Apple to take on China AI with BABA, US inflation concerns assuaged for now

Asia Market Update: Apple to take on China AI with BABA; US inflation concerns assuaged for now, with US July Retail Sales tonight,

General trend and developments

-Breaking reports that Apple Intelligence will launch a suit of proprietary AI-equipped AI tools in China over the coming months, in partnership with Alibaba (maker of Qwen AI). Apple said to have trained a China-specific LLM which would give Apple more control over its AI-equipped devices sold in China. If successful could help Apple device's upgrade cycles in China and provide a competitive edge over domestic competitors.

-Going the other way (CN --> US) Zhiphu / Z.AI to release its GLM-5.3 model with coding said to be comparable to Anthropic's Fable 5. (Note: Elon Musk's newly released Grok 4.6 also getting very close to Fable 5 and Open AI's GPT Sol 5.6 performance).

-Kospi again outperformed Asia today, +1.8%, as it has for most of the week, gaining +10% since Monday. Otherwise mixed results for Asian indices, with the Nikkei eking out a small gain today.

-Two ADNOC ships were attacked in the Strait of Hormuz, a day after President Trump claimed “total control” of the Strait, which Iran denied. However, US Energy Secretary Wright reiterated 8-9M barrels of oil are transiting daily with the US coordinating with ships. Separately, Treasury Secretary Bessent promised unprecedented (“never been seen”) measures against Iran - presumably more extreme financial and economic sanctions. WTI front FUTs traded in a narrow band of $80-81/bbl.

-As per July CPI the day before, overnight the US July PPI was also fairly benign, with September Fed rate hike chances falling sharply from 40% the day before down to 32.9%. US Fed’s Goolsbee expressed satisfaction at the recent economic data being “a little bit better today, hopefully it will continue”.

- Fitch affirmed US’ sovereign rating at ‘AA+’ with Outlook stable, citing economic resiliency despite higher tariffs, border controls and spending cuts. However, the agency does project economic growth to slow to 1.9% for 2026–2027 (down from 2.8% in 2025) and also highlighted a cooling in job creation.

-Japanese Yen still hovering in the early- to mid-159 range, as Japan’s former Top FX Diplomat Furusawa said he thinks the BoJ likely wants to eventually raise rates to around 1.5-1.75%, while the US could intervene again if the Yen returns to levels before their coordinated action in end-July (i.e. ~164/USD).

-President Putin’s visit to the Russian-controlled Kuril Islands, in particular one of the southernmost islands close to Hokkaido that Japan has legally claimed as its own since the end of WWII (Iturup in Russia / Etorofu in Japan), has the potential to inflame tensions as Japan weighs countermeasures against Russia.

-New Zealand’s July Manufacturing PMI couldn’t keep up with the blistering 60.1 pace back in June, but July’s 54.3 still implying better GDP growth in New Zealand coming down the pike.

-On trade, Australia PM Albanese said he asked Pres Trump to consider exemptions or no increases in tariffs for Australia. (Comes after the US applied an effective 2.5% extra forced labor tariff on top of last year’s 10% base rate (total now 12.5%).

-South Korea import prices for July fell a second month, amid the stronger Won and lower oil prices for the month. Export prices continued to rise on tech / AI demand.

-LG Electronics signed an MOU with Nvida on robotics and mobility, with the first humanoid robot expected in Q1, 2027.

-China PBOC injected nil (zero) via its 7-day reverse repo Open Market Ops again today, but the impact otherwise blunted via a sizable injection of CNY394B in the recently minted overnight OMOs, taking away the surprise value of four days in a row of no gross injection in the 7-day reverse repos.
CHINA EARNINGS:

-China chipmakers SMIC and Hua Hong both reported triple-digit profit jumps in Q2, driven by AI demand as well as mature-mode manufacturing orders. Both stocks initially +2-3% following upbeat forward guidance, but Hua Hong later losing -10%.

-CK Hutchison net profit improved via disposal gains of UK asset sales, which underlying Net +7%. Shares largely flat post-release.

-JD.com fell -7%, punished for lack of revenue growth, which the online retailer said was due to a high base y/y, although tepid domestic spending remains a fundamental problem for China retailers.

