Dovish Fed outlook raises stocks but continued Yen strength hits JP exporters

Asia Market Update: Dovish Fed outlook raises stocks but continued Yen strength hits JP exporters; Asia PMIs mixed with large economies' manufacturing struggling; Focus on UK BOE & US ISM July Mfg PMI.

General trend

- US Fed Powell’s comments post-FOMC rate hold that the Fed is watching very carefully for a sharper downturn in labor market, and that a September rate cut is certainly being considered saw US stocks take off again to the upside, with Nvdia +12%.

- However, from the start in Asian trading the Nikkei struggled, down 3.4% at one point during the morning with automakers hard hit amid the Yen appreciating beyond the 150 level for the first time since March. Toyota was particularly hard hit, down 7% on the added issue of yet more certification irregularity woes.

- Australia's ASX saw yet another record high with the rest of Asia mixed.

- China unexpectedly saw its Caixin manufacturing PMI fall into contraction for the first time in 9 months..

- Australia PMI Manufacturing stayed mired in contraction, July being its 6th month of contraction and down at the worst 2020 levels.

- Japan also confirmed moving back into PMI Manufacturing contraction.

- South Korea exports rose at their fastest pace in 6 months within continued strong chip exports (+50% y/y) but below overall expectations as the country recorded a lower than expected trade surplus. -

- US equity FUTs +0.5% to +0.8% during Asian trading.

Looking ahead (Asian time zone)

- Thu 1st (Thu eve BOE rate decision, Thu night US ISM July Mfg PMI).

- Fri 2nd KR July CPI, AU Q2 PPI, (Fri night US July NFP).

Holidays in Asia this week

- Mon July 29th Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 8,105.

- Australia Jun Trade Balance (A$): 5.6B v 5.0Be.

- Australia Q2 Import Price Index Q/Q: +1.0% v -0.7%e; Export Price Index Q/Q: -5.9% v -5.3%e.

- Australia July Final PMI Manufacturing: 47.5 v 47.4 prelim (lowest since 2020 and confirms 6th month of contraction).

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2030, 2034 and 2037 bonds.

- Australia July CoreLogic House Prices M/M: 0.5% v 0.7% prior [overnight update].

- New Zealand July CoreLogic House Prices M/M: -0.5% v -0.5% prior [overnight update].

China/Hong Kong

- Hang Seng opens flat at 17,327; Shanghai Composite opens +0.1% at 2,940.

- CHINA JULY CAIXIN PMI MANUFACTURING: 49.8 V 51.5E (first contraction in 9 months).

- China likely to cut the RRR and interest rates in H2 [as early as Q3]; cites analysts – China Securities Daily.

- Reportedly US considers new restrictions on China's AI memory chips; New chip limits from US could come as soon as next month - press.

- (CN) China Premier Li Qiang: Reiterates govt stance of need to strengthen the positive economic trend.

- China PBOC said to be planning to change 1-Year MLF Loan Operation date - press.

- China to restrict exports of some drones used for military purposes, effective from Sept 1st - press.

- US) Reportedly US to unveil a new rule next month to expand US powers to stop exports of chip manufacturing equipment from foreign countries to China, but would exclude shipments from Japan, Netherlands and South Korea – press.

- Hong Kong Q2 Advance GDP Q/Q: 0.4% v 0.3%e; Y/Y: 3.3% v 2.7%e [overnight update].

- China PBOC sets Yuan reference rate: 7.1323 v 7.1346 prior.

- China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos; Net drains CNY225B v net injects CNY186B prior.

Japan

- Nikkei 225 opens -0.8% at 38,781.

- Japan BOJ comments on yesterday's BOJ Quarterly Report: Big firm's positive wage-setting behaviour is spreading steadily to smaller firms.

- Japan July Final Manufacturing PMI: 49.1 v 49.2 prelim (confirms 1st contraction in 3 months).

- Japan releases weekly flows data [period ended July 26th]: Foreign buying of Japan equities: -¥670.5B v -¥56.9B prior; Japan buying of foreign bonds: -¥700.5B v -¥730.7B prior.

