Nvidia results out of the way frees up market to look ahead again

Asia market update: Nvida results out of the way frees up market to look ahead again; CN to help steel sector; CN-US AI war heats up; JP 2-yr JGB coverage awful; KR BOK holds rates.

General trend

- Nvidia dipped -5% initially after slightly beating estimates, later paring losses to -3% in after hours trading. Co noted H20 chip sales to China fell by $4B. Forecast Q3 Rev of $54B assumes no H20 sales. Japan chip-relateds Advantest -2.0%, Tokyo Electron +1.7%.

- Aussie earnings peak season continued, while Australia private Capex for Q2 rose vs the prior fall. Business investment rose 0.9%. Businesses revised their expected capex for 2025-26 to be up by 12% since their last estimate.

- Hang Seng underperformed for a second day running, -1.2% with the Kospi and Nikkei up +0.8% and +0.6% respectively.

- Japan trade negotiator Akazawa postponed plans to visit US this week to instead next week. Meanwhile, Japanese Aug 1 - 10 exports and particularly imports fell significantly on a year-by-year basis, adding grist to the suspicion that US trade policy may have a longer-term impact on the Japanese economy.

- Japanese five major trading houses all up today, with Mitsubishi Corp (after earlier taking a hit over withdrawing from three Japanese wind projects over cost overruns), turned around to be +2.3% after Berkshire Hathaway raised its stake to 10.23% to become a Major Holder (prior 9.74%). Mitsui Corp also said Berkshire had increased its holdings.

- Japan two-year JGB auction saw terrible coverage of only 2.84x, lowest demand since Sept 2009, compares to 12-month average of 4.01x. Bond market reaction was muted, however, with 2-year yields paring back early 1bp gains to be flat on the session. JP long-end yields down ~2-3bps.

- Toyota reported record July global sales, with US exports surging 25% y/y in July (likely due to front-running of the Aug 1st US-Japan trade deal deadline).

- China-US AI war heats up as China LLM player Cambricon yesterday briefly overtook liquor co Moutai as China’s most valuable domestic company (building a CUDA-parallel stack to rival Nvidia’s architecture). Also yesterday China chipmakers reported to target a tripling of their AI chip output in 2026. Star (tech) Index today +4.8%.

- Former PBOC Gov Zhou said to 'push back' against China stablecoin idea less than a week after China said to consider use of Yuan-backed Stablecoins to drive usage of the Yuan internationally.

- China coming to help the dire state of its steel sector with plans to stabilize steel sector growth for 2025 and 2026.

- Bank of Korea kept rates steady, as expected, while ticking up CPI forecasts this and year and next, as well as edging up this year’s GDP forecast. Gov Rhee revealed the decision to cut was Not unanimous with one member calling for a rate cut. Most members are still open to a cut over the next three months.

- New Zealand’s August Business Confidence ticked up to nearly 50, while Activity Outlook remained mired below 40.

- China PBOC again set a stronger Yuan today, up to the 7.10 handle. Offshore Yuan moved higher right up to the July 7.14 resistance line, with any breaking of that line taking prices back to levels not seen since early Nov. 2024.

- BOJ board member Nakagawa added little new insight to BOJ thinking, although in her press conference did suggest that environment for a rate hike has improved since April, due to less uncertainty in trade.

- NY Fed President Williams earlier underscored Chair Powell’s messaging from last week suggesting a Sept rate could be in the cards.

- US equity FUTs -0.1% to -0.3% during Asian trading.

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

- Thu Aug 28th PH BSP Rate Decision, (Thu eve US Q2 GDP 2nd Est).

- Fri Aug 29th JP July Retail Sales, JP July Industrial Prod, JP Aug Consumer Confidence, IN Q2 GDP (Fri night US July Core PCE).

Holidays in Asia this week

- Mon Aug 25th Philippines.

- Wed Aug 27th India.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 8,962.

- Australia Q2 private capital expenditure: +0.2% V -0.2% prior.

- Australia sells A$150M v A$150M indicated in 0.25% Nov 2032 Indexed Bonds: Avg Yield 1.7518% v 1.8679% prior: bid-to-cover: 3.89x v 4.04x prior.

- New Zealand Aug ANZ Business Confidence: 49.7 v 47.8 prior.

- New Zealand July Filled Jobs M/M: 0.2% v 0.1% prior.

- RBNZ: Renews FX swap agreement with China PBOC.

China/Hong Kong

- Hang Seng opens -0.7% at 25,030; Shanghai Composite opens -0.1% at 3,796.

- China issues plans to stabilize steel sector growth for 2025 and 2026 - Press.

- HK$ HIBOR overnight interbank rate +86bps.

- China MOFCOM: Top China trade negotiator Li Chenggang is wlling to explore more cooperation with Canada - Comments on meeting Canada's Trade Official in Ottawa.

- Former PBOC Gov Zhou said to 'push back' against China stablecoin idea - Press [update.

- China analysts said to urge investor "caution" on AI rally - China Securities Journal.

- (CN) Reportedly Mexico to raise tariffs on Chinese goods; Tariffs to be included in budget plan - financial press.

- China Assistant Foreign Min comments on military parade: 26 foreign heads of state and government will attend the parade.

- China chipmakers reportedly target tripling output of AI chips next year – FT [overnight update].

- China issues statement on satellite communication; To support low-orbit satellite internet development [overnight update].

