Markets continue to meander following temporary resolution of US-CN trade deal earlier in the week

General trend

- Mixed and light trading saw ASX in Australia outperform +0.5%, lead by REITs.

- Japan’s economy contracted (first time in a year) during the first quarter, a little more than the slight contraction expected and well below the +0.6% registered in the prior quarter. Conversely, Japan’s continued strength in Japan machine tool orders attributed to China and chips demand offsetting tariffs.

- Japanese autos overall flat today, with Nissan +4.5%, after yesterday’s reports that Japan mulling letting in importation of US-built cars.

- Dovish comments from BOJ board member Nakamura who used US tariff uncertainty to warn that if the BOJ rushes to raise rates this could dampen both consumption and investment. At the same time a Tier-1 brokerage firm in Japan said not to expect a further BOJ rate hike until early 2026. Did not stop JPY strength, which has gained back all and more of its large Monday losses following the US-CN trade war pause.

- Taiwan said to raise 2025 chip output to $209B, +19.1% y/y (prior growth rate ~16%).

- Singapore Apr Non-Oil domestic and electronic exports both rose strongly.

- New Zealand’s hard economic data continued to improve, with April Manufacturing PMI seeing its 4th month of expansion. Also hotter than expected second quarter Inflation Expectations for one and two years out. Kiwi dollar outperformed +0.6%.

- WTI crude kept up its recovery (following 4% losses yesterday after Iran signaled it was open to a nuclear deal with the US) and has now pared about half of those losses after the Iranian Foreign Minister said today that they are hearing ‘contradictory positions’ out of the US.

- Support for China-leaning Lee, leader of South Korea main opposition Democratic Party, rose to 51% ahead of the country’s Jun 3rd elections.

- On the trade front the US told Vietnam its trade deficit is 'unsustainable' and a "major concern", while for Japan trade rep Akazawa continued to indicate Japan may be stickier for the US than first thought.

- Nvdia reportedly seeking US approval to build an R&D center within Shanghai, China.

- US equity FUTs flat during Asian trading.

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

- Fri May 16th (Fri night US prelim Apr Michigan Consumer Sentiment).

Holidays in Asia this week

- Mon May 12th Indonesia, Philippines, Singapore, Thailand.

- Tue May 13th Indonesia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 8,310.

- Australia sells A$800M vs. A$800M indicated in 2.5% 2030 bonds; Avg Yield: 3.7759% v 4.0988% prior; bid-to-cover: 4.36x v 4.74x prior.

- Lynas (LYC.AU) Announces first separated heavy rare earths output at Lynas Malaysia; Now the world’s only commercial producer of separated Heavy Rare Earth products outside China.

- New Zealand Q2 Inflation Expectation Survey: 2-year Outlook: 2.3% v 2.1% prior; 1-Year inflation expectation at 2.4% v 2.2% prior

- New Zealand Apr Non Resident Bond Holdings: 61.6% v 61.9% prior

- New Zealand Apr Manufacturing PMI: 53.9 v 53.2 prior (4th month of expansion)

- New Zealand Trade Min will meet with USTR Greer again later during 2025 for tariff talks - Press

China/Hong Kong

- Hang Seng opens -0.9% at 23,249; Shanghai Composite opens -0.2% at 3,374.

- Nvidia reportedly seeking greenlight from US to build research center in Shanghai - FT.

- China MOFCOM: Reiterates firmly promotes high-level opening up, rules-based global economic and trade order [comments on Digital Economy Partnership Agreement (DEPA)].

- Trump Admin said to be split on adding Chinese chipmakers to China entity list; Considering adding Changxin Memory and CXMT to the entity list - FT.

- (US) Reportedly Pres Trump's effort to secure AI deals in Middle East runs afoul of some administration China hawks – press.

- China Sec News: China lithium prices have 'fallen below breakeven level'.

- China Premier Li Qiang: To increase domestic circulation to counter uncertainty and stabilize employment [overnight update].

- (US) Treasury Sec Bessent: Very important step to establish relationship with China; Over next 90 days we can accomplish a lot [overnight update].

- Alibaba Reports Q4 (CNY) 12.52 v 12.71e, Rev 236.5B v 237.9Be; Approves $0.95/ADS special dividend; Confident in business outlook, remain committed to enhancing shareholder returns; Sees AI + Cloud as a new engine for long-term growth [overnight update].

- China MOF sells 20-year ultra-long Special Sovereign bonds.

- China MOF sells 2-year bonds.

- China PBOC sets Yuan reference rate: 7.1938 v 7.1963 prior [strongest since Apr 3rd].

- China PBOC Open Market Operation (OMO): Injects CNY107B in 7-day reverse repos; Net injects CNY30B v drains CNY95B prior.

Japan

- Nikkei 225 opens -0.1% at 37,703.

- JAPAN Q1 PRELIMINARY GDP Q/Q: -0.2% V -0.1%E; ANNUALIZED Q/Q: -0.7% V -0.3%E.

- Japan Mar Final Industrial Production M/M: +0.2% v -1.1% prelim; Y/Y: +1.0% v -0.3% prelim.

- BOJ Nakamura: Greater uncertainties from US tariff policies could pose serious challenges for Japan; If the BOJ rushes to raise the policy interest rate even during an economic slowdown, this could dampen both consumption and investment, with a lag – speech.

- Japan State Minister of Economy, Trade & Industry Ogushi says no talks with USTR Greer at APEC meeting - Press.

