BOK: On Hold, Retain Easing Bias, Watching Financial Stability
Jul-10 02:11
As widely expected, the BoK left policy rates unchanged at 2.50%. The accompanying BOK statement noted the central bank will adjust the timing and pace of any further rate cuts, with a host of factors in play, around growth, inflation and financial stability.
- On inflation, the BoK appears fairly comfortable, albeit recognizing uncertainties surrounding the outlook (from both international and domestic drivers). It expects headline and core inflation pressures to remain fairly close to the 2% target.
- On growth, more uncertainty faces the outlook. On domestic conditions, the BoK noted that consumption is likely to improve with political uncertainty now in the rear-view mirror, while the government's recently passed extra budget should also be a positive. It noted though that construction activity remained weak. Export growth is expected to slow in H2 due to the tariff impact, although there remains significant uncertainty regarding the outlook, given on-going trade negotiations. Overall, the domestic economic is expected to see a low growth rate for some time.
- Financial stability also remains an important watch point. The central bank noted: "Regarding financial stability, as risks associated with the housing market in Seoul and its surrounding areas and with household debt have increased, it is necessary to assess the effect of the macroprudential policies while
remaining cautious about the possibility of heightened volatility in the foreign exchange market." - If we see signs of macroprudential efforts working in terms of cooling the Seoul housing market, along with curbing household debt growth, we could see the central bank turn more dovish and cut again to support the economy.
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US STOCKS: Futures Make Fresh Multi Month Highs
Jun-10 01:43
US equity futures breaking to fresh multi month highs in the first part of Tuesday trade, with Nasdaq futures slightly outperforming. We can't see any direct fresh catalysts for the move. In the cross asset space, US yields are a little higher, while the USD is firmer, particularly against the yen.
- As we noted earlier, dips continue to bought, even with the market looking overbought in the short term.
- Momentum type funds and share buybacks have kept the market well supported as an underweight market has been forced to reenter. Share buybacks are set to enter their blackout period in the middle of June, will this signal the potential for a pullback ?
CHINA: Central Bank Withdraws CNY255.9bn via OMO
Jun-10 01:31
- The PBOC issued CNY198.6bn of 7-day reverse repo at 1.4% during this morning's operations.
- Today's maturities CNY454.5 bn
- Net liquidity withdrawal CNY255.9 bn.
- The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.41%, from yesterday's close of 1.51%.
- The China overnight interbank repo rate is at 1.35%, from the prior close of 1.33%.
- The China 7-day interbank repo rate is at 1.53%, from the prior close of 1.45%.
AUSTRALIA DATA: Lower Rates/Inflation Cautiously Boosting Confidence
Jun-10 01:27
Westpac’s measure of consumer confidence rose 0.5% in June to 92.6 after May’s 2.2% increase boosted by 50bp of RBA easing this year and lower inflation. The index is at its highest since January but still 1.8% below that level as global events have weighed on sentiment.
- The survey was taken after the RBA cut rates on May 20, which likely supported sentiment this month. This and lower inflation are reflected in the 7.5% m/m pickup in “time to buy a major purchase” to 100.2. Westpac expects the Board to remain cautious and be on hold in July with the next easing in August.
Australia Westpac consumer confidence
Source: MNI - Market News/LSEG
- While consumer confidence is improving, global events continue to be a dampener. Westpac asked about news recall this month and for “international conditions” 77% assessed it as “unfavourable”, a 3-year high. Forward-looking components of consumer sentiment also were more negative than current ones, reflecting elevated global uncertainties around the outlook.
- 63% assessed news reports around inflation as “unfavourable” down 2pp since March and 13pp since December. Interest rate news was seen as more positive than negative for the first time since 2021.
- Unemployment expectations rose 5% m/m to 127.4, just below the series average of 129.
- Family finances compared to a year ago rose 0.5% m/m, while over the coming year they fell 1.9%. This is despite around 80% of respondents expecting rates to fall over the year.
- “Time to buy a dwelling” rose 3.6% m/m, while house price expectations jumped 7%, highest since 2013.
