Equity markets drop amid central bank speak [Fed’s Powell, ECB], UST yields and USD extend gains

Asia Market Update: Equity markets drop amid central bank speak [Fed’s Powell, ECB]; UST yields and USD extend gains; AU and CN/HK firms continue to report earnings.

General trend

- Fed policy uncertainty lingers despite Powell’s comments?

- CNH hit 2-year with the USD strength, PBOC weakened the yuan.

- Shanghai Composite has pared decline.

- Shanghai Banks index lags.

- China bank earnings remain in focus [Bank of Communications, China Everbright Bank, Minsheng Banking]; AgBank expected to report later today.

- HK-listed property developers underperform; Longfor declines after recently reporting earnings.

- Nikkei 225 drops >2.5% following the declines on Wall St.; Nasdaq drop weighs on SoftBank Group.

- Australian Financial and Resources indices lag [Fortescue declines amid earnings report].

- Australia ex-dividends [Ansell, Challenger, Worley].

- US equity FUTs extend declines.

Headlines/economic data

Australia/New Zealand

- ASX 200 opened -0.4%.

- (AU) Australia July Retail Sales M/M: +1.3% v 0.3%e.

- FMG.AU Reports FY22 Net $6.2B v $10.30B y/y; Underlying EBITDA $10.6B v $16.4B y/y; Rev $17.4B v $22.3B y/y; affirms FY guidance.

- MIN.AU Reports FY22 (A$) Underlying Net 0.4B v 1.1B y/y; underlying EBITDA 1.0B v 1.9B y/y; Rev 3.4B v 3.7B y/y.

Japan

- Nikkei 225 opened -1.7%.

- (JP) Bank of Japan (BOJ) Gov Kuroda: Reiterates stance that need to continue monetary easing until wages and prices rise in a stable and sustainable manner - Jackson Hole comments.

- (JP) Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 25bps; Opens window to buy unlimited amount of 10-year JGBs at 0.25% [as expected].

- (JP) Japan Jun Final Leading Index CI: 100.9 v 100.6 prelim; Coincident Index: 98.6 v 99.0 prelim.

Korea

- Kospi opened -2.0%

- (KR) South Korea Vice Fin Min: Need to monitor financial market.

- (KR) South Korea and China agree to establish a supply chain council – press.

- (KR) Bank of Korea (BOK) Gov Rhee: Do not think that South Korea can end policy tightening before US Fed – press.

- (KR) Bank of Korea (BOK) Sells KRW1.0T v KRW0.9T indicated in 3-month Monetary Stabilization Bonds (MSB): avg yield 2.550% v 2.410% prior.

- (KR) South Korea Defense Min: North Korea remains ready to carry out a nuclear experiment, but no "particular" signs have emerged yet that the test is imminent - Yonhap.

China/Hong Kong

- Hang Seng opened -1.0%; Shanghai Composite opened -1.0%.

- (HK) Speculated that Hong Kong daily covid cases may reach 10K this week, but experts say no need for restrictions – SCMP.

- 386.HK Guides FY22 crude throughput 240Mt, Board approves first share buyback program.

- (CN) Sichuan, China has resumed power to most industries Sunday (ends 2 weeks of disruptions).

- (CN) China PBOC sets Yuan reference rate: 6.8698 v 6.8486 prior (weakest fix since late Aug 2020).

- (CN) China State Media, Global Times Op Ed: US China deal on audits of dual listed companies is "symbolic" for ties and a "useful lesson" for both nations.

- (CN) Hebei province, China (borders Beijing) expands Covid lockdown after new uptick in cases - press.

- 386.HK Reports H1 (CNY) Net 44.5B v 40.2B y/y; Rev 1.61T v 1.26T y/y.

- (CN) China PBOC Open Market Operation (OMO): Sells CNY2.0B in 7-day reverse repos v CNY2.0B prior; Net CNY0B v Net CNY0B prior.

- Macau sets minimum gambling revenue threshold for casinos in 2023 .

Other

- (TW) US warships cross Taiwan Strait for first time since Pelosi visit - press.

- (SG) Monetary Authority of Singapore (MAS) MD: MAS to issue public consultation on new measures related to cryptocurrency by Oct, will propose regulatory approach for stablecoins.

North America

- (US) Fed chair Powell: Sept rate action will depend on totality of incoming data; Fed will keep at it until confident inflation under control- Jackson Hole remarks [Aug 26th].

Europe

- (EU) Some ECB policymakers said to want to discuss quantitative tightening this year, have not had discussions about QT yet – press [Aug 26th].

- (EU) ECB's Schnabel (Germany): Both the likelihood and the cost of current high inflation becoming entrenched in expectations are uncomfortably high; In this environment, central banks need to act forcefully [Aug 27th].

- (FR) ECB's Villeroy (neutral, France): Significant rate hike is needed in Sept; Should get rates to 'neutral' by year end; Neutral is somewhere between 1.00-2.00% - Jackson Hole comments [Aug 27th].

- (EU) ECB's Kazaks (Latvia, hawk): ECB should discuss 50 and 75 bps hikes in Sept, and should raise by at least 50 bps - Jackson Hole comments [Aug 27th].

- (UK) Financial press notes that UK Govt data suggests that the UK is still buying oil from Russia, but its coming through other countries, despite the Stats Office reporting last week it was no long buying from Russia.

- (CH) SNB President Jordan: SNB is prepared to act decisively if price stability is under threat - Jackson Hole comments.

Levels as of 01:00ET

- Hang Seng -0.7%; Shanghai Composite -0.2%; Kospi -2.1%; Nikkei225 -2.6%; ASX 200 -1.9%.

- Equity Futures: S&P500 -0.9%; Nasdaq100 -1.3%, Dax -0.6%; FTSE100 closed for holiday.

- EUR 0.9968-0.9915; JPY 138.90-137.54; AUD 0.6888-0.6841; NZD 0.6135-0.6102.

- Commodity Futures: Gold -0.9% at $1,734/oz; Crude Oil +1.2% at $94.19/brl; Copper -2.2% at $3.62/lb.