CNH, Copper, Gold and commodity currencies catch a bid

Asia market update: China assets rip higher following PBOC+ pronouncements; CNH, copper, gold & commodity currencies catch a bid; AU RBA holds rates; AU CPI tomorrow.

General trend

- A rare joint press conference by the China PBOC, SCRC and NFRA (China’s top 3 financial regulators) announced a raft of rate cuts and stimulus announcements.

- The RRR broad reserve requirement ratio will be cut by 50bps and a potential further 25-50bps later in the year. The key 7-day policy rate to be cut by 20bps and the MLF will be cut by 20-30bps.

- There will also be support for listed companies for stock buybacks and the PBOC may add an additional CNY500B to swap facility; Will consider a stock stabilization fund.

- The market reacted positively, with initial gains in CN property, consumer and banking stocks. Hang Seng and Shanghai Composite both up ~3.5% for their highest daily gains since Feb 6th, with Consumer Staples +4% and SSE Banks +3.7%.

- China 10-year bond yield traded at a record low just above 2% straight after the policy easing by the PBOC, but later retraced back up to 2.06%.

- After some initial USD strength in the offshore Yuan post the announcements, CNH/USD saw renewed strength back at the 7.03 handle to 16-month highs.

- Spot gold hit a fresh record above $2,636/oz, with copper +2%.

- Australia RBA left rates unchanged, with the Statement reiterating the bank’s stance that rates to be sufficiently restrictive until confident on inflation. Aussie equities largely unmoved, while the AUD/USD continued its climb to be over 0.6850. Kiwi also +0.3% amid the CN stimulus.

- Japan prelim Manufacturing PMI saw its third straight contraction, while Service PMI saw its third straight expansion.

- A reminder that Japan investors are required to buy stocks by Sept 26th [Thurs] in order to have dividend rights. [Note that on Sept 28th 2023 Japan 'high-dividend' stocks declined on ex-dividends (>1,400 companies traded ex-dividend in one day)].

- Just prior to this update, BOJ Gov Ueda reiterated to raise rates if economic outlook is realized.

- US equity FUTs moved slightly lower then slightly higher during the Asia session.

Looking ahead (Asian time zone)

- Tue Sep 24th (Tue eve DE IFO Biz Climate).

- Wed Sep 25th AU Aug CPI, JP MOF meets w JGB dealers, KR Consumer Conf.

- Thu Sept 26th JP BOJ Minutes (2 mtgs prior), AU RBA Financial Stability Review; (Thu eve US Final Q2 GDP, US Fed Powell).

- Fri Sept 27th JP LDP leadership race, KR Biz Conf; (Fri night US Aug Core PCE).

Holidays in Asia this week

- Monday Sept 23rd Japan.

- Upcoming Chinese market holidays: Sept 29th (Sun); Tue Oct 1st to Mon Oct 7th; Sat Oct 12th.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 8,153.

- Reserve Bank of Australia (RBA) leaves cash rate target unchanged at 4.35%; as expected.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 84.9 v 84.1 prior.

China/Hong Kong

- Hang Seng opens +2.4% at 3,785; Shanghai Composite opens +0.8% at 2,770.

- China PBOC, SCRC and NFRA (China’s top 3 financial regulators) briefing: To cut its RRR by 50bps "soon".

- China PBOC to cut its broad reserve requirement ratio (RRR) by 50BPS "soon"; (as long speculated).

- China PBOC to cut 7-day Reverse Repo by 20bps to 1.50% (from 1.70%) [effective date uncertain]

- Chinna PBOC Gov PAN Gongsheng: MLF to be cut by 20-30BPS.

- China CSRC: To guide banks to support listed companies for stock buybacks.

- China 10-year bond yield trades at record low just over 2.0% after policy easing by the PBOC.

- China said to consider stock stabilization fund – US financial press.

- US Commerce Dept confirms to propose prohibiting key Chinese software and hardware in connected vehicles on US roads due to national security concerns; Proposal would effectively ban all existing Chinese light-duty cars and trucks from the US market, but would allow Chinese automakers to seek "specific authorizations" for exemptions; The prohibitions would prevent testing of self-driving cars on U.S. roads by Chinese automakers [overnight update].

- Germany Eco Min: Big part of auto market lies in demand from China and this problem will likely not be resolved soon [overnight update].

- China Auto Dealers Association: Price wars cost CNY138B on dealerships as consumers hold off on making major purchases.

