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Asia Morning Bites

The Bank of Japan (BoJ) meets to decide on policy today and is widely expected to retain its yield curve control (YCC) policy. Singapore will report CPI inflation while South Korea will release data on PPI inflation.

 

Global Macro and Markets

    Romanian GDP Slows Beyond Expectations: Revised Forecast and Economic Outlook

    Tough day for retailers and Tesla in the US, and Tencent broadens the rout in Asia | Saxo Bank

    Saxo Bank Saxo Bank 19.05.2022 08:15
    Summary:  Asian markets joined the overnight selloff in US equities although some reversals were seen subsequently. Risk sentiment saw a mild recovery but the outlook for consumer discretionary remains murky amid rising cost pressures and inventory building. Australia’s unemployment rate dipped to record lows and watch for Japan’s CPI and China’s loan prime rates due on Friday. What’s happening in markets? Wall Street stocks hit new lows as the market anticipates earnings declines and further slowdowns in consumer spending, amid tighter financial conditions. This is what’s dragging tech and consumer spending stocks (ex-reopening stocks) to new lows. The S&P500 fell 4% on Wednesday, eroding most of its recent gains. The Nasdaq fell 4.7%, taking the top 100 stock index to its lowest level since November 2020. We think the market is not yet at capitulation point - further selling is ahead. The extra risk now is that volatility, is causing boutique investment managers to be on the brink of margin collapse, which could add to further selling pressure in markets and stocks that are down heavily. Asian equity markets join the global sell-off. Japan’s Nikkei (NI225.I) was down over 2.5% led by tech such as Tokyo Electron (8035) and consumer discretionary with Fast Retailing (9983) down over 3%. Singapore’s STI index (ES3) also dropped close to 1% on Thursday morning after Singapore Airlines reported earnings with a narrower loss and an upbeat outlook. Hong Kong and mainland China equity markets gapped down but losses narrowed at mid-day.  Following overnight US equity market’s worst sell-off since June 2020, Hang Seng Index (HSI.I) slumped as much as 3.5% in the morning. Tencent’s (00700) over 8% plunge in share price after reporting Q1 results below market expectations dampened sentiment further. Tencent’s Q1 revenues and EPS coming at flat and -23% YoY respectively and both were 4% below consensus estimates. Online games revenues (PC + mobile) declined 2% YoY and online advertising revenue dropped 18% YoY. Investors were also troubled the management’s remarks saying support initiatives from the Chinese Government to the tech industry takes time and will not benefit the Company much in near-term.  By mid-day, Tencent is down 6.6% and Hang Seng Tech Index (HSTECH.I) is down 3%.  Hang Seng Index and CSI300 (00300.I) fell 2% and 0.3% respectively. Tesla (TSLA) shares slide 7%, more selling to come as S&P500 boots it out of ESG Index, at a time when market anticipates earnings growth to fall and costs to rise. S&P explained why it kicked Tesla out of its ESG index saying Tesla’s “lack of a low-carbon strategy” and “codes of business conduct,” along with racism and poor working conditions reported at Tesla’s factory in Fremont, California, affected the score. Separately, new research suggests battery cell prices will surge 22% from 2023 to 2026 amid the scarcity in raw materials needed to make EV batteries. This is why we continue to advocate that clients would be better served in commodity companies who are benefiting from price inflation, rather than commodity consumers (EV makers). Read next: Altcoins: What Is Litecoin (LTC)? A Deeper Look Into The Litecoin Platform| FXMAG.COM Cisco (CSCO) – a proxy for business IT spending, guides for weaker earnings. Cisco is of the largest IT and networking businesses in the world (catering to a 1/3 the world’s market). It reported its Euro and Asian sales fell 6%. But the real story is its weak guidance. Cisco CEO guided for a drop in revenue ahead, expecting a 1-5% revenue decline for Q4, at a time when the market expected revenue growth of over 5%. This reflects that businesses are not willing to open up their pockets, at a time when inflation (wages, energy) is rising and interest rates are going higher. Consumer spending retail proxies hugely disappoint - as their profit outlooks dim. Target (TGT) shares fell 25% (biggest drop since Black Monday). Walmart (WMT) fell almost 8% as both retailers cut their forecasts for profit amid a slowdown in home-good sales at a time when they’re guiding for rising costs pressures (fuel, freight costs, rising wages). Target and Walmart make $600 billion in combined revenue, that’s double the size of the biggest company on the ASX. So given that both the retail giants are proxies for consumer spending, their demise could translate to other companies. What to consider? US retailer earnings signal shifting consumer spending patterns. We have seen a number of weak retailer/ecommerce earnings from the US now starting with Amazon (AMZN) to Walmart (WMT) to Target (TGT) reporting a 52% decline in profits overnight. While US retail sales show that the consumer is still resilient, there is certainly a shift in spending patterns away from home appliances that were the most sought after during the pandemic to reopening and travel related items such as luggage and services. But it is also important to note that inventory levels are building up, which may mean more write downs or a mark down in prices to sell off. Higher costs are also weighing and only likely to get worse in the second quarter. This means retailers will continue to face the brunt for now. Offshore investors were net seller in onshore RMB bonds for the 3rd consecutive month.  In April, foreign investors sold RMB88 billion (USD13.3bn equivalent) worth of onshore RMB bonds.  The amount of selling moderated somewhat from March’s RMB98 billion. Net inflow of foreign currency from China’s trade settlement declined. In April, net trade settlement was only 42% of China’s trade surplus of that month, below the 2021 average of 58%.  The key driver for the low net inflows seems coming from higher than usual demand from importers to buy foreign currencies, staying at escalated level of 65.1% in April versus 2021 average of 55.8%.  Exporters repatriated 60.8% of the total goods exports in April.  It was down from March’s 65.8% but still well above 2021 average of 54.6%.  Dollar trimmed gains in Asia. The USD moved higher as risk sentiment was eroded overnight, but trimmed gains in Asia. GBPUSD rose back towards 1.2400 while EURUSD was seen back above 1.0500. UK inflation shot up to 9% y/y in April from 7% previously, continuing to complicate the task for the BOE. Yen weakened in Asia, but the cap in 10-year yields as equities lose momentum is suggesting yen weakness has mostly run its course, at least on the crosses. Read next: Altcoins: What Is Monero? Explaining XMR. Untraceable Cryptocurrency!? | FXMAG.COM AUDUSD rises 0.9%, off its low as Australian unemployment fell to a new historical monthly low (3.9%). This is the lowest reading for the survey. Unemployment was lower in 1974 when survey was quarterly. However, the AUD rose modestly off low, up 0.9% today to 0.7020, as the strong employment data gives the RBA more ammunition to raise rates - given Australia’s economy strengthened. China’s reopening theme also adds to upside for the AUD. However, longer term, as the Fed raises rates, this strengthens the USD, will likely cut the AUD’s grass. Japan imports swell on energy and weak yen. April trade deficit was seen at 839 billion yen as exports grew 12.5% y/y but imports rising 28% on higher energy prices and the drop in yen to two decade lows. Following a negative GDP print for Q1 reported yesterday, the impeding trade position is adding to Q2 risks and pent up demand remains the key to provide an offset in order to avoid a technical recession. Rising inflationary environment may however weigh on consumer spending and Japan’s April CPI will be on watch tomorrow. Consensus expects a rise to 2.5% y/y from 1.2% in March with core CPI also turning positive at 0.7% from -0.7% previously. Potential trading ideas to consider? Short CNHJPY trade that we put on last month may still have room to go. The larger foreign currency outflows due to offshore investors’ bond selling and smaller inflow of foreign currency from trade settlement tend to give add to the depreciating pressure the renminbi. At the same time, the Japanese Yen is benefiting from a safe haven bid in the midst of global equity sell-offs.  Both Japanese investors and overseas leveraged investors who fund their positions in Yen tend to repatriate and need to buy Yen in the time of turmoil.  In addition, the prospect of a pickup in inflation in Japan may trigger traders to cover their bearish positions in the Japanese Yen.  Asian retailers likely to see pressure from global counterparts. Consumer discretionary sector was leading the decline in the S&P overnight, and the rout is likely to spread to Asia. Watching key Asian retailer shares like Japan’s Fast Retailing (9983), Hong Kong’s Sun Art Retail (6808) and Australia’s Harvey Norman (HVN). With liquidity conditions only starting to tighten, there is likely room for the equity rout to run further, but cash is not a viable asset for long term investors. We remain overweight commodities and reopening.   Key economic releases this week: Friday: Japan nationwide CPI, China loan prime rates   Key earnings release this week: Thursday: Xiaomi, Generali, National Grid, Applied Materials, Palo Alto Networks, Ross Stores, DiDi Global   For a global look at markets – tune into our Podcast. 
    Reduction In Demand For Power In UK, Bank of Japan Plans To Maintain Current Policy

    Taiwan’s industrial production fell from previous month; further contraction is ahead | ING Economics

    ING Economics ING Economics 23.05.2022 15:47
    Taiwan's industrial production growth seems to be slowing down, with data revealing a monthly contraction. Export orders have also recorded a contraction on a yearly basis. China's lockdowns, Covid in Taiwan, and electricity stoppages could be reasons behind this, and these reasons are here to stay  Industrial production recorded month-on-month contraction April data seems to point to worsening growth in Taiwan. While industrial production recorded 7.5% year-on-year growth in April, it contracted 5.06% from the previous month. This pattern usually points to a change in trend. Production of semiconductors, which had been the growth engine of Taiwan's industrial production as well as GDP, recorded a mere 0.5% MoM growth rate, while other manufacturing industries showed contraction, e.g. computer and electronic goods (-21.14% MoM), LED panels (-16.63% MoM).  Mainland China lockdown, Covid in Taiwan, electricity stoppages are factors behind this The main reason behind this is that inventory levels of electronic items, particularly LED panels, are higher than usual. In Mainland China, which is a big consumer market in addition to being a manufacturing hub, demand for consumer electronics shrank during the Shanghai lockdown. The same explanation can be applied to the contraction in export orders (-5.5% YoY) released on Friday. With export orders shrinking, industrial production in the coming months could continue to contract, perhaps even showing a contraction from last year.  Covid in Taiwan is also part of the reason, as this has reduced the number of employees at work. Though the unemployment rate fell to 3.62% in April from 3.66% in March, most industries, including semiconductor manufacturing, recorded a small drop in employment in April. Electricity is also an issue. Though the government states that there is enough electricity this year, electricity generators have failed occasionally, leading to the suspension of work at some factories.  Cautiously optimistic for the rest of 2022 and monetary policy may be less aggressive The factors discussed above, which point to a changing trend in semiconductor production in Taiwan from strong to slow, are here to stay. Demand for semiconductors used in consumer electronics will be affected by the muted consumer market in Mainland China. Supply shocks from fewer workers due to Covid and electricity failures (especially over the summer) could also remain for the rest of 2022.  We are cautiously optimistic about the semiconductor industry as there is still strong demand for digital infrastructure to mitigate some of the negative factors cited above.  Central bank rate hikes were expected to follow the path of the Federal Reserve but this is less likely given this latest set of data. Though we still need more data points to confirm that the strong trend has changed in semiconductor production and therefore GDP, the central bank may be less aggressive than previously thought, and the rate hike path could therefore be flatter, with hikes of 12.5bp rather than 25bp until the negative factors fade. Read this article on THINK TagsTaiwan Semiconductors Lockdown Covid-19 Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    SEK: Riksbank's Impact on the Krona

    Indonesia’s central bank keeps rates unchanged, citing global growth concerns | ING Economics

    ING Economics ING Economics 24.05.2022 10:16
    Bank Indonesia opted to hold out on rate hikes for now, keeping rates untouched to bolster the economic recovery Bank Indonesia Governor Perry Warjiyo has hinted that he will consider tightening policy if inflation becomes a problem 3.5% BI policy rate   As expected Central bank remains unfazed by simmering inflation pressures Bank Indonesia (BI) kept policy rates unchanged at 3.5%, matching the market consensus. BI Governor Perry Warjiyo cited concerns about the pace of global growth suggesting that Indonesia’s ongoing economic recovery would need support from monetary authorities. BI retained both growth and current account projections from the previous meeting but recognised the threat of rising price pressures.  Warjiyo indicated that inflation would remain under control although he admitted that inflation expectations warranted monitoring. BI may have felt less pressure to hike policy rates today after fiscal authorities rolled out a subsidy package to help contain the recent increase in food and energy prices.  Inflation remains on the uptrend but BI appears confident that fiscal measures can contain price pressures Source: Badan Pusat Statistik Bank Indonesia enacts dovish pause We had expected BI to keep policy rates unchanged at today’s meeting, however we believed that Governor Warjiyo would at least set the table for a June rate hike. Warjiyo did the exact opposite by pledging sustained support for the economic recovery and citing Indonesian rupiah (IDR) stability.  It appears the central bank remains confident that inflation can be contained by subsidies rolled out by fiscal authorities and that IDR would remain supported by a healthy trade surplus in the near term. As such, it appears BI is in no hurry to hike policy rates in the near term unless we see a substantial pickup in core inflation in the coming months and or heightened weakness from IDR. With BI enacting a dovish pause, expect IDR to come under some pressure as BI opts not to join the rate hike camp for now.      Read this article on THINK TagsInflation IDR Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    China’s Caixin Manufacturing PMI Data Might Support The New Zealand Dollar (NZD)

    Discussing Monetary Policy Of Reserve Bank Of New Zealand, Bank Of Korea And Bank Of Indonesia, COVID In China And Equities | Market Insights Podcast (Episode 332) | Oanda

    Jeffrey Halley Jeffrey Halley 23.05.2022 12:52
    Jonny Hart speaks to APAC Senior Market Analyst Jeffrey Halley about news impacting the market and the week ahead. European PMIs are the week’s highlight tomorrow Welcome to a new week with policy decisions from the Reserve Bank of New Zealand, Bank of Korea, and Bank Indonesia. We start today’s podcast with a quick overview of Asian markets. A quiet news weekend has left Asian markets focusing once again on China and the covid zero slowdowns. We look at price action around Asia and discuss the future of China and covid zero. Next, it’s over to equity and currency markets. We discuss whether the worst is over for equities and if the US Dollar rally has run its course. We then look ahead to the data calendar which is fairly quiet this week. European PMIs are the week’s highlight tomorrow. We discuss them and their potential impact on the single currency. Read next: Altcoins: Ripple Crypto - What Is Ripple (XRP)? Price Of XRP | FXMAG.COM This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds. Learn more on Oanda
    Fed Expectations Amid Mixed Data: Wishful Thinking or Practical Pause?

    (EUR/USD) Euro To US Dollar Hasn't Fluctuated Significantly, US Non-farm Payrolls Coming! Easing Lockdown In China | Asia Morning Bites - 30/05/22 | ING Economics

    ING Economics ING Economics 30.05.2022 08:21
    A positive start to the week in Asia is helped by easing movement restrictions in China, but US payrolls and quantitative tightening could test that resolve later on... Source: shutterstock Macro Outlook Global: It is the US Memorial day holiday today (Monday), and equity markets rallied into the long weekend, providing a positive tone at the start of this week in Asia markets. News channels this morning noted that the equity rally took place on thin volumes, which is a bit of an exaggeration, though volumes were a bit below average, while the sell-offs recently seem to have more conviction. News stories trying to pinpoint the bottom for markets are still talking about equities approaching average forward P/E valuations. Though surely just touching an average from above is not sufficient to call a trough – averages don’t work that way – at least not if they are stationary. What are they teaching people in maths classes these days? Aside from the rally in stocks, most markets were fairly rangebound on Friday. EURUSD remained at about 1.0727, though looked to push above 1.0770 and below 1.0700 – both without success. AUD has clambered back to 0.7158, and there were also widespread gains amongst the Asian FX pairs, led by the KRW and CNY. Treasury yields were little changed on the previous day’s close. This week we get US non-farm payrolls, which could stir things up a bit. We also get the start of “Quantitative Tightening” (QT) from mid-week on, as the US Fed starts to draw down on its bloated balance sheet at a $30bn monthly rate for Treasuries and $17.5bn monthly rate for agency MBS. This will show just what impact (if any) actual selling has on the market, or whether this is entirely in the price. We also get Eurozone CPI inflation for May tomorrow (Tuesday). Consensus sees this rising to 7.8%YoY from 7.5% in April. And yet the ECB is still purchasing assets and is not expected to start raising rates until July. Enough said.  China: Shanghai announced approval for the resumption of work and production as a sign that it is lifting its lockdowns. However, workers still need a pass to leave their homes for work. Currently, permission is only granted to leave home a few times a week. This situation will change, but it will need to change quickly to be consistent with the resumption of work. In Beijing, the lockdown has been relaxed in the Chaoyang CBD area. The same problem is that workers who do not live in Chaoyang may not be able to get to their workplaces. Meanwhile, other cities are adopting regular and frequent Covid testing to try to detect positive cases early enough to stop the chain of transmission of the virus. As for stimulus measures, in addition to last week's national-level stimuli, Shanghai has offered more incentives, mainly to boost consumption, especially on pure electric vehicles. What to look out for: US non-farm payrolls Philippines bank lending (30 May) Fed Waller speech (30 May) South Korea industrial production (31 May) Japan retail sales and job-applicant ratio (31 May) China PMI manufacturing (31 May) Thailand trade balance (31 May) US Conference board expectations (31 May) Fed Williams speech (1 June) South Korea trade (1 June) Regional PMI manufacturing (1 June) Australia 1Q GDP (1 June) US ISM manufacturing (1 June) Fed Bullard speech (2 June) Indonesia CPI inflation (2 June) Australia trade balance (2 June) US ADP jobs, initial jobless claims, durable goods orders (2 June) South Korea CPI inflation (3 June) US non-farm payrolls and ISM services (3 June) Fed Mester speech (3 June) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    China: Caixin manufacturing PMI reaches 49.4, a bit more than in October. ING talks possible reduced impact of COVID on the country's economy

    Worldwide News. The Highest CPI Level In Two Years In The Asia Country! The US Dollar Is Making Concessions

    Marc Chandler Marc Chandler 10.08.2022 15:00
    August 10, 2022  $USD, China, CPI, Currency Movement, Inflation, Italy, UK Overview: The US dollar is trading with a heavier bias ahead of the July CPI report. The intraday momentum indicators are overextended, and this could set the stage for the dollar to recover in North America. Outside of a handful of emerging market currencies, which include the Mexican peso and Hong Kong dollar, most are trading lower. Losses in US equities yesterday and poor news from another chip maker (Micron) weighed on Asia Pacific equities. Europe’s Stoxx 600 is steady and US futures are a little higher. The US 10-year yield is going into the CPI report softly around 2.76%. The US Treasury sells 10-year notes today as the second leg of the quarterly refunding. European benchmark yields are 2-3 bp lower. Gold continues to press against the $1800 cap. It has not closed above it for over a month. September WTI is hovering around $90. It appears stuck for the time being in an $87-$93 range. US natgas is about 1.1% higher after rising 3.2% yesterday. Europe’s benchmark is up 3%. It rose 1.5% yesterday. Iron ore is flat, while September copper is about 0.5% stronger after a small loss yesterday snapped a three-day advance. September wheat is up 1%, as it extends this week’s rise. If sustained, it would be the third consecutive gain, which matches the longest rally since March.   Asia Pacific China's July inflation readings underscore scope for easier monetary policy, but officials have shown a reluctance to use this policy lever. The key one-year medium term lending rate will be set in the coming days, but it is unlikely to be reduced from the 2.85% rate since January. July CPI rose to 2.7% from 2.5%, its highest level in two years, but shy of the 2.9% median forecast in Bloomberg's survey. Food prices were up 6.3% from a year ago, driven by a 20.2% jump in pork prices, the first rise since September 2020. Fresh food prices rose 16.9% and vegetable prices rose almost 13%. However, this seems to be a function of supply, while demand still seems soft. Service prices pressures slowed to 0.7% from June's 1.0% increase. The core rate eased to 0.8%. Meanwhile, producer price increases slowed to 4.2% from 6.1%. The median forecast (Bloomberg's survey) was for a 4.9% increase. Chinese producer prices have slowed for nine consecutive months. It peaked at 13.5% last October. Japan's well-telegraphed cabinet reshuffle was not about policy. Key ministers kept their posts, including the finance minister and chief cabinet secretary. Former Prime Minister Abe's brother, Defense Minister Kishi was replaced by Hamada, but he will stay on as a national security adviser. Trade Minister Hagiuda, an Abe acolyte was replaced by Nishimura, also for the Abe faction, but will become party policy chief. Prime Minister Kishida named his one-time rival Takaichi as minister of economic security. The reshuffle seemed to be about re-balancing power among the key factions and solidifying the government whose support has waned. The next economic policy focus may be on the drafting of a supplemental budget. In terms of monetary policy, BOJ Kuroda's term ends next April, while the term of his two deputies ends in March. The dollar is in narrow range of less than half a yen today, hovering around JPY135.00. It did edge above yesterday's JPY135.20 high but held below Monday's high slightly below JPY135.60. The exchange rate will likely take its cues from the reaction of the US Treasury market to today's CPI report. The US 10-year yield remains within the range set at the end of last week with the stronger than expected employment report (~2.67%-2.87%). The Australian dollar held support near $0.6945 but has stalled near $0.6975 in the European morning, where this week's hourly trendline is found. Intraday momentum indicators are stretched, suggesting that even if there is some penetration, follow-through buying may be capped. There are options for A$400 mln at $0.6985 that expire today. The greenback edged a little higher against the Chinese yuan, but it remains subdued. It is well within recent ranges. The dollar's reference rate was set at CNY6.7612, slightly above expectations (median in Bloomberg's survey) for CNY6.7606. Europe The more potent risk is not that the center-right wins next month's Italian election. That is increasing looking like a foregone conclusion. It is hard difficult to tell how much this reflects the judgment of voters and how much reflects the ineptitude of the center-left parties. The risk is that the center-right secures a two-thirds majority in both chambers, which would make constitutional changes possible. A poll published yesterday by Istituto Cattaneo shows the center-right drawing 46% of the vote and securing 61% of the deputies and 64% of the Senators. Analysis by Istituto Cattaneo suggested that even if the center-right saw its share of the votes go up, it might not be able to increase the number of deputies or senators. Italy's 10-year premium over German has fallen in eight of the past ten sessions, including today. It is around 2.10% today, slightly more than 25 bp off its recent peak, and a little below its 20-day moving average. Italy's 2-year premium fell to 0.73% yesterday, the lowest since mid-July. It peaked above 1.30% in late July.  Ironically as it may sound, but it is not Italy's center-right that is attacking the Bank of Italy or the European Central Bank. It is Truss who is leading Sunak to become the next leader of the Conservatives and Prime Minister. BOE Governor Bailey warned that UK was about to go into a five-quarter contraction (that does not even count the 0.2% contraction that economists expect the UK will announce for Q2 ahead of the weekend). Truss quickly responded that her GBP39 bln tax cuts (~$$7 bln) could avert that scenario. Sunak hiked the payroll tax this past April. She would unwind it. Truss would suspend the green levy on household energy bills and nix Sunak's corporate tax increase that was to be implemented next year. The swaps market is 85% confident of a 50 bp hike at the mid-September MPC meeting, less than a fortnight after the new Tory leaders is chosen. In the last two meetings of the year, the swaps market is pricing another 75 bp in hikes.  The euro is first firm holding above $1.02 so far today, the first time since August 1. However, it remains within last Friday's range (~$1.0140-$1.0250). The 1.2 bln euro options at $1.0210 that expire today likely have been neutralized ahead of today's US CPI report. The session high, slightly above $1.0225 was set in the European morning. This stretched the intraday momentum indicator, and we suspect it will probe lower now. Initial support below $1.02 is seen in the $1.0170-80 area. Sterling is in the same boat. It too is consolidating within the range seen before the weekend (~$1.2000-$1.2170). The push to session highs, a little above $1.21, in Europe has stretched the intraday momentum indicators. The risk is for a return to the $1.2050-60 area. America Today's CPI report is interesting but at the risk of exaggerating, it does not mean much. First, the strength of the employment data, even if flattered by seasonal adjustments or is incongruous with other labor market readings, suggests the labor market slowdown that the Fed wants to see is still in the very early stages. Second, as we have noted, financial conditions have eased recently, and the Fed has pushed back against this. Third, before the FOMC meets again, it will have the August CPI in hand. Fourth, no matter what the data shows today, it will not and cannot meet the Fed's definition of a sustained move toward the 2% target. The median in Bloomberg's survey has converged with the Cleveland Fed's Inflation Nowcast. The median in the survey is for an 8.7% headline rate (down from 9.1%) and a 6.1% core rate (up from 5.9%). The Cleveland's Fed Nowcast has it at 8.8% and 6.1%, respectively. The Fed funds futures market has about an 80% chance of a 75 bp hike next month discounted. It may not change very much after the CPI report.  The US Treasury sold $34 bln 1-year bills yesterday at 3.20%. That represents a 24 bp increase in yield. The bid-cover dipped but was still three-times oversubscribed and the indirect bidders took down almost 63%, a sharp rise from a little less than 51% last time. The US also sold $42 bln 3-year notes, also at 3.20%. This was an 11-bp increase in yield. The bid-cover edged up to 2.5% and the indirect participants took 63.1% of the issue, up from 60.4% previously. Today, Treasury goes back to the well with $30 bln 119-day cash management bill and $35 bln 10-year notes. At the last auction, the 10-year was sold at 2.96%. In the when-issued market, the 10-year yield is about 2.79%. The US dollar traded between around CAD1.2845 and CAD1.2900 yesterday and remains in that range today. There are options for almost 1.15 bln at CAD1.29 that expire today. The greenback slipped to session lows in Europe but as in the other pairs, we look it to recover. A move above the CAD1.2910 area could spur a move toward CAD1.2950. Mexico reported slightly higher than expected inflation yesterday. It underscored expectations for a 75 bp hike by Banxico tomorrow. The US dollar is offered against the peso today and it is pressed near yesterday's low around MXN20.20. The top side is blocked around MXN20.27-MXN20.30. Options for around $765 mln at MXN20.30 expire today. A convincing break of the MXN20.20 area could target the MXN20.05 area    Disclaimer
    Oz Minerals’ Quarterly Copper Output Hit A Record High, Brent Futures Rose

    Copper Is Smashing For The Second Time This Summer! WTI Is Back From The Dead

    Marc Chandler Marc Chandler 11.08.2022 14:12
    Overview: The US dollar is consolidating yesterday’s losses but is still trading with a heavier bias against the major currencies and most emerging market currencies. The US 10-year yield is soft below 2.77%, while European yields are mostly 2-4 bp higher. The peripheral premium over the core is a little narrower today. Equity markets, following the US lead, are higher today. The Hang Seng and China’s CSI 300 rose by more than 2% today. Among the large bourses, only Japan struggled, pressured by the rebound in the yen. Europe’s Stoxx 600 gained almost 0.9% yesterday and is edging higher today, while US futures are also firmer. Gold popped above $1800 yesterday but could not sustain it and its in a $5 range on both sides of $1788 today. September WTI rebounded yesterday from a low near $87.65 to close near $92.00. It is firmer today near $93.00. US natgas is 1.4%, its third successive advance and is near a two-week high. Europe’s benchmark is also rising for the third session. It is up nearly 8% this week. Iron ore rose 2% today and it is the fourth gain in five sessions. September copper is also edging higher. If sustained, it would be the fifth gain in six sessions. It is at its highest level since late June. September wheat is 1.1% higher. It has risen every session this week for a cumulative gain of around 4.25%.  Asia Pacific In its quarterly report, the People's Bank of China seemed to downplay the likelihood of dramatic rate cuts or reductions in reserve requirements. It warned that CPI could exceed 3% and ruled out massive stimulus, while promising "high-quality" support, which sounds like a targeted measure. It is not tightening policy but signaled little scope to ease. Note that the 10-year Chinese yield is at the lower end of its six-month range near 2.74%. Its two-year yield is a little above 2.15%, slightly below the middle of its six-month range. Separately, Yiwa, a city of two million people, south of Shanghai has been locked down for three days starting today due to Covid. It is a manufacturing export hub. South Korea reported its first drop (0.7%) in technology exports in two years last month. While some read this to a statement about world demand, and there is likely something there given the earnings reports from the chip sector. However, there seems to be something else at work too. South Korea figures show semiconductor equipment exports to China have been more than halved this year (-51.9%) through July. China had accounted for around 60% of South Korea's semiconductor equipment. Reports suggest the main drivers are the US-China rivalry. Semiconductor investment in China has fallen and South Korea has indicated it intensions to join the US Chip 4 semiconductor alliance. Singapore's economy unexpectedly contracted in Q2. Initially, the government estimated the economy stagnated. Instead, it contracted by 0.2%. Given Singapore's role as an entrepot, its economic performance is often seen as a microcosm of the world economy. There was a nearly a 7% decline in retail trade services, while information and communication services output also fell. After the data, the Ministry of Trade and Industry narrowed this year's GDP forecast to 3%-4% from 3%-5%. While the drop in the US 10-year yield saw the dollar tumble against the yen yesterday, the recovery in yields has not fueled a recovery in the greenback. The dollar began yesterday above JPY135- and fell to nearly JPY132.00. Today, it has been confined to a little less than around half a yen on either side of JPY132.85. The cap seen at the end of last week and early this week in the JPY135.50-60 area, and the 20-day moving average (~JPY135.30) now looks like formidable resistance. Recall that the low seen earlier this month was near JPY130.40. The Australian dollar is also consolidating near yesterday's high set slightly below $0.7110. It was the best level in two months. The $0.7050 area may now offer initial support. The next upside target is seen in the $0.7150-70 band, which houses the (50%) retracement objective of the Aussie's slide from the April high (~$0.7660) and the July low (~$0.6680), and the 200-day moving average. The broad greenback sell-off yesterday saw it ease to about CNY6.7235, its lowest level in nearly a month. Despite the less-than-dovish message from the PBOC, it seemed to signal it did not want yuan strength. It set the dollar's reference rate at CNY6.7324, a bit above the median (Bloomberg's survey) of CNY6.7308. Europe Germany's coalition government has begun debating over the contours of the next relief package. The center-left government has implemented two support programs to ease the cost-of-living squeeze for around 30 bln euros. A third package is under construction now. The FDP Finance Minister Linder suggested as one of the components a 10 bln euro program to offset the "bracket creep" of higher inflation putting households into a higher tax bracket. The Greens want a more targeted effort to help lower income families. More work needs to be done, but a package is expected to be ready next month. The International Energy Agency estimates that Russian oil output will fall by around a fifth early next year as the EU import ban is implemented. The IEA warns that Russian output may begin declining as early as this month and estimates 2 mln barrels a day will be shut by early 2023. The EU's ban on most Russian oil will begin in early December, and in early February, oil products shipments will also stop. Now the EU buys around 1 mln barrels a day of oil products and 1.3 mln barrels of crude. Russia boosted output in recent months, to around 10.8 mln barrels a day. The IEA estimates that in June, the PRC overtook the EU to become the top market for Russia's seaborne crude (2.1 mln bpd vs. 1.8 mln bpd). Separately, the IEA lifted its estimate of world consumption by about 380k barrels a day from its previous forecast, concentrated in the Middle East and Europe. The unusually hot weather in the Middle East, where oil is burned for electricity, has seen stronger demand. In Europe, there has been more switched from gas to oil. The euro surged to almost $1.0370 yesterday on the back of the softer than expected US CPI. It settled near $1.03. It is trading firmly in the upper end of that range today. It held above $1.0275, just below the previous high for the month (~$1.0295). Today's high, was set in the European morning, near $1.0340. There is a trendline from the February, March, and June highs found near $1.04 today. It is falling by a little less than half a cent a week. Sterling's rally yesterday stalled in front of this month's high set on August 1 slightly shy of $1.2295. It is straddling the area where it settled yesterday (~$1.2220). We suspect the market may test the lows near $1.2180, and a break could see another half-cent loss ahead of tomorrow's Q2 GDP. The median forecast in Bloomberg's survey is for a 0.2% contraction after a 0.8% expansion in Q1.  America What the jobs data did for expectations for the Fed at next month's meeting were largely reversed by slower the expected CPI readings. On the eve of the employment data, the market was discounting a little better than a 35% chance of another 75 bp hike. It jumped to over a 75% chance after employment report but settled yesterday around a 45% chance. It is still in its early days, and the Fed will see another employment and CPI report before it has to decide. Although the market has downgraded the chances of a 75 bp hike at next month's meeting, it still has the Fed lifting rates 115 bp between now and the end of year. The market recognizes that that Fed is not done tightening no matter what trope is dragged out to use as a strawman. The truth is the market is pushing against some Fed views. Chicago Fed's Evans, who many regard as a dove from earlier cycles, said that Fed funds could finish next year in the 3.75%-4.00% area, which opined would be the terminal rate. The swaps market says that the Fed funds terminal rate is closer to 3.50% and in the next six months. More than that, the Fed funds futures are pricing in a cut late next year. At least a 25 bp cut has been discounted since the end of June. It was the Minneapolis Fed President Kashkari that surprised many with his hawkishness. Many see him as a dove because five years ago, he dissented against rate increases in 2017. However, he has been sounding more hawkish in this context and revealed yesterday that it was his "dot" in June at 3.90% this year and 4.4% next year. These were the most extreme forecasts. Perhaps it is not that he is more dovish or hawkish, labels that seemingly take a life on of their own but more activity. While neither Evans nor Kashkari vote on the FOMC this year, they do next year. San Francisco Fed President Daly seemed more willing to consider moderating the pace of tightening but still sees more work to be done. She does not vote this year or next.  Headline CPI was unchanged last month and the 0.3% rise in the core rate was less than expected. At 8.5%, the headline is rate is still too high for comfort, and the unchanged 5.9% core rate warns significant progress may be slow. Shelter is about a third of the CPI basket and it is rising about 0.5% a month. It is up 5.7% year-over-year. If everything else was unchanged, this would lift CPI to 2%. The US reports July Producer Prices. Both the core and headline readings are expected to have slowed. The headline peaked in March, 11.6% above year ago levels. It was 11.3% in June and is expected to have fallen to 10.4%. The core rate is likely to post its fourth consecutive decline. It peaked at 9.6% in March and fell to 8.2% in June. The median forecast (Bloomberg's survey) is for a 7.7% year-over-year pace, which would be the lowest since last October.  Late in the North American session, Mexico's central bank is expected to deliver its second consecutive 75 bp rate hike. It will lift the overnight target rate to 8.5%. The July CPI reported Tuesday stood at 8.15% and the core 7.65%. The swaps market has a terminal rate near 9.5% in the next six months. The subdued US CPI reading, helped spur a 0.85% rally in the JP Morgan Emerging Market Currency Index yesterday, its largest gain in almost four weeks. The peso, often a liquid and accessible proxy, rose around 1.1%. The greenback briefly traded below MXN20.00 for the first time since late June. The move was so sharp that closed below its lower Bollinger Band (~MXN20.08) for the first time in six months. The US dollar slumped to almost CAD1.2750 yesterday to hold above the 200-day moving average (~CAD1.2745). It is the lowest level in nearly two months, and it has not traded below the 200-day moving average since June 9. Like the other pairs, it is consolidating today near the lower end of yesterday's greenback range. The swaps market downgraded the likelihood that the Bank of Canada follows last month's 100 bp hike with a 75 bp move when it meets on September 7. It is now seen as a 30% chance, less than half of what was projected at the end of last week. We suspect that the US dollar can recover into the CAD1.2800-20 area today.     Disclaimer   Source: US Dollar Soft while Consolidating Yesterday's Drop
    The Gold Rally Is Continuing To Stall, This Could Be A Good Year For Crude Oil

    WTI Astonishing Streak! Japan Jumps. China, Australia And South Korea Are In Trouble?

    Marc Chandler Marc Chandler 12.08.2022 15:15
    Overview: The markets are putting the finishing touches on this week’s activity. Japan, returning from yesterday’s holiday bought equities, and its major indices jumped more than 2%. China, South Korea, and Australia struggled. Europe’s Stoxx 600 is firmer for the third consecutive session. It is up about 1.3% this week. US futures are also firmer after reversing earlier gains yesterday to close lower on the day. The US 10-year yield is flat near 2.88%, while European benchmarks are 4-6 bp higher. The greenback is mixed. The dollar-bloc currencies and Norwegian krone are slightly firmer, while the Swedish krona, sterling, and the yen are off around 0.3%-0.6%. Emerging market currencies are also mixed, though the freely accessible currencies are mostly firmer. The JP Morgan Emerging Market Currency Index is up about 1.15% this week, ahead of the Latam session, which if sustained would be the strongest performance in three months. Gold is consolidating at lower levels having been turned back from $1800 in the middle of the week. Near $1787.50, it is up less than 0.7% for the week. September WTI is edging higher for the third consecutive session, which would match the longest streak since January. US natgas surged 8.2% yesterday but has come back offered today. It is off 2.3%. Europe’s natgas benchmark is snapping a three-day advance of nearly 8% and is off 1.8% today. Iron ore rose 2.2% yesterday and it gave most of its back today, sliding almost 1.7%. September copper is unchanged after rallying more than 3.3% over the past two sessions. September wheat has a four-day rally in tow but is softer ahead of the Department of Agriculture report (World Agricultural Supply and Demand Estimates). Asia Pacific   Japan and China will drop some market sensitive high-frequency economic data as trading begins in the new week.  Japan will release its first estimate of Q2 GDP. The median in Bloomberg's survey and the average of a dozen Japanese think tanks (cited by Jiji Press) project around a 2.7% expansion of the world's third-largest economy, after a 0.5% contraction in Q1. Consumption and business investment likely improved. Some of the demand was probably filled through inventories. They added 0.5% to Q1 growth but may have trimmed Q2 growth. Net exports were a drag on Q1 (-04%) and may be flat. The GDP deflator was -0.5% in Q1 and may have deteriorated further in Q2. Some observers see the cabinet reshuffle that was announced this week strengthening the commitment to ease monetary policy. The deflation in the deflator shows what Governor Kuroda's successor next April must address as well. China reports July consumption (retail sales), industrial output, employment (surveyed jobless rate), and investment (fixed assets and property).  The expected takeaway is that the world's second-largest economy is recovering but slowly. Industrial output and retail sales are expected to have edged up. Of note, the year-to-date retail sales compared with a year ago was negative each month in Q2 but is expected to have turned positive in July. The year-over-year pace of industrial production is expected to rise toward 4.5%, which would be the best since January. The housing market, which acted as a critical engine of growth is in reverse. New home prices (newly build commercial residential building prices in 70 cities) have been falling on a year-over-year basis starting last September, and likely continued to do so in July. Property investment (completed investment in real estate) likely fell for the fourth consecutive month. It has slowed every month beginning March 2021. The pace may have accelerated to -5.6% year-over-year after a 5.4% slide in the 12-months through June. The surveyed unemployed rate was at 4.9% last September and October. It rose to 6.1% in April and has slipped back to 5.5% in June. The median forecast in Bloomberg's survey expects it to have remained there in July. Lastly, there are no fixed dates for the lending figures and the announcement of the one-year medium-term lending facility rate. Lending is expected to have slowed sharply from the surge in June, while the MLF rate is expected to be steady at 2.85%. Over the several weeks, foreign investors have bought a record amount of Japanese bonds.  Over the past six weeks, foreigners snapped up JPY6.44 trillion (~$48 bln). It may partly reflect short-covering after the run-in with the Bank of Japan who bought a record amount to defend the yield-curve control cap of 0.25% on the 10-year bond. There is another consideration. For dollar-based investors, hedging the currency risk, which one is paid to do, a return of more than 4% can be secured. At the same time, for yen-based investors, hedging the currency risk is expensive, which encourages the institutional investors to return to the domestic market. Japanese investors have mostly been selling foreign bonds this year. However, the latest Ministry of Finance data shows that they were net buyers for the third consecutive week, matching the longest streak of the year. Still, the size is small. suggesting it may not be a broad or large force yet. Although the US 10-year yield jumped 10 bp yesterday, extending its recovery from Monday's low near 2.75% for a third session, the dollar barely recovered against the yen.  After falling 1.6% on Wednesday, after the softer than expected US CPI, the greenback rose 0.1% yesterday and is edging a little higher today. Partly what has happened is that the exchange rate correlation with the 10-year yield has slackened while the correlation with the two-year has increased. In fact, the correlation of the change in the two-year and the exchange rate is a little over 0.60 and is the highest since March. The dollar appears to be trading comfortably now between two large set of options that expire today. One set is at JPY132 for $860 mln and the other at JPY134 for $1.3 bln. Around $0.7120, the Australian dollar is up about 3% this week and is near two-month highs. It reached almost $0.7140 yesterday. The next technical target is in the $0.7150-$0.7170 area. Support is seen ahead of $0.7050. Next week's data highlight is the employment data (August 18). The greenback traded in a CNY6.7235-CNY6.7600 on Wednesday and remained in that range yesterday and today. For the second consecutive week, the dollar has alternated daily between up and down sessions for a net change of a little more than 0.1%. The PBOC set the dollar's reference rate at CNY6.7413, tight to expectations (Bloomberg's survey) of CNY6.7415. Europe   The UK's economy shrank by 0.6% in June, ensuring a contraction in Q2.  The 0.1% shrinkage was a bit smaller than expected but the weakness was widespread. Consumption fell by 0.2% in the quarter, worse than expected, while government spending collapsed by 2.9% after a 1.3% pullback in Q1. A decline in Covid testing and slower retail sales were notable drags. The one bright spot was business investment was stronger than expected. The June data itself was miserable, though there was an extra holiday (Queen's jubilee). All three sectors, industrial output, services, and construction, all fell in June and the trade balance deteriorated. The market's expectation for next month's BOE meeting was unaffected by the data. The swaps market has about an 85% chance of another 50 bp hike discounted.  Industrial output in the eurozone rose by 0.7%, well above the 0.2% median forecast in Bloomberg's survey and follows a 2.1% increase in May.  The manufacturing PMI warned that an outright contraction is possible. Of the big four members, only Italy disappointed. The median forecast in Bloomberg's survey anticipated a decline in German, France, and Spain. Instead, they reported gains of 0.4%, 1.4%, and 1.1% respectively. Industrial output was expected to have contracted by 0.1% in Italy and instead it reported a 2.1% drop. In aggregate, the strength of capital goods (2.6% month-over-month) and energy (0.6%) more than offset the declines in consumer goods and intermediate goods. The year-over-year rise of 2.4% is the strongest since last September. The disruption caused by Russia's invasion of Ukraine and the uneven Covid outbreaks and responses are as Rumsfeld might have said known unknowns.  But the disruptive force that may not be fully appreciated is about to get worse. The German Federal Waterways and Shipping Administration is warning that water in the Rhine River will fall below a critical threshold this weekend. At an important waypoint, the level may fall to about 13 inches (33 centimeters). Less than around 16 inches (40 centimeters) and barges cannot navigate. An estimated 400k barrels a day of oil products are sent from the Amsterdam-Rotterdam-Antwerp region to Germany and Switzerland. The International Energy Agency warns that the effects could last until late this year, and hits landlocked countries who rely on the Rhine the hardest. Bloomberg reported that Barge rates from Rotterdam to Basel have risen to around 267 euros a ton, a ten-fold increase in a few months. The strong surge in the euro to almost $1.0370 on Wednesday has stalled.  The euro is consolidating inside yesterday's relatively narrow range (~$1.0275-$1.0365). The momentum traders may be frustrated by the lack of follow-through. We suspect a break of $1.0265 would push more to the sidelines. The downtrend line from the February, March, and June highs comes in slightly above $1.0385 today. The broad dollar selloff in response to the July CPI saw sterling reach above $1.2275, shy of the month's high closer to $1.2295. Similar to the euro, sterling stalled. It has slipped through yesterday's low (~$1.2180). A break of the $1.2140 area could see $1.2100. That said, the $1.20 area could be the neckline of a double top and a convincing break would signal the risk of a return to the lows set a month ago near $1.1760. America   Think about the recent big US economic news.  It began last Friday with a strong employment report, more than twice what economists expected (median, Bloomberg survey) and a new cyclical low in unemployment. The job gains were broadly distributed. That was followed by a softer than expected CPI and PPI. Some observers placed emphasis on the slump in productivity and jump in unit labor costs. Those are derived from GDP figures and are not measured separately, though they are important economic concepts. Typically, when GDP is contracting, productivity contracts and by definition, unit labor costs rise. In effect, the market for goods and services adjusts quicker the labor market, and the market for money, even quicker. If the economy expands as the Atlanta Fed GDPNow tracker or the median in Bloomberg's survey project (2.5% and 2.0%, respectively), productivity will improve, and unit labor costs will fall. Barring a precipitous fall today, the S&P 500 and NASDAQ will advance for the fourth consecutive week.  The 10-year yield fell by almost 45 bp on the last three week of July and has recovered around half here in August. That includes five basis points this week despite the softer inflation readings. The two-year note yield fell almost 25 bp in the last two weeks of July and jumped 34 bp last week. It is virtually flat this week around 3.22%. The odds of a 75 bp rate hike at next month's FOMC meeting fell from about 75% to about 47%. The year-end rate expectation fell to 3.52% from 3.56%. Some pundits claim the market is pricing in a March 2023 cut, but the implied yield of the March 2023 Fed funds futures contract is 18 bp above the December 2022 contract. It matches the most since the end of June. Still, while the Federal Reserve is trying to tighten financial conditions the market is pushing back. The Bloomberg Financial Conditions Index is at least tight reading since late April. The Goldman Sachs Financial Condition index is the least tight in nearly two months.  US import and export prices are the stuff that captures the market's imagination.  However, the preliminary University of Michigan's consumer survey, and especially the inflation expectations can move the markets, especially given that Fed Chair Powell cited it as a factor encouraging the 75 bp hike in June. The Bloomberg survey shows the median expectation is for a tick lower in inflation expectations, with the one-year slipping to 5.1% from 5.2%. The 5-10-year expectation is seen easing to 2.8% from 2.9%. If accurate, it would match the lowest since April 2021. The two-year breakeven (difference between the conventional yield and the inflation-protected security) peaked in March near 5% and this week reached 2.70%, its lowest since last October. It is near 2.80% now. Mexico delivered the widely anticipated 75 bp hike yesterday.  The overnight rate target is now 8.50%. The decision was unanimous. It is the 10th consecutive hike and concerns that AMLO's appointments would be doves has proven groundless. The central bank meets again on September 29. Like other central banks, it did not pre-commit to the size of the next move, preserving some tactical flexibility. If the Fed hikes by 75 bp, it will likely match it. Peru's central bank hiked its reference rate by 50 bp, the 10th consecutive hike of that magnitude after starting the cycle last August with a 25 bp move. It is not done. Lima inflation was near 8.75% last month and the reference rate is at 6.50%. The Peruvian sol is up about 1.2% this month, coming into today. It has appreciated by around 3.25% year-to-date, making it the second-best performer in the region after Brazil's 8.1% rise. Argentina hiked its benchmark Leliq rate by 950 bp yesterday to 69.5%. It had delivered an 800 bp hike two weeks again. Argentina's inflation reached 71% last month. The Argentine peso is off nearly 23.5% so far this year, second only to the Turkish lira (~-26%). The US dollar fell slightly below CAD1.2730 yesterday, its lowest level since mid-June. The slippage in the S&P 500 and NASDAQ helped it recover to around CAD1.2775. It has not risen above that today, encouraged perhaps by the firmer US futures. Although the 200-day moving average (~CAD1.2745) is a good mile marker, the next important chart is CAD1.2700-CAD1.2720. A convincing break would target CAD1.2650 initially and then CAD1.2600. While the Canadian dollar has gained almost 1.4% against the US dollar this week (around CAD1.2755), the Mexican peso is up nearly 2.4%. The greenback is pressing against support in the MXN19.90 area. A break targets the late June lows near MXN19.82. The MXN20.00 area provides the nearby cap.       Disclaimer   Source: Heading into the Weekend, Dollar's Downside Momentum Stalls
    Lowest China's Yield Level In 2 Years!? Dollar (USD) Is Disturbing Gold In It's Challenge

    Lowest China's Yield Level In 2 Years!? Dollar (USD) Is Disturbing Gold In It's Challenge

    Marc Chandler Marc Chandler 16.08.2022 11:44
    Overview: Equities were mostly higher in the Asia Pacific region, though Chinese and Hong Kong markets eased, and South Korea and India were closed for national holidays. Despite new Chinese exercises off the coast of Taiwan following another US congressional visit, Taiwan’s Taiex gained almost 0.85%. Europe’s Stoxx 600 is advancing for the fourth consecutive session, while US futures are paring the pre-weekend rally. Following disappointing data and a surprise cut in the one-year medium-term lending facility, China’s 10-year yield fell to 2.66%, its lowest in two years. The US 10-year is soft near 2.83%, while European yields are mostly 2-4 bp lower. Italian bonds are bucking the trend and the 10-year yield is a little higher. The Antipodeans and Norwegian krone are off more than 1%, but all the major currencies are weaker against the greenback, but the Japanese yen, which is practically flat. Most emerging market currencies are lower too. The Hong Kong Dollar, which has been supported by the HKMA, strengthened before the weekend, and is consolidating those gains today. Gold tested the $1800 level again but has been sold in the wake of the stronger dollar and is at a five-day low near $1778. The poor data from China raises questions about demand, and September WTI is off 3.6% after falling 2.4% before the weekend. It is near $88.60, while last week’s five-month lows were set near $87.00. US natgas is almost 2% lower, while Europe’s benchmark is up 2.7% to easily recoup the slippage of the past two sessions. China’s disappointment is weighing on industrial metal prices. Iron ore tumbled 4% and September copper is off nearly 3%. September wheat snapped a four-day advance before the weekend and is off 2.3% today.  Asia Pacific With a set of disappointing of data, China surprised with a 10-bp reduction in the benchmark one-year lending facility rate to 2.75%  It is the first cut since January. It also cut the yield on the seven-day repo rate to 2.0% from 2.1%. The string of poor news began before the weekend with a larger-than-expect in July lending figures. However, those lending figures probably need to be put in the context of the surge seen in June as lenders scramble to meet quota. Today's July data was simply weak. Industrial output and retail sales slowed sequentially year-over-year, whereas economists had projected modest increases. New home prices eased by 0.11%, and residential property sales fell 31.4% year-over-year after 31.8% decline in June. Property investment fell 6.4% year-over-year, year-to-date measures following a 5.4% drop in June. Fix asset investment also slowed. The one exception to the string of disappointment was small slippage in the surveyed unemployment rate to 5.4% from 5.5%. Incongruous, though on the other hand, the jobless rate for 16–24-year-olds rose to a record 19.9%. Japan reported a Q2 GDP that missed estimates, but the revisions lifted Q1 GDP out of contraction  The world's second-largest economy grew by 2.2% at an annualized pace in Q2. While this was a bit disappointing, Q1 was revised from a 0.5% fall in output to a 0.1% expansion. Consumption (1.1%) rebounded (Q1 revised to 0.3% from 0.1%) as did business spending (1.4% vs. -0.3% in Q1, which was originally reported as -0.7%). Net exports were flat after taking 0.5% off Q1 GDP. Inventories, as expected, were unwound. After contributing 0.5% to Q1 GDP, they took 0.4% off Q2 growth. Deflationary forces were ironically still evident. The GDP deflator fell 0.4% year-over-year, almost the same as in Q1 (-0.5%). Separately, Japan reported industrial surged by 9.2% in June, up from the preliminary estimate of 8.9%. It follows a two-month slide (-7.5% in May and -1.5% in April) that seemed to reflect the delayed impact of the lockdowns in China. The US dollar is little changed against the Japanese yen and is trading within the pre-weekend range (~JPY132.90-JPY133.90). It finished last week slightly above JPY133.40 and a higher closer today would be the third gain in a row, the longest advance in over a month. The weakness of Chinese data seemed to take a toll on the Australian dollar, which has been sold to three-day lows in the European morning near $0.7045. It stalled last week near $0.7140 and in front of the 200-day moving average (~$0.7150). A break of $0.7035 could signal a return to $0.7000, and possibly $0.6970. The greenback gapped higher against the Chinese yuan and reached almost CNY6.7690, nearly a two-week high. The pre-weekend high was about CNY6.7465 and today's low is around CNY6.7495. The PBOC set the dollar's reference rate at CNY6.7410, a little above the Bloomberg survey median of CNY6.7399. Note that a new US congressional delegation is visiting Taiwan and China has renewed drills around the island. The Taiwan dollar softened a little and traded at a three-day low. Europe Turkey's sovereign debt rating was cut a notch by Moody's to B3 from B2  That is equivalent to B-, a step below Fitch (B) and two below S&P (B+). Moody's did change its outlook to stable from negative. The rating agency cited the deterioration of the current account, which it now sees around 6% of GDP, three times larger than projected before Russia invaded Ukraine. The Turkish lira is the worst performing currency this year, with a 27.5% decline after last year's 45% depreciation. Turkey's two-year yield fell below 20% today for the first time in nine months, helped ostensibly by Russia's recent cash transfer. The dollar is firm against the lira, bumping against TRY17.97. The water level at an important junction on the Rhine River has fallen below the key 30-centimeter threshold (~12 inches) and could remain low through most of the week, according to reports of the latest German government estimate  Separately, Germany announced that its gas storage facility is 75% full, two weeks ahead of plan. The next target is 85% by October 1 and 95% on November 1. Reports from France show its nuclear reactors were operating at 48% of capacity, down from 50% before the weekend. A couple of reactors were shut down for scheduled maintenance on Saturday.  Ahead of Norway' rate decision on Thursday, the government reported a record trade surplus last month  The NOK229 bln (~$23.8 bln). The volume of natural gas exports surged more than four-times from a year earlier. Mainland exports, led by fish and electricity, rose by more than 20%. The value of Norway's electricity exports increased three-fold from a year ago. With rising price pressures (headline CPI rose to 6.8% in July and the underlying rate stands at 4.5%) and strong demand, the central bank is expected to hike the deposit rate by 50 bp to 1.75%. The euro stalled near $1.0370 last week after the softer than expected US CPI  It was pushed through the lows set that day in the European morning to trade below $1.02 for the first time since last Tuesday. There appears to be little support ahead of $1.0160. However, the retreat has extended the intraday momentum indicators. The $1.0220 area may now offer initial resistance. Sterling peaked last week near $1.2275 and eased for the past two sessions before breaking down to $1.2050 today. The intraday momentum indicators are stretched here too. The $1.2100 area may offer a sufficient cap on a bounce. A break of $1.20 could confirm a double top that would project back to the lows. America The Congressional Budget Office estimates that the Inflation Reduction Act reduces the budget deficit but will have a negligible effect on inflation  Yet, starting with the ISM gauge of prices paid for services, followed by the CPI, PPI, and import/export prices, the last string of data points came in consistently softer than expected. In addition, anecdotal reports suggest the Big Box stores are cutting prices to reduce inventories. Energy is important for the medium-term trajectory of measured inflation, but the core rate will prove sticky unless shelter cost increases begin to slow. While the Democrats scored two legislative victories with the approval of the Chips and Science Act and the Inflation Reduction Act, the impact on the poll ahead of the November midterm election seems minor at best. Even before the search-and-seizure of documents still in former President Trump's residence, PredictIt.Org "wagers" had turned to favor the Democratic Party holding the Senate but losing the House of Representatives. In terms of the Republican nomination for 2024, it has been back-and-forth over the last few months, and recently Florida Governor DeSantis narrowly pulled ahead of Trump. The two new laws may face international pushback aside from the domestic impact  The EU warned last week that the domestic content requirement to earn subsidies for electric vehicles appears to discriminate against European producers. The Inflation Reduction Act offers $7500 for the purchases of electric cars if the battery is built in North America or if the minerals are mined or recycled there. The EU electric vehicle subsidies are available for domestic and foreign producers alike. On the other hand, the Chips and Science Act offers billions of dollars to attract chip production and design to the US. However, it requires that companies drawing the subsidies could help upgrade China's capacity for a decade. Japan and Taiwan will likely go along. It fits into their domestic political agenda. However, South Korea may be a different kettle of fish. Hong Kong and China together accounted for around 60% of South Korea's chip exports last year. Samsung has one overseas memory chip facility. It is in China and produces about 40% of the Galaxy phones' NAND flash output. Pelosi's apparent farewell trip to Asia, including Taiwan, was not well received in South Korea. President Yoon Suk Yeol did not interrupt his staycation in Seoul to meet the US Speaker. Nor was the foreign minister sent. This is not to cast aspersions on South Korea's commitment to regional security, simply that it is not without limits. Today's economic calendar features the August Empire State manufacturing survey  A small decline is expected. The June TIC data is out as the markets close today. Today is also the anniversary of the US ending Bretton Woods by severing the last links between gold and the dollar in 1971. Canada reports manufacturing sales and wholesale trade, but the most market-sensitive data point may be the existing home sales, which are expected to have declined for the fifth consecutive month. Canada reports July CPI tomorrow (Bloomberg survey median forecast sees headline CPI slowing to 7.6% from 8.1% in June).  The Canadian dollar is under pressure  The US dollar has jumped above CAD1.2900 in Europe after finishing last week near CAD1.2780. Last week's high was set near CAD1.2950, where a $655 mln option is set to expire today. A move above CAD1.2920 could target CAD1.2975-CAD1.3000 over the next day or day. A combination of weaker equities, thin markets, and a short-term market leaning the wrong way after the likely drivers today. The greenback posted its lowest close in two months against the Mexican peso before the weekend near MXN19.85. However, it is rebounding today and testing the MXN20.00 area Initial resistance may be encountered around MXN20.05, but we are looking for a move toward MXN20.20 in the coming days. Mexico's economic calendar is light this week, and the highlight is the June retail sales report at the end of the week.    Disclaimer Source: China Disappoints and Surprises with Rate Cut
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Japan CPI May Hit Lower Level! Bank Of Korea And Bank Of Indonesia Announce Their Monetary Policy Decisions. Plenty Of Crucial Events Take Place In Asia Next Week!

    ING Economics ING Economics 19.08.2022 16:25
    The coming week features key central bank decisions from the Bank of Korea and Bank Indonesia, plus inflation data from Japan and Singapore  In this article (Central bank) decisions decisions decisions… Inflation from Tokyo and Singapore Other key reports out next week: Key Taiwan data and Japan’s PMI Source: Shutterstock Share    Download article as PDF (Central bank) decisions decisions decisions… Next week’s Asia calendar features key central bank decisions. We expect the Bank of Korea (BoK) to raise rates by 25bp on 25 August. On the same day, the BoK will release its latest economic outlook. The 2022 GDP outlook could be downgraded slightly to 2.6% from the current 2.7%, while the CPI inflation outlook should rise sharply to 5.3% from 4.5%.  Surveys for consumers and businesses are also likely to worsen as the recent nationwide floods will likely take a toll on sentiment. Bank Indonesia (BI) is also meeting next Thursday and we could see BI Governor Perry Warjiyo whipping out a surprise 25bp rate increase after staying on hold for all of 2022. BI has held firm despite tightening from regional players, indicating that inflation has stayed “manageable”. Recently, however, plans to decrease the energy subsidy, floated by President Joko Widodo, suggest that the price of subsidised fuel could increase in the near term. A jump in fuel prices could be enough to nudge core inflation past the target and this could be reason enough for BI to hike rates as early as next week.    Meanwhile, we expect banks in China to cut the Loan Prime Rate for 1Y to 3.6% from 3.7%, and 5Y to 4.3% from 4.45%. The market consensus points to banks cutting both the 1Y and 5Y by only 10bp, however. Our more aggressive projection of the 5Y rate cut comes from the government’s request to support economic growth and a larger 5Y cut should help existing mortgagors lower their interest cost burden. Inflation from Tokyo and Singapore Inflation reports are also the highlight for next week and Tokyo CPI inflation is expected to stabilise with lower global oil prices and a weaker yen. For Singapore, both headline and core inflation are expected to heat up further. This should keep the Monetary Authority of Singapore (MAS) on notice for additional tightening with a move likely at the October meeting. Headline inflation could heat up to roughly 7% while core inflation could pick up further to 4.5%. Other key reports out next week: Key Taiwan data and Japan’s PMI Other key data reports in the coming week are from Taiwan, which releases export orders, industrial production, and unemployment figures in the coming days. We expect that global demand for semiconductors will slide and therefore put downward pressure on export orders and industrial production. As such, we also expect that the unemployment rate could edge up as economic activity slows. Lastly, we round the week off with Japan’s preliminary manufacturing PMI data, which is likely to drop below 50 on concerns about slowing growth from developed markets and China. Asia Economic Calendar Source: Refinitiv, ING TagsEmerging Markets Asia week ahead Asia Pacific Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Rising Tensions in Japan Amid Currency Market Concerns and BOJ Insights

    What's On Asian Market? Find Out Now! Samsung, Hyundai, Covid And More...

    InstaForex Analysis InstaForex Analysis 22.08.2022 20:07
    Company does not offer investment advice and the analysis performed does not guarantee results. Asian stock markets were mixed on Monday. The Shanghai Composite and the Shenzhen Composite gained 0.57% and 0.64% respectively, while the Hang Seng Index went up by 0.12%. The Nikkei 225 decreased by 0.55%, the S&P/ASX 200 fell by 0.96%, and the KOSPI lost 1.15%. Investors are awaiting new information from Fed chairman Jerome Powell regarding the further monetary policy course of the US central bank. Powell is set to give a speech this week. Furthermore, market players took note of the Chinese central bank decreasing two of its key interest rates. The People's Bank of China cut its one-year loan prime rate to 3.65% from 3.7%. The five-year rate was cut to 4.3% from 4.45%. The move was not unexpected – earlier, the PBoC decreased its medium-term lending facility loan rate by 10 basis points to 2.75%. The Chinese central bank's rate cuts are aimed at boosting the country's economic growth, which has slowed down due to rising energy prices, weak property market, and COVID-19 lockdowns. On the Hang Seng Index, the biggest movers were Agile Group Holdings, Ltd. (+6%), CIFI Holdings (Group), Co. (+7%), Country Garden Holdings, Co., Ltd. (+3%), and China Resources Land, Ltd. (+2%) Shares of Sinopec Engineering (Group), Co. gained 4% after the company reported that its net profit increased by 0.6% in the first half of 2022. In Japan, the worst-performing stocks on the Nikkei 225 were Hino Motors, Ltd. (-3.5%), CyberAgent, Inc. (-3.1%), and Nippon Sheet Glass Co., Ltd. (-2,9%). The share price of Ai Holdings, Corp. advanced by 5%, thanks to the company's net profit jumping by 32% in the previous fiscal year. In South Korea, Samsung Electronics, Co. and Hyundai Motor, Co. lost 1.6% and 0.5% respectively. In Australia, BHP shed 0.2%, while Rio Tinto declined by 0.53%. Shares of NIB, Ltd. gained 6.6% thanks to the company's operating profit exceeding market expectations. Source: Forex Analysis & Reviews: Asian markets close mixed on Monday
    Construction Activity in Poland Contracts in May: Focus on Building Decline and Infrastructure Investment

    Jackson Hole Meeting Begins! USD/JPY May Be Turning Upside Down Shortly! Japanese Inflation Is Expected To Reach 2.5% In 2022

    InstaForex Analysis InstaForex Analysis 25.08.2022 11:02
      So the day has come. Today the Federal Reserve symposium starts in Jackson Hole. The closer the event is, the more cautious the markets are. The USD/JPY pair is falling in the morning, but at the same time retains a huge growth potential. Why is everyone waiting for the dollar rally? On Thursday, the main economic get-together of August begins in the US state of Wyoming - the annual symposium of the Fed. Markets expect that in Jackson Hole, the US central bank will finally reveal its plans for further monetary policy. The culmination of the forum should be Friday's speech by the head of the Federal Reserve. Most analysts believe that Fed Chairman Jerome Powell will confirm the need to continue an aggressive course. This opinion is supported by a lot of hawkish comments from Fed members, which were made ahead of the symposium in Jackson Hole. Officials are still determined to fight high inflation. Of course, there is no denying the fact that recent signs of easing inflationary pressures have caused a sigh of relief from Fed policymakers. However, the path to achieving price stability is far from over, and the central bank is likely to continue to raise interest rates at the same rate. Amid such rhetoric, concerns that the US central bank may be inclined to a slower pace of rate hikes have significantly decreased in recent days. Currently, futures markets estimate the probability of a 75 bps rate hike next month at 60.5%. If tomorrow the Fed chairman gives even the slightest hint that this is real, we will see another enchanting rally of the dollar. However, while uncertainty remains about the Fed's future route, the greenback remains under pressure. This explains its current weakness. The DXY index fell by 0.15% on Thursday morning and retreated from its almost 20-year high of 109.27 to 108.47. And most of all, the "greenback plunged against the Japanese yen. The USD/JPY pair fell by 0.25% to the level of 136.775.     Why does the yen have no chance against the dollar? The Japanese currency benefits from a less sharp increase in Fed rates, since it has already suffered a lot this year from the aggressive course of the US central bank. Recall that the monetary policy of the Bank of Japan remains ultra-soft, despite the global trend of tightening and increasing inflationary pressure in the country. Unlike its colleagues, who are struggling with rising prices by raising interest rates, the BOJ stubbornly keeps the indicator at an ultra-low level. And apparently, the central bank will continue to bend its line. The BOJ's main task is not to suppress inflation, but to restore the economy, which has suffered greatly after the coronavirus pandemic. It is for this reason that the Japanese authorities continue to inject liquidity into the financial system by actively buying government bonds. Despite the measures taken, Japan's economy still cannot fully recover from the recession caused by COVID-19. This was stated today by BOJ board member Toyoaki Nakamura. The official warned that the prospects for the Japanese economy are clouded by another surge in the incidence of coronavirus, continuing supply constraints and a constant rise in commodity prices. He stressed that the BOJ should not abandon large-scale incentives to support the economy and switch to the side of the hawks just because everyone is doing so now. In his opinion, the tightening of monetary policy may become a serious deterrent for business, as a result of which economic growth will again be under threat. Bank Of Japan To Keep Being Dovish? Meanwhile, most analysts believe that the BOJ will stick to its dovish strategy for a long time. A survey conducted by Bloomberg showed that 16 out of 19 experts exclude the possibility of a change in the monetary rate of the BOJ before the expiration of Haruhiko Kuroda's term of office in April 2023. According to experts, the head of the Japanese central bank will stand his ground even if inflation in the country reaches the highest level of 3% in more than 30 years. In order for Kuroda to agree to the normalization of monetary policy, inflation should remain above 3% for at least six months, Bloomberg writes. And this, if you believe the forecasts, will not happen. Japanese Inflation Said To Reach 2.5% In 2022 According to Japanese economists, inflation will reach 2.5% at the end of this year, and by the end of 2022 it may drop to 1%. All this indicates that the BOJ will remain a black sheep among its colleagues. This scenario is extremely unfavorable for the yen. Due to monetary divergence, the Japanese currency has fallen in price against the dollar by almost 15% this year. Therefore, the position of the JPY is unlikely to improve much, even if tomorrow the head of the Fed does not meet the expectations of the markets and signals a slowdown in the pace of tightening. The yen can only benefit from this in the short term. The dollar will still have the main trump cards in its hands – several more stages of raising rates. Long-term review Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/319863
    📈 Tech Giants Soar, 💵 Dollar Plummets! Disney-Charter Truce, Wall Street's AI Warning!

    Wow! S&P 500 Gained Over 1.40%, Nasdaq Added 1.67%!

