JP gets its official US trade deal – CN stocks stop falling

Asia market update: JP gets its official US trade deal; CN stocks stop falling; Goldilocks US jobs numbers 2 out of 3 so far with Focus on US Aug Nonfarm Payrolls.

General trend and developments

- Japan trade negotiator Akazawa finally got his US counterparts to acquiesce to Japan’s continued requests to reduce tariffs for Japanese auto imports down to the agreed 15% from the current 27.5% (incl. 2.5% MFN tariff on light-duty vehicles). Expected to be implemented within 10-14 days of Pres Trump’s Exec Order today. Affirmed the $550B investment package MOU in an official White House release, specifying target sectors such as Energy, Chips, Critical Minerals, Pharma, EV production.

- Shanghai Composite opened down but later turned positive, breaking the three-day losing streak.

- Relative CN positivity came after China’s Ministry of Industry and IT announced a further wave of stimulus policies last night [no time line or amounts detailed], towards the end of yesterday's trading session that saw Chinese equities down heavily -2.1%, for its third day of losses.

- Nikkei led Asia again, retaking the 43,000 handle hit in August. All major indices green today.

- US jobs figures for JOLTS (Wed) and ADP (Thurs) both saw just the right amount of softness to affirm expectations of a Fed rate cut this month without so being so soft as to inflame recession fears. A beat on headline ISM Services and a boost in its new orders also helped equities. Investor focus on Friday will be on most important jobs number of the three, Nonfarm Payrolls.

- Mixed wage figures out of Japan, with the first rise in real wages in 7 months, but cash earnings below estimates. Little market reaction, with yields somewhat softer across the curve. Japan Total Reserve Assets for August equaled the highest on record since July 2020 (¥1.32T). Japan’s first twenty days of August saw Exports and Imports continue to fall on a Y/Y basis.

- JP 10-year JGB yields -2.5bps, while US-10 year Treasury yield declined to the lowest level since May.

- US Fed's Goolsbee reiterated that the Sept Fed meeting will be live. The labor market might be deteriorating and inflation might be picking back up; Still uncertain how he will vote.

- Focus on US Nonfarm Payrolls tonight.

- US equity FUTs +0.2% to +0.3% during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Fri Sept 5th (Fri eve UK July Retail Sales, US Aug Nonfarm Payrolls).

Holidays in Asia this week

- Tue Sept 2nd Vietnam.

- Wed Sept 3rd Vietnam.

- Fri Sept 5th Indonesia, Malaysia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.4% at 8,862.

- Australia sells A$900M v A$900M indicated in 1.50% Jun 2031 bonds; Avg Yield: 3.7937% v 3.7539% prior; bid-to-cover: 4.03x v 2.48x prior.

China/Hong Kong

- Hang Seng opens +0.3% at 25,136; Shanghai Composite opens -0.1% at 3,761.

- China provinces said to be considering new uses for digital Yuan paying "long-delayed" debts - SCMP.

- China PBOC may inject 'reasonably ample' liquidity into the money markets during Sept - China Securities Journal.

- China President Xi: Willing to have 'AI coop' with different nations; cites letter to the World Smart Industry Expo - Chinese media.

- US Pres Trump: We're leading China by a lot in the AI race, a great amount.

- (RU) Russia Energy Min: Russia, China to decide Power of Siberia 2 funding in 2026; Memorandum on Power of Siberia 2 gas pipeline defines its route via Mongolia and supplies of 50 bcm per year [overnight update].

- (BR) China Foreign Min Wang Yi: China will work with Brazil in coordination with BRICs [overnight update].

- (MX) Mexico Pres Sheinbaum: Mexico is considering new tariffs on countries without trade deal, including China [overnight update].

- China PBOC sets Yuan reference rate: 7.1064 v 7.1052 prior.

- China PBOC Open Market Operation (OMO): Injects CNY188B in 7-day reverse repos; Net drains CNY595B v drains CNY203B prior.

Japan

- Nikkei 225 opens +1.0% at 43.000.

- Japan July labor cash earnings Y/Y: 4.1% V 3.0%E; Real Cash Earnings Y/Y: 0.5% v 0.6%e.

- Japan July Household Spending Y/Y: 1.4% v 2.3%e.

- Japan Aug Total Reserve Assets: $1.32T v $1.30T prior (equal highest on record since July 2020).

- Japan July Preliminary Leading Index CI: 105.9 v 105.8e.

- Japan and US issue memorandum of understanding (MOU) on $550B investment plans (as expected); notes investments to be made up to Jan 19th, 2029.

- Japan trade negotiator Akazawa: Welcomes US Exec Order as firm implementation of deal; Confirms to have signed MOU on Japan's investment package - post-US trade meetings in Washington DC.

