AUSTRALIA DATA: Retail Momentum Softens Further In May, Despite Clothing Bounce

Natural gas fell on Friday as global energy demand concerns resurfaced from increased protectionism as US President Trump noted that US-China trade talks had stalled. European prices fell 4.3% to EUR 33.87, close to the intraday low, but finished May up 4.6% on the month driven by fading hopes of a reduction in sanctions on Russia and continued refilling needs.

• Ukraine attacked Russian airbases with drones destroying 40 bomber planes, according to the BBC. It appears in response to larger Russian attacks on Ukraine recently including Kyiv. Talks are due to start Monday. There is a push by some US lawmakers to penalise imports from countries buying Russian fossil fuels, which would target China and India. The EU plans to phase it out completely.
• US gas fell 1.7% to $3.46 on Friday but was down 4.8% on the month as cooling demand as has so far been soft allowing inventories to rise to robust levels. It reached $3.56 before trending down but has started this week higher rising 2.1% to $3.52. Weather is mixed in the second week of June with the west and east US warmer but central US cooler.
• Lower-48 US gas output rose 3.9% y/y on Friday and demand +4.6% y/y, according to BNEF data.

Indonesia’s S&P Global manufacturing PMI remained in contractionary territory in May but improved slightly from April at 47.4 from 46.7. Weak demand, the sharpest drop in new orders in almost 4 years, drove a reduction in production and purchasing. However, S&P Global note that there is optimism around the outlook with a pickup in hiring and higher business confidence.

• Businesses are discounting to attract buyers resulting in the slowest increase in selling prices in eight months. Producers prefer to reduce margins rather than increase prices as input costs rose strongly in May driven by raw materials. This is another sign that inflation is well contained and if the rupiah continues to appreciate, BI could ease further after its May rate cut.
• New orders posted their second straight contraction and May was at a faster pace. Exports also fell with businesses noting less demand from the US.
• The ASEAN aggregate is released on June 4 but of the data released today only the Philippines posted above the breakeven 50-mark and only just at 50.1 down from 53.0, as recent global trade developments appear to be weighing on the region’s manufacturers.

S&P Global manufacturing PMI sa

US stocks traded heavily on Friday night likely aided by month-end rebalancing as funds sold Equities and bought bonds. The JPY consolidated some of last weeks gains in the crosses on Friday night as it looks to build on these moves.

• EUR/JPY - Friday night range 162.81 - 163.84, Asia is trading around 163.20. EUR/JPY continues to be capped on any move back towards 165.00. Looks like a 161 - 165 range for now.
• GBP/JPY - Friday night range 193.41 - 194.66, Asia trades around 193.65. Last week saw the move higher capped above 196.00 again. A sustained break sub 191.50 is needed to turn the focus back to the lows, until then it looks to be 192.00 - 196.00.
• NZD/JPY - Friday night range 85.45 - 86.17, Asia is currently dealing 86.15. The pair is trading sideways in a 84.00 - 87.50 range for now. No clear direction but there is an inclination for the market to want to express a long JPY.

• CNH/JPY - Friday night range 19.9114 - 20.0438, Asia is currently trading around 19.9100. CNY/JPY doesn’t seem to like it back above 20.00, can it begin to build for a move lower again, a move back below 19.7000 would turn the focus back towards 19.00.

  Fig 1 : GBP/JPY Daily Chart

  

  Source: MNI - Market News/Bloomberg