Quiet start to the week as Friday moves digested by market

Asia market update: Quiet start to the week as Fri moves digested by market; US equity FUTs pare some losses.

General trend

- Dollar slipped another -0.2% and US 10-yr FUTs ticked higher at the open, extending Friday’s UST rally following the severe downward revisions in Non-farm Payrolls data Friday. Fed fund futures expectations of a Fed rate cut in September doubled to 88% (from ~40-45% before the data) and now fully price in a cut by October. The FOMC-sensitive 2-year yield fell as much as -27bps on Friday (biggest fall since Mar 2023 banking crisis), and a full 65bps below the Fed Funds midpoint.

- WTI crude fell a further -0.8% at the open following 8 OPEC+ nations (incl. Saudi and Russia) approving another 547Kbpd production increase. Prices stabilized thereafter, countered by geopolitical tensions from the threat of a US-Russia nuclear sub standoff, as well as the threat of US-India/China secondary oil sanctions due to purchases of Russian oil. Indian officials said they will continue to buy Russian oil, despite the US imposing 25% tariffs and threats of further penalties. China last week also said to ‘push back’ on the US demands to stop Russian oil purchases.

- Quiet session in Asia. Japan PMI Ishiba said the Govt is ready to compile an extra budget if needed.

- Nikkei opened sharply lower -1.6%, and stayed down, underperforming Asia. Kospi outperformed +1.2%.

- The Japanese bond rally on Friday reportedly took some participants by surprise with BOJ Gov Ueda’s speech not dovish per se, but the move instead attributed to investors holding off prior to the BOJ decision + Ueda’s speech, then starting to buy. Chances of a 25bp BOJ rate hike by Dec fell from 80-85% to 68.5%.

- Today, Japanese and New Zealand 10-year benchmark yields fell as much ~8bps, with Australia -11bps (later all pared around 1/3 of their falls). Front end of the curve in Japan echoed the US on Friday, with 2-yr and 5-yrs down ~7-8bps, but at the long-end 30-yr and 40-yrs down only 2-3 bps (later flat).

- Following a hectic week of trade deals through the Aug 1st deadline, the latest on a potential US-China trade deal (from USTR Greer) is that the trade truce deadline is still under discussion. Mexico, Canada, India and Brazil also still outstanding among major nations. (Taiwan also attempting to lower its current 20% tariffs).

- In a press gaggle, Pres Trump affirmed “there will be sanctions if Russia does not stop the war” (implied deadline from Trump’s brought-forward warning is Aug 8th).

- US-China trade tensions likely not helped by a report out of the WSJ that China said to be 'choking' critical mineral supply to western defense companies.

- US Pres Trump appeared to further back off any potential firing of Fed Chair Powell as it “would disturb the markets”; Will instead appoint a new Chairman once Powell's term ends in 2026. (Trump also expressed happiness that he will be able to appoint a new Governor soon to replace the retiring Fed Gov Kugler).

- As Bitcoin and Ethereum correct 10-15% from their recent highs, a post from Erik Trump, “Let me say it again: Buy the dips!!!”

- Markets waiting for further details on Trump’s sectoral tariffs (esp. pharma and chips).
~3,200 highly-skilled union members who build fighter jets at Boeing facilities in St. Louis decided to strike from Monday midnight. Would be the first strike since 1996 at Boeing’s St. Louis-area defense factories.

- US equity FUTs +0.4% during Asian trading.

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

- Tue Aug 5th KR July CPI, JP BOJ Minutes, CN Caixin Services PMI, ID Q2 GDP, (Tue night US July ISM Services).

- Wed Aug 6th NZ Q2 jobs, IN RBI rate decision.

- Thu Aug 7th AU Jun Trade Balance, PH Q2 GDP, CN July Trade Balance (Thu eve UK BOE rate decision).

- Fri Aug 8th JP Jun Household Spending, BOJ Summary of Opinions.

- Sat Aug 9th CN July CPI/PPI.

Holidays in Asia this week

- N/A.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.4% at 8,630.

- Australia July Melbourne Institute Inflation M/M: 0.9% v 0.1% prior; Y/Y: 2.9% v 2.4% prior.

- Australia July Cotality Home Value M/M: 0.6% v 0.6% prior [weekend update].

China/Hong Kong

- Hang Seng opens -0.3% at 24,431; Shanghai Composite opens -0.4% at 3,547.

- China said to be 'choking' critical mineral supply to western defense companies - WSJ.

- Follow up: US CDC issued a 'Level 2' travel advisory related to China after China recorded ~5.0K cases of the chikungunya infection - US financial press [update].

- USTR Greer: Trade truce deadline for China still under discussion [weekend update].

