MNI EUROPEAN OPEN: Biden Reiterates No Change In Taiwan Policy After Monday Mishap

EXECUTIVE SUMMARY

• FED'S GEORGE SEES POLICY INTEREST RATE NEAR 2% BY AUGUST (RTRS)
• FED'S DALY DOES NOT EXPECT A RECESSION (RTRS)
• BIDEN: NO CHANGE TO POLICY OF STRATEGIC AMBIGUITY ON TAIWAN (RTRS)
• US MUST BE ‘STRATEGIC’ ON CHINA TARIFFS, TRADE CHIEF SAYS (BBG)
• UK TO START LEGISLATING AGAINST BREXIT DEAL WITHIN THREE WEEKS (BBG)
• UK C’LLR SUNAK ORDERS PLAN FOR WINDFALL TAX ON ELECTRICITY GENERATORS (FT)
• CHINA NEWSPAPER SEES SPECIAL SOVEREIGN BOND ISSUE TO AID ECONOMY (BBG)

Fig. 1: USD/CNH

Source: MNI - Market News/Bloomberg

UK

BREXIT: The UK aims to introduce its controversial bill to override parts of the Brexit deal it negotiated with the European Union within the next three weeks, Northern Ireland Secretary Brandon Lewis has signaled. Parliament is not sitting next week and officials in charge of legislation are eyeing the fortnight following June 6. There is then a six-week window for the bill to pass the lower House of Commons before Parliament breaks for its summer vacation, planned for July. (BBG)

BREXIT: British Prime Minister Boris Johnson knows very well what action the European Union could take if London fails to comply with the post-Brexit agreement it struck with the bloc on Northern Ireland, Dutch Prime Minister Mark Rutte said on Monday. "We will keep on working to ensure that we somehow find a way out of this, but if it is not possible then we also have to take our next steps and think about those," Rutte said in a joint news conference with his Irish counterpart, Micheál Martin, saying his country stood "shoulder to shoulder" with Ireland. "I don't want to guesstimate about what they could be because I don't think that is helpful, but I think Boris Johnson and the UK know very well what the next steps could be. Let's hope we don't come to that." (RTRS)

BREXIT: “It’s very, very clear that everything’s on the table” for the EU to respond to any move by the UK to unilaterally override the Brexit trade deal’s Northern Ireland protocol, Irish PM Micheal Martin tells reporters at joint press conference with Netherlands PM Mark Rutte in Dublin. Martin says best way to resolve protocol issues is through EU, UK talks; need “good faith” negotiations. (BBG)

FISCAL: Chancellor Rishi Sunak has ordered officials to draw up plans for a possible windfall tax on more than £10bn of excess profits by electricity generators, including wind farm operators, on top of a hit on North Sea oil and gas producers. Treasury officials are working on a scheme that would go well beyond Labour’s original windfall tax plan, as Sunak looks to raise billions of pounds of financial support for households struggling with soaring energy bills. “North Sea oil and gas producers are only half the picture,” said one government insider. “The other half is that high gas prices have led to some pretty substantial windfall profits for all electricity generation.” By pulling big power generators such as SSE, ScottishPower, EDF Energy and RWE into the scope of any windfall tax Sunak would sharply increase the revenue it brings in. Sunak and Boris Johnson urgently want to set out measures to address rising energy bills and how to pay for them, officials say. An announcement could come this week or after the Jubilee bank holiday in early June. (FT)

POLITICS: Boris Johnson is facing new claims that he misled parliament after he was photographed drinking with aides at a lockdown-breaking party in No 10. The photographs show the prime minister raising a glass at a leaving party for Lee Cain, his director of communications, in November 2020. The prime minister is in front of a table with several bottles of alcohol, including wine and gin. Johnson was not fined for attending the event despite the police issuing fixed-penalty notices to at least one other person who was present. The fine was issued for the offence of participating in an indoor gathering with more than two people. (The Times)