    ING Economics ING Economics 26.08.2022 08:28
    Prelude to Powell uniformly hawkish... Source: shutterstock Macro Outlook Global Markets: US equities seem to be betting on the Fed’s Powell providing a lifeline, which seems like an optimistic point of view.  The S&P500 opened up and had a strong start before fading and then rallying hard into the close to finish up 1.41% on the day. The NASDAQ closed 1.67% higher. Equity futures are hedging this optimism a bit, indicating small declines at the open today. The latest optimism could reflect a slightly lower bond yield environment, but it seems outsized if that is indeed the case. 2Y US Treasury yields backed off only 2.4bp yesterday to take them to 3.366%. There was a bit more action at the back end of the curve, where 10Y UST yields fell 7.8bp, taking them to 3.026%. What caused that? Well, it wasn’t other Fed speakers in the run-up to Powell’s speech at Jackson Hole today. James Bullard, for example, noted that he favoured “front-loading”, and a year-end Fed funds rate of 3.75%-4%. Esther George noted that rates may have to go above 4%, and hadn’t moved into a restrictive range yet. Raphael Bostic said it was too soon to call peak inflation and was keeping an open mind on 50bp to 75bp next month, and Patrick Harker said rates needed to become restrictive (implying that they currently aren’t). So it is a fair bet that the Powell speech will take a similar turn today. If so, the most likely market reaction would be a rise in yields at both the front and back of the yield curve, a sell-off in equities and dollar strength as markets seem to have been positioning themselves for a more supportive set of comments.  In currency space, EURUSD had another go at moving higher, pushing up in the direction of 1.004 before retreating back below parity to finish almost unchanged from this time yesterday at 0.9970.  The AUD has made further gains though, rising to 0.6982 vs the dollar before settling a bit lower at 0.6972. Cable is looking a little stronger today too, and is up to 1.1829 now, while the JPY has pulled back down to below 137 and is now 136.57. The rest of the Asian FX pack also gained, led by the THB (helped by the passing of a budget yesterday) and the KRW (lifted by the BoK’s 25bp rate hike). G-7 Macro: It really all boils down to what Jerome Powell says today, and his speech will eclipse any of the other macro releases in all likelihood. We have already had some Tokyo CPI data this morning for August, and this shows annual inflation for the Japanese capital running at 2.9%, up from 2.5% in July. This suggests a similar  0.4pp increase in national headline inflation, which would take it to 3.0%YoY if so. The rise in the core rate of inflation excluding fresh food and energy was more muted, however, rising only 0.2pp to 1.4%YoY, which should provide the BoJ with the comfort it needs to leave policy settings unchanged. PCE inflation data from the US for July are out today. Look in particular at the core measure which the Fed is thought to be taking a bit more interest in than the headline. The current rate of PCE inflation is 6.8%YoY. It is 4.8% for the core rate. The core rate is expected to fall 0.1pp today. A flat reading would be a disappointment. University of Michigan consumer sentiment and inflation expectations close out the macro calendar for the G-7 today.   What to look out for: Powell's speech at Jackson Hole Japan Tokyo CPI inflation (26 August) Singapore industrial production (26 August)  Thailand trade balance (26 August) Malaysia CPI inflation (26 August) Powell speech at Jackson Hole symposium (26 August) US University of Michigan sentiment and core PCE (26 August) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Worrying China-Taiwan News, S&P 500 And Nasdaq Decreased Yesterday, EUR/USD Avoided Reaching Parity

    ING Economics ING Economics 31.08.2022 08:21
    China-Taiwan tensions rise again after drone incident Source: shutterstock Macro outlook Global markets: It’s slow, and it’s measured, and volumes are normal, but US equities declined again yesterday. Both the S&P500 and NASDAQ declined by about 1.1% on Tuesday. Equity futures are mixed, but basically flat. Friday’s US non-farm payrolls report may provide the next big leg up or down. US Treasury yields are also grinding very slowly higher. The yield on the 2Y US Treasury rose 1.8bp to 3.442%, while that on the 10Y bond remained flat at 3.102%. 10Y UK Gilt yields pushed up 10.2bp yesterday, catching up their European peers after the public holiday on Monday.  EURUSD was fairly steady yesterday, holding above parity and edging up to 1.0022. The AUD pushed up strongly at one point to close to 0.696, but then collapsed back to 0.6857 on a Reserve Bank of Australia (RBA) report cited by Bloomberg that hinted at more moderate rate hikes ahead. Cable collapsed back below 1.17 to 1.1658 after the public holiday, while the JPY has remained fairly steady at 138.75. Asian FX was a mixed bag. The PHP and SGD joined Australia at the bottom of the pack, and the TWD was also weaker – perhaps disturbed by reports that a Chinese drone was shot at over the Kinmen islands. The INR, IDR and MYR all solid made gains yesterday, the INR rising on hopes that Government securities may be included in the JPMorgan global index. G-7 Macro: Eurozone preliminary CPI inflation for August and the US ADP employment survey are the main macro releases today. EU inflation could rise to 9.0% from 8.9%YoY. While analysts expect the ADP survey to show a 300,000 increases in private sector employment in August.   China: Official PMI data for China are due out at 0930SGT. Consensus forecasters expect the manufacturing index to remain in contraction territory at 49.2, though this would be a slight improvement from the July figure of 49.0 if so. The non-manufacturing index is expected to show a slowdown in growth with the index easing down to 52.3 from 53.8. India: Later tonight, India releases GDP data for 2Q22, where the consensus expects a base-effect dominated series could deliver a 15.3%YoY increase. This will keep India on track to achieve 7%-plus rate of growth for the calendar-year 2022. The consensus estimate is in line with our own expectations. Fiscal deficit data for July will also be released. Australia: 2Q construction work done and private sector credit growth are today’s macro offerings. Both will provide some indication of the work the RBA will need to do to slow the economy enough to bring inflation down. Construction is bouncing along either side of zero quarter-on-quarter and is due a slight upward bounce in 2Q after a -0.9%QoQ result for Q1. Private sector credit growth is running at more than 9%YoY and will need to come down to be consistent with the Reserve Bank’s inflation target. Korea: The July Industrial production outcome was weak with the all-industry index falling (-0.1% MoM). Manufacturing production (-1.3%), retail sales (-0.3%), equipment investment (-3.2%), and construction (-2.5%) all dropped while services (0.3%) alone rebounded. Forward-looking machinery orders and construction orders also declined, suggesting a weak investment outlook for the next quarter. Also, it was particularly noticeable that all semiconductor-related figures came out poorly. The weak start of the quarter poses downside risks to the current quarter’s GDP. We don’t expect growth to contract in the current quarter, but the likelihood of a negative quarter is growing. If GDP contracts this quarter, it will complicate the BoK’s policy action at the year-end. Japan: In contrast to Korea, the July Industrial production (IP) performance was pretty strong. IP rose unexpectedly by 1.0% MoM sa (vs -0.5% market consensus), following a 9.2% surge in June. Retail sales also rose more than expected (0.8% in July vs -1.4% in June).  Also, output forecasts for August and September improved suggesting that solid production is likely to continue this quarter. Today’s reports signal that the economy continues to recover, mostly due to catch-up production gaps and reopening boosts. What to look out for: Regional PMI and US non-farm payrolls South Korea industrial production (31 August) Japan industrial production (31 August) China manufacturing and non-manufacturing PMI (31 August) Hong Kong retail sales (31 August) India GDP (31 August) Fed's Mester speaks (31 August)  South Korea GDP and trade (1 September) Regional PMI manufacturing (1 September) China Caixin PMI manufacturing (1 September) Indonesia CPI inflation (1 September) US initial jobless claims and ISM manufacturing (1 September) Fed's Bostic speaks (1 September) South Korea CPI inflation (2 September) US non-farm payrolls and factory orders (2 September) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    South Korea Hopes To Achieve Carbon Neutrality By 2050

    Asia: Korean Industrial Production Decreases By 1.3%, GDP Is Expected To Fall

    ING Economics ING Economics 01.09.2022 08:18
    July data for industrial production was significantly worse than expected with industry-wide declines and weak orders. We don’t expect growth to contract in the current quarter, but the likelihood of a negative quarter is growing.  Source: Pexels -1.3% Industrial production %MoM, sa Worse than expected All-industry industrial production index dropped -0.1% MoM sa in July (vs 0.8% in June) Manufacturing production fell -1.3% MoM in July while June data was revised down to 1.7% (vs preliminary 1.9%). Automotive production rose (1.1%) for the second month but was more than offset by declines in semiconductors (-3.4%) and related equipment (-3.4%). For semiconductors, inventory accumulation was quite large as shipments were worse than production, thus the near-term production cycle looks quite negative. Combined with weak semiconductor equipment orders, the downturn of semiconductors could be longer than expected. On the other hand, the automotive sector is expected to catch up with production gaps for a while as global supply chain problems fade. Services rose 0.3% in July (vs -0.2% in June) and almost all major service sub-sectors gained. Hotels/restaurants, leisure, and transportation were all strong as reopening effects on consumer services remained supportive. But real estate services fell for a second month, reflecting the recent weakness in that market. All industry production fell due to weak manufacturing and construction Source: CEIC Retail sales and investment dropped in July Retail sales fell -0.3% MoM, for the fifth straight month of decline as high inflation strained goods consumption. For investment, domestic machinery orders were down, posing downside risks for the investment outlook for the second half of the year. Construction completions declined in July, but orders data remained positive, suggesting that the underlying recovery story for construction remains valid. The decline of machinery orders paints a cloudy picture for investment Source: CEIC Construction should remain solid until the year-end Source: CEIC Outlook for third-quarter GDP and BoK policy The weak start to the third quarter poses downside risks to GDP. We expect GDP to slow to 0.2% QoQ this quarter (vs 0.7% in 2Q22), but the likelihood of a negative quarter is growing. If GDP does contract this quarter, it will complicate the BoK’s policy actions towards the year-end. After hearing from the Bank of Korea last week, we think that they will raise policy rates three more times, in October, November and next February as CPI inflation will likely remain above 5% until early next year. But with hard activity data giving a gloomy outlook for the rest of the year, the BoK's strong commitment to curb inflation may be toned down in the coming months.   Read this article on THINK TagsRetail sales Investment Industiral production Bank of Korea Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Is Asian Export Weakening? China’s Macroeconomy Is Not In Great

    ING Economics ING Economics 04.09.2022 09:41
    Non-China Asian exports are still growing, but the pace of increase has slowed and will slow still further as key export destinations struggle with inflation, energy security, and rising recession risks In this article Asian exports going sideways Electronics production growth has also moderated China's lockdowns played their part, but they are now over Recession risks could further undermine Asia's exports Asian exports going sideways As economies worldwide re-opened after the lockdowns of the Covid pandemic, non-China Asian exports to the rest of the world surged. But that rate of growth looks like it's slowing. Distortions caused by the Lunar New Year always make interpretation of trade data trends at the beginning of the year tricky, and there was an expected jump in March. But since then, the numbers look to be struggling. In year-on-year terms, the rate of overall export growth is now skirting single-digits again. A slowdown in year-on-year terms was inevitable after the re-opening surge, but this slowdown has also become evident in USD terms in recent months.  Non-China Asia export growth slowing Japan, India, South Korea, Taiwan, Malaysia, Vietnam, Thailand, Singapore, Philippines Source: CEIC, ING Digging deeper into the Asian export numbers, one of the more surprising aspects is that the electronics sector did not have a stronger recovery in 2021/22. Globally, semiconductor sales grew robustly in 2021, but topped out in December 2021 and have gone only sideways since then. Given the dominance of this sector in Asia, the increase in non-China Asian electronics exports over this period has been disappointing, not matching the strength in global electronics sales. Explaining this isn’t easy. One interpretation is that given shortages in electronics globally, more of Asia’s output remained locally - less of it being shipped overseas. But that hypothesis doesn’t actually stack up against production figures, which show an equally lacklustre performance since January this year. Instead, this seems to point more firmly to capacity constraints in the industry as the main explanation.   Selected Asian electronics production (YoY%) Source: CEIC, ING China's lockdowns played their part, but they are now over Back in April and May this year, China was struggling with its zero-Covid policy, and the port of Shanghai had its operations disrupted by lockdowns. As the world's busiest port, this will have hurt the exports of firms across the region and beyond. Even though China’s Covid cases are still bubbling away in the background, the lockdowns are now much more focused, and the big citywide lockdowns of the second quarter that were so disruptive are not being repeated. Yet Asia’s export figures continue to look weak. As well as potential roles for capacity constraints and lingering supply disruptions, there does seem likely to be a demand element at play. Non-Asian exports to Mainland China have been weakening sharply in recent months. China’s macroeconomy is not in great shape currently (see our specific China section). Ongoing, albeit lower intensity Covid restrictions continue to weigh on the economy to some extent. But on top of this, the languishing property sector has also cut demand for building materials. And topping things off, heatwaves, drought and related power shortages have all taken a toll, which an ever-expanding list of government stimulus policies seems only partially able to offset. It’s worth also considering that this may not be an entirely China demand story. Asia’s complicated supply chains mean that China is only an intermediate destination for some of Asia’s exports, many of which may then be destined for Europe or the US after further processing. Asia's exports to China South Korea, Taiwan, India, Indonesia, Japan, Malaysia, Philippines, Singapore, Thailand, Vietnam Source:CEIC, ING Recession risks could further undermine Asia's exports There are some definitional changes to the Harmonized Commodity Description and Coding System (HS) data that can explain some of the declines in exports of some specific items, in particular, exports of smartphones. But these should not adversely impact the broader export figures for the region. And we doubt that China has, despite its best efforts, already managed to become self-reliant in all these areas of technology.  More time and more data will help shed light on the evolution of this sector for the Asia Pacific region over the rest of the year. But if it turns out that capacity issues are a factor, then these are unlikely to be solved before 2023. Likewise, China’s activity could pick up slightly over the second half of the year, though will probably still fall well short of the government’s 5.5% target for 2022 (about which we hear relatively little these days). The global slowdown outside the region in contrast is only likely to get worse. Europe may already be in recession (see also our European note). The US is technically already there, but the technical nature of its recession may give way to a more substantive recession as we move into 2023 and rate rises bite deeper. In short, whatever the full reality of the complicated situation we are trying to untangle, Asia’s trade sector is more likely to become a drag on economies in the region over the coming quarters. And on top of the drag from inflation on domestic spending power, we may need to reflect this with some more moderate growth forecasts for the second half of this year, and potentially for full-year 2023.      China's weak economy Asian export weakness Asian export strength Asian economies   Source: https://think.ing.com/articles/hold-for-monthly-asian-exports-softening/?utm_campaign=September-01_hold-for-monthly-asian-exports-softening&utm_medium=email&utm_source=emailing_article&M_BT=1124162492 Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    EUR: Testing 1.0700 Support Ahead of ECB Meeting

    Singapore Expect Sales To Remain In Expansion. Austraila Expect A Very Strong Contribution To GDP From The Net Trade Side.

    ING Economics ING Economics 03.09.2022 09:28
    Next week's calendar is relatively light but we do have a key central bank decision and some inflation data out in the next few days In this article The week ahead Australia’s 2Q GDP report and the RBA meeting Price pressures continue to build in the Philippines Retail sales reports in Singapore   The week ahead Australia’s releases are in the spotlight this coming week as the Reserve Bank of Australia decides on policy while 2Q22 GDP data is also released. Within the rest of the region, the Philippines will report August inflation data that will likely show the continuation of the year-long upward trend. Meanwhile, Singapore's July retail sales data is expected to grow despite inflationary limitations. Australia’s 2Q GDP report and the RBA meeting We will get a day-ahead steer towards the GDP figure on 6 September, with the net export figures. The trade balance during 2Q22 was extremely strong relative to 1Q22, so we anticipate a very strong contribution to GDP from the net trade side. Domestic demand figures should also look pretty strong, though labour shortages may crimp this somewhat. A figure of 1.0% quarter-on-quarter seems possible to us, a bit stronger than the 1Q22 growth rate of 0.8%. Meanwhile, the Reserve Bank of Australia will probably not be swayed all that much by the GDP numbers, though they will likely be strong and tilt the balance a little towards larger rate increases. But the RBA will probably also have taken comfort in the 2Q22 wages price index, which showed a growth rate of only 2.6% year-on-year, softer than had been expected despite clear evidence of labour shortages and the record low unemployment rate. September will probably still deliver a 50bp rise in rates, taking the cash rate target to 2.35%, but there is a growing sense that the central bank may slow the pace of tightening from here on, and that may also add some downside risk to this meeting too.   Price pressures continue to build in the Philippines August inflation in the Phillippines will likely stay elevated given rising food prices and expensive energy. We predict inflation to settle at 6.4%YoY, flat from the previous month although still well above the central bank’s target. Transport fares are set to be adjusted higher, for the second time this year, which should ensure that inflation remains firmly on an upward trajectory in the coming months.  Retail sales reports in Singapore July retail sales will be reported next week. We expect retail sales to remain in expansion although the pace of growth should moderate from the previous month. Sales will be supported by the return of tourists although surging inflation should cap growth. Inflation recently hit 7%YoY, which should sap some consumption momentum.    Asia Economic Calendar   Source: Refinitiv, ING Asia week ahead Asia Pacific Asia Markets Asia Economics Source: https://think.ing.com/articles/asia-week-ahead-philippine-inflation-and-singapore-retail-sales/?utm_campaign=September-01_asia-week-ahead-philippine-inflation-and-singapore-retail-sales&utm_medium=email&utm_source=emailing_article&M_BT=1124162492   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Important Data About Chinese, Australian And Indonesian Economies Is Released Next Week!

    ING Economics ING Economics 08.09.2022 13:50
    China’s activity data and Australia’s labour data will be keenly watched in the coming week Source: Shutterstock The week ahead China’s activity data tops the list next week as industrial, retail data and more will be announced. Although upcoming reports will not capture the recent lockdowns, they could be a useful measure of the health of China's economy ahead of the closures. Aside from China data, we also have labour data from Australia and India’s inflation report. Other data reports in the coming week are Indonesia’s trade data and Korea’s MPC minutes, which could shed light on future rate hike decisions. Lastly, Japan reports core machinery orders which are expected to dip amid a slow global recovery. China to share key economic data We should continue to see weak growth in China's industrial production and smaller growth in fixed asset investment as this will be largely dragged down by residential projects. Retail sales could show slightly better growth due to the summer holidays, as this year’s inbound travel showed more activity than last year due to more flexible social distancing measures. We expect no change in the 1Y Medium Lending Facility policy rate at 2.75% as the People's Bank of China (PBoC) has adopted a wait-and-see approach after it cut the rate last month. Loan growth should jump in August as the central bank has lowered interest rates and provided guidance for banks to increase lending. Australia's labour report Australia’s labour market report for August is also set for release next week. The Reserve Bank of Australia has made labour market conditions a key input into its rate-setting behaviour, given that official inflation and wages data are released only quarterly. In July, there was a 40,900 decline in total employment, which runs against all the anecdotal evidence of labour shortages across Australia. We would look for many of the 86,900 full-time jobs that were apparently lost in July to be replaced, and expect some upside to the +30,000 total median with up to 55,000 jobs possibly added for the month. That could result in a further decline in the unemployment rate but we believe the current 3.4% should hold, as the employment figures and unemployment rate are not directly connected. India's inflation could inch up to 7% after recent reprieve Some of the recent moderation in India's high food price inflation may be waning in response to extreme weather and other factors, which could see headline inflation nudging up back towards the 7% year-on-year level. But if energy prices remain under pressure in the months ahead, this increase in inflation may prove short-lived. India also delivers industrial production data for July. This should ease back sharply from the 12.3% YoY rate from June as reopening boosts have run their course.   Indonesia's trade data, BoK minutes and Japan machinery orders Other data reports in the coming week include Indonesia’s August trade data and we expect recent trends to hold. Both exports and imports should remain in expansion mode, but exports are expected to outpace imports again resulting in a hefty surplus. The trade surplus could settle at roughly $4.5bn which could support the Indonesian rupiah in the near term.  Meanwhile, the minutes from the Bank of Korea's August Monetary Policy Committee (MPC) meeting will be reported on Tuesday, revealing members’ views on future rate hike decisions. Korea also reports labour data, with the unemployment rate expected to edge up to 3.0% in August as bad weather adversely affected construction and some services. Lastly, due to a weak global demand recovery, July's core machinery orders in Japan are expected to decline and export growth is expected to slow down in August.   Asia Economic Calendar Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    It's not clear we find out the results of mid-term elections immediately. Binance to buy FTX

    Japanese PPI Stays The Same. Decline Of The US CPI Let US Stocks And EUR/USD (Euro To US Dollar) Gain

    ING Economics ING Economics 13.09.2022 12:46
    Asian currencies likely to extend gains against the USD as risk sentiment remains solid ahead of the US inflation report  Source: shutterstock Macro outlook Global Markets: US equities made further gains yesterday ahead of the US CPI release later today, which is expected to show a decline in headline inflation thanks to lower crude oil, and hence retail gasoline prices. The risk-on sentiment has also hurt the USD, with EURUSD pushing back above 1.01 to 1.0126, and other G-10 currencies all following suit. In Asia, currencies yesterday made modest gains on the whole against the USD, but have lagged the G-10 moves. So with equity futures suggesting no turn in sentiment just yet, Asian FX will likely continue to strengthen today ahead of the US session. USDCNY is now down to 6.9265, taking the USDCNY 7.0 target off the agenda for the time being. US Treasury yields were slightly higher yesterday, especially at the back end, where a lackluster USD32bn 10Y auction saw yields on 10Y bonds rising almost 5bp to 3.358%. G-7 Macro: It’s all about the US August CPI result tonight. And though the headline inflation rate will most likely decline from July’s 8.5%YoY rate, thanks to lower gasoline prices, the core rate is expected to rise 0.3%MoM, and take core inflation up to 6.1% from 5.9%. Markets are likely to balance any headline falls against core rises, so its too early to be celebrating the end of inflation, as some market participants seem already to be doing. UK labour market data and Germany’s ZEW business confidence survey are also on the calendar. India: August inflation came in just above the consensus expectation at 7.0% (consensus 6.9%, ING f 7.0%), mainly due to somewhat stronger food price inflation. In any event, with inflation still well above the RBI’s target range (2-6%), more rate increases are still likely over the coming 2 meetings before the year end. The repo rate is currently 5.4%. We see rates ending the year at 5.9%.   China: With the yuan under recent weakening pressure, we don’t anticipate the PBoC making any further amendments to its 1Y medium term lending facility (1Y MLF) rate today, which will remain at 2.75%. Japan: Pipeline prices appear to have stabilized in August. Producer price inflation remained unchanged at 9.0% YoY in August (vs 9.4% in June) and import price growth slowed to 21.7%YoY (vs 26.1% in July). Despite the recent weakness in the JPY, the drop in global oil prices has led to price stabilization. But next week’s August CPI report is expected to show inflation still accelerating to nearly 3.0%. Despite the recent depreciation of the JPY and looming 3% inflation, we still expect no policy change from the BoJ at its September meeting. What to look out for: US inflation and China activity data Japan PPI (13 September) Australia consumer confidence (13 September) US CPI inflation (13 September) Japan industrial production and core machine orders (14 September) Hong Kong PPI and industrial production (14 September) US PPI inflation (14 September) Japan trade balance (15 September) Australia labour market data (15 September) US initial jobless claims and retail sales (15 September) South Korea unemployment (16 September) Singapore NODX (16 September) China industrial production, retail sales and fixed asset (16 September) US University of Michigan expectations (16 September) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Indonesia: Inflation moderates further in March

    Indonesian Exports And Imports In August Are Impressive

    ING Economics ING Economics 15.09.2022 14:32
    Exports surge anew, keeping the trade balance in a hefty surplus         Source: Stenly Lam 28 Consecutive months trade balance in surplus   Trade balance hits $5.8bn Indonesia’s export sector bested market expectations, rising 30.2%YoY compared to a median forecast of 19.9%.  Increased demand for energy products helped exports to rise 61% while outbound shipments of non-oil and gas rose 28.7%.  Imports also posted double digit gains, increasing by 32.8%, only slightly higher than expected. Energy imports expanded 80.6% (fuel for road vehicles) while non-oil and gas imports rose 26.1% as economic activity continues to improve. The overall trade balance touched $5.8bn, much better than market expectations and the second highest level on record.  Trade surplus since May 2020 Source: Badan Pusat Statistik Stable IDR to limit BI's rate hike prospects? Not so fast Heightened demand for Indonesia’s commodity exports has supported the economy’s recovery in many ways this year.  Surging exports have in turn helped drive manufacturing activity, with PMI manufacturing indices staying in expansion for all of 2022.  Meanwhile, 28 straight months of trade surpluses have shored up the IDR and the currency has been relatively stable compared to regional peers.  The currency has also faced less depreciation than in previous episodes of intense financial market volatility, such as 2018 or early 2020.  A stable IDR has eased pressure on Bank Indonesia (BI) hike rates aggressively this year with the central bank, hiking by only 25bp so far. Today’s trade data limits somewhat expectations that BI Governor Warjiyo will carry out a 50bp rate hike next Thursday.  However, given Warjiyo’s surprise rate hike last August, we cannot put it past BI to front load tightening (50bp rate hike) in anticipation of a sharp uptick in inflation after the fuel price hike.           Read this article on THINK TagsIndonesian rupiah Indonesia Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Much Business May Shift To Eastern Economies

    South Korean Won (KRW): What Can We Expect From Bank Of Korea (BoK)?

    ING Economics ING Economics 16.09.2022 10:14
    China data dump the main highlight for Friday Source: shutterstock Macro outlook Global Markets: US stocks did not follow through on their Wednesday bounce, and stock futures for once were an unreliable guide to the opening price. The S&P opened down on the previous close and despite a couple of attempts to rally, it was a fairly clear downtrend for most of the session, leaving it 1.13% down from the previous day to sit on recent lows. If they are to be believed, then equity futures suggest we will break lower today, which could then see the market look to re-test the June and July lows. The NASDAQ was down 1.43%. Bond yields continued their upward march, with the 2Y yield rising 7.7bp to 3.865%. This time, 10Y yields also followed, but as usual, by rather less, rising 4.4bp to 3.449%. EURUSD bounced around yesterday, but showed little overall direction, currently trading at 0,9989, but with an intraday low of 0.9956 and an intraday high of 1.0018. The AUD has slipped below 0.67 despite a nondescript labour report on Thursday, and Cable slid steadily on Thursday to reach the mid-1.14s. The JPY rally also seems to have run out of steam, as was widely expected, and has risen back to 143.36, giving it just a small buffer between the 145 level that seems to be the current line in the sand for the Bank of Japan. There was widespread weakness across the Asian FX pack on Thursday, and this will probably continue into the weekend. The CNY led the weakness, coming within sniffing distance of USDCNY7.0 even as the PBoC left the 1Y MLF rate unchanged yesterday.  We expect this USDCNY level to be breached, probably sooner than later. G-7 Macro: US Retail sales for August were rather mixed, with the headline 0.3%MoM gains driven mainly by auto sales, while the control group, which gives the least volatile readings, was flat on the month. James Knightley writes about these numbers here. US industrial production for August was slightly softer than expected too, falling 0.2%MoM against expectations for no change. See here for more details on these numbers and why we see further weakness ahead. Today’s main release is the US University of Michigan consumer sentiment survey for September. Consensus is forecasting a slight improvement to 60 from 58.2, though this would still be a very weak reading. South Korea: The jobless rate for August unexpectedly fell to its historical low of 2.5% beating the market consensus of 3.0% and last month’s 2.9% reading. Labour market participation declined to 63.9% (vs 64.1% in July), seemingly due to unfavourable weather conditions. Manufacturing employment has now increased for three months in a row and services employment was also solid, boosted by reopening and holiday effects. We expect the unemployment rate to rise again to 3% in the coming months but the relatively tight labour market will likely continue for a while. In a separate report, import prices fell for the second consecutive month in August (-0.9% MoM NSA) mainly due to a drop in global oil prices. We think that global oil prices are a more dominant factor determining import prices than the KRW currently. As long as global commodity prices remain stable, then import price inflation should slow in the months ahead. Data released today will support a 25bp hike by the Bank of Korea (BoK) in October. There is a growing opinion that the BoK may take another “big step” in October to catch up with faster rate hikes by the US Fed and to mitigate recent currency depreciation. However, we believe the BoK will take “normal” steps due to more downside risks to growth and signs that it has passed the high in  inflation. Singapore: Singapore's August non-oil domestic exports (NODX) surprised on the upside, rising 11.4% YoY vs the 8.3% estimate and benefiting from a favorable base.  NODX, however, contracted from the previous month (-3.9%) weighed down by the slowdown in electronics, which fell by 4.5% YoY.  Pharmaceuticals posted a 68.8% YoY gain but was entirely due to base effects and was not a major driver of the headline result.  Exports to China fell sharply in July and this decline extended to August (-18.2%).  We expect NODX to moderate further in the coming months as global growth slows.  What to look out for: China activity data South Korea unemployment (16 September) Singapore NODX (16 September) China industrial production, retail sales and fixed asset (16 September) US University of Michigan expectations (16 September) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Much Business May Shift To Eastern Economies

    Much Business May Shift To Eastern Economies

    TeleTrade Comments TeleTrade Comments 27.09.2022 10:03
    Asian stocks have rebounded as the DXY has turned subdued ahead of US Durable Goods data. World Bank has cut growth projections for China amid Covid-19 issues and a real estate crunch. The BOJ has announced an unscheduled bond-buying program. Markets in the Asian domain have rebounded as the US dollar index (DXY) has weakened after failing to sustain above the critical hurdle of 115.00. The DXY is witnessing pressure amid lower consensus for the US Durable Goods Orders data. As per the preliminary estimates, the apparels durables data will tumble by 1.1%. At the press time, Japan’s Nikkei225 gained 0.50%, ChinaA50 added 0.27% while Hang Seng dropped more than 1%. Chinese equities are getting support despite a decline in the growth projections by the World Bank. The giant lender believes that China’s longer zero-tolerance approach towards Covid-19 and the real estate crisis have trimmed its growth rate. Demand for steel, base metals, cement, and other building materials has declined firmly. Also, the eastern developing economies will perform better as much business will shift to them. In today’s session, the US Durable Goods Orders data will be of utmost importance. The economic data will remain subdued as higher interest rates by the Federal Reserve (Fed) and soaring core Consumer Price Index (CPI) numbers have forced individuals to postpone their current purchasing plans. Meanwhile, the Bank of Japan (BOJ) has announced an unscheduled bond-buying program. The central bank is offering to buy JPY 250 billion worth of Japanese Government Bonds (JGBs). On the oil front, oil prices have displayed a less-confident rebound after dropping to nearly $75.00. The pullback move seems a result of a subdued performance by the DXY. The oil prices will continue to remain on the tenterhooks as fears of the global recession are skyrocketing.
    Singapore's non-oil domestic exports shrank 20.6% year-on-year

    Singapore’s Industrial Production (IP) Came In Above Expectations

    TeleTrade Comments TeleTrade Comments 27.09.2022 13:51
    Senior Economist at UOB Group Alvin Liew assesses the latest Industrial Production figures in Singapore. Key Takeaways “Singapore’s industrial production (IP) came in above expectations as it rose by 2.0% m/m SA, which translated to a growth of 0.5% y/y in Aug, (from the upwardly revised Jul readings of -2.1% m/m, 0.8% y/y). Excluding the volatile biomedical manufacturing, IP actually contracted by -2.9% m/m, 1.2% y/y% y/y in Aug (from an upwardly revised -0.9% m/m, 3.1% y/y in Jul).” “While the Aug IP beat expectations, it was due to a rebound in pharmaceutical production (6.4% y/y). Other main sources of IP growth were from the continued expansions in transport engineering (32.8% y/y), general manufacturing (18.8% y/y), and precision engineering (2.9% y/y), offsetting the declines in electronics output (-7.8% y/y) and chemicals (-11.2% y/y).” “Accounting for the Aug’s increase, Singapore’s IP expanded 4.4% in the first eight months of 2022. The latest dip in Aug electronics PMI (to 49.6, first contraction after two years of continuous expansion, and the lowest reading since Jul 2020) painted a consistent picture from what we saw in the latest NODX and manufacturing data, a start of the electronics downcycle. We continue to be cautiously positive on the outlook for transport engineering, general manufacturing, and precision engineering, to support overall IP growth but we see a weaker electronics performance and slowing demand from North Asian and key developed economies that could increasingly weigh on NODX momentum and manufacturing demand. We keep our Singapore manufacturing growth forecast at 4.5% in 2022 (from 13.2% in 2021) but we expect the sector to contract by 3.7% in 2023 due to the faltering outlook for electronics and weaker external demand. In the same vein, our 2022 GDP growth forecasts are also unchanged at 3.5% but the faltering 2023 manufacturing outlook indicates the downside risk to our GDP growth projection next year.’
    South Korea Hopes To Achieve Carbon Neutrality By 2050

    Asia: Korean Industrial Production May Catch You By Surprise! What's The Expected GDP For The Third Quarter Of 2022?

    ING Economics ING Economics 30.09.2022 14:57
    Service and construction activity increased but couldn't stop the decline in the all-industry production index as manufacturing activity fell in August. Solid consumption and facility investment should lead the current quarter's growth, but we then expect a sharp deceleration. We expect only a 0.1%QoQ GDP gain in 3Q22 (vs 0.7% in 2Q22) Source: Shutterstock -1.8% Industrial Production %MoM, sa Lower than expected All industry production fell for a second month due to weak manufacturing activity Industrial production dropped by 1.8% MoM (sa) in August, which was a bigger fall than had been expected (-1.3% in July and -0.8% market consensus), recording its second monthly decline. By industry, automobile production continued to gain solidly (8.8%) with improving global supply conditions helping suppliers to fill gaps in existing orders. But other major export items such as semiconductors (-14.2%) and petrochemicals (-5.0%) fell, suggesting that overall global demand conditions worsened. Semiconductor production dropped for a second month and was also accompanied by a worrying accumulation of inventories. Usually, this leads to a downward cycle for semiconductors. We expect a weak semiconductor performance in the coming quarters. Meanwhile, economic reopening appears to have supported activity in services. Social/welfare services declined (-1.3%) as the Covid situation improved, but wholesale/retail sales (3.7%) and leisure services grew solidly. Manufacturing IP fell for a second month in August Source: CEIC Equipment investment and construction rebounded in August There was a positive message in the investment component of this data. Equipment investment rebounded 8.8% in August. In addition, the forward-looking machinery orders series also showed gains, mainly driven by the IT sector. It seems as if despite the downturn in the semiconductor cycle, manufacturers continue to expand their investment in advanced technologies. For construction investment, both engineering and residential construction rose for the first time in three months while construction orders fell sharply reflecting the sluggish real-estate market in Korea. Investment rebounded in August Source: CEIC The growth outlook and the Bank of Korea policy reaction Based on today’s weaker-than-expected industrial production data, we expect 0.1% QoQ growth in 3Q22 (vs 0.7% in 2Q) and have downgraded our annual GDP forecast for 2022 to 2.5%YoY. In addition, with downbeat forward-looking data, we believe the probability of recession is growing rapidly. Yesterday’s business survey outcomes were weak, with manufacturing sentiment deteriorating to its lowest level since October 2020. Also, we expect a sluggish housing market in the coming quarters as a result of tightened liquidity conditions backed by today’s weak construction order data. Thus, we think growth for the next two quarters will likely contract with both weak domestic and external demand. Despite the recent poor performances in activity data, we believe that the Bank of Korea (BoK) will still put its policy priority on price stabilization. And we expect a 50bp hike at the BoK's October meeting. But the weak growth conditions will eventually slow the BoK’s tightening actions. And growing concern about recession, together with slowing inflation, should stop the BoK's rate hike cycle by early next year. Read this article on THINK TagsSouth Korea Investments Industrial Production Business confidence Bank of Korea Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Data From Asia And Australia Will Be In Focus For The Coming Week

    ING Economics ING Economics 01.10.2022 08:42
    A key central bank meeting and regional inflation and trade figures are in focus next week In this article The week ahead RBA meets to discuss policy Most regional inflation readings to accelerate Korea and Taiwan trade data PMI readings from Indonesia, Philippines and Singapore All about reserves Source: Shutterstock The week ahead In the coming week, we'll get readings on inflation, trade and PMI reports from the region. Also, with FX markets battered, data on dollar reserves will be in focus. Lastly, the Reserve Bank of Australia (RBA) meets to discuss policy, with the chance of a 50bp hike increasing.  RBA meets to discuss policy Following some reasonable August labour market data, and stronger-than-expected retail sales figures, recent hints from the Reserve Bank of Australia that it may soon start to tighten rates at a slower pace are looking a bit less credible right now. With a strong and unified hawkish chorus from US Fed officials, the apparent ruling out by the US White House of a plaza-style currency agreement, and a further sliding of the Australian dollar, the odds are swinging back towards another 50bp RBA move at the coming meeting. Most regional inflation readings to accelerate Price pressures are likely to kick into high gear for both the Philippines and Indonesia which should keep their respective central banks on notice.   Indonesia's inflation has remained relatively subdued of late, but a recent price hike for subsidised fuel should push headline inflation past 6% year-on-year. Philippine inflation should also edge higher after a brief pause.   Meanwhile, the sharp depreciation of the Japanese yen should add pressure to inflation, with Tokyo CPI inflation expected to rise to 2.9%YoY in September. Inflation in Korea will also likely move higher, up 5.7%. Gasoline prices may have declined but food prices climbed quite sharply for the month. Lastly, Taiwan's inflation should have a strong correlation with its trade data. Our outlook is for a slowdown in trade due to fading purchasing power for US and European markets. The weakness in the trade sector suggests softer demand in Taiwan given its dependence on external trade. Thus we expect lower CPI and WPI inflation for Taiwan. Korea and Taiwan trade data Korea's September trade data will also be in focus for the coming week. Set for release over the weekend, we expect export growth to slow to 2%YoY given the unfavourable calendar day effect. Semiconductors exports should rebound marginally after a sudden drop in August, but automobile exports are likely to turn negative as suggested by a recent industry report. Import growth is also expected to decelerate as the drop in oil prices overwhelms the weak Korean won.   Taiwan will also release trade figures in the coming days. Both exports and imports should be softer than in August, as high inflation in the US and Europe has led to a fall in purchasing power and thus weaker demand for Taiwan's exports.  PMI readings from Indonesia, Philippines and Singapore Next week will feature the latest readings for PMI manufacturing. We can expect declines in PMI indices for both the Philippines and Singapore due to slower export demand although both indices are likely to remain in expansion. Indonesia on the other hand should see a modest improvement in activity tracking surging exports.   All about reserves The ongoing rout in currency markets has central banks dipping into reserves to slow the depreciation of their currencies. Reserve levels are likely to fall in the coming months and both the Philippines and Indonesia could see lower levels given depreciation pressure for their respective currencies.   Asia Economic Calendar Source: Refinitiv, ING TagsTaiwan Reserve Bank of Australia Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    According to Franklin Templeton, small-cap companies, which could be positively affected by factors related changes in manufacturing, have potential

    Asia - South Korea: Exports Went Up By Almost 3%, It's Much Less Than In August

    ING Economics ING Economics 03.10.2022 09:09
    The trade balance in September recorded a six-month deficit while the trade deficit narrowed to -USD3.7 billion (vs -USD9.4 billion in August) as import growth decelerated at a faster pace than exports. We expect the trade deficit to continue to narrow until the year end and possibly turn into a surplus early next year Source: shutterstock.com 2.8% Exports %YoY Lower than expected Exports rose 2.8% YoY in September, the slowest pace in about two years Weakening global demand appears to have put pressure on Korea's exports, which recorded a 2.8% year-on-year rise in September (vs 6.6% in August), missing the market consensus of 3.3%. By product, semiconductor exports dropped by -5.7% in September (vs -7.8% in August) and performances of other IT products such as wireless phone (-7.0%) and computers (-23.6%) were also weak. Steel products made a sudden drop of -21.1% mainly due to a typhoon-triggered shutdown, which will be normalised fully by the year end; thus the slowdown is expected to continue. Meanwhile, petroleum product exports were solid with a 52.7% gain, and automobiles (34.7%)/auto parts (8.7%) exports rose for three consecutive months. By country, exports to the US (16.0%), Japan (2.5%), and ASEAN (7.6%) were solid while exports to China (-6.5%), the EU (-0.7%), and Vietnam (-6.4%) dropped.   Meanwhile, imports rose 18.6% YoY in September (vs 28.2% in August), slowing down due to the drop in global commodity prices. We expect import growth to decelerate further during the winter time, mainly due to the high base last year.  Trade deficit narrowed in September Source: CEIC Exports Automobiles vs IT products Source: CEIC, ING estimates Trade outlook and the Bank of Korea policy reaction Most of Korea's exports are intermediate goods processing trade. Therefore, if global external demand weakens, imports of raw materials and components will decrease. In addition, imports tend to weaken more quickly when domestic demand is weak, which is our base case scenario over the coming quarters, which could eventually lead to a trade surplus. We think that the current trade deficit trend will continue until early next year, but after that, as both external and internal demand weakens, the trade balance is expected to turn to a surplus again.  As the inflation is expected to stay above 5% for a few months, the Bank of Korea will likely continue to stay on the hiking path and frontload a 50bp hike at its October meeting. However, recent data releases from hard activity data to soft survey data suggest a sharp contraction of the economy in near term and real-estate markets already show a quite rapid price correction and liquidity concerns on mortgages and Jeonsei (yearly rent contract) deposits. Thus, we expect the BoK to put a break eventually early next year.  Read this article on THINK TagsKorea trade GDP Exports Bank of Korea Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Indonesia: Inflation moderates further in March

    Asia: Indonesian Inflation Hit 6%, One Of The Drivers Was The Increased Price Of Fuel

    ING Economics ING Economics 03.10.2022 13:44
    Headline inflation rises as Pertalite price increase kicks in Inflation in Indonesia has remained subdued 6.0% CPI year-on-year growth   As expected September inflation at 6% after fuel price hike Price pressures continue to build in Indonesia. September CPI inflation rose 6% year-on-year and 1.2% month-on-month after the government increased the price of subsidised fuel. As a result of the price increase for Pertalite, transport costs increased 8.9% for the month. Meanwhile, food inflation also accelerated to 7.9% while only clothing and financial services saw slower inflation from the previous month.    Core inflation settles at 3.2% The surprise today was the core inflation reading which increased to 3.2% YoY from 3.0%. The market consensus had core inflation rising to 3.5% as economic activity continued to improve.  Despite the downside surprise, we believe core inflation should continue to accelerate for the rest of the year as second-round effects from the recent fuel price hike begin to manifest. Furthermore, improved economic growth prospects suggest demand-side pressures are likely to build, putting pressure on core inflation to rise further. Headline inflation now at multi-year high Source: Badan Pusat Statistik and Bank Indonesia BI still likely to retain hawkish tone Bank Indonesia (BI) announced two successive surprises in the last three months; the first of which was an unexpected rate hike at the August meeting followed by a hefty 50bp rate increase when the market had priced in a more modest one.  With inflation now hitting multi-year highs, we expect BI to retain its hawkish tone with a rate hike at the October meeting still a possibility. The core inflation number however could mean that BI would be under less pressure to deliver another punchy (50bp) rate increase with the size of the hike likely dependent on the rupiah's performance for the month.      Core inflation expected to rise further as second-round effects manifest Source: Badan Pusat Statistik Read this article on THINK TagsIndonesian CPI IDR Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Bank of Japan to welcome Kazuo Ueda as its new governor

    Asia's Economic Calendar Is Full Of Reports And Another Decisions To Raise Rates

    ING Economics ING Economics 08.10.2022 13:20
    Inflation is in the spotlight in Asia next week while the Bank of Korea considers another rate hike In this article The week ahead Inflation readings from India and China Bank of Korea to hike another 50bp China and Philippine trade reports Japan and India’s industrial data Other important data reports: China loan data and Singapore’s GDP Source: Shutterstock The week ahead In the coming week, several regional economies will report their inflation figures while the Bank of Korea meets to discuss policy. On top of prices and central bank decisions, we also get trade data from China and the Philippines. Inflation readings from India and China India’s September inflation numbers are likely to be lifted by higher food prices, in particular, tomatoes, which jumped to almost INR44/kg in September from INR35/kg in August. That will help push food prices up by about 1.7% from the previous month and take the headline inflation rate to 7.8% year-on-year from its current rate of 7.0%. There is some seasonality at work in these price increases, and the effects of this price spike on inflation will likely dissipate quickly, taking inflation back to the low 7s by the following month, enabling the Reserve Bank of India to adopt a more gradual tightening path at its December meeting. Meanwhile, China’s inflation should see a slight pick-up to 2.7%YoY in September (2.5%YoY previous) as the economy gradually recovers. Bank of Korea to hike another 50bp The Bank of Korea (BoK) holds a meeting next Wednesday to discuss policy. We expect the BoK to raise interest rates by 50bp, given the faster-than-expected rate hike by the Fed coupled with persistently high domestic inflation. China and Philippine trade reports The coming week also features trade data from China. External demand for China’s exports has been weaker due to elevated global inflation and therefore we should only expect mild growth for both exports and imports. In the Philippines, recent trends in trade activity will likely continue. Exports will likely manage only a modest gain while imports are expected to post another month of double-digit gains. The trade deficit should test historic lows once again and put pressure on the Philippine peso in the near term. Japan and India’s industrial data Industrial production data is also on the data calendar although India’s industrial production data for August is a bit lagged. In Japan, machinery orders data will be released and we expect a continuous recovery thanks to manufacturers catching up with previously unmet existing vehicle orders and the economic reopening. Other important data reports: China loan data and Singapore’s GDP China will release loan data next week that should show another strong month of loan growth which is unusual towards the end of the year. The strong performance is likely due to more lending to SMEs and the agricultural sector. We do not expect any change for the 1Y Medium Term Lending Facility rate (currently at 2.75%). The central bank has stated several times that the current interest rate level is about the neutral level.    Lastly, growth in Singapore may settle at 3.0% YoY with quarter-on-quarter growth almost flat. Retail sales have held up decently in the quarter as have non-oil domestic exports.  Asia Economic Calendar   Source: Refinitiv, ING TagsAsia week ahead Asia Pacific Asia Markets Asia Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
    Asia Morning Bites - 14.02.2023

    Difference Between Now And Then In Asian Economies

    ING Economics ING Economics 09.10.2022 12:46
    Despite some superficial similarities, there are really very few parallels between today's markets and the Asian financial crisis of 1997/98 In this article Things were very different (worse) in 1997 Asia Asian FX: A relative outperformer FX reserves much fatter buffers Current accounts good, but not as good as they were On balance, things still look OK Source: Shutterstock Things were very different (worse) in 1997 Asia Being old enough to have been covering the Asia-Pacific region during the financial crisis in 1997/98, I can speak with some authority in saying that it was nothing like what we are experiencing today. Indeed, the Asia region as a whole was in far worse shape then than it is now.  Let's break it down.   Asian FX: A relative outperformer Perhaps the most important difference between now and then is in the exchange rate regimes being run by Asian economies. For the most part, these were fixed exchange rates pegged to the USD. There is a concise description of the causes and effects of the Asian financial crisis from the IMF in 1998 here. In a nutshell, Asian economies back then combined high interest rates to attract capital inflows to finance investment and currencies pegged to the US dollar at favourable rates to achieve rapid export-led growth. Hot money was often channelled into unproductive property investments rather than raising the productive capital of these economies, which worsened the side effects when the bubble finally popped. About the only similarity between then and now is what ultimately broke the currency pegs: hot money outflows attracted back to the US as the Federal Reserve raised rates to curb inflation upon emerging from recession in the mid-1990s. This caused the USD to appreciate along with Asian currencies as they were pegged, losing competitiveness. The Thai baht collapsed first, and contagion then pulled down the Philippine peso, Indonesian rupiah, and eventually the Korean won. The foreign debt that had helped finance the earlier rapid growth then became a massive debt-service headache, requiring IMF assistance and bailouts to prevent default. So the first and rather glaring point to make is that across the region, exchange rates are not currently pegged to the USD. They may not all be the purest floats, and not all currencies are freely convertible, but they are not fixed. Nevertheless, as the chart below shows, their depreciation (year-to-date and quarter-to-date 3Q22) is for the most part not as severe as the benchmark EUR/USD, or many other G-10 currencies (British pound, Swedish krona, Norwegian krone). Put another way, Asian currencies aren't collapsing; the USD is strengthening. Relative Asian FX performance year and quarter-to-date (3Q22) Source: CEIC, ING FX reserves much fatter buffers One of the remedies prescribed by the IMF to fix the broken Asian economies in the late 90s was that they needed to bolster themselves by accruing much bigger FX reserves. The two charts below show the extent of these reserves with reference to 1) months of import cover and 2) gross external debt (really, net external debt is the relevant metric, but gross debt serves its purpose here).  In almost all cases, export-cover is considerably better today than in 1997 or is very high anyway if not. Six months of cover is generally considered a decent buffer, so anything over that should not result in market nervousness. Malaysia is the main exception to this, and even then, import cover is almost double what it was back in 1997. The ringgit took a different path to salvation from other Asian currencies during this period. But for the record, Bank Negara Malaysia Governor Nor Shamsiah Mohd Yunus ruled out a return to capital controls or currency pegs a little more than a week ago.  The second chart shows reserves as a ratio to gross external debt. Like import cover, reserves relative to external debt are now much more substantial. Where they remain low (Japan, Singapore), the gross debt position is negligible anyway, and the net position is a substantial surplus, so it is irrelevant.    The only caveat we would make to this discussion that hints that everything is fine is that although the levels look comfortable, they have been declining. Central banks across the region have recently started intervening to limit the amount of currency depreciation, or at least to smooth its volatility. Reserves have been dropping, and the value of imports is rising due to inflation, so this is definitely a space worth watching. It isn't all good.    Import cover (months)   Reserves to external debt ratio Source: World Bank, ING Current accounts good, but not as good as they were The other thing that isn't quite as good now as it was before Covid and before Russia invaded Ukraine is Asia's current account environment. Of course, this is the main way to replenish depleted FX reserves. China used to account for a large proportion of Asia's inbound tourism, but as its zero Covid policies effectively keep these flows close to zero, tourism centres like Thailand have been hit extremely hard. As a result, their current account surplus has been turned into a deficit. Secondly, most of Asia is a net importer of energy (exceptions are Malaysia and Indonesia, as well as Australia). So, with natural gas prices spiking on increased competition with Europe for available non-Russian LNG, much of Asia has seen long-standing trade surpluses turn into deficits. Fortunately, large net investment income inflows mean that current accounts have held up better than trade balances.  Current accounts in Asia still strong   Source: CEIC, ING On balance, things still look OK We wouldn't want to finish this note by hinting that everything is fine in Asia. It isn't. Growth is slowing as inflation bites on spending power, and increasing policy rates are beginning to raise debt service burdens. China's lacklustre activity and European demand weakness are weighing on regional export strength, and a US recession is likely before too long. On top of this, there is also a downturn in the important semiconductor sector.  However, while all of this probably implies further currency weakness ahead, this is the safety valve that means a more abrupt break should be avoided. Never say never, but we don't see this ending like in 1997. TagsAsian macroeconomics Asian financial crisis 1997 Asian debt crisis   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
    Asia Market: Exports In Indonesia Are Likely To Continue To Grow, Chinese Interest Rate Decision Ahead

    Asia Stock Market: MSCI’s Index Of Asia-Pacific Shares Outside Japan Down And Japan’s Nikkei 225 Remains Mostly Steady

    TeleTrade Comments TeleTrade Comments 12.10.2022 09:28
    Looming intervention from Japan, economic fears cited by BOE’s Bailey, IMF keep bears hopeful. Yields grind higher as London/Tokyo struggle to defend respective currencies. Chinese shares lead bears, KOSPI fails to justify BOK’s rate hike. Asian stocks hold lower grounds, led by China, as economic slowdown fears join pre-Fed Minutes anxiety during early Wednesday. Even so, sluggish yields and an absence of major data/events restrict immediate moves. That said, MSCI’s index of Asia-Pacific shares outside Japan renews the 30-month low, down 0.75% intraday by the press time, whereas Japan’s Nikkei 225 remains mostly steady around a one-week low. Earlier in the day, USDJPY crossed the 145.90 level and pushed the Japanese policymakers to defend the domestic currency. Following the same, Japan’s Chief Cabinet Secretary Hirokazu and Finance Minister Shunichi Suzuki crossed wires while showing readiness to tame the price move, if needed. Elsewhere, China’s firmer determination to defend the zero-covid policy joins the recently gradual fall in the domestic currency to renew fears of the People’s Bank of China (PBOC), which in turn led the markets in Beijing towards witnessing more than 1.0% daily loss. While following the same, New Zealand’s NZX 50 drops 1.0% but Australia’s ASX 200 prints mild gains as Reserve Bank of Australia (RBA) Assistant Governor Luci Ellis mentioned, that the central bank’s policy is no longer in an expansionary place. However, comments like, “The neutral rate was a moving target and hard to determine at any stage in time,” seemed to have weighed on the Aussie stocks. South Korea’s KOSPI prints 0.25% intraday gains even after the Bank of Korea announced a rate hike while Indonesia’s IDX Composite traces Chinese equities to drop 0.65% at the latest. On a broader front, S&P 500 Futures remain sidelined around monthly low but the Treasury bond yields are mostly firmer, despite the latest inaction, which in turn portrays the market’s rush towards risk safety. Moving on, Federal Open Market Committee (FOMC) Meeting Minutes will be eyed for clear directions amid hawkish Fed bets. Also important will be the moves by the British and the Japanese policymakers to defend the GBP and the JPY respectively.
    South Korean exports shrank, but annual print shows a 6.1% gain in 2022

    South Korean Won (KRW) And THB Decreased Yesterday. S&P 500 And Nasdaq Declined A Bit

    ING Economics ING Economics 12.10.2022 09:37
    Interesting day for Asia with Bank of Korea rate meeting plus Indian inflation ahead of FOMC minutes and US PPI inflation tonight Source: shutterstock Macro outlook Global Markets: The turmoil that threatened to spread across markets from the UK’s Gilts market looked marginally less ominous for a while yesterday. 2Y Gilt yields retreated to the tune of 14.9bp, though their 10Y counterparts fell only 3.4bp. 2Y German bond yields also fell 5.7bp and were down 4.1bp in the 10Y Bund. It remains to be seen whether this calm will hold, as Bank of England (BoE) Governor, Andrew Bailey, noted that the BoE Gilt buying programme would still end this Friday.  Many pension funds seem to think that this is not long enough to make the necessary adjustments to their funds and there is a lot of speculation that the Friday deadline will have to be extended. US Treasury yields did their own thing yesterday. 10Y US Treasury yields rose 6.6bp to 3.947%, bringing 4% back into play as a near-term target. 2Y US Treasury yields were little changed at 4.31%. The pound came under further selling pressure yesterday, dropping to 1.0975 as of writing. EURUSD has ended up virtually unchanged after a very choppy session in US trading. The AUD is now down to 0.6267 and the JPY is nosing up towards the 145.90 level at which the BoJ intervened in mid-September. It looks like this could be an interesting day. Most of the Asian FX pack lost ground to the USD yesterday, led by the KRW which has risen to 1435, and the THB, which is up to 38.12. The CNY made further small losses, rising to 7.1687. Stock markets don’t yet seem to have woken up to what is going on in bond markets, and there were only small losses in the S&P500 and NASDAQ yesterday.  Equity futures are pointing to a small gain at the open. G-7 Macro: Yesterday’s US September small firm business survey (NFIB) rose for a third consecutive month. Most notably, there were slightly lower plans to increase selling prices (51% down from 53% in August and the 65% peak in May). The UK’s labour market data released yesterday showed a faster slowdown than had been expected, which won’t make the fiscal arithmetic any easier for the UK government, trying to make their tax cut plans add up to something that won’t crash the pound or Gilts market. The monthly GDP figures for August in the UK due out today will likely also make for uncomfortable reading. US mortgage applications and PPI numbers ahead of the September CPI release tomorrow as well as the FOMC minutes from the last meeting, will help set the tone for the market for the next 24 hours.     China: China loan growth jumped by almost double from a month ago to CNY247bn. Government bond issuance also jumped. This indicates that government spending will support the GDP growth figure in 3Q22. But fiscal pressure is mounting. India: September CPI due out later tonight will show inflation pushing higher. The consensus is for a rise to 7.4% from 7.0%. We think there is some upside risk to these figures based on some higher food price data over the month. South Korea: The Bank of Korea (BoK)  holds a rate decision meeting today. Both we and the market expect the BoK to raise its base rate by 50bp, considering the faster-than-expected Fed rate hikes, sticky inflation exceeding 5%, and growing inflation risks from the weak won and rebounding global oil prices. Inflation eased down to 5.8%YoY in September and inflation expectations also came down slightly. But the BoK will be very careful in reading too much into the latest figures as inflation is expected to pick up again in October. The market has already started talking about the possibility of another 50bp hike by the BoK at the next MPC meeting in November. We have to listen carefully to Governor Rhee’s comments today, but we think that October CPI is the key for the BoK regarding the next decision. If inflation goes back up to 6%, then another 50bp hike is possible. If not, then they will likely normalize their hiking pace. Japan: The JPY passed 145.9 this morning and if the authorities step in again, it will be no big surprise. Machinery orders fell in August by -5.8% MoM sa (vs 5.3% in July and -2.8% market consensus). The weakness mainly came from foreign orders (-18.9%), pointing to the slowdown in the global economy. Domestic demand orders rose modestly (1.9%). We think that Japan’s economy will stay on a recovery path, boosted by reopening-induced domestic demand. What to look out for: Inflation reports and the FOMC minutes Japan machine orders (12 October) India PPI inflation (12 October) US PPI inflation (12 October) Bank of Korea decision (12 October) FOMC minutes (13 October) Japan PPI inflation (13 October) US CPI inflation and initial jobless claims (13 October) China trade balance, CPI and PPI inflation (14 October) Korea unemployment (14 October) US retail sales and University of Michigan sentiment (14 October) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The Bank of Korea Is Likely To Respond With A Rate Cut In The Second Half Of 2023

    South Korean Won (KRW): Bank Of Korea Hiked The Rate By 50bp

    ING Economics ING Economics 12.10.2022 10:17
    Although inflation expectations and pipeline prices have eased in recent months, the Bank of Korea raised its policy rate by 50bp today, responding to faster-than-expected Fed rate hikes, sticky inflation and growing inflation risks from the weak won and rebounding global oil prices. Future guidance remained vague  3.00 BoK 7-Day Repo Rate   As expected The BoK decided to raise the policy rate to 3.00% but with two dissenting votes The market widely expected a 50bp hike, but two dissenting votes were a surprise. This is the first time that the policy rate decision has not been unanimous since August 2021. This clearly shows that the spectrum of dove-hawk tendencies is shifting slowly from curbing inflation to supporting growth. In addition, Governor Rhee mentioned that multiple members see the terminal rate around the 3.5% level, but that a couple of members believe it will be lower than this, so the Board’s opinions on future interest rate hikes are divided. Lastly, Governor Rhee gave a vague answer to the possibility of a 50bp rate hike in November and mentioned that the board members will opt to watch the Fed before deciding what to do then.  The BoK's rate decision outlook in November We believe that two conditions must be met for a 50bp hike in November. The first is the Fed’s rate hike decision in November. If the pace of Fed hiking is faster than the market expectation of 75bp then the BoK could consider a 50bp hike. The second is Korea’s consumer inflation in October and pipeline prices. If inflation goes back up to 6% and pipeline price pressures reaccelerate (driven either by rapid won weakness or a rebound in global oil prices), then another 50bp hike is possible.   Our ING house view is that the Fed will deliver a 75bp hike in November and that Korea’s October CPI inflation rate will rise to 5.9%YoY with a continued slowdown in pipeline prices. And as such, we think that the BoK will likely normalize its hiking pace back to 25bp in November. The BoK's rate decision outlook next year We believe that the BoK’s tightening cycle is coming close to an end. Governor Rhee repeated several times that rate hikes will be painful for highly leveraged debtors, but that action is necessary now to avoid an even bigger increase in interest rates. However, we think that tight monetary conditions will soon start hitting the real economy with further asset price adjustments and a rapid slowdown in private consumption and investment. Although upside risks on inflation are growing, Korea’s consumers are highly sensitive to interest rates, given the large exposure to variable rate loans. Thus we expect inflation to come down quite sharply from the end of next quarter. In turn, we believe that the BoK will stay on hold for a while next year before commencing its easing cycle towards the year-end. Read this article on THINK TagsInflation expectations CPI inflation Bank of Korea Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    China's Position On The Russo-Ukrainian War Confirmed At The G20 Meeting

    Asian Equities Have Witnessed A Sell-Off Amid The Risk-Off Impulse

    TeleTrade Comments TeleTrade Comments 13.10.2022 09:03
    Asian indices are facing pressure as investors prefer to move light for the US inflation event. Rising odds of BOJ’s intervention in currency markets are hurting the sentiment of Japanese investors. Oil prices have sensed selling interest on escalating US recession fears. Markets in the Asian domain are following the footprints of the S&P500 as escalating anxiety ahead of the US Consumer Price Index (CPI) release has forced investors to remain on the sidelines. Asian equities have witnessed a sell-off amid the risk-off impulse, citing gloomy growth outlook and signs of recession situation in the US economy responsible, apart from the Fed’s tight policy. At the press time, Japan’s Nikkei225 dropped 0.48%, ChinaA50 tumbled 1.10%, Hang Seng dived 1.26% and Nifty50 declined 0.62%. Accelerating odds of the Bank of Japan (BOJ)’s intervention in the currency markets is hurting the sentiment of Japan’s investors. Chatters over intervention are bolstering the fact that the Japanese yen could weaken further. This may hurt the firms which are highly dependent on other countries for raw materials. Indian indices have taken a hit after a jump in inflationary pressures. Headline inflation for September has landed higher at 7.4% vs. the prior release of 7.0% while the core CPI has escalated to 6.1%. This will weigh pressure on the Reserve Bank of India (RBI) to hike interest rates further. Meanwhile, the US dollar index (DXY) has continued with its lackluster performance ahead of the US CPI data. As per the consensus, the headline inflation data will decline to 8.1% while the core CPI that excludes oil and food prices will increase to 6.5%. No matter, if the inflation rate drops or accelerates, volatility will explode for sure as September’s inflation report shares the spotlight with the quarterly result season. On the oil front, oil prices are sideways after dropping to near $85.00. Weakness is expected to persist in the oil prices as fears of a recession situation in the US economy have heightened. Also, commentary from US President Joe Biden that recession will be slight if US encounters don’t bar the recession fears.
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Shares In The Asia-Pacific Region Remain Recovery

    TeleTrade Comments TeleTrade Comments 14.10.2022 09:15
    Asian equities remain firmer while tracking their global counterparts. Comments from BOJ, PBOC policymakers’ add strength to the optimism despite firmer US/China CPI. IMF urges Asian central banks to tighten monetary policy. Covid woes, political hustle and fears of higher rates keep buyers cautious ahead of the key US data. Shares in the Asia-Pacific region remain firmer on early Friday as policymakers push back calls for higher rates, as well as suggest more stimulus. Adding to the market’s recovery could be the upbeat performance of Wall Street despite a stronger US inflation print. While portraying the mood, the MSCI’s index of the Asia-Pacific shares outside Japan rebounds from the 31-month low whereas Japan’s Nikkei 225 rises 3.42% by the press time. Earlier in the day, Japanese Finance Minister (FinMin) Shunichi Suzuki and Bank of Japan Governor (BOJ) Haruhiko Kuroda resisted while signaling any market invention to come from Japanese policymakers due to the latest slump in the yen. “Want to take appropriate action versus excess fx volatility,” said FinMin Suzuki when asked whether Japan could intervene to prop up the yen. BOJ’s Kuroda, on the same line, mentioned that the pace of Japan's economic recovery still slow so BOJ must continue supporting the economy. Additionally, People’s Bank of China (PBOC) Governor Yi Gang mentioned, “The PBOC has room to adjust policy given the inflation rate in China is well within target.” The policymaker also signaled multiple moves, mostly suggesting more stimulus for infrastructure and housing, to provide stronger support for the real economy. It’s worth noting that China’s headline Consumer Price Index (CPI) matched upbeat market forecasts by rising 2.8% in September while the Producer Price Index (PPI) fell short of meeting expectations during the stated month, down to 0.9% versus 1.0% forecasts and 2.3% prior. Amid these plays, Chinese stocks appear the second in the winning league, after Japan’s Nikkei, which in turn favors equities in Australia and New Zealand. In addition to the stimulus hopes at home and mixed data, the UK government’s U-turn tax cut, as well as ongoing covid woes in China and Europe, are also some of the key catalysts that directed Asian markets. On a broader front, US 10-year Treasury yields keep the late Thursday’s pullback from the highest levels since October 2008 while the two-year and 30-year bond coupons also retreat from the multi-year tops by the press time. That said, the S&P 500 Futures also extend the bounce off monthly low with 0.60% intraday gains at the latest. Moving on, US Retail Sales for September, the preliminary readings of the Michigan Consumer Sentiment Index (CSI) and the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations for October are important to watch for clear directions.
    Dollar Strength Continues as 10-year Treasury Surges to 4.34%, Reaching Highest Levels Since Financial Crisis

    Monetary Authority Of Singapore Hikes The Rate As Country's GDP Growth Hits 4.4%

    ING Economics ING Economics 14.10.2022 10:06
    The Monetary Authority of Singapore (MAS) tightened policy further as inflation continues to heat up Source: Shutterstock MAS continues to tighten policy to combat searing inflation The Monetary Authority of Singapore (MAS) tightened policy further today, the 4th time this year and the fifth since they began to tighten last October.  Soaring inflation has called the MAS into play since late 2021 and they have been quite busy ever since.  A combination of elevated commodity prices and resurgent domestic demand has pushed core inflation past 5%YoY prompting the MAS into action in January, April and July.  The MAS inflation forecasts point to core inflation at 4% for the year and 3.5-4.5%YoY for next year, factoring in the implementation of the goods and services tax (GST) increase in 2023.   MAS adjusts mid-point and...? The MAS opted to re-centre the currency band to prevailing levels but kept the slope and the width of the band unchanged.  We had expected a more aggressive move, but Singapore's central bank believes that today’s move will build on past tightening carried out since October 2021 to reduce imported inflation and curb domestic cost pressures.  However, given the outlook for inflation, the MAS will at least need to retain its hawkish tone until price pressures finally show signs of moderating. MAS to re-centre policy band to prevailing levels Source: CEIC and ING estimates 3Q GDP surprises on the upside Singapore also released 3Q22 GDP advance figures today.  3Q GDP growth surprised on the upside, settling at 4.4%YoY compared to expectations for a 3.5% gain.  Retail sales, possibly bolstered by foreign tourist arrivals, and non-oil domestic exports have held up relatively well in the face of accelerating inflation and slowing global demand.  Despite today’s strong GDP report, we expect growth to slow down in 4Q22 with signs pointing to even faster inflation coupled with global trade softening on recession fears. Retail sales and NODX held up well but momentum shows signs of slowing Source: CEIC Read this article on THINK TagsSingapore GDP SGD NEER Monetary Authority of Singapore Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Bank of Japan to welcome Kazuo Ueda as its new governor

    Inflation Stabilized In Japan | Another Decision Of The Bank Of Indonesia About Interest Rates Is Ahead

    ING Economics ING Economics 17.10.2022 11:41
    China’s 20th Party Congress is the main event in the region in the coming week, followed by China’s GDP report In this article The week ahead China data and 20th Party Congress in focus Trade reports from India and Indonesia Australia’s jobs figures Japan’s inflation to stabilise at 2.7% Bank Indonesia to stay hawkish, but will we see another surprise? Source: Shutterstock The week ahead In the coming week, we get a relatively limited number of reports from the region, although we have a flurry of data from China and the much-anticipated 20th Party Congress will be held on 16 October. There should be a lot of buzz and market talk following the congress meeting. China data and 20th Party Congress in focus The major event in the coming week will be the 20th Party Congress to be held this Sunday. There will be a lot to talk about this event in the market. Meanwhile, China will release its 3Q22 GDP report and activity data for September on Tuesday. We expect improvements in GDP growth from 0.4% year-on-year to 4.4%YoY given that fewer lockdowns were implemented in the third quarter.  Retail sales, industrial production and fixed assets investments should grow slightly faster in September compared to a month ago. However, property investments and home prices should continue to be in a dire situation with buyers still adopting a wait-and-see approach, although we did note more home transactions by the first week of October. We expect policy rates for the Medium-term Lending Facility (MLF) to be released on Monday and the Loan Prime Rate (LPR) on Thursday. We expect both rates to stay the same as the People's Bank of China seems to be injecting funds into policy banks rather than into commercial banks to help local governments address problems associated with uncompleted residential projects. Traditional monetary policy accommodation of interest rate cuts may not the best solution for now. Trade reports from India and Indonesia In India, September trade figures will have benefited from the drop in crude prices that saw brent crude falling below $90/bbl at times in the month. The US$28bn trade deficit for August will probably fall to something closer to $26bn. Meanwhile, Indonesia reports August trade numbers next week. We expect both exports and imports will sustain double-digit gains. Exports will continue to benefit from elevated commodity prices while imports should rise further on improving domestic demand. The overall trade surplus will remain substantial, settling at around $5.5bn for the month.  Australia’s jobs figures Australia releases September labour market data. The August figures were pretty solid apart from a small uptick in the unemployment rate to 3.5%, and firm labour data will make it awkward for the Reserve Bank of Australia, which scaled back the pace of its rate hikes at the October meeting – though this may be even tougher after third-quarter inflation is released a week later on 26 October. Japan’s inflation to stabilise at 2.7% Consumer inflation in Japan is expected to stabilise to 2.7% YoY in September (vs 3.0% in August) and the monthly gain should have slowed mainly due to the decline in global oil prices. Also, we expect the trade deficit to narrow in September with imports growth slowing at a faster pace than exports. Bank Indonesia to stay hawkish, but will we see another surprise? Bank Indonesia meets next week and will likely tighten monetary policy again. Accelerating inflation and depreciation pressure on the Indonesian rupiah will likely convince Governor Perry Warjiyo to hike aggressively and increase policy rates by 50bp. Asia Economic Calendar   Source: Refinitiv, ING TagsAsia week ahead Asia Pacific Asia Markets Asia Economics
    China's Position On The Russo-Ukrainian War Confirmed At The G20 Meeting

    The Japanese Yen (JPY) Is The Only G20 Currency Which Have Been Weaken | China Delays Publication Of GDP Report

    Saxo Bank Saxo Bank 18.10.2022 10:40
    Summary:  Risk sentiment was supported by more U-turns in UK fiscal policy and strong earnings from Bank of America supporting the US banks. Equities rallied and the USD declined, but the Japanese yen failed to ride on the weaker USD and continued to test the authorities’ patience on intervention. Higher NZ CPI boosted bets for RBNZ rate hikes, and the less hawkish RBA meeting minutes brought AUDNZD to fresh lows. EU meetings remain key ahead as the bloc attempts to finalize Russian price caps. What’s happening in markets?   The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) rally after UK-policy U-turn. So far this reporting season earnings are declining The mood was risk-on amid Monday’s rally; with the major indices charging higher with the S&P500 up 2.7%. The breadth of the rally was so strong that at one point over 99% of the companies in the S&P500 were rising, which pushed the index up away from its 200-week moving average (which it fell below last week). Meanwhile the Nasdaq 100 gained 3.5%. The rally came after the UK made $30 billion pounds worth of savings after scrapping tax cuts (see below for more). It was received well by markets and investors looking for short term relief. Bond yields fell, equities rallied and after the GBP lifted 1.6% the US dollar lost strength. But the UK is not out of the lurch with power outages likely later this year. Plus also consider, so far this US earnings season, only 38 of the S&P500 companies have reported results and earnings growth has so far declined on average by 3%. So it’s too soon to gauge if markets can sustain this rally, particularly with the Fed likely to hike rates by 75 bps later this month and next. Strong earnings from bank boosted market sentiment. Bank of America (BAC:xnys), reporting solid Q3 results with net interest income beat and a 50bp sequential improvement on CET1 capital adequacy ratio, surged 6% and was one of the most actively traded stock on the day. U.S. treasury curve (TLT:xnas, IEF:xnas, SHY:xnas) steepened Initially US treasuries traded firmer with yields declining, after taking clues from the nearly 40bps drop in long-dated U.K. gilts following the new U.K. Chancellor Hunt scrapping much of the "mini budget" tax cuts and the support for household energy bills. Some block selling in the long-end treasury curve however took 30-year yields closing 3bps cheaper and 10-year yields little changed at 4.01%. The 2-year to 5-year space finished the session richer, with yields falling around 5bps and 2-year closed at 4.44%. The market has now priced in a 5% terminal Fed fund rate in 2023 and a 100% probability for a 75bps hike in November and over 60% chance for another 75bps hike in December. Australia’s ASX200 (ASXSP200.1) lifts 1.4%; with a focus on Uranium, stocks exposed to the UK and lithium Firstly Lithium stocks are in the spotlight after Pilbara Minerals (PLS) accepted a new sales contract to ship spodumene concentrate for lithium batteries from Mid-may, at $7,100 dmt. PLS shares are up 3.1% with other lithium stocks rising including Core Lithium (CXO) up 3.7% and Sayona Mining (SYA) up 4.7%. Secondly, shares in Uranium are focus today after Germany plans to extend the life of the countries three nuclear power plants till April, as it contends with the energy crisis. The Global Uranium ETF (URA) rose 5.9% on Monday and ASX uranium stocks are following suit like Paladin (PDN) up 2%. For a deep look at the uranium/nuclear sector, covering the stocks to perhaps watch and why read our Quarterly Outlook on the Nuclear sector here. Thirdly, amid the risk-on short term relief in markets from the UK, companies with UK exposure are rallying amid the short-term sentiment shift , including the UK’s 5th biggest bank, Virgin Money (VUK) which is listed on the ASX and trades up 5.3%. Ramsay Health Care (RHC), which is a private hospital/ health care business with presence in the UK trades up almost 2% today. Ramsay's recent full-year showed UK revenue doubled to $1.2 billion. Hong Kong’s Hang Seng (HSIV2) China’s CSI300 (03188:xhkg) Stocks in Hong Kong and mainland China traded lower initially and spent the rest of the day climbing to recover all the losses, with Hang Seng Index and CSI300 finishing marginally higher. General Secretary Xi’s speech last Sunday hailed China’s “Dynamic Zero-Covid” strategy and gave no hint of shifting policy priorities toward economic growth as some investors had hoped for. Among the leading Hang Seng constituent stocks, HSBC (00005:xhkg) gained 1.5% and the Hong Kong Stock Exchange (00388:xhkg), which is reporting Q3 results on Wednesday, climbed 2.3%. Chinese banks gained, with China Merchant Bank rising 2.3% and ICBC (01389) up 1.7%.  Healthcare names gained, Hansoh Pharmaceutical (03692:xhkg) surged 13.2% and Sino Biopharm (01177:xhkg) rose 3.6%. EV stocks were among the laggards, dropping from 1% to 5%. Li Ning (02331:xhkg) tumbled over 13% at one point and finished the trading day 4.3% lower following accusations on mainland social media about the sportswear company’s latest designs resembling WWII Japanese army uniforms.  Japanese yen paying no heed to jawboning efforts The US dollar moved lower on Monday, but that was no respite for the Japanese yen. All other G10 currencies got a boost, with sterling leading the bounce against the USD with the help of dismantling of the fiscal measures by the newest Chancellor of the Exchequer Jeremy Hunt and the slide in UK yields. The only G10 currency that weakened further on Monday was the JPY, which continued to test the intervention limits of the authorities. USDJPY rose to 149.08, printing fresh 42-year highs. Bank of Japan Governor Kuroda will be appearing before the Japanese parliament from 9.50am Tokyo time, after some stern remarks in the morning saying that they “cannot tolerate excessive FX move driven by speculators”. While intervention expectations rose, the yen still did not budge until last check. NZD rose on higher New Zealand CPI boosting RBNZ tightening bets Another surprisingly strong inflation print from New Zealand, with Q3 CPI easing only a notch to 7.2% y/y from 7.3% y/y against consensus expectations of 6.5% y/y and an estimate of 6.4% from the RBNZ at the August meeting. The q/q rate rose to 2.2% from 1.7% in Q2 and way above expectations of 1.5%. This has prompted expectations of more aggressive tightening from the RBNZ with a close to 75bps hike priced in for the Nov 23 meeting vs. ~60bps earlier, and the peak in overnight cash rate at over 5.3% from ~5% previously. NZDUSD rose to 0.5660 with the AUDNZD down to over 1-month lows of 1.1120 with RBA minutes due today as well for the October meeting when the central bank announced a smaller than expected rate hike of 25bps. Crude oil (CLX2 & LCOZ2) Crude oil prices stabilized in early Asian hours on Tuesday after a slight decline yesterday, despite a weaker dollar and an upbeat risk sentiment. WTI futures rose towards $86/barrel while Brent was above $91. Chinese demand concerns however weighed on the commodities complex coming out of the weekend CCP announcements. On the OPEC front, Algeria's Energy Minister echoed familiar rhetoric from the group that the decision to reduce output is a purely technical response to the world economic circumstances.   What to consider? UK need to know: Policy U-Turn provides shorter term risk-on rally, but long-term headwinds remain, UK holds talks to avoid power shutdowns New British chancellor Jeremy Hunt reversed almost all of PM Liz Truss’ mini-budget. Initially Truss’ plans sent markets into a tailspin - whereby the pound hit record lows and the Bank of England was forced to intervene. However, after Hunt virtually scrapped all of the announced tax cuts, and cut back support for household energy bills, saving $32 billion pounds, then risk sentiment improved and the pound gained strength. But, the issue is, firstly; there are still almost $40 billion pounds worth of savings to be made to close the fiscal gap; meaning more government spending cuts will come and possibly tax hikes. This is probably why new UK finance chief, Hunt, declined to rule out a windfall profit tax. Nevertheless, the U-turn was received well by markets for the short term, bond yields fell, equities rallies and the pound sterling (GPBUSD) rose 1.6% against the USD with the US dollar losing strength. And the second reason the UK is not out of the lurch is that the fundamentals haven’t changed; the UK energy crisis is not resolved – yesterday in the UK government officials met major data centers discussing the need to use diesel as backup if the power grid goes down in the coming months. Amazon.com and Microsoft run data centers in the UK. Earlier this month, National Grid also warned some UK customers they could face 3-hour power cuts on cold days. The Bank of England is expected to downgrade its rate hike expectations.    NY Fed manufacturing headline lower on mixed components The NY Fed manufacturing survey for October fell to -9.1, contracting for a third consecutive month and coming in below the expected -4.0 and the prior -1.5. While survey data remains hard to trust to decipher economic trends, given a small sample size and questioning techniques impacting results, it is worth noting that more factories are turning downbeat about future business conditions which fell 10 points to -1.8 and was the second weakest since 2009. Also, the prices paid measure rose for the first time since June, echoing similar results as seen from the University of Michigan survey. Fed speakers ahead today include Bostic and Kashkari and terminal rate expectations remain on watch after they are touching close to 5%. La Nina is underway in Australia; floods decimate some wheat crops In the Australian state of Victoria at the weekend, floods decimated some wheat crops, which has resulted in the price of Wheat futures contracts for March and May 2023 lifting in anticipation that supply issues will worsen. The Australian Federal Emergency Management Minister said parts of Australia face ‘some serious flooding’ with more rain forecast later this week, with 34,000 homes in Victoria potentially expected to be inundated or isolated. The Bureau of Meteorology forecasts the La Lina event to peak in spring that’s underway in the Southern Hemisphere, before turning to neural conditions early next year. La Nina is not only disastrous to lives, homes and businesses, but the extra rainfall usually brings about lot of regrowth when rain eases. The risk is, if El Nino hits Australia in 2023 for instance, bringing diminished rainfall and dryness, then there is a greater risk of grassfires and bushfires. Investors will be watching insurance companies like Insurance Australia Group, QBE. As well as companies that produce wheat, including GrainCorp and Elders on the ASX and General Mills in the US. RBA Meeting Minutes out – AUDUSD climbs of lows, up 1.7% The Aussie dollar rose 1.7% off its low after the USD lost strength when the UK re winded some tax cuts. The AUDUSD will be in focus with the RBA Meeting Minutes released, highlighted why the RBA rose interest rates by just 0.25% this month, moving from a hawkish to dovish stance. The RBA previously highlighted it sees unemployment rising next year, and sees inflation beginning to normalize next year, which in our view, implies the RBA will likely pause with rate hikes after December, after progressively making hikes of 25bps (0.25%). Still the Australian dollar against the US (AUDUSD) remains pressured over the medium term, given the Fed’s expected heavy-pace of hikes, while China’s commodity buying-power is restricted with President Xi maintaining a covid zero policy. As such, the AUD's rally might be questioned unless something fundamentally changes. China delays the release of Q3 GDP and September activity data Chin’s National Bureau of Statistics delays the release of Q3 GDP, September industrial production, retail sales, and fixed asset investment data that were scheduled to come on Tuesday without providing a reason or a new schedule.   For our look ahead at markets this week - Listen/watch our Saxo Spotlight.   For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-18-oct-18102022
    Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

