Iran and Fed outlook remain uncertain after Bessent’s comments and ahead of Jackson Hole

Asia Market Update: Directionless trading continues for a 2nd straight session; Iran and Fed outlook remain uncertain after Bessent’s comments and ahead of Jackson Hole; Oman’s Foreign Minister will visit Tehran to Tues, Pakistan commented on MOU.

General trend and developments

- Monday’s talks between Iran and Pakistan covered topics including the restoration of the Islamabad MOU to settle the US/Iran conflict. At the same time, US Treasury Sec Bessent’s economic sanctions announcement on Iran has left some uncertainty. For example, which large financial institution will be targeted by the measures?

- On August 24th, 2026, US Treasury Secretary Scott Bessent launched “Operation Economic Outcast,” expanding secondary sanctions on Iran’s five sectors of digital assets, technology, gold, aviation, and shipping sectors, warning that any entity facilitating money laundering or economic engagement with Iran will be cut off from the U.S. dollar system. It was all framed as an “economic D-Day” to sever every revenue lifeline and end rather than manage the Iran threat; IEA chief Fatih Birol separately confirmed no second strategic oil reserve release is under discussion.

- Canada is expected to announce retaliatory US tariffs on Tuesday [details not disclosed], according to the AP. With the recent escalation between both countries, on Monday US President Trump announced new 50% Canada tariffs on autos, auto parts and steel, effective Jan 1st, 2027. Canada’s Prime Minister Mark Carney had initially pledged dollar-for-dollar retaliatory tariffs on US goods starting September 8th, 2026, but later indicated it may be difficult to match purely dollar-for-dollar and that Canada would pursue a “more targeted” approach.

- Ahead of the anticipated Trump-Xi summit in Washington this September—following the White House’s May confirmation that President Trump would welcome Xi for a fall visit—markets are watching closely as the U.S. considers imposing a 7.5% tariff on Chinese goods over overcapacity concerns, a move that would lift second-term duties toward the 20% replacement tariff cap Beijing had previously accepted under the trade truce (after the 12.5% rate imposed in July, 2026). Chinese officials, meanwhile, have signaled willingness to strengthen cooperation with the U.S. and properly manage differences, according to financial press reports. USTR Jamieson Greer’s recent comments on August 24th, 2026, that Washington is shifting from trying to change China’s economic model toward simply protecting the U.S. market underscores the likelihood of durable tariff pressure even if the summit returns only limited deals, with the current one-year trade arrangement set to expire in November unless extended.

- Headlines continue to surface regarding Japan’s FY27/28 budget. Unsurprisingly, the government is expected to pay high interest costs during FY27/28 [Japan plans record ¥16.6T (v ¥15.5T prior) interest costs for FY27 (Yomiuri)]. Recall prior reports, also, noted the Finance Ministry is said to be considering setting the assumed interest rate at 3.8% [prior: 2.6%] for calculating debt servicing costs in FY27/28 budget request [Aug 21st]. Prior reporting has indicated the FY2027 budget requests will be submitted to the Finance Ministry by end-August; Tax incentives and special retail JGBs have been previously floated in the press. Meanwhile, Japan continues to seek to broaden the investor base for JGBs. This stance was confirmed earlier by the country’s Finance Min Katayama.

- Overall, Tuesday has been another quiet trading session for JGBs. Last week the US Treasury announced it would at least double the size of its liquidity-support buyback operations for longer-dated nominal coupon securities (10- to 20-year and 20- to 30-year sectors) to a minimum of $4 billion per operation, effective September 9th, 2026. Previously speculated funding methods for the debt repurchases included using the TGA. On Mon, CNBC reported that Treasury Secretary Scott Bessent could indeed tap the TGA’s roughly $950 billion cash balance to help fund the purchases. The news helped firm long-end Treasury prices and pull yields lower; the 10-year yield moved from levels around the time of the report to approximately 4.70% by the US market close.

- The August RBA meeting minutes confirmed the central bank’s hawkish bias and on-hold stance.

