Asian equities and USD softer in waiting game for Friday

Asia market update: Asian equities & USD softer in waiting game for Friday; Focus on US FOMC July Minutes tonight.

General trend

- Equities were softer throughout Asia as the market waited for US Fed Powell’s Jackson Hole speech on Friday, as well as anticipated remarks by Japan BOJ Gov Ueda at a special Lower House session about the recent BOJ rate hike (also on Friday, prior to Powell’s speech).

- USD index hit a 7-month low as the index entered the 101 handle. The Euro got used to being back in the 111 handle for the first time since 2023 while GBP firmly regained the 130 handle last seen shortly after the July 4th UK election. JPY settled in around the midpoint between last week’s low of 149 and the Aug 5th high of 141.

- Australian FY24 earnings season in full swing.

- Japan’s trade deficit for July was twice as bad as expected (and comes after a June surplus). Exports were up >10% y/y on chip-related demand, but a rise in imports of >16% on demand for pharmaceuticals and telephones added to the deficit, with imports also made more expensive by the weak Yen - and making Japanese exports less competitive.

- A glimmer of good news out of New Zealand, where BNZ reported July Job Ads +3.4% on the month. However, the bank added; “Gains have been few and far between in a very strong downtrend that started back in late 2022. The trend in job ads remains firmly downward”.

- Oil did not budge on reports from US officials that a Gaza peace deal is on the brink of collapse, in spite of Sec of State Blinken’s visit to the Middle East for negotiations that had been earlier reported to have some likelihood of success.

- US equity FUTs +0.2% during Asian trading.

Looking ahead (Asian time zone)

- Wed Aug 21st (Wed eve Indonesia (BI) rate decision, Wed night US FOMC July 31st Minutes).

- Thu Aug 22nd AU + JP + ID Aug Flash PMIs, KR BOK rate decision, (Thu eve DE + EU HCOB Aug Flash PMIs).

- Fri Aug 23rd JP July National CPI (Fri night US Fed Powell Jackson Hole speech).

Holidays in Asia this week

- Wed Aug 21st Philippines.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 7.995.

- Australia July Westpac Leading Index M/M: -0.04% v 0.01% prior (revised higher).

- Australia sells A$800M vs. A$800M indicated in 3.00% Nov 2033 bonds: Avg Yield: 3.8725% v 4.2151% prior; bid-to-cover 3.38x v 4.26x prior.

- RBNZ: New Zealand July Total Card Billings NZ$4.35B, -0.4% m/m.

- New Zealand BNZ July Job Ads M/M: +3.4% v -8.0% prior (first rise since Jan).

- Fonterra Global Dairy Trade Auction Dairy Trade price index: +5.5% v +0.5% prior [overnight update].

- Fitch affirms New Zealand sovereign rating at AA+ ; Outlook Stable [overnight update].

China/Hong Kong

- Hang Seng opens -1.1% at 17,313; Shanghai Composite opens -0.3% at 2,858.

- China MOF sells 30-year Special Bonds: Avg Yield: 2.3641% v 2.3406% prior.

- Follow up: China CAAM reiterates it firmly opposes EU Commission's final draft on high tariffs on China EVs - China state media.

- China banks have ‘room’ to cut LPRs; PBOC may further cut the 7-day reverse repo rate by 10-20bps in Q4 – China Securities Journal.

- China regulators said to ask big banks to survey impact of stronger Yuan on exporters - financial press (update).

- US Pres Biden approves secret nuclear strategy focused on the China threat.

- TSLA EU Commission to propose new 9% duty on Tesla cars made in China - press [**Note, compares to 17-37% new duty imposed on China EV makers in July; Earlier, EU said Tesla may receive an individually calculated duty rate at the definitive stage] [overnight update].

- China mulls letting local govts issue bonds to purchase homes – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1307 v 7.1325 prior (strongest since Jul 26th).

- China PBOC Open Market Operation (OMO): Sells CNY258B in 7-day reverse repos; Net drains CNY111B v net drains CNY237B prior.

Japan

- Nikkei 225 opens -1.1% at 37,653.

- Japan July trade balance: -¥621.8B V -¥350.0BE; Adjusted Trade Balance: -¥755.2B v -¥744.9Be.

- BoJ Outright JGB bond buying operation for 1-3 Years; 3-5 Years and 5-10 Years; (Inline).

- Japan Min Koizumi to run in LDP Leadership race - financial press.

- BOJ research note said to state that persistence of inflationary pressure in the economy keeps case to be made for another interest rate hike [overnight update].

South Korea

- Kospi opens -0.3% at 2,687.

- South Korea July PPI Y/Y: 2.6% v 2.5% prior (update).

- South Korea Aug 1-20 Exports Y/Y: 18.5% v 18.8% prior; Imports Y/Y: 10.1% v 14.2% prior.

- South Korea Q2 Short-Term External Debt: $142.0B v $141.0B prior.

- South Korea Sept Business Manufacturing Survey: 73 v 72 prior.

- South Korea confirms to extend fuel tax cuts a further two months - South Korea press.

Other Asia

- Thailand Caretaker Fin Min Pichai: Reiterates economy is ‘nearly in crisis’.

- Thailand reports first suspected case of Monkey pox (Mpox) Clade 1 case - financial press.

- (IN) India Central Bank (RBI) Gov Das: Ignoring food inflation is a mistake for policy; Targeting inflation to stay around 4% before any rate cut.

- Taiwan July export orders Y/Y: 4.8% V 2.7%E; Orders from US accelerate; Sees August total orders between +6.7-11.0% y/y [overnight update].

- Hong Kong July CPI Composite Y/Y: 2.5% v 1.6%e [overnight update].

North America

- (US) Former Pres Obama: America is ready for a new chapter with Harris, Walz - DNC Convention in Chicago.

- (US) Federal judge strikes down FTC ban on non-compete agreements - WSJ.

- (US) Reportedly Former Pres Trump open to RFK Jr in admin role provided he backs Trump – press.

- (CA) Canada July CPI M/M: 0.4% V 0.4%E; Y/Y: 2.5% V 2.5%E.

- (US) Aug Philadelphia Fed Non-Manufacturing Activity Regional Index: -25.1 v -19.1 prior; New Orders: -0.3 v -7.1 prior.

- (US) RFK Jr.'s running mate, Nicole Shanahan, says they are looking at joining forces with former Pres Trump's campaign - press.

- (US) Fed’s Bowman (voter, hawk): Still see upside risk to inflation; Need to pay close attention to price-stability side of mandate while watching for a risks of a material weakening in the labor market.

Europe

- (IL) US officials: Gaza peace deal on brink of collapse - US press.

- (IL) Israel July Unemployment Rate: 2.8% v 3.1% prior.

- (PT) Portugal July PPI M/M: 0.8% v 0.9% prior; Y/Y: 1.9% v 2.1% prior.

Levels as of 01:20 ET

- Nikkei 225 -0.4%; ASX 200 flat; Hang Seng -0.9%; Shanghai Composite -0.4%; Kospi -0.2%.

- Equity S&P500 FUTs +0.2%; Nasdaq100 FUTs +0.2%, Dax +0.2%; FTSE100 +0.5%.

- EUR 1.1116-1.1133: JPY 144.94-145.79; AUD 0.6740-0.6753; NZD 0.6139-0.6164.

- Gold +0.2% at $2,555/oz; Crude Oil -0.2% at $73.02/brl; Copper +0.3% at $4.1685/lb.