty pivotal levels.
• The support around 144/145 looks important now, the price action though does not look great and the market is still more comfortable selling rallies.

• MNI FX OPTIONS: Expiries for May16 NY cut 1000ET (Source DTCC)USD/JPY: Y147.75($1.09bln), Y146.85($778.9bln), Y145.00($735.4bln)

  Fig 1 : USD/JPY Spot Daily Chart

  

  Source: MNI - Market News/Bloomberg

Asia Stocks Mixed as Trade Truce Euphoria Fades

Asia stocks are mixed today as the impetus given from the news of the trade truce fades away and a focus on fundamentals reasserts.  High expectations for Alibaba’s results were not met as the Chinese tech giant’s results were seen as largely underwhelming.  The Asia region has experienced strong inflows led by Taiwan as flows  over the last five trading days reach USD$4.5bn.

• China’s bourses were mostly down with the Hang Seng lower by -0.81%, yet remain over +1.5% higher for the week.  The CSI 300 is down -0.57% today and holding onto a 1% gain for the week.  Shanghai is down -0.52% yet remains up +0.65% for the week whilst Shenzhen is up today by +0.35% and up +0.95% for the week.
• Taiwan’s TAIEX has had an incredible week of inflows and is up +0.20% today and over 4% for the week.
• The KOSPI is higher by +0.30% and set to deliver a 2% increase this week.
• The FTSE Malaysia KLCI fell modestly today by -0.11% and is up +1.8% for the week.
• The Jakarta Composite has delivered another strong week of gains rising +0.30% today and almost 2% for the week.
• Singapore’s FTSE Straits Times fell modestly today but remains +0.95% higher for the week whilst the PSEi in the Philippines fell again today to erase gains at the beginning of the week.  It remains just +0.3% higher on the week.
• The NIFTY 50 fell today by a modest -0.25% but has delivered a very strong week with gains over 4% 

Oil Claws Back Some Overnight Falls

• Oil had a small bounce in Asia trading after heavy falls in the US session overnight.  
• WTI is up marginally by +0.10% at US$61.75 bbl, and is on track to deliver over 1% of gains for the week.  
• Brent is up +0.09% at $64.66 and also up over 1% for the week.  
• Overnight President Trump said that the US and Iran a edging closer to a deal regarding Tehran's nuclear program and such a deal could potentially see Iran re-enter global oil markets and hence increase supply by 200,000 to 300,000 barrels a day, increasing the likelihood of a significant oversupply later this year.
• Average US oil exports dropped 10% to 3.76 million barrels a day in the four weeks through May 9, the slowest pace since January. The drop in exports is attributed to a combination of factors, including the global trade war, reduced refinery capacity, and cheap Middle Eastern barrels flowing into the market.
• Tumbling oil prices are set to boost consumption, the International Energy Agency said in its monthly market report. Retail prices for gasoline and gasoil have already declined to multiyear lows in most countries. "More to come once April's price rout is passed through to pump prices"

Gold Gives Back Overnight Gains 

• The gold market leapt on weaker than expected PPI for April overnight but couldn’t hold those gains in the Asia trading day preferring to focus on the language from the Fed that seemingly points to a period of being on hold rather than an urgent need to cut.
• Gold is down -0.80% today at US$3,214.15
• For the week Gold remains lower by more than 3%, its largest weekly fall for the year.
• Gold sits at the mid-point between the 20-day EMA of $3,260.68 and the 50-day EMA of $3,169.76

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
16/05/2025	0430/1330	**	JP	Industrial Production
16/05/2025	0730/0930		EU	ECB's Cipollone At EU Cyber Resilience Board Meeting
16/05/2025	0800/1000	***	IT	HICP (f)
16/05/2025	0900/1100	*	EU	Trade Balance
16/05/2025	1230/0830	*	CA	International Canadian Transaction in Securities
16/05/2025	1230/0830	***	US	Housing Starts
16/05/2025	1230/0830	**	US	Import/Export Price Index
16/05/2025	1230/0830		US	New York Fed's Roberto Perli
16/05/2025	1230/0830	***	US	Housing Starts
16/05/2025	1400/1000	***	US	U. Mich. Survey of Consumers
16/05/2025	1400/1000	**	US	University of Michigan Surveys of Consumers Inflation Expectation
16/05/2025	1500/1700		EU	ECB's Lane On Central Bank Communication Panel
16/05/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
16/05/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
16/05/2025	2000/1600	**	US	TICS
16/05/2025	0140/2140		US	San Francisco Fed's Mary Daly