EUROPE

ECB: German workers should expect large wage increases from their collective negotiations in the second half of this year, the head of the Bundesbank Joachim Nagel said on Monday. "I believe that in the second half...we will see high numbers coming from the wage negotiations," Nagel, who also sits on the European Central Bank's Governing Council, said at an online event organised by Austria's central bank. (RTRS)

ITALY/BTPS: Italy plans to sell up to EU2.25 billion ($2.4 billion) of 0% bonds due Nov. 29, 2023 in an auction on May 26. Italy plans to sell up to EU1.25 billion ($1.33 billion) of 0.1% inflation-linked bonds due May 15, 2033 in an auction on May 26. (BBG)

ENERGY: Italy wants the European Union to allow farmers to sell surplus electricity they generate on their land, a measure that could help soften a bloc-wide energy crunch. (BBG)

U.S.

FED: Kansas City Federal Reserve Bank President Esther George on Monday said she expects the U.S. central bank to lift its target interest rate to about 2% by August, with further action dependent on how both supply and demand are affecting inflation. "Fed policymakers have emphasized a commitment to act expeditiously to restore price stability, and I expect that further rate increases could put the federal funds rate in the neighborhood of 2% by August, a significant pace of change in policy settings" George said in remarks prepared for delivery to an agricultural symposium put on by the Kansas City Fed. "Evidence that inflation is clearly decelerating will inform judgments about further tightening." (RTRS)

FED: Kansas City Federal Reserve Bank President Esther George on Monday said central bankers believe markets have already priced in the Fed's planned slimming of its $9 trillion balance sheet, but said market reaction bears watching as the process begins next month. "I think watching market functioning will be particularly important over the course of the summer and into the fall to see how the market digests the rolloff of that big balance sheet," George said at a Kansas City Fed conference on Monday, noting that markets are less settled now than they were the last time the Fed reduced its balance sheet. (RTRS)

FED: After approving two more half-point rate increases at coming June and July meetings it "might make sense" for the Federal Reserve to pause further hikes as it assesses the impact on inflation and the economy, Atlanta Fed President Raphael Bostic said on Monday. "After you get through the summer, and we think about where we are in terms of policy, I think a lot of it will depend on the on the ground dynamics that we are starting to see" both with inflation and the impact of higher interest rates on the economy, Bostic said in comments to the Rotary Club of Atlanta. "I think a pause in September might make sense" before determining how much higher or faster rates might need to rise, Bostic said. (RTRS)

FED: San Francisco Federal Reserve Bank President Mary Daly on Monday said the U.S. economy has a lot of momentum, and said the central bank can raise interest rates to where they are no longer stimulating economic growth without starting a recession. "We really have a strong economy," Daly said in an interview on Fox News. "I think that we can weather this storm, get the interest rate up...price stability restored and still leave Americans with jobs aplentiful and with growth expanding as we expect it to." (RTRS)

FED: Federal Reserve Chairman Jerome Powell was formally sworn in on Monday to a second, four-year term leading the central bank, and governor Lael Brainard took the oath of office to become the Fed's vice chairwoman. Mr. Powell won confirmation to his new term with an 80-19 vote in the Senate on May 12. Ms. Brainard won Senate confirmation as vice chairwoman last month. The terms of their respective leadership positions run until May 15, 2026. Two new governors, economists Lisa Cook and Philip Jefferson, also formally took their seats on Monday. They were confirmed by the Senate earlier this month to fill terms that run through January 2024 and January 2036, respectively. (Dow Jones)

FED: Republican U.S. Senator Pat Toomey said Monday it is likely Michael Barr will be confirmed as the Federal Reserve's Wall Street cop, although he has not yet decided on whether to support the nomination. Asked by Reuters on the sidelines of the World Economic Forum in Davos, Switzerland, about Barr's prospects for confirmation, Toomey, the ranking member of the Senate Banking Committee, said: "I think it does look like he's likely to be confirmed.". The comments from Toomey, who led an effort to sink President Joe Biden's first nomination for the post, Sarah Bloom Raskin, are significant because it suggests Republicans will not mount a similar effort to challenge the nomination of Barr, who was a senior Treasury Department official under President Barack Obama. (RTRS)