-No standout names due today out of HK/CN, but next week sees Geely, Xiaomi, Baidu, Hong Kong Exchanges, Alibaba, China Telecom, Ping An and Sinopec, among others.

-US equity FUTs -0.2% to flat during Asia trading.

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

-Fri Aug 14th:TW Q2 GDP, HK Q2 GDP, EU Prelim Q2 GDP & Jun Trade Balance, (Fri night, US July Retail Sales, US Prelim Q3 Atlanta Fed GDPNow).

-Sat Aug 15th: KR July Trade Balance.

Holidays in Asia this week

-Mon Aug 10th: Singapore.

-Tue Aug 11th: Japan.

-Wed Aug 12th: Thailand.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens -0.7% at 9,127.

-(AU) Australia PM Albanese: Spoke with Trump about Middle East and Pacific developments; Also asked Trump to consider exemptions or no increases in tariffs.

-(AU) Australia RBA's Ian Harper to depart Monetary Policy Board; Names Melinda Cilento as part-time member of the RBA Board.

-(AU) Australia Q2 Home Loans Value Q/Q: -5.2% v -5.3%e.

-(AU) Australia Debt Agency (AOFM) to issue new May 2038 T-bond issuance via syndication on Aug 17th, 2026.

-(AU) Australia sells A$1.0B v A$1.0B indicated in 1.75% Nov 2032 bonds; Avg Yield: 4.6868% v 4.6189% prior; bid-to-cover: 3.75x v 3.16x prior.

-(NZ) RBNZ [citing annual review of macroprudential policy]: Maintains loan-to-value ratio (LVR) settings.

-(NZ) New Zealand July Manufacturing PMI: 54.3 v 60.1 prior (10th month of expansion).

-(NZ) New Zealand Jun Net Migration: 1.61K v 2.05K prior.

China/Hong Kong

-(CN) Shanghai Composite opens +0.1% at 3,930; (HK) Hang Seng opens -0.7% at 25,219.

-(CN) Fitch: China insurers likely to see 'modest growth' in 2026.

-(CN) China's commercial space industry said to be on 'record hiring spree' - Report, cited by China Securities Times.

-(CN) China MOF auctions 10-year bonds, 30-Year ultra-long special bonds.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY349B in 1-day Overnight Reverse Repos.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY0B in 7-day Reverse Repos; Net injects CNY348B v drains CNY1B prior (fourth straight nil injection, fifth time since 2020).

-(CN) China PBOC sets the yuan mid-point at 6.7878 v 6.7888 prior (strongest since Feb 8th, 2023).

Japan

-(JP) Nikkei 225 opens +0.7% at 68,746.

-(JP) Japan Former Top FX Diplomat Furusawa: BoJ likely wants to eventually raise rates to around 1.5-1.75%; Japan, US could intervene again if Yen returns to levels hit before their coordinated action in end-July.

-(JP) Japan PM Takaichi stated that Putin's visit to Etorofu made it difficult to improve relations between Japan and Russia [EU market close].

-(JP) Follow up: Japan weighing countermeasures after Russia Pres Putin's island visit to Kurils / Etorofu - NHK.

-(JP) Japan Foreign Minister Motegi to visit Saudi Arabia, Oman from Aug 17th.

-(JP) Japan sells ¥3.8T vs. ¥3.8T indicated in 3-Month Bills; Avg Yield: 1.0919% v 1.0665% prior; bid-to-cover: 3.52x v 3.70x prior.

-(JP) Japan sells ¥250B vs ¥250B indicated in Liquidity Enhancement Auction.

-(JP) Japan releases weekly flows data [period ended Aug 7th]: Foreign buying of Japan equities: -¥368.5B v -¥392.5B prior; Japan buying of foreign bonds: ¥1.63T v ¥477.9B prior.

Korea

-(KR) Kospi opens +2.7% at 6,695.

-(KR) South Korea Pres Lee support falls to 44%, record low - Gallup.

-(KR) South Korea Blue House: Public acceptance high for multiple-term 4-year presidency with stronger parliamentary powers - Yonhap.

-(KR) South Korea Jun M2 Money Supply M/M: 0.7% v 0.8% prior.

