Yen volatile and equities pensive ahead of US Fed – All eyes on FOMC tonight

General trend

- Equity markets were cautious ahead of FOMC rates as Korea remained closed for holidays, with Hong Kong also closed today. ASX 200 initially traded at a record high and the Nikkei also up early, but both fell back later. Japanese automakers and exporters at first found some relief from the lower yen overnight, with Toyota and others +3% in early trading.

- Japan woke up to find USD/JPY had rocketed back up to as high as 142.5 overnight, on higher than estimated US Retail Sales and Industrial Production data as well as the Atlanta Fed raising Q3 GDP growth expectations to 3%; All blunting some of the recent expectations for a 50bps cut by the Fed at its FOMC meeting tonight.

- Expectations of 50bps cut back down to 63%, after having reached 69% during Asian trading yesterday when the Yen hit a 14 month high of 139.95.

- Japan trade deficit for August was not as bad as expected, as the Yen retraced some of its overnight losses during the morning session.

- New Zealand’s Current Account deficit worsened in Q2.

- Australia Reserve Bank (RBA) announced a new three year digital money work plan called Project Acacia, adding that it will prioritize work on a wholesale central bank digital currency (CBDC), as its economic benefits are judged to outweigh those of a retail version.

- China PBOC fixed the Yuan at its strongest level since Jan 2nd.

- Reports in China that some 42 banks listed in the onshore market saw only CNY6.7T in new deposits in H1, CNY9.7T less than in the same period in 2023. State owned banks particularly hard hit.

- Dalian iron ore prices fell a further -3.6%. Comes the day after Tokyo Steel cut its hot rolled coil steel prices for first time since Aug 2022. Iron ore at $92/t in the US is at 2-year lows, with its pre-Covid lows in sight.

- In a follow up to the thousands of pagers of Hezbollah members exploding in Lebanon overnight, Taiwan’s Gold Apollo founder says his company did not make the pagers that were used in the detonations in Lebanon, rather a European company called BAC manufactured them, with BAC being authorized to use Gold Apollo’s trademark.

- US equity FUTs +0.1% during the Asia session.

Looking ahead (Asian time zone)

- Wednesday Sept 18th ID rate decision, UK Aug CPI, (Wed night US Aug prelim Building Permits, US FOMC rate decision + Presser).

- Thursday Sept 19th AU Aug Employment, TW rate decision, (Thu eve BoE rate decision).

- Friday Sept 20th JP Aug CPI, CN Sept LPR, BOJ rate decision + Gov presser (02:30ET).

Holidays in Asia this week

- Monday Sept 16th China, Indonesia, Japan, Malaysia, South Korea.

- Tuesday Sept 17th China, South Korea, Taiwan.

- Wednesday Sept 18th Hong Kong, South Korea.

- Upcoming Chinese market holidays: Sept 29th (Sun); Tue Oct 1st to Mon Oct 7th; Sat Oct 12th.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 8,140.

- Australia Aug Westpac Leading Index M/M: -0.05% v -0.03% prior (revised higher).

- Australia RBA Asst Gov (Financial) Jones: To prioritize a wholesale CBDC; Announces Project Acacia - Speech at Intersekt Festival, Melbourne.

- Australia sells A$1.0B vs. A$1.0B indicated in 3.75% Apr 2037 bonds; Avg Yield: 3.9566% v 4.5109% prior; bid-to-cover: 2.54x v 3.81x prior.

- New Zealand Q2 Current Account (NZD): -4.8B v -3.9Be.

- New Zealand Q3 Consumer Confidence: 90.8 v 82.2 prior.

- RBNZ: has refreshed its chart pack of financial stability indicators that help to inform its assessment of financial stability risks.

China/Hong Kong

- Hang Seng closed for holiday; Shanghai Composite reopens +0.1% at 2,705 (first trading day of the week).

- China banks ‘struggle’ to slow deposit declines; notes the impact of wealth management products [WMPs] – Shanghai Securities News.