ENERGY: The White House is considering waiving U.S. gasoline environmental rules aimed at reducing summertime smog as a way to combat rising pump prices, according to three sources involved in the discussions. Refiners and blenders are required to avoid lower-cost components like butane in summer gasoline, but the White House is weighing suspending that rule to help lower fuel costs. The components help elevate gasoline's reid vapor pressure, which contributes to smog at higher levels. No final decision has been made, the sources said. (RTRS)

BANKING: JPMorgan is seeing a steep drop in the current quarter for investment banking revenue but a better-than-expected trading environment. Daniel Pinto, the bank's president and head of the corporate and investment bank, says fees from banking in 1Q are trending down 45% for 2Q compared with what was a record year-ago period. But trading revenues are likely to rise 15% to 20% in the quarter. (Dow Jones)

OTHER

GLOBAL TRADE: Any corridor designed to secure safe passage for food exports out of the Ukrainian port city of Odesa could only occur with Russian consent, a Western official said on Monday, adding it would not be possible without Moscow's permission. Ukrainian First Deputy Prime Minister Yulia Svyrydenko has called for such a corridor, saying it would help Ukraine and help avoid world hunger. "Clearly the Russians are dominating that area. It would require the permission of the Russians, some sort of agreement to allow that to take place," the Western official said, speaking on condition of anonymity. "It would require some sort of security guarantee, I think from Turkey, to make it a reality. I think the thing that we'd have to rule out is any sense that this could be done without Russia's permission." (RTRS)

U.S./CHINA: The US must be “strategic” when it comes to a decision on whether to remove China tariffs, Trade Representative Katherine Tai said a day after President Joe Biden mentioned he would review Trump-era levies as consumer prices surge. “With respect to the tariffs, our approach as with everything in this relationship, is to be strategic,” Tai said on Tuesday in an interview with Bloomberg Television’s Shery Ahn and Haidi Lun. “We have to keep our eye on the ball in terms of how to effectively realign the US-China trade and economic relationship.” Tai would not say whether the administration would remove the tariffs, or give a time frame for making a decision. “All options are on the table in terms of how we address our short-term economic needs, but our eye must be on the ball with respect to the medium and long term needs for the United States to realign this economic and trade relationship,” she said. (SCMP)

U.S./CHINA: Sixteen months into the Biden presidency, U.S. officials are still divided over what to do about a trade legacy left by President Donald J. Trump. President Biden’s decision on Monday to try to align with Asian partners to form an economic bloc against China comes at a moment of frustration over his administration’s economic approach to Beijing, with some White House advisers pushing the president to move away from the Trump-era policies he criticized and others arguing that Mr. Biden risks being seen as weak on China if he relents. Some officials have grown frustrated that U.S. trade relations with China are still defined by policies set by President Donald J. Trump, including tariffs imposed on more than $360 billion of products and trade commitments made during a deal the United states and China signed in early 2020. (New York Times)

U.S./CHINA/TAIWAN: U.S. President Joe Biden said on Tuesday there had been no change to the policy of strategic ambiguity on Taiwan. Asked if there had been any change to the policy after remarks on Monday where he volunteered U.S. military support for the self-governed island claimed by China, Biden said "No." He did not answer a question about whether he would put troops on the ground to defend Taiwan. (RTRS)

U.S./CHINA/TAIWAN: U.S. Defense Secretary Lloyd Austin said on Monday he believed that President Joe Biden had not announced a change to America's policy on military assistance to Taiwan. "I think the President was clear on the fact that the policy has not changed," Austin told a news conference. Asked earlier on Monday if the United States would get involved militarily if Taiwan if it were attacked, Biden responded yes, and said that was the commitment that the United States made. (RTRS)

