Nikkei plays catch up back to pre-Black Monday levels

Asia market update: Nikkei plays catch up back to pre-Black Monday levels; Markets await direction from US inflation [US July PPI & US July CPI].

General trend

- Post-holiday the Nikkei (+3.0%) caught back up to levels before last Monday’s ~15% crash and above 36K for first time since Aug 2nd. Other Asian equities were little changed.

- Japan’s July PPI rise to the 3% handle was the largest y/y rise since August 2023.

- Singapore Final GDP came in above prelim and upwardly narrowed 2024 GDP growth forecast from +1.0-3.0% to 2.0-3.0%.

- By two different measures, Australian consumer confidence improved over both last week and last month. Meanwhile Business Confidence fell, but Business Conditions rose m/m.

- Australia Q2 Wage Price Index was more or less inline, with the Aussie dollar steady after the result. The private sector wage rise was the lowest rise for a June quarter since 2021 and the equal lowest rise for any quarter since December quarter 2021.

- WTI Crude hitting nearly $80 overnight on increased Middle East tensions was added to by Adani Ports forecast of Red Sea disruptions to remain until at least end-2024 and on the back of earlier reporting by the UKMTO reporting an explosion near a vessel near, Hodeidah (Yemen), although the ship was able to continue to port.

- US equity FUTs +0.2% to +0.3% during Asian trading.

Looking ahead (Asian time zone)

- Tue Aug 13th (Tue eve DE ZEW Aug Econ Sentiment, Tue night US July PPI).

- Wed Aug 14th NZ RBNZ rate decision, Thai Court to rule on PM Srettha dismissal /ethics case, 3 pm local time (Wed eve EU Q2 prelim GDP + Ind Production + Employment; UK July CPI; Wed night US July CPI).

- Thu Aug 15th JP Q2 prelim GDP, CN July ‘data dump’, AU July employment, (Thu eve UK Q2 prelim GDP, Thu night US July Retail Sales).

- Fri Aug 16th (Fri night US Michigan Aug Consumer Sentiment).

Holidays in Asia this week

- Mon Aug 12th Japan, Thailand.

- Thu Aug 15th India, South Korea.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 7,814.

- Australia Q2 Wage Price Index Q/Q: 0.8% v 0.9%e; Y/Y: 4.1% v 4.0%e.

- Australia July NAB Business Confidence: 1 v 4 prior.

- Australia Aug Westpac Consumer Confidence Index: 85.0 v 82.7 prior.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 83.9 v 81.3 prior.

- Australia sells A$100M v A$100M indicated in 1.25% Aug 2040 indexed bonds: Avg Yield: 1.8659% v 1.9160% prior; bid-to-cover: 3.45x v 2.83x prior (May 14th, local time).

- New Zealand Jun Net Migration: 2.7K v 1.4K prior.

- New Zealand RBNZ: Household Survey shows 2-year median inflation expectations 3.0% (unchanged q/q).

China/Hong Kong

- Hang Seng opens +0.3% at 17,160; Shanghai Composite opens +0.1% at 2,860.

- General Motors said to cut jobs and plans to restructure ops in China - financial press.

- China regulators reportedly told some rural banks to renege on bond trades – press [overnight update].

- OPEC Monthly Oil Report (MOMR); Notes softening expectations for China's oil demand growth in 2024 [overnight update].

- US) More press speculation that US reportedly drafted new rules that would limit shipments to China of the machinery and software used to make chips from a number of countries if they are made with US parts or technology, as well as some types of semiconductors; US has also considered lower thresholds for China exports of AI chips made by Nvidia and other companies; Some of the rules that the US plans to impose would have significant carve-outs - NYT [overnight update].

- China PBOC sets Yuan reference rate: 7.1479 v 7.1458 prior (weakest since Nov 20, 2023).

- China PBOC Open Market Operation (OMO): Sells CNY386B in 7-day reverse repos; Net injects CNY385B v net injects CNY74B prior.

Japan

- Nikkei 225 opens +1.3% at 35,490 (post-holiday).

- Japan July PPI (domestic CGPI) M/M: 0.3% v 0.3%e; Y/Y: 3.0% v 3.1%e.

- Follow up: Japan Parliament to hold special session at lower house committee on Aug 23rd [Fri] to discuss BOJ rate hike – financial press.

South Korea

- Kospi opens +0.2% at 2,624.

- South Korea July Import Price Index M/M: 0.4% v 0.7% prior; Y/Y: 9.8% v 9.7% prior.

- South Korea Jun Money Supply M2 M/M: 0.6% v 0.0% prior.

Other Asia

- Philippine Central Bank (BSP) Gov Remolona: We project that inflation will soon return to target - financial press.

- Singapore Q2 Final GDP Q/Q: 0.4% v 0.2%e; Y/Y: 2.9% v 2.7%e.

- Thai Cabinet approves creation of National Credit Guarantee Agency; Also agrees to expand govt equity fund [Vayupak Fund] to invest in Thai stocks - financial press.

- India July CPI Y/Y: 3.5% V 3.6%E [overnight update].

North America

- (US) Former Pres Trump interviewed by Elon Musk on X; Musk says massive DDOS attack on X, working on shutting down the attack - financial press.

- (US) S&P Global: Demand for raw materials and semi-manufactured goods weakened in July, falling at fastest rate this year; Worldwide supply chain spare capacity rises, adding to the calls for Fed to lower interest rates soon; Suppliers to North America report underutilized capacity.

- BAC CEO: If the Fed does not start cutting interest rates relatively soon, US consumers could become dispirited; Once the American consumer really starts going very negative, then it's hard to get them back - CBS.

- (US) July NY Fed 1-year Inflation Expectations: 3.0% v 3.0% prior; 3-year expectations: 2.3% v 2.9% (series low).

- (US) USDA World Agricultural Supply and demand estimates (WASDE) crop report: End 2024/2025 US Stocks (M bu): Soybeans: 560 v 472e; Corn: 2,073 v 2,092e; Wheat: 828 v 860e.

Europe

- Adani Ports: Red Sea disruptions to remain until at least end-2024 - financial press.

- (UK) Navy (UKMTO): Reports explosion near a vessel, 63NM south-west of Hodeidah (Yemen); Crew reported safe, vessel is proceeding to its next port of call.

- Bank of England's (BOE) Mann (dissenter) stated that UK wage growth was still a concern for inflation despite the main rate remaining at the BOE's 2% target in June.

- (DE) Germany Jun Current Account: €23.2B v €18.5B prior.

- (IL) More press speculation that Israeli intelligence community's updated assessment that Iran is poised to attack Israel directly in retaliation for the assassination of Hamas' political leader in Tehran and is likely to do it within days, but the situation is "still fluid" - Axios.

Levels as of 01:20 ET

- Nikkei 225 +2.9%; ASX 200 +0.1%; Hang Seng +0.3%; Shanghai Composite -0.2%; Kospi +0.2%.

- Equity S&P500 FUTs +0.2%; Nasdaq100 FUTs +0.3%, Dax +0.3%; FTSE100 +0.2%.

- EUR 1.0928-1.0941: JPY 146.92-147.80; AUD 0.6579-0.6601; NZD 0.6013-0.6038.

- Gold -0.2% at $2,500/oz; Crude Oil -0.6% at $79.59/brl; Copper -0.7% at $4.0418/lb.