    Chinese Yuan And Japanese Yen (JPY) In Trouble, Gold Price Broke A Record

    Marc Chandler Marc Chandler 20.10.2022 15:50
    October 20, 2022  $USD, Australia, Canada, Currency Movement, Current Account, Japan, Turkey, UK, US Overview: China and Japan continue to struggle to stabilize their currencies, while global interest rates rise. The offshore yuan has fallen to new lows but in late dealings the onshore and offshore yuan have recovered. The dollar also traded above JPY150 for the first time since 1990 and the market knows it is on thin ice as with the threat of official intervention. A risk-off mood permeates. Equity markets have retreated in the Asia Pacific region and Europe. US futures are also trading lower. Benchmark 10-yields are 1-3 bp higher in Europe, and 10-year US Treasury yields reached a new high around 4.17% before steadying. The greenback is mixed. Among the G10 currencies, the Australian and Canadian dollars are firmer, while sterling, the Swiss franc, and Swedish krona are nursing small losses. Emerging market currencies are also mixed. Central Europe is outperforming East Asia. Gold recorded a new low for the month near $1622.50 before catching a bid. Initial resistance is seen near $1640. December WTI extended yesterday’s recovery and reached a new four-day high near $86.30. The nearby cap is seen in front of $88.00. Natural gas is snapping a four-day drop in both the US and Europe’s benchmark. Iron ore tumbled 2.4% to new lows below $90. However, copper is jumping back 1.4% in what could be its first gain in five sessions. December wheat, which has lost 2.3% over the past two sessions is recouping a little more than 1% today.  Asia Pacific The dollar rose above JPY150 for the first time since 1990 and there has been no sign of intervention. Ironically, the weaker yen is one of the factors pushing up Japanese yields, which in turn spurs BOJ purchases, which in turn underscore the monetary divergence that weighs on the yen. In regularly scheduled and unannounced purchases, the BOJ bought about JPY1.3 trillion today (~$8.5 bln). The yen's weakness aggravates the terms-of-trade shock in the first instance. Japan reported a slight narrowing of the September trade deficit to JPY2.09 trillion from JPY2.8 trillion. Export growth accelerated to 29% year-over-year from 22%, while import growth slowed to 45.9% from 49.9%. Tomorrow, Japan reports September CPI. The core rate, which excludes fresh food, is seen rising to 3%, while the measure that excludes both fresh food and energy may tick up to 1.8% from 1.6%. The BOJ meets next week. Its forecasts may change, but policy is a different story. Employment in Australia ground to a near halt in September, gaining less than 1000 jobs. This may overstate the case, a little. The loss of part-time positions more than offset the 13.3k increase in full-time posts. Still, the loss of momentum is clear. The three-month moving average of full-time posts is slightly negative the lowest this year. The other metric held in better. The participation rate was unchanged at 66.6%, and the unemployment was steady at 3.5%. The Reserve Bank of Australia meets on November 1 and is expected to hike the target rate 25 bp to 2.85%. The dollar poked above JPY150 in early European turnover and quickly fell back to about JPY149.70. It just as abruptly snapped back to the JPY149.90 area. The market knows it is tempting official action and is skittish. Indeed, the entire session range was set in a little more than 30 minutes. Without international cooperation, we see BOJ intervention most likely confined to Tokyo hours and that the second operation will not yield the same results as the first. Late September's record intervention immediately knocked the dollar back about 5.5 yen. Follow-through selling initially saw the Australian dollar fall to a three-day low near $0.6230 before bouncing back to new session highs in the European morning near $0.6280. The intraday momentum indicators are getting stretched, suggesting a run to yesterday's highs around $0.6325 may be too much. The dollar traded to CNY7.2480 today, its highest level since late September. It pulled back a little away from the CNY7.25 level and is trading near CNY7.2360 in late turnover. The prime lending rates were left unchanged today. Even without the latest weakness of the yuan, a cut was not expected. The PBOC lifted the dollar's reference rate to CNY7.1188. That puts the upper end of the 2% band a little above CNY7.26. The greenback reached CNH7.2790 against the offshore yuan, a new high. It has pulled back to below the CNH7.2550 area. Europe Out of the frying pan, into the fire. So goes the UK Prime Minister whose honeymoon may be measured in hours. Her tenure is still be debated. It is not about economic policy so much anymore, as Truss has accepted the reversal of her fiscal experiment. She did not win the leadership challenge among the Tory parliamentary members, but their job was to narrow the field to two candidate and let the rank-and-file decide. And chose they did. Now, a new effort by the MPs to force her out short of an election, which polls say the Conservatives are sure to lose. Meanwhile, Home Secretary Braverman was forced to resign after violating cabinet confidentiality. Braverman was a candidate herself party leader but was knocked out early. Her resignation letter was also a biting criticism of Truss. Ironically less than 24 hours earlier, in a rhetorical flourish, Braverman called the Labour Party and the Lib Dems, a "coalition of chaos, it's the Guardian-reading, tofu-eating wokerati."  Truss tried tightening the screws on a vote on fracking, Tory MPS were threatened with expulsion from the party if they voted against the beleaguered government and controversial issue even in some strong Tory districts. The Chief whip, the parliamentary enforcer resigned as did her deputy. And then in a dramatic reversal, it appears Truss persuaded them to retract their resignations to end a dramatic day. The eurozone reported a 26.3 bln euro August current account deficit. Like, Japan, the eurozone has experienced a significant terms-of-trade shock and a marked deterioration of its external balance. Consider that last August, the EMU recorded a 17.1 bln surplus, or that this year it has recorded an average monthly deficit of 9.2 bln euros compared with an average surplus of 28.3 bln euros in the first eight months of last year. The euro initially extended yesterday's losses to about $0.9755 before recovering to almost $0.9800, where options for nearly 2 bln euros expire today. We suspect that they have largely been neutralized, but today's high is about $0.9795. The intraday momentum indicators suggest there may be a little more upside potential, but the $0.9820 area looks like the best that can be hoped for today, barring new developments. Sterling has sulked to almost $1.1170 in the European morning. On the downside, there are options for GBP480 mln at $1.1145 that roll off today. If Truss does step down, we suspect sterling can bounce initially. While we suspect a major low is in place, a move above $1.15 would add credence to this view. More immediately, the $1.1250 area looks to offer the initial cap. Lastly, Turkey's experiment is set to continue. Despite CPI above 84%, the central bank is expected to cut its one-week repo rate by 100 bp (to 11%) for the third consecutive move. The lira is off about 28.5% this year, of which about 5% has been recorded in the past three months. America The Beige Book was unexpectedly dour. However, it did not deter the surge in US interest rates. The anecdotal report prepared for the November 1-2 FOMC meeting gave an overall sense of slowing activity and easing of some price pressures. Businesses were worried about demand. Several districts reported easing of labor market conditions. In broad strokes, here is a scenario, which seems to be gaining credence:  Q3 growth is a bit of catch-up the first half and most of the payback will be from trade. The US economy may nearly stagnate or worse over the next few quarters. Monetary and fiscal brakes are being slammed. Inflation is high but the year-over-year comparison has too long of a memory, as it were. US headline CPI rose at an annualized rate of around 10% in Q1 and Q2. It slowed to 2.0% in Q3. The Fed, as Bullard suggests, may front load more hikes this year and ratify market expectations (that he helped shape), meaning 75 bp moves in November and December. Frontloading takes on new meaning if one is in a hurry to get inflation down, so it is in a better position to act if when the economy warrants. The implied yield of the December 2023 Fed funds futures is about 17 bp below the implied yield of the September 2023 contract.  September housing starts reported yesterday were weaker than expected, slowing after jumping almost 14% in August. Existing home sales are on tap for today and they are expected to have continued to fall. January was the last month-over-month increase. Mortgage demand has cratered as one would expect. Also, the drying up of the refinance market also cuts into a source of income (consumption?) as previously, owners were often tempted to take out equity. Also, weekly initial jobless claims are rising again but the levels are modest. Still, looking ahead, it seems reasonable to assume the labor market conditions are likely to weaken. The October Philadelphia Fed survey may confirm the weak sentiment seen in the Empire State survey last week. The price sub-indices draw attention given the market's sensitivity to inflation. Four Fed officials have scheduled appearances, but only Hacker (around midday ET) may address the economic issues. Canada's CPI was stronger than expected and this sparked a new appreciation for the risks that the Bank of Canada delivers another three-quarter point hike next week. The headline rose slightly, and the market had expected a small decline. The year-over-year rate eased to 6.9% from 7.0%., not quite as much as expected. That said, the pace of inflation stopped cold in Q3. Consider, and CPI rose at an annualized pace of more than 13% in Q1 and almost 12% in Q2. Q3? Minus 0.4%. The average of the core rates was little changed because of the upward revision to the August series. In the swaps market the odds of a 75 bp move surged from almost 25% to 85%. That failed to give the Canadian dollar traction as the risk-off (proxy S&P 500) was the flavor of the day. For the third session, the US dollar has found offers above CAD1.38 that caps the greenback. A close below CAD1.3720, where the 20-day moving average is found, would be a cautionary note for the greenback. This moving average has not been violated on a closing basis for over a month. Without new US dollar strength, the 5-day moving average can fall below the 20-day moving average early next week. It would be the first time in two months. The greenback firmed to a marginal new high for the month yesterday against the Mexican peso near MXN20.1760. With a few exceptions, the MXN20.20 area has capped the dollar since mid-August. For those needing to buy peso, this area may be attractive. Initial support today is seen near MXN20.05-MXN20.10.    Disclaimer
    Saxo Bank Podcast: The Bank Of Japan Meeting And More

    The Depreciation Of The Japanese Yen Will Not Cause Any Changes In The Policy Of The Bank Of Japan

    ING Economics ING Economics 22.10.2022 08:35
    The coming week features several inflation readings, a Bank of Japan meeting, and Korea's third-quarter GDP report In this article Inflation reports out from Australia, Singapore and Japan Korea’s growth to decelerate while sentiment indices point to challenging outlook The BoJ to keep rates unchanged despite JPY weakness Taiwan industrial production likely stable Source: Shutterstock Inflation reports out from Australia, Singapore and Japan Australia is expected to release its 3Q22 CPI inflation data next week.  We don’t think the 6.1% inflation reading in 2Q22 was the peak, and look for the inflation rate to increase to 6.4%YoY, following a 1.0% QoQ increase.  The Reserve Bank of Australia has already stated that it expects inflation to rise further, so this doesn’t necessarily imply any deviation from their recent slower pace of tightening at forthcoming meetings, or for that matter, the outlook for the AUD. Singapore's inflation will be reported on Tuesday and we expect both headline and core inflation to heat up further.  Headline inflation could hit 7.6% while core inflation will likely accelerate to 5.2% which should keep pressure on the Monetary Authority of Singapore (MAS) to stay hawkish in the near term.  In Japan, CPI inflation excluding fresh food is expected to climb to 3% in October as the weak JPY translates to domestic inflation.  Unlike other major economies, Japan’s PMI and labour market report are expected to show continued recovery, aided by the reopening boost and government stimulus packages. Korea’s growth to decelerate while sentiment indices point to challenging outlook We expect 3Q22 GDP in Korea to decelerate to 0.1%QoQ sa (vs 0.7% in 2Q). The trade component should contribute negatively to growth for 3Q, mainly due to high commodity prices, while private consumption likely lost its steam after purchasing power faded.   Meanwhile, the consumer and business sentiment surveys will provide a bleaker outlook for the current and coming quarters. Weakness in asset markets, such as housing and equity, likely hurt consumer sentiment while businesses should be cautious given the slowdown in global demand and the weak KRW. The BoJ to keep rates unchanged despite JPY weakness Next week also features the Bank of Japan policy meeting and we expect them to stand pat despite the recent JPY weakness. Governor Kuroda could however warn that the recent currency movements would have a negative impact on the nation’s economy but we doubt the JPY depreciation will trigger any changes in the BoJ’s policy stance. Taiwan industrial production likely stable Taiwan industrial production growth should be fairly stable at around 3.5%. Further weakness of demand for semiconductors might not have reflected in this data but we might see weaker growth later in the year. Asia Economic Calendar Source: Refinitiv, ING This article is part of Our view on next week’s key events   TagsAsia week ahead Asia Pacific Asia Markets Asia Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Things May Soon Get Better In The Chinese Markets

    Bank of Japan performed another FX intervention. BoJ seems to be determined to protect Japanese yen

    Conotoxia Comments Conotoxia Comments 24.10.2022 13:57
    On Friday, September 21, during the late afternoon hours in Europe and, in turn, the evening hours in Japan, there was a sharp plunge in the USD/JPY exchange rate. Quotations plunged from around 151.50 to 146 yen per dollar. The market was expected to see another intervention by Japanese authorities after the yen had previously weakened to levels last seen 32 years ago. Is the yen sinking in strength? Japanese Finance Minister Shunichi Suzuki said Monday that the government is trying to confront currency speculators as the yen continues to fluctuate widely. The systematic weakening of the currency prompted another Bank of Japan intervention on Friday. Suzuki assured that the ministry is monitoring the currency market, BBN reported. In turn, Japanese Deputy Finance Minister for International Affairs Masato Kanda added that the government "will continue to take appropriate measures against excessive disorderly movements in the market." Source: Conotoxia MT5, USD/JPY, H1 Statements by Japanese authorities Masato Kanda also told reporters that Japan cannot tolerate speculators who significantly alter currency rates and have a negative impact on people's lives and the global economy. Meanwhile, Japanese Prime Minister Fumio Kishida issued a new warning on Saturday against excessive yen movements in the currency market, saying the country will not hesitate to take "appropriate" measures when necessary. In turn, Bank of Japan Governor Haruhiko Kuroda said the central bank must support Japan's economic recovery from the pandemic. The BOJ  would do everything to achieve stable inflation supported by wage growth. The rapid weakening of the yen is becoming a factor in lifting inflation, according to quotes published by Bloomberg. Will the Bank of Japan fight the Fed? It appears that the main factor that may be behind the yen's weakening in recent months is the divergence in the monetary policy pursued by the Fed and the Bank of Japan. The Fed has opted for an unprecedented pace of interest rate hikes, while the Bank of Japan persists with loose monetary policy. As a result, the U.S. dollar is increasing its interest rate in favor of the Japanese yen, and capital seems to be flowing to where it can get more interest. Source: Conotoxia MT5, USD / JPY, MN. Nonetheless, current Japanese actions seem to indicate that the finance ministry  would try to chase away those who gamble on further JPY weakness. If this is indeed the case, it seems  that Japan  believes the Fed is indeed close to moving away from the pace of 75 bp hikes every meeting. With the BOJ poised to maintain ultra-low policy at this week's meeting, the only hope for lasting relief for the yen should come from the other side of the Pacific. If that doesn't happen, however, it seems that the only result Japan might achieve, would be a decline in foreign exchange reserves. Did you know that CFDs allow you to trade on both falling and rising prices?Derivatives allow you to open buy and sell positions, and thus invest when quotes rise as well as fall. At Conotoxia, you can choose from CFDs on more than 100 currency pairs. Wanting to find a CFD on USD/JPY, for example, you just need to follow 4 simple steps: To access Trading Universe - a state-of-the-art hub of financial, information, investment and social products and services through a single Smart account, register here. Click "Platforms" in the "Invest&Forex" section. Choose one of the accounts: demo or live On the MT5 or cTrader platform, search for the CFD currency pair you are looking for and drag it to the chart window. Use the one-click trading option or open a new order with the right mouse button. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Read more reviews and open a demo account at invest.conotoxia.com Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.21% of retail investor accounts lose money when trading CFDs with this CFD provider. Consider whether you understand how CFDs work and whether you can afford the high risk of losing your money. Read the article on Conotoxia.com
    John Hardy to FXMAG: The UK economy faces significant head-winds from supply side limitations

    We Know The Successor Of Liz Truss | Asia's Economy Is Plummeting Into Public Debt

    Kamila Szypuła Kamila Szypuła 25.10.2022 11:12
    UPS reports its positive results. Negative news is pouring in from Asia. And also we met the new UK prime minister. In this article: The next UK prime minister Summary of Q3 Electric-vehicle market Asia’s economic outlook FedEx problems Rishi Sunak to become the next UK prime minister CNBC Now tweets about the new prime minister of UK BREAKING: Rishi Sunak set to be Britain's new prime minister as rival Penny Mordaunt drops out https://t.co/sNXCUoAvtq — CNBC Now (@CNBCnow) October 24, 2022 Rishi Sunak is set to become Britain’s new prime minister, succeeding Liz Truss who resigned Thursday. Liz Truss was the shortest reigning prime minister in the UK, the current situation has surpassed her. After Liz Truss' resignation, there were voices that Boris Johnson would again take over the British government. But as we know, these were only false guesses. Current information that Sunak will take over this position. He will not become prime minister immediately because, according to the ritual, the outgoing prime minister, in this case Truss, must first resign in favor of King Charles. After that, the king will appoint another prime minister, Sunak, in the coming days. The question is whether the new prime minister will cope with the challenges that await him and restore stability to the British economy? UBS results UBS in its tweets shares the results for the third quarter. Particularly noteworthy is the tweet with the statement by CEO Ralph Hamers. Hear from our CEO Ralph Hamers on the progress we made over the third quarter as well as the trends we saw for client activity. pic.twitter.com/OjEAeb5WeV — UBS (@UBS) October 25, 2022 UBS Group AG, as an international investment bank and financial services company, enjoys popularity and high profits. Along with the end of a certain period, in this case of the third quarter, the company summed up its achievements. The situation on the markets is diversified, and the observation of new trends may prove very helpful for the functioning of the instance. In the author's post, you can find out about the situation of UBS, which can affect its prominence and positions in financial services. Toyota and electric-vehicle Reuters Business tweets about electric-vehicle. On @Breakingviews: Toyota is mulling its third electric-vehicle reboot in 13 months. Frequent rejigs can mean bigwigs are flailing for ideas. But its latest overhaul implies boss Akio Toyoda is addressing missteps with more speed, says @AntonyMCurrie https://t.co/ayxtHq1ZAC pic.twitter.com/OuHPhkGTLQ — Reuters Business (@ReutersBiz) October 25, 2022 There is no doubt that electronic vehicles have become something desirable. Many car manufacturing companies try to modernize their products. One of them is Toyota, which is trying to match the giant in the production of electronic cars, Tesla. Some people may take away from trying to look for new ideas, and for some it means growing their business. Public debt in Asia has increased The IMF in its post addresses the topic of economic problems in Asia. Amid Asia’s dimming economic outlook and rising inflation, public debt has risen substantially in Asia over the past 15 years—particularly in the advanced economies and China. https://t.co/gDWrrRU0uD pic.twitter.com/YvJDzyAM7c — IMF (@IMFNews) October 25, 2022 Economies around the world struggle with the problems of rising inflation and its negative impact on the functioning of economies. China as Asia's largest economy is also struggling. Despite yesterday's positive results (Read more : Growth In China's Trade Balance. Significant Declines In Major Sectors Of Europe And Great Britain| FXMAG.COM), there is a bigger problem of public debt. Public debt is growing rapidly, which means that the governments of Asian countries are indebted to power. Despite positive reports, such a situation may have negative consequences for the economy. This may mean that a financial crisis is approaching, and as we know from history, dealing with this problem can be laborious and very expensive. Companies face problems Bloomberg Terminal tweets about the market loses of the FedEx shipping company. FedEx lost $11 billion in market value last month, wiping out two years of stock gains, after it pulled its forecast, feeding into fears of a global demand slowdown.https://t.co/OthLH3tipw — Bloomberg Terminal (@TheTerminal) October 24, 2022 The economic slowdown and rising inflation affect the situation of shipping companies. The prognosis is not very good. FedEx and UPS expect to see dramatic drops in US and global shipments. Which will have a negative impact on the financial result of these companies, and thus may cause a reduction in employment.
    The Bank of Korea Is Likely To Respond With A Rate Cut In The Second Half Of 2023

    Asia: South Korean Q3 GDP rose by 0.3%. ING expects a recession at the beginning of 2023

    ING Economics ING Economics 27.10.2022 10:58
    GDP grew 0.3%QoQ (sa) gain in 3Q22. Consumer spending, which had been boosted following reopening, slowed. In contrast, investment was more resilient. Based on the grim outlook for consumption and exports from recently released data, we maintain our view that the economy will experience a moderate recession early next year Source: shutterstock.com 0.3% Real GDP growth in 3Q22 %QoQ sa As expected Growth supported by domestic demand while net export contribution contracted even further In 3Q22, GDP growth was led by domestic demand, as expected. Household consumption rose 1.9% - a slower pace than the previous quarter (2.9% in 2Q22) mainly due to the increased debt service burden and higher inflation. Investment components were particularly strong. Construction and facility investment rose by 0.4% and 5.0% respectively. Investment in the IT sector expanded despite the recent semiconductor downturn cycle, and transportation equipment investment also increased as mobility restrictions were relaxed around the world and supply bottlenecks in the auto industry eased. Exports rebounded 1.0% in 3Q22 (vs -3.1% in 2Q) on the back of gains in auto and service exports. But, imports rose even faster than exports, rising 5.8% (vs -1.0%) with high commodity prices and increases in capital goods imports. As a result, the net exports contribution to GDP was a drag of 1.8pp more even than the 1.0pp drag in 2Q22.  By industry, manufacturing fell for the second consecutive quarter, while construction and services gained strongly.  3QGDP was led by domestic demand Source: CEIC GDP outlook : 2.6% in 2022, 0.7% in 2023 The latest data show the reopening boost starting to fade, and we expect this trend to accelerate in the current quarter. We think consumer spending will decline in the near term due to debt deleveraging and the debt service burden. Regarding investment, we expect IT equipment investment to continue to rise but other components of investment to weaken. The recent credit market squeeze will likely negatively impact investment due to high funding costs and increased uncertainty, with the construction sector being the hardest hit. Exports are also likely to turn weak again, due to the economic slowdown in major trade partners such as the US, EU, and China and sluggish semiconductor exports. Thus, we maintain our view that the economy will experience a moderate recession early next year.  The Bank of Korea's policy outlook With consumer price inflation back above 5%, the BoK is expected to raise its policy rate by 25bp in November instead of a 50bp hike. By doing so, the BoK's commitment to price stability can continue to be communicated to the market, while the BoK also needs to calm down the market's anxiety about the recent credit market squeeze to some extent. Although there is still a risk of inflation, an aggressive 50bp hike will probably be avoided as prices are expected to stabilize after a temporary rise in October.  The BoK's MPC will meet today. This is a regular meeting and the BoK will discuss policy response to the recent credit market issue. We believe that the BoK will not inject liquidity directly into the market as this would work against their current tightening policy stance. But, the BoK will likely adjust its micro-policy tools. Thus, we expect that options like reactivating Special Purpose Vehicles (SVPS) to purchase corporate bonds and CP and unlimited RP are not going to be delivered at this time. Instead, it is possible that the BoK will expand its purchases of bonds from commercial banks.  Read this article on THINK TagsSouth Korea GDP growth Exports Consumption Bank of Korea Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

    Taiwanese GDP rose 4.1% in Q3 (YoY). ING Economics correct their predictions for 2022 and 2023

    ING Economics ING Economics 28.10.2022 17:28
    Taiwan's economy grew faster at 4.1% year-on-year in the third quarter from 3.05% in the second. But weak global demand for semiconductors has already led to almost no growth in investments, pausing the momentum from strong investment growth in the first half of 2022. We are downgrading Taiwan's GDP forecasts for 2022 Taiwan's economy is being hit by a slump in demand for semiconductors Consumption supported growth in 3Q22 but this could be temporary Taiwan's GDP grew faster at 4.1% year-on-year in the third quarter, from 3.05%YoY in the second. That was mainly a result of strong consumption in the quarter due to fewer Covid restrictions. Consumption contributed 3.84 percentage points to the overall economic growth of 4.1%. This has helped Taiwan avoid recording another quarterly economic contraction.  But this may not last into 4Q22.  Global demand for semiconductor chips has subsided, and that has hit the main industry of Taiwan, from production to sales. This has been reflected in the fact that there was no growth in industrial production in the third quarter. As chips are mainly for export markets, export growth slowed to 1.36%YoY in 3Q from 4.32% in 2Q and 9.06% in 1Q. Weak export prospects led to slow investment growth. As capital formation grew only 0.91%YoY in 3Q after strong growth of 9.42%YoY in 2Q22, we expect the future growth of Taiwan's economy will be slower than previously expected next year if the global market for semiconductors does not recover. Revising GDP forecasts We are revising GDP forecasts downward to 3.2% from 3.4% for 2022, and to 3.1% from 3.4% for 2023. That is mainly a reflection of our US and Europe economic forecasts of a mild recession and my upcoming downward revision of China's GDP forecasts. Slower global economic growth implies weak demand for goods and therefore semiconductors, as these are used in many goods nowadays.  Read this article on THINK TagsTaiwan Semiconductors GDP Forecasts Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Inflation In Indonesia And The Philippines Will Likely Heat Up Further

    ING Economics ING Economics 29.10.2022 08:12
    The Reserve Bank of Australia (RBA) will likely revert to heftier rate hikes, while PMI reports from across the region could indicate differing growth outlooks In this article Regional PMI reports out in the coming days RBA to revert to heftier rate hikes Early returns from Japan’s reopening Korea weighed down by slowing trade activity Retail sales from Singapore and Australia Inflation in the spotlight Other key data releases: India’s budget figures Source: Shutterstock Regional PMI reports out in the coming days China will release PMI data next week and we expect slight gains for both manufacturing and non-manufacturing activity. Given the start of the export season, factories should be busier than during the previous month. Meanwhile, the Golden Week in early October – a seven-day holiday when tourists and shoppers flock to sites and shops – should bring some temporary recovery for retailers and restaurants. For Taiwan, manufacturing activities should continue to be weak due to a fall in demand for semiconductors, laptops and smart devices. Soft demand should keep the manufacturing PMI well below 50. For the same reason, capital outflows from the Taiwan stock market will likely lead to a mild fall in foreign exchange reserves. RBA to revert to heftier rate hikes The coming week also features Australia’s November central bank rate meeting, where after the big upside miss to 3Q22 inflation, we think the bank will have to return to 50bp of tightening after it dropped to just 25bp at the October meeting. Early returns from Japan’s reopening Japan’s activity is expected to continue recovering due to the reopening and revitalisation of the auto industry. Both industrial production and retail sales are expected to grow. Improved economic activity should keep respective PMIs above 50, suggesting positive momentum for the nation’s recovery in the near term. Korea weighed down by slowing trade activity In Korea, activity data should be soft due to slowing trade data, although the projected dip should be partially offset by gains in the automobile sector. This trend should be reflected in September’s industrial production data. Industrial production in September will likely record a contraction for the third consecutive month with persistent inventory stocking. Korea’s services sector should continue to recover but at a slower pace than during the previous months. Meanwhile, investments are expected to remain positive, as suggested in solid equipment imports. On the other hand, exports could record a small gain in October, but the trade deficit will likely still widen. We are now concerned as exports next year will likely turn negative with unfavourable base effects. Retail sales from Singapore and Australia Australian retail sales for September may reflect the high prices of many food items as shown in the recently published inflation numbers for 3Q22. This could bias the month-on-month figures higher, though adjusted for inflation we would expect to see spending growth beginning to slow down. In Singapore, retail sales are expected to slow on a month-on-month basis as fast-rising prices weigh on purchasing power. The return of foreign visitors may provide some support, but overall momentum is clearly slowing.    Inflation in the spotlight Inflation in Indonesia and the Philippines will likely heat up further. Indonesia’s recent price increase for subsidised fuel is expected to push transport costs higher. Meanwhile, Philippine inflation will likely move past 7% after food prices rose sharply due to crop damage from recent typhoons. In Korea, we can expect to get CPI inflation and the October MPC meeting minutes. Headline inflation is expected to accelerate again in October mainly due to the rise in utility rates and the weak Korean won, but October’s number should still be below the July peak of 6.3%. Other key data releases: India’s budget figures India releases deficit figures for September. The numbers have been running a little on the high side on a cumulative basis, so a figure equal to or lower than last year’s number for September (INR 58,842 Crore) would help to put India’s public finances back on track to meeting the 6.4% deficit target for the fiscal year. Asia Economic Calendar   Source: Refinitiv, ING TagsAsia week ahead Asia Pacific Asia Markets Asia Economics     Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more    
    China: PMI positively surprises the market

    Chinese manufacturing PMI decreased by 0.9, hitting 49.2. Non-manufacturing PMI went down as well

    ING Economics ING Economics 31.10.2022 09:53
    China's PMI indices show that the economy was weak in October. Rising Covid cases, further contraction in construction and a possible contraction in export demand means this weakness will likely continue We are worried that lockdowns in China will keep happening Both manufacturing and non-manufacturing indices indicate a weaker Chinese economy in October China's official manufacturing PMI recorded a contraction in activity (49.2) in October, down from the very modest expansion (50.1) indicated in September. The non-manufacturing PMI index also registered a contraction, falling to 48.7 in October, down from 50.6 in September a month ago.  For the manufacturing PMI, almost every sub-index fell from last month's reading. The exception to this was for raw material prices, which means even thinner profit margins for manufacturers. New orders were weaker, hinting at a further fall in activity levels in the coming months. New export orders remained in contraction, but slightly less so than last month. That makes it very hard to be optimistic about either manufacturing or exports for November and December. Read next: Elon Musk Closes Twitter Deal, Apple Reported Record Revenue, ECB May Turn Dovish| FXMAG.COM In terms of the non-manufacturing PMI, the index was still dragged lower by real estate and construction. But adding to the gloom, the retail sector was also weaker, even though the first week of October was the Golden Week holidays. As a result, we believe that retail sales in October could be very soft. All in all, October looks to have been a weak month for the economy, and November looks as if it will be no better than October. Compounding this is the fact that Covid cases are climbing again, and it is possible that we will see further small-scale lockdowns in China. We also expect a contraction in export demand in the coming months reflecting the weakening external environment.  Yuan to weaken further We expect that the CNY will weaken further in the short term given the apparent weakness of the economy.  Together with more Covid cases and expected lockdowns, it becomes even more difficult to be upbeat about the yuan. But the central bank does not want the CNY to weaken too fast. With the recent increase in macro-prudential parameters for cross-border finance, we expect that demand for the yuan should increase when USDCNY gets close to 7.4. It is therefore possible that the yuan will remain range-bound between 7.2 and 7.4.   Read this article on THINK TagsUSDCNY PMI China Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Philippines: inflation soars 7.7% as destructive typhoon makes food price go higher

    ING Economics ING Economics 04.11.2022 12:02
    October inflation blew past expectations to hit 7.7% YoY Price pressures continue to mount in the Philippines as supply chain constraints disrupt food supplies 7.7% YoY October CPI inflation Highest since 2008 Higher than expected Storm damage pushes food prices even higher October headline inflation jumped to 7.7%YoY (from 6.9% in September) as damage caused by a recent typhoon pushed food price inflation even higher (9.4% vs 7.4% previously).  Prices rose 0.9% month-on-month and blew past market expectations for an increase in the inflation rate to only 7.1%.  On top of food prices, inflation was also driven by utility costs due to still expensive imported energy. Furthermore, transport inflation rose at a 12.5% pace, pushed higher by the 9% increase in public transport fares which took effect in October.  Meanwhile, demand-side price pressures were also evident.  Robust demand helped inflation for both restaurants & accommodation services (5.7%) and personal care (3.7%) to move higher. Inflation likely to head higher in coming months Source: Philippine Statistics Authority and Bangko Sentral ng Pilipinas Are we there yet? Not likely Bangko Sentral ng Pilipinas (BSP) recently indicated that we may be close to a peak in inflation, but we expect price pressures to remain potent, especially after the country was hit by another storm last week.  The confluence of supply and demand side pressures should push headline inflation close to 8% by December before drifting slowly lower in the first half of 2023,  as second-round effects are likely to linger.  BSP should remain hawkish even after their recent pre-announced 75bp rate increase.  We expect the central bank to hike again in December, likely matching any move from the Fed to close out the year.     Read this article on THINK TagsPhilippines inflation Bangko Sentral ng Pilipinas Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

    Is China "Reopening"? The Forex Impact

    Jing Ren Jing Ren 04.11.2022 16:19
    China's covid policy hasn't led to a nation-wide lockdown, so it's more of a metaphor to talk about "reopening". However, the economic impact from a shift in the current zero-covid policy could be seen as a parallel to when other countries "reopened" in 2021 (and then were subject to renewed restrictions with the omicron variant). More importantly, the change in policy in China is expected to have global implications. So far, changes haven't been officially confirmed, so here are some things to keep in mind ahead of any possible changes. The latest Overnight, there were unverified twitter reports that the Chief Scientist at China's CDC Zeng Guang had said that economic development would be prioritized over covid prevention. This followed prior speculation about when China would pivot away from zero-Covid policy. Reports circulated earlier in the week that China had formed a commission to revise policy related to coronavirus, but that policy wouldn't change until March. Note that in March is when the new leaders appointed following the last CCP Congress take office. It was also reported yesterday that Chinese officials were modifying how covid restrictions were communicated in order to reduce the impact. Reportedly, officials were privately talking to certain businesses and locations to curb covid spread, instead of making broad public announcements. But they are still rumors… Chinese health authorities are scheduled to hold a press conference on "targeted covid prevention" tomorrow. Many speculate this could be an opportunity to announce either a new policy, or to tweak existing policy in a way that would substantially reduce the economic impact. There had been rumors for a while that China could start relaxing covid measures after the CCP Congress, but that didn't materialize. As of yet, there hasn't been any confirmation that a change in policy is imminent, though that might come as soon as over the weekend. The implications China's economy has been significantly impacted by a combination of the zero covid policies and the near collapse of the housing market (which is also attributed to issues around covid). The mere rumor that restrictions could be lifted in a few months' time sent markets in China shooting higher. The rolling lockdowns created uncertainty around which industries and areas might suddenly be affected, slowing investment. A formal acknowledgement that zero-covid would be replaced with a policy that did not include lockdowns would likely substantially support the Chinese economy - and increase demand for imported goods, particularly from Japan, New Zealand and Australia. The outlook Slowing growth in China is one of the factors contributing to an expected global recession in the coming months. That contributed to lower oil prices, as well as other commodities. But a return of consumer demand could give China similar headaches as other countries: rising inflation and the need for the PBOC to start tightening policy. With the housing market already in trouble, higher interest rates could make the internal economy a little shakier. But increases in productivity could help global supplies. And the stronger yuan could support increased imports of raw materials.
    Conflict Over Taiwan Would Trigger A Huge Global economic Shock

    Inflation In Both China And Taiwan Is Expected To Slow

    ING Economics ING Economics 05.11.2022 08:17
    In the coming week, we'll get trade data from China and Taiwan which should indicate that global trade is slowing In this article China and Taiwan reports could highlight slowing global trade Third-quarter GDP from Indonesia and Philippines India’s industrial production China’s loan data Other important releases: Korea’s employment figures and price data from China and Taiwan Source: Shutterstock China and Taiwan reports could highlight slowing global trade China and Taiwan will release trade data next week. We expect both to report slower export growth with Taiwan possibly even posting a contraction. Import growth should however slow even faster than exports resulting in larger trade surpluses, which would help GDP growth. Third-quarter GDP from Indonesia and Philippines Indonesia and the Philippines report third-quarter GDP figures next week. Indonesia is expected to post a 5.5% year-on-year expansion, helped by strong exports and robust manufacturing activity.  In the Philippines, third-quarter GDP will likely settle at 5.2%YoY, a slowdown from the previous quarter after the boost from the May presidential election fades. Surging inflation likely capped household spending although the recent pickup in bank lending could offset the consumption slowdown.  India’s industrial production India’s September industrial production figure should show some improvement from the -0.8%YoY pace registered in August, as manufacturing PMI indices point to a modest improvement in output from the previous month, which should translate into about a 2%YoY increase. China’s loan data China will release loan data sometime next week. After the unexpectedly strong growth posted in September, overall lending could show a smaller monthly increase. This should still be strong compared to the previous years’ fourth-quarter loan growth as the Chinese government urges banks to support the economy. Other important releases: Korea’s employment figures and price data from China and Taiwan Korea will release the latest job numbers with expectations for the jobless rate to rise with health/social work jobs declining, coupled with potential job cuts stemming from sluggish manufacturing activity. Meanwhile, inflation in both China and Taiwan is expected to slow. The PPI inflation report from China could be a market mover as it could post a contraction, reflecting the weakness of the economy. Asia Economic Calendar Source: Refinitiv, ING TagsAsia week ahead Asia Pacific Asia Markets Asia Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The USD/IDR Pair Is Expected A Further Downside Movement

    Positive signal from Asian economies. Indonesian GDP rose by almost 6% year-on-year in the third quarter

    ING Economics ING Economics 07.11.2022 09:11
    Indonesia’s recovery continues aided by robust exports and retail sales but headwinds loom Source: Stenly Lam 5.7% YoY growth   Higher than expected 3Q GDP up 5.7% Indonesia’s economy grew 5.7% year-on-year which was a shade better than the market consensus of 5.6%. Economic activity was underpinned by robust export performance with Indonesia recording substantial trade surpluses during the period. Also supporting growth for the quarter was still-solid household spending with retail sales up an average of 5.3% for 3Q.  Growth, however, is expected to face challenges as early as 4Q22 as both core and headline inflation accelerate, a development which could undercut domestic consumption. Meanwhile, expectations for a slowdown in global trade could also weigh on Indonesia’s export sector in the coming months.    Growth momentum could be challenged as early as 4Q Source: Badan Pusat Statistik Solid growth report suggests hawkish BI Bank Indonesia (BI) had been one of the more reluctant rate hikers in 2022. BI Governor Perry Warjiyo opted to delay his tightening cycle for as long as inflation allowed him to but the central bank has since hiked rates, with the first increase last July. The better-than-expected GDP report should give BI some space to tighten aggressively, especially with the recent slide in the rupiah.  We are pencilling in a 50bp rate hike by BI at the 17 November meeting.         Read this article on THINK TagsIndonesia GDP Bank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

    In China overall credit growth hit much lower level than a month and a year ago. Mortgage loans amounted to over 33B Chinese yuans

    ING Economics ING Economics 10.11.2022 12:49
    Small loan growth is a direct reflection of weak loan demand and a weak economy Small loan growth indicates a weak economy in the fourth quarter The fourth quarter is usually a quiet time for loans and credits, but this set of data for October is just too soft.  Overall credit growth was only CNY907.9 billion in October, lower than the previous month's CNY3530 billion, and less than CNY1617.6 billion a year ago. Among all credit growth, yuan loan growth was CNY615.2 billion, also lower than the previous month's CNY2470 billion. Outstanding yuan loans grew 11.1% year-on-year, slower than 11% in the previous month and 11.9% during the same month in 2021. This indicates that demand for loans was weak in October. Together with PMI and trade data, we believe that there could be a deeper-than-expected slowdown during the month. The housing market should still be quiet as mortgage loans, which are a big part of household long-term loans, grew only CNY33.2 billion. Government and corporate bonds have been big drivers of credit Yuan loans made up nearly 68% of total new credit in the month of October. Most of the rest were net issuance of corporate and government bonds, which contributed nearly 26% and 31%, respectively, of total new credit.  Local government special bonds will raise funds for the 2023 quota in the fourth quarter of this year. The issuance amount for 2023 is likely to be higher than the issuance amount of around CNY4.15 trillion in 2022. We believe funding raised will be used on finishing uncompleted home projects, buying back land from some property developers, infrastructure projects that have already started, and Covid-19-related spending.   What will be interesting to find out is how much more local government bond quotas are set for 2023. We believe that both central government and local governments will be key supporters of the economy until there is more relaxation in Covid measures. We are still keeping GDP growth at 3.3% for 2022 and USD/CNY at 7.4 by the end of the year. Read this article on THINK TagsLoan growth Housing market China Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Middle Distillates: Strong Market Support Expected

    It seems that Biden-Xi meeting during the G-20 summit in Bali delivered us with more positive news than it was expected at first

    ING Economics ING Economics 15.11.2022 10:56
    Presidents Xi and Biden strike unexpectedly constructive tone at G-20 summit in Bali Source: shutterstock Macro outlook Global Markets: Perhaps the most unexpected development yesterday, was a surprisingly positive meeting between President Xi and President Biden at the G-20 summit in Bali. The two talked about Taiwan, where Biden noted that the US position on Taiwan and the "One China – two systems" stance, had not changed. That was helpful. For his part, President Xi openly spoke out against the use of nuclear weapons by Russia. That was also helpful. The meeting will be followed up by a visit by Secretary of State, Blinken, to visit senior Chinese officials later in the year. This was far more progress than we, or indeed most commentators had expected, and dominates what may otherwise turn out to have been a fairly irrelevant G-20 summit. That said, the feel-good factor that had been driving markets following the softer-than-expected October CPI release in the US evaporated on Monday. Stocks had been trading higher after a slightly weaker open, but tailed off sharply in late trading, leaving the S&P500 and NASDAQ down about a per cent. There had been more optimism in Asian bourses yesterday following the announcement of measures to reduce the impact of zero-Covid and to prop up the property sector. However, the CSI 300 finished only slightly higher on the day, while the Hang Seng Index put in a more solid 1.7% gain. Equity futures point to a turnaround today with US futures markets suggesting a positive open, while Chinese markets may open lower. Currencies haven’t done a lot. EURUSD is at 1.0317, not much changed from this time yesterday, the same goes for the AUD, though both the GBP and JPY have lost some ground. Asian FX had a mixed day yesterday. The KRW and INR both dropped back about half a per cent, while there was better news for the TWD and CNY. US Treasury yields pushed higher again, and really don’t seem to know which way to go. The 2Y yield is 5.7bp higher, while the 10Y is 4.1bp higher at 3.854%. Lael Brainard got in on the act talking about the Fed soon beginning to moderate the pace of tightening, though noting that they still had work to do. At least she didn't say they had "...a ways to go" which despite being ungrammatical is becoming quite a cliché.   G-7 Macro: Second-tier releases dominate the  G-7 Macro calendar today. UK labour market figures, Germany’s ZEW business survey and US PPI indices are not likely to provide much for markets to base directional trades on.   China: at 10.00 SGT/HKT today we have China’s October data dump, including industrial production, retail sales, fixed asset investment, residential property investment and the surveyed jobless rate. On balance, we don’t think the numbers will be particularly uplifting, in spite of the Golden Week holidays, which ought to have provided some support to retail spending.    Japan: 3Q22 GDP fell 0.3%QoQ, weaker than expectations for a 0.3% QoQ increase. This marks a sharp slowdown from the 0.9% QoQ increase registered for 2Q22. Private consumption grew 0.3%QoQ, down from 1.2% in 2Q22. But the biggest drag on growth came from net exports, which subtracted 0.7pp from the total GDP growth figure, while inventories nicked off a further 0.1pp. Private business investment was a bit stronger, rising 1.5%QoQ and contributing 0.2pp to overall growth, and public investment also added a further 0.1pp to overall GDP growth. Today’s weaker data add downside risk to our 2022 and 2023 GDP forecasts of 1.6% and 1.1% respectively. Indonesia:  Trade data for October is due for release today.  We expect another month of strong gains for imports and exports with the trade balance still likely in surplus.  Export growth however has slowed, which should translate to a less sizable trade surplus.  Record high trade surpluses have supported the IDR for most of 2022 but the gradual decline of this buffer suggests that a key support for the currency may be fading going into 2023.  India: Indian inflation came in at 6.77%YoY for October, which was marginally higher than had been forecast by the consensus (6.7%) but still a decent pull back from the September reading of 7.41%. Inflation will remain at about this level in November, before spiking higher again on base effects in January and February before moving lower again. So the RBI’s job isn’t over yet, even if they can probably take a more laid-back approach to rate hikes from here on. What to look out for: China activity data and G-20 Japan GDP and industrial production (15 November) Australia RBA minutes (15 November) China activity data (15 November) Indonesia trade balance (15 November) US empire manufacturing and PPI inflation (15 November) Fed's Williams, Harker Cook and Barr speak (15 November)   Japan core machine orders (16 November) Australia Westpac leading index and wage price index (16 November) US retail sales (16 November) Japan trade balance (17 November) Australia labor data (17 November) Singapore NODX (17 November) Malaysia trade (17 November) Bank Indonesia policy meeting (17 November) Bangko Sentral ng Pilipinas policy meeting (17 November) US housing starts and initial jobless claims (17 November) Japan CPI inflation (18 November) US existing home sales (18 November) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    APAC: Japanese economy contracts by 0.3%, China retail sales plunge

    APAC: Japanese economy contracts by 0.3%, China retail sales plunge

    Alex Kuptsikevich Alex Kuptsikevich 15.11.2022 14:47
    The statistics packages from China and Japan - the largest economies in the Asian region - came out below expectations, highlighting weak domestic demand and production. Japan's economy lost 0.3% in the third quarter while it was expected to grow by the same amount. Meanwhile, real GDP added 1.8% y/y. A jump in imports was responsible for the decrease while private consumption showed a relatively moderate positive contribution. Read next: Nike, the market leader in fashion NFTs, to unveil DOT Swoosh, risk appetite in the market increased, AMZN to layoff 1% of its workforce| FXMAG.COM Industrial production lost 1.9% in September, reversing a sharp turnaround after three months of growth, during which the index increased by 13.4%. A jump in energy prices prevents production from taking full advantage of the weaker yen. China's slowdown will likely constrain Japan's industry by not giving it enough orders. China noted a 0.5% y/y fall in retail sales thanks to 0-covid restrictions. These are gradually easing but remain much more restrained than in other major economies worldwide. Industrial Production growth slowed to 5% y/y last month versus 6.3% in September. Weighing retail sales and manufacturing numbers would be enough of a signal for the government to step up support to the economy. Considering the weak data from Japan and China, their currencies have particularly strengthened this month by 6.5% and 4%, respectively. Currency volatility risks hurting exporters for whom exchange rate stability might be a better option after a slump since the start of the year.
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Asia News: Bank Indonesia (BI) Meets Today To Discuss Policy

    ING Economics ING Economics 17.11.2022 10:37
    Australian employment data bounces back, Singapore NODX flops, and markets are flailing around for direction  In this article Macro outlook What to look out for: Fed speakers and US housing data Source: shutterstock Macro outlook Global Markets: There doesn’t seem to have been much improvement in sentiment following the revelation that the missile that struck Poland yesterday may not have been fired by Russia after all. But it’s not clear to me that this was a major force for market moves anyway, as the EUR largely outperformed Asian FX, which doesn’t tally with the missile narrative. And despite, or perhaps because of a fairly robust set of US retail sales figures for October (1.3%MoM vs 1.0% expected), coupled with some weak industrial production data (-0.1%MoM) and a slowdown in import price inflation (4.2%YoY down from 6.0%), US stocks took a turn for the worse yesterday.  One newswire story put this down to diminished hopes for a Fed pause. This is nonsense. That has not been a strongly held market view for a while. Equity prices opened slightly lower and slowly lost further ground through the session. The S&P500 ended down 0.83% while the NASDAQ dropped 1.54%. Chinese stocks were also weaker again yesterday, the CSI 300 falling 0.82%, while HK’s Hang Seng Index was down 0.47%. US equity futures are indicating a small gain at today’s open, while China’s stock outlook remains negative.  The EURUSD exchange rate has clawed its way back within grasping distance of 1.04 as of writing despite the stock weakness. The AUD, in contrast, has retreated back to 0.6742 from its intraday high of 0.6793 yesterday. Cable has crept slowly higher to 1.1916 ahead of today’s tax and spending announcements. And the JPY is pretty steady on a 24-hour view, though did test the weaker side early yesterday. Asian FX has mostly gone backwards in the last 24 hours. The CNY has pushed up to 7.0982 and pulled other currencies like the KRW with it. US Treasury markets aren’t doing a lot. There was a small increase in 2Y US Treasury yields (+1.7bp), though the back end continued to rally and 10Y yields dropped 8bp to 3.69% - maybe helped by dovish comments from the Fed’s Waller, who remarked that he was open to half point hikes from here on. Though I think the market was already fully on board for this.   G-7 Macro: As mentioned, there was a mixed bag of macro data on Wednesday, some stronger-than-expected retail sales, weak industrial production and improving pipeline price pressures from imported goods. Taken together, these don’t add a great deal to the picture of the US economy or rate expectations, though to the extent that they say anything at all, they tend to support the notion that price pressures are abating - something we wrote about in more detail yesterday, and which is backed up by industry data on falling residential rents. Today’s G-7 data is mainly focused on the US housing market, with building permits and housing starts data for October, both of which are expected to show month-on-month declines. Australia:  October labour market data rebounded after the weak September figures. Total employment rose by 32,200, though that understates the improvement which was entirely due to a 47,100 increase in full-time employment offsetting a 14,900 decline in part-time employment. The participation rate dipped slightly, which helped to nudge the unemployment rate down 0.1pp to 3.4%. We do not believe this data substantially affects the Reserve Bank’s rate policy decisions. We expect them to continue hiking at a 25bp pace, with rates to peak early next year at 3.6%.   Singapore: Non-oil domestic exports (NODX) data for October showed a second month of contraction.  NODX fell by 5.6%YoY and was down by 3.7% month-on-month as signs of the slowdown in global trade become more evident.  Shipments to China (-31%YoY) were the main reason for the slowdown after electronics exports dropped by -9.3%YoY.  We can expect NODX to continue to struggle in the coming months as global trade is expected to be weighed down by probable recessions in Europe and the US.  Indonesia: Bank Indonesia (BI) meets today to discuss policy.  We expect BI to hike by 50bp to combat elevated headline and core inflation.  The relatively sizable rate hike will also be needed to steady the currency which is the worst-performing regional currency for November.      Philippines: Bangko Sentral ng Pilipinas (BSP) will follow through with its previously announced rate hike decision.  BSP Governor Medalla pre-announced his intention to hike the policy rate by 75bp two weeks ago to match the Fed’s own move.  We do not expect any surprises from BSP today with the policy rate set to increase to 5%.  What to look out for: Fed speakers and US housing data Japan trade balance (17 November) Australia labor data (17 November) Singapore NODX (17 November) Malaysia trade (17 November) Bank Indonesia policy meeting (17 November) Bangko Sentral ng Pilipinas policy meeting (17 November) US housing starts and initial jobless claims (17 November) Fed's Waller, Bullard, Bowman, Mester, Jefferson, Kashkari speak (17 November) Japan CPI inflation (18 November) US existing home sales (18 November) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Indonesia: Inflation moderates further in March

    Indonesian rupiah: Bank Indonesia goes for a 50bp rate hike

    ING Economics ING Economics 17.11.2022 13:37
    Bank Indonesia hiked rates aggressively despite softer-than-expected inflation Indonesia's central bank governor Perry Warjiyo 5.25% BI policy rate   As expected BI hikes rates by 50bp Bank Indonesia hiked policy rates by 50bp, a move widely expected by market participants. The 50bp rate increase was dubbed as “pre-emptive” and “front-loaded” by BI Governor Perry Warjiyo as the central bank attempts to cap inflation pressures and shore up the currency.  BI expects growth to remain robust, retaining its 4.5-5.3% year-on-year growth forecast for the year. With growth momentum intact, Governor Warjiyo decided to continue on with aggressive tightening to help maintain a healthy differential with the Fed funds target rate. BI likely keeping hawkish tone amid IDR struggles and core inflation trends Source: Badan Pusat Statistik and Bank Indonesia Core inflation trends and IDR struggles to keep BI hawkish Indonesia’s core inflation has been steadily on the uptick (October at 3.3%) and should likely sustain this trend in the coming months. The price increase for subsidised fuel, recently implemented, will likely feed through to the rest of the CPI inflation basket to keep inflation elevated. Furthermore, the recent struggles of the Indonesian rupiah should keep BI hawkish going into 2023.  We expect BI to hike rates by 50bp at the December policy meeting, matching the likely increase by the Fed at the end of the year.  Read this article on THINK TagsBank Indonesia Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    lower Corporate Supply Expected in H2 2023, Forecasting €85-100bn Total Supply

    The Malaysian Ringgit (MYR) Is Currently Being Sold On Concerns About A Lack Of Stable Government

    ING Economics ING Economics 21.11.2022 09:21
    Malaysia to try to form a coalition government after the General Election results in a hung parliament  In this article Macro outlook: What to look out for: Chicago Fed national activity indicator and South Korea's trade balance Source: shutterstock Macro outlook: Global Markets: Friday did not mark a convincing spell for US equities, and although bourses opened up, they quickly lost ground, before staging a turnaround which left the S&P500 up by less than 0.5%, and the NASDAQ virtually unchanged. Equity futures are similarly lacking in a convincing directional steer today. US Treasury yields were more emphatic, with sizeable increases in yields across the curve, which may in time become the driver for a new down-leg in risk assets. 2Y Treasury yields gained 8.1bp while the 10Y rose 6.3bp to 3.829%. It’s not clear what if anything is driving this latest pick-up in yields. The main quoted Fed speaker over the latest period was Raphael Bostic, whose thoughts of a slower pace of tightening ahead and peak Fed funds rate of 4.75%-5% is hardly game-changing. G-10 currencies are a mixed bag. The EUR lost a little ground to the USD in the face of these higher bond yields and Fed rate hike expectations. EURUSD is now 1.0327, down from about 1.0360 this time Friday. The AUD is only slightly weaker, at 0.6679, while Cable has picked up slightly to 1.1886 though the JPY has weakened back above 140 and is now 140.31. Asian FX rates haven't done a lot. The CNY is a bit stronger against the USD following Friday’s moves which have brought it back down to 7.1198, and that has probably helped pull along the THB for the ride, which is now 35.814. G-7 Macro: It was a quiet end to the week for G-7 Macro, and the existing home sales figures for the US showed further declines, but were roughly in line with expectations, so didn't change the story much.  Today is equally devoid of macro interest, with a quick glance only merited for the Chicago Fed national activity index, which is likely to signal a slightly sub-trend growth reading. China: We expect banks in China to keep the 1Y and 5Y Loan Prime Rates (LPR) unchanged at 3.65% and 4.30%, respectively, given that the PBoC stayed put on the 1Y Medium-term Lending Facility (MLF) rate at 2.75% a week ago. Covid cases have climbed again. This increases the risk of more localised lockdowns even though Covid measures have been eased. This is because quarantine still depends on the number of positive Covid cases. With more relaxed Covid measures it is not surprising to see the number of cases increase. However, this should not trigger a reversal of the policy direction towards further easing of Covid policies in 2023. Taiwan: Export orders should remain in year-on-year contraction as demand for semiconductors reflects softer demand in the US and Europe and uncertainty in China. South Korea: Preliminary (first 20-day) export data has shown exports falling to their weakest since the April 2020 pandemic-induced slump. 20day November exports were 16.7% lower than a year ago, reflecting the weakness of demand in China, Europe, and to some extent the US, as well as the downturn in global semiconductor demand. Imports also fell by 5.5%YoY, which sends a downbeat message about the state of domestic demand, which could yet influence the BoK’s rate-setting intentions. Malaysia: The General Election has not resulted in a clear majority for any party, and today, we will see if talks between former Prime Minister Muhyiddin Yassin’s Perikatan Nasional (PN) Party, which came in second place, and a number of other smaller parties, will be enough to form a coalition government, or whether Anwar Ibrahim’s Pakatan Harapan (PH) coalition, which gained the most seats, can draw in enough support to form a government. Newswires expect a decision later today. The MYR is currently being sold on concerns about a lack of stable government.  What to look out for: Chicago Fed national activity indicator and South Korea's trade balance South Korea advance trade balance (21 November) China loan prime rate (21 November) Thailand GDP (21 November) Taiwan export orders (21 November) South Korea consumer confidence (22 November) Taiwan unemployment (22 November) US Richmond Fed manufacturing index (22 November) Singapore 3Q GDP final and core inflation (23 November) Thailand trade balance (23 November) US durables goods orders, new home sales, University of Michigan sentiment and initial jobless claims (23 November) Japan PMI (24 November) Korea BoK policy meeting (24 November) Japan Tokyo CPI inflation (25 November) Malaysia CPI inflation (25 November) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

    The China’s Central Bank (PBoC) Is Going To Provide Interest-Free Matching Loans To Commercial Bank Lending

    ING Economics ING Economics 22.11.2022 08:49
    China boosts lending to the property sector as rising Covid cases take their toll on the CNY  In this article Macro outlook What to look out for: Fed speakers   Source: shutterstock   Macro outlook Global Markets: After treading water on Friday last week, US stocks resumed their decline on Monday. In terms of catalysts for the down move – possibly Dell’s projections of weak earnings in the current quarter may have played a part. The S&P500 drifted 0.39% lower, while the NASDAQ fell 1.09%. Recent increases in bond yields may also be beginning to take their toll, though Monday saw only a further small rise in the 2Y US Treasury (+1.9bp) and the 10Y yield was virtually unchanged (-0.2bp) at 3.827%. EURUSD has dropped to 1.0241 from about 1.0330 yesterday, which you could put down to a slight increase in benchmark natural gas prices in Europe, though it was also spread widely across the G-10 FX space, so more likely just reflects a swing back behind the USD. The AUD has dropped back to just over 66 cents, Cable is back down to the low 1.18s and the JPY has increased to over 142.  Asian FX has tumbled across the board, led as usual by the region’s high-beta currencies, the THB and KRW. The CNY has moved back up to 7.1653 up from 7.12. Fed comments remained in line with the recent slant of rhetoric, with Mary Daly’s the most notable, talking about being mindful of the lags of policy, the possibility of a slowdown in the pace of tightening, and 5% as a good place to start thinking about peak Fed funds, though with upside risk.    G-7 Macro: Yesterday was slim pickings in terms of G-7 Macro releases. The US Chicago Fed national activity index recorded a figure consistent with slightly sub-trend US growth, though to be fair, the index was weaker in May and June of this year. The OECD Economic Outlook is published today, which will probably get some headlines for their latest, and presumably downgraded growth forecasts. The US releases the November Richmond Fed manufacturing survey. Nothing to get excited about. A good day to update charts and finish off reports.   China: Mainland China’s Central Bank, the PBoC, is going to provide interest-free matching loans to commercial bank lending for the purpose of finishing uncompleted residential property projects. The amount could be around CNY200 billion. The main point is that this is a matching loan for a specific purpose. This is a follow-up policy after PBoC allowed banks to lend to "good quality" property developers recently, and should provide funding for construction activity on uncompleted residential property projects. Another similar policy is that on 8th Nov, the government allowed credit-enhancing tools (standby letter of credit is one of the tools) for privately owned property developers to raise funds in the bond market. The market expects that this policy will help property developers to raise CNY250bn.  The sum of both policies is small relative to the remaining construction of the uncompleted projects. The main purpose of these policies is to stabilize confidence by finishing some key projects. Then credit risk should fall, and the industry could begin to operate without depending on such supportive measures. Nevertheless, we expect that the turnaround of credit risks in the industry will only happen around 2H23 to 1H24.   China: Beijing’s Covid cases have climbed, although the government still labels Chaoyang district, the business centre, a low-risk area. Most Beijing residents have apparently still been staying at home. The central government will be closely monitoring how much pressure the relaxed Covid measures are putting on the healthcare system before responding. The mortality figures are another indicator that the central government is concerned about. We expect that the economic impact of the current situation will still reflect the higher Covid cases even under the new “relaxed” Covid measures. What to look out for: Fed speakers South Korea consumer confidence (22 November) Taiwan unemployment (22 November) US Richmond Fed manufacturing index (22 November) Fed’s Mester, George and Bullard speak (23 November) RBNZ cash rate (23 November) Singapore 3Q GDP final and core inflation (23 November) Thailand trade balance (23 November) US durables goods orders, new home sales, University of Michigan sentiment and initial jobless claims (23 November) Fed meeting minutes (24 November) Japan PMI (24 November) Korea BoK policy meeting (24 November) Japan Tokyo CPI inflation (25 November) Malaysia CPI inflation (25 November) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
    Stocks to keep an eye on in the second half of 2023

    Changes at Disney | The Importance Of The Asia-Pacific Region

    Kamila Szypuła Kamila Szypuła 22.11.2022 12:10
    Changes, successes, research results are everyday life. Information about these topics often appears on twitter. Today we will look at the successes of Charles Schwab Corp and the reorganization at Disney, among others. In this article: Goldman Sach And McLaren Uncertainty about borrowing money Success of Charles Schwab Corp Reorganization at Disney The Responsible Investor Asia 2022 conference It was good season Goldman Sachs in the last tweet, congratulates its partner - McLaren Racing, on a good end of the season. Congratulations to our partners at @McLarenF1 for a strong finish to the season. We're looking forward to more shared success in 2023. See more about our partnership here: https://t.co/x5YzSo39F0 pic.twitter.com/hMyo6w4oxL — Goldman Sachs (@GoldmanSachs) November 21, 2022 Goldman Sachs is an Official Sponsor of the McLaren Formula 1 team. McLaren Racing's ambition is to make a difference in the sport. Goldman Sachs and McLaren Racing will push their shared expertise to the limit and help accelerate change. Such cooperation can have positive results not only financially but also in sport. To borrow or not? UBS tweets about uncertainty about borrowing money. Unsure of whether to borrow right now? You're not alone. Among those interested in borrowing money, half want to borrow now before rates increase further, while half want to wait until rates are lower. #shareUBS — UBS (@UBS) November 21, 2022 Observing the global economic situation, attention is focused on interest rate hikes. This instrument is intended to help central banks bring inflation back to a stable level of 2%. Rising interest rates are a hindrance to banks that live by borrowing. The higher the interest rates, the less willingness to take a loan. The results published by UBS show that consumers either take advantage of the still low level, but also wait for a cut. It is difficult to say what is the best way out, whether to borrow or not? Of course, the decision is largely an individual matter, because each financial situation is different. Schwab Retirement Plan Services No.1 Charles Schwab Corp tweets about its success. A job done so nice, they’ve awarded us twice. We’re happy to announce that the J.D. Power 2022 U.S. Retirement Plan Digital Satisfaction Study ranked Schwab Retirement Plan Services #1—our second year in a row! pic.twitter.com/K1x0rC5ay0 — Charles Schwab Corp (@CharlesSchwab) November 21, 2022 Everyone and everything is assessed. Financial institutions pay special attention to such ratings because they help position themselves in this sector. There is no doubt that not only the financial results are important, but also the satisfaction rating. The J.D. Power Retirement Plan Digital Experience Study provides an objective assessment of retirement plan participant satisfaction with plan provider digital experiences (desktop/mobile web and mobile app). The study sets a benchmark for leading firms vs. their industry peers. And the rating as the best is especially important from the point of view of consumers. Reorganization at Disney CNBC Now tweet about Kareem Daniel. Kareem Daniel, Disney head of media and Chapek's right hand, is out following Iger's return https://t.co/YcpzCNAi1a — CNBC Now (@CNBCnow) November 21, 2022 Disney will be undergoing restructuring in the coming weeks. CEO Bob Iger announced Daniel's departure in a memo to employees. Disney like many companies have started laying off employees, the difference is that Disney is doing it to reorganize. Asia is important Deutsche Bank tweets about statements at the Responsible Investor Asia 2022 conference. “We see Asia Pacific as the key region that will set the pace for growth of ESG globally, with more economic activities happening here” said Alexander von zur Mühlen opening #RIAsia 2022. pic.twitter.com/QICGLDvM4O — Deutsche Bank (@DeutscheBank) November 22, 2022 Alexander von zur Mühlen in his speech emphasized the importance of the Asia-Pacific region in further global development. There is no doubt that this region is particularly important for many industry sectors as well as a high demand market. So the development of this region is as important as the development of America or Europe. Speeches at this conversion may give clues in a particular direction for future action.
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Singapore October Inflation Data And The RBNZ's Decision Will Arrive Today

    ING Economics ING Economics 23.11.2022 08:41
    Korean business sentiment slides further, Singapore 3Q22 GDP revised lower, Taiwan exports likely to contract  In this article Macro outlook What to look out for: Fed minutes and US data dump Source: shutterstock   Macro outlook Global Markets: Despite yet another barrage of Fed comments that fit into the “higher-for-longer” category, equity markets re-found their mojo on Tuesday. Both Esther George and Loretta Mester gave fairly mainstream speeches highlighting the Fed’s commitment to curbing inflation, with George noting that the relatively high level of US household savings meant that the Fed may have to raise rates more than otherwise. That didn’t stop the S&P500 and NASDAQ both gaining 1.36% on the day, though equity futures are suggesting that this might be enough for now, with small losses indicated at the opening. Some small declines in bond yields won’t have hurt risk-market sentiment. 2Y US Treasury yields edged down 1.7bp while the 10Y dropped 7.1bp taking it back down to 3.756%. Nor at all surprisingly given all the above, the USD has lost ground to the G-10 currencies. EURUSD is back above 1.03, the AUD is up to 0.6645, Cable is higher at 1.1884, and the JPY has pulled back to 141.22. Asian FX has mostly followed suit, led by the THB (36.1145) and CNY (back down to 7.1399). Catch-up for some of the laggards is probable this morning. G-7 Macro: Today we get a slew of purchasing manager data from Eurozone countries as well as the US, and also the University of Michigan consumer sentiment survey for November, complete with inflation expectations and then new home sales.  In the early hours of tomorrow morning Asia time, we get the minutes of the November FOMC meeting. Taiwan: Industrial production for October will probably contract on a year-on-year basis. This is due to weak demand for semiconductors, which these days are an early indicator of demand for goods in general. Our estimate is -8.5%YoY, vs the consensus of -2.75%YoY. Export orders have been in contraction for two consecutive months. Industrial production in the coming months should remain in contraction as we expect the US and Europe to slow further, while the Chinese economy still needs time to recover. South Korea: Business sentiment for manufacturers hit a two-year low in December, with the Bank of Korea’s (BoK) survey index falling to 69 (vs 73 for November), while sentiment for services also declined slightly, down by 1pt to 77 (vs 78 for November).  Small/medium-sized companies and exporters have a darker business outlook compared to large companies and domestic demand-focused companies. Recently-released data taken together (weak early November export data, weak consumer and business sentiment and slowing inflation expectations) support our call for only a 25bp hike by the BoK tomorrow and a contraction in GDP this quarter. Singapore:  October inflation data is set for release today.  The market consensus points to core inflation staying flat at 5.3%YoY although the headline number could soften to 7%YoY (from 7.5%) as base effects kick in.  Despite the dip in the year-over-year number, prices may have picked up by 0.2% from the previous month suggesting that price pressures remain persistent.  Elevated core inflation should keep the Monetary Authority of Singapore (MAS) hawkish while the MAS monitors the impact of its recent string of tightening.  Meanwhile, 3Q GDP was revised down to 4.1% from the initial estimate of 4.4%YoY.  The downward revision reflects softer global trade activity and the negative impact of high inflation. Australia: The Preliminary November PMI indices have all weakened. The manufacturing index is down from 52.7 to 51.5, but more importantly, the service sector PMI, which had just drifted below the threshold 50 mark to register 49.8 in October, has fallen further to a weak-looking 47.2. This results in a composite PMI for November of 47.7. It looks as if the Australian economy is finally slowing in response to the Reserve Bank of Australia’s (RBA) tightening.    New Zealand: The Reserve Bank of New Zealand (RBNZ) meeting due at 0900 SGT/HKT is widely expected to deliver a 75bp increase to the cash rate, taking the target rate to 4.25%. CPI inflation is currently 7.2%YoY (3Q22). What to look out for: Fed minutes and US data dump RBNZ cash rate (23 November) Singapore 3Q GDP final and core inflation (23 November) Thailand trade balance (23 November) US durables goods orders, new home sales, University of Michigan sentiment and initial jobless claims (23 November) Fed meeting minutes (24 November) Japan PMI (24 November) Korea BoK policy meeting (24 November) Japan Tokyo CPI inflation (25 November) Malaysia CPI inflation (25 November) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Korea: Consumer inflation moderated more than expected in February

    Asia Market: The Bank Of Korea Has Delivered A 25bp Hike

    ING Economics ING Economics 24.11.2022 08:45
    Markets react positively to Fed minutes - a bit of an overreaction? Covid cases and movement restrictions rise in China, Japan's PMI contracts and Bank of Korea hikes rates 25bp In this article Macro outlook What to look out for: Bank of Korea policy meeting   Source: shutterstock Macro outlook Global markets: The relevant sentence in the minutes of the Fed’s November 1-2 meeting, as far as financial markets need to be concerned is this, “a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate”. Yes, there was lots of talk about how committed everyone was to achieving the 2% target (though none about whether that target was in fact appropriate), and for the hawks, there is this, “…with inflation showing little sign thus far of abating, and with supply and demand imbalances in the economy persisting, their assessment of the ultimate level of the federal funds rate that would be necessary to achieve the Committee’s goals was somewhat higher than they had previously expected”, which nods in the direction of James Bullard’s concerns that rates may have to rise considerably above the market’s peak Fed funds assumption of 5%. However, the balance of opinion seems to have been with the more dovish comments, and US equities staged a modest further rally - the S&P500 rising 0.59% and the NASDAQ rising 0.99%.  Equity futures are also indicating a slight further gain at today’s open. 2Y US Treasury yields dropped back 3.7bp and the 10Y yield declined 6.3bp to 3.693%. All of which left the way open for the USD to retreat considerably. EURUSD is now back to 1.0418 after a day of steady increases and is looking to continue those in early Asian trading. The AUD has risen about a full big figure to 0.6743, Cable has reattained the 1.20 level and is now 1.2072, while the JPY has fallen back below 140 again and is now 139.30. Asian FX was mixed yesterday, with the THB down 0.47% and CNY soft again (7.1605) but today will likely see currency pairs clawing back losses against the USD to keep track with moves in the G-10. A final thought: Are today’s moves excessive? To be honest, they do feel a bit much given the fairly even-handed nature of the Fed minutes -  there wasn’t all that much else going on, so it may be an idea to fade this move today. See also this from James Knightley on how the recent market moves will not be what the Fed wants to see. G-7 Macro: Besides the Fed minutes, yesterday’s releases centred on the November purchasing manager indices, which for Europe at least, remained solidly in contraction territory. The US indices were no better, and do indicate that the US economy is beginning to slow down. University of Michigan consumer sentiment showed a slight improvement, but the 1Y ahead inflation expectations figure dropped to 4.9% from 5.1%. October new home sales were surprisingly perky, rising at a 632,000 annual pace, up from 588,000. It’s Thanksgiving today in the US and so there is no data out of the US. In the rest of the non-Thanksgiving G-7, Germany’s Ifo survey marks the most interesting release. Trading will likely be light heading into the weekend. China: Covid cases continue to rise across much of the country, and mobility restrictions (lockdowns in all but name) are increasing. This is bound to have an impact on the fourth quarter GDP result, and as a result, could impact the outlook for 2023 GDP estimates which could be adversely affected by a year-end dip like this. Contemporaneous indicators for 4QGDP in China are looking quite bad right now. And it is probably with this in mind that the State Council was reported by CCTV yesterday as looking to get the PBoC to implement another RRR cut “in a timely and appropriate manner”. That suggests quite soon – maybe in the next few days. South Korea: The Bank of Korea has met for its policy decision meeting this morning and has delivered a 25bp hike (7-day repo rate now 3.25%) in line with market expectations. Recently released data suggest that the economy is headed for a contraction, while forward-looking price indicators suggest that inflation will slow further in the coming months. Today’s PPI inflation decelerated to 7.3% YoY in October (vs a revised 7.9% in September). The Bank of Korea is also due to release an updated forecast report, with GDP expected to be revised down to around 1.7% (from Aug forecast of 2.1%) and inflation to around 3.3% (from Aug forecast of 3.7%). What to look out for: Bank of Korea policy meeting Japan PMI (24 November) Korea BoK policy meeting (24 November) Japan Tokyo CPI inflation (25 November) Malaysia CPI inflation (25 November) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

    Asia Market: Inflation Reports Will Be The Highlight

    ING Economics ING Economics 24.11.2022 13:29
    Regional PMI readings and inflation reports will be the highlight for the coming week In this article Regional PMIs Inflation from Australia, Indonesia and South Korea Growth numbers from India Other key data releases   Shutterstock   Regional PMIs Both official manufacturing and non-manufacturing PMIs for China should be in deeper contraction in October as the number of Covid cases increased, affecting both factory and retail activities. This should also be reflected in the Caixin manufacturing PMI numbers which could show a bigger contraction, as smaller factories are more adversely affected given the challenging logistical situation.  Meanwhile, PMI indices for both South Korea and Taiwan should edge lower due to stalling demand for semiconductors from the US, Europe and China. Inflation from Australia, Indonesia and South Korea Next week we have Australia's October CPI inflation. Inflation data has typically only been released quarterly so this provides us with much more insight into the evolution of prices and provides much more timely updates than we have been used to. We think the outcome will probably be close to the recent month-on-month rate of increase, which would keep it roughly in line with the same period last year and leave inflation at about 7.3%. That could be interpreted as the peak, so markets may respond positively to that. Inflation in Indonesia will likely pick up further, with core inflation likely accelerating to 3.5% year-on-year while headline inflation should settle at 5.9% YoY.  Elevated price pressures have kept Bank Indonesia busy lately with the central bank recently tightening by 50bp. We expect inflation to inch higher in the coming months which could ensure that BI will stay hawkish going into 2023.  Meanwhile, inflation in Korea is expected to decelerate quite sharply to 5.1% YoY, mainly due to base effects. Fresh food and gasoline prices stabilised during the month while pipeline prices suggest a further deceleration in the coming months. Growth numbers from India India releases 3Q22 GDP data next week. The 2Q figure was buoyed by base effects and came in at 13.51%, which although admittedly very high, was a disappointment, and led us to downgrade our GDP forecasts. We have 6.3% YoY pencilled in for the third quarter, as well as for the full calendar year 2023. Deficit data for October is also due, and will likely show that a modest improvement in India’s debt to GDP in 2022/23 remains on track. Something in the region of INR40,000 crore would be in line with recent deficit trends. Other key data releases In Korea, November exports will likely be disappointing as suggested by preliminary data reports. We expect a contraction of 10.5% YoY in November as semiconductor exports and exports to China remain sluggish. Slowing export activity should translate to industrial production contracting for a fourth straight month. Semiconductor and steel production will likely be a drag, but auto production should rebound. In Japan, the jobless rate may edge up to 2.7% (vs 2.6% in September), but overall labour market conditions remain healthy. However, given the disappointing 3Q GDP report, September industrial production is expected to drop 1.0% MoM, seasonally adjusted, with weak external demand pressuring manufacturing activity. TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The Drop In German Inflation Is Welcome News, But It Is Mean That Can We Say That Inflation Has Peaked?

