US Pres debate spells trouble for Biden, Yen hits fresh lows as new FX diplomat announced

Asia Market Update: US Pres debate spells trouble for Biden; Yen hits fresh lows as new FX diplomat announced; JP data above ests; Key focus on US May Core PCE.

General trend

- The US Presidential debate may not have swayed opinion on Trump vs Biden in terms of policies, but after the debate the political analysis was conclusively negative for Biden. According to CNN’s own poll, 67% of debate watchers say Trump won the debate, while the WSJ said that “Biden crashes” and the FT said that [Democrats ‘panic’ as Biden ‘stumbles’ in debate].

- After the Yen hit a record low against the Euro, and a fresh 38-year low below 161 against USD, Japan announced that Top FX diplomat Kanda would retire on July 31st, to be replaced by MOF Official Atsushi Mimura. The Yen’s fall was at least temporarily halted by the news.

- Japanese data today was slightly above expectations for the BOJ’s target of “sustainable inflation”. Tokyo June CPI came slightly above or inline with estimates while May prelim Industrial Production came in well higher than estimates, with officials saying the increase was due to resumption of factories and increase in automobile production. However, in June expects semiconductor flat panel equipment and auto production to decline.

- Nike was down -12% after hours, after the CFO post-earnings said that the next few quarters will be challenging. Also called out a large decline in store traffic in China.

- The Hang Seng was up along with other major Asia equity markets today, but overall has now fallen 10% from its May highs.

- After the market closed yesterday, the BOJ released the Minutes of the 19th Round of the "Bond Market Group" Meetings [Jun 4-5th]. Some highlights noted by the Group: 1) Interest rates in Japan have become more likely to rise compared to overseas interest rates since the reduction in the Bank's purchase amount of JGBs in a regular operation in May. 2) Due to the deterioration in the balance of supply and demand of super-long-term JGBs, the yield curve is steepening. 3) JGB market depth is insufficient, since investors are reluctant to invest in JGBs.

- US equity FUTs +0.2% to +0.3% during Asian trading.

Looking ahead (Asian time zone)

- Fri 28th Jun: (Fri night US May Core PCE).

- Weekend: CN Jun National Mnfg PMI.

Holidays in Asia this week

- Fri Jun 28th New Zealand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 7,754.

- Australia May Private Sector Credit M/M: 0.4% v 0.5%e; Y/Y: 5.2% v 5.2% prior.

- Australia 2023-34 underlying cash surplus A$18.2B to May 31st.

- Reserve Bank of Australia's (RBA) Dep Gov Hauser: Whole series of data coming before Aug 5-6th's meeting; CPI did pick up a bit in May; May be taking little longer for policy to feed through [overnight update].

China/Hong Kong

- Hang Seng opens -0.8% at 17,583; Shanghai Composite opens -0.2% at 2,940.

- China Pres XI: What is needed in an era of economic globalization is not creation of divisive chasms, but the building of bridges; China holds Politburo study session - press.

- Fitch: recent escalation in tariff actions directed against Chinese exports does not pose an immediate challenge to the ratings of Fitch-rated issuers in China, but could contribute to trends that would influence credit profiles over time.

- China PBOC: To effectively fend off financial risks [overnight update].

- S&P affirms China sovereign rating at 'A+'; Outlook Stable [**Note: earlier Fitch and Moody's cut China's outlook from Stable to Negative] [overnight update].

- China's CCP to hold Third Plenum from July 15-18th - Chinese state media [overnight update].

- China PBOC sets Yuan reference rate: 7.1268 v 7.1270 prior.

- China PBOC Open Market Operation (OMO): Sells CNY50B in 7-day reverse repos; Net injects CNY40B v net injects CNY80B prior.

Japan

- Nikkei 225 opens +0.6% at 39,593.

- JAPAN JUN TOKYO CPI Y/Y: 2.3% V 2.3%E; CPI (EX-FRESH FOOD) Y/Y: 2.1% V 2.0%E.

- JAPAN MAY PRELIMINARY INDUSTRIAL PRODUCTION M/M: 2.8% V 2.0%E; Y/Y: 0.3% V 0.0%E.

- Japan government official comments on industrial production: In Jun expects semiconductor flat panel equipment and auto production to decline.

- JAPAN MAY JOBLESS RATE: 2.6% V 2.6%E.

- Japan said to name Atsushi Mimura as top FX diplomat, replacing Kanda – Nikkei.

- Japan sells ¥5.5T in 3-Month Bills; Avg Yield: +0.0160% v -0.0035% prior; bid-to-cover: 3.51x v 3.14x prior.

