Hot PPI and Oil prices continue to drive CB rate hike expectations and yields up

Asia Market Update: Hot PPI and oil prices continue to drive CB rate hike expectations and yields up; BOJ and Fed rate increases are possible for next week after ECB move; US CPI due on Fri.

General trend and developments

-Global bond yields continue to surge: Oil prices and USTs have been among the primary drivers. On Thurs, the US Treasury debt buyback targeted coupons maturing 2037-2046 [Received $10.5B of offers for buyback, accepted $5.2B (v maximum of $6B for the operation)]. 30-year USTs were also auctioned by the US Treasury at higher yields and bid-to-cover. Japan’s MOF is not considering government debt buybacks, according to recent comments from MOF official Sato.

-With that being said, traders are further eyeing the potential for BOJ and Fed rate hikes during next week ahead of today’s US CPI release. Before, the US consumer price data release, hotter Aug PPI figures have already been seen out of the US and Japan. On Thursday, BOJ’s Masu had already expressed concern about the recent spike in Japanese producer prices. Hence, the BOJ may signal readiness to speed up rate hikes, according to a recently released press report. Meanwhile, Aussie yields have been particularly active. Australian short yields have surged by 20bps ahead of more possible hawkish RBA comments next week, as Governor Bullock and other board members are scheduled to testify on Friday (Sept 18th). Australia, also, sold 3-year bonds at a much higher yield [Australia sold A$800M v A$800M indicated in 2.75% Nov 2029 Bonds: Avg Yield: 5.0396% v 4.4692% prior]

-Trump refutes WSJ report on Iran war timeline: The Iran war could ‘end before election’, according to the US President. Recall, top Trump Advisers [including VP Vance and Sec of State Rubio] had reportedly told him that the Iran war could last past Inauguration Day in January 2029, said the WSJ.

-Thus far, Friday has been quiet on the US/Iran military front. Even still, traders are expected to remain alert going into the weekend. Events related to Saudi Arabia are expected to continue to garner attention, especially with oil prices remaining north of $100/bbl. During the NY session, the Houthis captured control of a key port city, potentially giving them more leverage over the Bab el-Mandeb Strait, sending Brent above $105/barrel and WTI above $100/barrel. More recently, Trump declined a request from the Saudi Crown Prince MBS to strike the Yemeni Houthis [Axios].

-On Monday, Iran and Gulf States are due to meet on the Omani initiative regarding a Strait of Hormuz deal. Iran’s Top Security Official recently outlined plans of a restricted zone to be announced outside the Strait of Hormuz in the coming days, extending from the line of the US Navy’s blockade into the Gulf. Vessels entering the zone will face sanctions, with Iran and Oman expected to sign maps defining authorized shipping routes in the coming days. The routes were recently extended from Chabahar into parts of the Gulf of Oman and Arabian Sea.

-South Korea early Sept chip export growth accelerated to >270% y/y, as shipments to the US and China remained strong.

-The Shanghai Composite trades sharply lower by 2% as chipmaker Enflame rallies by >185% in debut. Therefore, we ponder whether mainland investors are electing to purchase the ‘Nvidia-competitor’s’ shares and sell other stocks. A similar pattern was seen when large chipmaker CXMT debuted in Shanghai back in late Jul. [https://www.scmp.com/tech/tech-trends/article/3367124/enflame-shares-soar-188-shanghai-debut-nvidia-challenger-taps-investor-fever-ai].

-US equity FUTs flat to +0.2% during Asia trading.

Looking ahead (Asian-weighted focus, using EST/EDT time-zone)

-Sun Sep 6th: OPEC Meeting, (Sun night, JP Aug Foreign Reserves - USD).

-Mon Sep 7th: CN/HK Foreign Reserves - USD, EU Q2 GDP & Employment, (Mon night, KR Q2 GDP, JP Q2 GDP, AU July Building Approvals, JP 5-Year JGB Auction, DE July Trade Balance, SA Q2 GDP).

-Tue Sep 8th: TW Aug CPI, CN Aug Trade Balance, (Tue night, KR Aug Unemployment Rate, JP M2 & M3 Money Stock, CN Aug CPI/PPI, ID Aug Consumer Confidence, MY July Industrial Production).

-Wed Sep 9th: TW Aug Trade Balance, US 10-Year Note Auction, (Wed night, TH Aug Consumer Confidence, ID July Retail Sales, DE Aug CPI).

