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Fed's Powell confirms discussion on future tapering now underway

Chris Scicluna
  • Fed leaves key policy rate steady, lifts reverse repo and IOER rates by 5bps, no change in QE programme, but Powell confirms discussion on future tapering now underway.
  • Fed’s message sends 10Y UST yield up 8bps to 1.58%, S&P500 closes down just 0.5% but equity futures a bit weaker since the close; greenback firmer.
  • Japan’s Reuters Tankan points to little change in business conditions in June. manufacturers remain optimistic while non-manufacturers see better times ahead.

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UK CPI inflation rises twice as much as expected

Chris Scicluna
  • Japanese exports take a breather in May, but up nearly 50%Y/Y thanks to base effects; BoJ data shows real import growth outpacing exports for first 2 months of Q2.
  • Japan’s core domestic machinery orders rise a disappointing 0.6%M/M in April, but foreign orders rebound strongly in boost for exporters.
  • UK CPI inflation rises twice as much as expected, up 0.6ppt to 2.1%Y/Y, with the core measure up 0.7ppt to 2.0%Y/Y, the highest since 2018, as hospitality reopens.

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Clear signs of recovery in UK labour market

Chris Scicluna
  • Japan’s service sector activity contracts in April, led by non-essential personal services.
  • Clear signs of recovery in UK labour market with big jumps in payrolls and vacancies; marked acceleration in pay growth flattered by composition and base effects.
  • Kiwi house sales remain strong in May; prices up almost 30%Y/Y.

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Japan’s April IP growth revised up; capacity utilization lifts

Chris Scicluna
  • Quiet start to the week in Asia due to local holidays and as investors await a key FOMC meeting midweek.

  • Japan’s April IP growth revised up and capacity utilization lifts; trade, machine orders and Reuters Tankan of interest this week, while Friday’s BoJ policy meeting should be a relative non-event.
  • Kiwi services PMI declines 5.1pts to 56.1 in May; Thursday’s Q1 GDP report likely to reinforce the RBNZ’s tightening bias.

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Japan’s MoF Business Outlook Survey points to weaker business conditions

Chris Scicluna
  • Japan’s MoF Business Outlook Survey points to weaker business conditions in Q2, but an expectation that conditions will improve in H2.
  • China’s credit growth little changed in May, but well down from a year earlier.
  • UK GDP accelerates in April as services reopen, other sectors weaker.
  • Kiwi manufacturing PMI remains elevated, increasing slightly to 58.6 in May.

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