Asia market update: US session red ink turns into blood-letting in Asia – US July NFP tonight

General trend

- Soft US ISM Manufacturing PMIs led to a general sell-off in the US, with bad economic news being regarded as actually bad news for equities for a change. This was only amplified in Asia from the opening bell. Nikkei traded below 37K for first time since Apr 19th dropping as much as 5%, Daiwa Securities crashed 21% (record intraday drop), while mega-bank MUFG was down 9%. Automakers continued to be hit, likely due to FX effects on earnings due to the higher Yen.

- Technology also suffered, with US semi-conductor SMH ETF -7.5% but Asia even worse off with Tokyo Electron leading Japanese chip-makers down -11%; Korea’s SK Hynix also down 8%, Hanmi -9%.

- Global yields also fell; with UK 10-years -9bps after the BOE rate cut last night, with US 10 year yields falling below 4%, Australia fell another ~10bps and Japan 10 years also falling below 1.00% to as low as 0.97%.

- Korea CPI was more or less inline, with officials saying they expected inflation to ease to the lower 2% range from August.

- US equity FUTs were initially up 0.5% to 0.9% in early Asia trading, but appeared to catch the Asian bug later in the morning to end up -0.7% to -1.3% during Asian trading.

Looking ahead (Asian time zone)

- Fri Aug 2nd (Fri night US July NFP).

Holidays in Asia this week

- Mon July 29th Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.4% at 8,084.

- Australia Q2 PPI Q/Q: 1.0% v 0.9% prior; Y/Y: 4.8% v 4.3% prior.

- Australia Jun Home Loans Value M/M: 1.3% v 0.1%e.

- Australia sells A$600M v A$600M indicated in 3.75% May 2034 bonds; Avg Yield: 4.0002% v 4.3708% prior; bid-to-cover 2.53x v 3.31x prior.

China/Hong Kong

- Hang Seng opens -1.6% at 17,025; Shanghai Composite opens -0.7% at 2,913.

- (HK) Offshore Yuan (CNH) overnight HIBOR falls to lowest since Dec 9th, 2022.

- China Commerce Ministry (MOFCOM) official: Reiterates complexity of the foreign trade environment is rising.

- Hong Kong Jun Retail Sales Volume Y/Y: -11.2% v -12.7%e; Retail Sales Value Y/Y: -9.7% v -11.8%e [overnight update].

- China PBOC sets Yuan reference rate: 7.1376 v 7.1323 prior.

- China PBOC Open Market Operation (OMO): Sells CNY1.2B in 7-day reverse repos; Net drains CNY357B v net drains CNY225B prior.

Japan

- Nikkei 225 opens -1.8% at 37,444.

- Nikkei trades below 37K for first time since Apr 19th.

- Japan July Monetary Base Y/Y: 1.0% v 0.6% prior.

- Japan Fin Min Suzuki: Recent FX moves have both merits and demerits; closely watching equity movements with a sense of urgency.

- Japan Industry Min Saito: Economic fundamentals are not ‘bad’.

- Ex-BOJ Official Kazuo Momma: Japan BOJ likely to hike again in October after "big shift" - press.

- Bank of Japan (BOJ) announcement related to outright bond buying operations: For <1 Year, 1-3 Years; 3-5 Years and 5-10 Years (Reduced bond-buying schedule for Aug, post-BOJ decision July 31st).

South Korea

- Kospi opens -2.1% at 2,719.

- South Korea July CPI M/M: 0.3% V 0.3%E; Y/Y: 2.6% V 2.5%E.

- South Korea Vice Fin Min: Inflation is expected to ease to lower 2% range from Aug - financial press.

- Bank of Korea (BOK) to issue new Annual Outlook this month (Aug) after reviewing uncertain conditions in Middle East, Weather and FX.

Other Asia

- (IN) JPMorgan to monitor India bond liquidity following investor curbs – US financial press.

North America

- (US) July Challenger Job Cuts : 25.9K v 48.8K prior; Y/Y: 9.2% v 19.8% prior.

- (US) Initial jobless claims: 249K V 236KE (1-year high); continuing claims: 1.877M V 1.855ME (highest since early March).

- (US) Q2 preliminary Nonfarm productivity: 2.3% V 1.8%E; unit labor costs: 0.9% V 1.7%E.

- (BR) Brazil July Brazil Manufacturing PMI: 54.0 v 52.5 prior (7th month of expansion).

- (CA) Canada July Manufacturing PMI: 47.8 v 49.3 prior (15th month of contraction).

- (US) July ISM manufacturing: 46.8 V 48.8E; prices paid 52.9 V 51.8E; New Orders: 47.4 v 49.0e; Employment: 43.4 v 49.2e (weakest since June 2020).

- (US) Jun construction spending M/M: -0.3% V 0.2%E.

- OPEC+ JMMC technical panel said to recommend no changes in oil policy (as speculated).

- (US) Weekly EIA Natural Gas inventories: +18 BCF VS. +31 BCF TO +34 BCF indicated range.

- U.S. prepares to counter Iranian attack on Israel within days - Axios.

Europe

- (UK) Bank of England (BoE) cuts bank rate by 25BPS TO 5.00%; as expected.

- (UK) Bank of England (BoE) Aug minutes; Vote was 5-4 (Greene, Haskel, Mann and Pill voted to keep rates steady).

- (UK) BOE Gov Bailey: Decision to cut was finely balanced; need to watch services prices very carefully - post rate decision press conference.

- (CZ) Czech central bank (CNB) cuts 2-week repurchase rate by 25BPS TO 4.50%; as expected.

- (UK) BOE’s Pill (chief economist): We aren't committing to further interest rate cuts; There will be bumps in the road ahead on inflation.

Levels as of 01:20 ET

- Nikkei 225 -5.0%; ASX 200 -2.2%; Hang Seng -2.4%; Shanghai Composite -0.5%; Kospi -4.0%.

- Equity S&P500 FUTs -0.7%; Nasdaq100 FUTs -1.2%, Dax -0.5%; FTSE100 flat.

- EUR 1.0781-1.0800: JPY 148.88-149.77; AUD 0.6486-0.6519; NZD 0.5930-0.5957.

- Gold +0.9% at $2,502/oz; Crude Oil +0.8% at $76.89brl; Copper +0.7% at $4.0975/lb.