Asian Market Update: Asian stocks follow US stocks in surge, recovering to pre-Black Monday levels (August 5).
Overall trends
– US stocks surged overnight on improved employment data and rising retail sales, while stocks in Japan and South Korea (after the holiday) opened significantly higher, with Australia and Hong Kong quickly following suit. – Semiconductor makers SK Hynix up 7%, Tokyo Electron up 5%, Renesas up 6% and Advantest up 4%. Technology in general was strong, with SoftBank up 5% and Nikkei main component Fast Retailing up 5%.
– The Nikkei Stock Average is down 149 yen again, +3.3%, having already recovered its losses from Black Monday on August 5th and is expected to rise by about 7.5% for the week, which would be its best weekly performance since April 2020.
– In Australia, the ASX 200 commodity index rose, with Energy up +2.1%, Resources up +2% and Financials up +1.5% on NAB's third quarter results.
– The Hang Seng Index also rose 1% at the open, following tech company earnings reports from JD.com and Alibaba overnight, as well as a pledge of support from People's Bank of China Governor Pan Gongsheng to implement policies and measures already in place and introduce additional measures.
– Japanese yields tracked the global upward trend overnight, with JP 10-year government bonds adding to the overnight gains, rising 4.5bps to 0.88% in early morning spot trading, while the yen remained flat after dropping to 149 yen against the US dollar overnight.
– After the intense volatility of Japanese stocks last week, it has emerged that foreigners bought 5 trillion yen worth of Japanese stocks in the week ending August 9. The 15% plunge in the Nikkei Stock Average on Monday, August 5, undoubtedly led to a large sell-off in stocks, but by the end of the week the Nikkei Stock Average had almost recovered to its pre-Black Monday level.
– The People's Bank of China injected more than 1.1 trillion yuan of liquidity through open market operations this week.
– Chinese regulators have reportedly issued “guidance” to mutual funds to limit allocations to seven-year Chinese government bonds, as the bond war between the Chinese government and investors who buy the bonds as a stable value hedge continues.
– In trade news, Japan has increased its requirements on semiconductor exports to China, adding semiconductor equipment to the list of products protected under its foreign trade law.
– Thailand's parliament has elected Pathomtarn Shinawatra as the country's new prime minister. At 37, she is Thailand's youngest ever prime minister and only the country's second female prime minister. Her popular father, Thaksin Shinawatra, was the first politician to win a majority in parliament.
– US stocks FUT were up +0.2% to +0.3% during the Asian trading period.
Future Schedule (Asia Time Zone)
– Friday, August 16th (Friday night, US Michigan August Consumer Confidence Index).
Asian Holidays This Week
– Monday, August 12th, Japan and Thailand.
– Thursday, August 15th: India, South Korea.
Headlines/Economic Data
Australia/New Zealand
– The ASX 200 opened at 7,887, up +0.3%.
– RBA Governor Block and staff: The Board believes that it has struck a good balance between preserving employment while containing inflation within a reasonable timeframe – Parliamentary testimony.
– Australia sold A$700 million for A$700 million indicated on 2.25% bonds due May 2028. Average yield: 3.5725% (previously 4.1383%). Bid ratio: 3.83 (previously 4.08).
– New Zealand July manufacturing PMI: 44.0 (previous month: 41.2) (17th consecutive month of contraction).
– New Zealand second quarter Producer Price Index (PPI) input change: 1.4% (previous quarter: 0.7%), output change: 1.1% (previous quarter: 0.9%).
– New Zealand non-resident bond ownership in July: 59.6% (previously 60.7%).
– RBNZ Governor Olliss: Follow-up comments: The Committee has gained a very high level of confidence that low and stable inflation has returned to within the 1-3% target – Financial Press.
– RBNZ Deputy Governor Silk: A cautious approach to OCR cuts is appropriate (Inline) – Financial journalist interview.
China/Hong Kong
– The Hang Seng Index opened up 1.0% to 17,286, while the Shanghai Composite Index was flat at 2,877.
– China Customs: Implementing rules on movement of people and goods from areas with monkeypox cases – China Press.
– Pan Gongsheng, Governor of the People's Bank of China: China will gradually shift away from a focus on quantitative targets and improve mechanisms for preventing and mitigating systemic risks (overnight update).
– Alibaba reports Q2 (RMB) of RMB 16.44 (17.37 YoY) and revenue of 243.2B (249.9Be). China commerce retail sales down 2% YoY. Alibaba said its cloud business achieved positive revenue growth momentum due to adoption of public cloud and AI-related products (overnight update).
– Some rural commercial banks in China's Jiangsu and Zhejiang provinces have been asked to limit investments in mutual funds, asset management products and other products to 2.5% of their total assets, according to reports. – Report (overnight update).