    German GDP Showed Favorable Results | Switzerland Employment Level Keeps Its Trend

    Kamila Szypuła Kamila Szypuła 25.11.2022 12:03
    The end of the week is quiet due to America's lack of activity due to Thanksgiving. The market's attention will be focused mainly on the Asian and European markets. Today, an important report turns out to be the result of the German GDP. Tokyo CPI At the beginning of today, Japan, and more specifically Tokyo, published its inflation report. In this city, Core CPI increased from 3.4% to 3.6% and it was a higher than expected reading (3.5%). The upward trend of this indicator has been going on since the beginning of May, but since May Core CPI has been above 1.0%. Also CPI increased significantly from 3.5% to 3.8%. The consumer price index only in Tokyo excluding fresh food and energy prices held its previous level of 0.2%. In this city, the rate peaked this year in May (0.4%), and then fell twice. After that, from July to September it held the level of 0.3%. Singapore Industrial Production Singapore Industrial Production MoM increased significantly. Comparing October to September, the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities was 0.9%, which is a good result as another decline was expected. The same index comparing the result from October 22 to October 21 has fallen. The fall was expected. The current reading is -0.8%, it is the first result in a year that was below zero, but it was higher than the expected -0.9%. This means that the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities has decreased significantly, but not as much as expected. Source: investing.com German GDP In Germany, both the quarterly and annual change in gross domestic product turned out to be a positive surprise. GDP Q3 YoY was 1.2%. Unfortunately, it was a decrease in comparison to the previous period, the reading of which was at the level of 1.8%. This time it was expected to score 0.1% lower. A very positive result for the German economy as well as for the euro zone turns out to be the reading of GDP Q3 q/q. The index increased by 0.3% compared to the previous period and reached the level of 0.4%. An increase to 0.3% was expected, but the result higher than expected may raise some optimism. German GDP figures show the country’s economy has grown slightly more in the third quarter than anticipated on the back of consumer spending. Switzerland Employment Level The Employment Level measures the number of people employed during the previous quarter. As the current reading shows, the exemplary trend is successively maintained. Employment increased this time to the level of 5,362M. The previous reading was about 46M than (5,316M). Such results show the good condition of the economy, because employment increases household income, and thus these households are able to spend more, which drives the economy because money remains in constant circulation. ECB’s speeches Markets expect only two speeches at the end of the week, and this time only from the European Central Bank (ECB). The first speeches took place at 9:50 CET. The European Central Bank Supervisory Board Member Kerstin af Jochnick spoke. The second and final speech of the day will take place at 18:00 CET, with Luis de Guindos, Vice-President of the European Central Bank The speeches of the ECB's officials often contain references to possible future monetary policy objectives, assessments and measures. What's more, statements can give strength to the euro (EUR), or set it in the opposite direction. Summary: 0:30 CET Tokyo CPI 0:30 CET CPI Tokyo Ex Food and Energy (MoM) (Nov) 6:00 CET Singapore Industrial Production MoM 8:00 CET German GDP (Q3) 8:30 CET Switzerland Employment Level 9:50 CET ECB's Supervisory Board Member Jochnick Speaks 18:00 CET ECB's De Guindos Speaks Source: https://www.investing.com/economic-calendar/
    Asia Morning Bites - 14.02.2023

    The Asia Forex Market Pack Were Broadly Weaker Vs The USD

    ING Economics ING Economics 29.11.2022 10:27
    Fed speakers dial up hawkishness ahead of Powell on Wednesday  In this article Macro outlook What to look out for: Fed speakers and US jobs report   shutterstock   Macro outlook Global Markets: Fed speakers were turning up the hawkish dial on Monday ahead of Fed Chair Powell’s speech on Wednesday, at which there is a good chance he will dial it up to 11. John Williams told reporters he was raising his expectations for rates. James Bullard, who has already gone on record as saying that rates could go up to 7%, said he thinks markets are underpricing the risks of a more aggressive Fed. Loretta Mester added that the Fed was nowhere near a pause in their rate-hike campaign, and Lael Brainard said that the Fed needed to lean against the risk of inflation expectations becoming unanchored. Coupled with protests in China over the zero-Covid policy and the prospects for this and rising Chinese Covid cases and lockdowns resulting in probable further supply constraints, and it is no wonder US stocks fell by a about 1.5% yesterday. Bond markets, which tend to be a bit more cerebral and a bit less emotive, are not buying into this hawkishness just yet though. 2Y US Treasury yields dropped 1.4bp and the 10Y yield remained roughly unchanged at  3.681%. EURUSD went on a roller coaster ride yesterday, and came close to 1.05, before retreating to 1.0345, a little lower over the whole 24 hour period. It was more of a straight line slide for the AUD, which is now back to 0.6654, and the GBP also dropped precipitously to 1.1964. The JPY followed the EUR’s moves, dropping at one point to 137.50 before rising back to 138.75, though remains a little stronger than a day ago. The Asia FX pack were broadly weaker vs the USD yesterday. The CNY recovered slightly after its very weak start to end at 7.2069. while the KRW gapped up to 1340 from 1325. G-7 Macro:  Preliminary German inflation data for November is due out today, and could show a slight decline from the October harmonized index rate of 11.6%YoY. That said, ECB President, Christine Lagarde, is adopting the same playbook as the Fed right now, saying that she would be surprised if Eurozone inflation had peaked. Her comments were echoed by Governing Council member, Klaas Knot, who said that the risks to inflation were entirely skewed to the upside. Other releases today include 3Q22 Canadian GDP and September US house price data. What to look out for: Fed speakers and US jobs report Japan labour data and retail sales (29 November) Taiwan GDP (29 November) US Conference board consumer confidence (29 November) South Korea industrial production (29 November) Japan industrial production (29 November) Fed’s Williams and Bullard speak (29 November) China PMI manufacturing and non-manufacturing (30 November) Bank of Thailand policy meeting and trade (30 November) India GDP (30 November) US ADP employment and pending home sales (30 November) Fed’s Bowman speaks (30 November) South Korea 3Q GDP and trade (1 December) Regional PMI (1 December) China Caixin PMI (1 December) Indonesia CPI inflation (1 December) US personal spending, initial jobless claims and ISM manufacturing (1 December) Fed’s Cook, Bowman, Logan, Barr and Powell speak (1 December) South Korea CPI inflation (2 December) Fed’s Evans speaks (2 December) US non-farm payrolls (2 December) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
    The Melbourne Institute Inflation Gauge For Australia Rose More Than Expected

    Asia: October CPI Data For Australia Surprised

    ING Economics ING Economics 30.11.2022 08:13
    China stocks bouyed by more thoughtful approach to zero Covid; production data from Korea and Japan disappoint; Australian inflation data surprises on the downside; Powell tonight!  In this article Macro Outlook What to look out for: Fed Speakers and US jobs report   shutterstock Macro Outlook Global markets: Chinese stocks made strong gains yesterday as a scheduled announcement on the recent Zero-Covid measures promised a less draconian approach in the future. Among the various measures noted, one was more pressure on the elderly to get vaccinated, which could be one route out of Zero-Covid, though there is a long way to go yet before this happens. The Hang Seng Index gained 5.24%, and the CSI 300 rose 3.09%. Daily symptomatic case numbers are currently hovering at a little under 4,000, where they have been since recording 4,010 on 23 November. US stocks were less upbeat. Both the NASDAQ and S&P500 made small losses on the day, perhaps taking defensive positions ahead of today’s speech by Fed chair, Jerome Powell, which we expect will be one of the more hawkish speeches to date. US equity futures also look slightly jittery.  US Treasury yields are edging higher too. The 2Y Treasury yield is up 3.5bp over the last 24 hours and there was a bigger 6.3bp rise from the 10Y bond which now yields 3.744%. European bond yields fell yesterday by about 6bp on average, probably helped by some lower inflation numbers. The EURUSD exchange rate pulled back a little further to 1.0323 on the combination of slightly higher risk aversion and yield differential swings. The AUD is actually slightly stronger than this time yesterday at 0.6674, but recent direction has been weaker after a big upswing. Cable performed much the same bi-directional move and is little changed in net terms at 1.1944 from a day ago, and the same goes for USDJPY which is currently trading at 138.75.  Asian currencies had a mixed performance in the last 24 hours. The CNH and CNY have both strengthened following the reassurances given on Zero-Covid policies, and that probably helped drag along the THB and TWD for smaller gains. The MYR held up the bottom of the table, variously blamed by newswires on profit taking and lower crude oil prices.   G-7 Macro: Germany’s inflation rate for November, fell to 10.0% from 10.4% in October (11.3% from 11.6% on a harmonised basis). Though as the linked note here suggests, inflation may not yet have peaked in Germany, so the drop in yields may prove short-lived.  Eurozone November inflation data is released later today and the harmonised inflation rate is due to decline to 11.3% YoY from 11.8%. In the US, the ADP survey provides the first and least unreliable indicator for Friday’s payrolls release. JOLTS job openings and layoffs data adds some nuance to last month’s employment numbers, but don’t actually tell us much new, and are unlikely to be market moving. The same goes for the second release of US 3Q22 GDP data. Industrial Production in October from South Korea and Japan were weaker than expected, reflecting signs of a global demand slowdown. Korea: Industrial production (IP) plunged -3.5% MoM sa in October, lower than the market expectation of -1.0% (vs a revised -1.9% in September).  All industry IP dropped -1.5% MoM sa in October, falling for the fourth consecutive month, and the contraction even intensified in October.  Meanwhile, retail sales (-0.2%) and facility investment (0.0%) outcomes were also sluggish as interest rate hikes and the gloomy outlook for the overall economy weighed on activity. Today’s weak outcomes support our view that GDP in the current quarter will contract, and that the ongoing trucker strike will put more strain on economic activity, at least in the current quarter. In addition, as the effect of the rate hikes to date have begun to have a more full-fledged impact on economic activity along with weak external demand conditions, the Bank of Korea probably only has limited room for further rate hikes. Japan: Industrial production fell -2.6% MoM sa in October (vs -1.7% in September, market consensus: -1.8%), recording a second monthly drop.  After the economy contracted in the third quarter, this weak start to the current quarter signals a cloudy outlook. Australia: Monthly October CPI data for Australia surprised with a much lower rate of inflation than the market had been expecting (Consensus 7.6%, ING f 7.8%). Headline inflation in October dropped back from 7.3% in September to only 6.9%YoY. The core trimmed mean inflation rate also edged slightly lower to 5.3% YoY from 5.4%, and against expectations for further increases. Lower-than-expected food prices were responsible for about 0.1pp of the decline. But the bigger share was attributable to a drop in the prices for holiday travel and accommodation. We don’t believe these lower inflation figures have any substantial ramifications for Reserve Bank (RBA) policy, which we believe will continue to increase at a 25bp per meeting pace into next year. But it does make us more comfortable with our 3.6% cash rate peak call. India: 3Q22 GDP data for India is out later today. We don’t disagree with the consensus 6.2%YoY figure, which is a sharp drop back from the 13.5%YoY base-effect driven 2Q number, with the latest number being a much better reflection of underlying economic growth. We still look for India to grow by about 6.3%YoY for the full calendar year 2022, but may have to adjust this view in the light of any surprises from today’s data.   What to look out for: Fed Speakers and US jobs report US Conference board consumer confidence (29 November) South Korea industrial production (29 November) Japan industrial production (29 November) Fed’s Williams and Bullard speak (29 November) China PMI manufacturing and non-manufacturing (30 November) Bank of Thailand policy meeting and trade (30 November) India GDP (30 November) US ADP employment and pending home sales (30 November) Fed’s Bowman speaks (30 November) South Korea 3Q GDP and trade (1 December) Regional PMI (1 December) China Caixin PMI (1 December) Indonesia CPI inflation (1 December) US personal spending, initial jobless claims and ISM manufacturing (1 December) Fed’s Cook, Bowman, Logan, Barr and Powell speak (1 December) South Korea CPI inflation (2 December) Fed’s Evans speaks (2 December) US non-farm payrolls (2 December) TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

    Next week in Asia: Japan's revised GDP, Singapore retail sales, China and Taiwan trading data

    ING Economics ING Economics 01.12.2022 12:28
    Global trade may be slowing and it's hitting both China and Taiwan’s export sectors Source: Shutterstock Slowing global trade weighing on China and Taiwan Export data for China and Taiwan should show a deeper yearly contraction, which reflects high inflation in the US and Europe. As domestic demand and export demand have been weak, PPI in China continues to shrink year-on-year, with CPI stabilising just slightly above 2%. Singapore retail sales supported by tourist arrivals? Singapore retail sales will be out next week. We had expected a slowdown in retail sales due to elevated inflation, but retail sales managed to hold relatively firm, possibly supported by the influx of foreign visitors. We expect October retail sales to remain in expansion although the pace of growth may slow somewhat as higher prices finally bite.  Read next: Spain: Manufacturing Purchasing Managers' Index hit 45.7, a point more than in October. Spanish economy will contract in the fourth quarter says ING| FXMAG.COM Philippine inflation could hit 8% Meanwhile, Philippine inflation is scheduled for release on 6 December. Headline inflation could hit 8.2%YoY, driven largely by higher food prices resulting from extensive crop damage due to typhoons. Bangko Sentral ng Pilipinas is likely to retain its hawkish bias to close out the year although governor Felipe Medalla has recently hinted that a pause may be in the cards as early as the first quarter of 2023. Other data releases next week Japan’s third-quarter GDP reading will be out next week but we expect no change from its initial forecast. We expect the -0.3% quarter-on-quarter seasonally-adjusted preliminary forecast to hold. Asia Economic Calendar Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    China: PMI positively surprises the market

    Asia Market: The CNY Made Further Gains Yesterday, Japan GDP Contracted

    ING Economics ING Economics 08.12.2022 08:52
    All is fairly quiet on the data front...but bond markets are still rallying...some suggest that this has gone too far... Source: shutterstock Macro and markets outlook - bonds the star of the show Global Markets: US equities registered further small declines yesterday and equity futures are setting us up for further declines today. Chinese stocks have also steadied after their recent return of optimism. Bond markets were far less humdrum. 2Y US treasury yields fell 11bp while 10Y yields fell 11.5bp to 3.417%. There was no substantial market-moving data out yesterday, nor Fed comments to explain this. One possibility is that bonds are simply making room to rise at next week’s FOMC meeting. Peak Fed funds implied rates are only pricing in 4.195% in June. And that seems almost 10bp too low, as we still look for a further 50bp of tightening after next week’s 50bp hike. Some newswire stories today suggest that the recent bond rally has become overbought. Charts lend some support to this suggestion. The EURUSD exchange rate pushed back up above 1.05 yesterday, mainly on the back of the further declines in US bond yields. Other G-10 currencies have also gained against the USD. Otherwise, it was a mixed day for Asian FX. The PHP was the best-performing currency on the day. Seasonal remittances, stock inflows and a reaction to the drop in the October unemployment rate to 4.5% are all vying as the catalyst to explain these outsize moves, which have left the USDPHP rate at 55.47. Manila is off today for a public holiday. The CNY also made further gains yesterday and is now 6.97. But it wasn’t such good news across the board in Asia. The KRW, THB and IDR all lost ground on the day. G-7 Macro: With the exception of the final revision of 3Q22 Japanese GDP, it is a very quiet day for G-7 Macro. Some articles today are highlighting the University of Michigan inflation expectations figure due out tomorrow as being the next big challenge for markets, suggesting that it may stall. I’d be surprised if it had much effect either way. It usually doesn’t.   China: The government has eased Covid measures further, while a Politburo meeting on 6th December pinpointed growth as the main policy initiative going forward. But we are not overly optimistic about either of these announcements leading to a significant uptick in economic growth. Even if there was a decrease in mobility restrictions before the Chinese New Year, many consumers may avoid crowded places. As such, we do not expect a sizeable jump in consumption in 1Q23. Australia: October trade data due at 0830 SGT is forecast to show a slowdown in export and import growth, but deliver a small contraction of the trade surplus to about AUD12bn. This is unlikely to have much impact on the AUD. Japan: The final 3Q22 GDP revision showed a slightly smaller revision than initially. GDP contracted by 0.2%QoQ (-0.3% previously). A slightly smaller drag from net trade (-0.6pp vs -0.7pp) and a small boost from inventories (0.1pp from -0.1pp) seem to have been enough to overcome a weaker consumer spending figure (0.1%YoY down from 0.3%).  What to look out for: Not a lot! Japan: Final revision of 3Q22 GDP data - already released Australia: October Trade data Read this article on THINK TagsEmerging markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    FX Daily: Upbeat China PMIs lift the mood

    Asia Market: Chinese Stocks Were Broadly Unchanged

    ING Economics ING Economics 09.12.2022 08:44
    November CPI inflation report is due from China. Markets tempering earlier China re-opening optimism Source: shutterstock Macro outlook Global Markets: It’s turning out to be a slightly more positive end to the week for US stocks, though nothing to get too excited about. The S&P500 rose 0.75% while the NASDAQ gained 1.13%, but there doesn’t appear to have been any strong catalyst for the moves, which can probably just be put down to re-positioning after several sessions of losses. Chinese stocks were broadly unchanged, as early optimism over the apparent re-opening moves has been tempered by rising Covid cases and scepticism about the ease with which this will be achieved. Equity futures are not indicating any strong conviction for the US open today, and it probably doesn’t help that Treasury yields have begun to head back higher again, as we indicated yesterday was probable as the falls until then looked overdone. 2Y US Treasury yields rose 5.2bp and the 10Y rose 6.5bp, but it still yields only 3.48%. With markets still not fully pricing in a 5.0% peak fed funds rate (4.94% for May 23 contract), there is probably a little further upside once this becomes more certain, for which we may need next week’s FOMC press conference for affirmation. The slight rise in bond yields hasn’t helped the USD much, and EURUSD is up to 1.0556, while the AUD has risen to 0.678, Cable is 1.2234, while the JPY isn’t much changed at 136.59. Asian FX hasn’t done a lot in the last 24 hours with the exception of the THB, which is up 0.76% to 34.833 following a solid rise in tourist arrivals. Other gains were modest (KRW 0.28%, VND 0.2%) and there were also some small losses, (TWD 0.13%, MYR 0.10%). There could be some catch-up with the G-10 today. G-7 Macro: A slight rise in the US weekly continuing jobless claims figures yesterday seems a questionable basis for running with the headline that the “US job market cools” though this is what a well-known financial broadsheet is doing today. The initial claims figures were little changed at 230,000 and bang in line with expectations. Continued claims rose 62,000 to 1,671,000. Today’s G-7 calendar is packed, with PPI inflation data (expected to fall from 8.0% to 7.2% for November), as well as the University of Michigan sentiment and inflation expectations figures, which have been “bigged-up” as potentially market moving, and who knows? If Treasury yields can rise or fall 10bp with seemingly no macro input, I suppose we shouldn’t rule out there being an improbable swing when there is one. China: Loan data could be released any day between today and 15 Dec. We expect more than a doubling of aggregate finance and new yuan loans in November compared to October. This will mainly come from around CNY1.2 trillion in loans to real estate developers near the end of November. There could be more financing from other channels for developers in December. CPI data today should continue to show mild inflation in November while PPI could show a slight yearly contraction from lower commodity prices in general, indicating weak economic activity in November. What to look out for: China inflation plus US producer prices and the Michigan sentiment report China CPI inflation (9 December) US PPI inflation (9 December) US University of Michigan sentiment (9 December) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 14.02.2023

    Asia Market: One More Hike Early Next Year Should Do It For The RBI

    ING Economics ING Economics 12.12.2022 08:49
    India inflation reading out tonight but the highlight for the week will be US inflation and the Fed policy decision later in the week  Source: shutterstock Macro outlook Global Markets: At times, markets simply see what they want to see in the data to justify the direction they intended to go anyway, and Friday’s trading looked a lot like that. US data (on which more below) put in a mixed performance on Friday. On balance, the data still pushed in the direction of moderating inflation, but there were some upside misses (PPI) and some downside (University of Michigan inflation expectations) misses too.  Neither of these has all much relevance for this week’s CPI data, save to confirm that it will probably also show a moderation, though exactly how much, and what split between headline and core rates remain uncertain. Yet markets had been longing to correct, which is exactly what they did. The S&P500 lost 0.74%, rounding off a poor week, while the NASDAQ lost 0.7%. Chinese stocks finished in better form, still buying into the China reopening story. The CSI rose 0.99% on Friday, the Hang Seng rose 2.32%. US equity futures remain a little downbeat about today’s opening prices. US Treasury yields added a little more gloom to the market story, with yields rising, though only by 3.7bp for the 2Y, while the 10Y yield rose 9.6bp taking the yield to 3.578%.  EURUSD remains above 1.05, pulling back from just below the 1.06 level on Friday and settling slightly lower. The AUD is a little stronger at 0.6788, the same as Cable at 1.2246, and the JPY is more or less unchanged at 136.71.  Most Asian FX made small gains on Friday, but there aren’t many clues as to their direction today. For choice, it’s probably looking a bit more negative for Asian FX than positive today. G-7 Macro: As mentioned above, the news flow out of the US on Friday supported the moderating inflation theme. University of Michigan inflation expectations for one year ahead dropped to 4.6%YoY from 4.9%, against expectations for no change, but the PPI index for November showed producer price inflation dropping less than expected at both headline and core levels, and this was probably what markets zoomed in on when selling Treasuries and stocks on Friday. It’s a big week for macro and probably therefore markets this week, with US CPI on Tuesday, and the FOMC Wednesday (3am SGT Thursday), not to mention NFIB and retail sales. UK production and construction data dominate the G-7 calendar today, and while this may have implications for Gilts and sterling, probably won’t do too much to alter the broader market picture. India: November CPI inflation is expected to come in at 6.36%YoY by the Bloomberg consensus, though we think there is a bit of downside risk to that figure (ING f 6.2%YoY). Falling vegetable prices and stable gasoline prices will drive a weak month-on-month increase and help deliver the lower inflation print, which will then be only just above the RBI’s 4%+/-2% target and suggests that they may be getting close to a peak in rates with the policy rate in line with projected inflation at 6.25%YoY.  Probably one more hike early next year should do it for the RBI. What to look out for: Inflation reports and central bank meetings later in the week Japan PPI inflation (12 December) India CPI inflation and industrial production (12 December) Australia Westpac consumer confidence (13 December) Philippines trade balance (13 December) US CPI inflation (13 December) South Korea unemployment rate (14 December) Japan Tankan survey and industrial production (14 December) US MBA mortgage applications and import price index (14 December) FOMC policy meeting (15 December) New Zealand GDP (15 December) Japan trade balance (15 December) Australia labor report (15 December) China industrial production and retail sales (15 December) Indonesia trade balance (15 December) BSP policy meeting (15 December) Taiwan CBC policy meeting (15 December) ECB policy meeting (15 December) US retail sales and initial jobless claims (15 December) Singapore NODX (16 December) Japan Jibun PMI (16 December) Eurozone CPI inflation (16 December) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    India: Reserve Bank hikes and keeps tightening stance

    Asia Market: In India November Inflation Dropped Far More Sharply Than Had Been Expected

    ING Economics ING Economics 13.12.2022 08:48
    Indian inflation comes in below policy rates...the pattern for others? US November inflation later Source: shutterstock Macro outlook Global markets: US stocks snapped their losing spell yesterday with some solid gains. The S&P500 rose 1.43% and the NASDAQ rose 1.26%. But with no macro releases to speak of and no Fed speakers during the blackout period before this week’s FOMC meeting, it is hard to see what drove yesterday’s moves higher. It certainly wasn’t falling bond yields, as US Treasury yields made further, albeit small gains. 2Y and 10Y UST yields both rose about 3bp. The 10Y yield now stands at about 3.61%. EURUSD looks almost unchanged from this time yesterday but has tested both ends of the 1.05 level, sitting at 1.0541 currently. Other G-10 pairs are a mixed bag, with the AUD and JPY looking soft, while GBP mirrored the EUR moves and ended roughly unchanged from a day ago. Most Asian FX sold off against the USD yesterday with the PHP at the bottom of the non-G-10 pile, followed by the KRW. The VND made small gains.  G-7 Macro: Today will be dominated by the US CPI release for November. The consensus expects the headline inflation rate to decline to 7.3% from 7.7%YoY, following a 0.3%MoM increase in the price level. And the core rate of inflation is expected to decline to 6.1%YoY from 6.3%, again on a 0.3%MoM gain in the core price level. The US NFIB survey is also released today, which provides a lot of price and wage-setting intentions for smaller firms, which have a strong track record predicting actual inflation, so well worth a look. Outside the US, Germany’s ZEW survey has registered small improvements recently, though from an extremely low base, and more of the same is anticipated for the latest data. India: November inflation dropped far more sharply than had been expected, with the headline inflation rate dropping to only 5.88%YoY (consensus 6.35%, ING f 6.20%).  The main culprit for the fall was a larger-than-expected fall in food prices, but the housing component was also weaker, as were the transport, and recreation sectors. With inflation now below the RBI’s policy rate (repo rate is 6.25%) there is a strong case to be made for at least easing back on further tightening, and possibly even considering a pause/peak in rates. That would certainly be welcome news for the economy, which registered a 4.0% decline in industrial production in October and could do with a boost. China: Aggregate finance increased CNY1990 bn in November from CNY908 bn a month ago, while new yuan loans rose CNY1210 bn, almost double the amount in October. The data is in line with expectations that loan growth increased in November after a quiet month in October. Over 70% of new yuan loans went to corporates. This should help the corporate sector to keep business running as the government eases Covid measures, and could keep employment stable. Household long-term loans, most of which will be mortgages, increased CNY210 bn in November from CNY33 bn the previous month. Though not comparable to pre-Covid level, this shows some home buyers started to find bargains in the home market. Government bond issuance increased by CNY652 bn, which should continue to increase in the coming months to finance infrastructure investment in 2023. Philippines:  The October trade report should show exports sliding back into contraction after posting a surprise expansion in the previous month.  The electronics subsector should revert to a contraction, dragging down the export sector for the rest of the year.  Meanwhile, imports should sustain their double-digit expansion, resulting in a still sizable trade deficit to keep some depreciation pressure on the PHP.   What to look out for: US inflation Australia Westpac consumer confidence (13 December) Philippines trade balance (13 December) US CPI inflation (13 December) South Korea unemployment rate (14 December) Japan Tankan survey and industrial production (14 December) US MBA mortgage applications and import price index (14 December) FOMC policy meeting (15 December) New Zealand GDP (15 December) Japan trade balance (15 December) Australia labor report (15 December) China industrial production and retail sales (15 December) Indonesia trade balance (15 December) BSP policy meeting (15 December) Taiwan CBC policy meeting (15 December) ECB policy meeting (15 December) US retail sales and initial jobless claims (15 December) Singapore NODX (16 December) Japan Jibun PMI (16 December) Eurozone CPI inflation (16 December) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Riksbank's Potential Rate Hike Amid Economic Challenges: Analysis and Outlook

    Asia Market: In South Korea, The Unemployment Rate Rose Slightly

    ING Economics ING Economics 14.12.2022 08:44
    US inflation report provides support for "pivotists" - Asian FX to bounce today in line with G-10 peers. Source: shutterstock Macro outlook Global Markets: Faster-than-expected falls in November inflation in the US have given risk assets a nice lift, dragged bond yields back down and weakened the dollar. The S&P500 rose 0.73%, a modest rise all things considered, and maybe investors are being a little cautious ahead of the FOMC today. Chair Powell may well try to curb market enthusiasm with some more “…lots of work to do…” type commentary. The NASDAQ rose 1.01%. Chinese stocks made small losses yesterday as the practical consequences of the new re-opening policy are digested. The Hang Seng rose 0.68%. US Treasury yields fell sharply. Yields on the 2Y bond fell 15.7bp to 4.218%, while those on the 10Y bond fell 11bp to 3.501%. This undermined the USD, and EURUSD rose to 1.0627. The AUD has surged to 0.6845. Cable too has risen sharply to 1.2358 and the JPY is down at just over 135.50. Asian FX had a mixed day yesterday but should rally strongly today in line with their G-10 peers. G-7 Macro: Here is James Knightley’s note on the US inflation report and what it means for the FOMC tonight (and further down the track). In a nutshell, rates still need to get to 5%, but it is much harder to see them rising above 5.0%. And the case for rate cuts in 2H23 is building. This will probably not be the message the Fed will want to portray, so there will remain a tension between the actual macro data and the Fed rhetoric which should keep volatility alive. But to be 100% clear, this is NOT a “higher for longer” call, but rather a “higher, then lower” call which will be at odds with the message from the Fed. In terms of the actual numbers, the headline inflation rate in the US fell from 7.7% to 7.1% in November and core inflation fell from 6.3% to 6.0%. With big base year comparisons over the next four months, it would be quite realistic to assume that March inflation released in April next year will be much closer to 5% (maybe even below) than 7%, delivering a neutral or possibly positive real (rate minus actual inflation) policy rate. Today (3 am tomorrow SGT time) is all about the FOMC and an almost certain 50bp of hikes and then the Fed’s decreasingly credible message. We are looming towards ECB and BoE rate hikes of 50bp each tomorrow. South Korea: The unemployment rate rose slightly in November to 2.9% (vs 2.8% in October), matching market expectations. The labour participation rate edged down to 63.9% (vs 64% in October). By industry, manufacturing has now shed jobs for three months in a row, and the pace even picked up in November (-51K Nov, -21K Oct, -16K Sep).  Among services, accommodation/restaurants continued to add jobs (24K) in November since the lift of major mobility restrictions in April. But other major service sectors, such as whole/retail sales (-19K), transportation (-18K), and financial services (-8K) lost jobs. By status of workers, the number of self-employed increased (37K), mainly for single-person self-employed without any employees. Labour conditions remained generally good, but details show that the reopening effect is fading and that manufacturing and construction weakness is growing. We believe today’s labour report will not have a meaningful impact on BoK’s rate decision, but at least it flags that slowing growth is beginning to have a negative impact on employment. Japan: Today’s data were slightly mixed. Core machine orders beat the market expectation, but business surveys were weaker than expected. Core machine orders rebounded 5.4%MoM sa in October (vs -4.6% in Sept) for the first time in three months. Manufacturing orders continued to decline but non-manufacturing orders rebounded. The Tankan survey showed that large companies foresee the business outlook becoming gloomier. The manufacturing outlook index declined from 9 to 6 (in line with the market consensus) while the non-manufacturing outlook remained unchanged at 11 (vs 15 market consensus) What to look out for: Fed policy decision South Korea unemployment rate (14 December) Japan Tankan survey and industrial production (14 December) US MBA mortgage applications and import price index (14 December) FOMC policy meeting (15 December) New Zealand GDP (15 December) Japan trade balance (15 December) Australia labor report (15 December) China industrial production and retail sales (15 December) Indonesia trade balance (15 December) Philippines BSP policy meeting (15 December) Taiwan CBC policy meeting (15 December) ECB policy meeting (15 December) US retail sales and initial jobless claims (15 December) Singapore NODX (16 December) Japan Jibun PMI (16 December) Eurozone CPI inflation (16 December) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Philippines: 4Q GDP Growth Was Impressive, Hit 7.2% YoY

    Asia Market: The Philippine Peso (PHP) Led The Non-G-10 Asia Gains

    ING Economics ING Economics 19.12.2022 08:49
    China's Work Conference spells out sectors to benefit from support in 2023 as G-7 quietens down for Christmas Source: shutterstock Macro Outlook Global Markets: US equities ended last week with a squelch, falling in each of the last three days of trading, though equity futures suggest that we may see some small gains today. The news flow out of the US over the back end of last week painted a fairly sombre picture, with falling retail sales and industrial production, and some very soft purchasing manager index figures. That dragged down 2Y US Treasury yields a little further. The 10Y yield rose slightly on Friday, though remains below 3.50% (3.482%). Friday also saw the USD edge back below 1.06 again, helped no doubt by the weaker sentiment on risk assets. Though considering that the US is now showing a broader slowdown in activity, there is arguably more room for cheer than recent price action suggests, as it means that the pivot story, which is still well priced in by bond markets, does indeed look on track, despite what Fed officials say. Apart from the JPY recovering some of the losses from earlier in the week, Friday was a fairly quiet day for Asian FX. The PHP led the non-G-10 Asia gains, while the bottom of the pack was held up by the KRW and VND. G-7 Macro:  US PMI data fell further into contractionary territory in the December preliminary readings. The manufacturing PMI fell to 46.2 from 47.7, while the services PMI fell to 44.4 from 46.2. Inflation data out of the Eurozone was disappointing. In contrast to the progress in the US, the headline rate of EU inflation rose to 10.1% from 10.0%YoY (Harmonised index rose to 12.6 from 12.5%YoY), while the core rate of inflation remained steady at 5.0%. Apart from Germany’s Ifo survey and UK CBI surveys, there isn’t much out of the G-7 today. China: The Central Economic Work Conference highlighted economic growth through domestic consumption as the top priority in 2023. New-energy cars, elderly services, technology platforms and real estate should benefit from policies to be announced at the Two Sessions in March. Please refer to the snap (China's Central Economic Work Conference outlines support priorities for 2023). What to look out for India Current account balance (19 December) Germany IFO surveys (19 December) China Loan Prime rate 1Y/5Y (20 December) Taiwan Export orders (20 December) EU Consumer confidence (21 December) Bank of Japan meeting (21 December) South Korea 20 Days exports and imports (21 December) US Mortgage applications and wholesale inventories (21 December)      Bank Indonesia meeting (22 December) Taiwan Unemployment rate (22 December) US Initial jobless claims and 3Q GDP Final (22 December) Japan CPI inflation (23 December) Taiwan Industrial output (23 December) Singapore CPI inflation (23 December) US Durable goods orders, personal Income, Core PCE price index, and new home sales (23 December) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    Asia Market: Optimistic Headlines From Regional Leaders China And Japan

    TeleTrade Comments TeleTrade Comments 22.12.2022 09:28
    Asia-Pacific markets pare BOJ-linked losses despite mixed news from China, Japan. Pullback in Treasury bond yields, hopes of more stimulus add strength to the positive mood. Hong Kong braces for best run-up in two weeks as China unveiled pro-growth policies. RBI’s rejection to an abrupt pause to the rate hike trajectory weighs on Indian shares. Asian shares grind higher, mostly positive, as traders cheer softer Treasury yields and upbeat headlines from the regional leaders China and Japan. In doing so, the equity traders also benefit from a lack of major data/events while ignoring the Covid-linked market fears. While portraying the mood, MSCI’s Index of Asia-Pacific shares outside Japan extends the previous day’s rebound, up near 1.0% intraday, whereas Japan’s Nikkei 225 adds half a percent to 26,505 ahead of Thursday’s European session. Japanese government revises growth forecasts for the fiscal year 2023. “Japan's real gross domestic product (GDP) is expected to expand 1.5% in the fiscal year beginning in April 2023, the government said in its new semi-annual projection, up from 1.1% in the previous forecast made in July,” mentioned Reuters. On the same line were comments from Japanese Prime Minister (PM) Fumio Kishida who pushed local industries for 100 trillion Japanese Yen investment as soon as possible. On the other hand, policymakers in China brace for pro-growth steps as hospitals in Shanghai eye more virus cases. On the same line could be the People’s Bank of China’s (PBOC) pledge to help overcome a slump in the local property market. With this in mind, Hong Kong’s Hang Seng rises 2.55% intraday to lead the region’s gainers while India’s BSE Sensex drops 0.40% on a day to buck the trend. Stocks in Australia ignore fears of a slowdown in spending, as conveyed by local banks, whereas those from New Zealand cheer optimism in Beijing to print daily gains. On a broader front, the S&P 500 Futures rise 0.30% intraday to 3,916 whereas the US 10-year Treasury yields remain depressed around 3.65%, extending the previous day’s pullback from the monthly high. Given the holiday mood, the markets may witness lackluster moves but final prints of the US Gross Domestic Product (GDP) and Core Personal Consumption Expenditure (PCE) details for the third quarter (Q3) could entertain traders ahead of Friday’s US Core PCE Price Index for November, also known as the Fed’s preferred inflation gauge. That said, the US GDP is expected to confirm 2.9% Annualized growth in Q3 while the Core PCE is anticipated to also meet the initial forecasts of 4.6% QoQ during the stated period.
    Canada's Inflation Expected to Ease in May, Impacting BoC's Rate Decision

    Mitsubishi Motors and Nissan Motor decreased by 2.5% and 2% respectively

    InstaForex Analysis InstaForex Analysis 23.12.2022 19:24
      Major Asian indices posted losses of up to 1.7% after yesterday's uptrend. The only indexes which closed in positive territory were the Shanghai Composite and Shenzhen Composite, which edged up by 0.01% and 0.07%, respectively. Other indices decreased: the Hang Seng Index fell by 0.61%, the S&P/ASX 200 dropped by 0.77%, and the Nikkei 225 slid down by 0.96%. The KOSPI was the worst performing index, shedding 1.7%. As usual, Asian markets followed US indices, which had declined the day before. The downtrend was triggered by the latest US GDP data for the last quarter. Although GDP increased by 3.2% and exceeded the preliminary estimates of 2.6% and 2.9%, market participants were anxious about the harsh monetary policy measures taken by the Federal Reserve. A stronger economy could lead the Fed to raise its key interest rate even higher. This, in turn, may result in the economic downturn that all investors fear. Meanwhile, Japanese consumer prices rose by 3.8% last month from the same period in 2021 hitting its highest level in 30 years. In October, inflation stood at 3.7%. Core CPI, which excluded food, climbed by 3.7% in November from 3.6% in September, reaching the highest level in four decades. The index exceeded the central regulator's 2% target for the eighth month in a row. Read next: Poor Stock Market Performance Meant That For Many Investors The Dollar Was A Safe Currency This Year| FXMAG.COM Shares of Japan's biggest companies plunged, with Advantest, Corp. down by 4.5%, Tokyo Electron, Ltd. dropping by 3.8% and Sapporo Holdings, Ltd. declining by 3.4%. Mitsubishi Motors and Nissan Motor posted slightly smaller losses of 2.5% and 2%, respectively, while Toyota Motor and Mazda Motor declined by 1.3% and 1.1%, respectively. At the same time other Japanese stocks increased: shares of Kansai Electric Power rose by 5.7%, Tokyo Electric Power gained 4.2%, Mitsubishi UFJ Financial Group and Chiba Bank added 2.8% and 1.8% respectively. On the Hang Seng Index, Alibaba Health Information Technology fell by 5.1%, BYD and Geely lost 4.5% and 3.3% respectively. Netease dropped 3%, while Xiaomi and JD.com lost 2.5% and 2.3% respectively. The KOSPI was dragged down by falling stocks of major companies, with Samsung Electronics down by 1.9% and Hyundai Motor retreating by 0.6%. The largest Australian companies also posted losses. GUD Holdings dropped by 5.6%, Star Entertainment Group slid down by 4.8%, Xero and Seek lost 1.9% and 1.7%, respectively. Computershare and BHP dropped by 0.7% and 0.2%, respectively. Relevance up to 13:00 2022-12-24 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/330680
    South Korean exports shrank, but annual print shows a 6.1% gain in 2022

    South Korean exports shrank, but annual print shows a 6.1% gain in 2022

    ING Economics ING Economics 02.01.2023 21:54
    South Korea recorded its largest trade deficit in 2022, mainly due to high energy prices. Going forward, weak global and domestic demand are likely to continue to hurt the nation's trade, which will weigh on first half 2023 GDP Source: shutterstock.com -9.5% Exports % YoY Higher than expected Exports fell for three consecutive months in December Exports, which had been relatively solid until the first half of last year, began to show a sharp slowdown in the second half. Export growth fell -9.5% year-on-year in December for the third consecutive month, yet the annual export growth recorded a 6.1% gain in 2022.  By export item, vehicles (28.3%) and batteries (29.7%) gained as the global supply bottleneck in the auto industry gradually improved. We think auto exports are likely to weaken over the next months as auto demand is expected to deteriorate under the high interest environment and some negative impacts from the IRA act. Vessels exports (76.1%), with high monthly volatility, also rose sharply and are expected to continue to rise throughout 2023 as the pre-ordered vessels in recent years will be gradually delivered. Meanwhile, the single largest export item, semiconductors (-29.1%) declined for five months in a row as memory chip prices fell significantly and are expected to stay weak over the next couple of quarters.  By export destination, exports to China (-27.0%) and ASEAN all dropped while exports to the US, EU, and Middle East continued to rise. Exports to China are likely to rebound later in the year as the Covid situation gets normalised. But, in the coming months, exports to China will remain sluggish amid China's Corona situation as well as weak global demand conditions.    Meanwhile, imports fell -2.4% in December, for the first time since 2020 November.  Energy imports continued to rise due to high prices but imports of other commodities and intermediate goods declined. Since about 40% of imports are for re-export, sluggish Korean imports indicate that global demand must have softened.  We expect exports to recover only by the second half of 2023; thus annual export growth in 2023 should decrease by about -7% YoY.   Korea's trade condition deteriorated further in December Source: CEIC Read this article on THINK TagsSouth Korea Korean trade Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

    Asia Market: Many Chinese People Have Chosen To Avoid Crowded Places, Therefore, Overall Retail Sales Should Be Weaker

    ING Economics ING Economics 05.01.2023 08:29
    "Santa rally" despite hawkish FOMC minutes and weak US ISM manufacturing report. ADP jobs numbers are out today ahead of the US non-farm payroll report on Friday. Caixin services sector PMI and Philippine inflation are also due... Source: shutterstock Macro outlook Global Markets: It’s being referred to as a “Santa rally”, though if so, Santa clearly thinks the market players were not especially good boys and girls in 2022 as the S&P500 rose only 0.75% while the NASDAQ gained only 0.69% in what was a very choppy session. The FOMC minutes (see more below) were probably one of the negative factors working on sentiment, though the “higher for longer” message they portrayed didn’t carry much credibility with markets, and the 2Y US Treasury yield dropped almost 2bp, while the 10Y yield fell 5.6bp to 3.68%. Better risk sentiment helped the EURUSD back above 1.06, though only just, and it was a really mixed session for the G-10 currencies. The JPY lost quite a lot of ground in late trading, getting up to 132.31, while the AUD pushed conclusively back above 0.68, maybe helped by indications that China would start to reimport Australian coal after a 2-year ban. Cable also hauled itself back above 1.20.  Apart from the THB, which continues to soar on China re-opening expectations, it was a fairly subdued day for most Asian FX pairs, though most made small gains. The CNY is now at 6.8973. G-7 Macro: Two things stand out from yesterday’s calendar, the FOMC minutes, and the manufacturing ISM index. First, the minutes, stated that no one at the FOMC “anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023", which is in contrast to our house view that they will indeed begin to ease before the end of the year. However, remember when the Fed told us that rates would not rise until at least 2024? You have to take these things with a very large pinch of salt. Moreover, many participants also were concerned that tightening “…could end up being more restrictive than is necessary to bring inflation down to 2%", suggesting that this “no cuts in 2023” view may be more for cosmetic purposes than a decision that is already carved in stone.  The second item, the manufacturing ISM, is covered in detail in this note here by James Knightley. Here, a second consecutive month of contraction, weak new orders and a tumbling prices paid index all suggest that the economy is slowing in a way that could well see the Fed easing later this year, bearing in mind their dual mandate. All we really need to see is some softness in the labour data and the arguments for this should really begin to stack up. But JK also notes that, though we may soon start to see the labour market soften, at the moment, firms are still hiring, and the consensus expectation for 200,000 jobs at tomorrow’s payrolls release looks about right. In Europe, the French CPI data for December echoed the previous day’s German numbers, showing a bigger-than-expected decline in inflation, which for December stood at 5.9%YoY, down from 6.2% (6.7% on a harmonized basis). Today’s highlights include the US ADP employment survey, and the service sector ISM – the last clues to tomorrow’s payrolls lottery.   China: The Caixin service sector PMI should remain below 50 in December and could even fall slightly from November’s 46.7 to 46.0. Extensive easing of Covid measures and surging Covid cases has resulted in anxiety and many residents have chosen to avoid crowded places. As such, retail sales in general should be weaker in December compared to the prior month. This should hit SMEs in the service sector. Some recovery should be seen during the Chinese New Year, starting from 22nd January. After the long holiday, there could be even more daily Covid cases, and then another quiet month for retail. The road to recovery may not be smooth for retailers. Philippines: December inflation is scheduled for release today.  Market consensus for inflation is at 8.2%YoY, an acceleration from the 8.0%YoY in the previous month.  Mounting price pressures, notably across the service sector, suggest that inflation is now more broad-based as pricey fuel costs feed through the rest of the CPI basket.  We do however expect the December reading to be the peak for this current episode and we could see inflation back below 8% as early as 1Q 2023.  The PHP is likely to gain support on expectations for sustained rate hikes by BSP until inflation heads convincingly lower.    What to look out for: US jobs reports Philippines CPI inflation (5 January) Thailand CPI inflation (5 January) China Caixin PMI services (5 January) Singapore retail sales (5 January) US ADP, trade balance and initial jobless claims (5 January) Taiwan CPI inflation (6 January) US non-farm payrolls, ISM services, durable goods and factory orders (6 January) Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Korea: Consumer inflation moderated more than expected in February

    Asia Week Ahead: The Bank Of Korea Is Expected To Use The Rate Hike Card More Carefully

    ING Economics ING Economics 05.01.2023 10:35
    Next week’s data calendar features China's growth numbers, inflation readings from Australia and India, plus a key central bank meeting Source: Shutterstock Inflation finally on the downtrend? The new monthly Australian inflation series should show a further small decline in the inflation rate to 6.8% year-on-year, down from October’s 6.9% rate – still too high for the Reserve Bank of Australia to stop tightening, but moving in the right direction. And in India, further falls in food prices and stable gasoline should bring the price level down by 0.1/0.2% month-on-month, although similar falls last year mean that the inflation rate could hold up at around 5.9%YoY for a second month – still, within the Reserve Bank of India’s target range and indicating that we may be closing in on peak rates.   China activity and loan data due in the coming days China will announce loan data between 9 and 15 January and activity data and GDP data between 10 and 27 January. Loan growth should have slowed in the last month of 2022 even after the People's Bank of China cut the required reserve ratio (RRR) to absorb liquidity. The impact of the RRR cut in December should be reflected in loan growth data for January and support economic activity post-reopening. China also reports activity data and we expect retail sales to face a deeper contraction on a yearly basis. Meanwhile, industrial production could turn from positive growth to mild contraction in December. This suggests that growth was supported mainly by fixed-asset investments for the period. As a result, GDP growth for the fourth quarter of 2022 should fall into a slight year-on-year contraction. BoK could surprise with a pause Bank of Korea (BoK) will meet next Friday. The market expects a 25bp hike, but we maintain our minority view that the BoK will likely stand pat this time. Since the last meeting, both inflation and inflation expectations decelerated quite meaningfully while the Korean won stabilised under the 1300 level despite a widening yield gap between the US and Korea. The BoK is expected to use the rate hike card more carefully as there is little room left to raise interest rates in this cycle given sluggish exports and economic activity. However, given the recent rise in gasoline and power prices, upside risks remain high and thus the BoK should retain a hawkish tilt despite the pause. Philippines exports likely to reverse recent surprise gain Exports are expected to revert to contraction following a surprise jump in the previous month. Electronics form the bulk of outbound shipments from the Philippines and given slowing global demand we could see the overall exports sector fall back into the red. Imports on the other hand should continue to expand, resulting in the trade deficit widening to roughly $4.4bn.  Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The Bank of Korea Is Likely To Respond With A Rate Cut In The Second Half Of 2023

    Next Week Bank Of Korea Will Announce Its Monetary Policy Decision, Australian And Indian CPI Report Ahead

    ING Economics ING Economics 08.01.2023 13:42
    Next week’s data calendar features China's growth numbers, inflation readings from Australia and India, plus a key central bank meeting In this article Inflation finally on the downtrend? China activity and loan data due in the coming days BoK could surprise with a pause Philippines exports likely to reverse recent surprise gain   Shutterstock    Inflation finally on the downtrend? The new monthly Australian inflation series should show a further small decline in the inflation rate to 6.8% year-on-year, down from October’s 6.9% rate – still too high for the Reserve Bank of Australia to stop tightening, but moving in the right direction. And in India, further falls in food prices and stable gasoline should bring the price level down by 0.1/0.2% month-on-month, although similar falls last year mean that the inflation rate could hold up at around 5.9%YoY for a second month – still, within the Reserve Bank of India’s target range and indicating that we may be closing in on peak rates.   China activity and loan data due in the coming days China will announce loan data between 9 and 15 January and activity data and GDP data between 10 and 27 January. Loan growth should have slowed in the last month of 2022 even after the People's Bank of China cut the required reserve ratio (RRR) to absorb liquidity. The impact of the RRR cut in December should be reflected in loan growth data for January and support economic activity post-reopening. China also reports activity data and we expect retail sales to face a deeper contraction on a yearly basis. Meanwhile, industrial production could turn from positive growth to mild contraction in December. This suggests that growth was supported mainly by fixed-asset investments for the period. As a result, GDP growth for the fourth quarter of 2022 should fall into a slight year-on-year contraction. BoK could surprise with a pause Bank of Korea (BoK) will meet next Friday. The market expects a 25bp hike, but we maintain our minority view that the BoK will likely stand pat this time. Since the last meeting, both inflation and inflation expectations decelerated quite meaningfully while the Korean won stabilised under the 1300 level despite a widening yield gap between the US and Korea. The BoK is expected to use the rate hike card more carefully as there is little room left to raise interest rates in this cycle given sluggish exports and economic activity. However, given the recent rise in gasoline and power prices, upside risks remain high and thus the BoK should retain a hawkish tilt despite the pause. Philippines exports likely to reverse recent surprise gain Exports are expected to revert to contraction following a surprise jump in the previous month. Electronics form the bulk of outbound shipments from the Philippines and given slowing global demand we could see the overall exports sector fall back into the red. Imports on the other hand should continue to expand, resulting in the trade deficit widening to roughly $4.4bn.  Key events in Asia next week Refinitiv, ING TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

    Asia Market: Japan CPI Hit 4.0% YoY For The First Time Since 1982, In China The Reopening Has Resulted In A Greater Increase In Arrivals Than Departures

    ING Economics ING Economics 10.01.2023 08:30
    Big rally in Asian FX yesterday, but today could see some profit taking  Source: shutterstock Macro outlook Global Markets: Monday stands for “mainly mediocre”. US stocks opened up but after rising in early trading, lost momentum and slid towards the close. This left the S&P500 roughly unchanged on the day, though the NASDAQ hung on to some of its gains and finished up by 0.63%. After tumbling sharply on Friday following the payrolls report, US Treasury yields only declined slightly more on Monday. 10Y Treasury yields fell 2.6bp to yield 3.53%, while 2Y yields dropped by 4bp. Two Fed officials yesterday hinted that they saw rates being raised above 5%. Raphael Bostic saw rates rising to 5-5.25%, while Mary Daly gave a vaguer “somewhere above 5%” indication. Both suggested that rates could start to go up in 25bp increments from here. Fed funds futures markets have reverted to not pricing in even 5% for peak Fed funds. The current implied peak comes in June this year at 4.93%. There were further increases in the EURUSD yesterday, which has now risen to 1.0733. This was mirrored in the AUD, which is back above 69 cents, and at its highest level since September last year.  Cable is also up at 1.2185 and the JPY is steady at 131.70. Asian FX had a great day yesterday. The KRW gained 2%, leading a pack that saw gains across the board. The THB, PHP, CNY, and SGD all gained between 1.69% (THB) and 0.7% (SGD). Today will likely see much more muted gains and perhaps some profit-taking. G-7 Macro: It was a quiet day for macro news in the G-7 yesterday. And it is also relatively quiet too today. The US NFIB business survey will be the main data point to look at. China:  Fiscal spending in 2023 should be stronger than last year. Increased spending for 2023 includes an increase in the issuance of special local government bonds and tax breaks for small and medium-sized enterprises. The aim of more government spending is to increase employment during the reopening process. So far, the reopening (which began on 8 January) has resulted in a greater increase in arrivals than departures as outbound travel has been deterred by the requirement for Covid tests in some foreign locations. We expect retail sales to pick up gradually in 1Q23 as some people could still be struggling to land a job at the beginning of the reopening process. Then we should see more pickup in activity in 2Q23, and more solid growth in 2H23. Chinese New Year annual migration has already started, and so far, we see more mobility than last year. This year, there are no "border controls" when people travel across provinces in Mainland China. The point to look for is whether this year's migration can reach a level similar to early 2020 (before Covid restrictions were imposed) Japan: Tokyo December CPI inflation data has been released. Both headline and core inflation (excluding fresh food) hit 4.0% YoY for the first time since 1982. As core inflation beat the market consensus of 3.8%, market expectations for the Bank of Japan’s (BoJ’s) exit strategy are expected to rise. But we do not believe that this data will persuade the BoJ to take any further action at their meeting next week. The BoJ thinks that higher-than-usual inflation is not sustainable, plus, other data, such as today’s household spending and the latest real cash earnings, both contracted, signalling weak growth. South Korea:  The current account posted a deficit of USD0.6bn in November - the first deficit in three months. The deficit in the goods account widened due to higher commodity prices together with sluggish exports. Also, the deficit in the services account widened as freight fares fell and outbound travel increased significantly. Today’s weak current account adds more downside risk to last quarter’s GDP.  With Industrial production and trade weaker than expected, we are considering lowering our GDP forecast for 4Q22 from -0.1% QoQ to -0.2%. Philippines: November trade data is out today.  Exports may revert to negative territory after last month's surprise growth given expectations for weak demand for electronics.  Imports, on the other hand, will likely sustain gains but fall short of double-digit growth as global energy prices eased from their peak in 2022.  The overall trade deficit should remain sizable at roughly $4.5bn, enough to keep the PHP from appreciating sharply this year as the current account remains in deficit. What to look out for: US and China inflation reports later in the week Philippines trade balance (10 January) South Korea good balance (10 January) Japan Tokyo CPI inflation (10 January) US NFIB small business optimism survey (10 January) Powell gives speeches (10 January) Australia retail sales (11 January) Malaysia industrial production (11 January) Japan trade balance (12 January) Australia trade balance (12 January) China CPI inflation (12 January) India CPI inflation (12 January) US CPI inflation and initial jobless claims (12 January) Fed’s Harker gives a speech (12 January) South Korea export price index and BoK decision (13 January) US University of Michigan sentiment (13 January) Fed’s Bullard gives speech (13 January) China trade balance (14 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    National Bank of Poland Meeting Preview: Anticipating a 25 Basis Point Rate Cut

    Discussion Of Bank Representatives On Financing The Ecological Transformation

    Kamila Szypuła Kamila Szypuła 11.01.2023 13:23
    The problems of climate change are becoming a frequent topic of discussion. Many governments and central banks are taking action to increase ecological transformations. The difficult economic situation raises the question of whether, in the fight against inflation, it is necessary to undertake investment activities in ecology? In this article: Digitizing Asia Financing the ecological transformation through monetary policy Digitizing Asia The development of technology and digitization is very important. This was shown by the time of the pandemic, in which technology played a significant role. The digital landscape of Asia has grown in recent years, and its further development may be an even greater opportunity for the inhabitants of this region. Digital technologies can increase the efficiency of the public and private sectors, expand financial inclusion, improve access to education and open up new markets by enabling companies to serve distant customers. During the pandemic, for example, digitalization has improved the allocation of valuable resources to health and social services, enabling quick relief while controlling public spending leaks. Digitization helped maintain resilience during the pandemic, where combined with heavy fiscal support, remote working and online sales, it protected employees, students and businesses. The pandemic has accelerated the trend of digitization of the region. The percentage of patent applications related to remote working and e-commerce technologies has increased during the pandemic. As the data shows, Asia is the leader in online retail. But despite this, there are still regions in Asia where digitization is not at a satisfactory level, and the differences between highly digitized and low digitized regions may be of key importance for the whole of Asia. Greater digitalization can help boost productivity growth in Asia, which already has shown itself to be a leader in fields from robotics to e-commerce. See our latest blog for more. https://t.co/QDPoYNFZiM pic.twitter.com/cN22xOfdtv — IMF (@IMFNews) January 10, 2023 Read next: Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM Should the role of central banks in the fight against climate change be active? There are divisions among the world's most powerful central banks over their role in tackling climate change as policymakers focus on curbing inflation. US Federal Reserve Chairman Jerome Powell said the Fed would not become a "climate policy maker" or engage in matters beyond its congressional mandate. The Governor of the Bank of Japan, Haruhiko Kuroda, said that any climate-driven policy decisions must remain within the relevant mandates of central banks and avoid compromising the market neutrality of policy makers. Whereas, from the ECB, Isabel Schnabel said the Frankfurt-based institution needs to become more climate-friendly. Soaring inflation and rising interest rates have thwarted the ECB's plan to redirect its corporate bond holdings towards greener assets to support the energy transition. Should banks participate in the ecological transformation? There are many who are in favor of it, because by financing such investments, the country in which the bank undertakes such activities builds a positive image for future investors. But in a difficult economic situation where it is difficult to implement, the question arises whether to take action in this direction. It all depends on whether the governments of the countries will be able to undertake this task. Major central bankers dispute role in tackling climate change as they battle inflation https://t.co/tN2NI4I6oy — CNBC (@CNBC) January 11, 2023
    Saxo Bank Podcast: The Bank Of Japan Meeting And More

    Asia Week Ahead: The Bank Of Japan Is Expected To Stand Pat, Indonesia Reports Trade Numbers

    ING Economics ING Economics 12.01.2023 11:38
    Next week’s data calendar features China’s GDP numbers, jobs data from Australia, and a rate hike by Bank Indonesia Source: Shutterstock RBA looking to jobs report next week for direction After the disappointingly high November inflation numbers, the Reserve Bank of Australia (RBA) will want to see some evidence of slowing in the labour market if it is not going to have to raise rates more than the additional 50bp we are currently forecasting. The consensus is for around 64,000 new jobs, which would indeed be a strong figure, and unless there was an offsetting rise in the unemployment rate, would probably prompt us to review our peak rates forecast in favour of an increase. We expect total employment of roughly 45,000 fresh jobs of which only 20,000 would be full-time jobs. Lending rate and activity data out from China The People's Bank of China (PBoC) will decide whether to cut the 1Y Medium Lending Facility rate (MLF) on 16 January. We expect the PBoC to pause at 2.75% as the economy is recovering. Furthermore, the government has emphasised that the central bank's actions should be more focused, and a general rate cut would not be considered a focused monetary policy move. After the PBoC’s announcement of 1Y MLF, Chinese banks will announce 1Y and 5Y Loan Prime Rates (LPR) on 20 January. We expect no change in these interest rates as banks usually follow the move of MLF and banks’ interest margins have been thinner. But the government has urged banks to lend out more loans, which may imply banks could be under pressure to cut. Meanwhile, China will announce activity data and GDP data between 10 and 27 January. We expect retail sales to contract deeper on a yearly basis while industrial production could turn from positive growth to mild contraction in December. This leaves the economy mainly supported by fixed-asset investments. As a result, GDP growth for the fourth quarter should be in slight year-on-year contraction. BoJ to reiterate dovish stance while BI set to hike The Bank of Japan (BoJ) is expected to stand pat after delivering its unexpected decision in December to expand the yield curve band. Governor Haruhiko Kuroda’s future guidance will remain dovish, but apart from that, the market appears to be pricing in additional normalisation steps from the next BoJ governor. Considering that Tokyo CPI inflation hit 4% year-on-year earlier this week, national CPI inflation for December is likely to climb up to 4%. But, pipeline prices, such as import price and producer price, are expected to be lower than in the past month.  Meanwhile, Bank Indonesia (BI) meets to discuss policy next week and we expect Governor Perry Warjiyo to start the year with a rate hike to support the Indonesian rupiah (IDR). Softer inflation reported in the past few months and fading growth momentum suggest that BI will likely opt for a 25bp rate increase which would widen interest rate differentials to support the currency. Indonesia's trade report to show slowing export growth Indonesia also reports trade numbers next week. With commodity prices moderating, exports will likely manage to grow a modest 6.2% while imports could contract for a second straight month. The trade balance will likely remain in surplus but could slide to $3bn, lower than the previous month and less than half of the record $7.6bn recorded in April last year. With the trade surplus fading, we could see the IDR missing a key support in 2023, which could suggest some depreciation pressure on the currency this year. Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Market: Exports In Indonesia Are Likely To Continue To Grow, Chinese Interest Rate Decision Ahead

    Asia Market: Exports In Indonesia Are Likely To Continue To Grow, Chinese Interest Rate Decision Ahead

    ING Economics ING Economics 16.01.2023 08:53
    China MLF decision and Indonesian trade are Asia's highlights on a quiet day for the G-7 as the US is on holiday. The JPY and JGBs remain in the spotlight ahead of Wednesday's Bank of Japan meeting Source: shutterstock Macro outlook Global Markets: US stocks made further gains on Friday, though on a relatively modest scale as the boost from low inflation data earlier in the week began to fade. Some of the zing also went out of the bond market too. 2Y US Treasuries, which had looked overbought at levels below the lower bound of the Fed funds rate (4.25%), saw yields rising 8.7bp, reversing most of Thursday’s decline. Yields on the 10Y US Treasury rose 6.4bp to just over 3.50%. It’s a public holiday in the US today so markets may be a little uninspired today. But there is still some room to close the gap between the implied peak Fed funds rate (currently 4.92%) and 5.0% (ING f) or 5.0%+ (consensus Fed view), and this gap will probably be closed, even if you think the Fed will pivot later this year. Given some fairly extreme speculative positioning (commitment of traders’ report) this raises the possibility of some tactical positioning, even if strategically, you consider the broader move in yields from here to be lower. EURUSD drifted a bit lower on Friday but remains above 1.08. Most of the rest of the G-10 pack is pretty steady, the exception being the JPY, which has been getting a lot of support from investors betting on a change in policy at Wednesday’s meeting. Practically none of the consensus of forecasters thinks the BoJ will actually move, but no one will want to miss out by being on the wrong side of any surprise on either yield curve control or policy rates. 10Y JGB yields remain above 0.50%. The rest of the Asian FX pack made solid gains on Friday, catching up with the G-10’s moves the day before. The IDR led the charge, rising 1.24%, followed by the THB (1.16%) and PHP (0.84%). G-7 Macro: There is nothing of much interest on the G-7 macro calendar today. China: The PBoC will announce its 1Y Medium Lending Facility (MLF) policy rate decision today. The consensus is for a pause at 2.75%. There could, however, be an extra liquidity injection on 1Y MLF volumes. One reason is that the Chinese New Year holiday is coming and liquidity is usually tight before this. But this is not certain, as the PBoC has already been injecting liquidity to cover the holiday period through open market operations. Another reason is that the PBoC could inject extra liquidity via the MLF at the beginning of the year rather than cutting the required reserve ratio to support what is usually strong loan growth in the first quarter. The market should perceive more liquidity injections as supportive measures for economic growth. Indonesia: Trade data will be released on Monday.  The market consensus points to a second straight month of contraction for imports as energy imports slide after global energy prices moderate.  Exports are likely to remain in expansion but settle at 7.4%YoY, resulting in a trade surplus of roughly $4bn, much lower than the high of $7.5bn recorded in 2022.  Smaller trade surpluses suggest that the IDR may lose some support in 2023. What to look out for: China activity data Japan PPI inflation (16 January) China medium term lending facility (16 January) Indonesia trade balance (16 January) Philippines remittances (16 January) Australia consumer confidence (17 January) China GDP, retail sales and industrial production (17 January) Singapore NODX (17 January) Japan core machine orders and industrial production (18 January) BoJ policy meeting (18 January) Taiwan GDP (18 January) US retail sales, PPI, industrial production and MBA mortgage applications (18 January) Japan trade balance (19 January) Australia employment change (19 January) Malaysia BNM policy meeting (19 January) Bank Indonesia policy meeting (19 January) US initial jobless claims and housing starts(19 January) South Korea PPI inflation (20 January) Japan CPI inflation (20 January) US existing home sales (20 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The Results Of The March Meeting Of The Bank Of Japan Are Rather Symbolic

    Asia Market: The Bank of Japan (BoJ) Is Expected To Stand Pat

    ING Economics ING Economics 18.01.2023 09:20
    Bank of Japan (BoJ) meeting is under the spotlight today  Source: shutterstock Macro outlook Global Markets: US stock markets traded sideways on their return from the long weekend, and equity futures are suggesting another nervous day ahead. The EURUSD has nosed back below 1.08 as of writing, but rather than reflecting a general sense of market unease, the cause seems to be specific to the EUR. Bloomberg is running a story today suggesting that ECB President, Christine Lagarde, is leaning towards smaller hikes after a 50bp February increase, and this may be tempering the EUR’s strength. There is a bit more life elsewhere in the G-10 FX space. For example, the AUD has risen to 0.699. Cable is also looking stronger, up at 1.2285 and the JPY is also fractionally stronger at 128.21 ahead of the BoJ meeting today (on which more below). Asian FX was mostly weaker yesterday. The CNY dropped half a per cent, rising at one point to 6.78 before settling a little lower, and this despite the better-than-forecast GDP figures yesterday. The IDR and PHP were also softer on the day. US bond markets gave a mixed performance, with yields on 2Y bonds dropping 2.7bp, while those on the 10Y Treasury rose 4.4bp to 3.548%. The Fed’s Barkin is reported to have said that it is “too soon” to end Fed hikes, which one could interpret as meaning that he sees the case for ending hikes as building, and therefore needing pushback. They say “never fight the Fed”, but equally, you might well take the advice “never take the Fed at face value”. G-7 Macro: US advance retail sales for December will be the most watched data release today. A 0.9% MoM decline is the median forecast number – which may be received reasonably by markets as pointing the economy in the right direction for lower inflation and an eventual pivot by the Fed. PPI data will probably add impetus to this, with a small month-on-month decline expected. Elsewhere, we have UK December inflation and final Eurozone inflation figures neither of which should provide markets with too much cause for concern.    Japan: The Bank of Japan (BoJ) is expected to stand pat today after announcing a surprise band widening in December. 10Y JGB yields have traded above 0.50% over the past few days, which suggests that the market is expecting another widening of the yield band or even abandoning the yield curve control (YCC) policy in near future. In our view, the economy is not ready for a reduction in stimulus yet. Today’s core machinery orders data recorded a fall of 8.3% MoM in November (vs 5.4% in October and -1.0% market consensus) and other recent activity data have also been weak. We believe that the BoJ’s outlook will support our view. We expect the BoJ's GDP forecast for FY2022 and FY2023 to be revised lower. For CPI, we expect the BoJ to revise their forecast up a bit, but for it to remain below 2.0% next year. Another reason for the BoJ to leave policy alone today is that another band adjustment would probably just increase market expectations for even more policy tightening after that, and this is not what the BoJ would like to see. Taiwan: GDP for 4Q22 will probably show slower growth than the previous quarter due to weaker external demand for semiconductors. This should result in annual GDP growth of around 2% in 2022 compared with 6.53% in 2021. We expect more headwinds from external demand in 2023 while the central bank will likely continue to shadow the Fed in raising interest rates. Both factors mean a challenging year for Taiwan’s economy in 2023.  What to look out for: BoJ discussion on Yield Curve Control Japan core machine orders and industrial production (18 January) BoJ policy meeting (18 January) Taiwan GDP (18 January) US retail sales, PPI, industrial production and MBA mortgage applications (18 January) Japan trade balance (19 January) Australia employment change (19 January) Malaysia BNM policy meeting (19 January) Bank Indonesia policy meeting (19 January) US initial jobless claims and housing starts(19 January) South Korea PPI inflation (20 January) Japan CPI inflation (20 January) US existing home sales (20 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
    Indonesia Inflation Returns to Target, but Bank Indonesia Likely to Maintain Rates Until Year-End

    Asia Market: Bank Indonesia Is Widely Expected To Hike Rates Today

    ING Economics ING Economics 19.01.2023 09:05
    Souring US data raises thoughts of the Fed's endgame. Australian labour data and Bank Indonesia decision APAC highlights Source: shutterstock Macro outlook Global Markets:  Big Moves in bond markets overnight – the run of soft data in the US is being taken at face value by investors – bad news finally equals bad news. Stocks had a bad day, with the S&P500 and NASDAQ both losing between 1 and a quarter and one and a half per cent on the day, but it is the moves in US treasury yields that most catch the eye. 2Y US Treasury yields fell 12.2bp, to 4.082%,  while the 10Y bond saw yields down 17.8bp to 3.37%, which has helped drag bond yields elsewhere down too. The Australian 10Y now yields 3.43%, which is down more than 60bp from the start of the year. Japan’s 10Y JGB is now yielding only 0.402% after investors were chastened by Kuroda’s blunt rejection of further changes to the BoJ’s policy stance. It did look at one point as if these weaker yields would drive EURUSD to new year highs, and for a while they did, reaching up to 1.0887, but the rise was short-lived, and EURUSD is now back to just below 1.08. The AUD had a similar gain and then reversal, as did Cable, though it managed to hold on to more of its earlier gains to trade at 1.2345 currently. The JPY did almost the opposite, selling off up to 131.50 after the BoJ meeting, only to recover back to 128.43. Asian FX had a mostly positive day yesterday, led by the THB, INR, IDR and PHP. G-7 Macro: December US advance retail sales came in even weaker than expected, dropping 1.1% MoM, with downward revisions to previous months’ data. PPI inflation data also fell sharply from the previous month, and there was a nasty fall of 0.7% MoM from industrial production. James Knightley has written about this data plus what it may mean for the Fed. It’s well worth the read – it even questions whether the Fed will raise further after February.  The Fed’s Beige book also noted that the rate of price increases was moderating in many districts with contacts expecting further moderation in the year ahead. In spite of this, James Bullard and Loretta Mester kept up the hawkish commentary – not that it seems anyone in the markets is listening. Today, we get US housing starts and permits. Housing starts have been on the slide since April last year, though these winter readings need to be taken with a pinch of salt as they are prone to seasonal anomalies. UK RICS house price balance is also released for December today and is expected to show further declines. Australia: The December labour report contains a lot of interesting data. The headline figure of a 14,600 decline in total employment is the most eye-grabbing detail, though it was mainly a result of part-time job losses (-32,200), and full-time jobs still grew a respectable 17,600, though slower than in November. And there was a higher-than-expected unemployment rate of 3.5% up from 3.4%. Together, these data mean that we will stick to our 3.6% peak cash rate call, despite the inflation disappointment last month. More inflation data is released next week, which we hope will restart inflation's move lower.  Indonesia: Bank Indonesia meets to discuss policy today.  The central bank is widely expected to hike rates at today’s policy meeting to steady the IDR and to quell still-potent price pressures.  Inflation unexpectedly flared up last December with BI Governor Warjiyo warning that inflation could remain elevated this year. BI will continue to monitor inflation developments and the performance of the currency. However, we could see the central bank eventually pause after Governor Warjiyo voiced some concerns about the economy’s growth trajectory in 2023.     Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
    Forex: On Friday US dollar against Japanese yen increased by 0.9%

