Asia Morning Bites - 18.04.2023

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)