- China reportedly plans a tax revamp raising costs for imported fuel oil, impacting independent refiners amid weak demand and thin processing margins, expected in Oct – press [overnight update].

- China PBOC sets Yuan reference rate: 7.0510 v 7.0531 (Strongest since May 23rd, 2023).

- China PBOC Open Market Operation (OMO): Sells CNY460B in 14-day Reverse Repos: Net injects CNY460B v net injects CNY75B prior.

Japan

- Nikkei 225 reopens +1.2% at 38,171 (following holiday yesterday).

- Japan Sept preliminary manufacturing PMI: 49.6 V 49.8 prior (3rd straight contraction).

- Japan Fin Min Suzuki: Reiterates monitoring impact from central banks' decisions.

- Japan to convene extraordinary Diet session on Oct 1st - Japanese press.

- China Foreign Min Spokesperson Lin: Willing to work with Japan on strategic bilateral ties [overnight update].

Korea

- Kospi opens +0.4% at 2,612.

- South Korea Aug PPI Y/Y: 1.6% v 2.6% prior.

- South Korea Aug Retail Sales Y/Y: 9.2% v 6.3% prior.

- South Korea Central Bank (BOK): Raises concerns on demographics - FT.

Other Asia

- Philippines Fin Min Recto: Reiterates inflation is on a downward trend; Expects 2.5% for Sept - press.

North America

- (US) US to send troops to help evacuate citizens from Lebanon - Press.

- JPM CEO Dimon: Sees a chance that rates could stay higher for longer ; Odds of a soft landing lower than 70% - Japanese press.

- (US) NHC on Tropical Storm John: Damaging hurricane-force winds and life-threatening storm surge and flash flooding are imminent.

- (US) Follow up: House passes exemption for Chips, bill to be sent to Pres Biden - financial press.

Reminder on Aug 26th: (US) Reportedly White House this week expected to announce final implementation plans for tariff increases on certain Chinese imports, announced in May - press.

- (US) US Commerce Dept confirms to propose prohibiting key Chinese software and hardware in connected vehicles on US roads due to national security concerns; Proposal would effectively ban all existing Chinese light-duty cars and trucks from the US market, but would allow Chinese automakers to seek "specific authorizations" for exemptions.

- (AR) Argentina Pres Milei: Govt will lift FX controls when Argentine inflation is 0% - local press.

- (US) Fed's Bostic (hawk, voter for 2024; non-voter for 2025): Fully supported 50bps cut at last meeting; 50bps cut does Not lock in cadence of future moves; Fed is now facing two, largely balanced risks - speech text.

- (US) Fed's Kashkari (non-voter for 2024 and 2025): Risks have shifted, more worried about labor market deterioration than inflation surprising to the upside - CNBC.

- (US) Sept Preliminary S&P manufacturing PMI: 47.0 V 48.6E (3rd month of contraction); Employment declines modest, less than reported in Aug; Saw acceleration of selling price inflation.

- (US) Port employers group says no meetings set this week with dockworkers union, willing to meet at the bargaining table at any time.

- (US) Fed's Goolsbee (non-voter for 2024; voter for 2025): Sees and suggests many more rate cuts over the next year; Rates need to come down significantly.

Europe

- (EU) ECB's Chief Lagarde: Inflation hasn't quite been defeated - US TV interview.

- (RU) Follow up: EU's top Diplomat Borrell: "It is clear" that Russia has been receiving new weapons , in particular missiles from Iran - financial press.

- (UR) Ukraine Pres Zelenskiy: Ukraine war is 'closer to the end' - US press.

- (UK) Sept CBI industrial trends total oreders: -35 V -23E.

- (RU) Reportedly Russia plans to increase defense spending to $142B by 2025 - press.

Levels as of 01:20 ET

- Nikkei 225 +0.9%; ASX 200 -0.2%; Hang Seng +3.6%; Shanghai Composite +3.4%; Kospi +0.7%.

- Equity S&P500 FUTs flat; Nasdaq100 FUTs +0.1%, Dax +0.3%; FTSE100 +0.3%.

- EUR 1.1103-1.1118: JPY 143.38-144.05; AUD 0.6825-0.6868; NZD 0.6259-0.6280.

- Gold +0.4% at $2,663/oz; Crude Oil +1.2% at $71.19/brl; Copper +2.1% at $4.4355/lb.