JAPAN DATA: PPI Stronger Than Forecast, Import Prices Surge To +25%y/y

Spot USD/CNH sits just under 6.7950 in the first part of Monday dealings. This is sub Friday lows (6.7955), and fresh lows back to 2023 for the pair. Spot USD/CNY finished up Friday trade at 6.8005. The CNY basket tracked edged a little higher on Friday to 99.68. Broader USD focus, to some extent, remains on oil price shifts with seemingly little progress in terms of US/Iran peace proposals (with US President Trump rejecting Iran's latest offer). We also have the Trump visit to China this week, whilst today sees CPI and PPI outcomes for April on tap. 

• For USD/CNH we are comfortably sub all key EMAs, with the 20-day back near 6.8265. The bias in the near term may be for yuan appreciation as Trump's visit looms at the end of this week. Also from the weekend we had stronger than expected trade figures for Apr. China's Exports in April reported 14.1% growth to USD359.44 billion, fastened from the previous 2.5% rise last month and exceeding the consensus of 8.4% increase. Our policy team also noted via advisors, analysts that the yuan is seen around 6.8000 before gradual gains resume. (see this link from late on Friday).
• On Trump's trip, he travels to Beijing on 14-15 May for talks with his Chinese counterpart Xi Jinping. The first visit to China by a US president in nearly a decade, the talks are likely to be dominated by the issues of trade, the war in Iran, and Taiwan. For Trump, the trip will likely be used as an opportunity to seek trade concessions from China alongside purchases of US agricultural products and machinery that can be touted as a ‘win’ for the administration ahead of the November midterm elections. For China, the focus will be on getting the US to change its language on Taiwan, as well as loosening restrictions on high-tech chip exports. The impact of the war in Iran on both geopolitical stability and global energy supply and prices will inevitably feature, but it remains to be seen if China becomes more involved beyond its previous activities in working to get Iran to the negotiating table in Pakistan.
• Note today we have Apr CPI and PPI figures due. A positive PPI/CPI combination would reinforce the PBOC's current liquidity approach, as the need for aggressive emergency stimulus fades in favour of structural support. Higher PPI levels, all else equal, can aid CNY basket gains. 

In post-Tokyo trade on Friday, JGB futures are stronger, closing +6 compared to settlement levels, after US tsys finished modestly richer on Friday despite stronger than expected Nonfarm payrolls in April, a seasonally adjusted 115k (sa) compared to Bloomberg consensus of 65k and a primary dealer median of 70k.

• The Kobeissi Letter on X: "Iran responds to the US with a "10-point" message on the Persian Gulf and Strait of Hormuz: "President Trump on the response just now: "I don't like it."
• Open Source Intel on X: "Netanyahu on Iran: "It's not over because there's still nuclear material." On how enriched uranium gets removed: "You go in and take it." Netanyahu says Trump told him directly: "I want to go in there."
• The U.Mich consumer survey saw sentiment fall to a fresh record low in the preliminary May reading whilst consumer expectations underwhelmed as they eased back from April's levels after a swift increase. U.Mich consumer sentiment fell to 48.2 (cons 49.5) in the preliminary May reading from 49.8 in April for a fresh record high.
• Today, the local calendar will be empty ahead of Household Spending, Leading Coincident Indices and BOJ Summary of Opinions (April MPM) on Tuesday. Tuesday will also see 10-year JGB supply.

Gas prices were little changed on Friday but have started today’s trading higher following oil up on news that President Trump rejected Iran’s peace proposal calling it “totally unacceptable”. Iran continues to refuse to give up its nuclear programme which appears to be causing a stalemate between the two sides and could result in a resumption of hostilities.

• European gas is currently up 1.4% to EUR 44.75 following a high of EUR 45.45 earlier. It rose only 0.3% to EUR 43.71 on Friday. It is down 2.6% in May but remains sensitive to news from the Middle East.
• European gas storage levels are off their post-winter low of 27.7% to be around 35.0%. The goal is 90% by November but with 20% of global LNG still shut in the Gulf, concern over its ability to refill remains at the fore.
• Iran escorted a Qatari LNG tanker through the Strait of Hormuz on Sunday destined for Pakistan as part of an Iran-Pakistan agreement that should allow some shipments given critical need in the latter, according to Bloomberg.
• Demand for Russia’s sanctioned LNG in the current environment appears to be increasing with Bloomberg reporting a Russian tanker mooring at the Saam floating storage facility in western Russia. With Europe maintaining its plan to end Russian gas imports by end-2026, the shipments appear destined for Asia.
• US gas fell 0.7% to $2.750 on Friday after reaching a high of $2.845 and is currently up 1.7% to $2.804. Ample domestic supply with flows to LNG export facilities moderating are capping US prices. BNEF data showed a 4.6% w/w decline as of Friday.
• Lower-48 US gas production rose 3.8% y/y on Friday while demand increased 1.2% y/y, according to BNEF data.