- Japan Finance Ministry (MOF) on July FX Intervention: Spent $36.6B in month.

- Jpan Fin Min Suzuki: Expect BoJ to keep considering bond market stability [overnight update].

- BOJ Gov Ueda: Upside risks to prices require attention; will continue to raise rates if economic and price outlook are realized - post rate decision press conference [overnight update].

South Korea

- Kospi opens +0.6% at 2,787.

- South Korea July PMI Manufacturing: 51.4 v 52.0 prior (3rd straight expansion).

- South Korea Fin Min: South Korea markets are 'relatively stable' (post FOMC comments) - press.

Other Asia

- Philippines July PMI Manufacturing: 51.2 v 51.3 prior [11th month of expansion].

- Malaysia July PMI Manufacturing: 49.7 v 49.9 prior (second month of contraction).

- Taiwan July PMI Manufacturing: 52.9 v 53.2 prior (4th month of expansion).

- Indonesia July PMI Manufacturing: 49.3 v 50.7 prior [first contraction in 34 months].

- Vietnam July PMI Manufacturing: 54.7 v 54.7 prior (fourth month of expansion).

- Thailand July PMI Manufacturing: 52.8 v 51.7 prior [3rd month of expansion and highest since Jun 2023].

- Taiwan Q2 Advance GDP Y/Y: 5.1% v 4.8%e [overnight update].

North America

- Brazil Central Bank (BCB) leaves Selic Target Rate unchanged at 10.50%; as expected (update).

- (US) JULY ADP EMPLOYMENT CHANGE: +122K V +150KE (lowest since Jan); annual pay growth continued to slow; Notes "if inflation goes back up, it won't be because of labor.".

- (US) TREASURY QUARTERLY REFUNDING ANNOUNCEMENT: TO SELL $58B IN 3-YEAR NOTES; $42B IN 10-YEAR NOTES AND $25B IN 30-YEAR BONDS; Repeats do not expect to increase coupon, FRN sizes for next several quarters.

- (US) Q2 EMPLOYMENT COST INDEX (ECI) 0.9% V 1.0%E.

- (US) Nevada reports Jun casino gaming Rev $1.29B, +3.3% y/y, Las Vegas strip Rev $758.6M, +4.3% y/y.

- (US) JULY CHICAGO PURCHASE MANAGER’S INDEX (PMI): 45.3 V 45.0E.

- (US) JUN PENDING HOME SALES M/M: 4.8% V 1.4%E; Y/Y: -7.8% V -7.4%E.

- (US) DOE CRUDE: -3.4M V -0.5ME; GASOLINE: -3.7M V -1.5ME; DISTILLATE: +1.53M V -0.5ME.

- (US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 5.25-5.50%; AS EXPECTED; RECENT MONTHS THERE HAS BEEN 'SOME' FURTHER PROGRESS TO 2% TARGET; ATTENTIVE TO RISKS ON BOTH SIDES OF MANDATE.

- (US) Fed Chair Powell: Rate cut could be on table for September but no decision yet; There was a real discussion about the case for cutting rates today - Q&A.

Europe

- (IT) Italy Jun PPI M/M: 1.0% v 0.3% prior; Y/Y: -3.5% v -4.9% prior.

- (IR) Iran’s supreme leader Khamenei has ordered direct attack on Israel in response to the Haniyeh assassination in Tehran - press.

Levels as of 01:20 ET

- Nikkei 225 -2.7; ASX 200 +0.5%; Hang Seng -0.1%; Shanghai Composite flat; Kospi +0.4%.

- Equity S&P500 FUTs +0.5%; Nasdaq100 FUTs +0.8%, Dax flat; FTSE100 +0.3%.

- EUR 1.0821-1.0835: JPY 148.51-150.32; AUD 0.6523-0.6551; NZD 0.5945-0.5963.

- Gold +0.7% at $2,489/oz; Crude Oil +1.0% at $78.65brl; Copper -0.3% at $4.1833/lb.