In May, China’s Consumer Price Index (CPI) fell by 0.1% compared to a year ago, which is better than the expected decline of 0.2%. The trade balance reached $103.2 billion, surpassing predictions of $101.3 billion. Japan’s GDP for Q1 was revised to a decrease of 0.2%, better than the expected drop of 0.7%. In April, Japan’s current account recorded a surplus of 2258.0 billion yen, although it was below the expected 2563.9 billion yen. New Zealand’s manufacturing sales grew by 2.4% in Q1, a significant increase from the previous 1.1%. Markets showed slight changes. Gold remained stable at $3309, while U.S. 10-year yields fell by 1.4 basis points to 4.49%. WTI crude oil declined by 8 cents to $64.49. The Japanese Yen led the market, while the U.S. Dollar struggled. Australia and parts of Europe were on holiday, but Asian data added some volatility to the start of the week. China continued to struggle with deflation, experiencing falling prices but still holding a strong trade surplus. There was optimism about a potential U.S.-China trade agreement before the G7 summit. Despite a weaker U.S. Dollar, stock markets in China and Japan saw gains. These latest economic reports give a clearer view of Asia’s financial health. China’s headline inflation is still weakening, as indicated by the drop in the CPI. While the decline wasn’t as severe as expected, it shows ongoing pressure on local demand. Companies may be reluctant to raise prices, and consumers are cautious. On a positive note, China’s trade numbers exceeded forecasts, suggesting either strong exports or reduced import demand. This highlights resilience in external sectors despite weaker consumer activity. Japan’s economy slightly contracted in Q1, but not as much as previously feared. This adjustment indicates less internal economic drag. The current account surplus, though lower than projected, remains positive, suggesting a healthy balance between Japan’s foreign and domestic accounts. New Zealand’s Q1 manufacturing output rose by 2.4%, more than doubling the previous growth. This could boost activity in the second quarter if input costs remain stable. In global markets, the reaction has been limited, though some trends are apparent. Precious metals remained steady, U.S. interest rates dipped slightly, and oil prices fell. Investors seem to be waiting for a key event, perhaps statements from central banks or further information from Asia’s production sector. Currency movements were more revealing. The Yen outshone other currencies, gaining strength as analysts noted stability in Japan’s economic data and anticipated less aggressive monetary easing. On the other hand, the U.S. Dollar weakened, likely due to falling bond yields and expectations that the Federal Reserve may take a cautious approach this summer. With some regions observing public holidays, trading volumes were lower at the week’s start. However, even light trading showed signs of volatility, particularly in Asia. While there are positive signals regarding easing tensions between Washington and Beijing, substantial changes are unlikely without concrete policy measures. We are closely monitoring trends in yields and shifts in regional growth data, as these will shape expectations for interest rates and influence market positioning. In the coming week, changes in commodity prices or new consumer data from Asia could spark interest in options that hedge against market shifts or exploit pricing errors. In the short term, we should focus on the differences between present inflation and future indicators, as well as variations between old and revised data. These variations can recalibrate expectations, impacting pricing in derivative markets. Maintaining a steady approach to risk while being agile with timing will be crucial in this environment.

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