China's Ministry of Commerce (MOFCOM): China will impose export controls on antimony-related materials from September 15. It will also impose export controls on some items related to ultra-hard materials (overnight update).
– China customer FX net settlement volume in July (CNY): -327.5 billion CNY (-282.2 billion CNY from the previous day) (updated overnight).
– The People's Bank of China set the yuan's reference rate at 7.1464, down from the previous day's 7.1399.
– People's Bank of China Open Market Operations (OMO): Sold RMB138 billion in 7-day reverse repos, net RMB125 billion, compared to the previous net amount of RMB571 billion.
Japan
The Nikkei Stock Average opened up 1.6% at 37,304.
– Japan's June tertiary industry index m/m: -1.3% compared to +0.6% m/m.
– Japan adds chip equipment to products protected by foreign trade law – US financial reports.
– Japan releases weekly flow data (period ending August 9): purchases of Japanese stocks by foreigners: +521.9 billion yen (previous period: -643.7 billion yen). Purchases of foreign bonds by foreigners: +1.54 trillion yen (previous period: 677.7 billion yen).
– Japan sold 249.9 billion yen of 10-year inflation-linked government bonds against the indicated amount of 250 billion yen. Yield at minimum acceptable price: -0.4260% (previous: -0.5450%), bid ratio: 2.96x (previous: 4.27x).
– Japan's budget request for fiscal year 2025/2025 (next fiscal year) is expected to exceed 115 trillion yen (the highest level ever) – Japanese Press (overnight update).
South Korea
– The Korea Composite Stock Price Index (KOSPI) opened at 2,695, up 1.9% (recovering the pre-offering level from Monday, August 5).
– South Korea announces that the impact of China's antimony export restrictions will be “limited” – Financial reports.
Other Asia
– The Thai parliament elects a new prime minister. Pathontar Shinawatra wins with 248 votes.
– BNM Governor Gafoor: Headline and core inflation are expected to remain within the forecast range of 2.0-3.5% and 2.0-3.0%, respectively.
– BSP Governor Remolona: He reiterated that 2025 is a key policy period and that interest rates may be cut again in 2024.
– (TW) UPDATE: Second earthquake shakes buildings in Taipei, Taiwan. USGS Magnitude 6.1, epicenter off the east coast, 26km southeast of Hualien City – Reports.
– Singapore's July non-oil domestic exports are expected to grow 2.1% month-on-month, up 12.2%, and 1.2% year-on-year, up 15.7%.
– Thai Minister of State for Finance Pumtam becomes caretaker Prime Minister – Financial news (overnight update).
– The Bangko Sentral ng Pilipinas (BSP) cut its overnight borrowing rate by 25 basis points to 6.25%, as expected (overnight update).
North America
– (US) Republican vice presidential candidate J.D. Vance has confirmed that he will debate Democratic vice presidential candidate Tim Walz on October 1 on CBS in New York City – US media.
– (United States) Total TIC net flows in June: $107.5 billion (down $15.8 billion q-o-q). Long-term TIC net flows: $96.1 billion (down $54.6 billion q-o-q).
– (US) Initial Jobless Claims: 227K vs. 235KE (lowest since early July), Continuing Claims: 1.864MV vs. 1.87ME.
– (US) Philadelphia Fed Business Outlook for August: -7.0 v +5.2E (below all expectations). Employment: -5.7 v +15.2 (previous).
– (US) August Imperial Manufacturing Index: -4.7V -6.0E.
– (US) July Retail Sales m/m: 1.0% v 0.4%E, Retail Sales (excl. motor vehicles) m/m: 0.4% v 0.1%E.
– (US) Import Price Index in July, 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. an indicated range of +5 BCF to +7 BCF (first negative reading since early April).
Europe
– REVOLUT.IPO (UK) UK Treasury officials reportedly to be in IPO talks with Revolut in the autumn – FT.
– (NO) Norway's central bank (Norges) kept deposit rates unchanged at 4.50% (as expected).
Levels as of 01:20 ET
– Nikkei Stock Average +3.2%, ASX 200 +1.0%, Hang Seng Index +2.0%, Shanghai Composite Index +0.1%, KOSPI +2.3%.
– Stocks S&P500 FUTs +0.2%, Nasdaq100 FUTs +0.3%, Dax +0.1%, FTSE100 -0.1%.
– Euro at 1.10971-1.0984, Japanese yen at 148.74-149.35, Australian dollar at 0.6607-0.6633, New Zealand dollar at 0.5978-0.6026 U.S. dollar.
– Gold was down 0.1% to $2,490/oz, crude oil was down 0.5% to $77.88/bbl, and copper was down 0.2% to $4.1355/lb.
