SOUTH KOREA: Unemployment Rate Steady, But Jobs Growth Momentum Slows
For May, South Korea's unemployment rate held steady at 2.8%, which was in line with the consensus forecast and the prior April outcome.
- The unemployment rate has largely been wedged between 2.5-3.0% since early 2022. On the jobs front, there were 80k job created in May versus a year ago.
- This a step down from the prior pace. In April we had +261k jobs added from a year prior and in Jan-Feb this was running in excess of 300k.
- May's 80k rise was the slowest pace since early 2021, so there are signs of softening jobs growth momentum.
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OIL: Crude Lower Over Uncertain Supply/Demand Outlook
Oil prices fell over a percent on Friday over uncertainty re the supply/demand outlook following the EIA showing a US crude stock drawdown but product builds. The USD index finished 0.1% higher on the back of higher yields following a pickup in University of Michigan 1-year ahead inflation expectations. This data also drove oil prices lower as it suggests a Fed cut isn’t imminent.
- WTI decreased 1.3% to $78.20 from a high of $79.96 earlier. It has started today testing $78 and is currently at $78.06. A bearish theme remains intact with support at $76.89. Initial resistance is at $81.00, 20-day EMA. Today’s low of $77.98 approached the 100-day simple moving average of $77.96.
- Brent fell 1.3% to $82.78/bbl, close to the intraday low. The benchmark remains vulnerable and there is scope for it to move down to $80.24. Initial support is at $81.71 and resistance at $85.45, 20 day EMA.
- Attention has shifted to the June 1 OPEC+ meeting where existing output cuts are expected to be extended into H2. Iraq wouldn’t comment on this possibility but said that it would not agree to further reductions. The oil minister said that Iraq had made enough cuts.
- Easing geopolitical concerns in the Middle East and uncertainty over the supply/demand outlook have resulted in a significant unwinding of oil longs with money manager positions down 53k in the week to May 7, according to ICE Futures Europe. Hedge funds reduced bullish gasoline positions to lowest in 6 months according to Bloomberg.
JGBS: Downside Bias, But Held Above 144.00, BoJ Bond Buying Ops Today
JGB futures (JBM4) finished the post Tokyo close period on Friday on the softer side. We ended at 144.18, -.08. Lows from last week near 144.00 remain intact though. Upside focus will rest with 144.88 (Tuesday highs).
- For futures, we remain above recent lows of 143.61 from late April. Global fixed income trends were softer through the tail end of last week. US yields rose post the rise in consumer inflation expectations on Friday.
- On the data front today we have April money stock figures, which shouldn't move market sentiment.
- BoJ buying ops could be in focus through with 1-25yr purchases on tap. This will be an on-going focus point given a likely reduction in BoJ bond purchases at some stage this year.
- To recap, cash JGB 10yr yields ended Friday just above 0.91%. The 30yr around 1.995%. 10yr swaps were just under 0.99%.
- Note tomorrow we have a 5yr debt auction and then 20yr later in the week.
AUSTRALIA: Focus On Labour Market Developments
This week the focus will be on the labour market which has remained surprisingly strong. The Q1 Wage Price Index is released Wednesday and April employment Thursday. Given the tightness of the labour market and the RBA’s warning on wage growth "given trend productivity growth", there is likely to be significant attention on these releases. Also the federal budget is announced Tuesday.
- NAB’s April business survey is out Monday. Business conditions have eased but remain above the historical average while business confidence is low it has been volatile and is still positive. The price/cost components will also be watched closely.
- CBA’s household spending indicator for April also prints Monday. This series has a high correlation with retail sales values.
- Tuesday at 1930 AEST the federal government’s budget is presented. RBA Governor Bullock said that Treasurer Chalmers has reassured her that inflation is at the front of his mind. There seems to be a lot of pressure to increase spending and stimulate growth though. Deficits beyond the current financial year are expected to worsen and Treasury is to forecast inflation below target by end-2024, a year ahead of the RBA.
- Consensus is expecting Wednesday’s Q1 WPI to rise 0.9% q/q to be up 4.2% y/y, in line with Q4. This series usually comes close to consensus.
- On Thursday April employment data is published. It has been volatile lately and so it will be important to look at recent averages. It fell 6.6k in March after jumping 117.6k in February. A moderate 23.7k rise with a tick up in the unemployment rate to 3.9% is projected. Given the RBA is "vigilant" to upside inflation risks and the labour market remains tight, this release will be monitored closely.
- The RBA’s Assistance Governor (Economic) Hunter is scheduled to speak on Thursday at 0940 AEST.
