Cautious equity gains seen, focal points ahead of the weekend include US jobs data

Asia Market Update: Cautious equity gains seen; Focal points ahead of the weekend include US jobs data, Iran and the Yen; Bessent commented on potential bank sanctions at the start of the week; JGB yields extended declines as Waller was dovish; Foxconn Aug sales due on Sat., NY holiday on Mon.

General trend and developments

-Aggressive moves lower in JGB yields have continued into Friday’s session, again led by the 30-year yield. US Fed Waller’s pre-jobs report dovish comment drove a collapse in Sept Fed rate hike expectations [https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html]. Waller stated he was open to keeping the policy rate in the 3.50-3.75% range, as recent data suggests signs of ‘disinflation.’ In corporates, SoftBank Group priced ¥1.0T in retail bonds. It was previously reported that Softbank has become the 'whale' of the retail bond market in Japan [FT article from May 2020]

-Japan Fin Min Katayama confirmed the FY27/28 budget requests would be a fresh record high of ¥143T (vs. ¥122.3T y/y). As expected, she will, also, not be replaced in the PM’s cabinet reshuffle. Suzuki is also expected to remain as the LDP General Secretary, according to reports from yesterday. These developments may suggest continuity and predictability in PM Takaichi’s fiscal strategy. Prior press reports had, also, noted Japan’s govt is said to be aiming to "guide" 40% of household assets into stocks, investment trusts and bonds by 2040 (currently 25.0%). Such a plan may involve domestic pension funds, which are already said to be mulling increases in domestic bond holdings. Japan pension funds are said to favor domestic bonds by the largest margin since 2008, according to an asset manager’s survey. Meanwhile, some were baffled by GPIF’s recent ‘unusual meeting’.

-While JP fixed income has remained active on the session, USD/JPY has been more subdued (reaching lows of 155.25 during the session) vs Thurs. BOJ accounts indicated there was no major yen intervention on Wed, Sept 2nd [the data is released at 5:00 AM ET]. Even still, the recent comments out of US Treasury Sec Bessent have remained in focus going into the weekend, Recall on Wed, he stated ‘I know what the Japanese are planning on doing.’ Bessent has long held his view that the yen has been undervalued on interest rate differentials, according to Katayama.
-Like Q2 prelim GDP, Japan’s Jul Housing Spending was negatively impacted by inflation. The data saw the largest drop in >2 years, as consumers cut back spending on food and transportation amid the Middle East impact.

-RBNZ officials affirm temporary rate hike pause. Assist Gov Silk suggests the central bank is more likely to tighten in Dec vs. Oct. MPC member Hansen was uncertain about the Oct decision. Recall RBNZ Gov Breman, also, said the central bank might need to take some time to assess the policy stance, according to comments made on Wed.

-The US July trade deficit came in at -$88.6B (vs. -$90.2 billion consensus), exports fell -2.1% m/m to $310.7 billion while imports rose +2.8% m/m to $399.3 billion, with the deficits between China and Japan both increasing to $17.4 billion and $4.7 billion respectively (together accounting for ~25% of the deficit). The figures underscore the persistence of the U.S. trade deficit since at least January 1992 [verified - citing the U.S. Department of Commerce], amid imbalances against a backdrop of heightened political pressure [including an auto industry group calling for a comprehensive US ban on Chinese vehicles by end-2026 amid ongoing US-Canada-Mexico auto negotiations and intensifying competition from Chinese EV manufacturers]. The US is said to have last reported a monthly trade surplus in 1975.

-Among the Chinese opening, The People’s Bank of China (PBOC) set the yuan midpoint at 6.7787 against the dollar, marking yet another strongest level mark since the 8th of February 2023. In the open-market operations the PBOC conducted no 7-day reverse-repo injections, resulting in a net drain of CNY20 billion (vs. a net drain of CNY103 billion prior); this marked the third consecutive session without liquidity injection and the twelfth such instance since 2020 in another move aimed at responding to “ample” or “reasonable” liquidity in the banking system. This comes amid the South China Morning Post reporting that a former White House staffer had urged the United States to consider military strikes to prevent China from achieving artificial general intelligence (AGI) first, as OpenAI’s president Greg Brockman described the newly unveiled GPT-6 Astra as a model that “could be defined as artificial general intelligence.”