U.S./CHINA/TAIWAN: US trade chief Katherine Tai met Taiwanese Minister Without Portfolio John Deng to discuss opportunities to deepen the nations’ economic relationship in the same week China’s top diplomat warned Washington it’s heading down the “wrong road” with its support for the island. Tai and Deng “discussed opportunities to deepen the economic relationship, advance mutual trade priorities based on shared values, and promote innovation and inclusive economic growth for their workers and businesses,” the Office of the US Trade Representative said in an emailed statement Friday. They met in Bangkok on the sidelines of a gathering of Asia-Pacific Economic Cooperation trade ministers. (BBG)

U.S./CHINA/TAIWAN: Taiwan National Security Council secretary-general Wellington Koo will lead delegation to meet U.S. officials including Assistant Secretary of Defense Ely Ratner in discussions scheduled in June in Washington D.C., Taipei-based United Daily News reports, without saying where it got the information. Discussions are what’s traditionally known as ‘Monterey Talks’ The two sides will communicate on U.S. arms sale policy. (BBG)

GEOPOLITICS: Western sanctions on Russia over its invasion of Ukraine and spillover from US interest rate hikes have fuelled discussion in China about how to reduce reliance on the dollar system and establish the yuan as a strong, internationally-traded reserve currency. Calls for China to create a more independent financial regime come amid patchy relations with the West, following the onset of the US-China trade war in 2018, the coronavirus outbreak and tensions over geopolitical issues ranging from Hong Kong to Taiwan. With concerns growing in China about exposure to the US dollar system, some government advisers are urging authorities to overhaul the exchange rate regime and turn the yuan into an anchor currency, especially for the Asia region. (SCMP)

GEOPOLITICS: Russia's Foreign Minister said on Monday that Moscow will consider offers of re-establishing ties with the West and think whether that is needed, but will focus on developing ties with China. "If they (the West) want to offer something in terms of resuming relations, then we will seriously consider whether we will need it or not," Lavrov said in a speech, according to a transcript on the foreign ministry's website. He also said Moscow's goal now is to further develop ties with China. "Now that the West has taken a 'dictator's position', our economic ties with China will grow even faster," Lavrov said. (RTRS)

GEOPOLITICS: Finland and Sweden’s military capabilities would help strengthen NATO across the board, including in Turkey, the two countries’ ambassadors to the US said. Sweden’s Karin Olofsdotter and Finland’s Mikko Hautala told an event at the Brookings Institution that they are in discussions with Turkey over their nations’ respective bids to join NATO, after Turkish officials signaled misgivings about the Move. “We really hope that we can see eye-to-eye with the Turkish,” Olofsdotter said. “We take joining NATO extremely seriously and we really see ourselves as a partner strengthening the whole alliance, all of its territory.” (BBG)

GEOPOLITICS: Saudi Crown Prince Mohammed bin Salman is planning a trip to Turkey, Cyprus, Greece, Jordan and Egypt where he will discuss regional and international issues and ink agreements in energy and trade, four sources familiar with the plans said on Monday. Saudi officials are still discussing the exact dates with the countries the crown prince is visiting, the sources said. Two of them added that the visit could happen as soon as early June. (RTRS)

BOJ: The Bank of Japan (BOJ) will patiently continue its powerful monetary easing to firmly underpin the economy to encourage the labour market to tighten to accompany wage hikes, a senior central bank official said on Tuesday. "It's not good for only prices to increase," Koji Nakamura, head of the BOJ division overseeing monetary policy drafting, told a parliament session. "It's important to form a virtuous cycle of price hikes led by increase in household real incomes." (RTRS)

BOJ: Japan’s inflation will stay above the central bank’s 2% target level in the final three quarters of this year, according to surveyed economists who raised their forecasts again. Consumer prices excluding fresh food will rise 2.1% this quarter and next quarter from a year ago, followed by a 2.2% gain in the final three months of the year, according to a survey of 57 economists by Bloomberg News. The upward revisions from the previous survey reflect a pattern in which inflation continues to outpace analysts’ expectations. (BBG)

