Oil falls on US pause in hostilities

Asia market update: Oil falls on US pause in hostilities; JPY up ~9 Big Figures; Astra-BMS merger?; US July ISM Mfg tonight; US Big Name earnings continue.

General trend and developments

- WTI Crude oil may have ended July +25% higher than the start of the month but today opened its August account down more than -7% at the open (FUTs briefly as low as $77/bbl handle). Over the weekend Pres Trump paused further military strikes on Iran after requests from regional nations (incl. Iran), but conditioning the cancellation on securing a rapid diplomatic agreement, with talks to restart Monday. Trump said key terms include the immediate, complete and total opening of the Strait of Hormuz and an elimination of Iran’s nuclear threat.

- OPEC+ also agreed overnight to raise output targets from September by an additional 188K bpd. The latest increase completes the rollback of the 1.65M bpd in voluntary cuts from 2023 (although total production is still significantly lower than pre-cut baselines).

- US equities were strong on the news, gapping up +0.7% to 1% at the open and holding the entire gap throughout the first session of the week. However, the cheer did not spread to Asia, where the Nikkei (-1%) and the Kospi (-5%) could not hold onto all of their Friday gains. Shanghai also down -0.6% and the best the Hang Seng & ASX could do was tread water.

- Japan & US confirmed to be engaged in ongoing joint intervention and coordination to halt the Yen's decline; at its peak today nearly 9 Big Handles off its 40-year lows earlier last week, from nearly 164 down to today's high of just over 155/USD - interestingly 155 was also the precise low following the last big BOJ intervention in late April. The massive move may force more positioning unwinds this week (Some hedge funds today reportedly selling USD/JPY in cash markets). Japanese, Korean and US officials have all now confirmed last week's three-way coordinated actions, which included South Korea's rare support for their own currency. The interventions coincided with a hawkish shift from Bank of Japan Gov Ueda after Friday's BOJ decision (“Will have firm discussions from next meeting on”). Comes as the long-end of the US Treasury yield curve is sitting on the edge of breaking even higher, introducing additional bond market pressure this week. (US 10-year FUTs Treasury yield rose to 4.6759%; 30-year FUTs Treasury yield rose to 5.239%).

- An amusing aside from Reuters, which at Friday’s Camp David Trump cabinet meeting snapped a memo card belonging to US Treas Sec Bessent, with a handwritten "To Do" note: "Buy Japanese Yen (JPY) $5-10 bil". (Amid press reports that Japan may have sold ~$65B in USD/JPY on Friday, which would be about $10B less than late April's intervention).

- Japanese OIS chances of rate hikes in September jumped to 40% late Friday (vs 25% day before), with October's chances jumping to 89% (79% day before). In today’s cash markets Japanese 2-year JGB yields rose to 1.54%, highest since 1995, while 5-year JGB yields touched a record high of 2.05%.

- In corporate news, AstraZeneca and Bristol Myers Squibb said to be talking about a $400B megamerger.

- Amid record-pace capex spending by Japanese big companies this year, Toyota and NTT leading with AI and expansion investments.

- On Friday memory-makers SK Hynix ended up +30% and Samsung ended up nearly +27%, the biggest one-day gains on record for both companies. Samsung actually ended up 2% for the week, eating up all of its massive cumulative losses Monday through Thursday. The Kospi index’ unprecedented +18% one-day gain at first glance would appear to be a printing error but is likely to put more pressure on South Korean regulators to take further action on the 18 single-stock ETFs already authorized since May 17th. Since all 18 ETFs are based on just Samsung or Hynix stock, and the two stocks comprise >50% of the Kospi, the underlying recipe for unmanageable volatility remains.

- Although the volatility trigger in Korea last week may have been the wipe-out of US hedge fund Situational Awareness, the issue is of systemic importance due to the subsequent leverage wipeout that struck South Korean retail investors. Local financial regulators confirm that over 1.2M retail accounts received margin calls, with 320-360K accounts being completely liquidated due to the severe drops through Thursday in the Kospi, Samsung and Hynix. In other words, 3.4% of the entire adult population in South Korea received margin calls, with ~ 1% suffering full account liquidations.

- Today Hynix and Samsung both down -8% in Korean trading with Japanese chip-relateds Renesas, Advantest and Tokyo Electron also giving up -3% to -5% of their Friday gains.

- In AI-related weekend news, further reports OpenAI is delaying its IPO until 2027 amid investor concern over high cash burn, while Blackstone has secured a deal with competitor Anthropic, which is actively preparing for its own IPO. Concurrently, investigators probing the Hugging Face incident caused by rogue OpenAI agents have uncovered evidence that other AI agents also escaped containment, prompting an expansion of the investigation.

- Further signs of AI-related trouble in the world of outsourcing: Indian tech giant Wipro to lose 25% of its revenue from Meta this year due to the US giant cutting at least 25% of the work that it used to outsource to Wipro.

- Alibaba confirmed to launch Qwen 3.8-Max, its most powerful model with 2.4 trillion parameters.

- After Friday’s denial by Tesla selling off its China business, SpaceX said to be making moves to keep Chinese nationals and parts out of its supply chain.