-US equity FUTs +0.1% to +0.3% during Asia trading.

Looking ahead (Asian-weighted focus, using Asian time-zone)

-Thu Sep 3rd: Global S&P/HSBC Svcs PMI, AU July Trade Balance, CN Aug RatingDog Svcs PMI, VN Aug CPI & Retail Sales & Industrial Production & Trade Balance, JP 30-Year JGB Auction, MY Interest Rate Decision, EU July PPI, (Thu night, US July Trade Balance & Q2 Nonfarm Productivity & Q2 Unit Labor Costs, CA July Trade Balance & Q2 Labor Productivity, US Aug S&P/ISM Svcs/Composite PMI).

-Fri Sep 4th: KR/TW/HK/PH Aug FX Reserves - USD, JP July Household Spending, PH Aug CPI, SG July Retail Sales, EU July Retail Sales, (Fri night, US Aug Average Hourly Earnings & Nonfarm Payrolls & Unemployment Rate).

Upcoming Holidays in Asia this week

- None seen.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens +0.4% at 9,054.

-(NZ) RBNZ Assist Gov Silk: Hike in October or December 'is still open'; Key rate more likely to be raised in December.

-(AU) ASX.AU Reports Aug metrics (A$): Total cash market value 199.68B; total avg daily value 9.51B, +11% y/y.

-(AU) ASIC: Reviewing 551 misconduct and whistleblower claims at big four audit firms.

-(AU) Australia sells A$800M v A$800M indicated in 4.75% Oct 2037 Bonds: Avg Yield: 5.2133% v 4.9566% prior; Bid-to-cover: 3.21x v 4.25x prior.

-(NZ) New Zealand Q2 Volume of All Buildings Q/Q: 4.8% v 1.0%e.

-(NZ) RBNZ Monetary Policy Committee Member Carl Hansen: Wednesday's rate hike was a "clear consensus" decision.

China/Hong Kong

-(CN) Shanghai Composite opens +0.3% at 3,956; (HK) Hang Seng opens +1.2% at 25,515.

-(CN) USD/CNY *China PBOC sets the yuan mid-point at 6.7787 v 6.7807 prior (strongest level since February 8th, 2023).

-(CN) Auto industry group said to urge US lawmakers to pass comprehensive ban on Chinese vehicles before the end of 2026 - press citing letter [US market close].

-(CN) US urged to consider ‘military strikes’ to stop from China achieving AGI first; cites a former White House ‘staffer’ – SCMP.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY0B in 7-day Reverse Repos; Net drains CNY20B v drains CNY103B prior (third straight nil injection, twelfth time since 2020).

Japan

-(JP) Nikkei 225 opens +0.5% at 64,427.

-(JP) USD/JPY Japan's dollar/yen rises to 156.44, rebounding from earlier lows of 155.25.

-(JP) Japan Fin Min Katayama: Bessent has long held his view that yen has been undervalued, due largely to interest rate differentials.

-(JP) Japan Fin Min Katayama said to retain post in Cabinet reshuffle - press [US market close].

-(JP) Japan July Household Spending Y/Y: -3.6% v -1.6%e [the largest decline in 2.5 years]; The government noted spending cutbacks on inflation-sensitive items [food and transportation].

-(JP) Japan sells ¥3.5T vs. ¥3.5T indicated in 3-Month Bills; Avg Yield: 1.1076% v 1.0794% prior; bid-to-cover: 3.00x v 3.21x prior.

-(JP) Japan Top FX Diplomat Mimura: Affirms always in contact with US authorities.

-(JP) Japan Chief Cab Sec Kihara: Japan to support environment for SME wage increases.

