FOMC decision drives market volatility

Asia market update: FOMC decision drives market volatility; BOE tonight and BOJ tomorrow.

General trend

- As the Asian session opened up the volatility seen around the FOMC and Fed Chair Powell’s press conference had largely dissipated and prices in most markets and instruments were more or less back to where they were pre-FOMC.

- However, just before the equity opening in Japan, US equity FUTs took off to the upside, +0.8% in a matter of minutes; US/JPY also gained +1.0% back above the 143 handle, despite JP 10-yr yields +2bps.

- Japanese stocks opened up +1.6% and kept surging from there, +2.5% within 15 minutes of the open. JP auto sector +3.8%.

- Australian ASX index also hit a fresh record high over 8,200, (REITS +0.7%). Singapore Straits Times index also at 2007 highs. Hang Seng also outperformed +2.0%.

- The Kospi did not fare so well, opening higher for the first trades of this week after extended holidays but then quickly slid to be down -0.7%, with chipmaker Hynix -10% after Morgan Stanley halved its price target. Hanmi Semi also -6%.

- Concurrently, Bitcoin rose +3.5% to over $62K in early Asia trading, levels not seen in a month.

- Amid gold volatility both ways, Copper hit a 2-month high.

- China 10-yrs -2bps to a fresh record low 2.04%, as the China Daily said that US Fed cut gives the PBOC more options. China property stocks higher after the Fed rate cut. Hang Seng Mainland Properties Index +6.2%.

- New Zealand Q2 GDP contracted but not as bad as expected; Kiwi dollar lost -0.4% in the subsequent two hours, although comparable to other currencies amid renewed USD strength during the Asian morning.

- Employment rate in Australia for August was steady, with mixed outcomes for full time (down) and part-time employment (up). Stats Agency said overall there is continued relative tightness in the labour market. AU bond yields extended rise after data.

- US equity FUTs +1.0% to +1.5% during the Asia session.

Looking ahead (Asian time zone)

- Thursday Sept 19th (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 +0.2% at 8,158.

- Australia  Aug employment change: +47.5K V +26.0KE; unemployment change: 4.2% V 4.2%E.

- New Zeland Q2 GDP Q/Q: -0.2% V -0.4%E; Y/Y: -0.5% V -0.6%E.

China/Hong Kong

- Hang Seng reopens after holiday -0.1% at 17,633; Shanghai Composite opens +0.2% at 2,723.

- China Aug Swift Global Payments (CNY): 4.7% v 4.7% prior.

- China Commerce Ministry (MOFCOM): Will continue to negotiate until the 'last minute' [comments on EU’s EV probe].

- China Daily: US Fed moves give PBOC more options.

- Hong Kong Monetary Authority (HKMA) cuts base rate by 50bps from 5.75% to 5.25% [tracks the US Fed].

- China's cabinet said to have passed the draft regulations on export controls for dual-use goods [overnight update].

- China Aug Client FX Net Settlement (CNY): +6.5B v -327.5B prior; FX Regulator SAFE: Cross border flows are becoming more stable [overnight update].

- CAAC: August China Air Passenger Traffic +12% y/y [overnight update].

- China PBOC sets Yuan reference rate: 7.0983 v 7.0870 prior.

- China PBOC Open Market Operation (OMO): Sells CNY524B in 7-day reverse repos; Net injects CNY363B v net injects CNY81B prior.

Japan

- Nikkei opens +1.6% at 36,958.

- Japan Aug Tokyo Condominiums for Sale Y/Y: -50.4% v -42.3% prior.

- BOJ Quarterly Flow of Funds Report: Japan household assets hit record high of ¥2,212T.

- Japan walkie-talkie maker Icom (6820.JP) says it is aware of reports its device used in Lebanon explosion - financial press.

- Japan sells ¥4.6T vs. ¥4.6T indicated in 3-Month Bills; Avg Yield: 0.0498% v 0.0567% prior; bid- to-cover: 3.50x v 3.13x prior.