- Continued strength in Japan machine tool orders attributed to China and chips demand offsett tariffs - Nikkei Asia.

- Japan Economic revitalization Min Akazawa: Govt to take all necessary steps to offer liquidity support to impacted firms - financial press.

- Japan Fin Min Kato: Will not comment on US and South Korea trade talks; plans to talk with US Treasury Sec Bessent on FX 'inline with agreement'.

- Japan sells ¥4.5T vs. ¥4.5T indicated in 3-Month Bills; Avg Yield: 0.3677% v 0.3979% prior; bid-to-cover: 3.17x v 3.13x prior.

- US officials said to consider revising US-Japan trade agreement as bilateral talks continue - Japanese press.

- Carlyle Japan co-head: `Not easy' situation for Japan IPOs amid market volatility - financial press.

Korea

- Kospi opens +0.4% at 2,630.

- South Korea Apr Import Price Index M/M: -1.9% v -0.4% prior; Y/Y: -2.3% v 3.4% prior.

- South Korea Fin Min: To continue to monitor financial markets closely - financial press.

- South Korea Trade Min Cheong: APEC members grap- South Korea main opposition party (Democratic Party) DP's Lee support rises to 51% ahead of Jun 3rd election (v 37% prior) - Gallup poll pling with "verlapping challenges" - financial press.

Other Asia

- Malaysia Central Bank (BNM): Ringgit remained broadly stable against currencies of major trade partners in the first quarter of 2025; has 'policy space' to act if needed.

- India reported to be reviewing US request to lift its ethanol import restrictions - financial press.

- Taiwan Premier Cho Jung-Tai: US is a big market for Taiwan, "but not the only one" - financial press.

- (VN) US tells Vietnam its trade deficit is 'unsustainable' and a "major concern" amid tariff talks - Vietnam state media.

- Singapore Apr Non-Oil Domestic Exports Y/Y: 12.4% v 4.3%e.

- Taiwan said to raise 2025 chip output to $209B, +19.1% y/y (prior growth rate ~16%).

North America

- Mexico Central Bank (Banxico) Gov Rodriguez: Merchandise and service CPI has been slowing.

- Walmart CFO: Warns it can’t hold on price forever; price hikes could start later this month as tariffs are still too high - pre-recorded media call comments.

- US) Truflation proxy of US aggregated inflation index ticks higher to 1.8% (testing march's highs) V 1.4% before Liberation day.

- CEO Dimon: Wouldn't rule out recession; Seeing more volatility and more trading volume lately; Repeats could see long rates go up.

- (US) May empire Manufacturing: -9.2 V -8.0E; New Orders: +7.0 v -8.8 prior; Prices Paid at its highest level in more than two years.

- (US) Apr advance retail sales M/M: 0.1% V 0.0%E; RETAIL SALES (EX-AUTO) M/M: 0.1% V 0.3%E; March revised higher.

- (US) Apr PPI final demand M/M: -0.5% V +0.2%E (biggest M/M drop since Apr 2020); Y/Y: 2.4% V 2.5%E; March revised higher.

- (US) Initial jobless claims: 229K V 228KE; continuing claims: 1.881M V 1.89ME.

- (US) May Philadelphia Fed business outlook -4.0 V -11.0E; New Orders: 7.2 v -34.2 prior; Prices Paid: 59.8 v 51.0 prior.

- (US) Fed Chair Powell: May be entering period of more frequent supply shock; Appropriate to reconsider average inflation targeting; Doesn't comment on economic or rates outlook - comments at Thomas Laubach Research Conference in Washington, D.C.

- (US) Apr industrial production M/M: 0.0% V 0.1%E; capacity utilization 77.7% V 77.8%E.

- (US) Mar business inventories: 0.1% V 0.2%E.

- (US) MAY NAHB housing market index: 34 V 40E.

- (US) One Democrat and one Republican Senator said to revive bill aimed at break big tech's "grip" on - (US) Elliott Management sees risk of capital flight from US due to trade war - FT cites investor letter.

- (US) Weekly EIA Natural Gas inventories: +110 BCF VS. +109 BCF TO +110 BCF indicated range.

- (US) Reportedly Trump's Administration is targeting billions in energy grants in a new round of audits - press.

- (US) Qatar Investment Authority (sovereign wealth fund) said planning to invest $500B in US over 10 years - press.

- (US) Atlanta Fed GDPNow: Raises Q2 GDP estimate from 2.3% to 2.5%.

- (MX) Mexico central bank (BANXICO) cuts overnight rate by 50BPS to 8.50%; as expected; vote was unanimous; price environment will allow rate-cut cycle to go on.

Europe

- (IR) Iran Foreign Min Araghchi: What negotiators say in media may be different to in talks; We are hearing many contradictory US positions.

- (IT) Italy PM Meloni said to want another cut to payroll tax in next budget.

Levels as of 01:20 ET

- Nikkei 225 -0.1%, ASX 200 +0.5%, Hang Seng -0.5%; Shanghai Composite -0.4%; Kospi +0.3%.

- Equity S&P500 Futures flat; Nasdaq100 flat; DAX +0.1%; FTSE100 flat.

- EUR 1.1182-112.15; JPY 144.97-145.73; AUD 0.6433-0.6495; NZD 0.5866-0.5913.

- Gold -0.3% at $3,215/oz; Crude Oil +0.3% $61.81/bbl; Copper -0.3% at $4.6643/lb.