-(KR) South Korea July Total Bank Lending To Households (KRW): 1,194.8T v 1,189.4T prior.

-KR) Bank of Korea to sell KRW600B v KRW600B indicated in 3-month Monetary Stabilization Bonds (MSBs) at Avg Yield: 2.710% v 2.700% prior.

-(KR) South Korea sells 50-year treasury bonds: Avg yield: 4.620% v 4.345% [July 9th].

-(KR) North Korea denounces US-South Korea joint drills - KCNA.

-(KR) North Korea plans to continue to expand its nuclear deterrent - State media.

Other Asia

-(ID) Indonesia Pres Prabowo: Indonesia has started addressing longstanding problems - State of the Nation Speech.

-(PH) Philippines Central Bank Gov Remolona: Inflation expectations remain well anchored; Disappointed with the last growth number, but it's not that bad - Forum event.

-(MY) Malaysia Q2 GDP Q/Q: 2.5% v 2.4%e; Y/Y (final): 6.0% v 5.8%e.

-(MY) Malaysia Q2 Current Account Balance (MYR): 10.8B v 24.9Be.

-(MY) Malaysia Central Bank (BNM): El Nino impact usually seen in a lag, expect to see more of an impact next year.

-(TW) Taiwan sells NT$20.0B vs. NT$20.0B indicated in 2-year Bonds; Avg yield 1.725% (highest since 2007) v 1.460% prior; Bid-to-cover 2.28x v 1.35x prior.

(TW) Taiwan sells NT$25B vs. NT$25B indicated in 2-year Certificates of Deposit (NCDs); Avg yield: 1.663% v 1.615% prior; Bid-to-cover 2.24x v 2.24x prior.

North America

-(US) JULY PPI FINAL DEMAND M/M: 0.0% V 0.2%E; Y/Y: 4.7% V 4.9%E [US market close].

-US) INITIAL JOBLESS CLAIMS: 209K V 202KE; CONTINUING CLAIMS: 1.777M V 1.80ME [US market close].

- (US) Fed's Hammack (voter, hawkish dissenter): Reiterates view of needing to raise rates 'now'; Too much growth could put additional pressure on prices [US market close].

-(US) Fed’s Barkin (non-voter): See arguments for and against raising rates; AI investment seems impervious to level of rates; Some inflation drivers, including AI, could be persistent [US market close].

-(US) TREASURY $25B 30-YEAR BONDS REOPENING DRAWS 5.216% V 5.058% PRIOR; BID-TO-COVER: 2.39X V 2.44X PRIOR AND 2.43X OVER THE LAST 8 REOPENINGS [US market close].

-(US) WEEKLY EIA NATURAL GAS INVENTORIES: +36 BCF VS. +31 BCF TO +33 BCF INDICATED RANGE [US market close].

-WDAY Reportedly Silver Lake in discussions to acquire Workday; Talks are ongoing - press [US market close].

-AMAT Reports Q3 $3.50 v $3.38e, Rev $9.12B v $9.00Be; Guides above consensus [US market close].

-(US) Trump signs proclamation setting various tariffs on drones, based on Section 232 trade investigation; Effective starting in 180 days.

-(US) Fed's Goolsbee (non-voter): Have been getting a little bit better readings on inflation, hopefully it will continue - Fox News Interview.

-(US) Sec of State Rubio to visit CENTCOM at 10am ET on Friday [14th August, 2026] in Tampa, Florida.

-(US) AAPL*Company said to have trained AI model specifically for the China market with Alibaba's - US financial press.

-(US) JPM Has ended banking ties with Polymarket on regulatory concerns - FT.

-(US) YUM Follow up: US FDA remains confident that all recalled iceberg lettuce [related to the Cyclospora outbreak] is now off the market.

-(PE) Peru Central Bank (BCRP) leaves Reference Rate unchanged at 4.25%; as expected.

-(BR) Follow up: Brazil begins analyzing reciprocity process on US tariffs - Statement.

-(CO) Colombia July Consumer Confidence: 20.7 v 24.3 prior (update).

-(EQ) China Ministry of Foreign Affairs: Equador Pres to visit China Aug 16-23.

