Asia Market Update: Markets calmed by Uchida (yesterday), better US data and Tokyo Electron; TSMC report for July due with publication of this update.
General trend
– Improved market sentiment in Asia yesterday – including positive guidance for chipmaker Tokyo Electron – contributed to better prices for the overnight session in New York. with US stocks then rising after improved US labor market data and some positive US corporate earnings/sales from Lilly, Costco and others. The renewed positive today in Asia again, the indices rose everywhere and yields continued to decline higher (except for China) after prices collapsed during the extreme volatility a few days ago.
However, shortly after the Tokyo Stock Exchange opened, Tokyo Electron lost all of its 9-13% overnight gains. and later in the afternoon session, the Nikkei 225 pared its earlier gains of 2.0% to +0.4%.
** STOP PRESS, as this update was being sent out, the Nikkei lost all its previous gains in the last hour and was down -0.7% at the time of writing. Other Asian indices remained stable during this period.
– The probability of a Fed rate cut in September has fallen further following the strong rally in stock prices overnight and is now at 56.5%.
– China’s consumer price index (CPI) improved more than expected. However, the producer price index (PPI) turned negative for the 22nd consecutive month as the country continues to try to climb out of deflation. Yields on 10-year Chinese bonds fell 3 basis points to 2.15%, and today’s 50-year ultra-long special bonds hit a record low yield.
– US equity FUTs +0.1% to +0.3% during Asian trading.
Outlook (Asian time zone)
– Friday, August 9 CN CPI for July.
Holidays in Asia this week
– Friday, August 9, Singapore.
Headlines/Economic data
Australia/New Zealand
– ASX 200 opens +0.3% at 7,701.
– Australia sells A$700 million vs A$700 million stated in 4.75% bonds for April 2027; Average yield: 3.6623% vs 3.6738% previously, bid-to-cover: 3.39x vs 3.84x previously (April 10, local time).
– New Zealand Finance Minister Willis: Ready to ask RBNZ to ease capital rules – NZ Press.
China/Hong Kong
– Hang Seng opens +1.2% at 17,097; Shanghai Composite opens +0.4% at 2,879.
– China, consumer price index (CPI) in July y/y: 0.5% vs. 0.3%E; producer price index (PPI) y/y: -0.8% vs. -0.9%E (22nd negative value in a row).
– China sells 50-year bonds (ultra-long special bond); Average yield: 2.3685% compared to 2.53% previously; Bid-to-cover: x compared to 5.38x previously (record low yield).
– A trader at the Bank of China (not the PBOC) noted that the PBOC’s bond intervention has stabilized markets and prevented declines in the domestic yield curve, citing an opinion piece in the US financial press.
– According to reports, a first barter deal between Russia and China in the agricultural sector could take place as early as this autumn, which could avoid payments and limit currency risk – Press (overnight update).
– The Chinese PBoC sets the yuan reference rate: 7.1449 compared to 7.1460 previously.
– Open market operation (OMO) of the Chinese PBoC: sale of CNY 13 billion in 7-day reverse repo transactions; net inflow of CNY 12 billion compared to net outflow of CNY 3 billion previously.
Japan
– Nikkei 225 opens 1.3% at 35,272.
– Japan, money supply M3 in July y/y: 0.9% compared to 1.0% previously; money supply M2 y/y: 1.4% compared to 1.5% previously.
– Addendum: Japan’s Prime Minister Kishida confirms cancellation of his trip to Kazakhstan, Uzbekistan and Mongolia due to the Kyushu earthquake (scheduled for August 9-12) – Japanese press.
– Japan sells 4.9 trillion yen vs. 4.9 trillion yen stated in 3-month bills; Average yield: 0.0859% vs. 0.1210% previously; Bid-to-cover: 3.01x vs. 3.65x previously.
– BOJ futures price: 30% chance of a 25 basis point hike by the BOJ by December, up from 60% on Monday. **Note: On August 7, BOJ Vice Governor Uchida said, “We will not raise interest rates while markets are unstable” (overnight update).
South Korea
– Kospi opens +1.8% at 2,603.
– Former Bank of Korea official said to downplay possibility of October rate cut – US financial press.
Rest of Asia
– Malaysia: Industrial production in June year-on-year: 5.0% versus 4.2%.
North America
– (US) Fed Chairman Schmid (non-voter, hawk): The Fed is “close, but not quite there” to achieving its inflation target of 2%.
– (US) Initial jobless claims: 233,000 vs. 240,000 (below 1-year high); continuing claims: 1.875 million vs. 1.871 million.
– (USA) EIA Weekly Natural Gas Inventories: +21 BCF versus +26 BCF to +27 BCF stated range.
– (MX) The Mexican Central Bank (BANXICO) cuts the overnight interest rate by 25 basis points to 10.75%, as expected. The decision was not unanimous.
– (USA) Former President Trump says he has agreed to a debate with Harris on Sept. 4 on Fox, Sept. 10 on ABC and Sept. 25 on NBC; he has agreed to terms with the networks but Harris’ side must still agree – press conference.
– (US) 30-year Treasury bond auction of $25 billion yields 4.314% vs. 4.635% previously; bid to cover 2.31 vs. 2.41 previously and 2.37 in the last four auctions; 3 basis points behind.
– (US) Fed’s Barkin (constituent): Employment growth has slowed but jobs are still being created; wages are falling, suggesting labor market normalization – comments from NABE webinar.
Europe
– (IE) Ireland, CPI for July, m/m: 0.2%, up from 0.4% previously; y/y: 2.2%, up from 2.2% previously.
As of 01:20 ET
– Nikkei 225 -0.7%; ASX 200 +1.10; Hang Seng +1.4%; Shanghai Composite +0.1%; Kospi +1.2%.
– Stock S&P500 FUTs -0.1%; Nasdaq100 FUTs -0.1%, Dax -0.4%; FTSE100 -0.3%.
– EUR 1.0911-1.0925: JPY 146.94-147.82; AUD 0.6581-0.6604; NZD 0.6002-0.6036.
– Gold unchanged at USD 2,462/oz; Crude oil +0.2% at USD 76.33/brl; Copper +1.1% at USD 4.0255/lb.