JAPAN: Japan needs to raise defense spending to 6.5t-7t yen, former Prime Minister Shinzo Abe was quoted as saying by Nikkei. Said he believes that was the range Prime Minister Fumio Kishida was referring to when he pledged to increase the defense budget in a meeting with US President Joe Biden. (BBG)

NEW ZEALAND: Dairy Companies Association of New Zealand updates production figures, on website. Production collected for processing in April was 143.6m kg milksolids, down 5.2% y/y. Production in 11 months through April was 1,776m kg, down 3.9% y/y. (BBG)

BOK: South Korea's central bank is likely to hike its benchmark rate at a second consecutive meeting on Thursday to combat inflation running at more than double its target, taking rates higher by year end than previously thought, a Reuters poll showed. Inflation in Asia's fourth-largest economy rose to more than a 13-year high of 4.8% in April, as repercussions from the Russia-Ukraine war and a weakening won, down 7% this year, ramped up prices. Inflation has stayed above the central bank's target of 2.0% for more than a year. All but one of the 28 economists polled May 17-23 forecast the Bank of Korea (BoK) will raise its policy rate by 25 basis points to 1.75% at its May 26 meeting. Among the first central banks to start raising rates since the pandemic, it has already hiked the base rate by a cumulative 100 basis points since August 2021. (RTRS)

HONG KONG: Hong Kong is “very unlikely” to further relax its border control during Chief Executive Carrie Lam’s leadership. “In other words, we will still have the hotel quarantine. We will still require vaccination before a passenger could board a plane to Hong Kong,” Lam says at a briefing. (BBG)

TURKEY: Turkey's President Tayyip Erdogan said on Monday Ankara would soon launch new military operations along its southern borders to create 30-km deep safe zones to combat terrorist threats from these regions. "The main target of these operations will be areas which are centers of attacks to our country and safe zones," Erdogan said, without elaborating. Erdogan said the operations would be launched as soon as military, intelligence and security forces have completed their preparations. (RTRS)

TURKEY: Turkish President Recep Tayyip Erdogan said on Monday he has no intention of ever meeting with Kyriakos Mitsotakis again, following the latter’s criticism of Turkey on his recent visit to the United States. “For me, there is no Mitsotakis. I will never meet with him again,” the Turkish president is reported as saying after a meeting of the cabinet. “How is Greece treating us at the moment? Is not Greece a destination for the FETO organization at the moment?” Erdogan asked, referring to the Gülen movement, an organization that Turkey defines as terrorist. (Kathimerini)

BRAZIL: Brazil's government announced on Monday a new 10% reduction in the tax rate for import goods on a large part of products purchased abroad, aiming to reduce inflationary pressures. The economy ministry's tax cut, which covers approximately 87% of the country's tariff goods, was approved after a meeting of the Brazilian Foreign Trade Chamber is effective between June 1 this year and Dec. 31, 2023. A source had previously confirmed the information to Reuters. (RTRS)

BRAZIL: Brazil economy ministry official Caio Mario Paes will be the next chief executive of Brazil's state-run oil company Petrobras, the country's mining and energy ministry said in a statement late on Monday. (RTRS)

RUSSIA: If Ukraine loses the war against Russia, Russia will go on to attack NATO countries, potentially putting American lives at risk, Ukrainian President Volodymyr Zelensky said during an interview with Axios' Jonathan Swan on Monday. (Axios)

RUSSIA: US Defense Secretary Lloyd Austin said 20 nations have agreed to send more security assistance to Ukraine. “We are intensifying our efforts,” Austin told reporters after more than 40 nations participated in a Zoom meeting of the Pentagon-hosted Ukrainian Defense Contact Group. (BBG)

RUSSIA: It would be a mistake to expel Russia from the G20, as it would give less opportunity to influence the country, Mexico’s Foreign Minister Marcelo Ebrard said Monday. Mexico to focus on health-care coordination at Summit of the Americas, Ebrard said at Chatham House conference. Mexico seeking more investment from Gulf sovereign wealth funds. (BBG)

