RBNZ cuts but could have been more

Asia Market Update: RBNZ cuts but could have been more; Japan PM Kishida to step down; China new lending collapses; Focus on US July CPI tonight.

General trend

- Kiwi dollar dropped -1.0% after RBNZ cut rates (by 25bps) for the first time in over 4 years. NZX50 stock index outperformed Asia, +2.1% with NZ 2-yr yields -14bps as yield curve steepened. NZ swap rates imply a further 29bps of rate cuts by October and 37bps by November. Gov Orr in his press conference later said that a 50bps cut had been considered by the Committee.

- Against low approval ratings, Japan PM Kishida said he would withdraw from the ruling-party LDP leadership elections in September, signaling he will resign as Prime Minister. A local poll shows LDP heavyweight Shigeru Ishiba remaining the public's favorite for next LDP leader.

- New Yuan Loans for China were only CNY260B in July, well below estimates of CNY450B and a fraction of the prior month’s CNY2.13T. Also less than the CNY350B on a y/y basis, which was then lowest monthly data since 2009.

- China PBOC-backed Financial News claimed victory over bond market speculation, which it said was easing, citing industry insiders. Recently a battle has taken place between investors, who want to keep bidding Chinese bonds up due to continued deflationary forces and the PBOC, which is actively intervening via state-owned banks in the market to stop the decline in yields in an attempt to stimulate demand and also protect the Yuan. CN 10-yr yields fell 4bps to 2.16%. Today’s 20-yr Special Bond auction also saw a record low yield.

- Thai Court to rule on PM Srettha dismissal/ethics case, 3pm local time (08:00 GMT).

- US equity FUTs flat during Asian trading.

Looking ahead (Asian time zone)

- Wed Aug 14th (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 +0.1% at 7,830.

- Australia sells A$800M vs. A$800M indicated in 3.50% Dec 2034 bonds; Avg Yield: 3.9818% v 4.2235% prior; bid-to-cover: 2.74x v 4.22x prior (Jun 26th, 2024, local time).

- NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE (OCR) BY 25BPS TO 5.25%; NOT EXPECTED.

- (NZ) New Zealand Central Bank (RBNZ) Gov Orr: We considered cutting 50bps today, consensus was 25bps as a "low-risk start" - post rate decision press conference.

- New Zealand govt to publish 2023-24 Financial Statements on Oct 10th - financial press.

China/Hong Kong

- Hang Seng opens +0.4% at 17,233; Shanghai Composite opens -0.1% at 2,866.

- China sells 20-year Special Bonds; Avg Yield 2.3300% v 2.4415% prior (record low).

- China bond market speculation said to ease - PBOC-backed Financial News, citing industry insiders.

- HUAWEI.CN *Reportedly to start shipping new Ascend 910C chip as soon as Oct; Chip aims to challenge Nvidia's H100, which isn't directly available in China – WSJ (add FXI tag).

- CHINA JULY YTD AGGREGATE FINANCING (CNY): 18.9T V 19.149TE [overnight update].

- CHINA JULY YTD NEW YUAN LOANS (CNY): 13.53T V 13.700TE; Notes the first-ever monthly drop in new loans to the real economy [overnight update].

- CHINA JULY M2 MONEY SUPPLY Y/Y: 6.3% V 6.0%E (V 6.2% prior, which was record low) [overnight update].

- China PBOC sets Yuan reference rate: 7.1415 v 7.1479 prior.

- China PBOC Open Market Operation (OMO): Sells CNY369B in 7-day reverse repos; Net injects CNY369B v net injects CNY385B prior.

Japan

- Nikkei 225 opens +0.8% at 36,535.

- Japan PM Kishida said NOT to intend to run for ruling-party LDP leadership in Sept - Japanese press.

- JAPAN SELLS ¥2.3T VS. ¥2.3T INDICATED IN 5-YEAR JGB BONDS; AVG YIELD: 0.4520% V 0.6120% PRIOR; BID-TO-COVER: 3.51X V 4.26X PRIOR.

South Korea

- Kospi opens +1.1% at 2,649.

- South Korea July Unemployment Rate: 2.5% v 2.9%e.

Other Asia

- Thai Court to rule on PM Srettha dismissal/ethics case, 3pm local time (08:00 GMT).

North America

- Kellanova Follow up: Mars expected to pay $83.50/shr in all-cash deal for Co [Cheez-it, Pringles maker] for EV of $30B - WSJ.

- Google/Alphabet Reportedly DOJ officials are considering calling for Google breakup after antitrust victory (update).

- (US) JULY PPI FINAL DEMAND M/M: 0.1% V 0.2%E; Y/Y: 2.2% V 2.3%E (lowest annual pace since Apr 2024).

- (CA) Canada Telecom Regulator to force big phone companies to provide rivals with wholesale access to fiber-optic networks; Order covers the entire country, effective Feb 13th.

- (US) Fed’s Bostic (hawk, voter): Balance of risks in the economy is getting back to level; If the economy evolves as expected, there would be a rate cut by year end.

Europe

- Conflicting UK unemployment figures put further doubt over the methods used for calculation by ONS, after ILO unemployment rate hits lowest since Feb, while July Jobless Claims was highest since the pandemic or 2009 if excluding pandemic. Following BOE beginning easing on Aug 1st, could see both hawks and doves use today’s data as evidence for their case. Cable (GBP/USD) and Gilt yields trade higher. FTSE lags slightly.

- Substantial miss in German ZEW survey, for biggest drop in ~2 years and lowest since Feb as ZEW economists note domestic economy is ‘breaking down’.

- (IL) Hamas says it targeted Tel Aviv with two rockets; Explosions heard in the city - press.

Levels as of 01:20 ET

- Nikkei 225 +0.1%; ASX 200 +0.4%; Hang Seng -0.5%; Shanghai Composite -0.5%; Kospi +0.7%.

- Equity S&P500 FUTs flat; Nasdaq100 FUTs flat, Dax flat; FTSE100 +0.1%.

- EUR 1.0984-1.0999: JPY 146.08-147.19; AUD 0.6618-0.6643; NZD 0.6003-0.6084.

- Gold -0.3% at $2,500/oz; Crude Oil +0.6% at $78.84/brl; Copper -0.5% at $4.0420/lb.