Powell lights the rate-cut fuse Friday night – Asia continues the theme on Monday

General trend

- On Friday night Asia time US Fed Chair Powell gave the markets the message they had been waiting and wanting to hear at Jackson Hole; that US inflation is on a sustainable path to target (2%) and the time has come for policy to adjust. Data will determine timing and pace of rate cuts.

- USD index hit an 8-month low that night, while stocks and currencies rose (JPY +1.3%), along with Gold and Bitcoin.

- Likely to be an increased focus on US jobs going forward as Powell indicated that the dual mandate of the Fed was now squarely in play.

- Following through in Asia today bonds ticked higher in tandem with the rest of the world, while equities were mixed. The Nikkei under-performed -1.3% as the Yen strengthened. Automakers along with other Japanese exporters sold off during the morning in Tokyo.

- Currencies were slightly further up against USD, continuing Friday night’s post-Powell theme, led by JPY +0.3% (was up as much as +0.7%, well into the 143 handle during the Asian morning).

- Over the weekend Robert F. Kennedy Jr suspended his Presidential campaign and endorsed Donald Trump; By taking his name off the ballots in 10 battleground states he likely gives the Trump campaign a boost in the toss-up states that will decide the election, given his appeal to independent voters and some moderate Republicans and Democrats. The magnitude of such a boost is yet to be determined by how many supporters follow him to support the Trump campaign.

- China PBOC left MLF rates unchanged (at 2.3%) on their new monthly MLF operations date of the 25th (delayed one day today due to weekend), with a larger injection than expected. PBOC also injected a further 471B Yuan in regular 7 day reverse repo ops.

- US equity FUTs -0.1% during Asian trading.

Looking ahead (Asian time zone)

- Mon Aug 26th (Mon eve DE Ifo Aug Business Climate, Mon night US July Durable Goods).

- Tue Aug 27th N/A.

- Wed Aug 28th AU July CPI (Wed eve DE GfK Consumer Conf).

- Thu Aug 29th (Thu night DE prelim Aug CPI, US Q2 GDP 2nd est).

- Friday Aug 30th, JP July Industrial Production & Retail Sales, AU Retail Sales, JP Aug Consumer Conf (Friday eve various European prelim Aug CPI, Fri night India Q2 GDP, CA Q2 GDP, US Core PCE, Michigan Consumer Sentiment).

- Sat Aug 31st CN Aug National PMIs.

Holidays in Asia this week

- Mon Aug 26th Philippines.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,030.

- Australia Treasurer Chalmers could visit China ‘within weeks in early Sept’ [would be the first such trip to China in 7 years] – AFR [update].

- Follow up: NZ PM Luxon: We have an energy security crisis; Govt to reverse ban on offshore oil and gas exploration and allow electricity line companies to own generation - financial press.

China/Hong Kong

- Hang Seng opens +0.6% at 17,709; Shanghai Composite opens flat at 2,855.

- AI engineers in China said to be secretly accessing banned Nvidia chips via remote access - WSJ.

- Follow up: China govt said to urge local govts to accelerate special bond sales - Chinese press.

- China bond trading ‘collapses’ amid PBOC crackdown; cites data from CFETS – US financial press [update].

- China PBOC Gov Pan Gongsheng reiterated overall financial system is stable – Press interview [update].

- China PBOC said to be carrying out stress-tests on financial institutions for bond risks - report by PBOC-backed Financial News.

- (US) White House National Security Adviser Sullivan will visit China Aug 27-29th and will meet with Chinese diplomat Wang Yi in China – press [weekend update].

- US govt adds 123 new entities to its 'entity list', includes 63 in Russia and 42 in China [weekend update].

- China Pres Xi: China and UK should strengthen dialogue and cooperation - follows 1st call with UK PM Starmer [weekend update].

- China PBOC conducts CNY300B V CNY275BE in 1-year medium term lending facility (MLF) monthly setting at 2.30% VS. 2.30% prior.

- China PBOC sets Yuan reference rate: 7.1139 v 7.1358 prior (strongest since Jun 13th).

- China PBOC Open Market Operation (OMO): Sells CNY471B in 7-day reverse repos; Net injects CNY419B v net injects CNY242B prior.

Japan

- Nikkei 225 opens -0.5% at 38,156.

- Japan Jun Final Leading Index CI: 109.0 v 108.6 prelim; Coincident Index: 113.2 v 113.7 prelim.

- Japan ruling party LDP's Kono confirms candidacy for leadership contest on Sept 27th - press conference.

- Ishiba is leading in the polling for the LDP leadership elections - ANN Poll; Ishiba and Koizumi are both leading according to an Asahi poll [consistent with prior polls].

South Korea

- Kospi opens +0.6% at 2,716.

- South Korea Central Bank (BOK) Study: South Korean exports would be hit by Trump tariffs on China - Financial press.

- Bank of Korea (BOK) official said the Aug rate decision was ‘difficult’ – Press [update].

- Follow Up: South Korea is planning KRW40T in consumption supporting measures before Chuseok holiday (Sept 16-18th) - Press.

Other Asia

- Singapore July Industrial Production M/M: 10.1% v 5.0%e; Y/Y: +1.8% v -0.5%e.

- World Bank: Forecasts Vietnam 2024 GDP 6.1%; 2024 inflation 4.5%.

North America

- *(US) Fed Chair Powell: Confidence has grown that inflation is on sustainable path to 2%; time has come for policy to adjust - Jackson Hole Symposium [weekend update].

- Robert F. Kennedy Jr (Independent) suspends Presidential campaign and endorses Donald Trump; To take his name off ballots in 10 battleground states [weekend update].

- NSC Reaches tentative five-year collective agreements with four labor unions - financial press [weekend update].

Europe

- (EU) ECB’s Holzmann (Austria, dissenter): Sept rate cut is not foregone conclusion – Press [update].

- (IL) Axios' reporter Barak Ravid: Israeli negotiating team for talks on the hostage deal has returned to Israel from Cairo.

- (EU) ECB's Lane (Ireland, chief economist): The return of inflation to 2% target is not yet secure; Policy must remain restrictive as long as necessary - Jackson Hole (update).

- (UK) BOE Gov Bailey: Second round inflation effects appear to be smaller than we expected, but it is too early to declare victory - Jackson Hole speech [weekend update].

- (EU) ECB’s Centeno (Portugal, dove): We always look at data as a whole; Sept is an easy decision - TV interview [weekend update].

- (EU) ECB’s Centeno (Portugal, dove): We always look at data as a whole; Sept is an easy decision - TV interview [weekend update].

Levels as of 01:20 ET

- Nikkei 225 -1.1%; ASX 200 +0.7%; Hang Seng +0.7%; Shanghai Composite -0.3%; Kospi -0.5%.

- Equity S&P500 FUTs -0.1%; Nasdaq100 FUTs -0.1%, Dax -0.4%; FTSE100 -0.2%.

- EUR 1.1181-1.1202: JPY 143.45-144.37; AUD 0.6773-0.6798; NZD 0.6113-0.6133.

- Gold flat at $2,546/oz; Crude Oil +0.6% at $75.31/brl; Copper -0.1% at $4.2553/lb.