JAPAN DATA: Preliminary May PMIs Mixed, Manufacturing Edges Up, Services Weaker
Japan preliminary PMIs for May were mixed. The manufacturing read was 49.0 versus 48.7 in April (per Jibun Bank). The index has been sub 50 since mid last year. The services PMI fell to 50.8 from 52.4 in March, which dragged down the composite read to 49.8 form 51.2 prior.
- In terms of the detail, manufacturing output fell to 48 from 48.9, but new orders did rise.
- On the services side, employment edged down to 51 from 52.1 (per BBG), while prices charged were also down on the April read.
- For the composite reading, new order fell to 49.6 from 50.9 prior, which is the weakest read since Dec 2022 (per BBG).
- The trend in the services and composite reads have been choppy so far in 2025, but the new orders trends will be watched. The last China PMI prints also showed deterioration in new orders, led by the external side.
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FOREX: USD Edges Higher, As US Equity Futures Firm
Early G10 FX trends are skewed modestly in favor of the USD, unwinding some of Monday's shifts, albeit only marginally at this stage. The USD BBDXY was last up a little over 0.15%, to be close to 1218.25. A firmer US equity futures backdrop since the open is aiding USD sentiment, particularly against the safe havens.
- The USD BBDXY index is still close to intra-session lows from Monday near 1212, which was fresh lows in the index back to end 2023.
- Eminis and Nasdaq futures are up around 0.30-35% at this stage, but this follows cash losses from Monday trade of more than 2%. Concern around Fed independence weighed notably.
- USD/JPY has risen back above 141.10 in latest dealings, with Monday lows just under 140.50. EUR/USD is down to 1.1490, while USD/CHF is back above 0.8110, these currencies off around 0.20-0.30% versus the USD.
- US yields are mostly lower, with the 10yr back sub 4.40%, after Monday's sharp rise led by the back end of the curve.
- Japan FinMin Kato stated that he is heading to the US today for global meetings, and aims to meet with US Tsy Secretary Bessent and discuss FX.
- Elsewhere Economic Revitalization Minister Akazawa stated that Japan and the US are deciding the scope of trade talks (per BBG). This will remain a key focus point for markets.
- NZD/USD is down around 0.30% as well, last near 0.5980/85, while AUD/USD is back close to 0.6400.
- We had NZ trade data earlier, with another trade surplus recorded, but NZD sentiment wasn't impacted.
- The data calendar is empty for the remainder of today's Asia Pac session.
NEW ZEALAND: NZ Continues To See Strong Export Growth, Outlook Clouded
NZ recorded its third merchandise trade surplus in four months in March at $970mn up from $392mn. The YTD deficit narrowed to $6.13bn from $6.63bn. It has now declined around $11bn since the May 2023 peak. Both export and import growth were robust last month. Trade is a bright spot in NZ’s struggling economy but with a 10% tariff on goods to the US and an escalating US-China trade war the outlook is highly uncertain and likely to be negative.
NZ merchandise trade balance $bn YTD
Source: MNI - Market News/LSEG
- Goods exports rose 0.6% m/m sa and 18.9% y/y with shipments strong to the two largest destinations China (+22.7% y/y) and the US (+21.8% y/y) while they were weak to Australia after a run of solid months (-0.5% y/y).
- Exports to the US have been trending higher since before Covid but they reached a new record level in March, as producers likely wanted to beat the imposition of US tariffs.
- Shipments of milk products, meat and machinery & equipment have driven the strength over the year. There was strong growth in milk products & fruit to China, while to the US it was meat.
- Imports fell 1.9% m/m sa in March but annual growth has been robust rising to 12.4%. The annual strength has been concentrated in consumer goods (+14.7% y/y) and non-transport capex (+8.3% y/y), while transport has been weak down 3% y/y, but does tend to be volatile.
- Q1 merchandise export values rose 11% q/q, while imports were up 4.1% q/q.
NZ goods exports y/y% 3-mth ma
US TSYS: Cash Open - Quiet Start
TYM5 is trading 110.24+, down 0-01 from its close.
- Risk turned lower on Monday with concerns that President Trump will fire Fed Chairman Jerome Powell, adding to a market that is already consumed with uncertainty.
- “The US treasury has $60 Billion of extraordinary measures left, in addition to its cash pile, to help keep paying the government's bills.”(per BBG)
- Global GDP may take a $2 Trillion hit by the end of 2027 from Trump’s tariffs, per Bloomberg Economics estimates.
- Russia - Ukraine: Trump said there’s a good chance of a deal being reached this week. A US delegation led by Marco Rubio, Steve Witkoff and Keith Kellogg are slated to meet Ukrainian and European officials in London on Wednesday.
- China has warned countries against striking deals with the US that could hurt Beijing’s interests, putting countries in a position where they will eventually have to pick a side.
- The US 10-year yield has opened in Asia around 4.40%, after closing at 4.4106%.
- Data: The IMF releases its World Economic Outlook