    Asia: Australian and Japan's CPI inflation figures go public next week

    ING Economics ING Economics 20.01.2023 16:18
    The coming week features several GDP reports and sticky inflation out of Australia and Singapore Source: Shutterstock Sticky inflation figures and an RBA decision Australian retail gasoline prices were down more than 8% month-on-month in December. Feeding this figure through to the transport component, we could see a smaller increase in the aggregate monthly price level of 0.2% MoM in December, down from an increase of 0.8% MoM in November. This should bring the December inflation rate down to 6.9% year-on-year, and the fourth quarter inflation rate down to 7.0%. With inflation still high, however, we expect the Reserve Bank of Australia (RBA) to continue with another 25bp rate hike at its meeting on 7 February. Singapore core inflation to inch higher Singapore is also expected to release the December 2022 inflation reports next week. Headline inflation has started to decelerate, and the latest reading could settle at 6.5% year-on-year with base effects kicking in. Core inflation, however, could still accelerate slightly to 5.2% YoY from 5.1% in the previous month. Price pressures could fade later in the year given the recent bounce in the Singapore dollar but core inflation should still be much higher than the central bank’s target of 2%.  GDP reports from Korea and the Philippines Korea's fourth quarter GDP report and surveys are scheduled to be released next week. We expect GDP to contract by -0.3% quarter-on-quarter (seasonally adjusted) on the back of sluggish exports and domestic demand. Monthly activity data suggest the manufacturing and service sectors weakened quite significantly in the fourth quarter with the terms of trade deteriorating further. Meanwhile, forward-looking survey data is expected to remain soft. Closely-watched gasoline and utility prices rose from January, and this should hurt consumer sentiment while the slowdown in external demand and weak exports could suppress business sentiment. Similarly, the Philippines reports fourth quarter GDP and trade data next Thursday. We expect another quarter of strong growth for the Philippines, supported mostly by an extended run of “revenge spending” during the holiday season. GDP growth in the final quarter of 2022 should settle at 7.5% YoY which should bring full-year growth to 7.7% YoY. This will be faster than the official growth target of 7.5%, however, 2023 presents several challenges which could push the trajectory of growth down sharply.  Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Asia Economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The RBA Raised The Rates By 25bp As Expected

    Asia Market: Disappointing Inflation Data From Australia

    ING Economics ING Economics 25.01.2023 09:03
    Disappointing inflation data already out from Australia suggest a higher peak cash rate. Singapore inflation data are out later  Source: shutterstock Macro outlook Global markets: Happy Chinese New Year to all our readers. US equity markets regained their composure at the end of last week, and have traded more or less sideways since then, so there is not too much to catch up on after the recent holidays in Asia. The S&P500 is now at 4016.95, which leaves it slightly above its 200-day moving average. The early part of this week saw US 2Y Treasury bond yields rising sharply, before drifting slightly lower again yesterday. The current 2Y yield is 4.21%. 10Y US Treasury yields have performed a similar rise then decline, currently at 3.45%. EURUSD pushed above 1.09 last Friday but has been trading just south of that in the first two days of this week. There is a mixed performance from other G-10 currencies. The AUD is looking firm against the USD, trading above 70 cents currently. But sterling is softer at 1.2332. And the JPY is holding at about 130, just slightly stronger after a weak start to the week. In other Asian FX, there isn’t much action given the Chinese New Year holidays in much of the region. The INR has been losing ground on reports of USD buying by Indian oil companies. G-7 Macro: Since we went on holiday, the most notable G-7 releases have been a bunch of PMI figures out of Europe, which painted a slightly less bleak picture of the economy than for some time, with the composite PMI just clawing its way back above the 50 threshold boom/bust level. Today, we get more colour on Germany from the Ifo business index. And the Bank of Canada will most likely raise rates a further 25bp taking policy rates to 4.5% Australia: Another big upside miss to the Australian CPI data, with December inflation rising from 7.3% to 8.4% YoY. This increase took the 4Q22 inflation rate up to 7.8% YoY from 7.3%. Both weighted median and trimmed mean measures of inflation also rose. We've had our cash rate forecast under "double-secret probation" for the last month, and see no other course of action than to raise this from 3.6% to 4.1%, by extending the Reserve Bank's hiking activity a further 2 months.  Singapore: December 2022 inflation is due for release later today.  The market consensus points to headline inflation easing slightly to 6.6%YoY while core inflation is likewise expected to soften to 5.0%YoY (from 5.1% previously).  Despite the slight dip in inflation, price pressures remain evident and core inflation is still well above the Monetary Authority of Singapore’s (MAS) inflation target of 2%. The recent rebound of the SGD means that the MAS may not need to tinker with policy just yet but we do expect the MAS to be mindful of the SGD’s appreciation which could eventually weigh on an already challenged export sector.    What to look out for: Australia and Singapore inflation Australia CPI inflation (25 January) Singapore CPI inflation (25 January) Bank of Thailand policy (25 January) US mortgage applications (25 January) South Korea GDP (26 January) Philippines GDP (26 January) Singapore industrial production (26 January) Hong Kong trade (26 January) US GDP, personal consumption, core PCE, initial jobless claims (26 January) Japan Tokyo CPI inflation (27 January) Australia PPI inflation (27 January) US personal spending and University of Michigan sentiment (27 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Philippines’ central bank hikes rates after blowout CPI report

    Asia Market: The Philippines 4Q GDP Growth Is Expected To Expand

    ING Economics ING Economics 26.01.2023 09:57
    Korean GDP contracts in 4Q22. Philippine GDP due later, also US GDP Source: shutterstock Macro outlook Global Markets: US stocks opened sharply lower yesterday, but clawed their way back to end the session more or less flat on the day. In contrast, Chinese stocks had another better day. The CSI 300 finished 0.6% higher, and the Hang Seng index rose 1.82%. Bond markets were, if anything, slightly more boring even than equities, with yields on 2Y US Treasuries edging down about 2bp to 4.125%, and yields on 10Y US treasuries fell only 1bp to 3.447%, though there was a little more volatility in the 10Y space, with trading in a 7bp range. In the absence of much excitement in other markets, EURUSD has traded above 1.09 for the first time since April 2022. This marks the 50% retracement from the June 2021 peak and makes subsequent moves more significant in terms of where we go next. ECB speakers yesterday – Makhlouf, Nagel and Vasle, all talked up the prospects of 50bp rate hikes at forthcoming meetings, which probably helped buoy the single currency. Other G-10 currencies are also trading stronger against the USD. The AUD is above 71 cents now, helped by yesterday’s higher-than-expected inflation print (see also here for what this means for the Reserve Bank of Australia’s rate policy) sterling is back above 1.24, and the JPY is back to 129.40. Other Asian FX are quite mixed, with the MYR and SGD making gains yesterday of more than 0.5%, but the PHP and IDR both losing ground against the USD. G-7 Macro:  Yesterday was fairly light in terms of data releases in the G-7, though Germany’s Ifo survey came in a bit higher. Here’s Carsten Brzeski’s take on that. And the Bank of Canada raised rates 25bp as expected to 4.5%, which looks like a peak according to James Knightley. Today, we get 4Q22 GDP for the US, which is expected to show a slowdown to a 2.6% annualized rate of growth, down from 3.2% in 3Q22. Our “ING f” forecast is actually a little lower than the consensus figure at 2.3%. December US durable goods orders are out later too – too choppy to make sense of this data series. US new home sales data for December are also released and will likely slow further, though this is a low turnover time of year, and seasonal anomalies are to be expected. The December US advanced goods trade balance rounds off the data for the day. South Korea: Real GDP dropped sharply as expected, posting a contraction of 0.4% QoQ (sa) in 4Q23 (vs +0.3% in 3Q22). For domestic components, private consumption dropped 0.4% with declines in both goods and service consumption. Construction and facility investment rose 0.7% and 2.3%, respectively. We think the impact of the cumulative interest rate increases has begun to slow down private consumption. As monthly activity data showed, construction and investment increased mainly due to the completion of pre-ordered projects, but we expect both to decline this quarter. For external components, exports and imports both fell significantly by 5.8% and 4.6% respectively. Sluggish exports of semiconductors and petrochemicals weighed on the total, and imports of crude oil and primary metal products also declined quite meaningfully. Both imports of crude oil and primary metals are mostly for re-export, suggesting that global demand conditions weakened sharply in the last quarter and this quarter as well. Philippines: The Philippines reports external trade and GDP numbers today.  4Q GDP growth is expected to expand 6.6%YoY - a slowdown from the 7.6% growth reported in the previous quarter.  Robust household spending likely supported growth to close out 2022.  Solid growth numbers should give the central bank space to push through with additional rate hikes in the first half of the year to slow multi-year high inflation.   What to look out for: US and Philippines GDP South Korea GDP (26 January) Philippines GDP (26 January) Singapore industrial production (26 January) Hong Kong trade (26 January) US GDP, personal consumption, core PCE, initial jobless claims (26 January) Japan Tokyo CPI inflation (27 January) Australia PPI inflation (27 January) US personal spending and University of Michigan sentiment (27 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Asia economics Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 14.02.2023

    Asia Morning Bites - 27.01.2023

    ING Economics ING Economics 27.01.2023 09:01
    Tokyo inflation data give the JPY an early boost.  Korean business sentiment dips.  Source: shutterstock Macro Outlook Global Markets: China is still out on holiday until next week, so no stock action to report there, though Hong Kong is back and the Hang Seng put in a solid performance yesterday, opening up and making further gains over the session. US stocks also did well, buoyed by stronger than expected GDP data, though as James Knightley’s note on this reveals, there are worrying signs of a slowdown ahead buried under the headline number. US Treasury yields also got a lift from the GDP figure, with 2Y and 10Y bond yields rising 5.8 and 5.3 bp respectively. The 10Y now sits at 3.495%. The EURUSD has pulled back below 1.09, but could just be a temporary departure, as it looks to be back on a rising trend again. Other G-10 currencies are looking reasonably firm. And the JPY has opened stronger this morning after stronger-than-expected Tokyo CPI data. Other Asian FX had a solid day yesterday, led by the Offshore Renminbi, which is at 6.733 today ahead of China’s return to markets next week.    G-7 Macro: As mentioned above, the main news yesterday was the 2.9% annualised GDP QoQ growth from the US in 4Q22. Personal consumption slowed to 2.1% from 2.3%. Gross private investment rose only 1.4%, within which was a 3.7% decline in business equipment investment and a 26.7% fall in residential investment. Durable goods orders for December were also stronger than expected,  though here too, there were some more negative signals beneath a strong headline figure. Today, we get PCE deflator figures for December, though as we have already got the full 4Q deflator figures from the GDP data, there shouldn’t be any real news here. The pre-GDP consensus was for a drop in the core deflator to 4.4%YoY, with a slight pick up in the MoM rate from 0.2% to 0.3%. The University of Michigan consumer sentiment and inflation expectations figures are also due later. Japan: Tokyo CPI for January came out with an upside surprise. Headline inflation accelerated more than expected to 4.4% YoY (4.0% in December and consensus), and core inflation - excluding fresh-food also rose to 4.3% (vs 4.0% in December, 4.2% consensus).  Looking at the details, the surprise mainly came from fresh food prices, which rose 6.4% (vs 4.4% in December) while utilities rose the most by 22.8%. We think that consumer prices are expected to come down slowly from February as the government’s energy subsidy program will start to work. The JPY looks like responding to the growing market expectations for the Bank of Japan’s policy shift due to a higher-than-expected inflation outcome. Based on the minutes of the BoJ meeting in January, the majority of the board was still in favour of keeping the current level of easing policy and monitoring the policy adjustment in December, but at the same time, there is also a growing view that the current policy should be revisited sometime in the future. We still think the policy change is a long way off. The Spring salary negotiations are key to watch as wage growth is a prerequisite for sustainable inflation. South Korea:  The Bank of Korea’s business survey results show that both manufacturing and non-manufacturing have a dim outlook for their businesses. The January outlook index fell to 65 from 68 for manufacturing and 70 from 72 for non-manufacturing. We believe that from now on, manufacturing sentiment will rebound due to China’s reopening, but non-manufacturing sentiment is expected to stagnate for a while as domestic demand conditions continue to deteriorate.  What to look out for: US University of Michigan sentiment Japan Tokyo CPI inflation (27 January) Australia PPI inflation (27 January) US personal spending and University of Michigan sentiment (27 January) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Disappointing activity data in China suggests more fiscal support is needed

    Asia Morning Bites - 01.02.2023

    ING Economics ING Economics 01.02.2023 09:09
    Weak Korean exports and possible PBoC tweaks to CNY currency management. Market noise about Fed May "pause" isn't causing much reaction with markets already there Source: shutterstock Macro Outlook Global Markets: Tuesday was almost a complete reversal of Monday for US stocks, which rallied, possibly taking comfort ahead of the FOMC from some reports that the Fed may pause their hiking after the next couple of meetings. So much for the so-called blackout period! Chinese stocks declined for a second consecutive day. The Fed pause story only seems to have confirmed what markets were already suspecting, and 2Y US Treasury yields only dropped 3.3bp, with 10Y yields down a similar amount to 3.507%. Currency markets don’t seem to be affected much either. EURUSD remains in the upper half of the 1.08s, the AUD in the mid-0.70s, Cable has retreated slightly to 1.2312. And the JPY remains close to 130.  Other Asian FX was on the weaker side yesterday. The INR, THB and MYR all lost more than half a per cent to the USD. The CNY remained firm at 6.7553 after some solid PMI data (see also below) G-7 Macro: The Eurozone just managed to eke out a positive 4Q22 GDP figure, though 0.1%QoQ is not particularly impressive either. Today will be all about the FOMC decision and subsequent press conference. The decision is at 3 am Singapore time, so will be ready for your cornflakes tomorrow. A 25bp hike looks all but assured, and the real question is whether the pause story currently doing the rounds will get any further endorsement, or if Powell will push back and try to engineer some tighter financial conditions. Inflation is now below where the Fed was forecasting it to be back at their December meeting, so they would be within their rights to acknowledge the progress made. Recent talk about service sector inflation ex-housing is all very well and good, and you can keep stripping away the bits of inflation that are falling to keep pretending that you still have a problem, but it gets less and less credible with each passing month. Wages will, without doubt,  follow the headline rate of inflation lower – slowly, and with a lag, but they are already turning down, and that is giving you a fairly helpful forward-leaning clue. It’s the ECB and BoE tomorrow to add to the excitement. Both are expected to raise rates 50bp. China: There has been some market speculation that the People's Bank of China may lift previous counter-cyclical measures in light of the recent strengthening of the RMB. This could include the removal of the 20% risk reserve on foreign exchange forward buying or maybe feature an increase in the foreign exchange deposit reserve ratio. This "speculation" comes from Premier Li's urging for a stable exchange rate and financial sector. The current USDCNY level at around 6.7 is around the middle of the range for the past five years. It may be a bit early to remove the risk reserve on FX forward purchases or any similar actions. 6.5 seems to be a more reasonable level. However, we cannot rule it out as the Chinese government wants the economy to recover smoothly during the reopening period. If there is anything that could hurt the economy at the moment, the government is likely to try to minimise the risk. Assuming the PBOC does remove the 20% risk reserve, we do not think that this will have a long-term impact on the RMB but there could be some short-term volatility in the FX market similar to the opposite operational impact we have seen during previous CNY depreciations. South Korea: Korea’s exports fell 16.6% YoY in January (vs -9.6% in December, -11.1% market consensus) mainly due to sluggish chip exports (-44.5%). Imports dropped modestly (2.6% YoY), resulting in a trade deficit of 12.7 billion USD, which is the largest on record. We think that January’s weaker-than-expected export result adds more downside risk to first-quarter growth. As the downcycle of semiconductors is only expected to bottom out by the end of the 2nd quarter, we think poor exports will likely continue for the time being. Indonesia: Indonesia reports January inflation today.  Headline inflation will likely moderate further to 5.4%YoY (from 5.5% previously) although core inflation could inch higher to 3.5%.  Bank Indonesia (BI) Governor Warjiyo warned that price pressures would remain in 2023 which was the main consideration for BI's rate hike in January.  We expect BI to take their queue from core inflation and we could see BI reversing their stance should core inflation head back towards the central bank target of 3%.   What to look out for: Regional PMI readings, US ADP report and the FOMC decision New Zealand unemployment (1 February) South Korea trade balance (1 February) Japan Jibun PMI (1 February) Regional PMI manufacturing (1 February) China Caixin PMI manufacturing (1 February) Taiwan industrial production (1 February) Hong Kong GDP (1 February) Indonesia CPI inflation (1 February) US ADP employment change (1 February) ISM manufacturing (1 February) FOMC meeting (2 February) South Korea CPI inflation (2 February) ECB policy meeting (2 February) US initial jobless claims, durable goods orders and factory orders (2 February) Japan Jibun PMI services (3 February) China Caixin PMI services (3 February) Singapore retail sales (3 February) US non-farm payrolls and ISM services (3 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Disappointing activity data in China suggests more fiscal support is needed

    Asia week ahead: Regional inflation data, Taiwan trade numbers and Indonesia's GDP

    ING Economics ING Economics 02.02.2023 11:46
    Next week’s calendar features inflation readings from Australia, India, the Philippines and China, plus Indonesia’s growth performance and trade data from Taiwan Source: Shutterstock Has inflation peaked in Australia? On 7 February, the Reserve Bank of Australia (RBA) is expected to hike rates by 25bp. Some months ago, when the RBA adopted the smaller 25bp hike approach, it became obvious that the central bank was not operating on a data-dependent policy. As it got closer to the peak in rates, it would simply proceed at a slower pace to avoid, or at least limit, the risk of overtightening. Considering the much higher-than-expected inflation readings over the past two months, we have increased our peak RBA cash rate forecast to 4.1% from 3.6%, assuming that there are two further months of 25bp hikes ahead. We see a slight softening of the labour and housing markets, but this is not likely to be decisive for future rate decisions There will be a subsequent statement on monetary policy on 10 February and this will likely provide more clarity on direction. India expected to pause hikes We can expect to see further central bank action from the Reserve Bank of India (RBI) on 8 February, and the outcome is much less certain than the RBA. The current repo rate is at 6.25%, which is 55bp higher than the prevailing rate of inflation, which has since fallen back into the top end of RBI’s 2-6% tolerance range. Our contention has been that the RBI is at or close to the peak, and we believe that the RBI will put a pause on the hikes to give growth a chance. Philippine inflation to stay elevated as supply shortages persist Philippine inflation is expected to dip to 7.8% year-on-year in January, down slightly from 8.1% in the previous month. However, we expect inflation to remain at elevated levels as supply shortages persist. Low domestic production resulted in surging prices for basic food commodities, Meanwhile, still-elevate global energy prices have resulted in high utility costs and rising gasoline prices. The Bangko Sentral ng Pilipinas (BSP) is expected to retain its hawkish stance for the time being although Governor Felipe Medalla has hinted at a possible reversal later in the year. Read next: Resumption Of Cooperation Between Airbus And Qatar Airways| FXMAG.COM Price pressures expected to slow in China China’s January CPI inflation should rise faster given the post-Covid lockdown reopening and extended holiday. Our estimate is 2.4%YoY.  Despite the acceleration, it’s too early to say whether this is a trend and is still below the warning level of 3%. Inflation should be slower in February after the holiday. PPI on the other hand should stay at a slight year-on-year contraction level due to the combination of lower commodity prices and a high base effect. Construction activities have yet to pick up, leading to lower metal prices. We expect construction activities to start to recover after winter which should give some support to PPI inflation. Headwinds in Taiwan's semiconductor industry Taiwan’s trade data should show a dire picture as the western market has placed fewer orders on semiconductor chips while the Mainland China market has yet to fully recover. We expect a contraction for both exports and imports of around 20%YoY.   This might lead to more uncertainty about the projected central bank’s hike in the first quarter of the year. Taiwan’s central bank should consider opting not to follow the Fed or hike at a slower pace due to the headwinds in the semiconductor industry. Other data reports: PBoC's decision on RRR, reserves and Indonesia's GDP report We do not expect the People's Bank of China (PBoC) to change the interest rate or RRR this year. The main monetary policy should be through a re-lending programme, which is more focused and helpful for economic recovery. Meanwhile, China is going to release credit data (from 9-15 February) and we expect a jump in January despite being the month of the Chinese New Year. New yuan loans will be the key engine of credit growth in the first month of the year. More credit growth from the debt market should follow during the first quarter. FX reserves should rise as indicated by the strengthening of the yuan which implies capital inflows into China. Further capital inflows are possible, especially portfolio inflows. But due to uncertain geographic tension, multinational companies might defer direct investments into China. Lastly, Indonesia reports fourth-quarter GDP and we expect growth to hit 4.9%YoY, taking 2022 full-year growth to 5.2%. Softer commodity prices weighed on both export performance and industrial output, however solid domestic demand was able to offset the downturn.     Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsEmerging Markets Asia week ahead Asia Pacific Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites 13 March 2023

    Asia Morning Bites - 03.02.2023

    ING Economics ING Economics 03.02.2023 09:09
    With central bank decisions out of the way, it's all about the US jobs report out tonight.   Source: shutterstock Macro outlook Global Markets: Thursday marked another very solid day for US equities. The NASDAQ, which had risen by 2% on Wednesday, piled on another 3.25% on Thursday as further thoughts of a Fed pause/pivot gained ground. The S&P500 rose 1.47%. Chinese stocks didn’t fare so well, with the Hang Seng Index and CSI 300 both dropping. Most of the action in bond markets yesterday was outside the US Treasury market, which didn’t move much. But European bond markets saw steep falls in yields as both the ECB and Bank of England hiked policy rates by 50bp. 10Y Bund yields  dropped 21.3bp, while Gilt yields fell a staggering 30bp. There were similar-sized falls in Italian and Greek bond yields. Markets seem to be taking the view that policy rate hikes are nearing an endpoint across the whole of the G-10.  All of this has undone some of the EUR’s recent sparkle, and it has dropped back below 1.10 to 1.0923 as of writing, taking the G-10 currencies, AUD and GBP with it. The JPY seems to have weathered this latest retreat better than the other  G-10 currencies and is at 128.71. There were gains for most of the Asian currencies yesterday, led by the PHP, KRW and TWD. The INR and THB missed out on the appreciation, losing a little ground to the USD. Today, we will probably see Asian FX dropping back after the G-10 moves overnight.   G-7 Macro: Here are some links to our economists’ thoughts on the European Central bank meeting and the Bank of England Meeting. The short story on both seems to be that the ECB is trying to get us to believe that they will hike a further 50bp in March with possible hikes beyond that, but in reality, seem to be wondering if the data will compel them to do that. A bewildering mixture of pre-commitment and data dependency which leaves many analysts scratching their heads. The Bank of England is a lot clearer, with hints that they may now be done. Today, we have the January non-farm payrolls release in the US, and after the weak ADP survey earlier this week, there must be some speculation that we see a surprise undershoot of the consensus 190,000 job gain view. Anything is possible with payrolls, and over a longer time frame, we would not discount the explanatory power of the ADP survey. But as a month-on-month predictor, we’d rather flip a coin, to be honest. Hourly earnings (currently 4.6%YoY) and the unemployment rate (3.5% right now) will be as interesting as the payrolls figure itself, given the Fed’s recent preoccupation with the labour market. But then markets do not seem to be paying much attention to what the Fed is interested in right now, and probably rightly so.  The service sector ISM that is also released later today will be of mainly academic interest following the payrolls number. China: According to the Financial Times, US Secretary of State, Antony Blinken, will meet China's Xi Jinping on 5 and 6 Feb. Before that, China is trying to convince Japan and the Netherlands to relax their ban on exports of semiconductor equipment. We do not expect these talks to succeed, so U.S.-China relations may continue to deteriorate. This is a new risk in the supply chain for some industries, as China could respond by halting exports of solar panel technology. There could be more tit-for-tat retaliation between the US and China for the remainder of 2023. This is not good news for global macro. While the impact may not be apparent at this early stage, repeated retaliation could weigh on long-term global growth. The Caixin Services PMI should rise above 50 in January, but this is no longer “news” and therefore should not substantially impact the market. Singapore: December retail sales will be reported today.  Market consensus points to a 5.2%YoY increase, a moderation from the 6.2%YoY gain in the previous month.  We’ve noted a gradual slowdown in retail sales which was reflected in a similar downturn in general economic activity.  Higher prices appear to be taking their toll on spending although department store sales have held up well, possibly supported by tourist arrivals.  Expect more of the same in early 2023 as high prices and the implementation of the goods and services tax increase kicked in this January.  Read next: Santander Bank Polska Shareholders Can Expect A Solid Dividend, The ETH Liquid Staking Narrative Is Already Going Strong| FXMAG.COM What to look out for: US jobs report Japan Jibun PMI services (3 February) China Caixin PMI services (3 February) Singapore retail sales (3 February) US non-farm payrolls and ISM services (3 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 10.05.2023

    Asia Morning Bites - 06.02.2023

    ING Economics ING Economics 06.02.2023 08:36
    Payrolls shock and balloon pop to dominate today's trading Source: shutterstock Macro outlook Global Markets: Once again, US non-farm payrolls caught markets off guard, with a surprisingly strong headline figure which drove up US bond yields and caused the USD to strengthen. 2Y US Treasury yields rose 18.4bp to 4.289%, while 10Y yields rose 13.2bp to 3.525%. EURUSD dropped back below 1.08, and the USD also rallied against other G-10 currencies. The AUD is back below 70 cents at 0.6925. Cable has fallen all the way back to 1.0250 and the JPY shot back above 132, though has since settled back to 131.67 this morning. Part of that JPY move may have been on speculation about BoJ Governor Kuroda's successor, as BoJ incumbent and continuity candidate, Masayoshi Amamiya was rumoured to have been approached for the job. Finance Minister, Shunichi Suzuki later said he hadn't heard anything about the nomination. Most Asian currencies have weakened against the USD. Many of them will fall sharply in early Asian trading as they take onboard the G-10 movements. USDCNH is back up to 6.8219 with the balloon incident not helping China's currency (see more below).  US stocks didn’t like the implications of a stronger labour market either, as it hurts the Fed pause/pivot story. The S&P500 dropped 1.04% on Friday, while the NASDAQ was down 1.59%. The Hang Seng and CSI 300 were also both down on Friday. G-7 Macro:  For the full gory details of the US labour report, please refer to James Knightley’s note. The headline numbers are a 517,000 rise in employment, a fall in the unemployment rate to 3.4% from 3.5%, but a moderation in hourly wage inflation to 4.4%YoY from 4.8%. James has gone on to dig deeper into the detail of the report, which reveals that almost all of the employment gains were part-time, and much may be attributable to warmer than usual weather in January, lifting outside work which would normally be very limited at that time of year. The weather has since turned very cold, which suggests that we may see some reversal of the apparent strength in the labour market next month. Though who really knows with this data? There is no data out of the US today. In the rest of the G-7, German factory orders data for December are the main release. A continuation of double-digit year-on-year declines is expected. China: The Chinese balloon shot down by the US has hardened President Xi's stance on relations with the US, which was inevitable as he needs to demonstrate strong foreign policy to China’s citizens. The implication is an intensified tech war. Both sides will likely impose more export bans on technology in different industries. This is a new threat to supply chain disruption, although the risk of logistical disruption from Covid restrictions has now disappeared. This new risk is more of a long-term risk than an imminent one. Nonetheless, the balloon event is bad for the yuan today. Indonesia:  4Q22 GDP is set for release today.  The market consensus points to a 4.9%YoY gain, good enough to take 2022 full-year growth to 5.3%.  Indonesia’s export and manufacturing sector managed to post solid growth in 2022 in large part due to the global commodity price surge.  This area of support faded towards the end of lat year and the economy will need to rely on other sectors like domestic consumption to carry growth momentum on into this year.        What to look out for: Fed speakers and China inflation Indonesia GDP (6 February) Thailand CPI inflation (6February) Australia RBA meeting and trade balance (7 February) Philippines CPI inflation (7 February) Taiwan trade balance (7February) US trade balance (7 February) South Korea BoPcurrent account (8 February) India RBI policy meeting (8 February) US mortgage MBA applications (8 February) Fed’s Powell, Williams, Cook and Barr speak (8 February) Taiwan CPI inflation (9 February) Japan machine tool orders (9 February) US initial jobless claims (9 February) Fed’s Kashkari and Waller speak (9 February) Japan PPI inflation (10 February) China CPI inflation (10 February) Malaysia GDP (10 February) US University of Michigan sentiment (10 February) Fed’s Waller and Harker speak (10 February)   Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Disappointing activity data in China suggests more fiscal support is needed

    Asia Morning Bites - 07.02.2023

    ING Economics ING Economics 07.02.2023 08:52
    RBA decision out later - 25bp hike expected. Markets are pricing in more hikes this year in the US, with less easing by year-end Source: shutterstock Macro outlook Global Markets: US stocks continued to lose ground yesterday in the wake of Friday’s payrolls shock. The S&P500 dropped by 0.61%, and the NASDAQ was down exactly 1.0%. Balloon antics and the rising possibility of more trade restrictions may have weighed on Chinese stocks which also fell. US Treasury yields kept on rising. The yield on the 2Y note rose a further 18.4bp, with markets pricing in a good chance that Fed funds get to 5.25%, and that they only just start to edge down by the year-end. 10Y US Treasury yields rose a further 11.5bp to 3.64%. The USD remains bid, and EURUSD is currently trading at 1.0727. The AUD and GBP are both steadier than on Friday, but still slightly weaker than this time yesterday. The JPY has also drifted weaker, with more speculation about the Bank of Japan’s replacement for outgoing Governor Kuroda. Asian FX weakened across the board yesterday. Declines were led by the THB (-2.14%), KRW (-1.9%) and PHP (-1.33%) G-7 Macro: There was nothing of much note in the G-7 macro calendar yesterday. German factory orders were a bit better than had been expected in December, but still down 10.1%YoY. Eurozone retail sales were very soft (-2.7%MoM, -2.8%YoY). Germany’s December industrial production (consensus expectation is for -1.6% YoY) and the US December trade balance (-USD68.5bn expected) are also on the calendar. Australia: The Reserve Bank of Australia (RBA) will almost certainly raise the cash rate a further 25bp to 3.35% later today. The recent run of much higher-than-expected inflation means that today’s decision is firmly in the bag. Larger hikes do not seem probable, though the inflation story does likely keep the RBA hiking for longer than previously thought. We now see the cash rate rising to 4.1% before it peaks. China: The government has released a policy outline for building a high-quality country by 2025. The outline is very broad and covers many areas, including the service sector, technology, manufacturing and social governance. As such, it is a policy outline to grow the private sector and strengthen the government’s governance ability. “Quality” should form part of the goals set for 2023 by the upcoming “two sessions” meetings. It follows that the government should target both the growth rate (around 5%) and quality. These two targets will mean a possible further deterioration in the fiscal health of local government, a risk that is rising following Covid spending in 2022. Taiwan: Export and import data released today should contract by around 20%YoY, mainly due to weak global demand for semiconductors. This weakness should continue into 1Q23. The main question is whether this weakness will continue through the rest of the year, as the weakness in the US and European economies looks as if it may be less severe, but go on for longer this year. In this case, we could see a smaller but longer contraction in Taiwan’s trade. Japan: Japan released two data points this morning: labour cash earnings and household spending. The results were mixed.  Nominal labour cash earnings for December rose 4.8% YoY, which was more than had been expected (0.5% in November and 2.5% market consensus). This was the largest gain since 1997. We think this jump is only temporary as companies paid winter bonuses (7.6%YoY) to offset the recent spike in inflation. Basic salaries rose 1.9% YoY which is similar to the recent trend. Real cash earnings rose 0.1% YoY, the first rise in nine months. However, the increase in wages did not lead to an increase in household spending, which dropped -1.3% YoY (vs -1.2% in November, -0.4% market consensus). The three-month annualized spending figure did improve from the previous quarter, so we expect 4QGDP to rebound from the contraction in the third quarter.  We believe that today’s above-3% wage growth is a temporary boost and we need to see if it can be sustained for a while, which will be determined by the Spring wage negotiations. As we mentioned in our monthly report, the Bank of Japan won’t likely move as fast as most in the market hope. Philippines:  The Philippines reports headline inflation today.  Market consensus points to a 7.6%YoY increase for prices but we could see headline inflation settle higher at 7.8%YoY.  Although headline inflation is expected to dip from the 8.1% reported in December 2022, price pressures remain broad-based with high inflation reported for more than 70% of the CPI basket.  This type of broad-based inflation pressure should convince the Bangko Sentral ng Pilipinas (BSP) to increase policy rates next week. We expect a 25bp rate hike from the BSP as Governor Medalla keeps up the fight against persistent inflation.         What to look out for: RBA meeting and US trade Australia RBA meeting and trade balance (7 February) Philippines CPI inflation (7 February) Taiwan trade balance (7 February) US trade balance (7 February) South Korea BoP current account (8 February) India RBI policy meeting (8 February) US mortgage MBA applications (8 February) Fed’s Powell, Williams, Cook and Barr speak (8 February) Taiwan CPI inflation (9 February) Japan machine tool orders (9 February) US initial jobless claims (9 February) Fed’s Kashkari and Waller speak (9 February) Japan PPI inflation (10 February) China CPI inflation (10 February) Malaysia GDP (10 February) US University of Michigan sentiment (10 February) Fed’s Waller and Harker speak (10 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  
    Asia Morning Bites 13 March 2023

    Asia Morning Bites - 08.02.2023

    ING Economics ING Economics 08.02.2023 08:59
    Reserve Bank of India (RBI) will decide if the economy needs one last rate hike today. Powell's speech fails to deliver anything new.   Source: shutterstock Macro outlook Global Markets: It didn’t take much for markets to re-find their mojo after last Friday’s payrolls shock, just a speech from Fed Chair Powell, at which he was not materially more hawkish than he was after the recent FOMC decision. Powell said that the economy would need more interest rate rises to keep inflation on a consistent downward track. But that was not really a deviation from what had already been said, and equity markets saw that as an excuse to rally. For more background on the payrolls figure, the linked note from James Knightley is required reading. The S&P500 rose 1.29%, while the NASDAQ rose 1.9%. US Treasury Bond markets largely shrugged off Powell's remarks. Yields on 2Y US Treasuries declined less than a basis point and rose 3.4bp on 10Y bonds taking their yield to 3.674%. EURUSD is roughly unchanged from this time yesterday at 1.0725. The AUD has done better, rising to 0.6956 after a fairly hawkish RBA statement following their 25bp rate hike yesterday. See here for more details.  Sterling edged slightly higher against the USD and the JPY also advanced, moving down to 131.08. Asian FX was mixed. Propping up the bottom of the league table with a 1.24% decline was the PHP following poor inflation data yesterday. The MYR also lost more than a per cent, followed by the IDR and the VND. Outside the G-10 currencies, the SGD and THB were the best of a bad bunch yesterday, rising 0.33% and 0.2% respectively. G-7 Macro: Apart from Wholesale inventories, and mortgage applications in the US, this is a very thin day for macro in the G-7. A good day for some filing. India: At 1230 SGT/HKT, the Reserve Bank of India (RBI) will decide if it needs to raise rates any further. The overwhelming consensus is for a further 25bp rate hike taking the repo rate to 6.5%. There are, however, a couple of forecasters looking for no change. And we have some sympathy for that view. Policy rates are already above the rate of inflation, which itself has dipped back into the top of the RBI’s inflation target range. Sure, it isn’t low enough yet, but the arguments for yet more tightening when the current medicine seems to be working do not look overly compelling to us. If they do hike, we would be looking for some indication that rates may have peaked. If they don’t, the rhetoric can lean more towards policy becoming more data-dependent. In any case, we will know shortly after midday. What to expect: RBI meeting, Fed speakers South Korea BoP current account (8 February) India RBI policy meeting (8 February) US mortgage MBA applications (8 February) Fed’s Williams and Cook speak (8 February) Taiwan CPI inflation (9 February) Japan machine tool orders (9 February) US initial jobless claims (9 February) Fed’s Kashkari and Waller speak (9 February) Japan PPI inflation (10 February) China CPI inflation (10 February) Malaysia GDP (10 February) US University of Michigan sentiment (10 February) Fed’s Waller and Harker speak (10 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more    
    Asia Morning Bites 13 March 2023

    Asia Morning Bites - 09.02.2023

    ING Economics ING Economics 09.02.2023 08:40
    Taiwan's inflation this afternoon and US initial jobless claims to chew on tonight. More Fed speakers are scheduled, but markets are currently not paying them much attention Source: shutterstock Macro outlook Global Markets:  US stocks don’t seem to know which way to turn currently, and after Monday’s fall and Tuesday’s rise, Wednesday saw them falling again. There was nothing of note on the macro calendar, but a slew of Fed speakers kept up a hawkish background hum, which was probably the main cause of the falls. The S&P 500 fell 1.11%, and the NASDAQ fell 1.68%. Chinese stocks were down slightly, the HSI just barely lower by 0.07% and the CSI 300 down 0.44%. FX was quite whippy on Wednesday. EURUSD rose to 1.076 at one point but gave that all back to settle slightly lower at 1.0715. The AUD performed a similar set of acrobatics but finished close to where it started and is currently 0.6926. Cable actually performed a little better, the pound climbed up above 1.21 vs the USD, and though it too drifted lower, maintained a level of 1.2070. The JPY is at 131.34, slightly weaker than this time yesterday. Other Asian FX delivered a mixed bag, with the SE Asian currencies mainly stronger against the USD, but the more continuously traded currencies slightly softer. We will probably see some convergence with the SE Asian currencies coming more into line with their Northern peers this morning. US Treasury markets have gone back into “ignore the Fed” mode. 2Y US Treasury yields fell 4.4bp while yields on 10Y bonds fell 6.4bp to 3.61%. G-7 Macro: Preliminary German CPI for January is released today, and the consensus expects it will rise back up to 8.9% from 8.6% YoY in December. There is nothing else on the Macro calendar except for a couple more Fed speakers – Kashkari and Waller. So the hawkish tone should continue through today too. Markets may continue to ignore it ahead of next week’s CPI release. China:  Loan data released between 9 Feb and 15 Feb should show a jump in new yuan loans to over CNY 4 trillion. This is a seasonal phenomenon. Chinese banks usually book loans at the beginning of the year. Any amount over CNY 4.37 trillion will suggest strong loan demand from corporates that expect a strong recovery in the economy. Taiwan:  CPI inflation should be stable at around 2.7%YoY with WPI expected at around 5.3%YoY from 7.14%. In theory, this set of data should give Taiwan’s central bank an option to pause from March 2023. The downside of this would be a widening interest rate differential, which could induce portfolio capital outflows. In that case, the central bank could choose to just follow the Fed's hikes with small steps of 12.5bp from the current level of 1.75%. This would put extra pressure on the economy as we expect the semiconductor industry in Taiwan to experience a downward cycle in 1H23. This should result in a mild recession in Taiwan's economy in the same period. As such, the March meeting will be a difficult decision for Taiwan’s central bank. What to look out for: US initial jobless claims and Taiwan inflation data Taiwan CPI inflation (9 February) Japan machine tool orders (9 February) US initial jobless claims (9 February) Japan PPI inflation (10 February) China CPI inflation (10 February) Malaysia GDP (10 February) US University of Michigan sentiment (10 February) Fed’s Waller and Harker speak (10 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

    Asia Morning Bites - 10.02.2023

    ING Economics ING Economics 10.02.2023 08:27
    China's January inflation report, the latest RBA Statement on Monetary Policy and the US Michigan consumer sentiment are released today Source: shutterstock Macro and market outlook Global Markets: For the first time this week, we have seen some consistency from markets, as US stocks closed down for a second consecutive day after their roller-coaster ride earlier this week. There were some further Fed comments yesterday from Barkin along the lines of the Fed needing to “stay the course” on rates. But by now, such comments have to be viewed as part of the financial wallpaper and not contributing much to daily volatility. Bond yields reversed yesterday’s decline in yields. The 2Y US Treasury yield rose 6.1bp and the yield on the 10Y bond rose about the same to take it to 3.658%. EURUSD is fractionally higher than this time yesterday at 1.0737, though it briefly pushed through 1.0780 before retreating. The AUD followed a very similar path as did the GBP, though sterling did manage to hang on to more of its earlier gains. The JPY is also roughly unchanged from a day ago, after dropping to 130.345 at one stage, it is now 131.48. There is not too much to take away from the other Asian FX movements yesterday either. The PHP stands out as having done much better than the rest of the pack, rising 0.65%. The MYR stands at the other end of the spectrum, down 0.42%, but most of the rest are little changed on balance over the last 24 hours. G-7 Macro: 4Q22 Preliminary GDP in the UK is forecast to come in flat from the previous quarter. Canada releases labour market data, and from the US, we get the University of Michigan consumer sentiment and inflation expectations figures. Otherwise, it’s a quiet day. China: CPI inflation for January should continue to remain very moderate at around 2%YoY despite a rebound in service sector activity in January. PPI should still register a contraction on a yearly basis even though there was some pick up in steel prices recently as prices last year were even higher. The economy needs more industrial activity and infrastructure construction to push PPI high enough that the PBoC will need to increase interest rates, and that is very unlikely in 1H23, and also quite unlikely until 4Q23 or later. Australia: Adding some detail to the comments following their recent rate decision, the Reserve Bank of Australia (RBA) releases its “Statement on Monetary Policy” this morning. The main points to watch out for are justifications for the anticipated exceptionally slow decline in inflation back to the RBA’s target.   Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM What to look out for: US University of Michigan sentiment Japan PPI inflation (10 February) China CPI inflation (10 February) Malaysia GDP (10 February) US University of Michigan sentiment (10 February) Fed’s Waller and Harker speak (10 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    It Seems Likely Asia Will Have Relative Growth Outperformance

    It Seems Likely Asia Will Have Relative Growth Outperformance

    Franklin Templeton Franklin Templeton 11.02.2023 11:57
    Asia’s role in driving global growth Michael, let’s turn back to China, which recently announced the weakest economic growth it’s had since 1976, barring the first year of COVID in 2022.10 China’s population doesn’t seem to be growing like it used to. What is your outlook for China, which has so often been an engine for global growth? Michael: I would make a couple of points in terms of the short-term dynamics, but also the long-term structural evolution of China. For decades as China has grown and become a bigger and bigger economy, it is natural and expected that the rate of change will slow. That being said, last year’s severe lockdown amid zero-COVID policies really plunged that growth to an exceptionally low level. China’s growth rate was around 3% for the full year 2022, less than half of what it saw the year prior. Now we are seeing an amazing pivot where zero-COVID has been lifted and there is a full opening up of the economy across the board. This has led to virus surges and then immunities—a very accelerated path of working through COVID-19 compared to many other countries but reopening is underway and will lead to a resurgence in domestic economic activity. This will have some spillovers globally, whether it’s Chinese tourists traveling to other countries or further easing of supply chains that were still sticky. I think that is a meaningful positive that’s happening pretty quickly. That said, China will not likely have the type of growth surge it saw post-GFC, where there was incredible stimulus and demand for commodities globally and into China. So far, policymakers have indicated a lot more caution. There has been an acceleration of stimulus to the real estate market, and openness to stimulate monetary and fiscal policy, but of a lot lower magnitude than we’ve seen before. So, we see some acceleration in growth, but not the double or even high single-digit growth of decades past. Those days are behind us. So, Michael, you are probably one of the great investors over the last 10 years to spot the growth of emerging markets. What do the next five or 10 years look like for global growth, in your opinion? Michael: It’s not just about China, but if China could grow 4% to 5% over the next couple of years, given the size of its economy, the magnitude of that additive demand effect globally would be very meaningful. It’s an open question whether China can do that. There are always geopolitical risks and other things that could affect that outlook, but barring those, it does appear that’s manageable. I think the bigger question is about the economic model 10 years out. Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM Also, as Sonal mentioned, everyone thought Europe would face energy shortages this winter amid the ongoing Russia-Ukraine war, but because of factors such as warmer- than-expected weather, that hasn’t occurred. So, Europe seems unlikely to face the type of downturn that had been feared a few months ago, and I think the outlook can be considered fairly encouraging. When I think about pockets that can shine, I think about Asia. According to the latest International Monetary Fund forecast, GDP growth in the United States is seen at 1.4% this year, and Japan’s at 1.8%.11 Japan has not been in a position to outperform the US for over a decade. It’s a real meaningful adjustment. And emerging and developing Asia is looking at close to 5% growth this year. For the United States and Europe, maybe recession or no recession, we can debate that, but there is a downshift. That does not mean that growth everywhere is imploding, and Asia is one of the bright spots.   Currency considerations: moving away from US dollar-assets Michael, you’re really obviously looking at things more globally. How do you look at currencies within the context of this discussion? Michael: There are big geopolitical risks out there that can alter these central scenarios, and certainly in the currency space there is no certainty. But we are seeing some pretty big opportunities in non-dollar assets right now. We’ve started to see the dollar’s strength ebb over the past month, although these sorts of moves won’t necessarily be in a straight line. It’s not a uniform dynamic when looking at the US dollar versus various countries, so we have to be nimble and constantly adjust between countries, between regions. But generally, with fed funds getting close to a terminal rate— we can debate the exact number but we are getting close to that range—this seems to have taken away a big support element for the dollar. The recognition that growth in Asia is likely to outperform that of the United States’ is not without risks, but it seems likely Asia will have relative growth outperformance. And, the United States is still running these big fiscal deficits, and the debt ceiling debate keeps coming up, because the United States is spending a lot of money and still has a huge import bill. These issues are going to present investors with opportunities though. The pie is opening and there are different parts of the pie for investors to diversify with. I’d say one sliver of that is the non-dollar space. If people believe that the dollar is at a peak and has already started to decline, we think the non-dollar space is exciting. It’s not without risk, but valuations point to that as a good opportunity.
    FX Daily: Upbeat China PMIs lift the mood

    China was a leader in the region, buoyed by the government’s support for the economy to spur domestic demand and revive the property sector

    Franklin Templeton Franklin Templeton 11.02.2023 12:04
    Domestic demand in focus Emerging Market Insights Three things we ’ For illustrative purposes only and not reflective of the performance or portfolio composition of any Franklin Templeton fund. re thinking about today China’s reopening and impact on energy prices. China’s economic reopening is proceeding swiftly, despite the spike in COVID-19 cases in early January. Investor attention has recently switched to the reopening’s impact on energy prices. In contrast to Europe, China is experiencing a bitterly cold winter, with average temperatures 15ºF below average for the month of January.1 This is increasing demand for natural gas, the majority of which China imports from overseas. Liquid natural gas (LNG) prices in Asia and Europe have not yet reacted to the frigid weather in China, as Europe is experiencing temperatures on average 15ºF above average over the same period.2 However, if this were to change, LNG prices could rise, reigniting global inflation concerns and limiting China’s room for fiscal maneuvering given gas subsidies provided to households. Markets pivot toward growth. January witnessed a dramatic shift in the performance of growth stocks, with the MSCI Emerging Markets Growth Index posting double-digit returns.3 Value stocks witnessed positive performance but lagged behind. This is a reversal of the 2022 performance trend, wherein value stocks performed better than growth stocks as rising interest rates undermined the outlook for the latter. Looking ahead, the likelihood of a continuation of this January’s trend will likely be dependent on the direction of interest rates and the US dollar, among other factors. Emerging markets (EM) earnings outlook. 2023 Consensus expectations are for a recovery in emerging market earnings in , following a sharp decline last year. China’s reopening and economic recovery is expected to drive earnings, particularly in the financials and consumer discretionary sectors. High interest rates typically benefit banks, and a recovery in consumer technology business prospects looks likely to us, including ecommerce. Outlook The prospect of weaker external demand has led policymakers in EMs turn to domestic demand, in particular consumption, to shore up economic growth. For example, South Korea plans to offer large tax breaks to semiconductor and other technology companies investing within the country. The country is also planning to make investing in the local stock market easier for foreign investors and is providing subsidies for citizens to cope with increasing prices. Thailand has also approved a budget to boost tourism in the country, one of its biggest growth drivers. The longterm structural tailwind of EM consumption growth via expansion of the middle class and premiumization of buying patterns is now more significant than ever, in our view. The Chinese consumer opportunity is under the spotlight following the country’s economic reopening. Some US$2.6 trillion in Chinese bank deposits were amassed in 2022 — and middleclass households are looking to draw down these saving to spend on experiences, products and services. This is driving the premiumization trend opportunity at the heart of the EM consumption story we see. Other opportunities that look to boost EM growth besides Chinese consumption abound. For example, a surge in initial public offerings in the Middle East should help drive consumption via a trickle-down wealth effect. We believe these uncorrelated drivers of returns in EM economies present an investment opportunity which our team’s deep experience, local expertise and a bottom- up investment approach are poised to uncover. While this is a time of uncertainty, we continue to stress the importance of taking a long-term view and undertaking due diligence in making investment decisions. With over 30 years of experience in EMs, we are no strangers to market uncertainties and are experienced in investing through highly volatile periods, which we believe has helped us remain calm in the current market environment. We recognize that this period will pass, with history having shown us that markets should eventually stabilize and recover. Emerging markets key trends and developments Global equities began the year on a strong footing and nudged higher in January, with EM equities outpacing their developed market counterparts. Cooling inflation and growth in the US economy spurred sentiment, raising hopes that the economy may avoid a recession. Within EMs, analysts have raised 2023 earnings estimates for Asian companies given slowing inflationary pressures and China’s reopening.6 For the month of January, the MSCI Emerging Markets Index rose by 7.9%, while the MSCI World Index advanced by 7.1%, both in US dollars. Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM The most important moves in EMs in January 2023 Emerging Asian stocks finished the month higher, holding onto gains from the previous quarter. Once again, China was a leader in the region, buoyed by the government’s support for the economy to spur domestic demand and revive the property sector. A possible peak in COVID-19 infections, signs of normalization of China and the reopening of the China-Hong Kong border also boosted sentiment. Conversely, Indian stocks were under pressure from continued selling and higher oil prices. Latin American EM equities also swung higher in January, with all countries showing gains. Regional heavyweights Mexico and Brazil started the year on higher ground. Brazil reported a sharp drop in inflation at the end of 2022 due to fiscal measures and monetary policy tightening. Mexico saw economic activity rebound in 2022 as the tourism sector experienced a revival. Exports from the automotive sector also contributed to Mexican economic growth. EMs in Europe, Middle East and Africa also advanced as a whole but saw more moderate gains than Latin American and Asian EMs. Saudi Arabian shares ended higher amid a recovery in oil prices, and South African equities benefited from relatively cheap valuations and a slowing inflation rate. Conversely, Turkish stocks tumbled and ended a prior rally as investors shifted their risk appetite and took profits in a market which outperformed in 2022.
    Asia Morning Bites 13 March 2023

    Asia Morning Bites - 13.02.2023

    ING Economics ING Economics 13.02.2023 09:06
    Light data calendar on Monday so focus will be on Tuesday's US inflation report.  Source: shutterstock Macro and markets Global Markets: It was a fairly miserable end to the week for US stocks, though they managed to stabilize a bit after their earlier declines. The S&P 500 even managed a small gain on the day, though the NASDAQ went down 0.61%. Chinese stocks also did poorly on Friday. The CSI 300 dropped 0.59%, and the Hang Seng Index fell 2.01%. The evident deterioration in market sentiment had filtered through to renewed demand for the USD, and EURUSD has returned back below 1.07. Other G-10 currencies have also given up ground to the USD. The JPY has been a bit firmer than most, though did not hang onto gains after the announcement of the new BoJ Governor caused the currency to rally sharply on Friday. 10Y JGB yields ended slightly higher on Friday, at 0.49% after toying with crossing the 0.5% upper target rate. 2Y US Treasury yields rose 3.5bp, and the 10Y yield rose to 3.732%. Other Asian FX was softer against the USD on Friday, with most currencies losing around 0.4-0.5% against the USD. The THB topped that loss, falling 0.95%. G-7 Macro: Macro data was pretty thin on the ground on Friday. A flat 4Q22 GDP result for the UK saves them the embarrassment of having to declare a technical recession. There is nothing much of note on the calendar today either – the usual dribble of Fed speakers.  Tomorrow though, we get US January CPI inflation data, which could be interesting as there are some elements this month that mean the MoM figure could rise quite a bit., including for the core inflation rate. This is well priced-in. Nevertheless, it feels like this release has the scope to provide some decent market reaction and things may be relatively quiet ahead of this.   Read next: Campbell Bought A $100,000 Plane To Live In It| FXMAG.COM Japan: There was surprise news on Friday regarding the Bank of Japan. Local newswires reported that Prime Minister Kishida had picked Kazuo Ueda as the new BoJ governor. We think that Ueda, will not be as dovish as Amamiya, the current deputy governor, would have been if picked. But, if we put him in a dove-hawk spectrum, he will still probably lean towards dovish. That means that he is likely to shift monetary policy only gradually and the BoJ's data dependency - inflation and wage growth -  will become more important. Ueda’s hearing is going to be around 24 Feb. The market will likely stay in its current range until he reveals his philosophy on monetary policy on that day. Singapore:  The final estimate for 4Q2022 GDP settled at 2.1%YoY compared to the 2.2% initial estimate - likely due to the downside surprise noted in non-oil domestic exports.  Growth momentum should remain challenged this year as global trade moderates while inflation stays elevated. What to look out for: US inflation report Singapore GDP (13 February) India CPI inflation (13 February) Fed’s Bowman speaks (13 February) Japan GDP and industrial production (14 February) Australia Westpac consumer confidence (14 February) US CPI inflation and NFIB small business optimism (14 February) Fed’s Barkin speaks (14 February) Fed’s Harker and Williams speak (15 February) South Korea unemployment (15 February) India trade balance (15 February) Indonesia trade balance (15 February) US industrial production and retail sales (15 February) Japan trade balance (16 February) Australia unemployment (16 February) Bank Indonesia policy (16 February) Bangko Sentral ng Pilipinas policy (16 February) US initial jobless claims and housing starts (16 February) Fed’s Mester speaks (16 February) Fed’s Bullard and Cook speak (17 February) Singapore NODX (17 February) Thailand GDP (17 February) US import prices (17 February) Fed’s Mester, Barkin and Bowman speak (17 February) Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 14.02.2023

    Asia Morning Bites - 14.02.2023

    ING Economics ING Economics 14.02.2023 08:34
    Japan's Government will formally nominate Kazuo Ueda today as the new Governor of the BoJ. US inflation data will dominate markets today    Source: shutterstock Macro and Markets outlook Global Markets: Market risk sentiment staged a recovery yesterday ahead of today’s US inflation figures, so it may not last. The S&P 500 rose 1.14%, while the NASDAQ went up 1.48%. Chinese stocks also improved, with the CSI 300 gaining 0.91%, though the Hang Seng index dropped 0.12%. US Treasury yields took a breather yesterday after recent gains. The 2Y yield was unchanged at 4.517%, while the yield on 10Y bonds dropped back by 3bp to 3.70%. This recovery in sentiment and lower yields will have supported the EUR against the USD, and EURUSD has crept back above 1.07 to 1.0724 currently. Other G-10 currencies followed suit. The AUD has risen back to just below 0.697, Cable has pushed higher to 1.2139, though the JPY lost ground yesterday, rising to just below 133 before settling back at around 132.4. Asian FX was mostly weaker against the USD yesterday, though will likely track yesterday’s G-10 moves in early trading. The KRW was the weakest APAC currency yesterday, rising to 1277. G-7 Macro: Today will be totally dominated by the US CPI release, where the scope for market surprises is high. The consensus expectation is for the headline inflation rate to fall to 6.2% YoY from 6.5% on the back of a 0.5% MoM increase in the index. That itself is inconsistent, as a 0.5% increase should result in an inflation rate of 6.3% or 6.4%. So something has gone wrong with the consensus numbers. Then there is the core rate, which is expected to fall to 5.5% from 5.7% on a 0.4% MoM increase. At least those numbers stack up. The small firm NFIB survey is also released today but will be buried behind CPI noise. India:  CPI inflation in India rose to 6.52% YoY in January, up from 5.72% - a much larger increase than the consensus had been expecting. The increase totally vindicates the last RBI rate decision and maintenance of the tightening bias. There was no change in the core measures of inflation, which remain above the RBI’s upper target bound of 6%. Further tightening at forthcoming meetings looks probable until these core measures fall consistently back below 6%.  Japan: 4Q22 GDP data was disappointing. The economy grew by 0.2% QoQ sa, but was weaker than expected (vs -0.3% downgraded 3Q22 and 0.5% market consensus). We believe that the modest recovery will continue this year, but today’s data support the Bank of Japan’s argument that the recovery is still fragile and that easy monetary policy is needed. The incoming new governor will find it difficult to start any normalization. Private consumption (0.5%) led the quarterly growth, but investment (-0.5%) and inventories (-0.5 ppt) partially offset overall growth. We believe that the government’s travel subsidy program supported service activity and private consumption, but weaker external demand led the drop in equipment investment. For external components, exports rose 1.4% while imports fell -0.4%, thus net exports contributed 0.3pp to growth. A stronger yen and weaker commodity prices probably worked in favour of improving net export contributions. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM What to look out for: US inflation report Japan GDP and industrial production (14 February) Australia Westpac consumer confidence (14 February) US CPI inflation and NFIB small business optimism (14 February) Fed’s Barkin speaks (14 February) Fed’s Harker and Williams speak (15 February) South Korea unemployment (15 February) India trade balance (15 February) Indonesia trade balance (15 February) US industrial production and retail sales (15 February) Japan trade balance (16 February) Australia unemployment (16 February) Bank Indonesia policy (16 February) Bangko Sentral ng Pilipinas policy (16 February) US initial jobless claims and housing starts (16 February) Fed’s Mester speaks (16 February) Fed’s Bullard and Cook speak (17 February) Singapore NODX (17 February) Thailand GDP (17 February) US import prices (17 February) Fed’s Mester, Barkin and Bowman speak (17 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Disappointing activity data in China suggests more fiscal support is needed

    Asia Morning Bites - 15.02.2023

    ING Economics ING Economics 15.02.2023 08:27
    After all the hype - the US inflation miss doesn't cause too much upset in markets. Korean Jan unemployment rate down and PBoC later. Retail sales out from the US too   Source: shutterstock Macro and markets Global Markets: The disappointingly high January CPI numbers did less damage to markets than you might have expected. Yes, 2Y US Treasury yields did push up to 4.615%, rising 9.8bp on the day. But the yield on 10Y US Treasuries only rose 4.2bp to 3.743%, which was muted (all things considered). James Knightley dissects the numbers  in this note.  Equity markets were also fairly relaxed about the inflation figures, maybe taking the view that this really is just a blip on the road to lower inflation and eventually lower rates – despite the usual “higher for longer” rumblings from various Fed speakers yesterday. The S&P500 ended virtually unchanged on the day, and the NASDAQ actually rose 0.57%.  There was quite a lot of volatility in currency markets. EURUSD traded up to 1.0803 at one stage, and as low as 1.0713, but ended just slightly higher at 1.0737. Other G-10 currencies, (AUD and GBP) were also both whippy, but on balance, slightly stronger vs the USD over the last 24 hours.  The JPY continues to steer its own path and has drifted higher to reach almost 133 currently.  Other Asian FX has been mixed, with the KRW registering a small (0.63%) gain at one end of the pack, and the PHP, dropping 0.15% at the other. Cautious optimism in markets, if it persists, may suggest a slightly positive day for Asian fx today. G-7 Macro: The details of the US CPI release were, in some senses, not that surprising. The MoM 0.5% gain in the headline and 0.4% gain in the core were all consensus views, though the year-on-year inflation rates were higher for both measures, something we touched on in our note yesterday in terms of the inconsistency with the consensus numbers. So it may have been that we were not alone in giving little weight to the YoY consensus view, which may be why markets seemed so ambivalent about it.  One figure that may not get as much attention as it perhaps deserves, is the real hourly earnings numbers, which are a synthesis of these CPI figures and the hourly earnings data released with the labour report. This now shows real earnings growth falling at a 1.8% YoY pace, a bit lower than the 1.6% rate of decline for December. Related to earnings strength, retail sales due out today in the US are slated to bounce after the horrible December figures. Auto sales are likely to help lift the figure. A small bounce in January industrial production is also on the cards. China: The PBoC will announce its 1Y MLF rate decision today. We expect them to keep the rate at 2.75% as the economy is recovering and the central bank will want to wait and see how the strong loan growth in January will transmit to business and investment activity. From recent open market operations, it seems that the central bank is stabilising interest rates via active liquidity management. This is another sign that the central bank will stay put this month. South Korea: The jobless rate in January fell unexpectedly to 2.9% (vs revised 3.1% in December, 3.3% consensus). This could have occurred for two reasons - severe weather possibly prevented workers from accessing the job market and also, the Lunar New Year holidays overlapped during the survey period. Consequently, due to these idiosyncratic factors, we don’t actually think labour conditions improved in January after all. The details of the data also were pretty weak. Manufacturing employment fell sharply (-67K) for the fifth straight month, with a total of -149K hiring cuts since September 2022. Another major industry, construction (-5K), has shed jobs for three months in a row. The service sector modestly added jobs (36k) so it seems that this sector continues to hold up relatively well.  Korean import prices fell for the third straight month in January (-2.3% MoM, nsa). Global commodity prices rose but currency effects dominated the decline in import prices. The recent cooling of import prices is expected to help ease consumer price inflation in the coming months. On the other hand, consumer prices are expected to slow down only gradually in the first quarter, as the fallout from last year’s high import prices will come early this year after a time lag. Singapore: Finance Minister Wong announced that he expects a “slight deficit” of 0.1% of GDP for the 2023 budget (from 0.3% in 2022).  Wong also indicated that the fiscal authorities would be extending a support package for lower-income households to cope with the high cost of living as inflation should remain high.  Wong also noted that growth could be challenged as trade slows amidst a global downturn and as tensions between global superpowers rise.  Elevated inflation coupled with slowing growth mean that the Monetary Authority of Singapore (MAS) will have to strike a balance between remaining hawkish but at the same time mindful of Singapore’s export competitiveness.  Indonesia: Indonesia is planning to ask exporters to keep a portion of export proceeds onshore for a period of 3 months to a year in order to bolster the domestic supply of dollars.  Details on this regulation have yet to be released.  The move is being deployed to provide support for the IDR but the implementation of such a measure may still lead to increased volatility as this could be viewed as a form of capital control.  What to look out for: US retail sales South Korea unemployment (15 February) India trade balance (15 February) Indonesia trade balance (15 February) US industrial production and retail sales (15 February) Japan trade balance (16 February) Australia unemployment (16 February) Bank Indonesia policy (16 February) Bangko Sentral ng Pilipinas policy (16 February) US initial jobless claims and housing starts (16 February) Fed’s Mester speaks (16 February) Fed’s Bullard and Cook speak (17 February) Singapore NODX (17 February) Thailand GDP (17 February) US import prices (17 February) Fed’s Mester, Barkin and Bowman speak (17 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    China: manufacturing activities slipped back to contraction in April. Technical look at China A50

    Asia week ahead: Australian wages, Singaporean inflation, Bank of Korea meeting

    ING Economics ING Economics 16.02.2023 11:56
    Some of the highlights in Asia next week include Australia’s wage data, the BoK meeting, Taiwan's export orders and Singapore’s CPI  Source: Shutterstock Australia's wage price index will provide direction for policymakers Australia is set to release fourth-quarter wage price index data on 22 February. This was a keenly watched data point in 2021 when the Reserve Bank of Australia (RBA) tied its cash rate target to wage growth rising to a level consistent with target inflation of 3.5-4%. In the last quarter, the wage price index grew by 3.1%, which means that there is still room to inch higher, while inflation is currently running at 8.4% YoY. If the wage price index grew by 1.0% in the fourth quarter from the third – as it did in the third quarter from the second, the index would finally reach 3.5%. Although this very lagging data point is mainly of academic interest, a rising number would still encourage hawkish rhetoric from the RBA. BoK to pause on Thursday? The Bank of Korea will meet on Thursday. We believe that the BoK’s rate hike cycle ended with the 25bp hike in January. But given that January's consumer price index picked up again, we are expecting the BoK to maintain its hawkish stance. China's loan prime rates to remain unchanged Chinese banks will announce possible changes to loan prime rates (LPR) next week. Given that the economy is recovering and that the People's Bank of China left the 1Y Medium Lending Facility rate (MLF) unchanged, we predict that the chance for a change in the LPR is small. Moreover, banks have been told by the government to offer lower interest rates on mortgages to provide support to the economy. This would result in banks not having enough room to squeeze net interest margins. Weak semiconductor demand could hurt Taiwan's economy Export orders and industrial production will likely give clues about how bad semiconductor demand was in January. We expect declines of around 10-20% year-on-year for both. Final GDP data should show a slight yearly contraction; the advance estimate was -0.86% YoY. We expect Taiwan to enter a mild recession in the first half of this year given weak demand for semiconductors, the main pillar of the economy. Read next: Tesla Will Make Supercharger Network, Visa Will Allow The Use Of Cryptocurrencies To Settle Transactions| FXMAG.COM Singapore CPI Inflation report We could see headline inflation tick lower, but core inflation will likely remain elevated at 5.2% YoY as the latest increase in the goods and services tax kicks in. Finance Minister Lawrence Wong announced a fresh round of subsidies to help households deal with the rising cost of living. Wong believes inflation will remain elevated for at least the first half of the year.  Persistent price pressures should keep the Monetary Authority of Singapore (MAS) in hawkish mode although it needs to strike a delicate balance as slowing global trade threatens to negatively impact the export sector.  Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets  
    Asia Morning Bites 13 March 2023

    Asia Morning Bites - 17.02.2023

    ING Economics ING Economics 17.02.2023 08:27
    The Fed's Bullard floats the idea of a 50bp rate hike in March - markets are not yet convinced, but it is worth watching this space.  In Asia, Singapore's NODX contracted for a 4th month while Thailand reports 4Q GDP today.   Source: shutterstock Macro outlook Global Markets: Strong January US PPI data probably didn’t help market sentiment to recover yesterday, and US stocks had another down day. The S&P 500 dropped 1.38% while the NASDAQ was down 1.78%. Chinese stocks were mixed. The CSI 300 dropped 0.73% but the Hang Seng Index rose 0.84%. US Treasury yields have slowed their rise. 2Y yields were up less than a basis point, though there was another 5.6bp rise in the 10Y yield taking it to 3.86%, within spitting distance of 3.90%, which a number of market commentators have said is a target for re-entering long bond positions. This hasn’t yet become a consensus view, but it was interesting yesterday to see the St Louis Fed’s James Bullard raising the prospect of returning to 50bp hikes at the next Fed meeting. This was also supported by Loretta Mester. Barkin and Bowman speak later today. The USD remains pretty strong not surprisingly. EURUSD has dropped to 1.0664. There was a more moderate view expressed by the ECB’s Lane, who noted that much of the effect of earlier tightening was still in the pipeline. While Stournaras said that the updated economic projections due in March should decide the magnitude of the next rate increase. The AUD was also weak, not helped by yesterday’s poor labour data. Cable also slid back below 1.20 but the JPY was fairly steady at just over 1.34. Yesterday was quite mixed for other Asian FX. There were small gains from the PHP, IDR, and INR, but currencies were flat or registered small losses elsewhere. G-7 Macro:  US PPI data came in stronger than expected in January. Final demand PPI rose 0.7% MoM, against expectations for a 0.4% MoM rise. There were above-consensus rises for core measures too. Somewhat curiously, the number of housing starts declined in January, which does put some strain on the weather explanation for some of the other data flow recently, and so we have to be alert to the possibility that there is more to the recent strong data than we have been thinking up until now. This is quite a worry. There isn’t a lot on the G-7 calendar today. Singapore: Singapore reported January non-oil domestic exports (NODX) today.  NODX slid for a 4th straight month, declining 25%YoY as demand faded sharply.  Shipments of electronics fell 26.8%YoY while petrochemical exports dropped 26.6%.  Exports to major trading partners like China (-41.1%YoY) and the US (-31.5%YoY) contracted although exports to the European Union managed to jump 21.4%.   The reopening of China from strict lockdown measures could help revive demand in the coming months but for now, we see a couple more months of contraction for NODX.      Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM What to look out for: Fed speakers on deck Singapore NODX (17 February) Thailand GDP (17 February) US import prices (17 February) Fed’s Barkin and Bowman speak (17 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

    Asia week ahead: Australian wages, Singaporean inflation, Bank of Korea meeting - 18.02.2023

    ING Economics ING Economics 18.02.2023 09:02
    Some of the highlights in Asia next week include Australia’s wage data, the BoK meeting, Taiwan's export orders and Singapore’s CPI  In this article Australia’s wage price index will provide direction for policymakers BoK to pause on Thursday? China's loan prime rates to remain unchanged Weak semiconductor demand could hurt Taiwan’s economy Singapore CPI Inflation report   Shutterstock Australia’s wage price index will provide direction for policymakers Australia is set to release fourth-quarter wage price index data on 22 February. This was a keenly watched data point in 2021 when the Reserve Bank of Australia (RBA) tied its cash rate target to wage growth rising to a level consistent with target inflation of 3.5-4%. In the last quarter, the wage price index grew by 3.1%, which means that there is still room to inch higher, while inflation is currently running at 8.4% YoY. If the wage price index grew by 1.0% in the fourth quarter from the third – as it did in the third quarter from the second, the index would finally reach 3.5%. Although this very lagging data point is mainly of academic interest, a rising number would still encourage hawkish rhetoric from the RBA. BoK to pause on Thursday? The Bank of Korea will meet on Thursday. We believe that the BoK’s rate hike cycle ended with the 25bp hike in January. But given that January's consumer price index picked up again, we are expecting the BoK to maintain its hawkish stance. China's loan prime rates to remain unchanged Chinese banks will announce possible changes to loan prime rates (LPR) next week. Given that the economy is recovering and that the People's Bank of China left the 1Y Medium Lending Facility rate (MLF) unchanged, we predict that the chance for a change in the LPR is small. Moreover, banks have been told by the government to offer lower interest rates on mortgages to provide support to the economy. This would result in banks not having enough room to squeeze net interest margins. Weak semiconductor demand could hurt Taiwan’s economy Export orders and industrial production will likely give clues about how bad semiconductor demand was in January. We expect declines of around 10-20% year-on-year for both. Final GDP data should show a slight yearly contraction; the advance estimate was -0.86% YoY. We expect Taiwan to enter a mild recession in the first half of this year given weak demand for semiconductors, the main pillar of the economy. Singapore CPI Inflation report We could see headline inflation tick lower, but core inflation will likely remain elevated at 5.2% YoY as the latest increase in the goods and services tax kicks in. Finance Minister Lawrence Wong announced a fresh round of subsidies to help households deal with the rising cost of living. Wong believes inflation will remain elevated for at least the first half of the year.  Persistent price pressures should keep the Monetary Authority of Singapore (MAS) in hawkish mode although it needs to strike a delicate balance as slowing global trade threatens to negatively impact the export sector.  Key events in Asia next week Refinitiv, ING TagsAsia week ahead Asia Pacific Asia Markets   Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    National Bank of Poland Meeting Preview: Anticipating a 25 Basis Point Rate Cut

