China/HK Equities Rebound, USD Off Recent Highs

Most of the volatility has been in the equity space, particularly in China/HK stocks. After opening weaker we have seen a recovery, led by the tech sector, with the HSI tech sub index now back to flat.

• Onshore benchmarks in China are now back to positive territory as well, despite the flare-up in COVID-19 cases in Shanghai, which widened the scope of its partial lockdown.
• Initial weakness in China's tech stocks has been linked to a drop in Alibaba shares as a Chinese regulator denied a BBG report noting that it was working on reviving the IPO of Hangzhou-based tech giant.
• Sentiment appears to be have been aided by the slightly weaker than expected China inflation outcome. Headline CPI coming in at 2.1% versus 2.2% expected, while core inflation was steady at 0.9% YoY. PPI inflation eased as expected to 6.4% from 8.0%.
• There is some chatter we could see fresh easing in China policy settings, but we haven't seen anything concrete on this.
• There isn't much positive spillover to the rest of the region from China/HK resilience. However, US futures are edging higher, Nasdaq back to 0.30%.
• Oil and Iron ore remain off their recent highs. Oil to the low $122/bbl region, while iron ore is sub $140/tonne.
• US yields continue to edge higher ahead of tonight's CPI print. The 10yr up 1bp to 3.05% in the Cash Tsys market. The 2yr slightly firmer to 2.83%, nearly 2bp higher.
• In the FX space, the USD is down from overnight highs. USD/JPY dipped sub 134.00 but found some support below this level. AUD and NZD are also off their respective lows, AUD/USD back through 0.7100, NZD/USD to 0.6400. USD/CNH remains sub 6.7000.