- Japan Cabinet Office (Govt) Monthly Report: Maintains overall economic assessment; Upgrades view on bankruptcies first time in 42 months [overnight update].

Korea

- Kospi reopens +0.7% at 2,594 for its first trading day of this week.

- South Korea Fin Min Choi: Will stabilize markets when needed - financial press.

- Bank of Korea Gov Rhee: FOMC decision reduces concerns about currency - financial press.

- KEPCO (015760.KR) (KR) South Korea Pres Yoon; Reiterates confident can overcome appeals against the Czech nuclear deal launched by Westinghouse and France's EDF - statement.

Other Asia

- Philippines Fin Min Recto: To support 50bps rate cut in Oct.

- (TW) China Ministry of Finance: China to stop duty-free policy on some Taiwanese agricultural products EXPECTED [overnight update].

- Indonesia Central Bank(BI) cuts BI-rate by 25BPS TO 6.00%; not expected [overnight update].

North America

- (US) US House defeats the Republican stopgap funding bill; Govt shutdown draws nearer – WSJ.

- (BR) BRAZIL CENTRAL BANK (BCB) RAISES SELIC TARGET RATE BY 25BPS TO 10.75%; AS EXPECTED.

- (US) JULY TOTAL NET TIC FLOWS: $156.5B V $92.0B PRIOR; NET LONG-TERM TIC FLOWS: $135.4B V $80.5B PRIOR.

- (US) MBA Mortgage Applications w/e Sept 13th: 14.2% v 1.4% prior.

- (EU) ECB’s Nagel (Germany): Rates will Not fall as quickly and sharply as they rose; Intervals between interest rate moves may vary.

- (US) DOE CRUDE: -1.6M V -1ME; GASOLINE: +0.1M V +0.5ME; DISTILLATE: +0.1M V +0.5ME.

- (US) AUG HOUSING STARTS: 1.356M V 1.318ME (highest since Feb 2024); BUILDING PERMITS: 1.475M V 1.410ME.

- (US) DOE CRUDE: -1.6M V -1ME; GASOLINE: +0.1M V +0.5ME; DISTILLATE: +0.1M V +0.5ME.

- (CA) Bank of Canada (BoC) Summary of Deliberations: Some had become more concerned with the downside risks to inflation; Other members took view that inflation risks were balanced.

- (US) FOMC CUTS TARGET RANGE BY 50BPS BPS TO 4.75-5.00%; Dot plot projects 100bps of cuts in FY24 and FY25; Vote was not unanimous.

- (US) Comparative Analysis of current vs July FOMC statements: Gained greater confidence inflation is moving toward target, triggering the rate cut; Notes slowing job gains, dual mandate risks have finally come into balance and now notes commitment to supporting max employment; First dissenting vote in over 2 years.

- (US) Fed Chair Powell: Nothing about our SEP projections suggests that we're in a rush; Can go quicker, slower, or pause if appropriate; If we'd gotten the jobs data before, we may have cut in July - FOMC Q&A.

Europe

- EU27 Aug New Car Registrations: -18.3% v +0.2% prior.

- (PT) Portugal Aug PPI M/M: 0.0% v 0.9% prior; Y/Y: 2.0% v 1.9% prior.

- (ES) Spain Econ Min Cuerpo: Lowers 2023 debt-to-GDP ratio forecast by 2.7ppts from 105%.

- (IL) Germany has reportedly placed exports of military weapons to Israel on hold in the aftermath of Hezbollah pager explosions - press.

Levels as of 01:20 ET

- Nikkei 225 +2.7%; ASX 200 +0.6%; Hang Seng +2.0%; Shanghai Composite +0.6%; Kospi -0.5%.

- Equity S&P500 FUTs +1.0%; Nasdaq100 FUTs +1.5%, Dax +0.6%; FTSE100 +0.7%.

- EUR 1.1069-1.1130: JPY 141.88-143.95; AUD 0.6737-0.6798; NZD 0.6181-0.6228.

- Gold -0.2% at $2,592/oz; Crude Oil +0.2% at $69.99/brl; Copper +0.7% at $4.3015/lb.