Asia stocks extend declines while Gov't bond yields rise following hawkish Fed hold

Asia Market Update: Asia stocks extend declines while Gov't bond yields rise following hawkish Fed hold; USD continues to rise; USD/JPY quiet ahead of Fri BOJ decision, but o/n vols rise.

General trend

- Asian equities accelerated their four-day slide, with only the Shanghai Composite (-0.5%) not falling more than 1%.

- The US Fed’s ‘hawkish hold’ overnight saw the USD once again move higher against all major and Asian currencies today.

- USD/JPY overnight implied vol rises to >19.0% [highest since Jul figure of 21.2%] with BOJ rate decision due on Fri (Sept 22nd).

- Higher USD/JPY was despite Japanese 10-yr JGB yields rising to 0.745%, the highest since Sep 2013 -- but more than balanced by UST 30-yr rising to 4.47%, the highest since 2011.

- CNH erased loss [China PBOC again set the strongest fix on record, nearly 1,500 pips above market price (Note: PBOC max band daily limit is 2.0%, raised from 1.0% in 2014)].

- New Zealand’s Q2 GDP handily beat estimates, with Fin Min Robertson later saying there was and is no recession in NZ.

- The union strike against Chevron LNG facilities in Australia may unexpectedly end as early as this Friday as Australia’s industrial arbitrator said the sides were close to agreement.

- Former Australia RBA Gov. MacFarlane warns that new Gov. Bullock risks losing control of interest rates in Australia as due to the new RBA board structure Bullock “Would be outnumbered by six “part-timers” and the Treasury secretary on the nine-person board”.

- ASX dragged down by energy and financials, both down by ~2%.

- US equity FUTs -0.4% in Asian trading, extending losses from the NY session post-FOMC.

- Asia CBs expected to remain on hold later today after Fed (IDR, PHP, TWD).

Looking ahead (Asian time zone)

- This evening UK BoE Rate Decision.

- Fri JP CPI (national) and JP BOJ Rate Decision.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 7,154.

- New Reserve Bank of Australia (RBA) Gov Bullock risks losing control of interest rates to outsiders; cites former RBA Gov Macfarlane.

- Chevron CVX Australia Industrial Arbitrator: Unions and Co. close to agreement; "On precipice of achieving historical first enterprise agreements for LNG facilities".

- CVX Co. says it is discussing with members the recommendations made by Australian Industrial umpire to resolve co. dispute with union - financial press.

- CVX Australia Union Official: discussing with members the recommendations made by Australian Industrial umpire to resolve dispute with union.

- Woodside (WDS.AU) Australia LNG union workers vote 98% in favor of Woodside deal - financial press
APRA: Examining options to improve AT1 bond effectiveness.

- NEW ZEALAND Q2 GDP Q/Q: 0.9% V 0.4%E; Y/Y: 1.8% V 1.2%E.

- New Zealand Fin Min Robertson: There was and is no recession in NZ.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2028, 2032 and 2051 bonds.

China/Hong Kong

- Hang Seng opens -0.5% at 17,795.

- Shanghai Composite opens -0.2% at 3,103.

- Hong Kong Monetary Authority (HKMA) leaves rates unchanged at 5.75% (as expected), follows US Fed.

- PM Meloni told China that Italy plans to exit the belt and road initiative - Italian press (overnight update).

- Russia Pres Putin confirms to visit China in Oct - Russian press (overnight update).

- China State Cabinet: Will speed up development of advanced manufacturing sector (overnight update).

- China Foreign Min Wang Yi: Willing to deepen cooperation with Russia and Mongolia (overnight update).

- China said to be accusing US of hacking Huawei's servers continuously back to 2009 to steal critical data (overnight update).

- Former PBOC Gov Yi: Urge govt to step up policy support to meet the 5% GDP growth target (overnight update).

- USD/CNH (CN) China PBOC sets Yuan reference rate: 7.1730 v 7.1732 prior (strongest fix on record).