-Thu Sep 10th: OPEC Monthly Report, EU ECB Interest Rate Decision, US Aug PPI, US Aug Existing Home Sales, US 30-Year Bond Auction, (Thu night, NZ Aug Business PMI, JP Q3 BSI Large Manufacturing Conditions, JP Aug PPI, MY July Unemployment Rate, UK July GDP & Industrial Production & Trade Balance).

-Fri Sep 11th: IEA Monthly Report, RU Interest Rate Decision, US Aug CPI & Core CPI, US Sep Preliminary Michigan Consumer Sentiment, WASDE Report, RU Q2 GDP & Aug CPI.

-Sat Sep 12th: CN Aug New Yuan Loans & Total Social Financing & M2 Money Stock.

Holidays in Asia this week

-No holidays in Asia this week.

-Mon Sep 7th: (Note: “Labor Day” – U.S. markets closed, reduced liquidity).

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens -1.0% at 8,728.

-(AU) Australia 3-year bond yield rises +16bps to highest since May 2011.

-(AU) Citi: Now sees two more RBA hikes in 2026, lifting rate to 4.85%.

-(AU) Australia Port Hedland Aug Iron Ore Exports: 46.0Mt v 44.3Mt y/y; Iron ore exports to China 38.0M v 36.7Mt y/y.

-(AU) Hawkish RBA jawboning 'likely' to continue next week; cites analyst - Market Talk.

-(AU) Australia sells A$800M v A$800M indicated in 2.75% Nov 2029 Bonds: Avg Yield: 5.0396% v 4.4692% prior; bid-to-cover: 4.47x v 3.46x prior.

-(NZ) New Zealand Aug Manufacturing PMI: 53.1 v 54.3 prior (11th month of expansion).

China/Hong Kong

-(CN) Shanghai Composite opens +0.6% at 3,911; (HK) Hang Seng opens -0.9% at 24,718.

-(CN) China unveils 15th five-year plan for NEV industry development: China aims for large-scale autonomous vehicles adoption by 2030.

-(CN) China reportedly halts new battery projects pending a capacity review - press [US market close].

-(CN) China plans to boost AI adoption in software industry - US financial press.

-(CN) Chinese embassy to raise visa fees for Japanese nationals.

-(CN) Investors ‘snap up’ QDII funds as managers reimpose curbs – Shanghai Securities News.

-(CN) China regulators examine offshore debt swap bonds used by distressed property developers - Press [update].

-(CN) Foreign carmakers offer 'steep discounts' on petrol-powered cars in China - SCMP.

-(CN) China sells 5-year bonds, 10-year sovereign bonds.

-(HK) 700.HK Tencent-backed AI chipmaker Enflame (677701.CN) debuts at CNY410/share, gaining +188% in Shanghai Stock Exchange's STAR Market.

-(CN) ANTHROPIC.IPO Follow-up: Comments: Chinese AI labs secretly used millions of Claude exchanges to train their models.

-(CN) TSLA Tesla China launches new Model Y performance AWD model priced at CNY369K (≈$55K).

-(CN) USD/CNY China PBOC sets the yuan mid-point at 6.7743 v 6.7766 prior (strongest level since February 8th, 2023).

-(CN) China PBOC Open Market Operation (OMO): Sells CNY4B in 7-day Reverse Repos; Net injects CNY4B v injects CNY3B prior.

Japan

-(JP) Nikkei 225 opens -1.5% at 64,277.

-(JP) JAPAN Q3 BSI LARGE ALL INDUSTRY Q/Q: +5.3 V -0.5 PRIOR.

-(JP) Japan Aug PPI (domestic CGPI) M/M: -0.2% v 0.0%e; Y/Y: 7.6% v 7.4%e.

-(JP) Japan Fin Min Katayama: Our stance has not changed at all since US-Japan coordination; Will aim to ensure stable Forex movements, will closely communicate with US [inline comments].

-(JP) BOJ may signal readiness to speed up rate hikes, but has no pre-set view on the terminal rate nor the timing of further rate hikes; cites sources - financial press.

-(JP) [Many] Japanese firms caught wrong-footed on FX assumptions - Nikkei.

-(JP) Japan Trade Minister Akazawa: Japan dichlorosilane exports to China are not dumping; Japan conveying stance on dichlorosilane to China.

