Risk assets catch a bid from 1st Trump trade deal unveiling tomorrow

Asia market update: Risk assets catch a bid from 1st Trump trade deal unveiling tomorrow; Focus on UK BOE Rate Decision.

General trend

- US equities popped as much as +0.7%, later extending to +1.0% (approaching last week’s post April 2nd equity highs) after Pres Trump promised the first 'major' trade deal, leaving the country unnamed, presumably to be unveiled tomorrow morning at 10 AM ET in the Oval Office. (Indicated earlier this week by the FT that the UK was ready to make a deal, reiterated today by the NYT today). Bitcoin broke through to a 3-month high to pierce $98K, later extending through $99K. Gold, Copper and Silver also well supported initially but then pared some gains.

- Asia equities had a slight positive bias, with only the Hang Seng initially matching the pace of US equity FUTs, +1.0% on the Trump news, but then paring gains. (Note: perhaps some CN/HK trepidation pre-US/CN talks this weekend?).

- BOJ’s Ueda and Nakamura both spoke in parliamentary testimony, but along with the March policy Minutes (two meetings ago) provided no fresh insights.

- Japan 10-year JGB auction poorly supported at 2.54x, the weakest demand since 2021 and with a tail of 18bps (v 11bps last month). JP 10-year yields edged up a further 1bp.

- Bank of Korea noted that South Korea's foreign reserves fall to a 5-yr low in April, while also noting uncertain US Fed leaves uncertainty related to trade in general.

- NAB, the third big Aussie bank to report this week also saw modestly positive beats; driven by lower impairments and strong Markets and Treasury income.

- China PBOC cut the Policy Rate (7-day reverse repo) by 10bps to 1.40%, as expected.

- US equity FUTs +0.8% to +1.2% during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Thu May 8th Thu eve UK BOE Rate Decision.

- Fri May 9th JP Mar Cash Earnings, CN Apr Trade Balance.

- Sat May 10th CN Apr CPI.

Holidays in Asia this week

- Mon May 5th China, Hong Kong, Japan, South Korea, Thailand.

- Tue May 6th Japan, South Korea.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.2% at 8,164.

- Australia sells A$100M v A$100M indicated in 0.25% Nov 2032 Indexed Bonds: Avg Yield 1.9425% v 2.1062% prior: bid-to-cover: 6.08x v 3.20x prior.

- New Zealand PM Luxon: Budget to allocate more money for capital projects - pre-budget speech.

- New Zealand 9-month budget deficit NZ$6.59B (NZ$529M narrower than forecast).

- New Zealand RBNZ rates and meeting frequency said to have been questioned by Fin Min Willis prior to Gov Orr resigning - financial press, citing Freedom of Information Act-acquired documents.

- RBNZ Hawkesby: Labor market data confirms activity is subdued.

China/Hong Kong

- Hang Seng opens -0.5% at 22,589; Shanghai Composite opens -0.4% at 3,331.

- China bonds to enter 'slow bull' market amid easing hopes - Chinese press.

- White House Council of Economic Advisers Chair Miran: The US has the leverage in China dealings; Trump has said that there may be disruptions from trade; Disruptions are possible in the short term; Americans can be flexible with trade patterns; It'll take time to adjust to trade patterns.

- US Pres Trump: In response to tariff exemptions, "Doesn't know, will take a look; Not looking for so many tariff exemptions;" Confident the US Ambassador to China will do an exceptional job; Not open to pulling back on 145% China tariffs.

- US President Trump says he will raise the Jimmy Lai issue in the China trade talks - Press.

- CHINA APR FOREIGN RESERVES: $3.282T V $3.295TE [overnight update].

- China PBOC sets Yuan reference rate: 7.2073 v 7.2005 prior.

- China PBOC Open Market Operation (OMO): Injects CNY159B in 7-day reverse repos; Net injects CNY159B v drains CNY335B prior; Cuts rate by 10bps to 1.40%, as expected.

Japan

- Nikkei 225 opens +0.2% at 36.860.

- Japan Apr Tokyo Avg Office Vacancies: 3.7% v 3.9% prior.

- Bank of Japan (BOJ) Mar Monetary Policy Meeting Minutes (2 decisions ago): Reiterates to raise rates if economic outlook is realized.

- Bank of Japan BOJ Gov Ueda: Reiterates rice price is helping to drive up inflation - parliamentary testimony.

- BOJ Nakamura: Reiterates to raise rate if economic outlook is realized.

- Japan reportedly mulls bringing shipbuilding into US tariff deal – Nikkei.

- Japan sells ¥3.5T vs. ¥3.5T indicated in 6-month Bills; Avg Yield: 0.4381% v 0.4137% prior, bid-to-cover: 3.79x v 3.34x prior.

- Japan sells ¥2.6T VS. ¥2.6T indicated in 10-year JGB bonds; AVG YIELD: 1.2740% V 1.405% prior; bid to cover: 2.54X V 3.15X PRIOR (Weakest demand ratio since 2021).

Korea

- Kospi opens +0.3% at 2,581.

- Bank of Korea (BOK): Uncertainty in Fed policy direction has increased regarding trade - statement post-FOMC decision.

