Asia market update: Asia equities sharply higher, following US stocks; Recapture levels pre-Black Monday and more (Aug 5th).
General trend
– Following last night’s US stock rally after better jobs data and higher US retail sales, shares opened up sharply higher in Japan and Korea (post-holiday), quickly followed by Australia and HK playing catch up. – Chipmakers SK Hynix +7% Tokyo Electron +5%, Renesas +6% with Advantest +4%. Technology in general was strong with Softbank +5% and major Nikkei component Fast Retailing +5%.
– The Nikkei +3.3% also enjoyed a weaker Yen again of 149, and having already recuperated its losses from Black Monday on Aug 5th is poised for a weekly gain of ~7.5%, which would be its best weekly performance since April 2020.
– In Australia the ASX 200 commodity sensitive indices were up; Energy +2.1%, Resources +2%; Financials +1.5% post Q3 results from NAB.
– The Hang Seng also rose by 1% at the open, following tech earnings out of JD.com and Alibaba overnight, along with PBOC support pledges from Gov Pan Gongsheng to implement already-introduced policies and measures and introduce additional measures.
– Japanese yields followed the overnight global trend higher, with JP 10-yr +4.5bps to on top of gains overnight to be 0.88% in early cash trading, with the Yen holding steady after falling back to 149 against USD overnight.
– After last week’s severe volatility in Japanese stocks, the week ended August 9th showed that foreigners bought a net half trillion Yen in Japanese stocks. While the 15% plunge of the Nikkei on Monday, Aug 5th no doubt saw significant selling of equities, by end of week the Nikkei had more or less recovered to its pre-Black Monday levels.
– China PBOC injected >1.1T Yuan of liquidity via open market operations during the week.
– In a continuation of the bond war between the China govt vs investors buying up bonds as a stable hedge of value, China’s regulator was reported to have provided “guidance” for mutual funds to restrict their fund allocations for 7-year China Treasury bonds.
– In trade news, Japan upped the ante concerning chips exports to China, adding chip equipment to products that are protected under the foreign trade law.
– Thailand Parliament voted in Paetongtarn Shinawatra as new Prime Minister; at just 37 Thailand’s youngest ever PM and the nation’s second female PM. Her popular father Thaksin was the first Thai politician ever to win an overall majority of seats.
– US equity FUTs +0.2% to +0.3% during Asian trading.
Looking ahead (Asian time zone)
– 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 +0.3% at 7,887.
– Reserve Bank of Australia (RBA) Gov Bullock and staff: Board is of the view that it has the balance right between reducing inflation in a reasonable time frame while preserving jobs – Parliamentary testimony.
– Australia sells A$700M vs. A$700M indicated in 2.25% May 2028 bonds; Avg Yield: 3.5725% v 4.1383% prior; bid-to-cover: 3.83x v 4.08x prior.
– New Zealand July Manufacturing PMI: 44.0 v 41.2 prior (17th month of contraction).
– New Zealand Q2 PPI Input Q/Q: 1.4% v 0.7% prior; Output Q/Q: 1.1% v 0.9% prior.
– New Zealand July Non-Resident Bond Holdings: 59.6% v 60.7% prior.
– New Zealand Central Bank (RBNZ) Gov Orr: Follow up comments: Committee has achieved a very strong level of confidence that low and stable inflation is back within target 1-3% – financial press.
– New Zealand Central Bank (RBNZ) Asst Gov Silk: Measured approach on OCR cuts are appropriate (inline) – financial press interview.
China/Hong Kong
– Hang Seng opens +1.0% at 17,286; Shanghai Composite opens flat at 2,877.
– China Customs: To implement rules for movement of people and goods from areas with Monkeypox cases – Chinese press.
– China PBOC Gov Pan Gongsheng: China will gradually shift away from a focus on quantitative targets; China will improve the mechanism for forestalling and defusing systemic risks [overnight update].
– Alibaba Reports Q2 (CNY) 16.44 v 17.37 y/y, Rev 243.2B v 249.9Be; China commerce retail Rev -2% y/y; Notes cloud business achieved positive revenue growth momentum, driven by public cloud and AI-related product adoption [overnight update].
– Reportedly some rural commercial banks in China’s Jiangsu and Zhejiang provinces are required to cap their investments in the likes of mutual funds and wealth management products at 2.5% of their total assets – press [overnight update].