- South Korea Labor Talks: SK Hynix (000660.KR) union members rejected a tentative 2026 wage and collective bargaining agreement, with 50.08% (7,535 members) voting against it, following earlier talks that the wage agreement included a 6.3% pay rise plus a mix of cash (40%) and company shares (60%) as bonuses. Separately, Hyundai Motor (005380.KR) reached a tentative agreement with its South Korean labor union for a KRW 100,000 (=$72.31) monthly base salary increase, and KakaoBank’s union is planning to hold a 5-day strike in late August.

- Naphtha supply issues appear to still be prevalent. This is of particular concern for South Korea’s chip industry. That being said, South Korea’s government plans to extend its emergency supply measures. These policies were scheduled to conclude at the end of August. However, the supply situation from Sept onward will need to be 'managed', according to South Korea. South Korea previously implemented export curbs for naphtha back in March.

- US equity FUTs +0.1% to +0.3% during Asia trading.

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

- Mon Aug 24th: TW July Unemployment Rate, (Mon night, MX Q2 GDP).

- Tue Aug 25th: KR Aug Consumer Confidence, SG Q2 Prelim GDP, AU RBA Meeting Minutes, JP BoJ Core CPI, TW July Industrial Production, HK Jul Trade Balance, (Tue night, US Jul New Home Sales & Building Permits, US Aug CB Consumer Confidence).

- Wed Aug 26th: AU Q2 Construction Work Done, SG July Industrial Production, TH BoT Interest Rate Decision, (Wed night, US July Core PCE, US Q2 GDP (2nd revision) & Prelim Personal Spending/Durable Goods Orders, RU July Industrial Production).

- Thu Aug 27th: KR BoK Interest Rate Decision, CN July Industrial Profit YTD, PH BSP Interest Rate Decision, (Thu night, ECB Monetary Policy Accounts, US Jackson Hole Symposium Begins, MX July Trade Balance).

- Fri Aug 28th: JP Aug Tokyo CPI & Core CPI, JP July Unemployment Rate, PH July Trade Balance, TH July Industrial Production, EU Aug Consumer Confidence, (Fri night, CA Q2 GDP, US Jackson Hole Symposium Fed Governor Warsh Speaks).

Holidays in Asia this week

- Tue Aug 25th: Indonesia, Malaysia.

Headlines/economic data

Australia/New Zealand

- (AU) ASX 200 opens +0.1% at 9,111.

- (AU) Reserve Bank of Australia (RBA) August Minutes: "Several" board members judged quite possible upside risks to inflation would crystallize.

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 77.5 v 75.0 prior [strongest reading since the "Iran War began" in late-February].

- (AU) Australia RBA David Jacobs [Head of Domestic Markets]: Aim is a system that can flexibly supply whatever quantity the banking system demands, while keeping the cash rate close to the Board’s target - "The Road to Ample – Towards a Demand-driven Liquidity Regime" speech, RBA, Sydney, Australia.

- (AU) Australia sells A$1.2B v A$1.2B indicated in 1.00% Nov 2031 bonds; Avg Yield: 4.631% v 4.8309% prior; bid-to-cover: 3.63x v 4.24x prior.

China/Hong Kong

-(CN) Shanghai Composite opens -0.5% at 3,863; (HK) Hang Seng opens +0.5% at 25,634.

-(CN) US considers 7.5% China overcapacity tariff before Xi-Trump talks [US market close].

-(CN) China said to be willing to strengthen cooperation with US and properly manage differences - financial press [EU market close].

-(CN) China's Vice President Han Zheng meets India's National Security Advisor in Beijing, China - Xinhua.

-(CN) China has proposed an amendment to road traffic law; under the amendment autonomous driving and driver-assistance functions are ‘defined’, liability issues have also been clarified - Xinhua.

-(CN) Chengdu local government further eases housing rules, cuts payments -15% - Press.

-(CN) US scrutiny deters certain China tariff refund claims; at least 17 companies from China have received a total of $160M - Nikkei.

-(CN) China PBOC sells CNY30B vs. CNY30B indicated in 3-month and 6-month bill in Hong Kong.

