Trump reciprocal tariffs remain for now, but will they stay?

Asia market update: Trump reciprocal tariffs remain for now, but will they stay?; Sept 1st Asia macro data dump; JP/KR stocks fall as HK/CN rise again heading into US holiday.

General trend

- US equity FUTs ticked higher at the Asian open after the post-close Friday breaking news of a US Federal Appeals Court voting 7-4 that Trump exceeded his Executive authority by imposing global tariffs using IEEPA emergency laws – otherwise known as the April 2nd “Liberation Day tariffs”.

- However, the court did stay the decision until Oct 14th, leaving the tariffs in place for now as the case likely next heads to the US Supreme Court. Trump shortly after posted his dissatisfaction, stating “If these Tariffs ever went away, it would be a total disaster for the Country”.

- The work the Trump Admin has recently been putting into potentially replacing IEEPA reciprocal tariffs with more durable and robust Section 301 tariffs (for unfair foreign trade practices, such as against China from 2018) and Section 232 tariffs (for national security issues, e.g. Steel, Alum, Copper) now come into starker focus.

- At minimum the picture for US tariffs moving forward becomes murkier again with potentially more targeted and bespoke tariffs, with higher and more complex compliance costs, just as the majority of US trading partners had been getting used to their respective countries’ new blanket tariff rates into the US.

- Nasdaq and S&P500 FUTs, which traded down -1.3% and -0.7% respectively on Friday, rose back +0.4% and +0.3% in the first couple of hours of Asian trading. However, all gains lost as the session continued. Gold FUTs, which closed at record highs late Friday at $3,530/oz gained another 0.3% while on Silver +1.9% to be >$40/oz for the first time since 2011. However, Bitcoin and the rest of the Alt Coin universe diverged the other way, with Bitcoin threatening to break below the $107K handle, last seen in early July.

- Chipmakers Samsung and Hynix in Korea down heavily on losing US chip waivers to their China facilities. However, two chip analysts said that would benefit Korean chip equipment suppliers by driving memory prices up. Japan’s Advantest also -9.0% as their own waiver may be similarly revoked.

- Japanese second quarter Capex/Company profits came in overall better than the poor outcomes expected, with only company sales less than expected.

- Japanese final PMI Manufacturing for Aug confirmed a second month of contraction.

- Australia component and advance indicator data released today ahead of Q2 GDP on Wed included Q2 Company inventories (weaker than expected), operating profits (marginally higher), while building approvals were also weaker. Australia Aug Final Manufacturing PMI on the other hand delivered its highest read, up to the 53 handle, since Sept 2022. Aussie dollar traded at 2-week high vs greenback.

- Nikkei underperformed Asia, -1.9% to fall below 42K for first time since Aug 8th as Softbank -6.8%.

- Hang Seng outperformed +2.0 with Alibaba +17% on AI cloud business Rev and outlook last Friday post-close.

- Japan, which led the developed world back in 2017 in beginning to develop crypto legislation, is now attempting to catch up to recent Trump Admin moves in the US to fully financialize crypto. One of Japan’s biggest depositors for every day Japanese, Japan Post Bank (with $1.3T in deposits) will next year launch a digital currency for depositors to trade blockchain-based financial products including tokens and NFTs.

- South Korea kept a healthy trade surplus for August, with chip exports again +27% y/y, however US exports fell 12% y/y due to tariffs, the biggest drop since May 2020.

- Europe’s Von der Leyen said that Europe has a as a 'pretty precise' plan to send troops to Ukraine, adding that Pres Trump reassured at the White House that there will be an American presence as part of the backstop for Ukraine. Said the EC will maintain funding and find “new funding streams”.

- A busy weekend in East Asia for India PM Modi, meeting first with Pres Xi of China at the Shanghai Cooperation Organization (SCO) Summit in a bid to mend ties between the two countries, then hopping across to Japan to meet with PM Ishiba at a chip plant, with Japan also committing to nearly triple its level of private investment into India over the next decade over 2010s levels.

- Russia’s Pres Putin also attended the SCO Summit in Tianjin, Northern China, and spoke with Pres Xi on the sidelines.

- China’s Aug PMI Manufacturing PMI stayed mired in contraction for a fifth straight month, with the 49.4 reading even less than the 49.5 estimate. However, the renamed RatingDog (formerly Caixin) PMI Manufacturing for Aug bounced back into expansion after one month of contraction.

- China corporate earnings for the Q2 season finished with a bang on Friday, with BYD and the big banks China Construction Bank, China Merchants Bank, Bank of China, Agricultural Bank of China, ICBC, and Bank of Communications.

- China MOFCOM confirmed Top China trade negotiator Li Chenggan visited the US Aug 27-29th and held (informal) discussions with US officials on bilateral economic and trade relations.