- All the major economies in Asia including SE Asia saw expansion in their Manufacturing PMIs for July. Within the continued strong PMI figures for Japan, output recorded its strongest increase since early 2014 while overseas orders grew at the fastest pace in over five years, especially from Asia and the US. Taiwan also continued its strong performance, with new orders growing at one of the fastest rates in five years but production growth was unable to keep up. China’s RatingDog China PMI fell to 50.9 from 51.7 in June.

- Another big week for US tech earnings, with Palantir on Monday after the close, AMD on Tuesday after the close, along with SpaceX’s highly anticipated debut public-market earnings. (However, SpaceX’s release comes with a potentially sour after-taste for the under-pressure stock, as the event will trigger the first major share lock-up expiry for insiders, who will be able sell up to ~20% of their shares immediately). SanDisk reports Wednesday.

- Other notable earnings this week include Berkshire Hathaway, Caterpillar (2nd highest weight in the Dow) and Eli Lilly (healthcare having been a leading beneficiary from the recent rotation out of AI stocks).

- US July Nonfarm Payrolls at the end of this week.

- US equity FUTs +0.6% to +0.8% during Asia trading.

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

- Mon Aug 3rd: Global July PMI’s Day, (Mon night, US July S&P/ISM Mnfg PMI).

- Tue Aug 4th: KR July CPI, JP Benchmark 10-Year JGB Auction, (Tue night, US Jun Trade Balance, US Jun JOLTS).

- Wed Aug 5th: KR July USD FX Reserves, NZ Q2 Jobs, AU July S&P Mnfg/Svcs PMI, JP BoJ Monetary Policy Meeting Minutes, JP July S&P Mnfg/Svcs PMI, CN July RatingDog Svcs PMI, ID Q2 GDP, IN Rate Decision, Global July Services PMI’s Day, EU Jun PPI, (Wed night, US July ADP Nonfarm Employment Change, US July S&P/ISM Svcs PMI).

- Thu Aug 6th: AU Jun Trade Balance, EU Jun Retail Sales.

- Fri Aug 7th: JP Jun Household Spending, PH Q2 GDP, CN July Trade Balance (Fri night, US July Nonfarm Payrolls & Unemployment Rate).

Holidays in Asia this week

- No holidays in Asia this week.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens -0.4% at 8,941.

-(AU) Australia July Final PMI Manufacturing: 52.0 v 51.7 prelim (confirms 4th month of expansion).

-(AU) Follow up: Australia said to raise demands on large tech firms regarding payment for news stories - Press.

-(AU) Australia July Melbourne Institute Inflation M/M: +1.0% v -0.4% prior; Y/Y: 4.0% v 3.9% prior.

-(AU) Australia confirms 62 confirmed detections of H5 bird flu in wild seabirds - Statement.

-(NZ) New Zealand Fin Min Willis: Fuel price support price remains for now, but under active review.

-(NZ) New Zealand Jun Building Permits M/M: -3.6% v -4.0% prior.

China/Hong Kong

-(CN) Shanghai Composite opens -0.5% at 3,812; (HK) Hang Seng opens +0.4% at 25,987.

-(CN) China July RatingDog PMI Manufacturing: 50.9 v 52.0e (9th month of expansion).

-(CN) China's CSRC [China securities regulator] Chief Wu: Preparing for CNY counter and REITs Connect with Hong Kong; Plans to add RMB trading counters in Southbound STK connect; To launch more ETF products tracking Chinese assets - CGB FUTs Launch Ceremony, Hong Kong.

-(CN) In 2026, China convertible bond sales might exceed CNY100B – Chinese press.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY63B in 7-day Reverse Repos; Net drains CNY563B v injects CNY45B prior.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY300B in 1-day Overnight Reverse Repos.

-(CN) China PBOC sets the yuan mid-point at 6.7898 v 6.7894 prior.

-(HK) Macau July Casino Rev (MOP): 20.3B, -8.4% y/y v -6.2%e [weekend update].

-(HK) Hong Kong CEO Lee: Hong Kong is actively promoting Yuan internationalization - CGB FUTs Launch Ceremony, Hong Kong.

-(HK) 0005.HK Announces completion of first China government bond FUT trades in Hong Kong.

Japan

-(JP) Nikkei 225 opens -1.0% at 63,710.

-(JP) Japan July Final PMI Manufacturing: 54.5 v 54.7 prelim (confirms 6th month of expansion).

-(JP) Japan Top FX Diplomat Mimura: Will not hesitate to conduct further joint intervention (inline).

-(JP) Japanese official: Fin Min Katayama expected to announce on Monday that Japan and US took "joint action" to arrest the decline in the Yen; The Yen "operation is still ongoing" - press [weekend update].

-(JP) Japan Finance Ministry: Confirms conducted coordinated Yen-buying intervention with US on Friday.

-(JP) Japan Fin Min Katayama: No comment on whether there was Forex intervention today.

-(JP) USD/JPY Some hedge funds reportedly selling USD/JPY in cash market - Traders' reports.