- South Korea Apr Foreign Reserves: $404.7B v $409.7B prior [5-year low] (update).

- South Korea Acting Fin Min Kim: Vows 'speedy' extra budget spending.

- Bank of Korea (BOK) Apr Minutes: Most members see downside risks growing faster than expected, boosting case for rate cuts [overnight update].

Other Asia

- Taiwan Central Bank (CBC) Gov Yang: Reiterates US did Not pressure Taiwan for NT$ dollar appreciation - financial press.

- Vietnam Trade Min: Vietnam wants to buy "great amount" of US products.

- Pakistan PM Sharif: India must face consequences for its strikes - televised address.

- Taiwan Central Bank (CBC): Any sovereign wealth fund should not come from FX reserves without compensation [overnight update].

- Taiwan Apr CPI Y/Y: 2.0% v 2.1%e [overnight update].

North America

- (UK) Follow Up: Trump Administration to report trade deal with the UK - NYT.

- (US) President Trump: Reiterated 'big news' conference on 'major' trade deal to be held tomorrow morning at 10 AM ET - Truth Social post.

- (US) White House official Hassett: 'Respect' the independence of the Fed [follows Fed decision].

- (US) Follow Up: White House says Treasury and Commerce Depts have formulated plans for a sovereign wealth fund, but no final decisions have yet been made.

- (US) Trump: We are making great progress on “The One, Big, Beautiful Bill.”.

- (US) MBA Mortgage Applications w/e May 2nd: +11.0% v -4.2% prior.

- (US) April Manheim wholesale used vehicle Index: 208.1 v 207.1 prior; +2.7% m/m; +4.9% y/y.

- (US) US VP Vance: US and Europe are on the same team; Security posture of the last twenty years are not adequate for the next twenty years.

- (IL) US and Israel said to discuss possible US-led administration of Gaza - press.

- (MX) Mexico Pres Sheinbaum: No sign that the USMCA will end; Wants a USMCA review as simple as possible; Mexico is working to avoid tariffs on tomatoes.

- (US) DOE CRUDE: -2.0M V -1.5ME; GASOLINE: +0.2M V -1.5ME; DISTILLATE: -1.1M V -1.5ME.

- (US) US Pres Trump: In response to tariff exemptions, "Doesn't know, will take a look; Not looking for so many tariff exemptions; Not open to pulling back on 145% China tariffs.

- (US) FOMC leaves target range unchanged between 4.25-4.50%; as expected; repeats attentive to risks to both sides of mandate with risks to both higher employment and inflation rising.

- (US) Fed Gov Powell: We can't say now which way risks will shake out, too early to know; Reiterates policy is modestly restrictive; Will know more about the effects of tariffs when we start to see them; My gut tells me that uncertainty is extremely elevated; Downside risks are elevated; The committee is unanimous on a wait and see approach; The costs of waiting are fairly low - Q&A.

- (US) Reportedly Trump to propose sweeping Medicare drug price plan, may sign order on Medicare action next week - Politico.

- Nvidia: Trump reportedly plans to repeal advanced chip export restrictions – press.

- (BR) Brazil central bank (BCB) raises selic target rate by 50bps to 14.75%; as expected; unanimous decision.

Europe

- (UK) NIESR [think-tank]; Sees BOE cutting key rate today, then one more cut this year; Cuts UK 2025 GDP to 1.2% (from 1.5%); Sees UK govt breaching its fiscal rules.

- (UK) Apr RICS House Price Balance: -3% v -4%e (lowest since July 2024).

- US VP Vance: US and Europe are on the same team; Security posture of the last twenty years are not adequate for the next twenty years; We think that the Russians are asking for too much.

- (PT) Portugal Q1 Unemployment Rate: 6.6% v 6.7% prior.

- (DE) Germany Fin Min Klingbeil: Goal would be to have 2025 budget before summer break.

- (DE) German Chancellor Merz: Ukraine can continue to count on both German and French support - comments from Paris.

- (CZ) Czech central bank (CNB) cuts 2-week repurchase rate by 25bps to 3.50%; as expected.

- (EU) EU to list provisional list of US tariffs tomorrow if trade talks with US fail.

- (PL) Poland central bank (NBP) cuts base rate by 50bps to 5.25%; as expected.

- (IR) Iran Oil Minister Paknejad: Continues to support OPEC+ decisions that ensure market stability - Iranian state media.

- (DE) Germany Chancellor Merz: Skeptical about new EU debt instruments; We can imagine something similar on an EU level to the German defense borrowing constitutional amendment - comments to media.

Levels as of 01:20 ET

- Nikkei 225 +0.5%, ASX 200 +0.3%, Hang Seng +0.6%; Shanghai Composite +0.2%; Kospi +0.3%.

- Equity S&P500 Futures +0.8%; Nasdaq100 +1.2%; DAX +0.7%; FTSE100 +0.5%.

- EUR 112.98-1.1336; JPY 143.45-144.07; AUD 0.6423-0.6565; NZD 0.5938-0.5975.

- Gold -0.3% at $3,380/oz; Crude Oil +0.8% $58.53/bbl; Copper +0.6% at $4.6478/lb.