-(JP) Japan FSA plans to increase inspections of bank branches overseas - Nikkei.

-(JP) Japan Defense Min Koizumi plans to 'skip' the annual dialogue in South Korea - Yonhap.

-(JP) KBSTY To raise prices of all steel products from October, 2026.

Korea

-(KR) Kospi opens +1.1% at 6,654.

-(KR) Blue House: South Korea President Lee to visit France on Sept 6-9th.

-(KR) South Korea Minister: Seoul and Washington are continuing talks on U.S. semiconductor tariffs under the understanding that South Korea would not be put at a disadvantage compared with its competitors - Yonhap.

-(KR) South Korea President Lee approval rating falls to record low of 40% (vs. 44% prior) - Gallup.

-(KR) South Korea July Current Account Balance: $42.1B v $49.7B prior.

-(KR) South Korea Industry Min Kim: We plan to announce our first US investment project later this month - press.

-(KR) South Korea Finance Ministry: South Korea to closely monitor local bond market movements - Statement.

-(KR) South Korea prepares to send support ship to the Strait of Hormuz - Chosun.

Other Asia

-(MY) MALAYSIA CENTRAL BANK (BNM) LEAVES OVERNIGHT POLICY RATE (OPR) UNCHANGED AT 2.75% [EU market close].

-(PH) Philippines Aug CPI M/M: 0.6% v 0.5%e; Y/Y: 6.1% v 6.1%e.

-(TH) Thailand Fin Min: Will introduce minimum requirements for data center business.

North America

-(US) USTR Greer: Haven't had negotiations with Canada since; Mexico is eager to do things to protect North America from Chinese imports - Fox News Interview.

-(US) AUG ISM SERVICES INDEX: 55.4 V 54.1E; Prices paid highest since July 2022 [US market close].

-(US) Fed's Waller (voter): Recent data suggest finally seeing some disinflation; Open to keeping policy rate in the 3.50-3.75% range this month if data supports it; If inflation comes in hot, would consider a rate hike; Expects 'reasonable' CPI and PPI in next month [US market close].

-(US) Q2 FINAL NONFARM PRODUCTIVITY: 1.4% V 1.4% PRELIM; UNIT LABOR COSTS: 1.2% V 1.3% PRELIM [US market close].

-(US) JULY TRADE BALANCE: -$88.6B V -$90.2BE [US market close].

-(US) INITIAL JOBLESS CLAIMS: 206K V 205KE; CONTINUING CLAIMS: 1.78M V 1.79ME [US market close].

-(US) OPENAI.IPO Introduces GPT-6 Astra, rolling out today to enterprise customers with daybreak access; Includes cyber guardrails [US market close].

-(US) TSN Cuts FY26 Rev +1.5-2.0% (prior +2.5-3.5%) Adj Op $1.85-2.05B (prior $2.1-2.3B); Cites additional pressure in beef segment and consumer caution around discretionary spending [US market close].

-(US) CPB Reports Q4 $0.39 v $0.40e, Rev $2.14B v $2.15Be; Guides initial FY27 below est; Cuts quarterly dividend 35.9% to $0.25 from $0.39 (indicated yield 4.22%) [US market close].

-(US) LULU Reports Q2 $2.92* v $1.79e, Rev $2.40B v $2.47Be; Guides Q3 light, cuts FY26 outlook [US market close].

-(MX) Mexico Aug Consumer Confidence: 46.1 v 44.9e [US market close].

-(BR) Brazil Aug Services PMI: 50.5 v 49.7 prior (moves back into expansion) [US market close].

-(US) USTR Greer: UK-EU alignment is ‘problem’ for US trade deal - FT.

-(US) SEMI: global semiconductor equipment billings increased 23% year-over-year to US$40.53B in the second quarter of 2026. Second quarter 2026 billings registered an 11% quarter-over-quarter growth.

-(US) IMF: IMF reaches staff-level agreement on combined second and third reviews under El Salvador's extended fund facility arrangement.

