The Bangko Sentral ng Pilipinas (BSP) has already indicated a 0.25% hike, with the incoming governor stating he isn’t a fan of large hikes. Both the Philippines Peso and Indonesian rupiah have been under the cosh lately. Of most interest will be the monetary policy decisions out of the Philippines and Indonesia today. That won’t be enough to tip the MAS’ hand for an out-of-sequence tightening announcement, especially with recession fears rising among key export markets. Singapore’s Core and headline Inflation for May are expected to increase slightly to 5.50% and 5.5% YoY respectively.
Both numbers should hold steady, or increase slightly from April, due to the knock-on effects of China’s covid-zero reopening.
Taiwan’s Industrial Production and Retail Sales come out late today, at 1600SGT, and will likely be lost in the noise of the S&P Manufacturing and Services PMI releases from France, Germany, and the Eurozone. I am putting that down to a gradual reopening of borders and government stimulus. Japan Jibun Bank June Flash Manufacturing PMI edged lower to 52.7, but the Services PMI rose from 52.6 to 54.2, quite the surprise. Australian Manufacturing and Services Flash PMIs for June were steady at 55.8 and 52.6 respectively. South Korean PPI YoY for May held steady at 9.70%, although the MoM number fell to 0.50%. We have another day of Powell testimony on the Hill this evening, so stand by for more intraday choppiness and analysis paralysis of his every word. I’m humming “Ironic” by Alanis Morissette. Basically a chap in Bangkok robbed a gold store to cover his crypto losses. To help readers understand my point of view, here is a story from Thailand overnight. Depending on your point of view, bitcoin is tracing out a major bottom in prices before the new dawn, or it is consolidating a dead cat bounce before heading lower. Gold, of course, did nothing, while in the crypto space, bitcoin had another almost unchanged day, hovering once again, just above USD 20,000.00. Notably, the Australian and New Zealand dollar, both global sentiment indicators like the won, both finished the day lower as well. Notably the Korean won, with a high beta to the health of the US economy, had a tough day at the office. The Bank of Japan would have been breathing a sigh of relief as lower US yields took USD/JPY back below 136.00, but in the Asian EM space, regional currencies generally weakened. The fall in yields was enough to stop the rot in equities, leaving them roughly unchanged, but the US dollar fell slightly versus the euro and yen. US yields flopped overnight on the recession words, notably at the long end, which is a bit of a concern, given the market’s infatuation with inverse yield curves.
But while Mr Powell was talking recession possibilities and being “nimble” from FOMC meeting to FOMC meeting, the reality that a recession probably isn’t great for stocks tempered animal spirits. US equities were clearly dying for any excuse to hit the buy button, such is their genetically pre-programmed disposition. That left markets in somewhat of a no man’s land. Mr Powell finally dispensed with soft landings, describing them as challenging, and instead said that a recession is “certainly a possibility.” That should have been enough to spark a somewhat counterintuitive risk sentiment rally as Fed hiking expectations were dialled back, but instead, we got a mixed response as Mr Powell asserted, quite forcefully, that soaring inflation had to be brought back to earth. Markets looking for direction after Powell testimonyįederal Reserve Chairman Jerome Powell’s semi-annual testimony on Capitol Hill was the centre of attention overnight.
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