- China PBOC sets Yuan reference rate: 7.1063 V 7.1108 prior.

- China PBOC Open Market Operation (OMO): Injects CNY416B in 7-day reverse repos; Net injects CNY163B v drains CNY236B prior.

Japan

- Nikki 225 opens -0.4% at 42,319.

- Bank of Japan (BOJ) Nakagawa: Reaffirms to keep raising rates if Outlook is met.

- Japan 30-year JGBs fall 6bps to 3.17%.

- Japan sells ¥2.6T VS. ¥2.6T indicated in new 2-year JGB bonds; AVG yield: 0.8630% V 0.8410% prior; bid-to-cover: 2.84X V 4.47X prior (12-month average of 4.01x, weakest demand ratio since 2009).

- Japan trade negotiator Akazawa drops plan to visit US this week, due to "administrative matter" , as foreshadowed by Japanese officials yesterday - Japanese press.

- Japan Aug 1-10 Exports Y/Y: -4.5% v -2.0% prior; Imports -16.1% v -8.2% prior (provisional).

- Japan releases weekly flows data [period ended Aug 22nd]: Foreign buying of Japan equities: -¥496.8B v ¥1.17T prior; Japan buying of foreign bonds: -¥167.2B v -¥310.9B prior.

- Japan Trade Rep Akazawa: Urges US to issue order to cut Japanese auto tariffs [vernight update].

- Japan Inc. remains ‘coy’ on Alaska LNG – Nikkei [overnight update].

- (US) State Dept: US, Japan and South Korea remain united in efforts to counter threat posed by North Korean IT workers [overnight update].

Korea

- Kospi opens -0.4% at 3,175.

- Bank of Korea (BOK) leaves 7-day repo rate unchanged at 2.50%; as expected.

- Bank of Korea (BOK) Gov Rhee: Decision to keep policy steady was not unanimous (6-1); board member Sung-Hwan dissented to the rate decision and called for rate cut - post rate decision press conference.

Other Asia

- Thailand July ISIC Manufacturing Production Index Y/Y: -4.0% v -1.4%e (first drop in 5 months).

- Taiwan prosecutors: indicted three people for stealing TSMC core national key technology trade secrets under national security law [overnight update].

North America

- (US) Pres Trump fires Robert Primus from Surface Transportation Board, overseeing Union Pacific / Norfolk Southern rail merger; Primus to challenge termination - WSJ.

- Brazil Trade Panel approves 6-month anti-dumping duties on Polythylene resins from Canada, US as well as Polyester and steel sheets from China, others - statement.

- Microsoft: US Defense Sec Hegseth: Issued letter of concern to the co.; requested audit of the co's digital escort program.

- (US) Fed Gov Cook to file lawsuit as soon as today to overturn President Trump's firing - CNBC.

- (US) MBA Mortgage Applications w/e Aug 22nd: -0.5% v -1.4% prior.

- (US) Treasury Sec Bessent: Don’t want wider spread on mortgages vs treasuries; Do not think Nvidia needs financial support; Could take stakes in other areas, like shipbuilding.

- (BR) Brazil July Total Outstanding Loans (MXN):6.716 T v 6.691T prior; Outstanding Loans M/M: 0.4% v 0.4% prior.

- (US) Fed's Williams (voter): Fed could cut interest rates and still be somewhat restrictive; Nothing to say anything on allegations and situation around Lisa Cook: Fed independence is extremely important brings stability - CNBC.

- (US) DOE CRUDE: -2.4M V -1.9ME; GASOLINE: -1.2M V -1.7ME; DISTILLATE: -1.7M V 1.0ME.

- (MX) Mexico Pres Sheinbaum: We achieved a good framework for US security deal.

- (US) Treasury $70b 5-year note auction draws 3.724% V 3.983% prior, BTC 2.36 V 2.31 prior and 2.39 over the last 12 auctions.

Europe

- (UK) Aug CBI Retailing Reported Sales: -32 v -34 prior.

- (DE) Germany Chancellor Merz: Agreed with Macron to make a decision about the future of FCAS at end of year.

- (IT) Italy PM Meloni: Pledge to structurally cut energy costs.

- (PL) Poland Central Bank (NBP) Member Wnorowski: Sees 25bps cut at upcoming Sept MPC meeting.

- (RU) Russia extends gasoline exports ban for fuel producers until the end of Sept.

- (RU) EU said to consider secondary sanctions on Russia - press [EU had previously declined to sign on to threatened US secondary sanctions].

- (FR) France PM Bayrou: Ready to meet with opposition parties on Mon (Aug 27th) - TV interview.

- (RU) EU said to consider secondary sanctions on Russia - press [EU had previously declined to sign on to threatened US secondary sanctions].

- (CN) NATO Sec Gen Rutte: Russia and China preparing for confrontation with us and are expanding their defense industries.

- EU said to propose removing all tariffs on US industrial goods this week to meet Pres Trump's demands - press.

Levels as of 01:20 ET

- Nikkei 225 +0.6%, ASX 200 +0.1%, Hang Seng -1.2%; Shanghai Composite -0.5%; Kospi +0.8%.

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

- EUR 1.1635-1.1655; JPY 147.08-147.49; AUD 0.6503-0.6523; NZD 0.5847-5868.

- Gold +0.3% at $3,444/oz; BTC +1.1% at $113,040; Crude Oil -0.9% at $63.55/bbl; Copper -0.3% at $4.4865/lb.