    Singapore’s Largest Bank DBS Declared A Special Dividend

    Saxo Bank Saxo Bank 20.02.2023 09:26
      Summary:  Earnings focus moves to Asia this week, even though US retail earnings from Walmart and Home Depot will still be key. Outlook from airlines like Singapore Airlines and Qantas, as well as commodity giants like BHP and Rio and Singapore’s agri player Wilmar, will add more colour on the potential pickup in Chinese demand. China’s tech sector and its progress on ChatGPT style products will also be a key focus as Alibaba and Baidu report. Singapore bank earnings also in focus. ChatGPT craze on test in China technology sector Alibaba (BABA:xnys) and Baidu (09888:xhkg) report earnings this week, and the key focus will be on the outlook on the potential for artificial intelligence (AI) as well as the impact from easing crackdown of the Chinese government on the internet companies. While Baidu is likely to see the ongoing recovery in its advertisement business and upside in cloud opportunity become more supportive, key focus for investors will be on any further details on its ChatGPT-style product which the company is expected to launch in March. Alibaba is also likely in the race for an AI Chatbot, but earnings will take some time to capture the real enthusiasm from China’s reopening. Both Alibaba and Baidu have seen a rebound in their share prices this year, market will be focused on evidence of an earnings recovery and a strong outlook to sustain the price momentum. Travel demand outlook from airline stocks on watch Earnings reports from Singapore Airlines (C6L:xses), Qantas Airlines (QAN:xasx) and Air New Zealand (AIZ:xasx) will be key to assess how the Asia reopening theme has been playing out. More importantly, the outlook for the travel and tourism sector will be on watch in anticipation of the return of Chinese tourists. US airlines earnings results for Q4 have been strong amid booming demand and a decline in jet fuel prices, and a similar momentum remains likely from Asian airline results due in the week. Singapore Airlines has recently reported a 400% increase in passenger traffic in January from last year amid year-end traffic and the Lunar New Year holiday, but it is still trading below historical averages and at a discount to its regional peers. Qantas is expected to return to profitability, and also appears undervalued despite being up 55% from its 2022 lows. Air New Zealand also reports this week. Singapore banks remain a key dividend play Singapore’s largest bank DBS (D05:xses) reported bumper Q4 earnings last week, and declared a special dividend. The other two banks, UOB (U11:xses) and OCBC (O39:xses) will be reporting this week and are also likely to show resilient earnings. UOB reports on Thursday pre-market and may be able to garner gains in net interest income and show a greater impact from the acquisition of Citi’s retail banking business, but that will be offset by lower wealth management fee amid continued investor caution. OCBC's profit remains more vulnerable than that of DBS and UOB due to its large wealth-management and insurance businesses, which account for 50% of non-interest income. Commodity giants BHP, Rio Tinto and agricultural producer Wilmar also on tap Resource company BHP Group (BHP:xnys) reports earnings before Australia open on Tuesday, and dividend payout is expected at USD 0.88, well below the USD 1.50 declared in February 2022 amid the Oz Minerals acquisition being in play. Market expects lower revenues and earnings compared to last year due to the weakness in iron ore and copper prices. Rio Tinto (RIO:xlon) reports full year results on Wednesday, and plans for Pilbara (PLS:xasx), its lithium arm, will be key to watch. The focus will also be on BHP and Rio’s upcoming projects and outlook for the year ahead, with supply constraints reigning and expectations of Chinese demand picking up. Another lithium player Allkem (AKE:xasx) also reports results this week. On the agri side, Singapore’s Wilmar (F34:xses) is expected to report record profits for 2022 and outlook is likely to remain positive as well with China demand picking up. Source: Asia: Key earnings this week will add more color on the potential from incoming China demand boost | Saxo Group (home.saxo)
    Disappointing activity data in China suggests more fiscal support is needed

    The Reopening Of China Will Contribute To Growth In The Tourism Sector

    Saxo Bank Saxo Bank 21.02.2023 10:23
    Summary:  Outbound tourism from China has been the biggest contributor to global tourism pre-pandemic. With border measures being eased after three years, pent-up demand and accumulated savings of Chinese consumers will likely mean a surge in outbound travel demand over the next few years. The big and early winners of that will potentially be in Asia as the number of flights to the West destinations still remain limited. We have identified a list of stocks that provide exposure to the Asian hospitality sectors that mostly serve Chinese tourists. Chinese travelers dominate global tourism China’s outbound travelers have been the biggest contributor to global tourism before the pandemic. Before the pandemic, Chinese travelers made 155 million trips abroad in 2019 and spent almost $255 billion, amounting to 14% of global tourism revenue. After three years of pandemic restrictions, China has relaxed its Covid contained measures in a quicker-than-expected manner since November. We have been of the view that the biggest pivot for 2023 has been the faster-than-expected China reopening, and that will continue to be the key theme for traders and investors this and next year as the Chinese demand comes back online to drive local, regional and global markets. China Outbound Tourism Research Institute (Cotri) expects Chinese travelers to take 110 million international trips this year, which is about two-thirds of the 2019 level. This could mean an estimated spend of about $180 billion globally, which could be a source of revival for the hospitality industry that has seen a big void from the absence of Chinese tourists in the last three years. Since the reopening of China and easing of border restrictions in January, travel pickup has been restrained with concerns around spread of the virus and risks of new variants. However, there has been no sharp rise in cases reported even after the Lunar New Year celebration at the end of January, and China saw an average of 410,000 exits and entries per day, up 120% over the Lunar New Year holiday last year, as per the National Immigration Administration. Further recovery should start to pick up now into the second quarter as the May 1 Labor Day holiday approaches and gather further pace in the second half of the year and into the national holidays in September and October. China has a five-day holiday for Labor Day and a week off in early October for National Day, and both these are considered to be the golden periods for travel. Asia tourism growth to lead the global recovery While it is prudent to expect that full Chinese travel demand recovery will take a few years, there is no doubt that the floodgates are about to be open. The big and early winners of that will likely be some of the Asian travel operators as regional destinations remain the top choice for most Chinese travellers. These will include Hong Kong, Macau and Thailand, followed by Japan, South Korea, Australia and other Southeast Asian countries. Hong Kong received only 370,000 visitors from the mainland in 2022, down from around 50 million pre-pandemic. Expectations are for this to be revived to 60-70% this year, suggesting about 30-35 million tourists from China. Thailand expects to host 7-8 million Chinese tourists in 2023, also a 60-70% recovery from 2019 levels. Travel to further destinations in Europe and North America could take about an year or more to recover as the limited number of commercial flights and visa backlogs restrain a pickup. A lack of flights keeps the prices higher, although that may be offset slightly by higher budgets driven by accumulated savings over the pandemic years. Chinese travellers are also likely to chose safer destinations as travel resumes, given the surge in anti-Asian sentiment globally since the emergence of the pandemic. Asia Pacific Tourism equity theme basket We have launched a new Asia Pacific Tourism equity theme basket to capture the expectations of an improvement in China’s outbound tourism. The list contains predominantly Asian stocks across booking platforms, airlines, airport services, hotels, casinos and restaurants in countries that will likely see the biggest inflow of tourists from China over the course of the year. We have also included the key Thailand index given its heavy dependence on Chinese tourism. The basket represents a total market value of $476.6 billion with Booking Holdings leading the pack. Sales growth has returned to a positive territory over the last year after the Covid shock but earnings have remained under pressure. Analyst generally expect earnings rebound for these companies as Chinese travel rebounds, and this is reflected in median price targets being 12% above the current price currently. Source: Bloomberg, Saxo Risks to the view A lack of international flights, as well as the shortages of pilots and crew, is keeping travel prices higher and remains the biggest risk for the Chinese outbound travel recovery. In January, the capacity of global carriers' flights traveling to and from China was only 11% of the level compared with 2019. In April, the number is expected to rise to 25%, according to travel data provider Cirium. Higher prices could force Chinese consumer to push their international holiday plans to late 2023 or 2024. Other risks are seen from new Covid variants or mass spread of infections prompting another round of travel curbs around the region. Meanwhile, if economic growth across the region slows down enough to erode the purchasing power of consumers, that could mean a setback on demand for travel.   Source: The upcoming surge in Chinese outbound travel demand | Saxo Group (home.saxo)
    Asia Morning Bites 13 March 2023

    Asia Morning Bites - 22.02.2023

    ING Economics ING Economics 22.02.2023 08:55
    Sentiment sours as markets price in higher-for-longer rates Source: shutterstock Macro outlook Global Markets: US stock markets came back from the President’s Day holiday in a foul mood. The S&P 500 dropped 2%, and the NASDAQ fell 2.5%.  Rising bond yields won’t have helped sentiment at all. Yields on the 2Y US Treasury rose 10.6bp, to 4.723%, while the 10Y yield rose 13.8bp to 3.953%. The implied rate on Fed funds from futures has risen to a peak of 5.365% for the August contract, suggesting that a peak upper bound of 5.5% is being increasingly priced in. These moves helped the USD and pushed EURUSD down to 1.0652. Other G-10 currencies, AUD and JPY were also weak. Sterling bucked the trend after stronger-than-expected PMI data suggested that a recession might be avoided. Asian currencies were mostly weaker on Tuesday, with the exception of the VND. The THB was the worst performing on the day falling 0.63% against the USD to 34.65. G-7 Macro: Tuesday saw the release of masses of PMI data across the G-7 and as mentioned, a stronger-than-expected UK services sector PMI – it rose to 53.3 from 48.7 - was one of the standouts. US service sector PMI data also recovered above the threshold 50 level, and there were improvements in Germany’s ZEW survey too. This is followed by Germany’s Ifo survey today. The US releases mortgage applications data today, though the main focus will be on Fed minutes at 3 am tomorrow morning SGT/HKT Australia: The Wage price index is not the binding constraint it once was now that inflation is running at 8.4%YoY. The rise to 3.3% from 3.1% in 4Q22 was a little less than had been expected. Nevertheless, this is not likely to encourage thoughts that the RBA will change its tightening path any time soon. Taiwan: Final GDP for 4Q22 should contract 0.9%YoY, slightly worse than the advance estimate of -0.8%YoY, reflecting the impact on the economy of weak demand for electronics, mainly semiconductors. This weakness should continue at least in 1Q23, which implies the chance of a slight recession in Taiwan. There is a hope that China's recovery can lift demand for semiconductors but this is still uncertain as car sales should be quite flat after 2020-2022 subsidies on electric vehicles, and demand for laptops might not be strong compared to the one-off demand surge seen during Covid. The last hope is on smartphones, and for Taiwan, it means the iPhone, which is still unknown given the weak sales of the latest model. What to look out for: FOMC minutes New Zealand trade balance (22 February) Australia wage price index (22 February) New Zealand RBNZ policy (22 February) Taiwan GDP (22 February) Hong Kong GDP (22 February) South Korea retail sales (22 February) US MBA mortgage application (22 February) FOMC minutes (23 February) Singapore CPI inflation (23 February) Hong Kong CPI inflation (23 February) South Korea BoK policy (23 February) EZ CPI inflation (23 February) US GDP, initial jobless claims, core PCE (23 February) Japan CPI inflation (24 February) Malaysia CPI inflation (24 February) Singapore industrial production (24 February) US personal spending, University of Michigan sentiment and new homes sales (24 February) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Belgian housing market to see weaker demand and price correction

    The Real Estate Market In China Has A Chance To Revive, Indonesia Economy Is More Resilient

    Kamila Szypuła Kamila Szypuła 23.02.2023 10:38
    The pandemic, Russia's attack on Ukraine will cause a series of difficulties, especially economic ones. Asian countries play an important role in the global economy, and their condition is particularly important. China, after covid restrictions, is back to recovery, including the real estate market. Indonesia is showing that despite external influence it is doing well.   In this article: Chinese households Indonesia is doing well The value of muni ETFs Chinese households There is no shortage of problems caused by the pandemic in the Chinese economy. The real estate market will definitely weaken. The number of families who choose not to invest in real estate has increased significantly. China's real estate sector, once a key driver of the world's second-largest economy, fell into a deep crisis in 2022, with real estate investment and sales plummeting, which took a toll on house prices. But there is an optimistic signal. More households were considering buying a home or investing in other assets in the coming three months, according to a survey by a research institute and think tank within the Ant Group and Southwestern University of Finance and Economics published Wednesday. The survey also shows that respondents' willingness to invest in domestic stocks, funds and foreign asset classes has also increased. Stabilizing the crisis-hit real estate sector will be a key challenge this year for policy makers as they attempt to kick-start economic recovery. Much depends on how quickly people start spending again after the government abruptly lifted strict COVID-19 restrictions in December. The number of Chinese households that decided against buying a home soared in the fourth quarter of 2022, a private survey showed, as COVID infections and lockdowns sapped sentiment, while property foreclosures soared as the economy slowed. More here: https://t.co/vo2GeVfK8u — Reuters Business (@ReutersBiz) February 23, 2023 Read next: Tesla Opens Its Global Engineering Headquarters In Palo Alto, California| FXMAG.COM Indonesia is doing well As the world's largest economy, what the US does has major implications around the world, including in Indonesia. Therefore, Indonesia is taking steps to make its economy more resilient so that it can withstand global shocks such as inflation, especially from the United States. Indonesia has coordinated its fiscal and monetary policy tools well to contain inflation and sustain growth. Unlike the US, where inflation remains stubbornly high, inflation in Indonesia fell in January. The headline consumer price index, the main indicator of inflation, fell to 5.28% yoy in January from 5.51% in December. The Indonesian minister said that despite the global slowdown, Indonesia's economic growth remains strong and domestic demand continues to improve. Indonesia says it's working to become more resilient to inflation shocks from the U.S. https://t.co/jdgiXla4Ka — CNBC (@CNBC) February 23, 2023 The value of muni ETFs In the past, ownership of municipal bonds was largely limited to very wealthy investors: it takes significant assets to build a diversified portfolio of municipal bonds, and investing in them requires a high level of expertise and management between brokers and clients. However, the introduction of exchange-traded funds (ETFs) holding an assortment of municipal bonds has created an attractive option for investors. Morgan Stanley Research expects the value of muni ETFs to double to $200 billion in assets under management by 2026, about a third of the time it takes for this asset class to reach $100 billion. Municipal exchange-traded fund assets are growing, which could improve market structure and give more households the potential to reap tax benefits. Learn more: https://t.co/WvxFskSqe5 #ETFs — Morgan Stanley (@MorganStanley) February 22, 2023
    Disappointing activity data in China suggests more fiscal support is needed

    Asia week ahead: growth and inflation reports from major economies

    ING Economics ING Economics 23.02.2023 12:17
    Next week’s Asia calendar features GDP data from India and Australia, inflation from Australia, Japan and Indonesia, Singapore’s retail sales and PMI data from Korea, Japan, China and Taiwan Source: Shutterstock India's economy not slowing anytime soon High-frequency activity indicators for the fourth quarter showed little sign of slowing in India, and as a result, we are looking for the year-on-year growth rate to come in at 4.0% or even higher. Substantial base effects make the interpretation of a single quarter’s data virtually impossible. But a figure of 4.0% in the fourth quarter will deliver a growth rate of 6.7% for India for the calendar year of 2022 and put it on course to achieve around 6.3% for the fiscal year that ends in March 2023. We anticipate another year of growth in the region of 6% in 2023 following a supportive budget which contains a big increase in capital investment in infrastructure. Inflation to remain resilient in Australia The end of 2022 was characterised by extensive flooding in some parts of Australia, and we would not be surprised to see this have some impact on the 4Q22 GDP numbers that are due on 1 March. Tighter monetary policy will likely exert a slight drag on the economy, especially from the more interest-sensitive parts of the economy, such as housing. We anticipate GDP growth of 0.5% quarter-on-quarter (2.5% year-on-year), which will still deliver a respectable 3.6% growth rate for the full year 2022. Australia also releases January CPI inflation data. The December figures provided a rude shock to those who thought that inflation had peaked, with the unprecedented 27% month-on-month increase in holiday prices the culmination of the economic re-opening colliding with seasonal holidays. We do anticipate some unwinding of that result, though there is likely to be plenty of residual strength in other parts of the CPI result to limit the decline in the inflation rate from 8.4% to 8.2%YoY (0.3%MoM). Trade, PMI, and industrial production data from Korea In Korea, we expect exports to deepen their contraction further in February mainly due to the sharp decline in semiconductor exports. Meanwhile, manufacturing PMI is expected to rise marginally on the back of the optimism surrounding China’s reopening, but remain below 50. Given sluggish exports in January, we expect January’s industrial production to decline but retail sales could rebound as severe weather may have boosted weather-related consumption. So, a weak start to the quarter will likely weigh on first quarter GDP, which could translate into a contraction.    PMI, jobless rate and Tokyo CPI from Japan With a relatively late reopening of the economy, Japan should continue to recover on the back of the government support programme. Thus, we believe that service PMI and hiring are expected to improve. However, January’s cold wave probably had a negative impact on manufacturing activity and consumption, thus we foresee a decline in the January industrial production numbers. Meanwhile, Tokyo CPI inflation is expected to come down quite sharply to a 3% level from the recent peak of 4.4% due to the government energy subsidy programme and base effects. China PMI data to be released next week In China, we expect manufacturing activity to pick up in February as factories resumed work after the long holiday. Services PMI however could dip to just above 50 after the spike in spending related to the holiday which was likely offset by an increase in financial and real estate services. Upcoming Taiwan manufacturing PMI In the coming week, Taiwan is set to release manufacturing PMI. We expect the numbers to move higher from 44.3 to 47.0 in February after the Chinese New Year. Export orders for semiconductors, however, were still in contraction, which is not a good sign for the prospects of manufacturing activity. Indonesia's core inflation to stay flat in February Headline inflation in Indonesia could tick higher to 5.4%YoY but the core inflation reading is expected to remain flat in February. Bank Indonesia (BI) cited slowing inflation as one of the main reasons for pausing at its most recent policy meeting. Price pressures have eased somewhat but BI might refrain from cutting policy rates until we see a more pronounced slide in core inflation. Singapore retail sales to slip in January? Retail sales in Singapore are expected to post a modest contraction in January after a surprise gain in December 2022. The implementation of the latest round of goods and services tax may have had a negative impact, although solid department store sales may have provided a boost to overall retail sales. Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsEmerging Markets Asia week ahead Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia week ahead: Policy meetings in China and the Philippines

    Asia week ahead: growth and inflation reports from major economies - 25.02.2023

    ING Economics ING Economics 25.02.2023 12:02
    Next week’s Asia calendar features GDP data from India and Australia, inflation from Australia, Japan and Indonesia, Singapore’s retail sales and PMI data from Korea, Japan, China and Taiwan In this article India’s economy not slowing anytime soon Inflation to remain resilient in Australia Trade, PMI, and industrial production data from Korea PMI, jobless rate and Tokyo CPI from Japan China PMI data to be released next week Upcoming Taiwan manufacturing PMI Indonesia’s core inflation to stay flat in February Singapore retail sales to slip in January?   Shutterstock India’s economy not slowing anytime soon High-frequency activity indicators for the fourth quarter showed little sign of slowing in India, and as a result, we are looking for the year-on-year growth rate to come in at 4.0% or even higher. Substantial base effects make the interpretation of a single quarter’s data virtually impossible. But a figure of 4.0% in the fourth quarter will deliver a growth rate of 6.7% for India for the calendar year of 2022 and put it on course to achieve around 6.3% for the fiscal year that ends in March 2023. We anticipate another year of growth in the region of 6% in 2023 following a supportive budget which contains a big increase in capital investment in infrastructure. Inflation to remain resilient in Australia The end of 2022 was characterised by extensive flooding in some parts of Australia, and we would not be surprised to see this have some impact on the 4Q22 GDP numbers that are due on 1 March. Tighter monetary policy will likely exert a slight drag on the economy, especially from the more interest-sensitive parts of the economy, such as housing. We anticipate GDP growth of 0.5% quarter-on-quarter (2.5% year-on-year), which will still deliver a respectable 3.6% growth rate for the full year 2022. Australia also releases January CPI inflation data. The December figures provided a rude shock to those who thought that inflation had peaked, with the unprecedented 27% month-on-month increase in holiday prices the culmination of the economic re-opening colliding with seasonal holidays. We do anticipate some unwinding of that result, though there is likely to be plenty of residual strength in other parts of the CPI result to limit the decline in the inflation rate from 8.4% to 8.2%YoY (0.3%MoM). Trade, PMI, and industrial production data from Korea In Korea, we expect exports to deepen their contraction further in February mainly due to the sharp decline in semiconductor exports. Meanwhile, manufacturing PMI is expected to rise marginally on the back of the optimism surrounding China’s reopening, but remain below 50. Given sluggish exports in January, we expect January’s industrial production to decline but retail sales could rebound as severe weather may have boosted weather-related consumption. So, a weak start to the quarter will likely weigh on first quarter GDP, which could translate into a contraction.    PMI, jobless rate and Tokyo CPI from Japan With a relatively late reopening of the economy, Japan should continue to recover on the back of the government support programme. Thus, we believe that service PMI and hiring are expected to improve. However, January’s cold wave probably had a negative impact on manufacturing activity and consumption, thus we foresee a decline in the January industrial production numbers. Meanwhile, Tokyo CPI inflation is expected to come down quite sharply to a 3% level from the recent peak of 4.4% due to the government energy subsidy programme and base effects. China PMI data to be released next week In China, we expect manufacturing activity to pick up in February as factories resumed work after the long holiday. Services PMI however could dip to just above 50 after the spike in spending related to the holiday which was likely offset by an increase in financial and real estate services. Upcoming Taiwan manufacturing PMI In the coming week, Taiwan is set to release manufacturing PMI. We expect the numbers to move higher from 44.3 to 47.0 in February after the Chinese New Year. Export orders for semiconductors, however, were still in contraction, which is not a good sign for the prospects of manufacturing activity. Indonesia’s core inflation to stay flat in February Headline inflation in Indonesia could tick higher to 5.4%YoY but the core inflation reading is expected to remain flat in February. Bank Indonesia (BI) cited slowing inflation as one of the main reasons for pausing at its most recent policy meeting. Price pressures have eased somewhat but BI might refrain from cutting policy rates until we see a more pronounced slide in core inflation. Singapore retail sales to slip in January? Retail sales in Singapore are expected to post a modest contraction in January after a surprise gain in December 2022. The implementation of the latest round of goods and services tax may have had a negative impact, although solid department store sales may have provided a boost to overall retail sales. Key events in Asia next week Refinitiv, ING TagsEmerging Markets Asia week ahead Asia Markets Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Disappointing activity data in China suggests more fiscal support is needed

    Asia Morning Bites - 28.02.2023

    ING Economics ING Economics 28.02.2023 08:25
    India reports 4Q22 GDP data later tonight followed by US consumer confidence.  Source: shutterstock Macro and market outlook Global Markets: US stocks opened higher on Monday, but then lost ground for much of the rest of the session leaving them with only small gains at the close. The S&P 500 rose 0.31% and the NASDAQ rose 0.63%. Chinese stocks had an even less inspired day. The CSI 300 lost 0.42% while the Hang Seng Index was down 0.33%. The re-opening story doesn’t seem to be providing much uplift currently. US Treasury yields drifted a little lower. The 10Y bond yield fell 2.9bp to 3.914%, while the 2Y dropped 3.5bp to 4.778%. The EUR rallied against the USD in late trading, finding its way back above 1.06. The AUD has not followed suit, yet, and sits at 0.674, about the same as this time yesterday. Likewise, the JPY, which remains roughly unchanged at about 136. The GBP, in contrast, has climbed back to 1.2067. This difference in G-10 performance may be linked to the EU-UK agreement on the Northern Ireland protocol yesterday though this was well flagged and seems a bit of a stretch. Central bank speakers likewise were out on the newswires from both the Fed (Jefferson and Mester) and ECB (Vujcic), though no new ground was broken, with both sides sticking to the story of persisting with tightening until the inflation battle is won. Vujcic speaks again today, along with Philip Lane (Macro-Financial Stability). The bulk of the Asian FX pack lost ground to the USD yesterday with the KRW and PHP leading the pack weaker. There were small gains from the CNY which now sits at 6.9441. G-7 Macro: US Durable goods orders out yesterday are always a bit of a struggle to disentangle, but the 3m moving average of the capital goods orders and shipments are one way of tackling the noise inherent in the series. Both series indicate a slight softening from December, in keeping with senior loan officers’ surveys of tightening lending standards and weaker borrowing demand. This is worth watching. In contrast, pending home sales for January picked up 8.1% MoM against expectations for only a 1.0% gain. Another seasonal anomaly? US house price data along with inventories and the Conference Board consumer confidence surveys form the main items of interest in the day ahead along with some preliminary French inflation figures. India: At 8pm SGT tonight, India releases 4Q22 GDP results. The consensus is for a 4.7%YoY outcome. We favour a slightly smaller growth rate, but one that would nevertheless, cement a 6%+ growth outcome for the full year. Solid momentum despite the external backdrop is likely to help India secure another 6%+ growth outcome in 2023.    Japan: Monthly activity data for January was mixed. Industrial production (IP) was weaker than expected while retail sales came in stronger. Industrial production declined for the first time in three months in January, weighing on the country’s recovery momentum. Production fell 4.9% MoM in January (vs +0.3% in December, -2.9% market consensus). January export data had already suggested the weak IP in January which is partially related to China’s lunar new year holidays and we expect a rebound in February. But the inventory ratio continued to rise (2.5% vs 1.5% in December), suggesting that the inventory cycle is not helpful for a meaningful pick up in production anytime soon. Meanwhile, retail sales rose a solid 1.9% MoM sa in January (vs 1.1% in December, 0.4% market consensus).  Apparel (7.7%) and motor vehicles (8.1%) rose the most. As we have previously argued, Japan’s economy should recover in the current quarter, mainly led by services and consumption while production remains sluggish. What to look out for: Indian GDP Japan retail sales and industrial production (28 February) Australia retail sales (28 February) Singapore unemployment (28 February) Thailand trade balance (28 February) India GDP (28 February) US wholesale inventories and Conference board consumer confidence (28 February) South Korea trade balance (1 March) Australia GDP (1 March) Japan Jibun PMI (1 March) Regional PMI manufacturing (1 March) China PMI and Caixin PMI (1 March) Indonesia CPI inflation (1 March) US ISM (1 March) South Korea industrial production (2 March) Hong Kong retail sales (2 March) US initial jobless claims (2 March) Japan Tokyo CPI inflation and Jibun PMI services (3 March) China Caixin PMI services (3 March) Singapore retail sales (3 March) US ISM services (3 March) Read this article on THINK TagsEmerging Markets Asian macroeconomics Asia Pacific Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites 13 March 2023

    Asia Morning Bites 1 March 2023

    ING Economics ING Economics 01.03.2023 08:28
    Australia's GDP and inflation both come in below expectations. Upcoming, China and other Asian PMI reports and Indonesia's inflation  - a busy day in Asia Source: shutterstock Global Macro and Markets Global Markets: Further uncertainty plagued equity markets yesterday. Both the S&P 500 and NASDAQ did trade up during the session but failed to hold on to gains and both ended slightly down from the previous day’s close. Chinese equities were mixed, with the Hang Seng making a 0.79% decline, while the CSI 300 pushed up 0.63%. US Treasury yields reversed the previous day's declines and the 2Y yield rose 3.8bp, while the 10Y was basically unchanged at 3.92%, though was as high as 3.98% at one stage. The USD is a bit stronger than this time yesterday, trading at 1.0578 against the EUR currently, though it was also a choppy session, and it rose above 1.064 before retreating. The AUD has also been very choppy, but currently is a bit down on this time yesterday, at 0.6732, and it is a similar story for most of the G-10 currencies. Big on volatility, but low on direction. That just about sums up the Asian FX group, where, with the exception of the THB, which lost 0.69% yesterday, and the PHP, which gained 0.36%, most of the other currencies lie pretty close to where they were a day ago. G-7 Macro: Disappointing French and Spanish inflation data yesterday has encouraged thoughts of a 4% refi rate from the ECB and we get some additional German CPI inflation numbers today that could cement these thoughts. US Conference Board data showed confidence weakening from the previous month. The manufacturing ISM index later today is a timely reminder that payrolls is looming, though due to the shortness of the last month, will not be released until next Friday. Considering what payrolls did to markets last month, it is no wonder markets are a bit jittery. Australia: 4Q22 GDP came in a lot weaker than had been expected rising just 0.5%QoQ, though thanks to upwards revisions to previous data, the year-on-year rate managed 2.7% as expected. We have also had January 2023 CPI inflation data. And that too came in softer than expected, at 7.4%YoY, after last month's surprise surge to 8.4%.  India: India delivered 4.4% YoY growth in 4Q22, which equates to a 6.7% YoY growth rate for 2022 as a whole. The release also shows growth momentum remaining strong as India heads into 2023, and we anticipate another 6%+ growth figure this year. China: Official PMI data for February help fill the data vacuum of the Lunar New Year period until we get the next hard data releases in a couple of weeks. We are expecting the PMIs to support a view of a modest recovery in February after a stronger January.   Indonesia:  Inflation is set for release today.  The market consensus points to inflation ticking higher to 5.4%YoY (from 5.3%) although core inflation could inch lower to 3.2% (from 3.3%).  Bank Indonesia recently declared victory in the inflation fight, keeping policy rates untouched at the last policy meeting.  With BI indicating it would not be hiking rates anymore this year, the IDR is expected to come under additional depreciation pressure.  What to look out for: China manufacturing and non-manufacturing PMI China PMI and Caixin PMI (1 March) Indonesia CPI inflation (1 March) US ISM (1 March) South Korea industrial production (2 March) Hong Kong retail sales (2 March) US initial jobless claims (2 March) Japan Tokyo CPI inflation and Jibun PMI services (3 March) China Caixin PMI services (3 March) Singapore retail sales (3 March) US ISM services (3 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Bank of Japan keeps the rate unchanged, Tokyo Core CPI increases to 3.5%

    Asia Morning Bites - 02.03.2023

    ING Economics ING Economics 02.03.2023 07:22
    Sentiment rises in China but stays sour in the US as economic data diverges  Source: shutterstock Global Macro and Markets Global Markets: Another day, another drop. US equities fell again yesterday. Not by much, but it is all adding up. The S&P 500 has now retraced almost two-thirds of the gains it made at the beginning of the year, before payrolls and other data knocked sentiment. There was a far better performance in Chinese stocks, as yesterday’s stronger than expected PMI numbers showed the re-opening to be stronger than had been imagined. The Hang Seng rose 4.21% and the CSI 300 rose 1.41%.  US Treasury yields nosed higher again yesterday. The 2Y Treasury yield rose 6.1bp to 4.876%, while that on the 10Y rose 7.2bp to 3.992%, and even went above the 4% level at one point. Is this it? We may have to wait until payrolls next week to find out. Despite the poor risk sentiment, and rising yields, the USD was pressured yesterday, and EURUSD rose to 1.0669. The AUD also rose, though not before it had a brief lurch downwards on the weaker growth and inflation figures (see here for more details).  Cable didn’t get much of a lift, and our UK economist and FX strategists don’t see the Northern Ireland Protocol agreement with the EU as a game changer for sterling. The JPY has been on a bit of a roller coaster ride but is only fractionally stronger than this time yesterday at 136.04. Most of the Asia FX pack made gains against the USD yesterday, led by the CNY which has gained to 6.8698. G-7 Macro: German CPI for January remained at 8.7%, highlighting the difficulty that lies ahead for the ECB, which has already raised the refi-rate to 3.0%, and clearly still has a lot of work to do. The Eurozone CPI inflation figures are released today along with Euro area unemployment data and the ECB also publishes an account of the February policy meeting. The US data yesterday was mixed at best, softer production indicators and weaker construction combined with an increase in the ISM prices paid index also suggest that the US economic mix is not very favourable. There isn’t much worth looking at on the US calendar today. Maybe jobless claims ahead of next week’s payrolls. South Korea: Industrial production (IP) rebounded 2.9% MoM sa in January, the first rise in seven months. Semiconductor production fell (-5.7%) but a huge increase (111.0%) in mobile phones & camera modules and a decent rise in autos (9.6%) led the gains. We believe that the deviation between semiconductors and autos will continue for a while, but based on the weak February export outcome (-7.9%YoY), we expect manufacturing IP to turn soft again in February. Retail sales declined 2.1% MoM sa for a third consecutive monthly decline as reopening effects dissipated and higher interest rates dragged down consumption. Facility investment also fell 1.4%MoM sa mainly led by the decline in chip manufacturing equipment. Summing up the recent export and production data together, we expect GDP in the current quarter to contract (-0.2%QoQ sa) and downside risks are growing. Read next: Rivian Automotive estimates production of 50,000 vehicles in FY23 | FXMAG.COM What to look out for: US initial jobless claims Hong Kong retail sales (2 March) Thailand trade balance (2 March) US initial jobless claims (2 March) Japan Tokyo CPI inflation and Jibun PMI services (3 March) China Caixin PMI services (3 March) Singapore retail sales (3 March) US ISM services (3 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The RBA’s aggressive rate tightening cycle will be continued

    Asia week ahead: Reserve Bank of Australia meeting plus regional inflation data

    ING Economics ING Economics 02.03.2023 12:04
    The Reserve Bank of Australia (RBA) meeting will be the highlight for the week while several regional economies report inflation data Source: Shutterstock More confirmation needed before pausing rate hikes in Australia Following the larger-than-expected decline in January’s inflation figures, coupled with a slowdown in GDP growth in the fourth quarter, we expect that the upcoming RBA meeting is going to be much more interesting than has been the case recently. Although the January inflation rate had dropped a full percentage point, inflation still stands at 7.4% year-on-year – way higher than the RBA will be comfortable with. The RBA will want to see confirmation of a downward trend in inflation, not just a reversal of seasonal spikes to even consider pausing its current 25 basis point per meeting tightening strategy. The softer-than-expected 4Q22 GDP number was encouraging but we would need to see confirmation from other data to conclude that a slowdown is underway, and of a sufficient magnitude to see inflation fall back within the RBA’s 2-3% target range. Consumer prices expected to fall in Korea Consumer inflation is expected to fall to 4.9% in February (vs 5.2% in January). The recent increase in utility fees likely raised prices for eating out and manufactured products. On the other hand, gasoline prices continue to decline and the impact of the drop in jeonse prices (rental) is expected to appear in the index. Thus, we expect consumer prices to cool out gradually in February. Foreign reserves and trade data from China China will report its February foreign exchange reserves data next week. The weaker yuan should lead to some capital outflows for the month and a slight fall in foreign exchange reserves.  As capital flow channels have widened via stock and bond connects, capital movements in 2023 will be more reflective of exchange rate movements. China will also release international trade data for January and February. We expect the yearly contraction to continue for exports and imports in the first two months. Import growth should contract less than exports due to strong consumption demand in China. However, imports for processing trade should continue to be affected by slowing global demand. Trade data and CPI from Taiwan Taiwan will report trade data for February. Both exports and imports should continue to be in yearly contraction, around 15% to 20%. This reflects falling demand for semiconductor chips as global demand weakens. Meanwhile, Taiwan's CPI inflation should edge lower as the economy faces external demand headwinds that should have driven wage growth lower.  This trend should allow the central bank (the Central Bank of the Republic of China) to pause its rate hike cycle. The central bank will likely be watching the Fed fund rate movements closely. There is a possibility that the CBC could cut interest rates in the fourth quarter. Philippine inflation to sustain upward trend? Price pressures in the Philippines remain evident and we could see another month of elevated inflation. The January report caught many by surprise and we could be in for another upside surprise for headline inflation again. We expect headline inflation to be 8.7%YoY or higher as food inflation is still expected to be substantial. This should prompt another rate hike from the Bangko Sentral ng Pilipinas (BSP) at its March meeting although BSP Governor Felipe Medalla signalled his preference for only a 25bp rate hike given the supply-side nature of the price increases.   Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    FX Markets React to Rising US Rates: Implications and Outlook

    A last hurrah for Asian inflation

    ING Economics ING Economics 04.03.2023 10:54
    The US is not alone in seeing an unwelcome acceleration in inflation in January – a number of Asian economies have seen something similar. But for many of Asia's economies, this is likely to be the peak, or if not, close to it   In this article It has been a bad start to the year for inflation in Asia A mixed bag of reasons for stubborn inflation Policy prognosis equally mixed   Shutterstock It has been a bad start to the year for inflation in Asia As well as the unwelcome resilience of inflation in the US and Europe, a number of Asian economies have provided upside misses to consensus inflation forecasts in the last month or two.  The biggest upset was in Australia, where monthly inflation rates in December jumped up to 8.4% year-on-year from 7.3% previously, a gain of more than a full percentage point. This has proved short-lived, with the January inflation figures already retreating back to 7.4%. There were also big increases in inflation in India and the Philippines.  Besides the reversal in Australian inflation, most other economies in the region have seen at least some small increase in the inflation rate between December 2022 and January 2023, and only in Thailand were the declines also particularly substantial with the year-on-year inflation rate dropping to 5.02% from 5.89%.  Inflation is still rising in most Asian economies CEIC, ING A mixed bag of reasons for stubborn inflation Exactly why inflation across most of the region staged a further increase in January seems to differ from economy to economy. Doing a lot of the damage to the Australian numbers in December was an eye-popping 30% increase in the costs of holidays – as reopening collided with seasonal holidays. That dropped out again in January, but it doesn't tell us much about the months ahead.  In India, food, as is often the case, was the main culprit. Rising wheat prices coupled with smaller declines in vegetable prices than in the previous month were responsible for much of the increase in the year-on-year rate, though base effects also played their role.    Japan's inflation, as the Bank of Japan has been keen to point out as it sticks to its ultra-easy monetary policy, remains largely driven by supply-side factors. Exclude food and energy, and the core rate is only 1.9% YoY even as headline inflation rose to 4.2% in January from 4.0% in December. The Philippines is a slightly different story, with contributions from almost all categories, presenting Bangko Sentral ng Pilipinas (BSP) – the central bank of the Philippines – with more of a price-taming headache than many of its Asian peers. And inflation rates also continued to push higher in Vietnam, Taiwan, South Korea and Singapore in January.   Policy prognosis equally mixed With a mixed bag of reasons for the persistence of inflation across the region, there is no single policy remedy or likely outcome as we head further into the year. For some economies, the January figures do look like the last hurrah of earlier price increases. And with last year's price levels strongly affected from February onwards by the Russian invasion of Ukraine, year-on-year comparisons should help to bring year-on-year inflation rates down, absent any further positive price-level shocks, which against the backdrop of tense geopolitics and increasingly frequent climate change-related extreme weather events, is not a caveat you can lightly make these days. Certainly, there are some economies in Asia where the inflation-taming struggle is not yet won, and the backdrop of a Federal Reserve also hard at work squeezing inflation out of the US economy will keep central banks of the more inflation-challenged economies in tightening mode.  For others, it has felt for a few months now that the worst of the inflation crisis has passed. And while it may not be the right time to start talking about an Asian pivot, if inflation rates do begin to ease lower over the middle of the year, the monetary tightening already put in place across the region could begin to look not only adequate but perhaps a little excessive, raising the prospect of some paring of rates further down the line. For now, though, such thoughts are not even on the long-range radar, though it would probably only take a month of benign price data to bring such thoughts back into view.    TagsAsian rates Asian inflation Asian economics   Read the article on ING Economics   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites 13 March 2023

    Asia Morning Bites - 08.03.2023

    ING Economics ING Economics 08.03.2023 08:19
    Short-term yields surge after Powell's speech, driving USD appreciation. ADP and Beige book later ahead of Friday's payrolls.  Source: shutterstock Global Macro and Markets Global Markets: The positive tone at the end of last week abruptly vanished yesterday as global equities took another lurch downwards. In the US, the S&P 500 dropped by 1.53%, and the NASDAQ fell 1.25%. In China, the CSI 300 fell by 1.46%, and the Hang Seng also declined by 0.33%. Bond yields rose very sharply yesterday. The yield on 2Y US Treasuries rose 12.2bp to 5.008% after Jerome Powell’s hawkish testimony to the Senate Banking Committee (See more below), though the 10Y yield was virtually unchanged at 3.964%. One of those yields probably needs to change now to deliver some consistency. Either the 10Y needs to rise to reflect the higher for longer rate view, or the 2Y yields need to revert to their previous level. Ahead of Friday’s payrolls release, it’s a toss-up which of these transpires. The sharp rise in shorter maturity yields sent EURUSD into a steep dive, which has seen it reach 1.0550. This has also brought the AUD down to 0.6590, which was probably not helped by yesterday’s “dovish hike” by the RBA. Cable has dropped to 1.1829 and the JPY has pushed up to 137.20. Other Asian FX was also weaker yesterday. The CNH weakened by 0.74% to 6.9959. The SGD was also one of the weaker currencies on the day, falling 0.72% to 1.3315. G-7 Macro: Despite the overtly political stage for Powell’s speech overnight, he chose to go large on the inflation-fighting credibility theme, rather than provide any more soothing noises about the economy and soft versus hard landings. At one stage, Powell even appeared to raise the prospect of a return to larger rate hikes, saying, “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes”. See James Knightley’s note for more detail.  Today’s top data pick will be the ADP report. Admittedly, it was not even close to predicting last month’s 517,000 payrolls gain, but it is still the least bad labour market data point for indicating payrolls numbers. There is almost certainly no substance to the consensus 200K figure for this release. The Bank of Canada has a rate setting meeting today and is expected to leave rates at 4.5%. Tonight, we get the Fed’s Beige book. China: The Two sessions unveiled some changes to government structure, including a larger financial regulator, the State Administration of Financial Supervision and Administration (SAFSA), which will be responsible for monitoring and regulating risks in different parts of the financial system. After the changes are implemented, SAFSA will replace the existing regulator, CBIRC. We believe this will be helpful for risk prevention and earlier detection of risks in the financial system. We don't think SAFSA will tighten regulations immediately. Instead, we think it will gather more information from financial institutions in different areas and create a new model to monitor risk before implementing more regulations.    In addition to the expanded financial regulator, there have been other changes in technology, data, agriculture, ageing, intellectual property and public complaints departments or bureaus. All in all, these policy-making and oversight functions will be more centralized - some of them falling directly under the State Council. The State Council will be able to make better use of the information it has to make more efficient and effective policies, though possibly at the expense of some flexibility of a less centralized system. What to look out for: US ADP report and Powell's testimony to Congress US trade balance and ADP employment (8 March) Fed’s Powell speaks (8 March) Japan GDP (9 March) China CPI inflation (9 March) Malaysia BNM policy meeting (9 March) US initial jobless claims (9 March) Fed’s Barr speaks (9 March) Japan PPI inflation (10 March) US nonfarm payrolls (10 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

    Asia Morning Bites - 09.03.2023

    ING Economics ING Economics 09.03.2023 08:19
    China inflation out this morning with a focus on PPI. US initial jobless claims and Challenger job cuts up next before we get payrolls data on Friday Source: shutterstock Global Macro and Markets Global Markets: US Equities struggled for most of Wednesday, though managed a late rally to leave them up on the day, though barely. The S&P 500 gained 0.14%, while the NASDAQ rose 0.4%. Equity futures are currently giving no clear direction. Chinese stocks did less well. The CSI 300 fell 0.36%, while the Hang Seng index dropped 2.35%. The Fed’s Powell repeated his earlier remarks about the prospects for higher rates and possibly bigger hikes at round-2 of his testimony to Congress, which didn’t help sentiment (see more below). 2Y US Treasury yields continued to move higher, reaching 5.05%, with Fed funds futures implied peak rates reaching 5.685% in the October contract. That seems a bit high - but ask us again after tomorrow’s payrolls. The 10Y US treasury yield also rose, but only by 2.8bp and still sits below 4% - just  - at 3.991%.  EURUSD retreated back to 1.0548 yesterday and showed few signs of rising. Other G-10 currencies followed suit. The AUD dropped to 0.6591. Cable is now down to 1.1848, and the JPY has risen to 137.27. Other Asian FX was also mostly weaker yesterday, with the KRW, THB and MYR all weakening by more than a per cent against the USD. The CNY was roughly stable at 6.9592. G-7 Macro: Although essentially the same message, Powell’s tone yesterday to Congress was regarded by many commentators as slightly softer, noting that data would be the final arbiter of the size of the next hike and that no decision on the size of the March hike had yet been made.  The Fed’s Beige Book, which was released in the early hours of our Asian morning, showed about half the districts reporting economic activity expanded at a modest pace, with the rest showing little or no change. A couple of districts reported stronger retail spending than normal for the time of year, and travel and tourism held up strongly. The ADP survey showed job gains of 242,000 in February, though the January figure was not much changed at 119K. It’s hard to see this as clarifying the employment picture ahead of tomorrow’s payrolls release, which remains a lottery. Overall, this latest set of data suggests that the Fed still has work to do, though how much remains an open question, and the expectations for economic activity in the months ahead, according to this latest Beige Book, were fairly downbeat. Eurozone GDP for 4Q22 managed zero growth, thereby just enabling the region to avoid reporting a technical recession, with 3Q22 growth of just 0.1%. This is nit-picking though. The Bank of Canada left rates unchanged at 4.5%. US Challenger job cuts and jobless claims will be in focus later. China: CPI should show a slower YoY increase in February as consumption was quieter in the month after the long holidays in January. PPI should still be in yearly contraction. We believe that infrastructure growth will only pick up slowly. The central government is concerned about the rising risk of local government debt. As such, infrastructure, the funding for which comes mainly from local governments, will only be a supplementary measure to support growth when consumption increases slower than expected.  What to look out for: China inflation and US initial jobless claims China CPI and PPI inflation (9 March) Malaysia BNM policy meeting (9 March) US initial jobless claims (9 March) Fed’s Barr speaks (9 March) Japan PPI inflation (10 March) US NFP (10 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 10.05.2023

    Asia week ahead: Flurry of data from China plus key central bank meeting

    ING Economics ING Economics 09.03.2023 13:28
    Next week’s data calendar is packed, with a data dump from China, India’s inflation reading, Australia’s labour figures, Japan’s trade data and the Bank Indonesia policy meeting Source: Shutterstock Upcoming activity data from China China will release two months’ worth (January and February) of activity data on Wednesday, and we should see an approximate picture of economic growth in the first quarter. We expect retail sales to rise about 5% year-on-year, year-to-date in February, which looks optimistic, but industrial production may increase a more modest 2%YoY YTD as export-related manufacturing declines due to weak external demand. The surveyed jobless rate could improve to 5.3% (5.5% previously), which will provide support for consumption in the coming months. Meanwhile, home prices should be stable in the first two months but should pick up more in the coming quarters as there are still down payments on deposit accounts waiting for confidence in the housing market to return. Overall, we believe this set of data should point to a stable recovery of the economy. Given the data, it is likely that the People's Bank of China will keep the 1Y medium-term lending facility (MLF) interest rate unchanged at 2.75%, and there should be no net injection of liquidity from MLF. Has inflation peaked in India? On Monday, India releases CPI data for February. Widespread declines in the price of foodstuffs in February together with flat prices for gasoline should see the headline inflation rate dip back below the Reserve Bank’s 6% upper target bound – well below the consensus forecast of a more modest decline from 6.5% to 6.3%. More importantly, we may also see core measures dipping lower too, which could also encourage thoughts that the RBI may be near to or have even peaked already in this rate cycle.   RBA to look to upcoming labour data for confirmation of peak rates Australian labour data for February will be interesting after two months of decline. The upcoming labour data will give an indication as to whether the previous releases were arbitrary or if there is confirmation that the economy really is slowing down. With the Reserve Bank of Australia indicating that it is getting close to peak cash rates, a much weaker employment number could even give rise to thoughts that rates may have already peaked at 3.6%. Read next: Fed Chair testimony summary: Powell emphasized that the final decision has not been made and it would largely depend on the jobs data coming out on Friday | FXMAG.COM Jobless rate expected to rise in Korea Korea’s jobless rate is expected to rise as the slowdown in construction and manufacturing activity continues while IT and financial services also begin to trim down headcount. Rising unemployment shouldn’t be a major concern for the Bank of Korea just yet as the unemployment rate should stay close to the relatively healthy level of 3% for some time. Upcoming trade data from Japan Japan’s February trade figures should begin to normalise with the unwinding of Lunar New Year effects. Exports are expected to rise 9.0%YoY (vs 3.5% in January). Core machinery orders data is also expected to rise as the domestic economy continues to expand with the services sector leading the recovery. Can Bank Indonesia pause again? Bank Indonesia (BI) meets next week to decide on policy. BI recently declared victory over inflation with Governor Perry Warjiyo indicating that he need not hike rates anymore this year. Decelerating core inflation could give BI a reason to keep rates untouched although recent pressure on the Indonesian rupiah (IDR) could force the central bank to take a hard look at a potential rate hike.  Possible bounce back for trade in Indonesia and the Philippines Trade activity should pick up for both Indonesia and the Philippines, however, the trend of worsening trade balances should persist for both economies. Indonesia’s hefty trade surplus had previously been a key support for the IDR in 2022. This trend has since reversed and we are likely to see a further narrowing of the trade surplus to roughly $3.3bn by February. Meanwhile, the Philippine trade deficit is expected to remain substantial and settle at around $4.3bn. The narrowing trade surplus in Indonesia and the persistent trade deficit in the Philippines point to depreciation pressure for both the IDR and the Philippine peso in the near term. Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    China: manufacturing activities slipped back to contraction in April. Technical look at China A50

    Asia Morning Bites - 10.03.2023

    ING Economics ING Economics 10.03.2023 15:51
    Trouble at US Banks roils US markets ahead of payrolls. Kuroda's last meeting at the BoJ today...   Source: shutterstock Global Macro and Markets Global Markets: The main story from markets overnight is the astonishing slump in shorter-maturity Treasury yields following their recent run-up. The 2Y US Treasury yield dropped a remarkable 20bp to 4.87%. The catalyst for the move appears to be the US banking sector, where one firm wound up operations and another undertook a large capital-boosting operation, encouraging speculation that other financial institutions may be suffering too. The S&P 500 and NASDAQ both dropped around 2%. 10Y Treasury yields fell too, but only 8.8bp to 3.903%, opening up some clear space below the 4% hurdle it has been hovering around recently. There don’t appear to have been any notable Fed speakers yesterday, and the slight pick up in jobless claims won't have played much of a role in yesterday's market gyrations. EURUSD crept higher on the back of lower US yields, reaching 1.0581. The AUD had a go at moving higher too, but struggled and has flopped back to 0.6588. Sterling looked more convincing, and the pound rose to 1.1919 against the USD, while the JPY  strengthened to 136.16 on the day of Kuroda’s last policy meeting. Many pundits believe this is still a live BoJ meeting, though we aren’t expecting any fireworks. There was very little movement in the Asian FX pack yesterday. G-7 Macro: It’s all about payrolls again today, though, in all fairness, the unemployment rate and wage growth figures will also be worth a close look. The consensus figure is 225K, which if achieved, will make a 50bp hike at the 23 March meeting a toss-up. Market chatter seems to view a 250K figure as sufficient for a 50bp hike, and anything less than 200K should enable the Fed to stick to their 25bp pace. But the consensus is nothing more than a wild guess, so we shouldn’t read too much into it. Yesterday’s jobless claims showed a slight rise in the initial claims figure to 211K, up from 190K, while the continued claims figure rose to 1718K. This data falls outside the payrolls sampling period though, so in theory, should have no bearing on today’s employment report. Besides this, keep an eye out for the BoJ later. Just in case. What to look out for: US non-farm payrolls, BoJ BoJ meeting Japan PPI inflation (10 March) US non-farm payrolls (10 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    India: Another solid year ahead for the economy

    India: Another solid year ahead for the economy

    ING Economics ING Economics 10.03.2023 16:01
    Good growth momentum, strong credit growth and a supportive budget environment provide a positive backdrop, though the Reserve Bank of India (RBI) still has work to do to tame inflation    India's economy grew by 6.7% in 2022, making it one of the fastest-growing economies in Asia. India looks set to achieve a similar rate of growth in 2023, and that comes despite a very difficult backdrop with the US and Europe close to recession or slowing, as well as the drag on purchasing power resulting from higher inflation. Another supportive budget, including a substantial boost to capital expenditures, will provide the bedrock for growth in 2023, with the private sector also providing some added impetus as private investment weathers the rise in interest rates and as inflation is brought under control by the Reserve Bank of India.  Economic growth strong and staying strong GDP for the fourth quarter of 2022 slowed to a 4.4% year-on-year rate, down from 6.3% in the third quarter and from 13.2% in the second. However, these year-on-year figures are extremely distorted by pandemic-related volatility in 2022 and need to be treated with great care. It is perhaps better to focus on the full-year 2022 growth rate, which delivered a very solid 6.7% increase from 2021 – one of the fastest rates of economic growth in Asia. Consumer spending and capital expenditure led economic growth in the third quarter of 2022. The pattern of growth for the fourth quarter showed business investment still in the driving seat, but less of a boost from consumer spending, and the drag from net exports diminishing.   Despite the fourth-quarter slowdown in consumer spending, we believe this component of national expenditure is likely to do much of the heavy lifting for growth in 2023 as inflation subsides and real spending power returns. But we also believe that private investment will remain a strong source of economic growth, helped along by the additional capital spending measures outlined in the latest Union budget. As a proxy measure for consumer spending, personal loan growth has been firming in recent months, with the January 2023 growth rate edging up to 23.7% YoY. Within this total, loans for big-ticket items such as vehicles and consumer durables are both growing strongly, signalling no shortage of consumer confidence, along with good growth in education loans. Credit card borrowing is also on the rise, though not much faster than overall personal loans. Personal borrowing growth (YoY%) Source: CEIC, ING Business investment buoyed by credit growth The outlook for private business investment also remains positive, and this is despite the increase in policy rates that the RBI has had to implement to tame inflation. In support of private investment, the banking sector is looking in decent shape despite the impact of the pandemic, with non-performing loan ratios declining across all main banking sub-groups. Scheduled commercial bank credit is growing strongly, and though the gross fixed capital formation series that feeds into GDP is more volatile, all indications are that it is growing robustly, and this should continue as rates peak out and the monetary environment becomes less restrictive. Scheduled commercial bank credit growth and fixed capital formation Source: CEIC, ING Exports and the external balance India’s chronic trade deficit hit its worst in September 2022, but since then it has been moderating. Export growth has slowed down reflecting the external slowdown in economies such as the US and Europe, though India has been less exposed to recent Chinese economic weakness, with much less direct trade with China than many of its Asian peers. As a result, export growth is running at only about -6.5%YoY, a much smaller decline than the 20% fall we see in economies such as Korea, Taiwan, and Singapore. The decline in international crude oil prices may also be playing a role here, though India has also been benefitting from the much lower prices paid for Russian oil. A large proportion of India’s imports from Russia are accounted for by oil, and dollar imports from Russia have risen over the last 12 months. Deflating these dollar import figures from Russia by the price of Urals grade oil shows the extent of the increase in import volumes from Russia, which is undoubtedly aiding the improvement in the trade deficit. That said, it is evident that much of the improvement is coming through the non-oil part of the trade deficit. And the main contribution to the improvement in the trade position is a sharp slowdown in non-oil imports, which in January fell at about a 10%YoY rate.   Indian crude oil import volumes Source: CEIC, ING Government spending The recently released Union budget for 2023/24 also shows that government support for the economy will continue to provide a solid backdrop for the business sector, with strong infrastructure investment likely to help “crowd in” additional business investment. Capital expenditure accounts for almost a quarter of the Indian government’s expenditure in the coming fiscal year, totalling INR 13,709 bn, an increase of 30% over the previous year. Infrastructure projects will be the main beneficiary of such spending. Budget figures Source: Ministry of Finance - India   Budget finances are kept on an improving path assuming the growth projections run to plan and expenditure doesn’t overrun. But the path to a lower deficit is a gentle one, with the 2023/24 deficit projected to come in at just under 6% after the 6.4% deficit in 2022/23. If met, that deficit projection should see the debt-to-GDP ratio continue on its downward path, though after hitting almost 90% during the pandemic, there is not a lot of flexibility here for India, and the ratings agencies will want to see continued progress on debt reduction if India is to maintain its BBB- rating (Fitch and S&P) and Baa3 (Moody’s) all with stable outlooks. Indian deficit and debt evolution Source: CEIC, ING Inflation and monetary policy After dropping back to below 6% and within the RBI's 4%+/-2% inflation target in December, inflation shot back up to 6.5% in January. With food making up almost half of the entire CPI basket, it is no surprise that the January lurch higher was due to this component, and in particular, a slight reduction in the decline in vegetable prices from the previous month as well as some higher wheat prices. Contribution to YoY inflation (pp) Source: CEIC, ING   However, following the last RBI rate-setting meeting, at which the repo rate was raised a further 25bp to 6.50%, and the tightening bias left in place, much more significant weight was given to core rates of inflation than the headline. So these volatile food price moves can be largely ignored for the time being. The specific core rate we need to focus on is unclear, but neither of the more obvious ones is within the RBI’s target range, and neither shows much sign of falling. Read next: Surprisingly low Turkey's inflation: The 2021 Turkish lira devaluation crisis inflated prices very quickly causing a very high base for comparison for this year| FXMAG.COM The last rate hike and maintenance of the tightening bias were by no means unanimous, with two of the six board members dissenting. But while core inflation rates remain high and given the shift of the external monetary setting towards a “higher for longer” stance, we consider that it is likely we will see a further 25bp of tightening at the April meeting, taking rates to a more restrictive setting of 6.75%. That said, we do think both headline and core inflation rates will move down in the coming quarters, so this should not only mark the peak for Indian policy rates, but we could well see rates being pared back before the year-end as this happens. Headline and core inflation Source: CEIC, ING Currency and bond markets The Indian rupee (INR) was one of the worst-performing currencies in the Asia-Pacific region in 2022, falling by 10.24% against the US dollar (USD), only marginally better than the Japanese yen's 12.05% decline. At the other end of the spectrum, the Thai baht and Vietnamese dong both declined less than 4%.  Weakness in 2022 was at least partly due to USD strength, and the INR was not alone in weakening. But its relative underperformance can be attributed to a few factors: The chronic trade deficit, though this is now showing some signs of moderating. Within which, the rise in crude oil prices in early 2022 didn’t help – the INR is one of the more energy-sensitive currencies in the region, given its high reliance on imported energy. We do expect oil prices to rise again, especially in the second half of the year, but the greater imports of Russian crude grades should limit the impact of this. RBI accommodation – the central bank was pragmatic about the need for higher policy rates during 2022, and only towards the latter part of the year did it shift the balance of policy from both leaning against inflation and supporting growth to a more single-minded pushback against inflation. General USD strength was a big factor driving INR weakness. Now, with US pivot hopes being priced out by a run of strong data, the USD is strong again. But we believe this moment will pass, and a more neutral-to-weaker outlook for the USD could help the INR make some moderate gains, though, in the long run, we look for further depreciation against the USD, as Indian inflation is likely to run higher than US inflation over the medium to long run, even if it is currently in line.   China’s re-opening is likely to result in a stronger Chinese yuan over the year and could drag other Asian currencies along for the ride. Indian local currency bond yields rose sharply at the beginning of 2022. Yields on 10Y Government securities rose from about 6.45% at the beginning of the year to a peak of 7.60% by mid-June but have been relatively steady since then and currently yield about 7.40%, providing about a per cent of real return over current inflation. The global bond index inclusion story has gone a bit quiet since its implementation last year was delayed. In theory, this could happen this year, but with the US Treasury market a little unsettled currently, and debt ceiling concerns rumbling in the background, it may be later in the year, once US inflation and rates look more benign before this happens. Estimates of likely capital inflows range from $30-40bn so would likely have a noticeable supportive impact on both government securities as well as the INR. In the meantime, we anticipate that 10Y bond yields will remain in their current range until mid-year, before slowly declining into the year-end. Summary forecast table Source: CEIC, ING Read this article on THINK TagsReserve Bank of India INR Indian rate policy Indian inflation India economy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites 13 March 2023

    Asia Morning Bites 13 March 2023

    ING Economics ING Economics 13.03.2023 08:22
    US labour market data take second billing to the Federal Reserve program to stop deposit outflows and firesales by banks after recent failures. US February inflation data tomorrow  Source: shutterstock Global Macro and Markets Global Markets: Global Markets: The market reaction to Friday’s non-farm payrolls release was a curious one. However, it is probably complicated by the reaction to the banking failures that have roiled the US tech sector and subsequent measures to calm things down. On Sunday, the Fed implemented an emergency lending facility (the Bank Term Funding Program or BTFP) to backstop banks and secure access to funds for depositors. The aim will be to try to limit contagion to other banks and prevent banks from conducting fire sales of Treasury bonds and other financial instruments to meet deposit outflows. After their sell-off on Friday, US stock market futures are looking positive currently, so it looks for now as if the Fed’s rapid action may have forestalled a larger problem. What it also does, is make a 50bp rate hike at the March FOMC meeting look fairly unlikely. The implied hike according to Fed funds futures at that meeting is 0.274%, meaning that only a small fraction (0.024%) above a 0.25% rate hike is being priced in. The day after Powell’s hawkish testimony to the Senate Banking Committee last week, the market was pricing in 0.135% of the additional 0.25% (i.e. more than half) that would deliver a full 0.5% rate hike. US Treasury yields have plummeted. Yields on the 2Y Treasury bond have fallen a further 28.4bp, and those on the 10Y bond are down 20.5bp to 3.699%, reversing just over half of the gains in yield we have seen since the January lows. This has not helped the USD, and EURUSD has risen to 1.0690, after toying with the 1.07 level several times. Better market sentiment today may see EURUSD retreat lower. Other G-10 currencies have also been supported. The AUD is now 0.6641, and the pound is back to 1.2099, while the JPY is now 134.51. Most of the Asian FX pack has made gains against the USD in the last trading period, with the CNY moving down to 6.9172. G-7 Macro: For the full lowdown on the latest US labour report, please see this note by James Knightley. The main elements of the report are as follows: The headline payrolls figure came in stronger than expected, at 311K, with only small revisions down to the previous release. But the average hourly earnings figure came in at only 0.2%MoM, to take wages growth to 4.6%YoY, lower than had been expected, and if this sort of wages growth persists, we should see annual wage inflation rates ease to the lower end of 4% over the coming months. The unemployment rate also edged up to 3.6% from 3.4% - mainly due to swings in the labour force, but it still counts. Today is pretty quiet for data, but tomorrow, we get US February CPI inflation data, which is likely to show a decent decline in the headline rate and a smaller decline in the core rate. China: In its latest reshuffle, the government has retained many economic and financial officials, including Yi Gang, the People’s Bank of China governor. This implies that the government wants to maintain policy consistency in the recovery of the economy and financial sector. It could also reflect a perception of rising risks in global financial markets - for example, the recent failures of tech-focused small banks in the US, and the risks of further financial shocks as US and other interest rates go higher. It could also reflect concern about domestic financial markets. For example, we have recently highlighted the growing risks of local government debt. India: The consensus view on February inflation due out this evening is for it to remain well above the Reserve Bank of India’s upper target bound at 6.4% (upper bound is 6%). Our own calculations indicate that we may see a much better (lower) outcome than this – closer to the lower end of the 5.7% to 6.7% forecast range – mainly due to lower food prices. What to look out for: India inflation Malaysia industrial production (13 March) India CPI inflation (13 March) Australia Westpac consumer confidence (14 March) Philippines trade balance (14 March) US CPI inflation and NFIB small business optimism (14 March) South Korea unemployment (15 March) Philippines remittances (15 March) China 1-yr medium term lending rate, retail sales, industrial production (15 March) Indonesia trade balance (15 March) India trade balance (15 March) US PPI inflation and retail sales (15 March) New Zealand GDP (16 March) Japan trade balance, industrial production and core machine orders (16 March) Australia unemployment (16 March) Bank Indonesia policy (16 March) Hong Kong unemployment (16 March) US initial jobless claims and housing starts (16 March) ECB policy meeting (16 March) Singapore NODX (17 March) Malaysia trade balance (17 March) US industrial production and Univ of Michigan sentiment (17 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 10.05.2023

    Asia Morning Bites - 15.03.2023

    ING Economics ING Economics 15.03.2023 09:28
    Markets rally on a return to stability in the banking sector, despite the higher US inflation numbers. Activity data for China will be released this morning. Later today, the US will report PPI inflation and retail sales.  Source: shutterstock Global Macro and Markets Global Markets: It is not entirely clear what equity markets found to cheer about yesterday after the higher-than-predicted inflation data (see below), but they did nonetheless. The S&P 500 rose 1.65% and the NASDAQ rose 2.14%. Perhaps the seeming return of stability in the banking sector is worth more of a relief rally than the anxiety of higher inflation – especially coupled with the sense that 50bp hikes at this month’s FOMC meeting look relatively unlikely now. Still, shorter tenor Treasury yields rose sharply, reversing some of their earlier declines, and 2Y yields shot up 27.4bp to 4.25%, while yields on the 10Y Treasury rose a more sedate but still meaningful 11.6bp to 3.689% - still feeling a bit low relative to Fed funds expectations. EURUSD had quite a ride up and down on the day but managed a net rise from this time yesterday to 1.0729 currently. The AUD also managed some small gains, while the GBP was flat to weaker, and the JPY lost ground steadily to the USD to trade at 134.46 currently. Most of the Asia pack was somewhat weaker vs the USD yesterday, with the KRW also losing about 0.68% to 1310.55, and the INR also weaker (82.49).   G-7 Macro:  The figure everyone was fixated on yesterday was the core February CPI print, and this rose a more-than-expected 0.5% MoM to leave core inflation just 0.1pp lower at 5.5% YoY. Headline inflation fell to 6.0% from 6.4% on a similar month-on-month gain. See this note from James Knightley for more details. US PPI data for February due today will give further insight into pipeline inflation strength. Retail sales is also due and a small decline (-0.4%) is predicted after last month’s 3.0% MoM surge. China: Activity data should show a stronger recovery of retail sales than industrial production. The holiday factor is in play for sales, but it also reflects the fact that the prospect for exports is not optimistic. Our focus today will be on fixed-asset investments. The two things we will look out for are how strong infrastructure investments are, given our concern about high levels of local government debt and also whether there is any recovery of real estate investments in the first two months of the year. South Korea:  February’s labour report showed that the labour market is still relatively well buoyed despite high interest rates and sluggish exports. But we are careful not to read too much into the headline numbers as most of the job growth was driven by government policy, not the private sector. The unemployment rate unexpectedly dropped to 2.6% in February (vs 3.0% market consensus) from 2.9% in January. And the labour participation rate improved as well to 64.2% in Feb (vs 63.8% in Jan). Health & social work jobs gained the most (109K). Considering the normalization of the COVID situation, we think that most of the job growth comes from social welfare projects driven by the government. Government social work programs usually offer contracts of less than one year, which showed in the large jump in temporary employment gains (252K). The private sector also made some improvements, but these were at a slower pace. Manufacturing added a mere 1K jobs, after falling for six months (shed 149K jobs in total during the past six months) while transportation gained 28K jobs for the first time in seven months (shed 100K jobs in total during the past seven months). We think it is too early to say that private-sector employment is set to recover from now on. And we believe that the Bank of Korea will also focus on the quality of employment rather than just the headline figures. Thus, we maintain our BoK call of no policy action in April. Indonesia:  Trade data for February will be reported today.  We are expecting recent trends in trade data to hold with exports possibly expanding by close to 5%YoY and the overall trade balance remaining in surplus.  However given moderating prices for Indonesia's export commodities complicated by softer global demand, we should see the trade surplus come in at around $3.3bn, much lower than the record highs of $7.5bn.  A narrowing trade surplus points to less support for the IDR and this could mean that the currency may face depreciation pressure in the near term.   Read next: UK economy: according to Ebury analyst, recession is becoming increasingly less likely| FXMAG.COM What to look out for: China activity data and US retail sales South Korea unemployment (15 March) China 1-yr medium term lending rate, retail sales, industrial production (15 March) Indonesia trade balance (15 March) India trade balance (15 March) US PPI inflation and retail sales (15 March) New Zealand GDP (16 March) Japan trade balance, industrial production and core machine orders (16 March) Australia unemployment (16 March) Bank Indonesia policy (16 March) Hong Kong unemployment (16 March) US initial jobless claims and housing starts (16 March) ECB policy meeting (16 March) Singapore NODX (17 March) Malaysia trade balance (17 March) US industrial production and Univ of Michigan sentiment (17 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 22.05.2023

    China shows a gradual recovery

    ING Economics ING Economics 15.03.2023 10:42
    The market focus will be on retail sales and real estate in this set of activity data. We also focus on infrastructure investment. This is a "supplementary" growth factor in case consumption is not growing adequately. But it is at the same time limited by high levels of local government debt Chongqing embraces the post-holiday travel peak, Chongqing, China, 28 January 2023 Source: Shutterstock Retail sales Retail sales grew 3.5%YoY in the first two months of the year after contracting by 1.8%YoY in December. This growth rate looks quite moderate, though when we exclude car sales, retail sales grew 5.0%YoY YTD  (car sales fell 9.4%YoY YTD). The fall in car sales was mainly a result of the discontinuation of subsidies on electric vehicles at the start of this year.  Removal of Covid restrictions boosted catering, which increased by 10.2%YoY YTD. Our preferred indicator of an average consumer's consumption appetite is clothing, which rose by 5.4%YoY. This is an encouraging sign of returning consumption sentiment. Weaker exports continue impacting industrial production Industrial production increased 2.4%YoY after 1.3%YoY growth in December, which was an improvement, but still a little softer than expected. The National Statistics Bureau added that month-on-month growth in February was just 0.12%, which is very weak, reflecting weakening exports. The biggest export item, electronic parts, including semiconductors, fell 17%YoY YTD. Microcomputing products fell 21.9%YoY YTD and smartphones fell 14.1%YoY YTD.  Read next: Pfizer Will Buy Biotech Seagen For $43 Billion| FXMAG.COM But if we look at industrial production for domestic use then it is not too bad. For example, electronic equipment production rose 13.9%YoY YTD in February, indicating the need for equipment updates after Covid. Real-estate-related materials such as cement continued to fall. Exports dragging on GDP growth Source: CEIC, ING Fixed asset investment growth is steady Fixed asset investment grew 5.5%YoY YTD in February, after 5.1% growth in December. We focus on infrastructure investment, which we view as a "supplementary" growth driver in case consumption is not growing as well as needed during 2023.  Infrastructure investment grew 9%YoY, mainly coming from public utilities, which grew 11.2%. We believe that this is the post-Covid restructuring of local facilities. Looking at railway investment, which includes metro investment, this grew 17.8%YoY. It looks like this part of infrastructure investments is picking up momentum and so the supplementary growth engine is providing support. But rising local government debt could slow down infrastructure investment at any time. Local governments could be forced to cherry-pick only essential infrastructure projects to avoid increasing debt too quickly. Real estate investment fell more slowly at -5.7%YoY YTD, an improvement from -10% in December. That is in line with our expectations, with small numbers of home buyers taking advantage of low home prices and re-entering the market. This creates some positive sentiment in the housing market, but a full return of sentiment needs all uncompleted homes to be finished to a good standard, which is still a concern. Consequently, we only expect positive growth of real estate investment to return in 2024.  China land sales still in contraction Source: CEIC, ING Our forecast of GDP growth at 5% remains unchanged We retain our GDP forecast for China at 5% for 2023. The main reason is that although consumption should rise moderately, there are headwinds for China, including exports and local government debt that could derail infrastructure investment as well as the slow recovery of the real estate sector.  Read this article on THINK TagsChina trade China retail sales China investment China economy Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Disappointing activity data in China suggests more fiscal support is needed

    Asia Morning Bites - 16.03.2023

    ING Economics ING Economics 16.03.2023 10:07
    Here we go again...Massive declines in front-end bond yields as market angst over banks spikes ahead of the ECB policy decision. Bank Indonesia is also meeting today   Source: shutterstock Global Macro and Markets Global Markets:  Without a doubt, the main talking point from markets overnight has to be the 36.3bp decline in 2Y US Treasury yields, which now yield 3.887%. A 23.4bp decline in yields on 10Y US Treasuries means the 2s10s curve remains inverted, but at 3.455% on the 10Y, the curve is a lot flatter than it has been recently. A little over a week ago, the 2Y Treasury note was yielding more than 5%.  All this seems still to be related to banking angst, with concern about Credit Suisse yesterday adding to the SVB drama of the previous week. OFR financial stress indicators have been spiking higher, though they are down a bit overnight, possibly due to the Swiss National Bank appearing to step in to provide liquidity. But it all adds unwanted excitement ahead of next week’s FOMC and today's ECB meetings. The bond yield swings also reflect yet more reductions in the implied Fed funds rate, which now does not even fully price in a 25bp hike next week (see more below). This feels like an overdone move to this author, but it would only take another piece of bad market data – another struggling financial institution for example – or a bad reaction to today's ECB decision, and it might not look so implausible. Despite this massive drop in bond yields, especially at the front end, the USD seems to be benefiting from its safe-haven status, and EURUSD is now back down to 1.0586 from a high of 1.0760 yesterday. The AUD is also down to 0.662 ahead of today’s labour data. Cable has dropped to 1.2070, though the JPY has appreciated, moving to 133.13, which again fits the safe haven story…In Asia, the KRW also joined the JPY in making gains, though there were losses at the other end of the spectrum, with the CNY down 0.47% to 6.90. US equity moves have been mild in contrast. The S&P 500 has dropped 0.7%, but finished the session on an up note, while the NASDAQ actually managed to eke out a tiny gain on the day. It was not so rosy in Europe, where many of the major bourses were down more than 4%, with declines across the board, but led by financials. US equity futures look a bit brighter today, though it is still a sea of red in Europe and Asia also looks challenged. G-7 Macro:  After the recent robust US data, yesterday’s data run was noticeably weaker. Pipeline price measures, as measured by the PPI index, fell back in February. The final demand index dropped 0.1% MoM to take PPI inflation down to 4.6% YoY from 5.7%. There were big drops in the core index also.  Retail sales also fell, though were in line with expectations, delivering a 0.4% MoM decline in February after the outsize and upwards revised 3.2% gain in January. The so-called “control group” of core items was, however, still pretty robust rising 0.5%MoM.  See this note by James Knightley, which also sets out his thoughts on what all this and other news means for the Fed. The ECB is the main event today, and they are expected to hike by 50bp, though as JK points out, if this goes down badly with markets, it could affect the Fed’s decision next week. Here is a link to a cheat sheet on the ECB decision. Japan: Today’s trade and core machinery orders suggest that the recovery in Japan continues this quarter, driven mainly by the service sector. The trade deficit in February narrowed more than expected and core machinery orders in January rose more than expected. Exports rose 6.5 % YoY in February (vs 3.5% in January, 7.0% market consensus). By country, exports to the US (14.9%) and EU (18.6%) rose sharply. Exports to China dropped again (-10.9%) but improved from January’s 17.1% fall as lunar new year effects dissipated. Meanwhile, import growth slowed quite sharply to 8.3% in February (17.8% in January, 12.4% market consensus) mainly due to declines in commodity imports. The trade deficit in February narrowed to -897 billion yen from its record shortfall of 3,496 billion yen in January. Separately, data showed core machinery orders, a highly volatile data set (regarded as a forward-looking investment indicator), rose 9.5% in January (vs 0.3% revised in December, 1.4% market consensus). Non-manufacturing orders rose 19.3% while manufacturing orders dropped -2.6%, showing the resilience of domestic demand for services. We believe that the continued signal of a domestic economic recovery will give the new governor of the Bank of Japan a greater chance to seek policy normalization in the second half of the year. Read next: US pipeline price pressures ease, giving another excuse for a Fed pause| FXMAG.COM Australia: After two months of employment losses, the February figures staged a large turnaround. Total employment gained by 64,600, driven by a 74,900 increase in full-time jobs. And the unemployment rate fell back to 3.5% from 3.7%. With Australia’s labour market clearly still very hot, we find it hard to accept that there is only one more rate hike left for the RBA before peak cash rates are reached – despite the hints from the most recent RBA statement. The minutes of the last meeting are released next week, which may help to settle what they really intend – though more likely not.   Indonesia:  Bank Indonesia (BI) meets today to discuss policy.  With all that's happened in the past few days, BI will likely keep rates unchanged at 5.75%.  Inflation remains high but core inflation edged lower, and this gives BI enough reason to sit tight.  Governor Warjiwo should tie any future decision on rates to the inflation outlook, but he will also likely attempt to calm jitters about Indonesia's own banking sector.  What to look out for: BI policy meeting, ECB meeting and US initial jobless claims Bank Indonesia policy (16 March) Hong Kong unemployment (16 March) US initial jobless claims and housing starts (16 March) ECB policy meeting (16 March) Singapore NODX (17 March) Malaysia trade balance (17 March) US industrial production and Univ of Michigan sentiment (17 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Australian dollar against US dollar - "It seems that the currency will soon hit a price above 0.68"