RUSSIA: Latvia needs a NATO brigade, a military contingent that would amount to as many as 5,000 troops, to deter Russia from a potential attack, President Egils Levits said on the sidelines of the World Economic Forum in Davos, Switzerland. “Russia is not provoked by strength, but Russia is provoked by weakness,” Levits said on the sidelines of the World Economic Forum in Davos, Switzerland, on Monday. “So we are looking also for NATO troop presence at a brigade scale,” he said, a level that “can deter Russia.” (BBG)

METALS: A South African labor court has dismissed an application by ArcelorMittal South Africa Ltd. to prevent workers from striking at its plants for higher wages, making way for the action to be intensified. The Labour Court in Johannesburg temporarily stopped workers at the company’s blast furnaces, coke batteries and steel plants from striking on May 11, in response to an urgent application by ArcelorMittal, until a final judgment was made. “A final decision on this was finally handed down and it confirmed that all employees, without exception, have the right to strike,” the National Union of Metalworkers of South Africa said in a statement Monday. The union is demanding a 10% wage increase and plans to march to the company’s headquarters in Vanderbijlpark on May 24 to present its demands, it said. (BBG)

METALS: Peru’s new Mining Minister Alessandra Herrera failed to reach an agreement with communities blocking MMG’s Las Bambas copper mine area, Canal N reported. Talks between communities and other ministers will continue Tuesday, according to Canal N. (BBG)

OIL: The world is facing a major oil supply crunch as most companies are afraid to invest in the sector as they face green energy pressures, the head of Saudi Aramco told Reuters, adding it cannot expand production capacity any faster than promised. (RTRS)

OIL: A European Union proposal last week to support oil infrastructure in states heavily dependent on Russian crude should provide a chance for countries to agree sanctions on Russian oil, the EU's energy policy chief said on Monday. (RTRS)

OIL: The European Union will likely agree an embargo on Russian oil imports "within days", German Economy Minister Robert Habeck told broadcaster ZDF on Monday. Habeck warned, however, that an embargo would not automatically weaken the Kremlin as rising prices were enabling it to rake in more income while selling lower volumes of oil. Therefore, one consideration was to no longer pay "any price" for oil, but to agree on upper limits, he said. For that to work, however, many countries would have to get on board. (RTRS)

OIL: Dutch Prime Minister Mark Rutte said on Monday that he believes the European Union can reach a consensus within the next week on a sixth package of EU sanctions on Russia that would put a stop to its consumption of Russian oil and gas as soon as possible. (RTRS)

CHINA

PBOC: The People’s Bank of China should give more emphasis on the use of quantitative tools at the moment, as lowering policy interest rates will further invert the Sino-U.S. spread and may add to the pressure of capital outflows, said NetEase Finance citing a former director of the PBOC’s Statistics and Analysis Department. Sheng also noted prices tend to rise due to imported inflation and likely rising pork prices, the newspaper said. The PBOC should maintain the basic stability of the yuan at a balanced level and if necessary, the forex deposit reserve ratio can be further lowered from the current 8% and the counter-cyclical adjustment factor can be restarted, said Sheng. (MNI)

FISCAL: China is likely to make further use of fiscal tools, including special sovereign bond issuance, to shore up its flagging economy, China Securities Journal says in a front-page report, citing analysts. China has been front-loading its fiscal stimulus this year, as reflected by an acceleration in special bond issuance by local governments and tax rebates. China may have to boost its fiscal deficit ratio or issue special sovereign bonds in order to maintain its fiscal spending in the second half, report cites Huachuang Securities analyst Zhou Guannan as saying. It’s getting increasingly necessary for China to issue special sovereign bonds because of an estimated fiscal shortfall of 700 billion yuan-1.8 trillion yuan this year due to government implementation of Covid-19 control policies, Guotai & Junan analyst Dong Qi says in the report, adding that fiscal pressure is being exacerbated by infrastructure spending. (BBG)

