Asia Morning Bites: Korean Authorities Limit Fallout as MGCCC Branches Close, US Non-Farm Payrolls in Focus

Asia Morning Bites

Korean authorities give a strong deposit protection message to limit fallout as it closes some branches of MGCCC. US non-farm payrolls later - and a big number is expected following the ADP release.

 

Global Macro and Markets

• Global markets:  Strong US labour data ahead of today’s payrolls release caused US Treasury yields to move higher again yesterday. US 2Y yields rose a further 3.6bp while those on 10Y USTs rose 9.8bp taking them to 4.029% for the first time since early March. Equities didn’t respond well to the stronger-than-expected data. The S&P 500 fell 0.79%, while the NASDAQ dropped by 0.82%. Chinese stocks were also down. The Hang Seng fell 3.03%, while the CSI 300 fell a more modest 0.67%. In spite of the rise in yields, the USD lost a little ground to the EUR, and EURUSD moved up to 1.0894. The AUD was weaker though, falling back to 0.6630, while the GBP moved a little higher to 1.2743, and the JPY also made some gains, moving to just below 144. Most of the Asian FX pack was weaker against the USD yesterday
• G-7 macro: Yesterday’s market-moving release was the US ADP survey, which showed a 497 thousand increase in private employment in June. This was more than twice what had been expected and could set the market up for an upside surprise to the 230 thousand payrolls median forecast today. There was also a stronger-than-expected reading from the service sector ISM index, with both headline and employment indices rising a lot. It is going to be quite hard for the Fed to ignore these numbers at its 27 July meeting. As well as payrolls today, we also get hourly earnings data, which is expected to show a slight moderation from the 4.3% rate of annual growth in May. The unemployment rate, however, is thought likely to go down, not up.
• Korea: The risk of a bank run emerged suddenly as the delinquency rates of MGCCC rose sharply and a couple of branches decided to close. The government has issued a strong message that deposits will be protected. The BoK will keep rates on hold as financial market stress is expected to continue for a while. Please see details.
• Taiwan: Trade figures for June could show rates of decline moderating in year-on-year terms, though they are likely to remain in a double-digit descent. In USD terms, Taiwan’s exports have been steadily declining since August 2022, and today’s reading may simply signal that the rate of decline has eased slightly. This would be in line with what we see in other regional peers like South Korea.

 

What to look out for: US jobs report

• South Korea BOP balance (7 July)

• Taiwan trade (7 July)

• US non-farm payrolls (7 July)