- Late Friday further reports of Chinese companies working towards substituting around Nvdia chips with Alibaba said to have developed and now testing a new AI chip which is compatible with Nvidia tools. BABA also reported Q1 earnings, noting AI-related sales now exceed 20% of external customer revenue. Finally, China’s Deepseek also said to have selected Huawei chips for some of its model training, rather than Nvidia chips. Today BABA shares +17%, most since late 2022.

- In Europe, European Commission Pres Von der Leyen said Europe has a 'pretty precise' plan to send troops to Ukraine, the EC will explore new funding streams and said that Pres Trump has reassured of an American presence as part of the so-called Ukraine backstop.
- Indonesian stocks fell as much as -3.6% soon after the open follows several days of violent protests in cities throughout Indonesia.

- Overall, US investor focus currently on the strength of the jobs market and inflation indicators along with ISM PMIs this week, while the UK mainstream press the past several days has finally begun to focus on the UK’s dire fiscal situation and continually rising long-term rates – all ahead of Chancellor Reeves’ Autumn budget which needs to be delivered within the next couple of months (no date yet) and how she plans to plug a substantial fiscal hole and cover mounting interest payments on the national debt.

- Reminder that today is a holiday in the US, with reduced liquidity as a result.

- US equity FUTs-0.1% during Asian trading.

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

- Tue Sept 2nd KR Aug CPI, (Tue eve EU Aug CPI, Tue night US Aug ISM Manufacturing PMI).

- Wed Sept 3rd AU Q2 GDP, CN Aug Caixin Services PMI, (Wed night US July JOLTS, Fed Beige Book).

- Thu Sept 4th AU July Trade Balance, (Thu night US Aug ISM Services PMI).

- Fri Sept 5th JP July House Spending, (Fri eve UK July Retail Sales, US Aug Nonfarm Payrolls).

Holidays in Asia this week

- Mon Sept 1st Malaysia, USA (Labor Day).

- Tue Sept 2nd Vietnam.

- Wed Sept 3rd Vietnam.

- Fri Sept 5th Indonesia, Malaysia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.2% at 8,957.

- Australia Aug Final Manufacturing PMI: 53.0 v 52.9 prelim (confirms 8th month of expansion and highest since Sept 2022).

- Australia Aug Melbourne Institute Inflation M/M: -0.3% v 0.9% prior; Y/Y: 2.8% v 2.9% prior.

- Australia Aug Cotality Home Value M/M: 0.8% v 0.6% prior (update).

- New Zealand PM Luxon: To appoint new RBNZ Governor "within weeks" - New Zealand radio interview.

- New Zealand PM Luxon: Ruling party coalition parties have agreed that overseas-based investors with a NZ investor residence visa (Golden visa) will be allowed to buy a house worth at least NZ$5M - financial press.

China/Hong Kong

- Hang Seng opens +1.7% at 25,508; Shanghai Composite opens +0.3% at 3,869.

- CHINA AUG RATINGDOG PMI MANUFACTURING: 50.5 V 49.8E (moves back into expansion after one month contraction).

- CHINA AUG PMI MANUFACTURING (GOVT OFFICIAL): 49.4 V 49.5E (5th month of contraction) – update.

- (HK) Macau Aug (MOP) Casino Rev at 22.2B; Y/Y +12.2% v 12.0%e.

- China Pres Xi: SCO Summit has set a model for a new type of international relations - speech at Shanghai Cooperation Organization Summit in Tianjin, China (update).

- China Summer Box Office Rev >CNY12.0B, +2.8% y/y - China state media.

- China MOFCOM confirms Top China trade negotiator Li Chenggan visited US Aug 27-29th; Held discussions with US officials on bilateral economic and trade relations - China press (update).

- China Pres Xi: Agree with India PM Modi that China, India are partners, instead of rivals - comments following Sunday meeting at Shanghai Cooperation Organization Summit in Tianjin, China (update).

- USTR is stressing China's anti-free-market policies in textile sector; Concerns are regarding use of child labor in Vietnam [Friday update].

- Deepseek: Reportedly selects Huawei chips for model training - The Information.

- (US) Fed Register: US govt revokes authorizations for China units of Intel, SK Hynix and Samsung to receive US chipmaking equipment unless they obtain licenses; Govt also extends exclusions under Section 301 investigation into China and technology transfer, intellectual property (IP) and innovation to Nov 29th [Friday update].

- China PBOC sets Yuan reference rate: 7.1072 v 7.1030 prior.

- China PBOC Open Market Operation (OMO): Injects CNY183B in 7-day reverse repos; Net drains CNY106B v injects CNY422B prior.

Japan

- Nikkei 225 opens -0.9% at 42,298.

- JAPAN Q2 CAPITAL SPENDING (CAPEX) Y/Y: 7.6% V 6.1%E.