-(CN) DEEPSEEK.IPO Reportedly China hackers used Deepseek to intensify attacks - press.

-(CN) China PBOC sets the yuan mid-point at 6.7852 v 6.7841 prior.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY386B in 7-day Reverse Repos; Net injects CNY386B v injects CNY340B prior.

Japan

-(JP) Nikkei 225 opens -0.5% at 65,279.

-(JP) Japanese Govt reportedly considers tax breaks on gains from sales of non-core businesses - press [EU market close].

-(JP) Japan Govt reportedly moving ahead with new AI platform to speed up materials development by 10-fold - press [EU market close].

-(JP) BOJ Jul Core CPI (ex special factors) Y/Y: 2.3% v 2.6% prior; Core-Core CPI (ex special factors) Y/Y: 2.2% v 2.0% prior.

-(JP) Japan Jun Final Leading Index CI: 116.5 v 116.4 prelim.

-(JP) Japan plans record ¥16.6T (v ¥15.5T prior) interest costs for FY27 - Yomiuri.

-(JP) Japan Fin Min Katayama: Can't comment on budget requests for FY27; Will focus on key policies in FY27 budget to drive economic growth; Will balance fiscal sustainability and economic growth, communicate with markets on this stance.

-(JP) Japan Chief Cab Sec Kihara: Assessing global impact of US-Iran sanctions; Still in process of gauging what impact new US sanctions related to Iran will have on Japan.

-(JP) Japan Trade Minister Akazawa: Won't release government oil stockpile in September, October.

-(JP) Japan former BoJ Board Member: Groundwork is set for BoJ rate hike next month - US financial press.

-(JP) Japan to abolish paper shareholder meeting documents - Nikkei.

-(JP) 4186.JP World's leading photoresist maker enjoys strong sales - Japanese press [update].

Korea

-(KR) Kospi opens -2.4% at 6,536.

-(KR) South Korea Fin Min: Stronger KRW to help ease the rise in crude oil-related import costs; To extend naphtha supply steps through January - Cabinet Meeting.

-(KR) South Korea Aug Consumer Confidence: 104.5 v 106.8 prior.

-(KR) South Korea to reduce government bonds issuance next month - Infomax.

-(KR) South Korea sells KRW200B vs KRW200B indicated in 2.75% 20-year bonds at Avg Yield: 4.570% v 4.530% prior.

-(KR) 005380.KR Reaches tentative agreement with South Korea labor union on a KRW100K ($72.31) monthly base salary increase - Press.

-(KR) 000660.KR SK Hynix union members reject tentative wage agreement, with 50.1% voting against - Yonhap.

Other Asia

-(TW) On Monday, Taiwan charged 9 over illegal AI server exports to China - Press [update].

-(IN) USD/INR India Central Bank (RBI) said to be likely selling USD through state-run banks to limit the Rupee weakness – traders.

-(TH) Thailand Central Bank sells THB65B vs. THB65B indicated in 3-month bills; Avg Yield: 0.95206% v 0.93518% prior; bid-to-cover: 1.01x v 1.29x prior.

North America

-(US) Treasury could use ~$950B general account to fund bond buybacks - CNBC [**Note: last week, Tier1 analysts laid out exactly three funding options and TGA was on the map, but the base case was bill issuance] [US market close].

-(CA) Canada PM Carney: Canada has options for energy retaliation, but will start with positive initiatives; It may be difficult to go dollar for dollar on counter tariffs, we may go a "more targeted" route [US market close].

-(US) President Trump: Beating Iran very badly; Reiterates Iran can't have nuclear weapon; Gasoline prices are going to go down - Tele-Rally [Call in support of Darline Graham's senate campaign in South Carolina], Oval Office.

-(US) President Trump: This country desperately needs aluminum; We need aluminum badly, we mainly get from Canada; I do want to get beef prices down - Tele-Rally [Call in support of Mike Mazzei's gubernatorial campaign in Oklahoma], Oval Office.

-(US) Reportedly US govt preparing to rescind as many as 200K business and tourism visa - press.

-(US) US Supreme Court sides with Trump Admin for the time being on mail ballot restrictions.