China Commerce Ministry (MOFCOM): China to impose export control on antimony-related materials from Sept 15th; China will also impose export control on some items related to superhard materials [overnight update].
– China July Client FX Net Settlement (CNY): -327.5B v -282.2B prior [overnight update].
– China PBOC sets Yuan reference rate: 7.1464 v 7.1399 prior.
– China PBOC Open Market Operation (OMO): Sells CNY138B in 7-day reverse repos; Net injects CNY125B v net injects CNY571B prior.
Japan
– Nikkei 225 opens 1.6% at 37,304.
– Japan Jun Tertiary Industry Index M/M: -1.3% v +0.6% prior.
– Japan adds chip equipment to products that are protected under the foreign trade law – US financial press.
– Japan releases weekly flows data [period ended Aug 9th]: Foreign buying of Japan equities: +¥521.9B v -¥643.7B prior; Japan buying of foreign bonds: +¥1.54T v ¥677.7B prior.
– Japan sells ¥249.9B vs. ¥250B indicated in 10-year inflation-linked JGB Bonds; Yield at lowest accepted price: -0.4260% v -0.5450% prior, bid-to-cover: 2.96x v 4.27x prior.
– Japan FY25/25 (next fiscal year) budget request seen over ¥115T (record level) – Japanese press [overnight update].
South Korea
– Kospi opens 1.9% at 2,695 (recaptures levels prior to Mon, Aug 5th sell off).
– South Korea says impact from China’s antimony export controls will be ‘limited’ – financial press.
Other Asia
– Thailand Parliament votes on new PM: Paetongtarn Shinawatra wins with 248 votes.
– Malaysia Central Bank (BNM) Gov Ghaffour: Headline and Core inflation seen remaining in forecast ranges of 2.0-3.5% and 2.0-3.0%.
– Philippine Central Bank (BSP) Gov Remolona: 2025 is the relevant policy horizon; reiterates might cut interest rates again sometime in 2024.
– (TW) Follow up: A second earthquake shakes buildings in Taipei, Taiwan; USGS Magnitude 6.1, centered off Eastern Coast, 26km SE of Hualien City – press.
– Singapore July Non-oil Domestic Exports M/M: 12.2% v 2.1%e; Y/Y: 15.7% v 1.2%e.
– Thailand Dep PM Phumtham to act as interim Prime Minster – financial press [overnight update].
– PHILIPPINES CENTRAL BANK (BSP) CUTS OVERNIGHT BORROWING BY 25BPS TO 6.25%; AS EXPECTED [overnight update].
North America
– (US) Republican VP candidate J.D. Vance confirms to debate Democrat VP Candidate Tim Walz on Oct 1st on CBS in NY City – US press.
– (US) Jun total net TIC flows: $107.5B V $15.8B prior; net long-term tic flows: $96.1b v -$54.6b prior.
– (US) Initial jobless claims: 227K V 235KE (lowest since early July); continuing claims: 1.864M V 1.87me.
– (US) Aug Philadelphia Fed business outlook: -7.0 V +5.2E (below all estimates); employment: -5.7 v +15.2 prior.
– (US) Aug empire Manufacturing index: -4.7 V -6.0E.
– (US) July advance Retail Sales M/M: 1.0% V 0.4%E; Retail Sales (ex-auto) M/M: 0.4% V 0.1%E.
– (US) July import price index M/M: 0.1% V -0.1%E; Y/Y: 1.6% V 1.5%E.
– (US) Weekly EIA Natural Gas inventories: -6 BCF VS. +5 BCF to +7 BCF indicated range (first negative reading since early April).
Europe
– REVOLUT.IPO (UK) UK Treasury Official reportedly to meet Revolut on IPO talks in Autumn – FT.
– (NO) Norway Central Bank (Norges) left the Deposit Rates unchanged at 4.50% (as expected).
Levels as of 01:20 ET
– Nikkei 225 +3.2%; ASX 200 +1.0%; Hang Seng +2.0%; Shanghai Composite +0.1%; Kospi +2.3%.
– Equity S&P500 FUTs +0.2%; Nasdaq100 FUTs +0.3%, Dax +0.1%; FTSE100 -0.1%.
– EUR 1.10971-1.0984: JPY 148.74-149.35; AUD 0.6607-0.6633; NZD 0.5978-0.6026.
– Gold -0.1% at $2,490/oz; Crude Oil -0.5% at $77.88/brl; Copper -0.2% at $4.1355/lb.