- Japan Aug Final Manufacturing PMI: 49.7 v 49.9 prelim (confirms second month of contraction).

- India PM Modi, Japan PM Ishiba visit Japan chip equipment plant in Miyagi prefecture, Japan - financial press.

- Japan Post Bank: To launch digital currency in FY26 for depositors to trade blockchain-based financial products including tokens and NFTs – Nikkei.

- Japan FTC to probe if SMEs were forced to provide data - NHK (update).

Korea

- Kospi opens -0.7% at 3,164.

- South Korea Aug PMI Manufacturing: 48.3 v 48.0 prior (8th month of contraction).

- South Korea Aug Trade Balance: $6.5B v $5.7Be.

Other Asia

- Taiwan Aug PMI Manufacturing: 47.4 v 46.2 prior (6th month of contraction).

- Indonesia Aug PMI Manufacturing: 51.5 v 49.2 prior (moves back into expansion for first time in 5 months).

- Philippines Aug PMI Manufacturing: 50.8 v 50.9 prior (5th month of expansion).

- Thailand Aug PMI Manufacturing: 52.7 v 51.9 prior (4th month of expansion).

- (ID) Indonesia Central Bank (BI): Continues to assure it 'is in the market' to stabilize Rupiah (IDR) with FX interventions (follows violent protests for several days in cities throughout Indonesia).

North America

- US) Pres. Trump: This is a total Conflict of Interest. The Judge must RECUSE, IMMEDIATELY!!! (Refers to Fed Gov Lisa Cook case) - post on Truth Social.

- (US) Proposed bill would ban members of Congress from trading individual stocks and require them to sell off their existing individual stocks within 180 days - WSJ (update).

- (US) Pres Trump: Plans to sign Exec Order requiring Voter ID across the US; Plans to ban mail-in ballots - Truth Social post (update).

- (US) Pres. Trump: ALL TARIFFS ARE STILL IN EFFECT! Today a Highly Partisan Appeals Court incorrectly said that our Tariffs should be removed, but they know the United States of America will win in the end. [weekend update].

- (US) FEDERAL APPEALS COURT IN 7-4 VOTE RULED PRES TRUMP EXCEEDED AUTHORITY BY IMPOSING GLOBAL TARIFFS USING IEEPA EMERGENCY LAW; COURT LETS TARIFFS STAY IN PLACE WHILE THE CASE PROCEEDS; APPLIES TO LIBERATION DAY TARIFFS, RECIPROCAL TARIFFS, EXTRA INDIA TARIFF, BUT NOT TO DE MINIMIS EXEMPTION CANCELLATION [weekend update].

- META: Reportedly considering partnerships with Google or OpenAI on AI features of its applications – press [weekend update].

- (US) Fed’s Daly (non-voter): It will soon be time to recalibrate policy; We can't wait for perfect certainty without risking the job market [weekend update].

- (US) AUG FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 58.2 V 58.6E [weekend update].

- (US) AUG CHICAGO PURCHASE MANAGERS INDEX (PMI): 41.5 V 46.0E [weekend update].

- (US) JULY PCE PRICE INDEX M/M: 0.2% V 0.2%E; Y/Y: 2.6% V 2.6%E [weekend update].

- (US) JULY PERSONAL INCOME: 0.4% V 0.4%E; PERSONAL SPENDING: 0.5% V 0.5%E [weekend update].

- (US) JULY ADVANCE GOODS TRADE BALANCE: -$103.6B V -$90.2BE [weekend update].

- (US) Atlanta Fed GDPNow: Raises Q3 GDP from 2.2% to 3.5% [Friday update].

Europe

- (IE) Ireland Aug PMI Manufacturing: 51.6 v 53.2 prior (8th month of expansion).

- (RU) Russia Pres Putin discussed recent Russia-US contact with China Pres Xi on sidelines of Sunday meeting at Shanghai Cooperation Organization Summit in Tianjin, China - Russian press (update).

- UK govt: Highly pathogenic avian influenza (HPAI) confirmed in poultry near Exminster, Devon, UK.

- (UR) European Commission Pres Von der Leyen: Europe has a 'pretty precise' plan to send troops to Ukraine - FT interview.

- (FR) French trade unions to hold protests, strikes on Sept 18th against the government's fiscal plans - press.

Levels as of 01:20 ET

- Nikkei 225 -1.5%, ASX 200 -0.5%, Hang Seng +1.9%; Shanghai Composite +0.3%; Kospi -1.7%.

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

- EUR 1.1687-1.1715; JPY 146.84-147.38; AUD 0.6535-0.6550; NZD 0.5891-5814.

- Gold +0.9% at $3,547/oz; BTC -1.1% at $107,830; Crude Oil -0.4% at $63.77/bbl; Copper -0.3% at $4.5948/lb.