    Asia week ahead: Regional central bank meetings and trade data

    ING Economics ING Economics 16.03.2023 10:52
    Next week’s calendar features policy meetings from several regional central banks, trade numbers from India, Korea and Taiwan, activity data from Japan and Taiwan plus inflation readings from Japan and Singapore Source: Shutterstock Expected slowdown in India's current account deficit India’s current account deficit has widened substantially and although the trade deficit slowed its increase in the last three months of the year, the consensus forecast for a narrowing of the broader current account deficit looks optimistic. Upcoming RBA minutes of March policy meeting The minutes from the Reserve Bank of Australia's March meeting next Tuesday could be an interesting read and may shed more light on what appeared to be a hint that peak rates were nearing. Upcoming CPI and PMI data from Japan Consumer inflation in Japan is expected to cool to 3.5% year-on-year in February (vs 4.3% in January) due to the government’s energy subsidy programme, helped along by the base effects of a slowdown. For the fresh PMI reports, we believe the trend of weak manufacturing alongside a strong services sector will continue. Read next: The Commodities Feed: Oil plunges| FXMAG.COM Trade data from Korea Early April trade data will be out from Korea and we expect sluggish exports to continue. The trade deficit however is expected to narrow in April as imports of commodities could decline more sharply. China to announce target interest rate Banks in China will announce their loan prime rate and we expect no change at 3.65% and 4.3% for 1-year and 5-year, respectively. The ongoing economic recovery means that banks do not have to ease further. Busy week for Taiwan Taiwan’s central bank will decide on policy in the coming days. We believe the recent Silicon Valley Bank collapse will be another factor in the central bank's rate decision. The best way forward for the central bank should be to stay put at 1.75% as hiking further may create concerns for the financial market. Meanwhile, Taiwan’s industrial production and export orders should continue to reflect slowing growth in the US and European economies. We do not think China's growth can fill the gap. A mid-teen yearly contraction is likely for both reports. Singapore inflation stays hot Price pressures remain in Singapore as the impact of the recent implementation of the goods and services tax feeds through. Headline inflation could slow slightly to 6.4% YoY but core inflation is likely to heat up further to 5.6%. Faster inflation is expected to weigh on overall retail sales for at least the first half of the year. Elevated inflation could produce a potential policy response from the Monetary Authority of Singapore (MAS) at the April meeting. We expect MAS to retain its current hawkish stance given the significant challenges faced by Singapore’s growth outlook. BSP to hike again as inflation remains an issue Bangko Sentral ng Pilipinas (BSP) meets next week to discuss policy. Although we expect the central bank to sustain its rate hike cycle, we could see Governor Felipe Medalla downshift to a 25bp increase. Medalla recently hinted at a less aggressive rate hike when he called for the rapid deployment of supply-side measures to address the tight supply of basic food items. Recent developments in the global banking system will also be watched closely and thus we believe that next Thursday’s hike could be the last for this tightening cycle. Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsEmerging Markets Asia week ahead Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 10.05.2023

    Asia Morning Bites - 20.03.2023

    ING Economics ING Economics 20.03.2023 09:53
    A relief rally is possible on Monday but the Fed meeting later in the week is still in focus. Source: shutterstock Global Macro and Markets Global Markets: US equity futures seem to be responding positively to the latest news out of the banking sector over the weekend, with reports of a takeover of Credit Suisse by UBS and improvements to dollar funding liquidity. That said, the session on Friday was again down, with both the S&P 500 and NASDAQ making losses. Anxiety ahead of this week’s Fed meeting (23 March) and the accompanying message may keep risk sentiment more subdued than otherwise. (Here is a link to a video on the upcoming Fed decision). Market futures attach only a 68.3% probability to a 25bp rate hike. Chinese stocks were higher on Friday, perhaps helped by the RRR cut. The Hang Seng rose 1.64% while the CSI 300 rose 0.5%. Bond markets were once more extremely erratic. The 2Y US Treasury dropped by 32bp to 3.837. 10Y US Treasury yields fell 14.8bp to 3.429%. Despite risk sentiment still being challenged, such large falls in bond yields have led to losses by the USD against the EUR. EURUSD moved higher on Friday returning to 1.0680. The AUD also re-gained ground, rising to 0.6710, as did Cable (1.2817) and the JPY (132.17).  Other Asian FX also made gains against the USD on Friday, led by the KRW and THB.  G-7 Macro: There wasn’t too much out on Friday, but the US dataflow was not particularly positive. Industrial production was flat on the month after a 0.3% MoM gain in January. And the University of Michigan sentiment indices were also mostly lower, including the inflation expectations figures. Today is a very quiet day for G-7 data, with only German PPI for February, UK house prices and EU trade figures to break the calm. Read next: Dollar funding solutions get beefed up| FXMAG.COM China: After the PBoC cut the Reserve Requirement Ratio (RRR) on Friday evening, the market is watching whether 1Y and 5Y loan prime rates will also go down today. The PBoC's governor, Yi Gang, said earlier that RRR cuts are the preferred tool for economic recovery. And although that does not rule out rate cuts - doing both at the same time is probably not the central bank’s choice as it could provide too much stimulus and fuel inflation later in the year. We, therefore, expect no cut in loan prime rates. If we are wrong, the probability of a cut to the 5Y loan prime rate is larger than that for the 1Y rate. That is because these would lower the cost of long-term investment, leading to lower interest payments for new issuance by local government financing vehicles - a big risk on our radar.  There is a new surge in African swine fever in China - the disease that killed as many as 50% of all pigs in China back in 2018-2019. That would by itself be enough to push CPI higher even without any rate cuts today. This will not reflect immediately in the upcoming CPI data, but it should move higher in 2H23 if the swine fever spreads further. What to look out for: FOMC meeting China loan prime rate (20 March) Malaysia trade balance (20 March) Taiwan export orders (20 March) South Korea advance trade balance (21 March) Australia RBA minutes (21 March) US existing home sales (21 March) Australia Westpac leading index (22 March) US FOMC meeting (23 March) Singapore CPI inflation (23 March) Taiwan industrial production (23 March) Philippines BSP policy meeting (23 March) Taiwan CBC policy meeting (23 March) Hong Kong CPI inflation (23 March) US initial jobless claims and new home sales (23 March) Japan CPI inflation and Jibun PMI (24 March) Malaysia CPI inflation (24 March) Singapore industrial production (24 March) US durable goods orders (24 March)       Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia week ahead: Policy meetings in China and the Philippines

    Asia Morning Bites - 21.03.2023

    ING Economics ING Economics 21.03.2023 09:31
    Is calm returning? Or is this just a pause before the next shock?  Source: shutterstock Global Macro and Markets Global Markets: After the sea of red in Asian equity markets on Monday, it is quite a surprise to wake this morning to see that both European and US equities finished up on the day, though European stocks got off to a very shaky start before recovering. Even Swiss indices managed small gains. In contrast, the Heng Seng index fell 2.65% on the day, while the CSI 300 registered a smaller 0.5% fall. US Treasuries seem to be calming down a bit too  - the 2Y Treasury yield only rose 13.9bp yesterday (still seems odd to preface that with “only”), though it was down almost 20bp at one point. 10Y Treasury yields were up 5.6bp to 3.485%. It is tempting to conjecture that some sort of base is being formed around these levels, but the unpredictability of data from the financial system makes this impossible to do. Slightly improved risk sentiment trumped higher US Treasury yields and the USD slid against the EUR, and EURUSD rose to 1.0720. The AUD hasn’t really followed, sitting at 0.6716, though Cable had a good day, rising to 1.2276, as did the JPY, which has made its way down to 131.30. Other Asian FX was a mixed bag yesterday. The SGD hugged the JPY’s gains, along with the THB and ahead of the CNH. But the KRW struggled again, dropping 0.59%. G-7 Macro: Apart from the Credit Suisse takeover news, there wasn’t much on the macro calendar yesterday. President Xi is meeting with Russia’s President Putin, and there seems to be some talk of a peace plan for the war in Ukraine, though it is not clear if this is a realistic suggestion at this stage. It is very quiet too on the G-7 calendar today. Germany’s ZEW survey tops the billing in the Eurozone, while February existing home sales is about the only real interest out of the US.  Australia: The RBA releases minutes of the March policy meeting this morning. With mixed messages recently, this might be worth a hard look, though it mostly predates SVB and subsequent financial market turmoil, so it is not clear how useful they will be. Read next: Polish data points to first quarter GDP contraction and sizable price pressures| FXMAG.COM What to look out for: US FOMC South Korea advance trade balance (21 March) Australia RBA minutes (21 March) US existing home sales (21 March) Australia Westpac leading index (22 March) US FOMC meeting (23 March) Singapore CPI inflation (23 March) Taiwan industrial production (23 March) Philippines BSP policy meeting (23 March) Taiwan CBC policy meeting (23 March) Hong Kong CPI inflation (23 March) US initial jobless claims and new home sales (23 March) Japan CPI inflation and Jibun PMI (24 March) Malaysia CPI inflation (24 March) Singapore industrial production (24 March) US durable goods orders (24 March)       Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia week ahead: RBA policy meeting plus regional trade data

    Asia Morning Bites - 23.03.2023

    ING Economics ING Economics 23.03.2023 10:16
    Fed opts for "dovish hike" and keeps dot plot.  With the Fed out of the way, Taiwan and the Philippines decide on monetary policy later on Thursday, as does the Bank of England.   Source: shutterstock Global Macro and Markets Global Markets:  With hindsight, last night’s FOMC meeting could have gone worse. Given what was at stake, a 1.65% decline in the S&P 500 and a 1.6% decline in the NASDAQ, led once more by financials, might well be regarded as an acceptable price to pay for the Fed sticking to its guns on the inflation fight. Though there was, without doubt,  room for improvement. Despite seeming to rule out rate cuts this year, which was, in any case, a very unlikely steer when rates were still going up, much of the damage seems to have come from Treasury Secretary Yellen’s parallel remarks to Congress that a blanket deposit insurance had not been discussed and was not being considered, right when Jerome Powell was insisting that the banking sector was sound. This won’t be the final word on either rates or deposit insurance in all likelihood, and a little further homework and collaboration between Fed and Treasury Dept seems probable after yesterday. Treasury yields were well down, though by recent standards, a 23bp decline in 2Y yields is a mid-sized drop, while 10Y Treasury yields fell 17.5bp to 3.434%. Confirming that yesterday’s market moves were more considered than panicky, EURUSD took advantage of lower US yields to rise to 1.0866. The AUD has made more modest gains to just under 67 cents currently, though briefly spiked up to 0.676 yesterday. Cable has also pushed on up to 1.2274 ahead of today’s Bank of England meeting, while the JPY has rallied in early Asian trading to 131.26. Other Asian FX is following the JPY stronger, and there is likely to be some more catch-up today. G-7 Macro:  For a full view of the Fed decision, please use this link to the note by our US team and FX strategists. Short story, more dovish from the Fed, only one more rate hike – maybe… And in time, that may be the good news story that lifts market sentiment again, though for now, things remain a bit sketchy. Our US Economist is still sticking to his 2H23 rate cut call, as he believes the recent market turmoil will have added to what were already looking like much tighter credit availability conditions that will weigh on business investment. Today, we have the Bank of England, where we are tentatively looking for a 25bp hike, thanks to some less helpful inflation figures recently. Taiwan:  Taiwan’s central bank is expected to leave rates unchanged today at 1.75%, having last raised rates at its December 2022 meeting. CPI inflation fell back to 2.43% YoY in February from a peak of 3.59% in June 2022, so there is no imminent threat from inflation in Taiwan. In addition, the economy is in a downward cycle due to declining demand for semiconductors from the US and Europe, while demand from Mainland China has yet to fill the gap. Given the macro and financial market conditions, even though the Fed raised rates by 25bps overnight, it will be surprising if the central bank raises rates today. Taiwan also releases industrial production data today, which should fall around 10%YoY in February after a 19% drop in January. If we exclude the impact of the Chinese New Year holiday, industrial production is likely to remain in a monthly decline. If iPhone 15 production is larger than the previous model, demand for semiconductors produced by Taiwanese companies could be greater and could be a factor that will support the economy. But this is uncertain given the weakness of demand in the US and Europe. Singapore:  February inflation will be reported today.  Headline inflation is expected to slow from 6.6%YoY to 6.4%. However, the more closely watched core measure is forecast to accelerate further to 5.8%YoY (5.5% previous).  Accelerating core inflation could put pressure on the Monetary Authority of Singapore (MAS) to tighten further at their April meeting.  Softer activity data however could temper any potential moves by the MAS as the growth outlook remains uncertain. Philippines:  The Bangko Sentral ng Pilipinas (BSP) meets today to discuss policy and we expect Governor Medalla to downsize the pace of tightening from 50bps to 25bps.  Inflation remains elevated, prompting action by BSP today. But we believe the BSP will resort to a smaller increase after Medalla signalled the need for more supply-side remedies to address shortages in basic food items.   Read next: Fed hikes US interest rates by 25bp, but acknowledges we are close to the peak| FXMAG.COM What to look out for: Regional central bank meetings Singapore CPI inflation (23 March) Taiwan industrial production (23 March) Philippines BSP policy meeting (23 March) Taiwan CBC policy meeting (23 March) Hong Kong CPI inflation (23 March) US initial jobless claims and new home sales (23 March) Bank of England rate meeting Japan CPI inflation and Jibun PMI (24 March) Malaysia CPI inflation (24 March) Singapore industrial production (24 March) US durable goods orders (24 March)       Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Disappointing activity data in China suggests more fiscal support is needed

    Asia Morning Bites - 24.03.2023

    ING Economics ING Economics 24.03.2023 09:05
    Rising Japanese core inflation will get the "normalizers" excited again - but elsewhere Yellen sounding a little less dismissive on deposit insurance and ECB's Knot a bit less hawkish than usual help us to end the week on a calmer note Source: shutterstock Global Macro and Markets Global Markets: The last 24 hours have been mercifully quiet. US stocks crept tentatively higher (S&P 500 +0.3%, NASDAQ +1.01%), but equity futures are close to flat, suggesting that the direction from here on remains a coin flip. US stocks may have taken comfort in comments from Treasury Secretary Yellen, who was a bit less dismissive of further actions on deposit insurance than she was the day before. Chinese stocks had a much better and more convincing day yesterday. The Hang Seng rose 2.34%, while the CSI 300 rose 0.99%. US treasury yields declined again. The yield on the 2Y note fell 10.4bp, while the yield on the 10Y bond was virtually unchanged at 3.427%. EURUSD pushed above 1.09 yesterday, but has not been able to hold onto those increases and is slightly down from this time yesterday at 1.0835, probably as 2Y European bond yields dropped even more than US Treasuries yesterday.  That may have stemmed from comments by ECB Governing Council hawk, Klaas Knot, who is reported as suggesting that though a May hike was likely, it was unclear how large it should be (implication, possibly smaller than previous hikes…). The AUD also had some abortive attempts to push higher, and is roughly unchanged now from yesterday at the same time, after failing at 0.676 a couple of times. Cable also had a similarly unproductive day, though the JPY held onto early gains to sit at 130.74 now. Asian FX had a very good day yesterday, with nearly all currencies making some gains against the USD. Leading the charge, as is so often the case, was the KRW, followed by the other Asian high-beta currency, the THB, with the MYR and CNH shortly behind. The KRW now stands at 1278. G-7 Macro: The Bank of England hiked rates yesterday by 25bp as anticipated. But our UK economist, James Smith thinks that this is probably it for this tightening cycle. PMI data dominates the G-7 calendar today, along with US Durable goods orders for February.   Japan: Consumer price inflation slowed for the first time in 13 months in February, mainly due to the government’s energy subsidy program. Consumer prices rose 3.3% YoY (vs 4.3% in January, 3.3% market consensus) while utilities were down -0.3% YoY in February (vs 14.9% in January). But aside from utilities, service prices have actually risen. The so-called core-core CPI (excluding fresh food and energy) accelerated further to 3.5% in February (vs 3.2 % in January). This is a sign of underlying inflationary pressures and perhaps this is the sign of demand-driven inflation that the BoJ has been waiting for, so long as wage growth can keep up with it. Today’s outcome will probably revive market speculation that the Bank of Japan might implement policy normalization sooner than expected. We still do not think incoming Governor Ueda will deliver a surprise at his first meeting in April. But, depending on the outcome of the spring wage negotiations, the BoJ may change its forward guidance at its meeting as early as June. Given the recent market turmoil surrounding the banking sector, the BoJ’s move will likely be well communicated with the market before it substantially changes its policy. Singapore:  Singapore industrial production is set for release today.  We expect another month of contraction in February, mirroring the struggles in non-oil domestic exports (NODX) as global demand remains soft.  We could see industrial production stay weak in the near term and weigh on Singapore's growth prospects.    Read next: Bank of England tightening likely done as it hikes by 25bp| FXMAG.COM What to look out for: US durable goods orders Malaysia CPI inflation (24 March) Singapore industrial production (24 March) US durable goods orders (24 March)       Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Inflation in Singapore heats up again in April

    Singapore: Industrial production down for a fifth month

    ING Economics ING Economics 24.03.2023 14:16
    Singapore’s February industrial production fell 8.9% year-on-year, the fifth consecutive month of decline. This highlights the challenges to the growth outlook in 2023 Production fell in the biomedical, electronics and chemicals sectors, likely due to soft demand from global trade partners -8.9%   February industrial production YoY change   Worse than expected   February industrial production slipped 8.9%YoY, weaker than expectations of a 1.8% contraction. Production fell sharply compared to the previous month (-11.7%), tracking the weakness recorded in non-oil domestic exports (NODX). Production fell in the biomedical (-33.6%YoY), electronics (-10%YoY) and chemicals sectors (-14.9%YoY) likely due to soft demand from global trade partners. The electronics sector was weighed down by the 11.1% drop in semiconductor production while the chemicals sector dipped due to the 32.9%YoY drop in petrochemicals.  Both industrial production and NODX posted their fifth consecutive month of contraction, highlighting the challenges to the growth outlook in 2023. Read next: FX Daily: Trading places| FXMAG.COM NODX and industrial production down for a fifth consecutive month Source: Singapore Department of Statistics Downbeat trade and production data point to slowing growth Elevated inflation (latest 6.3%) coupled with soft global demand will likely tag-team to sap GDP growth momentum for at least the first half of 2023. Substantial challenges to the growth outlook will likely factor into the decision of the Monetary Authority of Singapore (MAS) at the April meeting as it attempts to balance inflation fighting with providing as much support as possible for the struggling economy.  The reopening of China after an extended period of time could eventually jumpstart global demand, which in turn could be one factor that leads to a rebound in industrial production later in the year.    Read this article on THINK TagsSingapore NODX Singapore industrial production MAS Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 22.05.2023

    Asia week ahead: Inflation data from Australia and Japan

    ING Economics ING Economics 24.03.2023 14:24
    Next week’s data calendar features inflation numbers from Australia and Japan plus activity data from Korea and China Source: Shutterstock Has the time come for a pivot by the Reserve Bank of Australia (RBA)? A further unwinding of the holiday-induced surge in travel and recreation prices in February, together with some lower food prices, will partly offset higher gasoline prices and some stickiness in other subcomponents to bring inflation in Australia back below 7% in February. If so, it will support the RBA’s recent hints that rates are close to a peak, with one more 25bp hike looking like the most likely outcome now, taking the cash rate target to 3.85%. Positive signs for Japan's economy We think Japan’s economy is on the road to recovery. Inflation seems to have finally passed the peak. Tokyo CPI inflation is expected to slow further, stabilising energy prices and base effects. Labour markets continue to tighten mainly in the service sector. Manufacturing activity should rebound in February as snowstorm disruptions normalise. Upcoming survey and activity data from Korea Survey and monthly activity data will be out next week. We believe that recent developments in global banking probably hurt consumer sentiment. On the other hand, China’s reopening could help businesses be more optimistic for the future.   Meanwhile, production activity among industries should continue to diverge; we expect auto production to rise firmly on the back of good demand for electric vehicles while semiconductor production declines due to sluggish global demand for IT products. Read next: FX Daily: Trading places| FXMAG.COM China PMI data China is going to release PMI data next week. We expect a month-on-month fall in export orders but an expansion of domestic orders in the manufacturing PMI index. This is because of the slowing demand for goods in export markets. Non-manufacturing PMI should post slower growth as the recovery of the Chinese economy has been gradual. Real estate activities are included in the non-manufacturing PMI index. The recent increase in home transactions should support the non-manufacturing PMI index, but it should not be seen as a growth factor. Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia week ahead: Policy meetings in China and the Philippines

    Asia Morning Bites - 29.03.2023

    ING Economics ING Economics 29.03.2023 12:11
    Australian inflation data comes in soft. Chatter about a major regulatory overhaul of the US banking system is gathering volume  Source: shutterstock Global Macro and Markets Global Markets:  US equities drifted slightly lower on Tuesday, with regional banks and office REITS driving the fall, though there were gains from other sectors and the S&P 500 only fell 0.16%, while the NASDAQ dropped 0.45%. Clearly, investors have not completely lost their anxiety in the wake of the recent bank failures in the US and hints of a big regulatory overhaul are likely to weigh on the sector until details emerge. Chinese stocks were mixed on Tuesday. The Hang Seng Index rose 1.11%, but the CSI 300 fell 0.32%. US treasury yields rose for a second day. The yield on the 2Y Treasury rose 13.4bp reaching the 4% mark again, while the 10Y saw yields rising just 4bp to 3.57%. The EUR made solid gains, and EURUSD pushed back to 1.0839. The AUD also pushed higher, rising back just above 67 cents before this morning's softer CPI data brought it back below again (see below).  Cable also had a positive day, rising to 1.2330 and the JPY was stronger too at 131.05 after a very choppy session. The Asia FX pack made some decent gains on Tuesday. The THB reversed much of the previous day’s losses, though the KRW made only small gains. The IDR and MYR both gained a little more than 0.4% on the day. The PHP lagged behind, weakening slightly. Spot gold finished a little higher at $1975/oz, though off the highs of $2000/oz seen during the heights of market anxiety in recent weeks. Our Head of Commodities Strategy, Warren Patterson, has written this note on the outlook for gold from here. Read next: Hungary’s central bank ain’t got no room for change| FXMAG.COM G-7 Macro:  Yesterday’s main US release was the Conference Board Consumer confidence index, and it was slightly stronger than expected. James Knightley writes about the detail of this report here.  Today is another quiet day for G-7 Macro, with mortgage applications and pending home sales the main points of interest. Australia: February CPI inflation data dropped to 6.8% from 7.4% in January, much lower than the 7.2% consensus view (ING f 6.9%YoY). Together with yesterday's softish retail sales figures, this will encourage thoughts of a pause from the RBA at their next meeting, and potentially that this tightening cycle might now be over.  South Korea: Consumers' inflation expectations edged down to 3.9% in March (vs 4.0% in February). We think the recent drop in petroleum prices is the main cause. We expect actual CPI inflation (released next Tuesday) will slow to 4.3% (vs 4.8% in February), and the Bank of Korea will continue to stand pat at its April meeting. What to look out for: Australia CPI inflation (29 March) Bank of Thailand policy (29 March) US MBA mortgage applications and pending home sales (29 March) New Zealand building permits (30 March) US initial jobless claims, 4Q GDP, personal consumption (30 March) South Korea industrial production (31 March) China manufacturing and non-manufacturing PMI (31 March) Thailand trade balance (31 March) Hong Kong retail sales (31 March) US Univ. of Michigan sentiment and personal spending (31 March) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 10.05.2023

    China’s central bank pumps more liquidity into market

    ING Economics ING Economics 29.03.2023 13:38
    The People's Bank of China has already cut its Required Reserve Ratio and has continued to pump liquidity into the money market over the past few days. Is this about global market volatility or is it more about the domestic economy? Leading members of the People's Bank of China, including Governor, Yi Gang (waving) CNY852bn Net liquidity injection 21-29 March 2023   Higher than expected What's behind the large liquidity injection by the PBoC? China's central bank, the PBoC, has injected significant liquidity into the market since 21 March. From the 21st to the 29th of the month, the central bank injected more than CNY850 billion of net liquidity into the financial system. This includes CNY352bn injected through daily open market operations and CNY500bn by lowering the Required Reserve Ratio (RRR) which took effect on 27 March. We believe that there are at least two considerations behind these liquidity injections.  Read next: Australia: Softer inflation hints at pause in rates| FXMAG.COM These operations are occurring at the end of the first quarter. In China, loan growth for the year is usually booked in the first three months. This is a seasonal phenomenon and pushes up interbank interest rates at the end of the first quarter. As the chart shows, the overnight SHIBOR touched 2.5% on 20 March. Therefore, we think that loan growth should continue to be very strong in March compared to 2022, even after the rapid growth in the first two months. If this is the main reason for the PBoC's big liquidity injection, this should be seen as a positive sign for economic growth. The volatility in global financial markets is not over; there may be some ups and downs ahead. China has a more open capital account than in the past and global events may have some impact on the Chinese market. As such, the PBoC may be cushioning any potential volatility. This is more of a precautionary measure and should not be over-interpreted.  Interbank interest rates show that liquidity was tight before the PBoC's injection Source: CEIC, ING The market is discussing a rate cut, but we don't agree The market is actively discussing that the PBoC will cut the 7D policy rate and the medium-term lending facility (MLF) rate, which are currently at 2.0% and 2.75%, respectively. The discussion has intensified, especially after the PBoC announced a cut in the RRR this month. We do not see the need for China to lower interest rates. The economy is recovering at this time, although not as fast as the market expected though this is due more to the market's overestimation of the speed of the rebound. External markets are weakening and export activity will be dampened. But China's interest rate cuts will not help exports. Moreover, an excessively accommodative monetary policy may attract some unnecessary investments. As the economy recovers more quickly in the second half of the year, interest rate cuts could pose a risk of economic overheating.   Therefore, we keep our forecast for an unchanged policy rate in 2023. We also do not see the need for another deposit reserve ratio cut in China, as the peak in loan growth should have passed after the first quarter. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 22.05.2023

    Asia week ahead: Policy rate decisions from Australia and India

    ING Economics ING Economics 30.03.2023 15:54
    Next week’s data calendar features policy rate decisions from Australia and India, inflation numbers from Korea, Indonesia and Philippines plus activity data from China and Singapore Source: Shutterstock The end of rate hikes in Australia? Following softer-than-expected inflation numbers for February, we believe the Reserve Bank of Australia (RBA) will leave the cash rate target unchanged at 3.6% next week. The RBA hinted at its most recent rate-setting meeting that it was looking at a possible pause in rates, and these inflation numbers provide the perfect excuse. We are reserving judgement on whether this marks the peak for cash rates in this cycle. Other data, including from the labour market, could swing this decision one way or the other. Markets are, however, currently betting that 3.6% marks the peak. Inflationary pressures persist in India We expect the Reserve Bank of India to hike rates a further 25bp at its April meeting, taking the repo rate to 6.75% as inflation remains above the top of the upper target band (6%) and core rates of inflation also remain elevated. We do, however, think that this might be the last hike in this cycle as we expect inflation to drop sharply in March. Upcoming trade and inflation data from Korea March trade data will confirm that global semiconductor demand remains weak and China’s reopening story has yet to boost Korea’s exports. We expect the trade deficit to narrow in March due to a sharp decline in imports rather than a rebound in exports. Meanwhile, consumer inflation is expected to slow further in March. Utilities and food prices should show a rise, yet mostly be offset by falling in oil prices. Since we expect the CPI to head to 3% in the coming months, we maintain a long-standing Bank of Korea (BoK) forecast that the BoK’s hikes are done for this cycle. Diverging pace of recovery for China's manufacturing and services sector As Caixin’s PMI survey respondents are smaller companies compared to the official PMI survey, we expect Caixin’s manufacturing PMI to record a slower monthly growth as small exporters would be the first in the economy to suffer from weakness in US and Europe economies. However, Caixin services PMI respondents should enjoy more growth from retail sales than the respondents of the official PMI survey, which includes companies in the real estate sector. China's foreign exchange reserves to provide insights on capital flows China will announce foreign exchange reserves for March on 7 April. This data is important to gauge the direction of cross-border capital flows when US and Europe are at the core of the financial market turmoil. We expect a slight inflow into China in March as China is away from the sources of the turmoil and its economy is recovering. Singapore retail sales to rebound on year-over-year basis Singapore retail sales for the month of February could jump 20.7% from the previous year, benefiting from a favourable base. Sales however will likely be in contraction from the previous month as elevated inflation keeps a lid on economic activity. Soft retail sales alongside contracting industrial production and falling non-oil domestic exports point to a subdued GDP report for the first quarter. Upcoming inflation data from Indonesia and Philippines Price pressures remain evident in both Indonesia and the Philippines, although both economies should see the headline readings moderate as base effects filter through the data. Indonesia’s headline inflation could slow further to 5.2% year-on-year (from 5.5% previously) although core inflation may likely be unchanged at 3.1%. With core inflation very close to the central bank's inflation target of 3%, Bank Indonesia Governor Perry Warjiyo has opted to keep rates untouched at two consecutive meetings.  Meanwhile, in the Philippines, headline inflation likely dipped to 8%YoY from 8.6% in the previous month. Slowing inflation in the Philippines could allow the Bangko Sentral ng Pilipinas to pause at its May policy meeting. Governor Felipe Medalla hinted that his most recent rate hike could be the last for this episode should inflation continue to trend lower.   Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsEmerging Markets Asia week ahead Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Disappointing activity data in China suggests more fiscal support is needed

    What we expect from China’s first-quarter GDP report

    ING Economics ING Economics 06.04.2023 15:57
    With the Services PMI beating estimates, we're expecting strong retail activity data for March. But weaker export demand should drag on GDP. The government could provide stimulus to the economy after the release of the first quarter GDP data on 18 April Services is becoming a growth engine for the Chinese economy The Caixin service PMI was 57.8 for March, up from 55.0 the previous month. This is the highest level in more than two years, since November 2020. The rise can be attributed to the subindices of employment, which is also at its highest level since December 2020, and robust new orders that led to tightness in capacity.  With the faster recovery, there is rising price pressure seen in input prices but that has not been completely passed through to the selling price due to intensive competition. Retail sales in March should grow faster From what we have seen in the official non-manufacturing PMI and Caixin services PMI, retail sales in March should grow faster on a monthly basis. We should see a broad-based recovery of retail sales, except for automobiles, which should suffer from the end of subsidies for electric vehicles.  That should lead to around 5% year-on-year growth of retail sales in March after 3.5%YoY year-to-date growth in February. If we are correct on this forecast, then retail sales in the first quarter should grow 4%YoY. Read next: Following the collapse of Silicon Valley Bank, where do the risks lie for small banks?| FXMAG.COM While this is still lagging behind the 5% GDP growth target set by the government in the Two Sessions meeting in March, we need to remind ourselves that China is at the beginning stage of its recovery. The speed of recovery of retail sales, representing the growth of the domestic market, should pick up faster in the second quarter.  GDP lagging behind GDP for the first quarter should lag behind the 5% growth target for the whole of 2023. We expect GDP to only grow 3.8%YoY in the first quarter of this year. This is because of the slowing growth of external demand that should hurt exports and manufacturing activities. The removal of subsidies for electric vehicles has also led to the slowing production of automobiles compared to the same period last year.  China GDP and new home price forecast Source: CEIC, ING Stimulus is likely to follow the GDP report We expect stimulus to follow quickly after the release of the GDP report for the first quarter. 1. Infrastructure To keep the 5% growth target for 2023, the government needs to push forward infrastructure investments, most of which should be building metro lines and increasing the number of 5G towers as these are already in the plan for this year.  2. Consumption An extra stimulus could be resuming subsidies for electric vehicles after the sharp fall in automobile sales when the subsidies ended at the end of 2022. If the government believes that it has spare fiscal strength, it could also provide subsidies for consumer electronic goods. This could support the sales of domestic semiconductor companies. The improving service sector should provide a stable wage for the labour force. The stimulus should further stabilise labour demand in the manufacturing sector. These are the foundation of the increasing appetite for buying homes again in the economy. As such, we expect a moderate increase in new home prices in 2023, which should induce retail sales further via the wealth effect. We, therefore, expect GDP to grow faster at 6.0%YoY in the second quarter. We keep the full-year GDP forecast at 5% as external demand should be a concern for the year. Read this article on THINK TagsStimulus Retail sales GDP China Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 22.05.2023

    China: disappointing inflation data point to weakness in the economy

    ING Economics ING Economics 11.04.2023 14:53
    China's March CPI data were worse than expected and weaker compared to February. This is not the right sign for a full economic recovery. We expect next week's GDP report to show a partial recovery. The government needs to add more stimulus to the economy China's economy is showing signs of weakness 0.7%YoY China's March CPI Weaker CPI hints that China is not in full recovery mode yet Weaker inflation China's CPI only increased by 0.7% year-on-year in March compared to 1% in February. And PPI fell deeper too at -2.5%YoY from -1.4%YoY in February. Both point to a slower recovery in March. But CPI is mainly affected by food prices. Higher egg prices caused by a bird flu outbreak were offset by lower vegetable prices due to warmer weather. Clothing, a reliable gauge of average consumer behaviour, increased by 0.8%YoY and 0.5% month-on-month, which means that the average consumer is still spending. Competition among retailers during recovery should have limited price increases and squeezed profits. A weaker PPI could be an indicator of weaker industrial production data for March, which will be released next week. This should be a result of the weakening export demand. Weaker PPI could signal slower growth in industrial production Source: CEIC, ING Implication for macro policies Fiscal stimulus Data released so far do not point to a recovery that could lead to 5%YoY GDP growth for the first quarter. As such, we think the government will announce fiscal stimulus measures after the GDP report is released next week. There is no need to maintain a wait-and-see approach anymore. So far, the economic data show that the weakness in external demand has affected China's manufacturing activities and the labour market in the manufacturing sector. This could affect consumption growth later in the year if stimulus is not put in place.  There should be more infrastructure investment and some consumption stimulus. One such stimulus could be the resumption of subsidies for electric vehicles (EVs). However, this would increase the risk of overexpansion of the EV industry. Another option would be to provide a stimulus for the consumption of electronics, which would increase domestic demand for semiconductors. Read next: Bank of Korea stands pat again amid slowing inflation| FXMAG.COM Interest rate cuts An interest rate cut by the People's Bank of China, China's central bank, could support infrastructure and business investments by lowering borrowing costs. The PBoC can cut 10bp on both the 1Y Medium Lending Facility rate and the 7D reverse repo rate. This could then be followed by a 5bp cut in the 1Y Loan Prime rate and a 15bp cut in the 5Y Loan Prime rate by banks, which is the same pattern we saw in August 2022. This should create faster loan growth year-on-year in the second quarter and bring forward more infrastructure and company investments from the second half of this year to the second quarter.  The negative side of an interest rate cut is that it would lead to a wider interest rate differential with most major economies, and that could induce portfolio capital outflows from China. This is not ideal if the market reads the rate cut as a sign of weak economic recovery. CNY and CNH reacted to the weak inflation data USDCNY and USDCNH reacted higher to the inflation data, resulting in a softer yuan. USDCNY and USDCNH were as high as 6.89 when the data were released, and were 6.8847 and 6.8927 on 10 April 2023. The weakness in the currency is likely to continue until we see some good data in next week's GDP report (which we don't expect) or the government announces more stimulus measures. Read this article on THINK TagsStimulus Inflation GDP China Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Taiwan’s GDP contracted more than expected in first quarter

    Taiwan’s softer inflation and weak exports should make the central bank pause and weaken the currency

    ING Economics ING Economics 11.04.2023 15:02
    Taiwan's recent economic data has been weak and today's inflation and export data reflect this trend. We expect the central bank to stay put in the second quarter. This would widen the interest rate differential between the US, which should continue to hike in the quarter Taiwan's central bank CPI was milder in March and exports were weaker than expected Weaker inflation CPI fell to 2.35% year-on-year in March from 2.43% in February while the PPI fell to 0.52% YoY in March from 3.97% YoY in February. The steep fall in PPI was mostly affected by lower energy prices. Export and import prices fell into negative territory, to -0.74% YoY in March from 1.99% in February, and -1.98% YoY from 3.37%, respectively.  This set of price data highlights the acute problem of weak demand from the US and Europe, which is hurting Taiwan's economy and has passed from exports to the domestic market through slower wage growth and therefore lower CPI inflation. Very weak exports and imports Exports contracted 19.1% YoY to USD$35.2 billion from a contraction of 17.1% YoY in February. Exports to Mainland China fell deeper, by -35.0% YoY in March from -30.2% YoY a month ago. The migration of some Taiwanese factories is likely one of the causes of this big fall. It is also partly due to the overall weakness in global demand for semiconductors. Exports of integrated circuits, Taiwan's main export item which contributes more than 41% of total exports, fell 13.4% YoY in March. Almost every export item experienced a yearly contraction in March except for exports of minerals, but minerals contribute only a bit more than 3% of Taiwan's overall exports.  Imports experienced similar issues, as Taiwan's imports are mostly used for its export-related manufacturing activities. Imports contracted 20.1% YoY in March after a contraction of 9.4% YoY in February. The big contraction came from imports from Saudi Arabia and South Korea, which shrank more than 30% YoY. Imports from Mainland China also saw a deeper contraction, falling 26.7% YoY in March from -20.8% YoY in February. Both electronics parts and minerals, which are used in the production of other electronic parts and goods fell the most, by 34.8% YoY and 31.7% YoY in the month.  The data points to a very weak export picture in March and in the coming months. We maintain our view that the recovery of Mainland China's economy cannot fill the gap left by a weaker economy in the US and a milder one in Europe.  Central bank should pause rate hikes Taiwan's central bank surprised the market by hiking the policy rate by 12.5bp to 1.875% on 23 March 2023 when economic data had already been weak. Data released today shows that the economy has weakened further. Another rate hike would be very surprising. But the central bank could be concerned about the widening interest rate differential with the US as we expect the US to continue hiking in the second quarter.  Revising USD/TWD forecast This interest rate differential, together with the deteriorating prospect of Taiwanese semiconductor companies, could easily drive capital outflows from Taiwan's stock market. And this would put extra pressure on the Taiwan dollar, at least in the second quarter. Our previous forecast of USD/TWD was 30.00 and 29.50 by the end of the second and third quarters, respectively. Due to this set of weak economic data and our expectation of a pause from the central bank, we are now revising the USD/TWD forecasts to 31.00 and 30.00 by the end of the second and third quarters, respectively. Read next: Bank of Korea stands pat again amid slowing inflation| FXMAG.COM We expect the Federal Reserve to cut interest rates aggressively by 100bp in the fourth quarter, and by that time, the dollar should weaken. Though the Taiwan central bank should follow the Fed's rate cut in the fourth quarter, the degree of the cut should be much smaller, by only 25bp. And we expect Mainland China should be on track for economic recovery, and provide some fresh demand for semiconductors. All in all, there is still a high chance that we can achieve our USD/TWD forecast of 29.00 by the end of 2023. Read this article on THINK TagsUSDTWD Taiwan Monetary policy Exports CPI Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Euro's Rally Stalls as Focus Turns to Inflation and Data Disappointments

    Franklin Templeton Fixed Income talk Reserve Bank of Australia, RBNZ, Bank of Korea and People’s Bank of China

    Franklin Templeton Franklin Templeton 12.04.2023 14:13
    Reserve Bank of Australia (Not) a long pause The RBA kept rates steady in April after having hiked on ten consecutive occasions by a cumulative 350bps. The central bank had suggested earlier that they would prefer being data dependent going forward and assess the impact of the tightening done so far. We however think that the domestic inflationary momentum is still strong to signal an end to the current hiking cycle. Employment data improved in February after declining in the previous two months, the unemployment rate fell back to 3.5% and the National Australia Bank (NAB) business conditions survey remained resilient. Confidence has weakened, though in line with the monetary tightening, but we think further hikes are necessary to bring inflation closer to the 2%–3% mark from the current sub-8% levels. We expect a terminal cash rate of 4.10% by Q3. Elevated inflation (including rents and utilities) rules out a near-term rate cut, in our view, especially as the economy will likely avoid an outright recession. Reserve Bank of New Zealand A tough balancing act The inflation outlook has turned higher for 2023. Weather-related shocks like Cyclone Gabrielle have exacerbated these risks. The impact of the cyclone on New Zealand’s food prices is still emerging, prompting us to believe the aftereffects could linger. Even without the cyclone, the tightness of the labor market has stretched inflationary pressures further. Services inflation is turning sticky, and given that employment rose in February, the impact of monetary tightening so far has not translated into job losses just yet. This makes the case for a quick turnaround in inflation difficult; we now expect the country’s Consumer Price Index (CPI) to average just short of 6% in 2023. Growth has started to suffer, and the economy is already under a probable recession, while property prices have sharply cooled. The central bank cannot overlook the challenge of higher inflation becoming more normalized. We expect a terminal rate of 5.50% for the Official Cash Rate (OCR) by June, but the balance will be tricky as a quicker slowdown would prompt rate cut expectations. A sudden pivot is unlikely, but we expect a rate cut by early 2024. Bank of Korea Wait-and-see stance After a cumulative 300 bps of rate hikes starting in August 2021, the BoK paused at its February 2023 meeting, albeit not unanimously. Although the central bank revised its growth and inflation projections for 2023 marginally lower, five members (out of seven in total) were open to a higher terminal rate (of 3.75%) in a clear hawkish tilt. Inflation retreated to 4.8% y/y in February (after an acceleration in January following utility price hikes). However, core inflation remains sticky at best (at 4.8%), even as growth measures have deteriorated on softer consumption and tech exports. Yet inflation is expected to maintain a downward adjusting bias due to base effects, averaging close to 3.8% in 2023. With this outlook in mind, we remain comfortable keeping the terminal rate at 3.50% currently. Another hike in April cannot be ruled out but will be contingent on the March CPI print. Further hikes are unlikely, as monetary policy remains tight for now. Contrary to earlier expectations, an immediate policy pivot has been ruled out by the central bank unless the 2% inflation goal is clearly in sight. We now expect rate cuts by the BoK to begin in early 2024. People’s Bank of China Policy hamstrung by deficient demand With yet another 25-bp cut to the reserve requirement ratio (RRR), the PBoC continues to rely on quantitative tools over outright policy rate cuts to ease monetary policy. The latest RRR cut was aimed at replenishing bank lending capacity. Although China’s consumer spending and investment rebounded in the first two months of the year after COVID-19 restrictions were dropped in December, the strength of the recovery has underwhelmed. The recovery also remains uncertain given still-elevated unemployment, continued weakness in the property sector and declining exports weighing on industrial output. Headline credit growth, while strong, was likely due to policy pressures on banks, with more funding directed toward government-led entities. Meanwhile, private firms and households’ demand for credit has remained subdued. Rising mortgage prepayments and still-increasing household deposits suggest that demand deficiency has been the major hurdle for China’s recovery—also evidenced by downside surprises in inflation. Given insufficient domestic demand, we believe the PBoC will prefer to rely on quantitative tools (like RRR cuts) to sustain credit expansion. Room for policy rate cuts remains limited without a further downward adjustment to deposit rates, which are already at an all-time low. Franklin Templeton Fixed Income (FTFI) Policy Rate Forecasts vs. Market Pricing Source: Central Bank Watch | Franklin Templeton
    Bank of Japan stays on hold but policy adjustment is coming

    Asia week ahead: Policy meetings from China and Indonesia

    ING Economics ING Economics 13.04.2023 18:42
    Next week’s data calendar features rate hike decisions from China and Indonesia, trade and price data from Japan, plus GDP from China Source: Shutterstock Upcoming economic and price activity from Japan Japan will release several data points next week and we think that the trend of weak manufacturing against a strong services sector should continue. Fresh PMI data for manufacturing will likely show the sector staying in contraction while services PMI could continue to gain modestly on the back of a better tourism and leisure outlook. Meanwhile, March exports are expected to fall again mainly due to weak China and electronics exports. CPI inflation is expected to slow to 3.1% year-on-year in March due to base effects, but based on a monthly comparison, we believe service prices will post a modest gain. Upcoming GDP data from China China will release its GDP report for the first quarter and activity data for March. We expect GDP growth at 3.8%YoY, with consumption and infrastructure investment as the major drivers. Strong loan growth in March should support faster infrastructure investments. Retail sales should continue to recover. However industrial production will be affected by weak external demand. Read next: Another month of lacklustre industrial production data for Italy| FXMAG.COM We will be monitoring how quickly infrastructure investment grows amid strong loan growth. We will also look at the details of retail sales to find clues on consumption recovery, whether it is broad-based and how fast it can grow in the coming months. PBoC expected to cut policy rates The People's Bank of China (PBoC) will decide whether to change the 1Y Medium Lending Facility policy rate. The central bank should have most of the information it needs to make this decision even without the GDP data. A cut of 10bp is possible if the data is not as good as the government expects. Banks will follow the central bank's decision to decide on whether to cut the Loan Prime Rate. We expect that if there is a cut of 10bp by the PBoC then banks will cut the 1Y and 5Y Loan Prime rates by 5bp and 15bp, respectively. Bank Indonesia to keep rates unchanged Bank Indonesia will likely keep rates untouched at 5.75% given softening inflation and a relatively stable currency. Inflation has moderated and was last reported at 5% year-over-year while the Indonesian rupiah (IDR) is one of the best-performing currencies in the region for the month. These two factors should give the central bank enough room to maintain its current policy stance at its meeting next week. A sustained slowdown of inflation coupled with a strong IDR could even open the door for possible easing by Bank Indonesia in the coming months.  Key events next week Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Bank of Japan stays on hold but policy adjustment is coming

    Asia Morning Bites - 18.04.2023

    ING Economics ING Economics 18.04.2023 18:02
    Focus today will be on China's GDP, industrial production and retail sales figures  Source: shutterstock Global Macro and Markets Global markets: Slight gains in US stocks yesterday were mainly concentrated at the end of the session as Banks again rose, offsetting falls in energy companies as crude oil prices slipped. The S&P500 and NASDAQ both rose about 0.3%. Chinese stocks again looked stronger than their US counterparts. The PBoC’s no-change decision on MLF rates yesterday was interpreted positively ahead of today’s activity data dump. The Hang Seng rose 1.68% and the CSI 300 rose 1.4%. US Treasury yields kept rising sharply yesterday.  Markets are now pricing in an 85% chance of a hike at the 4 May meeting. So the driver at the very front end of the yield curve probably only has a bit further to go. 2Y Treasury yields rose a further 9.5bp, while 10Y yields rose 8.8bp to 3.60%. 10Y Japanese Government bond yields also rose to 0.479%, though remain below the 0.5% YCC cap. The USD made further gains yesterday, and EURUSD has fallen further to 1.0925. The AUD was steady at around 0.67. Cable slid a little to 1.2373, as did the JPY, which rose to 134.44 vs the USD. Asian FX was weaker across the board yesterday in the face of a stronger USD. The PHP, KRW and IDR led the declines. USDPHP is now 55.85. G-7 macro: There wasn’t much on the G-7 calendar yesterday. The US Empire manufacturing survey came in stronger than expected. And the NAHB housing market index was also a point higher at 45, but was in line with expectations. Housing starts and building permits are today’s data offerings from the US. Elsewhere, UK labour data for March is due.  Germany’s ZEW survey is out, and there is also European trade data for March to consider. The next few days see a wall of Fed speakers ahead of the 4 May decision. Though today we have only one, Barkin, and he also spoke yesterday, saying that he needed more evidence that inflation was peaking - feeding expectations for one further hike in May. ECB President, Christine Lagarde’s speech yesterday was mainly a longer-term piece noting the risks to growth and inflation from a fragmented multipolar global economy. It didn’t have much relevance for the upcoming ECB decision in May, where economists are looking for a further 25bp hike, with another two 25bp hikes by July expected.   China: China will shortly release its GDP report for the first quarter and activity data for March. Our forecast for 1Q23 GDP is 3.8% YoY. We expect consumption to lead growth in 1Q23 and an increase in infrastructure investment by the government should offset the negative impact on industrial production from slowing external demand. We expect that any GDP growth rate under 3.8%YoY will prompt further government stimulus. Indonesia:  Bank Indonesia (BI) meets to discuss policy today.  All signs point to a pause from BI with inflation moderating and the currency stable.  The IDR is the best-performing currency in the region for April while core inflation is back to target, limiting any need for BI to surprise with a rate hike today.  We expect BI to remain on hold in the near term but relatively tame inflation and an appreciating currency could eventually open the door for rate cuts in the second half of the year.    Australia: The Minutes of the April Reserve Bank of Australia meeting are released at 0930 SGT/HKT today. Read next: Hungary’s bond issuance needs under control| FXMAG.COM What to look out for: China GDP and Bank Indonesia meeting China GDP, retail sales and industrial production (18 April) Bank Indonesia policy meeting (18 April) US building permits and housing starts (18 April) Japan industrial production (19 April) Malaysia trade balance (19 April) US mortgage applications (19 April) New Zealand CPI inflation (20 April) Japan trade balance (20 April) China loan prime rate (20 April) Malaysia CPI inflation (20 April) Taiwan trade balance (20 April) US initial jobless claims and existing home sales (20 April) Japan CPI inflation and Jibun PMI (21 April) South Korea early trade balance (21 April) Hong Kong CPI inflation (21 April) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Japanese yen increased by over 0.5% on Friday. Japanese monetary policy may change soon

    Asia Morning Bites - 19.04.2023

    ING Economics ING Economics 19.04.2023 11:53
    Markets tread water Source: shutterstock Global Macro and Markets Global markets: After a strong open, US stocks dropped back yesterday, and both the NASDAQ and S&P 500 finished the day almost unchanged. There was a mixed performance too in Chinese stocks, despite the stronger Chinese activity data – spirits possibly dampened by reduced expectations of additional government stimulus. US Treasury markets trod water. Yields on 2Y Treasuries rose 0.3bp. Those on 10Y Treasuries drifted back 2.5bp to 3.576%. In central bank news, the Fed’s Raphael Bostic remarked that he saw one more hike and then a pause for some time. James Bullard is also reported as favouring more hikes. EURUSD made back some of the ground it had lost in recent days, rising back to 1.0975. The AUD has also recovered back to 0.6730, Cable has risen back to 1.2428, and the JPY has also made gains, moving down to just over 134. It was another mixed day for Asian FX, with the SGD and THB tracking the G-10 currency gains, the CNY and CNH doing very little, and the rest making moderate losses. G-7 Macro: There wasn’t a lot on the G-7 Macro calendar yesterday. The UK reported some softer labour market data, which will help bolster the case that the Bank of England is finished with hiking. US housing starts and building permits for March were mixed, with starts down but better than expected, but permits – an indicator of future construction activity, much softer. Germany’s ZEW survey was also mixed, with an improvement in the current situation offset by poorer expectations. Today, March UK inflation will likely slow further. April mortgage applications are the “main” US release. There is nothing of note today in terms of Fed speaker engagements, though there are a bunch of ECB members slated to make public comments. Philip Lane yesterday indicated his preference for further hikes in May, with the size of the hike to be determined by data flows.  Philippines: The PHP continued to underperform due to solid corporate dollar demand. Recent dovish comments from the BSP Governor suggesting he was open to a pause in May have also contributed to the recent slide. Read next: FX Daily: Choppy trading| FXMAG.COM What to look out for: Fed speakers Malaysia trade balance (19 April) US mortgage applications (19 April) Fed's Goolsbee and Williams speak (20 April) New Zealand CPI inflation (20 April) Japan trade balance (20 April) China loan prime rate (20 April) Malaysia CPI inflation (20 April) Taiwan trade balance (20 April) US initial jobless claims and existing home sales (20 April) Japan CPI inflation and Jibun PMI (21 April) South Korea early trade balance (21 April) Hong Kong CPI inflation (21 April) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia week ahead: Policy meetings in China and the Philippines

    The Commodities Feed: Strong Chinese activity data

    ING Economics ING Economics 19.04.2023 11:55
    Chinese GDP data was better than expected, while other Chinese activity data was also strong. The data releases helped to push metal prices higher, however, oil was more rangebound New orders for China's domestic market are growing faster than new export orders Energy- Strong Chinese refinery activity Better-than-expected GDP data from China was not enough to boost oil prices yesterday. Instead, the market settled close to unchanged and there are clearly still some concerns over the demand outlook. Weaker refinery margins will be adding to these concerns. Overnight, the API reported that US crude oil inventories fell by 2.7MMbbls over the last week, while crude stocks at the WTI delivery hub, Cushing, declined by 553Mbbls. On the refined products side, gasoline and distillate stocks also fell by 1MMbbls and 1.9MMbbls respectively. Overall, the report was fairly supportive due to a larger-than-expected crude draw and declines across the board.  Chinese activity data was also constructive yesterday. Domestic refiners processed 14.94MMbbls/d over March, up more than 8% YoY and also the highest monthly volume on record, though refinery maintenance through April will likely mean run rates fall in the next set of data. Activity and trade data also suggest that apparent oil demand over March was strong - coming in well above 14MMbbls/d. Despite the strong numbers, it would appear that China still built crude oil inventories over the month- adding in the region of 1.7MMbbls/d. Metals – China's metals output recovers The latest data from the National Bureau of Statistics (NBS) shows that Chinese primary aluminium production rose 3% YoY to 3.37mt in March. Cumulative output rose almost 6% YoY to 10.1mt in the first three months of the year. Monthly crude steel production in China continued to rebound, rising by almost 7% YoY to 95.7mt last month, while cumulative production grew 6.1% YoY to 261.6mt. In addition to activity data, China also released another batch of trade data. The latest shows that China’s imports of unwrought aluminium and products rose 1.8% YoY to 200.5kt in March. Cumulative imports are up 7.8% YoY to 574.8kt over the first three months of the year. Alumina exports jumped 313.6% YoY to 50kt last month, while YTD exports increased more than 10-fold to 310kt. These stronger flows will be due to increased exports of alumina to Russia. Read next: Asia Morning Bites - 19.04.2023| FXMAG.COM China’s Yunnan province started another round of power rationing earlier this month which may support aluminium prices in the near term. Up until now, this latest round of power cuts has not applied to aluminium smelters, but clearly, the risk is that it could extend to the industry if power shortages persist. The latest LME COTR report shows that net bullish positions for aluminium increased by 1,625 lots to 101,813 lots, as of last Friday. With respect to copper, speculators boosted their net long position by 7,404 lots to 60,352 lots (highest since May 2021) in the week ending 14 April. Agriculture – Indian sugar output falls The latest data from the Indian Sugar Mills Association (ISMA) shows that cumulative domestic sugar production fell 5.4% YoY to 31.1mt through until 15 April. The group added that just 132 mills were still crushing cane by mid-April compared to 305 mills at the same time last year. Sugar has seen significant strength so far this year, with prices up more than 20% YTD. Indian and Thai sugar output has fallen short of expectations, whilst El Nino weather risks are raising concerns for production next season from these two important producers. CS Brazil is expected to produce its second-largest crop on record this season, which one would think would help ease concerns. However, logistics out of Brazil could be a problem, given that Brazil is also dealing with record corn and soybean crops. Read this article on THINK TagsSugar Oil China GDP China activity data API Aluminium Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 22.05.2023

    Asia Morning Bites - 20.04.2023

    ING Economics ING Economics 20.04.2023 11:27
    Nothing is expected on Chinese rates today. Elsewhere, the US Fed's Beige Book suggests the economy is slowing... Source: shutterstock Global Macro and Markets Global markets: It was another flat day for US equities. After opening down from the previous session, stocks managed to claw their way higher, but ended almost unchanged at the end. Chinese stocks had a poorer day. The Heng Seng Index fell 1.37%, while the CSI 300 dropped 0.9%. US Treasury yields crept higher again yesterday despite the weak Beige Book. The yield on the 2Y note rose 4.7bp while that on the 10Y bond rose just 1.5bp to 3.591%. UK 10Y gilt yields rose 11bp after higher-than-expected inflation data pushed up expectations for a further 25bp from the Bank of England. EURUSD dropped as low as 1.0917 at one stage yesterday, though recovered back to 1.0951 to leave it only slightly lower than the previous day.  The AUD also lost ground to just above the 67 cent level, while Cable made small gains, helped by the rising rate hike expectations. The JPY rose back to 134.75, as thoughts of any action by incoming BoJ Governor, Ueda, were pared back. Asian FX was weak across the board yesterday. The THB and KRW were at the bottom of the pile, losing 0.55% and 0.54% respectively. G-7 macro:  It was another quiet day for G-7 data. As mentioned, UK markets were pushed about by the disappointingly high inflation print for  March, which comes on top of stronger wages data earlier in the week. The latest Beige Book from the US Fed showed that the US economy stalled last month, with hiring and price increases slowing and credit tightening. The Fed’s Williams sounded a slightly dovish note, saying that inflation was slowing and the labour market was cooling. He added that the run of data would indicate when the Fed could stop hiking. It sounds like he thinks this will be soon, though he indicated that he did support a further hike. US mortgage applications data was the only other release of note, which registered an 8.8% decline in the week of 14 April.  Today we get US March existing home sales, which are expected to come in at a 4.5m annual pace, a slight drop from February.  Elsewhere, European trade data for February is released. China: We expect Chinese banks to leave the Loan Prime Rate on 1-year and 5-year loans unchanged today. This is because the PBOC has left the 7D reverse repo and 1-year medium-term lending facility policy rates unchanged. It is unlikely that the central bank will ease as retail sales rose 10.6%YoY in March. Unless data show a pause in the economic recovery, which is not our base case, the PBoC has little reason to cut policy rates. The central bank could stabilize market interest rates by changing liquidity in the money market via daily market operations. A RRR cut also seems to be quite unlikely as it would inject too much liquidity into the market during the recovery and could fuel inflation later. Japan: The trade deficit narrowed modestly in March for a second month as imports (7.3% YoY) grew at a slower pace than the previous month (8.3%), mainly due to favourable currency effects and falling commodity prices. The March trade figures were slightly better than market consensus, but the trend of slowing exports has continued. Exports rose 4.3% YoY in March (vs 6.5% in Feb and 2.4% market consensus). By destination, exports to China fell 7.7%YoY while exports to the U.S. and EU rose 9.4% and 5.1% respectively. We expect interregional trade to remain sluggish as poor semiconductor performance will dominate the positive impact of China’s reopening, but solid exports to developing markets are likely to continue, especially in the auto sector, at least for this quarter. That said, given the US’s IRA act is expected to negatively affect Japanese automakers along with softening demand in the US, we believe that exports will likely turn negative in the coming months. Read next: Looking past the peak of Fed key rates| FXMAG.COM What to look out for: US initial jobless claims and Fed speakers China loan prime rate (20 April) Malaysia CPI inflation (20 April) Taiwan trade balance (20 April) US initial jobless claims and existing home sales (20 April) Fed's Waller, Mester, Bowman and Logan speak (21 April) Japan CPI inflation and Jibun PMI (21 April) South Korea early trade balance (21 April) Hong Kong CPI inflation (21 April) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

    Asia week ahead: Bank of Japan’s first meeting with new governor

    ING Economics ING Economics 20.04.2023 15:05
    Next week’s data calendar features several economic activity data from Korea, inflation from Japan, Singapore and Australia, job and growth data from Taiwan plus PMI data from China. Japan's central bank will meet for the first time under new governor Kazuo Ueda Source: Shutterstock Inflationary pressures expected to ease in Australia March inflation will probably fall substantially on base effects alone, as March 2022 saw a 1.1% month-on-month increase following Russia’s invasion of Ukraine and the resulting spike in energy and agriculture prices. But we may also have some additional help from volatile food prices, which rose 1.0%MoM in February, but will probably ease back to something closer to 0.3-0.4% in March. Some additional decline in alcohol and tobacco prices may provide a further pushdown, and offset slightly higher gasoline prices for the month, resulting in a total CPI index increase of 0.3%MoM, and 5.9% year-on-year, down from 6.8% in February. This should be enough to at least put the Reserve Bank of Australia on hold at the April meeting. And may also be enough to draw a line under this entire rate-tightening cycle. Weak semiconductor demand could hinder Korea's economy We expect first quarter GDP to post a mild contraction of -0.1% quarter-on-quarter seasonally adjusted (vs -0.4% in 4Q22) mainly due to sluggish exports and investment. Weak global demand for semiconductors is a major reason behind this development. However, private consumption and construction are expected to hold up relatively well despite higher borrowing costs and a sharp decline in real estate, while inventory also contributes positively to growth. Read next: France: business outlook worsens| FXMAG.COM We believe March industrial production will contract again as we expect that chipmakers cut production further in March to unload inventory. Meanwhile, the increase in auto sector activity should partially offset the overall decline. Meanwhile, sentiment survey data is expected to improve as the Bank of Korea maintained its policy rates and market rates have fallen gently. China’s reopening, as well as the calming of financial market jitters triggered by the banking sector, have also probably helped to boost consumer and business sentiment. Ueda's first meeting as Bank of Japan governor The Bank of Japan (BoJ) will hold its monetary policy meeting on 27 and 28 April, the first time under Governor Kazuo Ueda, amid speculation about the timing of the monetary policy adjustment. We believe the BoJ will opt to keep all settings untouched given the recent banking sector jitters in the US and Europe. Yet, it is still worth watching how the new governor will shape his views on monetary policy and macroeconomic conditions. The BoJ will also release its latest macro outlook report. The key takeaway will be the inflation forecasts and whether the BoJ sees inflation undershooting its 2% target in the near future, which will give us more hints about the BoJ’s reaction to the CPI in coming meetings. Other than that, Tokyo CPI inflation is expected to cool down further in April while labour market conditions are expected to remain solid mainly led by the service sector. March industrial production is expected to slow on the back of the weak global demand for IT products. Gloomy economic outlook for Taiwan Taiwan will release its first quarter GDP report next Friday, and we expect a mild contraction of 0.5%YoY from a 0.41%YoY contraction in 4Q22. This should mean that Taiwan fell into a recession in the first quarter. The dip in semiconductor demand has hurt the economy in terms of production and exports. We will wait to see the negative impact on industrial production in March and we expect another contraction of around 8%YoY in March after an 8.7% contraction in February.  The unemployment rate in Taiwan should therefore edge up to 3.6% in March from 3.58% in February. All of this points to a gloomy outlook for Taiwan. However, there is a low base effect for the second quarter, which should help GDP growth turn positive again. This technical rebound may not imply improvements in global demand for semiconductors as the US economy is slowing. Upcoming PMI data from China China will release official manufacturing and non-manufacturing PMIs on 29 April. We expect services to grow faster than manufacturing activities as there was a short holiday in April, and tourism-related activities increased. Meanwhile, manufacturing activities could grow slightly slower in April due to the shorter month. Inflation to trend lower in Singapore Singapore reports March inflation next week and we expect both headline and core inflation to moderate from the previous month. Headline inflation could settle at 5.7%YoY from 6.3%, while core inflation could dip to 5.2% from 5.5%. Slowing inflation could be one of the reasons why the Monetary Authority of Singapore (MAS) opted to retain policy settings last week after growth disappointed. We can expect inflation to grind lower in the coming months but given that it remains well above the central bank’s target, the MAS may be limited in its ability to ease settings to help support sagging growth momentum.    Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsEmerging Markets Asia week ahead Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Nasdaq 100 posted a new one year high. S&P 500 ended the day unchanged

    Asia Morning Bites 21 April 2023

    ING Economics ING Economics 21.04.2023 11:16
    Japanese core inflation data accelerates, while flash Korean exports drop further. Fed speakers to fill an otherwise empty macro calendar in the G-7.  Source: shutterstock Global Macro and Markets Global markets: After two days of indecision, equities made a more meaningful move lower yesterday. The S&P 500 fell 0.6%, while the NASDAQ fell 0.8%. Equity futures are looking slightly more positive though, so the drop may halt today. Chinese stocks were mixed, with the Hang Seng index up slightly on the day but the CSI 300 moving slightly lower. US Treasury yields reversed some of their recent increases. The yield on the 2Y note fell 10.1bp, while that on the 10Y bond fell 5.9bp to 3.532%. European 10Y Government bond yields were also about 7bp lower. EURUSD hasn’t done a lot over the last 24 hours and is currently 1.0968, just a little higher than this time yesterday. The AUD has moved more meaningfully higher to 0.6743, Cable is roughly unchanged at 1.2441, and the JPY has moved a little lower to 134.13. Asian FX has been fairly quiet. The PHP made small gains taking it down to 56.02, but otherwise, there was not too much going on.   G-7 macro: Today is another quiet day for macro data in the G-7, following yesterday’s uneventful calendar. US PMI data may get a quick look, and there is PMI data out in Europe too. Otherwise, a lazy Friday beckons. Fed speakers yesterday broadly confirmed what the market is currently expecting, namely one more hike and then a pause. This was the view promoted by Raphael Bostic with Loretta Mester also supporting another hike but suggesting that the Fed was nearing the peak in rates. Today is filled with Fed speakers with six separate speaking engagements on the calendar.  ECB speakers yesterday suggested that there was still some tightening to come. Isabel Schnabel noted the stickiness of core inflation even as headline rates were coming down. And ECB President, Christine Lagarde, said there was still “…a little way to go…” in the inflation fight. Schnabel speaks again today, along with several other ECB members. Japan: Headline inflation slowed to 3.2% YoY in March (vs 3.3% in Feb, 3.2% market consensus) as utility prices eased (-2.3%) due to the government subsidy program.  But CPI inflation excluding fresh food and energy accelerated more than expected to 3.8% YoY (vs 3.5% in Feb, 3.6% market consensus). Price pressures are broadening in Japan for the following reasons. 1) the secondary impact of past high commodity prices – housing goods (9.4%), clothing (3.6%), 2) rising service prices boosted by reopening – entertainment (2.3%), transport (1.6%). As we expect higher-than-usual wage growth this year, real spending should be able to keep up with this higher inflation. We expect the headline inflation rate to slow down to 2% later this year due to base effects and the energy subsidy program, but core inflation could remain above 2% for longer.  Yesterday, the tertiary industry index also confirmed strong service activity. So, we believe that there is a growing possibility that the BoJ will revise its yield curve control (YCC) policy as early as June. Next Friday, the Bank of Japan will keep its monetary policy settings. But with stronger-than-expected core inflation, wage growth, and service activity, we think it is possible that they may change their forward guidance on the statement by dropping the reference to “lower levels” in the text that normally states, “…short-and long-term policy interest rates to remain at their present or lower levels” giving them more flexibility to adjust policy in the future. Flash PMI indices showed that the strong service vs weak manufacturing trend continued. The service PMI edged down to 54.9 (vs 55 in March) but remains at a historically high level. Among sub-indices, employment and prices charged rose compared to the previous month, which signals a robust job market and higher pressure for services. Meanwhile, the manufacturing PMI edged up to 49.5 (vs 49.2 in March). And although it stayed below 50 for a sixth consecutive month, it seems to be improving gradually. The output sub-index continued to decline but new orders rose. Korea: Early April trade data confirmed that the weak export trend will extend this month and probably for several more months ahead. Chip exports dropped 39.3%, exports to China dropped 26.8%, but exports to the US rose 1.4%.  The outlook for Korean exports is quite cloudy, given the continued slump in semiconductor demand and the exclusion of Korean automakers from the recently developed EV-related incentive program in the US. The recovery of exports could be delayed until 2H23 when China’s reopening should eventually have a positive impact and the semiconductor cycle bottoms out. Read next: FX Daily: Time to take more defensive positioning| FXMAG.COM What to look out for: South Korea early trade balance (21 April) Hong Kong CPI inflation (21 April) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 22.05.2023

    Asia Morning Bites - 24.04.2023

    ING Economics ING Economics 24.04.2023 10:34
    Singapore inflation data is out later today Source: shutterstock Global Macro and Markets Global Markets: US stocks failed to make headway on Friday, with the S&P 500 and NASDAQ finishing less than 0.1% higher than the previous day. Chinese stocks fared even worse, with the Hang Seng down 1.57% and the CSI 300 dropping 1.96% on the day. Stronger-than-expected US PMI data may have dampened thoughts about Fed rate cuts later this year and weighed on stocks, though there were also geopolitical developments as a Chinese diplomat raised questions about the sovereign status of the Baltic States. Russia also threatened to end the Black Sea grain deal over proposed EU export bans. US 2Y Treasury yields rose 3.9bp to 4.182%, while yields on the 10Y Treasury bond rose 4.0bp to 3.572%. EURUSD is closing in on 1.10, and briefly edged above this level a few hours ago, though is wavering at about 1.0992 at the time of writing. The AUD is looking less robust and fell back below 67 cents on Friday where it remains in early trading today. Cable has managed to hold its ground against the USD, recovering from losses on Friday to sit at 1.2450.  The JPY is also about unchanged from this time last Friday at 134.02. Friday was a poor day for other Asian FX, which lost ground across the board, though not very much, while many economies were off for public holidays. G-7 Macro: On Friday, US PMIs registered some stronger activity. This was mainly concentrated in the service sector, where the index rose to 53.7 from 52.6, though the manufacturing sector index also rose to 50.4 from 49.2. Today is a quiet day for macro data, with Germany’s Ifo survey for April the pick of the day. Singapore: Singapore reports March inflation today (13:00 SGT), and the consensus is for 5.5%YoY headline inflation and 5.1%YoY core inflation.  Both measures are expected to ease from the previous month but remain above the central bank's target.  We expect to see inflation moderate in the coming months but the Monetary Authority of Singapore may only consider adjusting its policy settings once inflation is close to or back to target.  Read next: Central banks: Our latest calls ahead of a dramatic month| FXMAG.COM What to look out for: Singapore inflation Singapore inflation (24 April) Taiwan industrial production (24 April) South Korea GDP (25 April) Hong Kong trade (25 April) US new home sale and Conference Board consumer confidence (25 April) Australia inflation (26 April) New Zealand trade (26 April) Singapore industrial production (26 April) US durable goods orders (26 April) Thailand trade (26 April) South Korea business survey manufacturing and non-manufacturing (27 April) US GDP and initial jobless claims (27 April) South Korea industrial production (28 April) Japan labour market data (28 April) Australia PPI (28 April) Taiwan GDP (28 April) US personal spending (28 April) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia week ahead: RBA policy meeting plus regional trade data

    Asia Morning Bites - 27.04.2023

    ING Economics ING Economics 27.04.2023 12:33
    EURUSD rises sharply, but Asian currencies more stable Source: shutterstock Global Macro and Markets Global Markets: After Tuesday’s weakness, US stocks fared slightly better, though it was still a mixed picture. And despite the NASDAQ staging a small increase, the S&P 500 was down again. Equity futures suggest a slight improvement today for both indices. Chinese stocks also halted their recent slide. The Hang Seng rose 0.71% from the previous day while the CSI 300 was still down but by less than 0.1%. Slightly improved sentiment helped 2Y US Treasury yields to rise, and they are now 3.951%, up 6.2bp from the previous day while the 10Y yield is 3.448%, after rising 4.9bp. The last 24 hours for EURUSD has been very volatile. This time yesterday, EURUSD was about 1.0977, but it rose sharply after midday heading as high as 1.1095 before pulling back to 1.1044 now. Ongoing bank concerns may be one reason for the USD’s weakness, as US regulators (according to newswires) are weighing a  downgrade to their assessment of First Republic Bank, though other sources mention debt ceiling concerns as the driver. The AUD did not respond positively to the ongoing improvement in inflation and has dropped back to just above 66 cents. Cable, in contrast, has followed the EUR higher and is now 1.2471 and the yen has also made gains. USDJPY is now down to 133.43.  Wednesday was mixed again for Asian FX, though most moves were quite modest. The THB  led the pack with a 0.52% gain on the day while the KRW held up the bottom of the pack with a 0.3% decline. USDCNY was not much changed. G-7 Macro:  There was only light news flow yesterday, which from the US contained a narrowing of the trade deficit, some worse-than-expected core goods orders, and some rising retail inventories. There’s nothing in here to make too big a deal over.  The rest of the G-7 was quiet. Today will deliver a barrage of European confidence measures. But the highlight is most probably the advance 1Q23 GDP release from the US. The consensus view is for a 1.9% annualized growth rate, down from 2.6% in 4Q22. Read next: Riksbank: Growing dissent hinders efforts to support the krona| FXMAG.COM What to look out for: US GDP and core PCE China industrial profits (27 April)  US GDP, core PCE, pending home sales and initial jobless claims (27 April) South Korea industrial production (28 April) Japan labour market data (28 April) Australia PPI (28 April) Taiwan GDP (28 April) US personal spending (28 April) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia week ahead: RBA policy meeting plus regional trade data