-(US) US proposes South Korea to acquire stake in Westinghouse; The Trump Administration proposed to jointly acquire an equity stake in Westinghouse Electric Co. - Daily [South Korea later denied the article].

-(US) BTC/USD Bitcoin tops $80,000 for first-time since Mid-May.

-(US) AMZN Plans new automated 'Tetromino' warehouses using AI and robotoics; Will invest ~$530M+ - Business Insider [US market close].

-(US) AAPL Said to be eyeing iPhone price hikes for next month’s updated models (some models' prices to be hiked by around $100) and preparing retail store changes to support a slew of new home devices - financial press (update) [US market close].

-(US) META Plans to launch AI agent platform named "Hatch" in the coming weeks - The Information.

-(US) TSLA Tesla increases price of Cybertruck dual-motor AWD, premium all-wheel drive to $74,990 and $84,990 respectively in the US - Website.

-(CA) US Trade Rep Greer: Canada prohibited sale of US wine and spirits along with other products over a year ago; We offered them a lot but they wanted more [US market close].

-(CA) Canada to announce retaliatory US tariffs on Tuesday; cites a Canadian official - AP.

-(BR) Brazil Finance Minister Durigan: Brazil monthly minimum wage for 2027 will be BRL1,741.

-(VE) Venezuela Interim President Delcy Rodriguez: 28% of earthquake debris removed, equal to 580k tons - State TV.

-(VE) US opening Venezuela's telecommunications sector to new investment and technology, while explicitly excluding Chinese companies - SCMP.

Europe

-(UK) UK PM Burnham: European leaders may meet around United Nations General Assembly (UNGA) to talk Ukraine; Ukraine low stockpile of interceptors is "fixable" - US financial press interview in Kyiv, Ukraine.

-(UK) UK PM Burnham: Continue to support Ukraine; Ukraine-Russia war is similar to UK fight against the Nazi's - Kyiv during first visit [EU market close].

-(UR) Ukraine President Zelenskiy: Will seek talks with Putin on Grain exports; Ukraine's sea grain exports aren't fully blocked by Russia [EU market close].

-(DE) German Fin Min Klingbeil: Rise in bond yields is a result of Trump's war in Iran [EU market close].

-(IE) Ireland gets warning about overspending tax revenues - Press.

-(RU) Russia Local Governor: Fire broke out at Afipsky oil refinery in Russia's Krasnodar region.

Middle East

-(IR) Treasury Sec Bessent: We're going to end the Iran threat; We need to cut every economic lifeline that Iran runs on; No one is above the reach of US sanctions, incl China; Expect "a major financial institution" to be sanctioned this week [US market close].

-(IR) Iran Econ Min: Fully prepared for US economic campaign [EU market close].

-(IR) IEA Chief Birol: Not discussing a second release of strategic reserves at this time [US market close].

-(IR) Strait of Hormuz commodity vessel transits falls to more than "three month lows" [lowest level since May, 2026]; only 1 commodity vessel transited the Strait on Mon [lowest number since May 7th]; cites shipping data - financial press.

-(IR) UKMTO: Received a report of an incident 9NM Northeast of Omam's Ash Shishah.

-(PK) Pakistan Army Chief completes Tehran visit [Oman’s Foreign Minister will visit Tehran to Tues].

-(PK) Pakistan Army Chief Munir held discussions with Iran on focused measures to prevent further escalation - Pakistan Military Statement.

Levels as of 01:20 ET

Nikkei 225 +0.4%; ASX 200 +0.7%; Hang Seng -0.2%; Shanghai Composite +0.2%; Kospi +0.2%.

Equity S&P500 Futures +0.1%; Nasdaq100 +0.3%; DAX +0.2%; FTSE100 +0.1%.

EUR 1.1671-1.1654; JPY 159.40-159.04; AUD 0.7160-0.7145; NZD 0.5968-0.5956.

Gold -0.2% at $4,644/oz; BTC +4.4% at $80,551; WTI Crude Oil -0.1% at $84.94/bbl; Copper -0.1% at $6.5978/lbs.