-(US) Follow up: PJM Interconnection extends level grid emergency alert to Sept 4th (vs. Sept 3rd prior) as unusually hot and humid weather conditions continue.

-(US) Flexport Global Logistics Update: Ocean Trans-Pacific Eastbound (TPEB) September rates continue to rise on both the East Coast and West Coast..

-(US) Pres. Trump: I am pleased to announce that Adam Telle, the current Assistant Secretary of the Army for Civil Work... - post on Truth Social.

-(US) Pres. Trump: The Missouri Supreme Court just ridiculously ruled in favor of changing the maps back to what they w...

-(US) FOX (US) Pres. Trump: I can’t believe Maria Bartiromo is no longer going to have her great show(s) on FoxNews/Business. Th... - post on Truth Social.

-(US) FHFA Dir Pulte: Equifax, Experian, Transunion have been overcharging - post on X.

-(US) Elon Musk's Boring Co. recently closed round at ~$20B valuation - WSJ.

-(US) ANTHROPIC.IPO Finalizing $15B pre-IPO revolving credit facility - US financial press.

-(US) NVDA Follow Up: To invest $2.5B in Thinking Machines Lab - US financial press.

-(US) TSLA Spokesperson: U.S. auto safety regulator NHTSA is "in contact with Tesla" about cybercab rollout and "is evaluating the situation".

-(BR) Brazil Pres Lula polls at 46%; [Presidential Candidate] Flávio Bolsonaro at 44% in runoff - Datafolha poll.

-(VE) CVX Venezuela Oil Minister Paula Henao: Chevron output in Venezuela to reach 300Kbd by end-year - State TV.

-(AR) Argentina President Milei: To sign decree to sanction companies working on oil exploration off the Falkland Islands.

Europe

-(EU) Treasury Sec Bessent: EU has joined 'operation Economic Outcast'; Appreciate EU's 'strong and early stance' on Iran.

-(EU) Commission Pres Von der Leyen to announce €200M in fresh funding for Greenland - FT.

-(RU) Russia Dep PM Novak: Russia, China discussing LNG projects in Arctic - Tass.

-(UK) BOE’s Pill (chief economist, hawkish dissenter): Believes bank rate needs to be raised to 4%; Raising the bank rate needs to not be the beginning of a prolonged and aggressive series of increases; Fine tuning interest rates in the face of uncertainty about energy prices is problematic [EU market close].

-(SE) Sweden Central Bank (Riksbank) Gov Thedeen: Do not see any clear signs of a lasting, broad upturn in inflation but must have a high level of vigilance [EU market close].

-(EU) Various analysts comment on ECB rate path.

-(UK) UK Aug New Car Registrations: >90.0K units; +13.0% y/y.

-(RU) Russia Aug vehicle sales: 114.3K units, -6.5% y/y - Autostat.

Middle East

-(IR) VP Vance: About 15M bbl of crude transited through the Strait of Hormuz yesterday; Iran keeps shooting at commercial ships [US market close].

-(IR) Oman said to 'quietly refuse' Iran's pitch for fees through the Strait of Hormuz, countering IRGC's statement on a deal last week - NY Post.

-(IL) Israel Defense Min Katz: An Iranian attack on Israel will free the govt from existing limits [EU market close].

Levels as of 01:20 ET

Nikkei 225 +1.4%; ASX 200 -0.1%; Hang Seng +2.0%; Shanghai Composite +0.5%; Kospi +2.3%.

Equity S&P500 Futures +0.1%; Nasdaq100 +0.3%; DAX +0.3%; FTSE100 flat.

EUR 1.1633-1.1623; JPY 156.44-155.25; AUD 0.7215-0.7194; NZD 0.5901-0.5867.

Gold -0.1% at $4,471/oz; BTC +4.1% at $81,096; WTI Crude Oil +0.2% at $91.50/bbl; Copper -0.1% at $6.6660/lbs.