-(JP) Canadian banking unit TD Securities expects BoJ to hike interest rates by +25 bps each in September and December 2026, followed by hikes in April, July and October 2027.

-(JP) Japan sells ¥3.50T vs. ¥3.50T indicated in 3-Month Bills; Avg Yield: 1.1149% v 1.1076% prior; bid-to-cover: 3.34x v 3.00x prior.

-(JP) Japan auto-parts maker Astemo to invest $379M in Kentucky plant to expand production capacity for electric motors - Nikkei.

-(JP) 6954.JP Announces collaboration with Google on AI welding agent.

-(JP) 8306.JP Pricied MUFG ¥200B dual-tranche AT1 bond deal.

Korea

-(KR) Kospi opens -3.3% at 6,803.

-(KR) South Korea Sept 1-10 Days Exports Y/Y: 82.6% v 45.3% prior; Imports Y/Y: 20.7% v 23.1% prior.

-(KR) South Korea PM Han: Talks on strategic investment projects with the United States are progressing.

-(KR) South Korea President Lee to hold Central Asia Summit on Wed, Sept 16th.

-(KR) South Korea sells KRW800B vs. KRW800B indicated in 50-year treasury bonds: Avg yield: 4.72% v 4.62% prior.

Other Asia

-(TW) MU Micron Technology comments: Taiwan employees who joined before August 29th, 2025 to receive NT$1M thank-you cash bonus for FY2026.

-(IN) India Trade Min Goyal said to urge BRICS members to open markets, ensure faster clearance.

-(IN) India Top Court has requested the federal gov't provide a timeline for the implementation of food earning labels.

-(ID) Indonesia Government Communication Agency: Surge in global oil prices is certainly a risk; notes use of budget as a 'shock absorber'.

-(MY) Malaysia PM's Department: King decrees for Ex-PM Najib's royal pardon bid to be postponed to the next pardons Board meeting.

North America

-(US) President Trump: Going to take care of $40T debt through growth - Recorded interview with Fox News.

-(US) AUG PPI FINAL DEMAND M/M: 0.4% V 0.4%E; Y/Y: 5.4% V 5.3%E; (ex-food/energy) M/M: 0.2% v 0.3%e; Y/Y: 4.6% v 4.6%e [US market close].

-(US) TREASURY $22B 30-YEAR BONDS REOPENING DRAWS 5.308% V 5.216% PRIOR; BID-TO-COVER: 2.61X V 2.39X PRIOR AND 2.43X OVER THE LAST 8 REOPENINGS [US market close].

-(US) Treasury debt buyback targets coupons maturing 2037-2046; Receives $10.5B of offers for buyback, accepts $5.2B (v maximum of $6B for the operation) [US market close].

-(US) AUG EXISTING HOME SALES: 3.98M V 3.98ME [US market close].

-(US) INITIAL JOBLESS CLAIMS: 206K V 205KE; CONTINUING CLAIMS: 1.77M V 1.78ME [US market close].

-(US) WEEKLY EIA NATURAL GAS INVENTORIES: +40 BCF VS. +30 BCF TO +33 BCF INDICATED RANGE [US market close].

-(US) DOE CRUDE: -0.4M V -0.1ME; GASOLINE: +1.2M V -1.3ME; DISTILLATE: +2.1M V -0.7Me; Total domestic production approaches 14M [US market close].

-(US) Atlanta Fed GDP Now: Cuts Q3 GDP estimate from 4.7% to 4.4% [US market close].

-(US) Reportedly White House copper tariff plan stalls amid affordability concerns - press [US market close].

-(US) US Senate Maj Leader Thune: We'll cross that bridge when we come to it (references Trump's US $5K dividend check proposal) [US market close].

-(US) Senate Republicans are said to be circulating a new version of the Clarity Act ahead of vote scheduled for Sept 15th; Text is not bipartisan yet - Punchbowl [US market close].

-(US) President Trump: Let's call the $5000 payouts the “Trump dividend” - The President delivers Closing Remarks [Pre-Credentialed Media], American Airlines Center, Dallas.

-(US) Follow up: President Trump: JD Vance did very well tonight; [On dividend] Won't be a big problem at all - The President delivers Closing Remarks [Pre-Credentialed Media], American Airlines Center, Dallas.