YUAN: The yuan will return to a wider range of trade as depreciation expectations weaken, and the surplus in the balance of payments offers support, said the 21st Century Business Herald in an editorial. The Covid-19 spread has been effectively controlled and production, and recent pro-growth policies and 15 bps cut in five-year LPR helped restore market confidence in the economy, the newspaper said. It added that a fall in U.S. bond yields and the dollar index also provide support for the yuan. The PBOC has abundant tools to stabilise the currency, including the issuance of offshore central bank bills to tighten the liquidity of offshore RMB and narrow the onshore-offshore yuan spread, the newspaper said. (MNI)

PROPERTY: China's property market woes are likely to worsen this year with prices remaining flat and sales and investment falling further, while tighter and widespread COVID-19 curbs weigh on still fragile demand despite more policy easing. The property market, a pillar of the world's second-largest economy, was weakened by a government clampdown on excessive borrowing from developers last year. Since the beginning of this year, over 100 cities have taken steps to boost demand via cuts in mortgage rates, smaller down-payments, and subsidies. The outlook for the property market is expected to remain bleak in the first half of the year and for the whole of 2022. Average home prices are estimated to fall 1.3% on year in the first half, according to a Reuters survey of 13 analysts and economists conducted between May 16 and May 23. That compared with a 1.0% fall in a Reuters poll in February. For the full year, home prices are likely to be flat versus a forecast 2.0% rise in the previous poll. (RTRS)

PROPERTY: MNI: A Slow Road Ahead For China Property Rebound

• China’s embattled property market will see a gradual recovery in the second half of this year, as pledges from top policymakers to local authorities aim for a quick turnaround once Covid-19 cases drop, according to analysts citing the latest real estate data - on MNI Policy MainWire now, for more details please contact sales@marketnews.com.

CORONAVIRUS: The Global Times tweeted the following on Monday: “#Shanghai will allow supermarkets, convenience stores and drugstores to resume operations with maximum occupancy of 50% before May 31 and 75% after June 1.” (MNI)

CHINA MARKETS

PBOC INJECTS CNY10BN VIA OMOS, LIQUIDITY UNCHANGED

The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.1% on Tuesday. This keeps the liquidity unchanged after offsetting the maturity of CNY10 billion repos today, according to Wind Information.

• The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
• The 7-day weighted average interbank repo rate for depository institutions (DR007) rose to 2.0545% at 09:27 am local time from the close of 1.5796% on Monday.
• The CFETS-NEX money-market sentiment index closed at 45 on Monday vs 42 on Friday.

PBOC SETS YUAN CENTRAL PARITY AT 6.6566 TUES VS 6.6756

The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.6566 on Tuesday, compared with 6.6756 set on Monday.

OVERNIGHT DATA

JAPAN MAY, P JIBUN BANK M’FING PMI 53.2; APR 53.5
JAPAN MAY, P JIBUN BANK SERVICES PMI 51.7; APR 50.7
JAPAN MAY, P JIBUN BANK COMPOSITE PMI 51.4; APR 51.1

Flash PMI data indicated that activity at Japanese private sector businesses remained in expansion territory for the third consecutive month midway through the second quarter of 2022. Moreover, the rate of growth quickened from April to the sharpest seen since last December, led by the strongest rise in services activity for five months. On the other hand, the expansion in manufacturing output was the softest recorded in the current three-month growth sequence. Private sector firms reported that the reduced impact of COVID-19 had lifted services activity, most notably in the tourism sector as pandemic-related restrictions were eased further. That said, the renewed introduction of lockdown measures across China and economic sanctions placed on Russia amid the Ukraine war had exacerbated supply chain disruptions, with greater reports of material shortages and severe delivery delays. As a result, there was a further intensification in price pressures across the private sector, as firms reported series-record rises in both input and output prices. Moreover, uncertainty regarding the outlook for price and supply conditions dampened business confidence, which was at its softest since August 2021. (IHS Markit)

AUSTRALIA MAY, P S&P GLOBAL M’FING PMI 55.3; APR 58.8
AUSTRALIA MAY, P S&P GLOBAL SERVICES PMI 53.0; APR 56.1
AUSTRALIA MAY, P S&P GLOBAL COMPOSITE PMI 52.5; APR 55.9