Europe

-(EU) Euro Zone Jun Industrial Production M/M: 0.0% v 0.0%e; Y/Y: +0.1% v -0.6%e [EU market close].

-(UK) Jun Monthly GDP M/M: +0.4% v -0.1%e [EU market close].

-(UK) Q2 Preliminary GDP Q/Q: 0.4% v 0.4%e; Y/Y: 1.2% v 1.1%e [EU market close].

-(UK) Jun Industrial Production M/M: -0.2% v +0.1%e; Y/Y: -0.2% v +0.3%e [EU market close].

-(UK) Jun Visible Trade Balance: -£23.0B v -£20.4Be; Overall Trade Balance: -£5.5B v -£2.7Be; Visible Trade Balance (ex-precious metals): -£21.1B v -£19.2B prior [EU market close].

-(ES) Spain July Final CPI M/M: 0.3% v 0.2% prelim; Y/Y: 3.6% v 3.5% prelim [EU market close].

-(NO) Norway Central Bank (Norges) left Deposit Rate unchanged at 4.25%; as expected) [EU market close].

-(NO) Norway Central Bank Policy Statement reiterated its stance that would likely be necessary to raise the policy rate further at one of the forthcoming monetary policy meetings. Might still become necessary to raise rates. It was too early to conclude that the inflation outlook had changed materially since June but inflation had slowed and been lower than projected this summer [EU market close].

-(TU) Turkey Central Bank (CBRT) Quarterly Inflation Report (QIR) raised the end-2026 inflation from 26% range to 28% while maintaining end-2027 inflation at 15%. CBRT raised the 2026 Food Inflation forecast from 26.3% to 28.5% and maintained 2027 Food Inflation forecast at 19.0% [EU market close].

-(UR) Ukraine Pres Zelenskyy reportedly losing trust in Ukraine Central Bank (NBU) Gov Pyshnyy over IMF ties [EU market close].

-(RU) Local Governor: Area around Russia's Baltic Sea port of UST-Luga damaged in drone attack.

-(KZ) Kaztransoil: Kazakhstan's oil exports via Russia's UST-Luga port at 286k tons, via Russia's Novorossiysk port at 360k tons in July.

-(FI) Defense Forces: Finland imposes temporary restriction area for aviation and maritime traffic in the Eastern gulf of Finland - post on X.

-(LT) National Armed Forces: Latvia issues air threat alert - post on X.

Middle East

-(IR) Treasury Sec Bessent: We are soon going to apply measures that have never been seen on Iran in the history of economic isolation on a country - Newsmax.

-(IR) Reportedly during a visit to Israel, US CENTCOM chief Admiral Cooper told officials there that he is pushing for renewed attacks on Iran's infrastructure - Israel's Channel 13 News (update) [US market close].

-(IR) Iran joint military command spokesperson: Trump's claim of controlling Strait of Hormuz is a lie; No ship can safely transit the Strait of Hormuz without Iranian approval [EU market close].

-(IR) Sec of Defense Hegseth: The US can hold its blockade in Iran as long as needed [US market close].

-(IR) US VP Vance: This ends with US in a strong position and with Iran having no nuclear weapon, and Hormuz back to stable oil prices - Fox News interview [US market close].

-(IR) ADNOC.IPO UAE's ADNOC says two of its ships were attacked in the Strait of Hormuz today [US market close].

-(IR) US Energy Sec Wright: US talking and coordinating with every ship; 8-9M bbl of oil transiting through Hormuz daily - Fox News Interview.

Levels as of 01:20 ET

Nikkei 225 +0.4%; ASX 200 -1.0%; Hang Seng -0.9%; Shanghai Composite -0.4%; Kospi +1.8%.

Equity S&P500 Futures flat; Nasdaq100 -0.2%; DAX +0.5%; FTSE100 +0.3%.

EUR 1.1541-1.1526; JPY 159.55-159.30; AUD 0.7067-0.7054; NZD 0.5869-0.5846.

Gold -0.8% at $4,318/oz; BTC -0.9% at $63,319; WTI Crude Oil +0.2% at $81.38/bbl; Copper -0.5% at $6.5593/lbs.