- China PBOC Open Market Operation (OMO): Sells CNY169B in 7-day reverse repos v CNY208B prior; Sells CNY82B in 14-day reverse repos v CNY60B prior; Net injects CNY141B v Net injects CNY226B prior.

Japan

- Nikkei 225 opens -0.5% at 32,856.

- USD/JPY Overnight implied vol rises to >19.0% [highest since Jul figure of 21.2%]; BOJ rate decision due on Fri (Sept 22nd).

- Japan Chief Cabinet Sec Matsuno: Important that FX moves stably and reflects fundamentals.

- Japan PM Kishida: Will instruct people to 'pull together pillars' on economic package early next week; Japan to focus on structural pay rises, investments.

- Japan 10-yr JGB yield rises to 0.745%, highest since Sep 2013.

- Japan sells ¥5.6T v ¥5.6T indicated in 3-Month Bills; Avg Yield: -0.1507% v -0.1406% prior; bid-to-cover: 3.25x v 3.24x prior.

- Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 100bps; Opens window to buy unlimited amount of 10-year JGBs at 1.00%.

South Korea

- Kospi opens -0.6% at 2,544.

- South Korea Sept 1-20th Day Exports Y/Y: +9.8% v -16.5% prior; Imports Y/Y: -1.5% v -27.9% prior.

- South Korea Fin Min Choo: FX markets show stable trends.

- Bank of Korea (BoK) to repurchase some bonds via Repo operations (overnight update).

Other Asia

- Taiwan Aug Export Orders Y/Y: -15.7% v -10.0%e v -12.0% prior (12th straight decline); Sees Sept orders between -17.9% and -14.7% y/y; Notes Export orders in Q4 show positive growth based on what seeing now (overnight update).

- Thailand PM: Weak baht driven by funds outflows, interest rate differentials.

- Thailand PM Srettha: Thailand is seeking more US investment and deeper ties this year.

- Thailand Central Bank: Debt moratoriums should only be used in pressing situations.

- Thailand Commerce Minister Phumtham: To consider lowering prices of 20 food items.

- Bank of Japan (BOJ) and Malaysia Central Bank (BNM) renew bilateral currency swap arrangement of up to $3B; Effective Sept 18.

North America

- US House Speaker McCarthy (R-CA): House will vote on Defense appropriations rule on Thursday.

- Hollywood studios Vs. writers and producers hope to finalize deal tomorrow - Reporter's post on X.

- (US) DOE CRUDE: -2.1M V -1ME; GASOLINE: -0.8M V +0.5ME; DISTILLATE: -2.9M V -0.5ME.

- (US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 5.25-5.50% (AS EXPECTED); WILL CONTINUE TO ASSES ADDITIONAL INFORMATION AND ITS IMPLICATIONS FOR POLICY; Median fed funds rate seen at 5.1% at the end of 2024.

- (US) Fed Chair Powell: Stronger economic activity is main reason for needing to do more with rates; it may be that the neutral rate has risen and is higher than the longer-run rate - Q&A.

Europe

- ECB’s Schnabel (Germany): Unit labour costs are largest contributor to domestic inflation, while profits contribute less - slides.

- UK PM Sunak: We are taking a new approach to climate change - speech.

- ECB's De Cos (Spain): Can't afford persistently high inflation - blog post.

- ECB’s Makhluof (Ireland): We are at the top of the ladder on rate increases, but a March 2024 rate cut would be too early.

- Italian PM Meloni told China that Italy plans to exit the belt and road initiative - Italian press.

Levels as of 01:20 ET

- Nikkei 225, -1.2%, ASX 200 -1.3% , Hang Seng -1.4%; Shanghai Composite -0.5% ; Kospi -1.5%.

- Equity S&P500 Futures: -0.3%; Nasdaq100 -0.4%, Dax -0.5%; FTSE100 -0.9%.

- EUR 1.0617-1.0675 ; JPY 148.18-148.46 ; AUD 0.6403-0.6465 ; NZD 0.5903-0.5951.

- Gold -1.0% at $1,947/oz; Crude Oil -0.7% at $89.01/brl; Copper flat at $3.7402/lb.