The expansion of the Australian economy continued in May at a solid pace, according to the S&P Global Flash Australia Composite PMI. Although manufacturing output was affected by issues of COVID-19 disruptions and poor weather conditions, manufacturing demand remained robust, which had been a reassuring sign. Persistent supply chain constraints continue to pose challenges for firms in the private sector, both in terms of input acquisition and price fluctuations. Anecdotal evidence also suggested that firms are concerned with the rising interest rate outlook and the effect on their businesses, all of which are worth monitoring moving ahead. That said, overall business sentiment remained positive while workforce expansion continued at a strong pace in May, positive signs gleaned from the latest PMI survey. (IHS Markit)

AUSTRALIA ANZ ROY MORGAN WEEKLY CONSUMER CONFIDENCE 90.8; PREV. 89.3

Consumer confidence increased 1.7% last week, after a 7.7% decline over the past four weeks. The rise in the index was mainly driven by more people becoming confident about their ‘financial conditions over the next year’ along with more respondents saying it is a ‘good time to buy a major household item’. News that unemployment had fallen below 4% may have contributed to the lift in sentiment, even if the Q1 wage data disappointed. Household inflation expectations remained elevated at 5.3%, as average petrol prices rose sharply last week. Most of the survey was conducted before the federal election results were known. So the reaction to the election will be captured in next week’s index.” (ANZ)

NEW ZEALAND Q1 RETAIL SALES EX-INFLATION -0.5% Q/Q; MEDIAN +0.3%; Q4 +8.3%

SOUTH KOREA MAY CONSUMER CONFIDENCE 102.6; APR 103.8

SOUTH KOREA Q1 HOUSEHOLD CREDIT KRW1,859.4TN; Q4 KRW1,860.1TN

MARKETS

UP TODAY (Times GMT/Local)

Date	GMT/Local	Impact	Flag	Country	Event
24/05/2022	0600/0700	***		UK	Public Sector Finances
24/05/2022	0645/0845	**		FR	Manufacturing Sentiment
24/05/2022	0715/0915	**		FR	IHS Markit Services PMI (p)
24/05/2022	0715/0915	**		FR	IHS Markit Manufacturing PMI (p)
24/05/2022	0730/0930	**		DE	IHS Markit Services PMI (p)
24/05/2022	0730/0930	**		DE	IHS Markit Manufacturing PMI (p)
24/05/2022	0800/1000	**		EU	IHS Markit Services PMI (p)
24/05/2022	0800/1000	**		EU	IHS Markit Manufacturing PMI (p)
24/05/2022	0800/1000	**		EU	IHS Markit Composite PMI (p)
24/05/2022	0830/0930	***		UK	IHS Markit Manufacturing PMI (flash)
24/05/2022	0830/0930	***		UK	IHS Markit Services PMI (flash)
24/05/2022	0830/0930	***		UK	IHS Markit Composite PMI (flash)
24/05/2022	0900/1000	*		UK	Index Linked Gilt Outright Auction Result
24/05/2022	1000/1100	**		UK	CBI Distributive Trades
24/05/2022	-			EU	ECB de Guindos at ECOFIN Meeting
24/05/2022	1230/0830	**		US	Philadelphia Fed Nonmanufacturing Index
24/05/2022	1255/0855	**		US	Redbook Retail Sales Index
24/05/2022	1345/0945	***		US	IHS Markit Manufacturing Index (flash)
24/05/2022	1345/0945	***		US	IHS Markit Services Index (flash)
24/05/2022	1400/1000	***		US	New Home Sales
24/05/2022	1400/1000	**		US	Richmond Fed Survey
24/05/2022	1620/1220			US	Fed Chair Jerome Powell
24/05/2022	1700/1300	*		US	US Treasury Auction Result for 2 Year Note
24/05/2022	1800/2000			EU	ECB Lagarde Opens World Economic Forum Dinner