    Asia week ahead: RBA policy meeting plus regional trade data

    ING Economics ING Economics 27.04.2023 17:04
    Next week we'll get China activity data and regional inflation reports, plus a Reserve Bank of Australia meeting Source: Shutterstock Upcoming RBA policy meeting After pausing at its April meeting to gather more information and assess the impact of its tightening so far, the main point of note for the Reserve Bank of Australia (RBA) will have been the much lower inflation numbers in March than in February. Year-on-year inflation in March dropped from 6.8% to 6.3%, while the slower-moving quarterly series for the first quarter fell from 7.8% to 7.0%. Core inflation rates also fell or came in below expectations. These figures not only point to an extension of the pause but could also be viewed as raising the likelihood that 3.6% marked the peak in the cycle for cash rates. We would also not rule out there being some easing of rates before the end of this year, as by then we believe inflation will have fallen to a level that is only just above the upper bound of the RBA’s 2-3% inflation target. Trade figures and inflation from Korea Korea’s exports are expected to continue to decline in April and the downturn in exports will become widespread except for automobiles. Meanwhile, falling commodity prices and base effects should push down headline inflation. PMI data from China China will release its official PMIs on 30 April. We expect slightly slower monthly growth in the manufacturing PMI to 51.7 in April from 51.9 in March. The slight dip can be traced to slower export orders from the US and Europe. The non-manufacturing PMI should continue to improve to 59.0 in the month from 58.2 in March as real estate activities grew while retail sales have been fairly stable ahead of the Golden Week public holiday from 29 April to 3 May.  A similar trend should be recorded in Caixin’s manufacturing PMI and services PMI to be released on 4 and 5 May, respectively. Taiwan reports price data and economic activity figures Taiwan’s manufacturing PMI should continue to show a monthly contraction. The latest figure is expected to dip to 48.9 from 48.6. The slower deterioration can be attributed to a slight pickup in orders for new phone models. Meanwhile, falling industrial production likely put deflationary pressure on wholesale items more than on retail items. This will likely be the trend for Taiwan in the near term.  Thus, we expect CPI inflation to moderate to 2.25% in April from 2.35% in March while PPI should start to record a yearly contraction of 0.5% in April from a positive 0.5%YoY a month ago. Read next: Rates Spark: Waiting for that smoking gun| FXMAG.COM Inflation moderating somewhat in Indonesia and the Philippines Price pressures have been moderating in Indonesia and the Philippines with base effects also helping to push headline inflation lower. Indonesia’s headline inflation could head closer back to the central bank’s target and settle at 4.3%YoY while core inflation could be steady at 2.9%.  Meanwhile, headline inflation in the Philippines is also on the decline and we expect April inflation to dip to 6.9%YoY from 7.6% in the previous month. A slower inflation reading in the Philippines could open the door for the Bangko Sentral ng Pilipinas (BSP) to consider a pause at its May policy meeting.  Indonesia's first quarter GDP report Indonesia will release first quarter GDP data next week and forecast growth to settle at 4.4%YoY driven by solid household consumption topped off by a relatively strong export performance. PMI manufacturing remained in expansion mode for the first few months while retail sales managed to stabilise after a brief contraction in January with inflation easing.  Singapore retail sales Retail sales could revert to contraction, down by as much as 6%YoY given still elevated inflation and slowing growth momentum. Singapore recently reported disappointing first-quarter GDP numbers and retail sales likely reflected the downturn in growth.     Key events in Asia next week All time refers to Singapore time Source: Refinitiv, ING Read this article on THINK TagsAsia week ahead Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia week ahead: Policy meetings in China and the Philippines

    Asia Morning Bites - 02.05.2023

    ING Economics ING Economics 02.05.2023 09:45
    Reserve Bank of Australia (RBA) policy meeting later today - the consensus is for no change. Indonesia reports inflation later in the afternoon and the Eurozone reports important credit and inflation data ahead of the ECB later this week Source: shutterstock Global Macro and Markets Global markets: The US was not on vacation on Monday, unlike most of the rest of the world, though it might as well have been from a stock market perspective. US stocks had a flattish session and ended virtually unchanged from the previous day’s close. It was more lively in US Treasury markets. The yield on the 2Y Treasury rose by 13.4bp to 4.141%. 10Y yields rose 14.6bp to 3.568%. The renewed surge in US yields has dragged EURUSD back down to 1.0971. The AUD was slightly higher at 0.6627. Cable slid lower to 1.2487 and the JPY also weakened, rising to 137.50. Most of the rest of Asia was on vacation yesterday. G-7 macro:  US PCE deflator data on Friday last week was not too badly behaved. The March headline PCE inflation figure dropped to 4.2%YoY from an upward revised 5.1%. There was also an upward revision to the core inflation numbers, which meant that the 0.3% MoM increase in the core index translated into a slight drop in the annual inflation rate to 4.6%YoY from 4.7%. Spending figures were slightly stronger than the consensus, but not materially so. University of Michigan sentiment numbers were fairly flat, though the 5-10Y ahead inflation expectations figure ticked a tenth higher to 3.0%. Manufacturing ISM numbers out yesterday were stronger than had been expected, with a large rise in the prices paid and employment components, which may have been the undoing of the bond market.  Today, we have April CPI data from the Eurozone, which will be pivotal in the ECB’s rate decision this week as they choose whether to raise 25bp or 50bp. The consensus expects the headline rate of inflation to edge back up to 7.0%YoY and the core rate to drop only 0.1pp to 5.6%YoY. The US releases March JOLTS labour data.   It is, of course, the Fed this week as well, so please also look at our latest Central Bank preview note.  China:  China’s manufacturing PMI showed a surprise contraction in April, with the index falling to 49.2 from 51.9, following three straight months of growth since the start of 2023. Looking at the sub-indices, it is clear that the weakening export market has started to affect the domestic market. The feed-through channel will come through lower wages and employment starting from export-related factories to the overall manufacturing sector and then on to the service sector. As a result, we believe that the government will resume subsidies on electric vehicles, which would benefit both the manufacturing and services sector. The government might also push infrastructure construction faster. Australia:  The Reserve Bank of Australia will meet to consider rates policy today, and like most of the consensus, we are not looking for them to hike rates and to leave the cash rate at 3.6%. This follows a further decline in inflation according to the March inflation data released last week. This is not a unanimous call though, about a third of forecasters are looking for a further 25bp hike. So we could see a little further AUD weakness on a no-change decision. South Korea:  Consumer inflation continued to ease further to 3.7% YoY in April (vs 4.2% in March and 3.7% market consensus) mainly due to the high base last year. But there are also a few other reasons for price stabilization. Fresh food prices (3.1%) have stabilized considerably as weather conditions have improved. Rental prices also fell sequentially for the third successive month. The government has decided to extend the fuel tax cut program until August and utility fees have also been put on hold since the January hike. Thus, there are still more upside risks for prices in the near term, but we expect CPI to ease into a 2% range as early as July. Yesterday, Korea’s April export data came in lower than the market consensus (-14.2% YoY in April vs -13.6% in March and -12.2% market consensus). By export item, except for transportation - cars (40.3%) and vessels (59.2%), other major export items all declined with falling semiconductor exports (-41.0%) the worst performing. With inflation easing and exports/investment worsening, the Bank of Korea will be under pressure to end or reverse the course of tightening. We think the Bank of Korea will maintain its hawkish stance for the time being as core inflation (4.6% in April) is not cooling as fast as the headline rate and some service prices are still on the rise. Indonesia: Indonesia reports inflation today.  April headline inflation is expected to moderate further to 4.4%YoY from 5.0% while core inflation may be steady at 2.9%YoY.  Price pressures have faded in the first half of the year, which allowed the central bank to pause and keep policy rates at 5.75%.  If inflation continues to slide and the IDR remains stable, we coulnextd see Bank Indonesia bringing forward its rate cut to 3Q to give growth an added boost.    Read next: Stability and Growth Pact set for another makeover| FXMAG.COM What to look out for: RBA meeting and regional PMI Indonesia inflation (2 May) RBA policy meeting (2 May) Regional PMI reports (2 May) US factory orders and durable goods orders (2 May) Australia retail sales (3 May) Thailand inflation (3 May) US ADP employment and MBA mortgage applications (3 May) US ISM services (3 May) Fed policy decision (4 May) Australia trade (4 May) China Caixin PMI manufacturing (4 May) Hong Kong retail sales (4 May) ECB policy decision (4 May) US initial jobless claims and trade balance(4 May) Philippine inflation (5 May) China Caixin PMI services (5 May) Indonesia GDP (5 May) Singapore retail sales (5 May) Taiwan inflation (5 May) US non-farm payrolls (5 May) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 22.05.2023

    China: Manufacturing PMI contracts in April

    ING Economics ING Economics 02.05.2023 14:12
    After avoiding monthly contractions since the start of 2023, China's manufacturing PMI showed activity contracted again in April. This is a warning signal to the Chinese economy. The slower expansion in non-manufacturing activity is not a concern just yet as it is usually quieter anyway for retailers in April before the long holidays in May New orders for China's domestic market are growing faster than new export orders 49.2 Manufacturing PMI from 51.9 Worse than expected Manufacturing contracted for the first time this year China's manufacturing PMI showed a surprise contraction in April, falling to 49.2 after three straight months of growth since the start of 2023. Most sub-indicators show that this might not be a short-term aberration. For example, export orders fell to 47.6 in April from 50.4 in March, while imports fell to 48.9 from 50.9. In addition, output prices fell deeper to 44.9 from 48.6. This could be due to new orders (which could be for the domestic market), also falling into contraction (down to 48.8 from 53.6).  From these numbers, it appears that the weakening export market has started to affect the domestic economy. The feed-through channel is through lower wages and employment in export-related factories, pushing wages lower in the manufacturing sector. The employment sub-index has shown a contraction in hiring for two months already.  This weakness is easily passed through to the service sector. When employees in the manufacturing sector face lower wages, they may find a job in the service sector. This reduces wages in the overall job market, especially for low-skilled workers. Weakening external market has started to put pressure on the domestic market Source: CEIC, ING Slower growth in the service sector The official PMI shows that non-manufacturing activity slowed to 56.4 in April from 58.2. This slowdown is usual for April as consumers defer consumption to the long holiday period in May.  Read next: Monitoring Hungary: Gloom with some silver linings| FXMAG.COM But as we mentioned earlier, the contraction in manufacturing activity could put pressure on wages in both the manufacturing and service sectors. This would later turn into slower retail sales growth.  Stimulus could be coming We expect the Chinese government will release stimulus measures to support both the manufacturing and service sectors. One measure could be resuming subsidies for electric vehicles – this would provide support for car sales and manufacturing. The other stimulus could be pushing infrastructure investment faster, which would be supportive of manufacturing and construction activity.  Read this article on THINK TagsStimulus Manufacturing PMI EV China Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 10.05.2023

    Asia week ahead: Inflation readings from China and India

    ING Economics ING Economics 04.05.2023 12:50
    Next week’s data calendar features several inflation reports from China, India, and the Philippines. Meanwhile, we will also get trade data from China and Taiwan plus labour data from South Korea Source: Shutterstock Inflation to ease in India April inflation data in India will likely show another steep decline, taking the inflation rate closer to the mid-point (4%) of the Reserve Bank of India’s (RBI's) inflation target. We expect the CPI index for April to rise by 0.4% month-on-month. That is a full percentage point lower than the comparable increase in April 2022, and should take the inflation rate down to 4.7%. At these levels, a debate about the timing and extent of future easing of the repo rate by the RBI will likely start, and this could weigh on the Indian rupee, though any such change would ultimately be supportive of growth. We still expect easing to commence later this year, perhaps as early as the third quarter. Trade data from China and Taiwan China and Taiwan will release trade data next week. Due to weak external demand, we are expecting exports for both economies to slow. However, we note that China’s electric vehicle exports could see an increase on a yearly basis as Chinese car manufacturers are looking to exports as their key strategy, on top of organic growth in the domestic market. Jobless rate to rise in Korea The jobless rate in Korea is expected to rise in May with sluggish construction and manufacturing hiring. Meanwhile, the government's job programme likely added more jobs. Loan growth and price figures from China Next week, China will also announce loan growth, which should be growing mildly starting from April as Chinese banks usually book loans in the first quarter. Slower loan growth in April should not be interpreted as low loan demand as most of the loans for the year have already been booked. Read next: Spanish tourism boom propping up a weakening economy| FXMAG.COM Meanwhile, China should continue to show modest CPI inflation, and weaker manufacturing activities should continue to put deflationary pressures on PPI. Philippine GDP to slow as inflation bites The Philippines will release first-quarter GDP data next week and we are expecting a year-on-year expansion of 6.5% down from 7.2% previously. Growth will be supported by household consumption, although we note a slowing trend as elevated inflation saps some purchasing power. Meanwhile, capital formation will likely be subdued given moderating bank lending after Bangko Sentral ng Pilipinas (BSP) sustained rapid-fire rate hikes. GDP growth should continue to decelerate in the coming quarters as still high inflation and the fallout from central bank rate hikes take hold. BSP will see both inflation and GDP data ahead of its policy meeting on 16 May.  Key events in Asia next week Source: Refinitiv, ING Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Philippines central bank keeps rates on hold as inflation moderates

    Philippines: Inflation edges lower again in April

    ING Economics ING Economics 05.05.2023 12:11
    Headline inflation continues to moderate, falling to 6.6%YoY in April Source: Shutterstock 6.6% Headline inflation YoY change   Lower than expected April headline inflation down to 6.6% Price pressures continued to moderate with April headline inflation dipping to 6.6%YoY, well below the market consensus for a 7.0% increase.  Inflation was slower for index-heavy items such as food (7.9%YoY), utilities (6.5%YoY) and transport (2.6%YoY) benefiting from lower energy prices and favourable base effects.  Overall, prices were down 0.2% from the previous month and year-to-date inflation slipped to 7.9% from 8.3% previously.  Despite the slowdown, headline inflation remains well above Bangko Sentral ng Pilipinas’ (BSP) target of 2-4%.  Meanwhile, we note select subsectors that reported a pickup in inflation for the month, namely personal care (5.7% vs 5.6%), restaurants and accommodation (8.6% vs 8.3%) and recreation (4.7% vs 4.6%), suggesting that robust domestic demand may be slowing the pace of moderation. Headline inflation falls more than expected Source: Philippine Statistics Authority BSP likely to consider a pause BSP Governor Medalla recently indicated that he would be open to a pause at the next policy meeting should inflation slow further or if prices fall.  Today’s report increases the chances of a pause from the BSP at the 18 May meeting after month-over-month inflation was negative for a second month. Slowing inflation and a relatively stable currency could be enough to convince Governor Medalla to bring his recent tightening cycle to an end.  Read next: The Commodities Feed: Oil looking for a floor| FXMAG.COM Read this article on THINK TagsPhilippines inflation BSP Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Asia Morning Bites - 10.05.2023

    Asia Morning Bites - 08.05.2023

    ING Economics ING Economics 08.05.2023 08:54
    Mixed signals from US payrolls.  US inflation later in the week will be the next key data point for investors   Source: shutterstock Global Macro and Markets Global Markets:  Despite, or perhaps because of the stronger-than-expected payrolls numbers on Friday, US stocks finished the week on a positive note. The S&P500 was up 1.85% while the NASDAQ rose 2.25%. Equity futures aren’t sure of the direction from here though, so any bounce in Asia today may be short-lived. Chinese stocks were mixed on Friday. The CSI 300 lost ground and fell 0.33%, while the  Heng Seng index gained 0.5%. 2Y US Treasury yields rose 12.4bp to 3.914% following the labour data release. 10Y yields were up a more modest 5.8bp to 3.437%. From pricing in a greater-than-evens chance of a cut at the July meeting a few days ago, markets are now not looking for any Fed easing until September. St Louis Fed President, and non-voter, James Bullard, said that he thought higher rates would probably still be needed. We have not changed our view that the peak in rates has been reached and that cuts will come, but not until 4Q23. EURUSD weathered the payrolls numbers well and remains at about 1.1019 - not much changed from this time last Friday. Governing Council member, Klaas Knot, said that he thought more rate hikes from the ECB would be necessary, which probably helped the single currency. The AUD has re-found some of its lost mojo and is trading back above 0.6750 again. Cable was also stronger, rising to 1.2629, in line with May 2022 highs, though the JPY traded a little weaker, rising back to 135.20 from about 134.25 this time last Friday. Other Asian FX was fairly muted on Friday, with quite a few economies off on holiday. G-7 Macro:  Besides the upside miss on the headline payrolls number (253,000 versus 185,000 expected) the higher average hourly earnings print (4.4%YoY versus 4.3% previously) and the lower unemployment rate (3.4% versus 3.5% previously), this was not an unambiguously positive labour report. James Knightley reviews the numbers here in more detail, and notes the very large downward revisions (-149,000) to the last two months of data. Who’s to say the April 253K figure won’t also be revised down in the months to come? Read next: There’s still life in the US jobs market, but challenges are mounting| FXMAG.COM What to look out for: US and China inflation data later in the week Japan Jibun PMI services (8 May) Taiwan trade balance (8 May) Philippines bank lending (8 May) Australia Westpac consumer confidence (9 May) Philippines trade balance (9 May) China trade balance (9 May) South Korea labour market data (10 May) US CPI and core CPI inflation (10 May) Japan trade balance (11 May) China CPI inflation (11May) Philippines GDP (11 May) US initial jobless claims and PPI inflation (11 May) Hong Kong GDP (12 May) India CPI inflation (12 May) US University of Michigan sentiment (12 May) Read this article on THINK TagsEmerging Markets Asia Pacific Asia Markets Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    Disappointing activity data in China suggests more fiscal support is needed

    Disappointing activity data in China suggests more fiscal support is needed

    ING Economics ING Economics 16.05.2023 10:00
    The Chinese economy has been hit by weak exports. The central government needs to speed up investments in technology and green energy to support the manufacturing sector Haikou New Port in Hainan, China 0.12%MoM Industrial production   Worse than expected Very disappointing activity data This set of activity data should disappoint the market a lot. The biggest disappointment comes from industrial production staying at 0.12% month-on-month in April (5.6% year-on-year vs 10.9%YoY consensus and 3.9%YoY in March), which indicates a weak start to the export season. Export delivery values in April increased only 0.7%YoY in the month. This describes a bad month of exports as the base was low from last year. Even without logistic problems like last year, exports grew very slowly, pointing to weak external demand.  There was also slower than expected retail sales growth in April at 0.49%MoM from 0.78%MoM in March (18.4%YoY vs 21.9%YoY consensus and 10.9%YoY in March). This suggests consumers were saving money in April for spending on the holidays in May. Consumers are cautious when they spend. Another reason for the slower-than-consensus growth was due to reductions in spending on home decoration. Spending on home decoration contracted by 11.2%YoY in April after an 11.7%YoY contraction in the same month last year. China export delivery value falling Source: CEIC, ING Retail sales recovering, but only gradually Source: CEIC, ING Investment slowed We find that investments slowed to CNY4 trillion in April from more than CNY5.3 trillion in March. Private entities' investment moved very slowly at 0.4%YoY year-to-date in April, with most investments made by state-owned enterprises, at 9.7%YoY YTD. This is a barometer of how private companies perceive investment prospects in China. There is some upbeat data Two bits of data are more positive. One is home sales which grew by 11.8%YoY YTD in April from 7.1%YoY YTD in March, indicating quite some bottom fishing activities in the home buying market. The second is that the surveyed jobless rate reduced to 5.2% from 5.3%, but this data seems to be lagging behind most activity data. These two sets of data are not enough to convince us that the economy can avoid the weakness of external demand passing on to the domestic economy.  The Chinese economy needs faster fiscal support Even though we believe the long holiday in May should give a boost to the economy, the domestic economy is at risk from lower wages in the export-related manufacturing sector. The central government needs to push for infrastructure investments. China needs technology research and development and new energy infrastructure. These could provide future growth potential. But local governments may not be able to pick up these investments as they do not have enough revenue due to poor land sales. The investments should largely come from the central government budget. If the central government delays infrastructure investment, weak exports and related manufacturing activities would hit the labour market which could in turn hit consumption. Another way is to induce private investments in these long-term projects. Without long-term investments in technology and new energy, China's economic growth might not last after a brief rebound in the second and third quarters of the year. Read next: FX Daily: A key day for debt-limit negotiations| FXMAG.COM Our GDP forecast is 5.7% for 2023. Read this article on THINK Tags Retail sales Infrastructure Industrial production GDP Fixed asset investments China Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    RBNZ preview: Fiscal spending argues for a hawkish 25bp hike

    RBNZ preview: Fiscal spending argues for a hawkish 25bp hike

    ING Economics ING Economics 23.05.2023 10:27
    Last week, New Zealand’s government announced large spending plans and a set of more encouraging economic forecasts. All this has radically changed the picture for the Reserve Bank, which should hike by 25bp to 5.50% this week and may revise its peak rate projections to 6.00% given new inflationary risks. NZD can keep outpacing AUD on policy divergence    Source: Shutterstock Fiscal boost puts pressure for another hawkish surprise At the April meeting, the Reserve Bank of New Zealand hiked by 50bp, taking the official cash rate to 5.25%, and the latest rate projections suggest it should deliver one last 25bp hike this week. A 25bp hike is a consensus call and fully priced in, and most of the market reaction will however depend on forward looking language and the new rate projections. We had previously expected a drop in inflation to push the RBNZ towards confirming this was indeed the end of the hiking cycle, but the recent surprises in the New Zealand Treasury’s budget are generating fresh inflationary risks.   The government announced last week it will boost spending to support an economy hit by high cost of living and recently by severe weather events. The new estimates for the fiscal 2023 budget deficits are at NZD6.63bn, considerably above the NZD3.63bn December forecast. Most importantly for the RBNZ, the Treasury sharply revised growth forecasts on the back of extra spending, and no longer expects a recession this year (which is instead the RBNZ base case).     An above-expectations fiscal boost and improved growth expectations inevitably put pressure on the RBNZ to signal a higher peak at this week’s meeting. Markets are pricing in a peak at around 5.80%, but we think the RBNZ can deliver an extra bit of hawkishness and signal tightening until the 6.00% mark as it hikes by 25bp this week.  That would have positive implications for NZD in the near term. AUD/NZD has been on a descending pattern over the past week and we could see the 1.0485 December lows being tested on the back of RBA-RBNZ divergence. Still, our view remains that the RBNZ will be forced to start cutting rates as early as in the fourth quarter as inflation could prove less resilient than expected, the Fed starts its own easing cycle and global economic conditions deteriorate.   RBNZ rate projections Source: RBNZ, ING Migration, inflation and housing have sent mixed signals New Zealand experienced a net migration gain of 65,400 in the first quarter. Of the arrivals, 42,254 are on work visa, which far exceeds the RBNZ’s estimate of 6,600. One could argue that the large injection will help ease labour market pressures by increasing labour supply as New Zealand’s jobs market had remained very tight – despite overall labour market participation at its highest since 1987, first quarter unemployment remained unchanged from December at 3.4%. However, the Reserve Bank recently pointed at migration to be inflationary on balance, and the government’s focus on attracting skilled workers is probably behind this assessment.   Read next: Poland’s economic rebound in doubt as industry slows| FXMAG.COM Data wise, there have been no upside surprises for the latest headline inflation numbers. First quarter inflation fell well below the Reserve Bank’s February forecast, dropping from 7.2% to 6.7%. The housing story in New Zealand is not that different from few months ago – activities remain subdued as households face tight lending conditions and high cost of living pressures. CoreLogic’s latest data show annual housing consents down by 7.9%, and both sales number and prices are down by 30.5% and 10.3% respectively compared to April 2022.  New Zealand house prices Source: RBNZ, CoreLogic, ING   The housing market, however, has held up better than the Reserve Bank had anticipated. Compared to the previous month, average national prices dropped by 0.6%, which is smaller than the average level of 0.9% seen during the current downturn. We don’t see the housing market stopping the RBNZ from its hawkish stance, especially with inflationary risks from fiscal stimulus on the upside.  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
    The Commodities Feed: Central Banks Maintain Strong Demand for Gold as China Boosts Reserves

    The Commodities Feed: Central Banks Maintain Strong Demand for Gold as China Boosts Reserves

    ING Economics ING Economics 09.06.2023 08:53
    The Commodities Feed: Gold demand remains firm from central banks China increased its official gold reserves by 0.5mOz in May 2023 taking total gold purchases to 2.6mOz for the current year so far.   Energy: crude oil inventory drawdown in the US The weekly report from the Energy Information Administration (EIA) shows that commercial crude oil inventories in the US dropped by 0.5MMbbls over the week to 459.2MMbbls mainly on account of higher refinery runs. The market was anticipating a build-up of 0.35MMbbls. Refinery operating rates in the US increased further over the week to 95.8% (the highest level since 2019) of their capacity, up from 93.1% a week earlier.   Higher refinery runs have helped increase the refined products supplied in the domestic market with both gasoline and distillate inventories increasing at an accelerated pace. Gasoline inventories increased by 2.7MMbbls over the last week, against market expectations of 0.4MMbbls while distillate stockpiles rose by 5.1MMbbls last week, compared with expectations for a build of 0.9MMbbls.   Crude oil imports fell by 817Mbbls/d over the week to 6.4MMbbls/d for the week ending 2 June. On the other hand, crude oil exports dropped by nearly half to just 2.5MMbbls/d for the week due to higher demand in the domestic market as well as higher competition in the overseas market. On the supply side, the EIA reported that crude oil production in the US rose by 0.2MMbbls/d to 12.4MMbbls/d in the week ending 2 June, after remaining range-bound for the last seven months. This is the highest production level since the early weeks of April 2020. The increase comes even as the number of rigs targeting oil continues to fall.   The latest data from the Petroleum Planning & Analysis Cell in India shows that petroleum products demand in the country increased 9% year-on-year to 20mt in May 2023. ear-to-date demand for petroleum products is up 5% YoY to 96.2mt over the first five months of 2023. Crude oil demand from Asia has been recovering over the last few months as the pace of interest rate hikes slows down and economic growth picks up. Earlier, China also reported firm oil demand in May 2023 which also helped sentiment.    
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    Asia in Focus: BoJ Meeting and China's Retail Sales Highlight the Week

    ING Economics ING Economics 09.06.2023 09:10
    Asia week ahead: BoJ meeting plus retail sales from China The Bank of Japan meets next week but don’t expect any changes. China has a raft of data but we’ll be particularly focused on retail sales.   BoJ policy meeting but don't expect any changes at this meeting We have changed our view on the Bank of Japan’s policy in the near term based on Governor Kazuo Ueda’s recent dovish comments. We expect the BoJ to keep all its current policy settings unchanged at its policy meeting next week. Likewise, a potential tweak in the BoJ’s yield curve control policy is not likely to happen this month. However, should inflation remain at current levels in the second half of the year, we could still see a possible adjustment in the YCC policy over the next few months.   Retail sales in China to be in focus China will release the usual raft of data on economic activity for May. This will include industrial production, fixed asset investment, construction, and retail sales. Of these, most attention will probably be on the retail sales number, as consumer spending is what is keeping the economy afloat while production and construction both struggle amidst a tough global trade environment.   But the news on retail sales will probably not be very encouraging. We anticipate a 13.8% year-on-year increase in retail sales, which only looks this strong due to a very weak base comparison period, and is equivalent to around a 1% month-on-month decrease in sales adjusted for seasonality. Residential construction is likely to remain depressed, as is production.
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    Central Bank Jury: Inflation Concerns Delay Dollar's Decline

    ING Economics ING Economics 13.06.2023 13:03
    The central bank jury is most certainly still out on whether policymakers have done enough to tame inflation. The implications for FX markets are that the Fed may need to stay hawkish a little longer and our forecast cyclical dollar decline may get delayed. For now, however, we maintain the view that the dollar will be much lower by year-end   Executive Summary: Burden of proof Despite all the talk of economic slowdown and the turn in the inflation cycle, it seems that policymakers still lack sufficient evidence that inflation is under control. Swiss National Bank President Thomas Jordan recently warned of 'second and third round effects' in this inflation cycle. Central bankers as far apart as Australia and Canada have recently had to restart tightening cycles after brief pauses. Investors are now increasingly questioning their own convictions that rates have peaked.   Nowhere is this challenge greater than in the US where tight labour markets and core inflation stubbornly above 4% are keeping the Fed vigilant. And there is a chance that the Fed has to hike one last time this summer. Yet our house view remains that US disinflation becomes much more obvious in the third quarter and that hard will follow soft activity data lower. We still look for substantial Fed cuts in the fourth quarter.   This means we are still looking for the start of a cyclical multi-year dollar bear trend – probably starting in the third quarter. This should carry EUR/USD above 1.15 and USD/JPY well below 130. The tide of a softening dollar should lift most currencies around the world – especially higher-yielding currencies enjoying the benefits of the carry trade.   Within Europe, we forecast most currencies to hold recent gains against the euro – although sterling looks most at risk to Bank of England re-pricing. Modest CEE FX appreciation can continue – despite looming easing cycles. Latin FX looks constructive on the back of high yields and pockets of Asia can appreciate – especially the Korean won.
    Weak Economic Outlook for China: Challenges in Debt Restructuring and Growth Prospects

    Central Bank Jury: Inflation Concerns Delay Dollar's Decline - 13.06.2023

    ING Economics ING Economics 13.06.2023 13:03
    The central bank jury is most certainly still out on whether policymakers have done enough to tame inflation. The implications for FX markets are that the Fed may need to stay hawkish a little longer and our forecast cyclical dollar decline may get delayed. For now, however, we maintain the view that the dollar will be much lower by year-end   Executive Summary: Burden of proof Despite all the talk of economic slowdown and the turn in the inflation cycle, it seems that policymakers still lack sufficient evidence that inflation is under control. Swiss National Bank President Thomas Jordan recently warned of 'second and third round effects' in this inflation cycle. Central bankers as far apart as Australia and Canada have recently had to restart tightening cycles after brief pauses. Investors are now increasingly questioning their own convictions that rates have peaked.   Nowhere is this challenge greater than in the US where tight labour markets and core inflation stubbornly above 4% are keeping the Fed vigilant. And there is a chance that the Fed has to hike one last time this summer. Yet our house view remains that US disinflation becomes much more obvious in the third quarter and that hard will follow soft activity data lower. We still look for substantial Fed cuts in the fourth quarter.   This means we are still looking for the start of a cyclical multi-year dollar bear trend – probably starting in the third quarter. This should carry EUR/USD above 1.15 and USD/JPY well below 130. The tide of a softening dollar should lift most currencies around the world – especially higher-yielding currencies enjoying the benefits of the carry trade.   Within Europe, we forecast most currencies to hold recent gains against the euro – although sterling looks most at risk to Bank of England re-pricing. Modest CEE FX appreciation can continue – despite looming easing cycles. Latin FX looks constructive on the back of high yields and pockets of Asia can appreciate – especially the Korean won.
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    Market Reaction and Potential Implications: Wagner Group's Rebellion, Inflation Reports, and Central Bank Policies

    Ipek Ozkardeskaya Ipek Ozkardeskaya 26.06.2023 08:06
    Slow start following an eventful weekend.    The weekend was eventful with the unexpected rebellion of the Wagner Group against the Kremlin. Yevgeny Prigozhin's men, who fight for Putin in the deadliest battles in Ukraine walked towards Moscow this weekend as Prigozhin accused the Kremlin of not providing enough arms to his troops. But suddenly, Prigozhin called off the attack following an agreement brokered by Belarus and agreed to go into exile. The Kremlin took back control of the situation, but we haven't seen Vladimit Putin, or Prigozhin talk since then. The Wagner incident may have exposed Putin's weakness, and was the most serious threat to his rule in two decades. It could be a turning point in the war in Ukraine. But nothing is more unsure. According to Volodymyr Zelensky, there are no indications that Wagner fighters are retreating from the battlefield.  The first reaction of the financial markets to Wagner's mini coup was relatively calm. Gold for example, which is a good indication of market stress at this kind of moment, remained flat, and even sold into the $1930 level. The dollar-swissy moved little near the 90 cents level. Crude oil was offered into the $70pb level, as nat gas futures jumped more than 2% at the weekly open, and specific stocks like United Co. Rusal International, a Russian aluminum producer that trades in Hong Kong, gapped lower at the open but recovered losses.  Equities in Asia were mostly under pressure from last week's selloff in the US, while US futures ticked higher and are slightly positive at the time of writing.    The Wagner incident will likely remain broadly ignored by investors, unless there are fresh developments that could change the course of the war in Ukraine. Until then, markets will be back to business as usual. There is nothing much on today's economic calendar, but the rest of the week will be busy with a series of inflation reports from Canada, Australia, Europe, the US, and Japan.     Except for Japan, where the Bank of Japan (BoJ) doesn't seem urged to hike the rates, higher-than-expected inflation figures could further fuel the hawkish central bank expectations and add to the weakening appetite in risk assets.     The Federal Reserve (Fed) will carry its annual bank stress test this week, to see how many more rate hikes the baking sector could take in and the potential for changes in capital requirements down the road. The big banks are likely not very vulnerable to higher capital requirements, yet the profitability of the US regional banks could be at jeopardy and that could cause investors to remain skeptical regarding the US banking stocks altogether. Invesco's KBW bank ETF slipped below its 50-DMA, following recovery in May on the back of decidedly aggressive Fed to continue hiking rates, and stricter requirements could further weigh on appetite.    Zooming out, the S&P500 is down by more than 2% since this month's peak, Nasdaq 100 lost more than 3% while Europe's Stoxx 600 dipped 3.70% between mid-June and now on the back of growing signs that the aggressive central bank rate hikes are finally slowing economic activity around the world. A series of PMI data released last Friday showed that activity in euro area's biggest economies fell to a 5-month low as manufacturing contracted faster and services grew slower than expected. The EURUSD tipped a toe below its 50-DMA last Friday but found buyers below this level. Weak data weakens the European Central Bank (ECB) expectations, but that could easily reverse with a strong inflation read given that the ECB is ready to induce more pain on the Eurozone economy to fight inflation.     Across the Channel, the picture isn't necessarily better. Both services and manufacturing came in softer than expected. And despite the positive surprise on the retail sales front, retail sales in Britain slumped more than 2% in May, due to the rising cost of living that led the Brits back from loosening their purse string. One thing though. UK's largest lenders agreed to give borrowers a 12-month grace period if they missed their mortgage payments as a result of whopping costs of keeping their mortgages due to the aggressively rising interest rates. Unless an accident – in real estate for example, the Bank of England (BoE) will continue hiking the rates and reach a peak rate of 6.25% by December.   The only way to slow down the pace of hikes is to find a solution to the sticky inflation problem. And because the BoE has limited influence on prices, Jeremy Hunt will meet industry regulatory this week to discuss how they could prevent companies from taking advantage of inflation and raising prices more than needed, which adds to inflationary pressures through what we call 'greeflation'. But until he finds a solution, the BoE has no choice but to keep hiking and the UK's 2-year gilt yield has further to run higher, whereas the widening gap between the 2 and 10-year yield hints at growing odds of recession in the UK, which should also prevent the pound from gaining strength on the back of hawkish BoE. Cable will more likely end up going back to 1.25, than extending gains to 1.30.       By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank  
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    Global Manufacturing Hubs Show Weakness, US and Japan Stocks Bullish Despite Recession Risk

    Kelvin Wong Kelvin Wong 03.07.2023 11:03
    Global manufacturing hubs; South Korea, Singapore & China continued to indicate a weaker external demand environment. Several key stock markets; US & Japan are on bullish footing, ignoring global recession risk. Higher US consumer confidence & more positive earnings guidance are required to maintain the bullish animal spirits. Higher cost of funding & a deeply inverted US Treasury yield curve are key hurdles for the bulls. The great divergence continues between the state of the real global economy and risk assets such as equities. Latest data from key global manufacturing hubs in Asia have indicated more potential weakness ahead in the external demand environment for the second half of 2023. South Korea, a key provider of semiconductors and smartphones for the global economy saw its latest full monthly exports figure decline to -6% year-on-year in June, a lower magnitude of -15.2% recorded in May but lower than expectations of a 3% drop. Overall, it’s nine consecutive months of contraction for South Korea’s exports. In addition, soft data from South Korea’s Manufacturing PMI which tends to have a lead time over exports figures has remained in contraction mode for twelve consecutive months; it fell to 47.8 in June from 48.4 in May. Data from China’s Caixin Manufacturing PMI which provides coverage for small and medium enterprises fared slightly better than the official NBS Manufacturing PMI for June but remained lackluster; it dipped to a neutral level of 50.5 from 50.9 recorded in May and came in slightly above expectations of 50.2. Singapore’s non-oil domestic exports (NODX) slumped by 14.7% year-on-year in May, worse than forecasts of an 8.1% decline after a 9.8% reading in April; so far it has marked its eighth consecutive month of contraction.   US Nasdaq 100 and Japan Nikkei 225 were star performers in H1 2023   Fig 1: Key cross-assets performances as of 30 Jun 2023 (Source: TradingView, click to enlarge chart   Fig 2: Nasdaq 100 long-term secular trend as of 30 Jun 2023 (Source: TradingView, click to enlarge chart) In contrast, several major benchmark stock indices have continued to shrug off these “real negative growth backdrop”, entered bull market territories, and staged stellar performances. The top performer was the US Nasdaq 100 assisted by the Artificial Intelligence (AI) equity theme play rocketed to a gain of 38.75% in the first half of 2023 and outperformed the MSCI All-Country World Index which recorded a positive return of 13.03% over the same period. Japanese equities also performed well in the first half; the Nikkei 225 rallied by 27.19%, and the bulk of H1 2023 gains came from Q2 (+18.36). Thanks to a change in corporate governance that favoured shareholders’ activism, lower valuation over the US stock market, and rosy foreign funds’ inflows reinforced by prominent value investor, Warren Buffet’s increased stakes in several major Japanese trading firms made over the first six months.     In contrast, other Asian stock markets in general have been trapped in a muted tone due to a slowing China economy after a diminished growth spurt from the removal of stringent Covid-19 lockdown measures and rather lukewarm monetary and fiscal stimulus measures being implemented at this juncture. The MSCI All Country Asia ex-Japan has managed to score only a meagre gain of 2.55% in the first half, which still has a significant gap to cover to recoup its annual loss of -21.66% posted in the prior year. Over in Europe, Germany’s DAX managed to squeeze an H1 2023 return of 15.98% but do take note the bulk of its gain came in Q1 as the lackluster external growth environment has triggered a negative ripple effect where the DAX’s Q2 performance only stood at 3.32% that’s a huge gap of around 1,180 basis points over Nasdaq’s Q2 return of 15.16%. Markets are always forward-looking, around the end of Q1 2023, the bullish camp for equities had a “Fed Pivot” narrative where there were significantly high odds being priced into the Fed funds futures market that advocated rate cuts of 75 bps to 100 bps in the second half of 2023. Right now, given the Fed’s latest monetary policy guidance is to have “higher interest rates for longer periods”, rate cuts pricing in the futures market for H2 has evaporated, and even though further hikes may not be implemented in 2024 after two more hikes on the Fed funds rate that are being priced in before 2023 ends to bring its likely terminal rate to 5.50% to 5.75%, the start of an easing cycle may only kick in during the second half of 2024 based on latest data from CME FedWatch tool at this time of the writing. Thus, with the liquidity punch bowl being taken away for now. What are the possible catalysts that can continue to drive the positive animal spirits in the US stock market that can increase the odds of spreading to the rest of the world?   Higher consumer confidence and better-than-expected earnings guidance So far, US consumer confidence has been trending up modestly since July 2022. The final June reading of the University of Michigan Consumer Sentiment Index has been revised higher to 64.4, its highest level in four months. Higher consumer confidence tends to lead to higher consumer spending in the US where the US consumers may take on a similar pre-pandemic role of the “global consumer” for goods and services. Q2 2023 earnings reporting season in the US will go full fledge in around two weeks. Based on FactSet data as of 30 June 2023, its estimated earnings decline compiled from analysts for the S&P 500 is at -6.8% year-on-year, a further drop from Q1’s -2% y/y. The key will be the number of positive earnings forward guidance from the cyclical sectors such as Industrials and Consumer Discretionary to take over the baton from Information Technology. So far, there is more positive earnings guidance for FY 2023/2024 in Industrials as the mix is 65% positive and 35% negative whereas else Consumer Discretionary share of positive guidance is only 48% (52% negative).   Higher cost of funding and a deeply inverted US Treasury yield curve are key hurdles for the bulls The bond market seems to be not “buying” into the H1 2023 bullish narrative seen in the stock market. On the last trading day of H1, the US Treasury yield curve spread (10-year minus 2-year) continued to invert deeply to -1.06%, its lowest level since March during the onset of the US regional banking turmoil which indicates an increase odd of a hard landing in the US economy coupled with a higher level of interest rates environment for a longer period that can drive up the cost of leverage and borrowings for corporates and depress profit margins. If such a scenario materializes, current lofty bullish expectations in the US stock market may see a swift downward adjustment that is at risk of spreading to the rest of the world, and to prevent such occurrences, perhaps China needs to implement more aggressive expansionary monetary and fiscal policies to fill up the liquidity punchbowl given that inflationary pressures are benign in China.  
    Rising Star: Investing in Turkey

    Rising Star: Investing in Turkey

    FXMAG Team FXMAG Team 24.07.2023 07:58
    Globally, the real estate market is undergoing a profound transformation. Investors are flocking to a country that straddles two continents, drawing interest from both Europe and Asia. That country is Turkey, which has quickly become a global powerhouse in the construction sector. Turkey provides a richness that very few other countries can equal, from the historic grandeur of Istanbul to the magnificent Mediterranean beauty of Antalya.   Globally, the real estate market is undergoing a profound transformation. Investors are flocking to a country that straddles two continents, drawing interest from both Europe and Asia. That country is Turkey, which has quickly become a global powerhouse in the construction sector. Turkey provides a richness that very few other countries can equal, from the historic grandeur of Istanbul to the magnificent Mediterranean beauty of Antalya. Turkey's development benefits greatly from the dynamic interplay between its ancient and modern aspects. There are both old and new high-end homes in the area. Property for sale in Turkey reveals the country's unique blend of ancient and contemporary cultures. Luxurious beachfront mansions sit alongside hip urban apartments, demonstrating the breadth of the country's real estate market and its ability to meet the needs of investors. Property Turkey also provides enticing financial advantages. The Turkish government has made a number of moves to lure international investors. Attractive tax breaks and a path to citizenship are offered to entice foreign investors to put money into the country. Turkey's welcoming investment climate sets it apart from many other countries, making it more appealing to investors. Åžerif Nadi Varlı's Vartur Real Estate has been instrumental in promoting Turkey's real estate opportunities abroad. The company provides a full suite of services to help foreign investors navigate the complex Turkish real estate market. Comparatively, property prices in Turkey are much more affordable than they are in Western Europe or North America. Combined with the prospect of high rental returns and a rise in value, investing in Turkey is a tempting option. For example, the country's main metropolis, Istanbul (a desirable place to own property because of its flourishing economy, diverse culture, and long history), is a prime location for investors. Meanwhile, seaside areas like Antalya and Bodrum are trendy, particularly for second homes and retirement communities, thanks to their laid-back lifestyle and stunning natural beauty. Property for sale in Turkey is an enticing prospect, but savvy investors would not be foolish to overlook the country's warm Mediterranean climate, friendly locals, and fascinating history and culture. As a result of its rare combination of cultural wealth, state-of-the-art infrastructure, business-friendly environment, and abundance of available properties, Turkey is quickly becoming a global real estate powerhouse. The Turkish market is appealing to both seasoned investors and those thinking about investing in real estate for the first time. By working with experts like those at Vartur Real Estate, you can make smart investments in Turkish real estate that could bring about significant financial gains and an entirely new and exciting way of life. For many reasons, Turkey's real estate market is a shining example of success. The country's remarkable development in infrastructure stands out as one of its most distinctive features. The Turkish government has repeatedly shown its dedication to encouraging progress in vital areas like transportation, healthcare, and social infrastructure. By strategically investing in these areas, Turkey has strengthened its appeal and become an increasingly enticing destination for domestic and international investors. Improvements to the quality of life and property values brought forth by these projects are mutually beneficial. Turkey's strategic location is an additional positive factor. Because of its attractive location and special flavor that combines Eastern mysticism and Western modernity, property in Turkey is experiencing a surge in popularity. From an economic standpoint, Turkey is an exciting emerging market with robust domestic demand and a rapidly expanding middle class. Home prices have followed the general inflation trend by rising steadily over the past decade, reflecting the real estate market's response to the improving economy. Vartur Real Estate, led by the visionary Varlı family, has consistently shown the way in highlighting these exceptional benefits to investors worldwide. The skilled personnel at Vartur can help investors with everything from finding the right property to managing the necessary legal processes. Turkey is truly a rising star in the global real estate market, thanks to its exceptional blend of cultural opulence, cutting-edge infrastructure, and alluring property choices. Discover the enticing world of property investment with Vartur Real Estate, your trusted partner in navigating the thriving Turkish real estate market. Whether you're just starting out or a seasoned investor, our expert guide will ease the way for your successful venture into this lucrative industry. Take the leap and explore the endless possibilities that await you in the Turkish real estate market. With its many benefits, purchasing property in Turkey isn't the only thing you're getting; you're also getting a piece of a dynamic, developing globe that's brimming with opportunity. //
    Asia Morning Bites: Inflation Data in Focus, FOMC, ECB, and BoJ Meetings Ahead

    Asia Morning Bites: Inflation Data in Focus, FOMC, ECB, and BoJ Meetings Ahead

    ING Economics ING Economics 24.07.2023 10:15
    Asia Morning Bites The data calendar in Asia today is focused on inflation in Singapore while Taiwan reports industrial production figures. FOMC, ECB and BoJ meetings later this week will add some excitement.   Global Macro and Markets Global markets:  US equity markets moved sideways for much of Friday, finishing almost unchanged from the previous day. Equity futures are pointing to a similarly inconclusive start today, which is perhaps not surprising during the FOMC week. Chinese stocks were also somewhat directionless, with the CSI 300 also failing to make any ground, though the Hang Seng index did gain 0.78%. There wasn’t much going on in US Treasury markets either. The yield on the 2Y US Treasury was virtually unchanged at 4.837%, while the 10Y yield dropped by only 1.5bp to 3.835%. There was a bit more action in FX space, where EURUSD dropped sharply to 1.1130, erasing some of the gains of the previous week. Other G-10 currencies also lost ground, though Cable was pretty steady maybe helped by better inflation data at the end of last week. Asian FX struggled against the USD on Friday. The worst-performing currencies were the THB and KRW.  The INR has been extremely stable at just under USDINR 82.0, which given the weakness across other FX pairs, suggests that it is being actively managed at around this level.   G-7 macro:  Friday was a quiet day for G-7 Macro data, but today, we will be inundated with plenty of PMI numbers from across the G-7 for both the service and manufacturing sectors.   Taiwan:  June industrial production probably turned more negative again after a slight bounce in May. The year-on-year growth rate is forecast to drop back to -16.49% by the consensus, though we think the drop may be even more pronounced, and expect a fall of about 18% YoY. This is mainly a statistical correction, as it does appear that production is bottoming out at around current levels.   Singapore: June inflation is set for release today.  Both headline and core inflation are expected to dip with favourable base effects helping force both numbers lower.  Headline inflation is expected to slip to 4.4%YoY (from 5.1%) while core inflation could dip to 2.4% (from 2.8%).  Moderating inflation could give the MAS some breathing room and we expect slowing inflation and slightly better-than-expected 2Q GDP to be factored into the MAS decision later in 4Q.    What to look out for: Key moves from major central banks New Zealand trade balance (24 July) Japan Jibun PMI and department store sales (24 July) Singapore CPI inflation (24 July) Malaysia CPI inflation (24 July) Taiwan industrial production (24 July) Thailand trade balance (24 July) South Korea 2Q GDP (25 July) Bank Indonesia policy meeting (25 July) Hong Kong trade (25 July) US Conference board consumer confidence (25 July)Australia CPI (26 July) Singapore industrial production (26 July) US new home sales (26 July) US FOMC decision (27 July) China industrial profits (27 July) ECB policy decision (27 July) US personal consumption, durable goods orders initial jobless claims (27 July) South Korea industrial production (28 July) Japan Tokyo CPI and BoJ policy (28 July) Australia PPI (28 July) US personal spending, core PCE, University of Michigan sentiment (28 July)
    Hungary's Economic Outlook: Anticipating Positive Second Quarter GDP Growth

    Asia Morning Bites: Politburo's Economic Support and Global Market Analysis

    ING Economics ING Economics 25.07.2023 08:20
    Korea: 2Q23 GDP improved but with disappointing details South Korea’s real GDP accelerated to 0.6% QoQ (sa) in 2Q23 from 0.3% in 1Q23, which was slightly higher than the market consensus of 0.5%. However, the details were quite disappointing with exports, consumption, and investment all shrinking. We expect growth to slow in 2H23.   Net exports contributed positively to overall growth The upside surprise mainly came from a positive contribution from net exports (+1.3pt). However, we do not interpret this in a positive light, because it was not driven by an improvement in exports, but rather by a contraction of imports (-4.2%), which was deeper than that of exports (-1.8%). By major item, exports of vehicles and semiconductors rose as global supply conditions improved and global demand remained solid. But, exports of petroleum/chemicals and shipping services declined further with unfavourable price effects weighing. Falling commodity prices have had a positive impact on Korea's overall terms of trade, having a greater impact on imports, but "processed" exports such as petroleum/chemicals and shipping took more of a hit.   Net exports led growth but due to sharper decline of imports than exports   Meanwhile, domestic demand dragged down overall growth by -0.6pt As monthly activity and sentiment data already suggested, private consumption was down -0.1% with declining service consumption, while investment – both construction (-0.3%) and facilities (-0.2%) – contracted. Also, government expenditure dropped quite sharply (-1.9%) as spending on social security declined. We believe that the reopening boost effects on consumption have finally faded away, while tight credit conditions have also dampened investment. R&D investment (0.4%) was an exception, rising for the second consecutive quarter on the back of continued investment in new technologies.   GDP in 2H23 will likely decelerate again Forward-looking data on domestic demand indicates a further deterioration in domestic growth. Construction orders, permits, and starts have been declining for several months, while capital goods imports and machinery orders have also trended down recently. With continued market noise surrounding project financing and growing uncertainty over global demand conditions, business sentiment for new investment is very weak. This year’s fiscal spending will also not support the economy meaningfully, considering the tax revenue deficit and normalization of covid related spending. However, we think trade will take the lead in a modest recovery. We believe that exports will rebound by the end of the third quarter with support from improved vehicle demand, semiconductors, and machinery (despite the global headwinds). Please see our 2H23 outlook details here.   Korea's GDP is expected to slow down in 2H23     Although 2Q23 GDP was higher than expected, the details suggest a weaker-than-expected recovery in 2H23, together with weak forward-looking data, thus we keep our current annual GDP forecast for 2023 unchanged at 0.9% YoY.   The Bank of Korea watch We think today’s data should be a concern for the Bank of Korea (BoK). The BoK forecast growth to accelerate in 2H23 on the back of better exports. We agree that export conditions will improve, but we don't think they will be strong enough to dominate weak domestic growth, and today’s data also suggests that growth will slow down in the near future. Thus, the BoK’s policy focus will probably gradually shift from inflation to growth in 4Q23. In 3Q23, we believe that the BoK will continue to keep its hawkish stance while keeping a close eye on other major central banks’ monetary policies. Also, inflation may fluctuate a bit over the Summer season due to soaring fresh food prices amid continued severe weather conditions. However, if inflation stays in the 2% range for most of 2H23, then the BoK’s tone should shift to neutral and eventually revert to an easing cycle.
    ECB's Potential Hike Faces Limited Rate Upside as Macro Headwinds Persist

    Asia Week Ahead: RBA Policy Move and Regional PMI Data in Focus

    ING Economics ING Economics 28.07.2023 08:30
    Asia week ahead: Reserve Bank of Australia policy move and regional PMI data The Reserve Bank of Australia is likely to stand pat at next week's policy meeting. Plus, we'll get PMI readings from the region.   RBA likely to maintain rates as inflation slows The Reserve Bank of Australia (RBA) can use the latest inflation data as an excuse to leave the cash rate target unchanged at 4.1% this month. But while the figures are being touted as “better than expected” the truth is that the monthly June figure was still running hot, and with base effects almost used up, there may well be more convincing periods in the months ahead for the RBA to deliver further tightening. Our current thinking is that the bank will maintain rates at the current level until September, which could respond to inflation backtracking higher, or just not making sufficient downward progress. The latest data from the Australian Bureau of Statistics shows that the CPI for the second quarter fell to 6.0% year-on-year, lower than the 6.2% consensus. This is also the lowest quarterly rise since September 2021. As both headline and trimmed mean inflation are now below the central bank’s forecast, this gives it a good reason to believe that it is time to stop.      China PMI likely lower again Both the manufacturing PMI released by Caixin and the official numbers are expected to dip further as the government has yet to roll out any concrete policy to boost growth. While a weak yuan could provide a lift to the export sector, it also reflects the general pessimism that has taken hold in the economy. This has led to many consumers delaying spending; thus, we should see the services PMI also drop for a second month as the effect of "revenge spending" fizzles out.   Slowing global demand weighing on India and Taiwan Last month showed the first decline in India’s manufacturing PMI after several months of expansion. This is a sign that India may be losing a little steam as rate hikes worldwide are finally impacting the global economy. The shrinking global demand and semiconductor downturn also affects Taiwan, which has seen its PMI contracting for several months. We expect Taiwan’s PMI to remain in contraction.   Trade and inflation numbers from Korea Korean exports are expected to decline for the tenth straight month on the back of sluggish semiconductor and petroleum exports. Export details to the US and the EU should be monitored more carefully, as this could signal how consumers cope with rate hikes. Consumer inflation should stabilise further down to 2.5% year-on-year in July (vs 2.7% in June), mainly due to the high base last year. Meanwhile, recent floods and a rebound in global oil prices should push up food and energy prices on a monthly basis.   Japan reports activity data next week Monthly activity data should be closely watched in order to gauge whether Japan’s recovery can be sustained in the second quarter. Surveys and other forward-looking data suggest that both industrial production and retail sales will gain in June, supported by solid catch-up demand and improvement in the global supply chain.   Indonesia's inflation likely steady while Philippine price pressures ease further Both the Philippines and Indonesia will report inflation next week. Inflation in Indonesia returned to target earlier this year and we expect both headline and core inflation to remain well-behaved. Headline inflation should be flat at 3.5%YoY while core inflation could dip to 2.5%YoY from 2.6%.  Meanwhile, in the Philippines, headline inflation will continue its slide helped along by favourable base effects. Philippine inflation could edge lower to 4.8%YoY (from 5.4%) while core inflation could likely trend lower to 7.0%. Despite moderating price pressures, both Bank Indonesia and Bangko Sentral ng Pilipinas will likely keep rates untouched for the time being to provide support for their respective currencies.   Singapore retail sales could bounce in June Retail sales, which have been a bright spot for Singapore’s economy, could extend their gains for another month. June retail sales could rise by 3.5%YoY although this will be down 2.8% from the previous month. Slowing inflation coupled with the influx of foreign arrivals should provide some support, especially in services related to leisure and recreation.     Key events in Asia next week
    Turbulent FX Markets: Peso Strength, Renminbi Weakness, and Dollar's Delicate Balance

    Polish Manufacturing PMI Declines in July Amid Falling New Orders

    ING Economics ING Economics 01.08.2023 13:16
    Polish PMI dips in July on falling new orders Poland's manufacturing PMI fell to 43.5pts in July, down from 45.1pts in June, the lowest level since mid-2022, when the domestic economy struggled with the effects of rising energy prices, among other factors. The assessment of current production, orders, employment and purchases all worsened in July from the previous month.   The most significant thing to note from this data release is the deteriorating assessment of the acquisition of new orders (the worst ratings in eight months), especially for exports (the weakest performance since May 2020). This was followed by a decline in current production, the fastest since November 2022 and the fifteenth consecutive month of decline. We are most likely seeing the effects of economic weakness in the eurozone, especially in Germany (the industrial PMI there is below 40pts). Around 50% of Polish industry products go to foreign markets, and Germany is Poland's main trading partner. Planned employment decreased for the fourteenth month in a row. This can be seen in the CSO's employment data, where manufacturing accounts for much of the decline. In June, for example, the business sector lost about 5,000 full-time jobs, of which 3,000 were in manufacturing. Companies also reduced purchasing activity and sought to reduce inventories. In our view, this will translate into relatively weak imports. In addition to energy commodity prices, this should sustain Poland's trade surplus despite the weak export outlook.   Manufacturing PMI in Poland and Germany External demand affects the Polish industry   The bright spot is rapidly decreasing price pressure. The lack of demand has again pushed prices down. Input costs have fallen at the strongest rate since the survey began more than 25 years ago. This was helped by declines in raw material prices and/or the strengthening of the zloty. Selling prices also fell at the fastest pace ever. More than 27% of respondents reduced their prices during the month. While there are signs of stabilisation in domestic industrial production data, recent PMI reports suggest a cautious approach to expectations of a marked improvement in the sector's condition in the second half of the year. Manufacturing is seeing a marginal rebound in the US, Asia, and sluggishly in China, but not in Europe. We think the PMIs for Poland (and elsewhere) are much more pessimistic than real trends in activity (see graph), but other anecdotal evidence we collect has not provided positive signals so far.
    Escalating Russia-Ukraine Tensions Amplify Oil Supply Risks: The Commodities Feed

    Escalating Russia-Ukraine Tensions Amplify Oil Supply Risks: The Commodities Feed

    ING Economics ING Economics 07.08.2023 14:01
    The Commodities Feed: Russia-Ukraine tensions add to oil supply risks The Ukrainian drone attacks on Russian oil tankers in the Black Sea region have added to supply risks for the crude oil market. Meanwhile, the Joint Ministerial Monitoring Committee (JMMC) meeting of OPEC+ countries ended without any recommendation to change oil output levels for now.   Energy – Ukrainian drone attacks on Russian oil tankers ICE Brent settled above US$86/bbl on Friday as tensions in the Black Sea region increased further after Ukraine declared Russian ports in the Black Sea as ‘war risk’ areas and cautioned ships against using them. Ukrainian drones also attacked a Russian oil tanker over the weekend reflecting heightened tension within the region. The Black Sea route accounts for nearly 15-20% of the oil that Russia sells daily on global markets and is also a major transit corridor for Kazakh crude. In the recent JMMC meeting, the OPEC+ group noted its satisfaction regarding the compliance with the output levels by member countries and made no recommendation for any change in production strategy at this stage. The committee recognised the additional voluntary cuts from Saudi Arabia and Russia to balance the oil market. The group has changed the frequency of meetings from once a month to once every two months, with the next meeting scheduled for the first week of October. Saudi Arabia increased its official selling price for Asia and Europe for September deliveries following its decision to also extend the output cuts for the month. Saudi Aramco has increased the premium of Arab Light crude for Asian buyers by US$0.30/bbl to US$3.5/bbl for September deliveries. The increment was much steeper for European buyers with the new premium set at US$5.8/bbl compared to US$3.8/bbl for August deliveries. The premium for US buyers was left unchanged at US$7.25/bbl. The latest data from Baker Hughes shows that the US oil rig count declined by four for an eighth consecutive week to 525 over the last week. This is the lowest number of active rigs seen since 18 March 2022. The recent strength in oil prices should have seen higher capital expenditure and increasing rig count in the country, however, the oil exploration companies appear to still be assessing the stability of the current market strength. Lastly, the latest positioning data from CFTC show that speculators increased their net long position in NYMEX WTI for a fifth consecutive week by 13,855 lots over the last week, leaving them with net longs of 205,959 lots as of 1 August 2023, the highest since the week ending on 18 April 2023. Meanwhile, money managers increased their net longs in ICE Brent by 18,728 lots over the last week for a second consecutive week, leaving them with 215,368 lots as of last Tuesday.    
    China's Ninth Straight Month of Gold Holdings Increase; Oil Resilient Despite Russian Tanker Incident; Dollar Supported by Bond Supply Concerns

    China's Ninth Straight Month of Gold Holdings Increase; Oil Resilient Despite Russian Tanker Incident; Dollar Supported by Bond Supply Concerns

    Kenny Fisher Kenny Fisher 08.08.2023 08:48
    China increased gold holdings for a ninth straight month in July Oil unfazed as Ukraine sea attack Russian oil tanker didn’t lead to a major disruption Dollar supported amidst bond supply concerns; 10-year Treasury yield rises 3.8bps to 4.074%   Oil Crude prices are lower following a surge in the US dollar and as Saudi Arabia anticipates a bumpy road for the crude demand.  The Saudis are raising prices across most of Asia and Europe, with the Arab light crude only being boosted by 30 cents, which was less than the 50-cent rise expected by traders. The initial rally from news that a Russian oil tanker was damaged  only provided a brief rally on Sunday night.  Unless we see a meaningful disruption to crude supplies, prices will remain  Also dragging oil prices down is the rising expectations that the US will see a recession by the end of 2024.  A Bloomberg investor poll showed two-thirds of 410 respondents expect a recession by the end of next year and 20% see one by the end of this year.    Gold Gold prices are struggling here on a strong dollar and as global bond yields rise and after an early round of Fed speak are still supporting the case for one more hike by the Fed. Wall Street is playing close attention to fixed income at the start of the trading week, which saw the bond market selloff cool at the end of last week after a mixed nonfarm payrolls report. If Treasury yields rally above last week’s high, that could trigger some technical buying and that could be very negative for gold prices.  For many traders, this week is all about inflation data and any hot surprises could prove to be short-term bearish for gold.  As earnings season wraps up, stocks have mostly posted better-than-expected results (excluding Apple) and that has hurt the gold’s safe-haven appeal.  At some point over the next few weeks, if the stock market rally can’t recapture the summer highs, a decent pullback could help trigger a big move back into gold.     
    Navigating Disclosure and Standardisation: Policy Amidst Turbulence in Sustainable Finance Market

    Navigating Disclosure and Standardisation: Policy Amidst Turbulence in Sustainable Finance Market

    ING Economics ING Economics 10.08.2023 08:35
    Policy is still pointing at greater disclosure transparency and standardisation despite turbulence As mentioned above, transparent and standardised sustainability reporting is essential in assuring the credibility of an issuer’s ESG products, helping to boost investor confidence, and to drive the healthy growth of the global sustainable finance market. Policies and initiatives need to play a role here, and we are seeing more efforts ramped up in this area. In late June, the International Financial Reporting Standards Foundation’s International Sustainability Standards Board (ISSB) launched its sustainability and climate disclosure standards. The ISSB signals an important convergence of different reporting standards and frameworks such as the Taskforce on Climate-related Financial Disclosure (TCFD), offering companies an overarching framework. Already having support from G7 and G20 countries, the ISSB is expecting wide adoption over time.   The EU has a relatively more unified ESG policy environment, where disclosure requirements (Corporate Sustainability Reporting Directive, or CSRD), the sustainable activity classification system (Taxonomy) and the Green Bond Standard reinforce each other. Admittedly, complying with all the regulatory requirements can meet difficulties around necessary data and interpretation. And many of the bloc’s policies are still evolving, with the newly adopted European Sustainability Reporting Standards (ESRS) introducing more flexibility around ESG materiality and Scope 3 emissions disclosure. Still, the EU’s more established and complex ESG system can support smoother growth in sustainable finance issuance. In the US, although more than 30 states have passed or proposed anti-ESG investment bills, the Securities and Exchange Commission (SEC) is slowly advancing in mandating climate-related disclosure and aims to release the final proposed rules this October. The final rules will likely allow more flexibility – for instance, Scope 3 emissions data may no longer be required. Even if less strict relative to original plans, these rules will be revolutionary for the US market, facilitating a large step closer to European and other peers. In Asia, several economies already have their own guidelines and taxonomies, such as Japan’s green, social, and climate transition finance guidelines, China’s Green Bond Principles, South Korea’s Korea Green Taxonomy, etc. Yet Asia is more of a follower rather than a trend setter, and several jurisdictions have adopted the EU’s system, or the widely accepted international frameworks. The ISSB is likely to have a considerable impact on APAC – Singapore, for instance, has already proposed ISSB-aligned disclosure from listed companies starting in 2025. Nevertheless, we would expect more lenient local specifications in policy setting. For example, the Association of Southeast Asian Nations’ (ASEAN’s) taxonomy considers certain types of coal phase-out activities to be aligned.   What does this mean for investors and issuers? Quality issuance is the best strategy against uncertainty. As the sustainable finance market moves from the initial period of rapid growth to a maturing phase with more ESG disclosure mandates and scrutiny, it has become important for issuers to navigate through greenwashing risks by actively leveling up their sustainability credibility. Investors have started to and will increasingly favor quality issuers with ambitious long-term ESG targets, clear interim targets, rigorous progress reporting, as well as detailed disclosure of capital allocation from their sustainable finance products. Environmental, Social, and Governance aspects will all progress, but the urgency to reduce emissions and mitigate climate risks will remain a strong source of demand for sustainable financing. This can help promote innovation and facilitate the commercialization of nascent decarbonization technologies. We are in an era of adjustment and normalisation, but sustainable finance remains a crucial tool to provide financial support for sustainable activities. Therefore, we do see the market continuing to grow in the future.
    Turbulent FX Markets: Peso Strength, Renminbi Weakness, and Dollar's Delicate Balance

    Asia Morning Bites: Chinese Stocks Navigate US Investment Ban, Philippines GDP Data Ahead

    ING Economics ING Economics 10.08.2023 09:03
    Asia Morning Bites Chinese stocks weather the latest US investment ban. Chinese lending data today and 2Q23 GDP from the Philippines.   Global Macro and Markets Global markets:  It was another day of slight falls for US stocks on Wednesday, though things could have gone either way until late trading when there was a final dip lower. The S&P 500 fell 0.7% while the NASDAQ fell 1.17%. Chinese stocks were mixed, which isn’t a bad result considering the inflation data which turned negative, and the new US ban on investment in Chinese technology. The Hang Seng fell 0.32%, while the CSI 300 fell 0.31%. US treasury bond yields were also mixed on Wednesday, the 2Y yield rose 5.7bp to 4.808%, though the 10Y yield fell 1.4bp to 4.008% after a good auction.  EURUSD recovered a little ground, rising to 1.0976, but failed to make it above 1.10. The AUD and GBP were both fairly flat relative to the previous day, though the JPY saw further losses, rising to 143.657. Asian FX was fairly rangebound yesterday too, with most registering small gains of less than a quarter of a percent. G-7 macro:  US CPI inflation data for July is due today, and we are likely to see something we haven’t seen for some time, namely, annual inflation rising. The good news is that this is mainly due to base effects, and the month-on-month gain in the CPI index is expected to be modest at 0.2%, which is broadly in line with the Fed’s target. The bad news is that this indicates that the going will be a lot heavier for inflation from now on, without those nice helpful base effects that dominated the second quarter. Core inflation is expected to drop only 0.1pp to 4.7%. China: Aggregate finance data is released today. New CNY loans are forecast to rise by CNY780bn, which puts it slightly ahead of last year’s CNY678bn figure. Given the recent disappointing macro data, there might be some downward surprises here, though loans have been one of the stronger parts of China’s data in recent months.   Philippines:  2Q GDP is set for release today.  Market consensus is at 6.0%YoY, a slowdown from the 6.4% reported in 1Q.  Elevated prices likely capped household spending while capital formation also probably slowed due to the lagged impact of previous monetary tightening. Government officials are targeting full-year growth of 6-7%YoY, although given various headwinds, we feel that growth may be headed for a slowdown for the rest of the year.  What to look out for: US inflation Philippines GDP (10 August) RBI policy meeting (10 August) US initial jobless claims and CPI inflation (10 August) Singapore CPI inflation (11 August) Hong Kong GDP (11 August) US PPI inflation, University of Michigan sentiment (11 August)
    EUR/USD Fragile Amidst Strong US Data and Bleak Eurozone News

    Upcoming Economic Highlights in Asia: Trade, Inflation, and Central Bank Actions

    ING Economics ING Economics 11.08.2023 14:44
    The week ahead features trade and inflation data from Japan, India and China. We'll also get a Philippine central bank decision and Australia’s unemployment data, which could influence India's move on rates later this month. Australia unemployment rate to increase slightly Australia’s unemployment rate came close to its all-time low of 3.4% last month, falling to 3.5%. Despite that, the Reserve Bank of Australia (RBA) kept rates unchanged last week as the inflation data was more favourable. Although labour data is an important input into the RBA’s reaction function, we think that the central bank will continue to be subordinate to the monthly inflation numbers, which must grapple with large electricity tariff hikes in July and then much less helpful base effects between August and October.     Japan to release GDP, trade and inflation data With modest improvement in net exports and a solid recovery in service activity, we expect second-quarter GDP growth to rise 0.6% quarter-on-quarter seasonally-adjusted (vs 0.7% in the first quarter). For inflation, we believe that private consumption has cooled moderately as the high prices in the second quarter put off consumption demand, though this is likely to be compensated by improved terms of trade as imports fell sharply due to falling global commodity prices. However, we should expect exports to record a contraction in July, particularly due to base effects. We believe Japan’s inflation should stay at the current level while core inflation is expected to accelerate further, as the previous Tokyo inflation outcome suggested. Philippine central bank to extend rate pause? The Philippines' central bank, Bangko Sentral ng Pilipinas (BSP), is likely to extend a pause, but persistent upside risks to the inflation outlook could give Governor Eli Remolona a reason to stay hawkish. Headline inflation has been trending lower and could be within target as early as September. This would be the main reason the BSP holds rates at 6.25%. However, with global grain and energy prices inching higher, a fresh round of upside risks to the inflation outlook has surfaced. Persistent upside risks will likely translate to the central bank remaining hawkish even if the BSP opts to extend its current pause. We expect the BSP to keep rates untouched but signal a strong willingness to tighten further should upside risks to the inflation outlook materialise. Inflation to surge in India India will release its July CPI next week, and we are expecting a steep climb to over 8%, breaching the upper end of the Reserve Bank of India's (RBI's) 2-6% target range. This is due to soaring food prices caused by the erratic monsoon rains: tomatoes experienced a whopping 200% month-on-month increase in July. But this should not bother the RBI too much as food price shocks like this come and go. The effect of food inflation has also spilled over to exports, where the Modi administration has announced an immediate ban on some non-basmati rice. As such, we are expecting a further decline in India’s export to -23.6%. Key data on industrial production and retail sales from China While China’s data has been disappointing lately, the summer season from July may usher in some better news. Data from China Railway show that there was a 14.2% increase in operating passenger trains compared to the same period in 2019. Flight numbers, on the other hand, experienced a slower recovery. They are currently running at about 48% relative to the same period in 2019, but this is still a 12% increase on a yearly and monthly basis. The rise in movement could provide a boost to consumption and strengthen retail sales. However, the effect is unlikely to spill over into industrial production, and we should continue to see weak growth here. Both the official and Caixin Manufacturing PMI released earlier this month showed that China’s recovery has yet to gain traction.   Key events in Asia next week    
    Turbulent Q2'23 Results for [Company Name]: Strong Exports Offset Domestic Challenges

    SecoWarwick Group: Leading the Way in High-Tech Industrial Furnaces and Solutions

    GPW’s Analytical Coverage Support Programme 3.0 GPW’s Analytical Coverage Support Programme 3.0 16.08.2023 14:06
    SecoWarwick group - business model SecoWarwick is a customer solution provider for high-tech industrial furnaces for the thermal processing of metals. Solutions are dedicated to customers in the automotive, aircraft, energy, medical, tooling, powder metallurgy or defense industries, among others. SecoWarwick specializes in energy-efficient and environmentally friendly equipment. The company provides access to defining technologies and new solutions, provides state-of-the-art control and data analysis systems, as well as professional services available in the world's most important metallurgical markets. The offer includes standard and dedicated solutions, delivery of equipment including technology and associated equipment, installation and commissioning, service support, technical and technological training, tests and research in industrial and laboratory conditions, analyses and simulations. SecoWarwick's solutions also include industrial furnaces for fire testing, vacuum equipment, precision test chambers, thermal processing systems, windscreen heating and molding production lines. A wide range of technologies, highly qualified engineers and customized solutions give the customer a competitive edge. Geographical presence Currently, SecoWarwick's largest sales market is the US (37% of sales) served by two local production facilities. Next is Europe (30% of sales), which is mainly supplied by plants in Poland. Asia is the third market (28% of sales), served by plants in China. In the future, the opening of production in India (currently sales & service; planned production later this year) and an increase in deliveries from China to Europe cannot be ruled out due to the appreciation of the PLN to the USD and generally rising operating costs (manufacturing costs, transport costs), especially in Europe. Geographical diversif