KRW: USD/KRW Above 1360 Amid Broader USD Consolidation, Equity Weakness

ACGBs (YM -1.0 & XM -2.0) are modestly cheaper after today’s domestic data drop.

• ANZ job advertisements fell 1.2% m/m in May versus a revised -0.3% in April.
• MI inflation index fell 0.4% m/m in May versus +0.6% in April. Inflation index rose 2.6% y/y versus +3.3% in April.
• S&P Global manufacturing PMI falls to 51 from 51.7 in April.
• Cash US tsys have bear-steepened, with yields flat to 3bps higher, in today's Asia-Pac session.
• (MNI) The Federal Reserve should aim for a much smaller balance sheet in order to have a smaller footprint in financial markets and reduce the risk of inflationary bursts like the one experienced after Covid, former Fed Board Governor Kevin Warsh said Friday. The Fed's balance sheet "is trillions larger than it needs to be. We can't make this change overnight," said Warsh, who is seen as a leading candidate to replace Jerome Powell as Fed chair next year.
• Cash ACGBs are 1-2bps cheaper with the AU-US 10-year yield differential -14bps.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in July is given a 71% probability, with a cumulative 76bps of easing priced by year-end.

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