ASIA STOCKS: Taiwan Enjoys Huge In Flows

Stocks open steady at their overnight highs. A strong night for US stocks across the board, tailwinds were provided by a rebound in consumer confidence and a surge in bonds. The AUD crosses seem the best way to express an AUD short for now.

• EUR/AUD - Overnight range 1.7552 - 1.7627, Asia is trading around 1.7585. The dovishness of the RBA has provided the AUD with a strong headwind in the crosses. A base looks to be in place now from which to build for a move higher, expect buyers on dips now back towards 1.74/75. A break back above 1.7650 is needed to see the move extend.
• GBP/AUD - Overnight range 2.0913 - 2.1035, Asia is trading around 2.0960. First target above 2.1000 was reached overnight, dips are expected to find demand back towards the 2.0700/2.0800 area.
• AUD/JPY - Overnight range 92.64 - 93.10, Asia is trading around 92.85. The pair again struggled back towards the 93.00 area overnight, a break back above 93.50/94.00 would see the focus return once more to the 95/96 area. 

• AUD/NZD -  Overnight range 1.0806 - 1.0838, the cross is dealing in Asia around 1.0850. A sustained break above 1.0930 is needed to turn the focus higher, until then expect supply on bounces. The RBNZ today will dictate the price action in our session.

  Fig 1: AUD/JPY spot Hourly Chart

  

  Source: MNI - Market News/Bloomberg

Subdued demand for gas in Asia drove European prices lower on Tuesday, as the two regions compete for global supplies. Weak Asian consumption due to higher gas prices and milder weather frees up cargoes for Europe’s refilling needs but a heatwave could change this in the coming months. The market also remains sensitive to unplanned outages. European gas fell 1.5% to EUR 36.70 yesterday but is still up 13.6% in May. 

• European prices reached a high of EUR 37.94 during the session as it becomes increasingly clear that Russia is not looking for a peace deal in Ukraine, and so the prospect of an easing of sanctions is fading. In fact, the situation appears to be moving in the other direction with Europe imposing new measures against Russian financial intermediaries and its shadow fleet and the US is now also considering whether to impose new sanctions.
• US natural gas rose 2.3% to $3.41, close to the intraday high of $3.45, due to forecasts for warmer weather across much of the US at the start of June (NatGasWeather), which could trigger an increase in cooling demand which has been below average so far this season. US prices are up 3.8% this month.

The ESM5 Overnight range was 5868.25 - 5941.75, Asia is currently trading around 5935. A strong night for US stocks across the board, tailwinds were provided by a rebound in consumer confidence and a surge in bonds. “Tuesday's stock rally has the hallmarks of a short-cover and systematic-led rally. With computer-generated accounts skewed to buy equities over the coming week, that’s particularly true in Nasdaq futures, where even a flat tape will force CTA’s to buy +10% of their max size as algos accumulate their largest position size.”(BBG)

• “Nvidia’s earnings later today could serve as a barometer, with the world’s most valuable chipmaker expected to post another quarter of strong growth. Revenue from its core chip business is forecast to rise over the next four quarters, and options pricing implies a post-earnings move of more than 7%, according to data curated by Bloomberg.”(BBG)
• Bloomberg - “Yet not all is rosy under the surface. Bank of America analyst Vivek Arya sees potential cracks forming beneath the headline numbers. "We look for modest Q1 beat vs. the $43 billion guide and $43.4 consensus," Arya said in a recent note.
• "Yet, the expert warned that Nvidia’s gross margins could fall sharply due to a $5.5 billion inventory write-off tied to U.S. government restrictions on high-end H20 chips sold to China. That could drag gross margins from the guided 71% to just 58%, pushing pro forma EPS closer to $0.74, nearly 16% below consensus.”
• Stocks trade like a beachball being held under water, the move looks overdone but momentum type funds and share buybacks have kept the market well supported.
• In the short-term stocks continue to look overbought but dips are expected to be met with demand, the first buy-zone is back towards the 5600/5700 area.