- China cross-border trips +18.6% y/y during mid-autumn holidays - China state media.

- China Commerce Min asks Germany to push EU to reach solution over EV tariffs [overnight update].

- US reportedly probes uranium imports from China – press [overnight update].

- Group of senior US officials is expected to travel to Beijing this week [Thurs and Fri] for ‘high-level’ meetings; Notes ‘flood’ of cheap China exports – WSJ [overnight update].

- China PBOC sets Yuan reference rate: 7.0870 v 7.1030 prior (Sept 13th) [Strongest fix since Jan 2nd].

- China PBOC Open Market Operation (OMO): Sells CNY568B in 7-day reverse repos; Net injects CNY81B v net injects CNY95B prior.

Japan

- Nikkei 225 opens +0.9% at 36,546.

- Japan Aug trade balance: -¥695.3B V -¥1.432TE.

- Japan July Core Machine Orders M/M: -0.1% v 0.5%e; Y/Y: 8.7% v 2.5%e.

- Chinese navy aircraft carrier temporarily enters Japan's contiguous waters for the first time - NHK.

- Japan and UAE govts to enter talks regarding an EPA (Economic Partnership Agreement) – Japanese press, citing sources.

- Bank of Japan (BOJ) announcement related to outright bond buying operations: For 1-3 Years; 3-5 Years; 5-10 Years and 10-25 Years (Inline with prior purchases).

- AUKUS and Japan are considering maritime cooperation opportunities - joint statement from US, UK and Australia.

Korea

- Kospi remains closed for holiday.

Other Asia

- (TW) Follow Up: Taiwan Economy Ministry: Pager manufacturer judges exploding pagers in Lebanon likely modified after export - statement, citing manufacturer.

- Thailand said to consider domestic travel stimulus program - local press.

- Philippine Central Bank (BSP) Gov Remolona: No plans to float longer-term securities.

North America

- META: Follow up: Said to face 'hefty' EU antitrust fine over classified ad practices - FT.

- (US) Former Pres Trump says he will meet with India PM Modi next week - financial press.

- Nippon Steel said to win an extension for review of US Steel deal - financial press, citing sources.

- (US) Aug advance Retail Sales M/M: +0.1% V -0.2%E; Retail Sales (EX-AUTO) M/M: 0.1% V 0.2%E; Retail Sales (control group): 0.3% v 0.3%e.

- (CA) Canada AUG CPI M/M: -0.2% V 0.0%E; Y/Y: 2.0% V 2.1%E.

- (US) Mid-Sep Manheim wholesale used vehicle Index: 203.6 v 203.9 prior; -0.2% m/m; -5.0% y/y.

- (US) Aug industrial production M/M: 0.8% V 0.2%E; capacity utilization: 78.0% V 77.9%E.

- (US) Sept NAHB housing market: 41 V 41E.

Europe

- (UK) Times Shadow MPC: Recommends BOE leave rates unchanged and increase bond sales - update.

- (IE) Ireland Central Bank Quarterly Bulletin No 3: Cuts 2024 GDP forecast to -0.9% (prior +1.9%).

- (ES) Bank of Spain (BOS): Sees Q3 GDP growth at 0.6%.

- (DE) German Econ Min Habeck: Germany and China should avoid trade conflict at all cost; Need a political solution in the tariff dispute with China.

- (IL) Reportedly hundreds of Hezbollah soldiers have been wounded after their pager devices exploded in Beirut and southern Lebanon - press.

Levels as of 01:20 ET

- Nikkei 225 flat; ASX 200 -0.1%; Hang Seng closed; Shanghai Composite -0.3%; Kospi closed.

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

- EUR 1.1113-1.1130: JPY 141.22-142.43; AUD 0.6750-0.6774; NZD 0.6183-0.6208.

- Gold flat at $2,592/oz; Crude Oil -0.6% at $69.53/brl; Copper -0.9% at $4.2453/lb.