RBA holds, but produces stagflation-ish FY24 forecasts

Asia market update: RBA holds, but produces stagflation-ish FY24 forecasts; AU Retail Sales fall 5th time in 6 qtrs; AU yields fall; KR & JP lead Asian equities, esp chip-makers.

General trend

- Australia Q1 retail sales fell for the 5th time in past 6 quarters, with the Aussie Stats Agency saying that consumers cut back on buying large household items such as furniture and electronic goods. The only rise in volumes over this 18-month period was in the Dec quarter when extensive discounting from Black Friday sales boosted volumes.

- Australia RBA left rates at 4.35%, as expected, reiterating that the Board is not ruling anything in or out. RBA forecasting looked a bit stagflation-ish, raising its FY24 trimmed mean inflation forecast up to 3.4% (prior 3.1%), while cutting FY24 GDP down to 1.6% (prior 1.8%). AU 10-yr yields -7bps.

- Japan’s Nikkei came back from its Golden Week holidays full of demand (+1.2%), with major component Fast Retailing +3.3% in early trading after last week reporting its biggest jump in monthly Rev (for Apr) since summer 2022. Chip-maker Tokyo Electron also +5% in early trading.

- South Korea’s Kospi performed even better (+2.3%), led by chip-makers such as SK Hynix (+4%).

- Japan Final PMI Services & Composite came in slightly below estimates.

- China PBOC performed its largest net drain since January in open market ops.

- US equity FUTs flat to slightly down during Asian trading.

Looking ahead (Asian time zone)

- Thu May 9th CN Apr imports/exports, BOJ Summary of Opinions, (Thu eve UK BOE rate decision).

- Fri May 10th NZ Apr PMI, JP Current A/c, TSM Apr Rev, (Fri eve UK Q1 GDP, Fri night ECB meeting minutes, Michigan May Consumer Sentiment

- Sat May 11th CN PPI/CPI.

Holidays in Asia this week

- Thu May 9Th Indonesia.

- Fri May 10th Indonesia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 7,688.

- Reserve Bank of Australia (RBA) leaves target rate unchanged at 4.35%; as expected; Reiterates that Board is not ruling anything in or out.

- Reserve Bank of Australia (RBA) statement on monetary policy (SOMP).

- Australia Q1 Retail Sales Q/Q: -0.4% V -0.3%E (falls for 5th time in past 6 quarters).

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 80.5 v 81.1 prior.

- Australia Treasurer Chalmers: Gross debt to peak 10ppts lower than pre-election - Australian press.

- New Zealand Government 9-Month Financial Statements; NZ 9M budget deficit NZ$5.04B (NZ$619M wider than forecast).

- Australia official: Chinese jet fired flares next to Australia helicopter; Expressed concerns to China over the incident [overnight update].

China/Hong Kong

- Hang Seng opens flat at 18,577; Shanghai Composite opens flat at 3,139.

- China and France reaffirm commitment to promoting political and diplomatic settlement of Iranian nuclear issues - Chinese state media.

- BYD (1211.HK) Americas CEO: Affirms no plan to sell EVs in the US - Milken conference comments.

- China's Pres Xi: Denies that China has an overcapacity issue - Chinese press [overnight update].

- China’s Shenzhen province loosens home purchase limits - press.

- France President Macron: Dialogue between Europe and China at this time is more important than ever [overnight update].

- China PBOC sets Yuan reference rate: 7.1002 v 7.0994 prior.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repos; Net drains CNY438B v drains CNY8B prior (largest net drain since January).

Japan

- Nikkei 225 opens +1.1% at 38,636.

- Japan Apr Final PMI Services: 54.3 v 54.6 prelim (confirms 19th month of expansion).

- Bank of Japan (BOJ) announcement related to outright bond buying operations: For 1-3 Years; 3-5 Years; 10-25 Years (inline with previous ops).

- Japan top FX diplomat Kanda: No comment on US Treas Sec Yellen's earlier FX comments - Japanese press.

South Korea

- Kospi opens +1.6% at 2,718.

- South Korea Apr Foreign Reserves: $413.3B v $419.3B prior.

- South Korea Fin Min Choi Sang-Mok: To review revising higher 2024 GDP growth target from the current 2.2% after strong Q1 performance [overnight update].

Other Asia

- Philippines Central Bank (BSP): CPI may accelerate in next two quarters; Risk to inflation outlook leans to upside.

- Philippines Apr CPI M/M: -0.1% v 0.2%e; Y/Y: 3.8% v 4.0%e (5th month with annual pace within target band).

- (EU) ECB’s Vujcic (Croatia): Rates will be lowered over time but stay in restrictive territory.

- (EU) ECB's Simkus (Lithuania): We can afford to reduce restriction; Expect other rate cuts beyond June.

- (DE) German Fin Min Lindner: Our economic growth is not enough for the spending wishss of some ministries.

North America

- Reportedly Apple is developing its own chips to run AI software in data centers. code-named 'ACDC' - WSJ.

- (US) Fed April Senior Loan Officer Survey (SLOOS): 15.6% of banks reported tighter loan standards in Q1.

- (US) Fed's Williams (voter): We are seeing job growth moderate - Milken event.

- (US) Fed’s Barkin (voter): Doesn't see the economy overheating, but Fed knows how to respond if it does; The economy is moving toward a better balance.

Europe

- (UK) Apr LFL BRC Sales Y/Y: -4.4% v 3.2% prior.

Levels as of 01:20 ET

- Nikkei 225 +1.3%; ASX 200 +1.3%; Hang Seng -0.5%; Shanghai Composite +0.1%; Kospi +2.3%.

- Equity S&P500 Futures flat; Nasdaq100 -0.1%; Dax +0.1%; FTSE100 +0.7%.

- EUR 1.0760-1.0777; JPY 153.87-154.65; AUD 0.6597-0.6646; NZD 0.6006-0.6025.

- Gold -0.1% at $2,330/oz; Crude Oil +0.1% at $78.59/brl; Copper +0.1% at $4.6058/lb.