- BOJ October rate stance 'tough to call'; Uncertainties are bigger than what market participants are probably thinking - former BOJ Chief Economist Sekine.

- Japan sells ¥4.3T vs. ¥4.3T indicated in 3-Month Bills; Avg Yield: 0.4521% v 0.4742% prior; bid-to-cover: 3.02x v 3.45x prior.

Korea

- Kospi opens +0.2% at 3,208.

- South Korea trade official: Difficult to say when US auto tariffs will be lowered to 15% - financial press.

Other Asia

- Singapore July Retail Sales M/M: +4.1% v -1.1% prior; Y/Y: 4.8% v 2.1%e.

- Thailand parliament agrees to move up motion to vote on PM - financial press.

- Philippines Aug CPI M/M: 0.6% v 0.5%e; Y/Y: 1.5% v 1.2%e.

- Malaysia central bank (BNM) leaves overnight rate unchanged at 2.75%; as expected [overnight update].

- Thailand Aug CPI M/M: 0.0% v 0.2%e; Y/Y: -0.8% v -0.7%e [overnight update].

- (TW) Reportedly US and Taiwan defense officials held secret talks in Alaska last week – FT [overnight update].

North America

- *(US) Truflation proxy of US aggregated inflation index again drops to 1.9% V 2.3% W/W and 1.4% before 'liberation day'.

- (US) Fed's Goolsbee (voter): Hasn't made up his mind on rate decision come Sept's meeting; Reiterates that the meeting will be live; Labor market might be deteriorating and inflation might be picking back up; There continues to be a bit of wait and see colored by uncertainty.

- (MX) Trump said to be preparing for North America trade deal renegotiation - WSJ.

- (US) Aug Challenger Job Cuts: 86.0K v 62.1K prior; Y/Y: % v 139.8% prior (highest reading for Aug since 2020).

- (MX) Mexico Aug Domestic Vehicle Sales: 124.2K v 124.5K prior.

- (US) AUG ADP EMPLOYMENT CHANGE: +54K V +68KE; Notes hiring slowdown, momentum has been whipsawed by uncertainty after strong early 2025.

- (CA) CANADA JULY INT'L MERCHANDISE TRADE (CAD): -4.9B V -5.3BE.

- (US) JULY TRADE BALANCE: -$78.3B V -$77.9BE.

- (US) Q2 final Nonfarm productivity: 3.3% V 2.7%E (biggest jump since Q4 2023); Unit labor costs: 1.0% V 1.2%E.

- (US) Initial jobless claims: 237K V 230KE; continuing claims: 1.940M V 1.959ME.

- (US) Aug final S&P services PMI: 54.5 V 55.4E (confirms 31st month of expansion).

- (US) AUG ISM SERVICES INDEX: 52.0 V 50.9E; New Orders Index: 56.0 v 50.3 prior (highest reading since last October); prices paid 69.2 v 69.9 prior.

- (US) Weekly EIA Natural Gas inventories: +55 BCF VS. +55 BCF TO +57 BCF indicated range.

- (CA) Canada will have more announcements on supporting steel and aluminum sectors.

- (US) Fed's Williams (voter): Tariffs will likely add 1-1.50% to inflation this year; Monetary policy is modestly restrictive and appropriate for the current economy

Europe

- *(RU) Russia President Putin: Order govt to present development program for rare earth metals no later than Nov 2025.

- (DK) Denmark Central Bank Gov Thomsen: To cut 2025 GDP growth forecast.

- (UR) Russia Kremlin Spokesperson Peskov: Guarantees for Ukraine cannot be provided by foreign military contingents - Russian press.

- (EU) ECB’s Cipollone (Italy): Digital Euro would guarantee access for all citizens.

- (IE) Ireland Q2 Preliminary Current Account Balance: €19.5B v €5.8B prior.

- (PL) Poland Central Bank (NBP) Gov Glapinski: Current level of rates is still relatively high - post rate decision press conference.

- (EU) White House official: Trump told European leaders during call to stop purchasing Russian oil; Also emphasized that European leaders must place economic pressure on China for funding Russia's war efforts [overnight update].

Levels as of 01:20 ET

- Nikkei 225 +0.8%, ASX 200 +0.5%, Hang Seng +0.6%; Shanghai Composite +0.3%; Kospi +0.1%.

- Equity S&P500 Futures +0.2%; Nasdaq100 +0.3%; DAX +.2%; FTSE100 flat.

- EUR 1.1648.1675; JPY 148.08-148.54; AUD 0.6510-0.6532; NZD 0.5841-5865.

- Gold +0.3% at $3,617/oz; BTC +0.8% at $111,710; Crude Oil -0.3% at $63.30/bbl; Copper +0.6% at $4.5917/lb.