- Bank of Japan (BOJ) announcement related to outright bond buying operations: For 3-5 Years, 5-10 Years and >25 Years (lnline with prior purchases).

- BOJ Dep Gov Uchida: We consider the impact of weak yen on prices; Closely monitoring FX in conducting monetary policy – press [overnight update].

- Japan Cabinet Office (Govt) June Monthly Report: Maintains overall economic assessment; Warns of risks of elevated interest rates in the West affecting weak JPY (yen) - press [overnight update].

South Korea

- Kospi opens +0.3% at 2,792.

- South Korea May Industrial Production M/M: -1.2% v 0.2%e; Y/Y: 3.5% v 3.1%e.

Other Asia

- PHILIPPINES CENTRAL BANK (BSP) LEAVES OVERNIGHT BORROWING RATE UNCHANGED AT 6.50%; AS EXPECTED; Notes August cut "still possible and somewhat more likely" [overnight update].

North America

- (US) FT: Democrats ‘panic’ as Biden ‘stumbles’ in debate; WSJ says "Biden Crashes in First Clash with Trump" - US press reaction to US Presidential debate.

- (US) Q1 FINAL GDP ANNUALIZED Q/Q: 1.4% V 1.4%E; PERSONAL CONSUMPTION: 1.5% V 2.0%E.

- (US) MAY PRELIMINARY DURABLE GOODS ORDERS: 0.1% V -0.5%E; DURABLES (EX-TRANSPORTATION): -0.1% V 0.2%E; Capital Goods Orders (non-defense/ex-aircraft): -0.6 % v 0.1%e; Shipments -0.5% v 0.2%e.

- (US) INITIAL JOBLESS CLAIMS: 233K V 235KE; CONTINUING CLAIMS: 1.839M V 1.828ME (highest since early March).

- (US) Q1 FINAL GDP PRICE INDEX: 3.1% V 3.0%E; CORE PCE Q/Q: 3.7% V 3.6%E.

- (US) MAY PENDING HOME SALES M/M: -2.1% V 0.6%E; Y/Y: -6.6% V -0.8% PRIOR.

- (US) Fed’s Bostic (hawk, voter): Rate cut likely in Q4 with 4 more cuts penciled in for 2025.

- (US) Atlanta Fed GDPNow: Cuts Q2 GDP forecast to 2.7% from 3.0%.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: +52 BCF VS. +51-53 BCF INDICATED RANGE.

- (US) TREASURY $44B 7-YEAR NOTE AUCTION RESULTS: DRAWS 4.276% V 4.650% PRIOR, BID-TO-COVER RATIO: 2.58 V 2.43 PRIOR AND 2.55 OVER LAST 12 AUCTIONS.

- (US) Fed’s Bowman (voter, hawk): Inflation should ease with current Fed policy setting.

- (MX) MEXICO CENTRAL BANK (BANXICO) LEAVES OVERNIGHT RATE UNCHANGED AT 11.00%; AS EXPECTED.

Europe

- (UK) Jun Lloyds Business Barometer: 41 v 45e.

- (IE) Ireland Jun Consumer Confidence: 70.5 v 65.7 prior.

- French Pres Macron: Wants to reappoint Breton as EU Industry Commissioner - financial press.

- (EU) ECB's Kazaks (Latvia): ECB would cut faster without labor market concerns; Will take rate cuts step by step.

- (DE) German Fin Min Lindner: We are working intensively on 2025 draft budget.

- (CZ) CZECH CENTRAL BANK (CNB) CUTS 2-WEEK REPURCHASE RATE BY 50BPS TO 4.75%; MORE-THAN-EXPECTED.

- (CZ) Czech Central Bank: Vote was 5-2 to cut rates by 50bps today (with 2 votes for the expected 25bps cut); May pause rate cuts at coming meeting.

- (IL) Israel PM Netanyahu: See long battle ahead to get rid of Hamas.

Levels as of 01:20 ET

- Nikkei 225, +0.6%, ASX 200 +0.2%; Hang Seng +0.4%; Shanghai Composite +1.1%; Kospi +0.2%.

- Equity S&P500 Futures: +0.2%; Nasdaq100 +0.3%, Dax flat; FTSE100 +0.2%.

- EUR 1.0684-1.0711; JPY 160.64-161.28; AUD 0.6621-0.6652; NZD 0.6058-0.6095.

- Gold -0.2% at $2,332/oz; Crude Oil +0.7% at $82.27/brl; Copper +0.9% at $4.3738/lb.