A “normal” session after historic volatility and amid a dearth of new data

Asia market update: A "normal" session after historic volatility and amid a dearth of new data; Japan SOMP provides little new info; CN July CPI tomorrow.

General trend

- After several days of extreme volatility, Asian equity markets seemed to return to business-as-usual, for today at least. This was despite US markets trending sharply lower during the NY afternoon session. Markets were traded slightly down (though HK and CN slightly up) in relatively gentle ranges compared to the past several days.

- Currencies also traded within normal ranges for a change, even JPY crosses. Aussie dollar outperformed +0.6%, which included more hawkish language from Gov Bullock in fresh comments today.

- Japan July Summary of Opinions from last week’s surprise BOJ hike by 15bps did not reveal much new, and made no mention of FX in the monetary policy section. The SOMP had in any case been largely been superseded by the volatility and 20 Big Figure rise in the Yen since the BOJ met, along with comments yesterday by BOJ Dep Gov Uchida that there will Not be further hikes while the markets are volatile, comments which saw the Yen pare three more Big Figures from its recent spike high. The BOJ did, rather unusually, provide some transparency on what they see as the level of the Neutral Rate, which “seems to be at least around 1%”.

- Japan's Current Account and Bank Lending figures for July were inline.

- Toyota cut its annual global car output for 2024 to less than 10M vehicles for the first time in four years.

- New Zealand's inflation expectations fell to three-year lows according to the Q3 RBNZ survey, boosting the chances of rate cuts in the near future. Kiwi dollar fell -0.3% after the data, back below the 60 handle v USD. NZ 2-yr yields -10bps. **RBNZ meets next week (Aug 14th, Wed) for its OCR rate decision.

- China’s July Foreign Reserves were released overnight, revealing that China’s mounting Gold reserves have stalled for a 3rd straight month.

- US equity FUTs +0.1% to +0.4% during Asian trading.

Looking ahead (Asian time zone)

- Fri Aug 9th CN July CPI.

Holidays in Asia this week

- Fri Aug 9th Singapore.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 7,690.

- Reserve Bank of Australia (RBA) Gov Bullock: "Will not hesitate" to raise rates if needed (inline) - Speech (Economic Conditions in Post-Pandemic Australia with a Regional Lens).

- New Zealand Q3 RBNZ Business Inflation Expectations Survey (2-year): 2.0% v 2.3% prior.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2031, 2035 and 2041 bonds.

China/Hong Kong

- Hang Seng opens -0.6% at 16,773; Shanghai Composite opens -0.2% at 2,864.

- Calls for China PBOC to take a stronger role for government bonds in interest rate transmission - PBOC-backed Financial News.

- Follow up: China State Banks said to have sold 7-yr govt debt, helping to push up yields - press, citing traders.

- NDRC [China State Planner]: To issue 70 national standards in 2024 related to areas including carbon footprint.

- China July foreign reserves: $3.256B V $3.252TE [overnight update].

- HP Inc Reportedly plans to shift over half of PC production out of China – Nikkei [overnight update].

- China PBOC sets Yuan reference rate: 7.1460 v 7.1386 prior (weakest since Nov 20, 2023).

- China PBOC Open Market Operation (OMO): Sells CNY7B in 7-day reverse repos; Net drains CNY3B v net drains CNY252B prior.

Japan

- Nikkei 225 opens -1.3% at 34,645.

- BoJ summary of opinions for July: the level of the neutral rate seems to be at least around 1 percent.

- Japan Jun Current Account: ¥1.534T v ¥1.865Te.

- Japan July Bank Lending Y/Y: 3.2% v 3.2% prior.

- Japan releases weekly flows data [period ended Aug 2nd]: Foreign buying of Japan equities: -¥641.7B v -¥612.9B prior; Japan buying of foreign bonds: +¥669.7B v -¥694.7B prior.

- Japan July Tokyo Avg Office Vacancies: 5.0% v 5.2% prior.

- Japan sells ¥ VS. ¥900B indicated in 30-year JGB bonds; AVG yield: 2.2290% V 2.1900% prior, bid-to-cover: 3.47X V 2.97X prior.

- Japan sells ¥3.7T vs. ¥3.7T indicated in 6-month Bills; Avg Yield: 0.0948% v 0.0396% prior, bid-to-cover: 3.36x v 3.69x prior.

- Japan Fin Min Suzuki: No comment on BOJ Uchida comments [from Wed]; closely watching market developments.

- Japan Trade Min: No impact so far on Japan stable energy supply [comments on the Middle East].

- Toyota Cuts CY2024 Global Car output 9.8M (prior 10.3M); First undershoot of 10M units in four years - Japanese press.

- Japan top FX Diplomat Mimura: Stance on FX interventions should remain unchanged; Need to stay calm while watching with sense of urgency [overnight update].

South Korea

- Kospi opens -1.5% at 2,531.

- KDI [state think tank] cuts South Korea 2024 GDP to 2.4% (prior 2.6%); Cuts 2024 CPI to 2.4% (prior 2.6%).

Other Asia

- Philippines Q2 GDP Q/Q: 0.5% v 0.9%e; Y/Y: 6.3% v 6.3%e.

- Philippines Economic Planning Chief: 2024 GDP growth target is ‘achievable’.

North America

- (US) MBA Mortgage Applications w/e Aug 2nd: +6.9% v -3.9% prior.

- (US) July Manheim wholesale used vehicle Index: 201.6 v 199.7 prior; +0.6% m/m, -4.8% y/y.

- (US) DOE CRUDE: -3.7M V -0.5ME; GASOLINE: +1.3M V -1.5ME; DISTILLATE: +0.9M V +0.5ME; Total domestic production 13.4M bpd v 13.3M prior (record high).

- (US) Treasury's $42B 10-year note auction draws 3.960% V 4.483% prior; bid-to-cover ratio: 2.32 V 2.49 prior and 2.52 over the last 4 auctions (lowest BTC since Dec 2022); 3.1 bps tail over when issued.

- (US) Jun consumer credit: $8.9B V $10.0BE; Credit card balances record largest decline since Mar 2021- JPM CEO Dimon: People overreact sometimes to market fluctuations; Have been skeptical that the economic landing will be soft but hope it will be; Still sees odds for a soft landing around 35-40% - CNBC interivew.

- (CA) Bank of Canada (BoC) Summary of Deliberations: Agreed more cuts likely if inflation eases further.

Europe

- (UK) July RICS House Price Balance: -19% v -11%e.

- (EU) ECB's Rehn (Finland): Achieving 2% target will be bumpy this year; Sees recent market swings as overreaction.

- (IR) Iran calls on Muslim states to support its right to respond to Israel.

- (IR) Iran Foreign Min: Iran's response to Israel will take place in the right time and in the appropriate shape.

- (LY) Libya National Oil Company (NOC) declares force majeure in Sharara Oil Field (300K bpd capacity) beginning on August 7th - Statement.

Levels as of 01:20 ET

- Nikkei 225 -0.5%; ASX 200 -0.3%; Hang Seng +0.7%; Shanghai Composite +0.2%; Kospi -0.9%.

- Equity S&P500 FUTs +0.1%; Nasdaq100 FUTs +0.2%, Dax +0.8%; FTSE100 +0.6%.

- EUR 1.0920-1.0938: JPY 144.43-146.88; AUD 0.6507-0.6565; NZD 0.5982-0.6009.

- Gold flat at $2,433/oz; Crude Oil +0.3% at $75.46/brl; Copper +0.8% at $3.9605/lb.