-(JP) Verisk estimates insured losses from last week's Kumamoto, Japan earthquake at ¥220-340B.

Korea

-(KR) Kospi opens -3.6% at 6,358.

-(KR) South Korea July PMI Manufacturing: 53.1 v 52.1 prior (8th month of expansion).

-(KR) Korea Exchange activates sidecar on Kosdaq following Kosdaq 150 FUTs rising by 'more than' +6%, programme trading halted for five-minutes.

Other Asia

-(ID) Indonesia Presidential Chief of Staff: Government to only ban export of rare earth if it's the main products, not as other mineral byproducts

-(ID) Indonesia July CPI M/M: -0.1% v +0.1%e; Y/Y: 2.9% v 3.2%e.

-(ID) Indonesia July PMI Manufacturing: 50.2 v 46.9 prior (moves back into expansion after one month contraction).

-(TH) Thailand July PMI Manufacturing: 54.2 v 53.6 prior (15th month of expansion).

-(PH) Philippines July PMI Manufacturing: 51.8 v 50.9 prior (3rd month of expansion).

-(MY) Malaysia July PMI Manufacturing: 50.7 v 50.7 prior (2nd month of expansion).

-(TW) Taiwan July PMI Manufacturing: 55.1 v 55.2 prior (8th month of expansion).

-(VN) Vietnam July PMI Manufacturing: 52.9 v 51.8 prior (13th month of expansion).

-(VN) Vietnam July CPI Y/Y: 4.5% v 4.6%e.

-(VN) Vietnam July Retail Sales Y/Y: 14.5% v 14.8% prior.

-(VN) Vietnam July Industrial Production Y/Y: 14.5% v 12.7% prior.

-(VN) Vietnam July Trade Balance: -$3.6B v -$2.5Be.

-(MY) According to Japan brokerage firm, the loss by the Anwar Bloc has ‘limited’ impact on the Ringgit currency (MYR) [refers to state election results] – US financial press.

North America

-(US) President Trump: There's a deal on Hormuz and there will be a deal on denuclearization; US intervening because US has a good relationship with Japan; US getting financial benefit out of arrangement.

-(US) Treasury Sec Bessent: Friday's coordinated foreign exchange actions countered disorderly yen movements; We will not hesitate to participate in further joint intervention.

-(US) US Acting Attorney General Blanche: Rescinds May 18th anti-weaponization fund order (as expected)-(US) Acting Director of National .

Intelligence Bill Pulte: After speaking with Pres Trump and Jay Claton, we have decided the DNI transition will take place on Monday (Aug 3rd) [weekend update].

-(US) White House announces tariff rate quota on imports of quartz surface products (QSP), effective Aug 15th [weekend update].

-(US) OPENAI.IPO*Reportedly while probing Hugging Face incident, investigators have found evidence that other AI agents escaped containment; Investigators will now expand probe - press [weekend update].

-(US) US Acting Attorney General Blanche: Rescinds May 18th anti-weaponization fund order (as expected).

-(US) Trump's NIH chief Jay Bhattacharya outlines sweeping reforms for pandemics, including vaccine injury body and a vaccine injury body, in bid to improve future US response to health crises (update).

-(US) President Trump to sign an executive order at 1:30pm ET on Monday.

-(US) AZN* Held talks with Bristol Myers Squibb on pharmaceuticals megadeal valued at nearly $400B; both companies have not commented on the report - FT.

Europe

-(ES) EU convenes meeting of interior ministers on Tues (Aug 4th) to discuss Ceuta migrant crossings - press [weekend update].

-(HU) Hungary PM Magyar: Hungary's Pax nuclear plant will be powered down completely on Sunday [weekend update].

-(UK) PLTR NHS England to revise Palantir platform data following concerns - FT.

Middle East

-(IR) Trump agrees to cancel new attack on Iran "subject to being able to rapidly make a DEAL"; Asked by Iran and other Middle Eastern countries to hold off attack - Truth Social [weekend update].

-(IR) Follow up: President Trump: New round of Iran talks to start Monday - Remarks on Air Force One.

-OPEC+ agrees to raise output targets by an additional 188K bpd, as expected, commencing in Sept, 2026 [Sunday update].

-(IR) Iran Foreign Minister Araqchi tells Saudi counterpart that any aggression by the US and Israel will be met with a decisive response [weekend update].

-(IR) UKMTO received report of an incident 20NM Northeast of Khasab, Oman [timing uncertain].

Levels as of 01:20 ET

Nikkei 225 -1.1%; ASX 200 +0.2%; Hang Seng flat; Shanghai Composite -0.7%; Kospi -5.1%.

Equity S&P500 Futures +0.6%; Nasdaq100 +0.8%; DAX +1.1%; FTSE100 +0.4%.

EUR 1.1559-1.1527; JPY 157.89-155.23; AUD 0.7051-0.7027; NZD 0.5909-0.5878.

Gold +0.4% at $4,059/oz; BTC -1.0% at $62,820; WTI Crude Oil -6.1% at $79.49/bbl; Copper +1.2% at $6.5450/lbs.