- China Forex regulator (SAFE): Pledges to maintain stability in FX market; Will carry out countercyclical adjustment at the proper time.

- USTR Greer: Confident about rare earths flows from China - TV comments.

- China PBOC: Reiterates to implement a 'moderately loose' monetary policy [weekend update].

- China Finance Ministry: To resume VAT collection on interest income from new treasury, local govt and financial bonds issued from Aug 8th [weekend update].

- HKMA buys HK$3.53B to defend USD FX peg [weekend update].

- China PBOC sets Yuan reference rate: 7.1395 v 7.1496 prior.

- China PBOC Open Market Operation (OMO): Injects CNY545B in 7-day reverse repos; Net injects CNY49B v drains CNY663B prior.

Japan

- Nikkei 225 opens -1.6% at 40,138.

- Japan July Monetary Base Y/Y: -3.9% v -3.5% prior.

- Japan CDP party leader Noda: Will discuss sales cut tax with other opposition parties - press.

- Japan PM Ishiba: Implementation of trade deal is harder than reaching agreement - financial press.

- Japan Fin Min Kato: Need to consider cost, returns of Sovereign Wealth funds - financial press.

- Japan Economy Min/Trade Negotiator Akazawa: Affirms (US) trade deal is not (yet) on paper, same as US- EU deal - financial press.

Korea

- Kospi opens -0.2% at 3,114.

- South Korea Industry Min Kim: Still concerned about impact on companies of 15% US tariff rate - financial press.

- South Korea ruling party (DP) to declare stance on capital gains tax "ASAP" - Ruling Party Chief Jung.

- South Korea Trade Min: No written agreement regarding US-Korea trade deal; Devils are in the details [weekend update].

Other Asia

- (IN) India officials say they will continue to buy Russian oil, despite threats of additional tariffs from Trump Admin – NYT [weekend update].

- Thailand Fin Min Pichai: Expect to take more than a month to finish draft trade contract with US.

North America

- Canada and Mexico officials to discuss trade in meetings - Canadian Press.

- (US) Pres Trump: Will announce new BLS statistician " in the next few days"; Comments on Russia, Gaza - financial press.

- (US) White House Council of Economic Advisers Chair Miran: Tariff uncertainty fading away; Job data revisions reflect May-June data; July data 'decent'; No evidence of material price hike due to tariffs – CNN [weekend update].

- (US) Trump: Happy there is an open spot on the Fed board; I understand that Fed Gov Kugler [who is resigning] disagreed with Powell [weekend update].

- US Pres Trump: Firing Powell would disturb the markets; I will appoint a new Fed Chair once Powell's term ends in 2026 - NewsMax interview [weekend update].

- Brazil Fin Min Haddad: Will have a meeting with US Treasury Sec Bessent next week; In that meeting we will clarify how the Brazilian justice system works [weekend update].

- Apple CEO Cook tells town hall meeting at Apple that he intends to win the AI race and will make the appropriate investments to do so – press [weekend update].

- GBTC Erik Trump: Let me say it again: ₿uy the dips!!! $BTC $ETH [overnight update].

- (US) July change in Nonfarm Payrolls: +73K V +104KE; June and May payrolls revised sharply lower to almost no growth [weekend update].

- (US) July unemployment rate: 4.2% V 4.2%E [weekend update].

- Early Aug TTN Innovation & Corporate Confidence Index (ICCI): 113.0 V 112.9 prior (smallest rise since April) [weekend update].

- (US) Jun construction spending M/M: -0.4% V 0.0%E [weekend update].

- (US) July ISM Manufacturing: 48.0 V 49.5E [weekend update].

- (US) July final S&P Manufacturing PMI: 49.8 V 49.7E (confirms 1st contraction in 7 months) [weekend update].

- (US) Pres Trump: Learned that jobs numbers produced by Biden appointee; Directed staff to fire and replace Bureau of Labor Statistics Commissioner McEntarfer - Truth Social post [weekend update].

Europe

- Follow up: Group of 8 OPEC+ nations confirm further oil production increase by 547K bpd, ahead of schedule, citing steady global economic outlook - press.

Levels as of 01:20 ET

- Nikkei 225 -1.5%, ASX 200 -0.1%, Hang Seng +0.7%; Shanghai Composite +0.2%; Kospi +1.2%.

- Equity S&P500 Futures +0.3%; Nasdaq100 +0.4%; DAX +0.4%; FTSE100 +0.5%.

- EUR 1.1551-1.1597; JPY 147.06-147.91; AUD 0.6463-0.6486; NZD 0.5903-5923.

- Gold +0.3% at $3,411/oz; BTC +0.5% at $114,450; Crude Oil -0.2% at $67.22/bbl; Copper -0.6% at $4.4295/lb.