-(US) President Trump to meet with Ireland's Taoiseach and Fine Gael Leader at 10:10am [local time] on Saturday September 12th, 2026.

-(US) Treasury Sec Bessent: Plans to sanction a 'large bank' on Monday; The Treasury market is in very good shape - Interview.

-(US) Interior Sec Burgum asked about diesel export controls, says "Every idea is on the table" - press.

-(US) LIV Golf Reaches First Milestone on Path to Recapitalization Following Successful First Day Hearing.

-(US) ORCL Reports Q1 $1.92 v $1.74e, Rev $19.3B v $19.1Be; Raises FY27 outlook slightly [US market close].

-(US) OPENAI.IPO CEO Altman: [Tells staff] OpenAI is open to slowing cutting-edge AI - US financial press.

-(CA) Canada PM Carney: The latest US trade measures against Canada are 'modest'; Reiterates that Canada is always 'ready to sit down and negotiate with the US'.

-(PE) Peru Central Bank (BCRP) leaves Reference Rate unchanged at 4.25%; as expected.

Europe

-(EU) ECB RAISES KEY RATES BY 25BPS; AS EXPECTED; Raises growth and inflation outlooks [EU market close].

-(EU) ECB QUARTERLY STAFF PROJECTIONS; Raises growth and inflation outlooks [EU market close].

-(EU) ECB Chief Lagarde: Inflation to remain 'well above' target into H1 2027; Upward revisions in staff projections reflect economic resilience, which is likely to persist into Q3 [EU market close].

-(EU) ECB chief Lagarde: On rate path; market do what they have to do; ECB focus on stability and not debated on projected path; Today's decision to hike today was unanimous, a 'no-brainer' - Q&A [EU market close].

-(EU) ECB Officials reportedly expect more tightening ahead, with another hike possible in October - press [EU market close].

-(EU) countries said to seek import curbs on chemicals, plastics - press [EU market close].

-(EU) BCS Expects ECB to deliver another interest rate hike of +25bps in December, 2026.

-(EU) Follow up: EU finding ways to get use of frozen Russian assets approved - FT.

-(TR) TURKEY CENTRAL BANK (CBRT) LEAVES ONE-WEEK REPO UNCHANGED AT 37.00%; AS EXPECTED [EU market close].

-(IE) Ireland Aug CPI M/M: 0.7% v 0.1% prior; Y/Y: 3.7% v 3.4% prior [EU market close].

-(CZ) Czech Central Bank comments on CPI data: Sees reasons for increased policy caution [EU market close].

-(NL) Netherlands July Trade Balance: €10.9B v €11.7B prior.

-(FI) Finland July Current Account Balance: -€0.2B v +€2.8B prior.

Middle East

-(IR) Iran reportedly resumes producing ballistic missiles in underground facilities using stockpile components - WSJ [US market close].

-(IR) Houthis reportedly take control of Yemeni Red Sea city of Mocha - press [EU market close].

-(IR) Yemen Houthi's reportedly reach Red Sea islands of Hanish - press [EU market close].

-(IR) On Monday, Iran and 'Gulf States' to meet in 'push' for Hormuz deal [Omani Initiative] - FT.

-(SA) US expands intel and targets support for Saudi's campaign against Yemen's Houthis; 100+ US advisors are now in Saudi Arabia - CNN [US market close].

-(SA) Saudi Crown Prince MBS called US President Trump twice about Houthis on Thursday [September 10th, 2026] - Axios [citing two US officials].

-(YE) Yemen's Houthis: Freedom of navigation and international trade in the Red Sea and Bab El-Mandeb Strait remain safe and uninterrupted; Operations will stop when attacks on Yemen end and the blockade is lifted [EU market close].

-(PK) IMF team to visit Pakistan in coming weeks for program review.

Levels as of 01:20 ET

Nikkei 225 -2.2%; ASX 200 -1.0%; Hang Seng -0.8%; Shanghai Composite -1.5%; Kospi -2.0%.

Equity S&P500 Futures +0.2%; Nasdaq100 flat; DAX -0.1%; FTSE100 +0.1%.

EUR 1.1618-1.1599; JPY 154.62-154.17; AUD 0.7167-0.7150; NZD 0.5830-0.5795.

Gold +0.5% at $4,336/oz; BTC -1.8% at $77,208; WTI Crude Oil -0.5% at $101.98/bbl; Copper +0.4% at $6.5510/lbs.