More Yen strength – Asian equities follow US Big Tech down

Asia market update: More Yen strength; Asian equities follow US Big Tech down; JP Services PMI jumps (ahead of Fri Tokyo CPI and BOJ next week); AU PMIs stay mired; Focus on DE PMIs and CA Rate Decision.

- Yen continued its recent strength, testing levels not seen against the USD and EUR since early June, breaching ¥155/USD, and dropping below the 100 day moving average against USD for the first time since early March. JP 10-yr yields +2bps, with half of the rise post today’s 40-year JGB auction, which had a bid-to-cover of only 2.21x.

- EUR/USD cross also fell to its lowest in two weeks. Aussie, Kiwi and other Asian currencies also under pressure, with more India RBI intervention seen by traders.

- Equities were soft in Asia, led by JP Nikkei down 1%, not helped by A/H earnings from Big Tech in the US. Google and Tesla reported Q2 earnings after the close that did not impress Wall St. After hours Google fell 2% despite beating estimates but advertising revenue slowed. Meanwhile Tesla fell nearly 8% following its earnings miss, CEO Musk confirming delay of robotaxis to Oct (from Aug), along with lower production expectations.

- China’s Shanghai Composite fell below the 2,900 level for the first time since February.

- Although Japan’s July prelim Manufacturing PMI fell into contraction for the first time in three months, Japan Services PMI jumped from contraction up to 53.9 with Composite also jumping up to a 52 handle from prior contraction. A reminder that Tokyo CPI figures to be released on Friday, followed by the BOJ rate decision next week.

- Australia prelim PMI figures for July underwhelmed again. S&P reported that business activity in Australia's private sector neared stagnation in July as companies faced a second consecutive month of falling new orders. Business confidence dropped to the lowest since the outbreak of the COVID-19 pandemic.

- India prelim PMI for July continue to show strength through manufacturing and services.

- South Korea June Consumer Confidence rose to well over the 100 level.

- US equity FUTs -0.6% to -1.0% during Asian trading.

Looking ahead (Asian time zone)

- Wed 24th (Wed eve DE Aug Consumer Conf + July Flash PMI, Wed night CA BOC Rate Decision).

- Thu 25th KR Adv Q2 GDP, (Thu eve DE July Business Climate, Fri night US Q2 Adv GDP).

- Fri 26th Tokyo July CPI, (Fri night *US Jun Core PCE).

Holidays in Asia this week

- Mon July 22nd Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 7,966.

- Australia July preliminary Manufacturing PMI: 47.4 V 47.2 prior (highest in two months).

- Australia sells A$11.5B in new Dec 2035 bonds via syndication: Yield to maturity at 4.425% (vs current 10 yr yield: 4339%).

- Australia APRA (financial regulator) finalises targeted changes to strengthen banks’ liquidity and capital requirements; Effective July 1st, 2025.

- Australia RBA launches consultation on central clearing of Australia bonds and repos - statement.

China/Hong Kong

- Hang Seng opens flat at 17,454; Shanghai Composite opens -0.2% at 2,909.

- China Agriculture Ministry: Increased soybean self-sufficiency rate by ~400bps in 2 years.

- China President Xi: China will boost cooperation with Russia in Energy - state TV.

- China MOF sells 30-year Special Bonds: Yield 2.4700% v 2.4989% prior.

- China Premier Li: China willing to work with EU to consolidate China-EU political foundation and increase strategic mutual trust [overnight update].

- China NDRC (state planner): China supports qualified companies in expanding long- and medium-term external debt, in an effort to boost economic development [overnight update].

- China PBOC sets Yuan reference rate: 7.1358 v 7.1334 prior (weakest since Nov 21, 2023).

- China PBOC Open Market Operation (OMO): Sells CNY66.1B in 7-day reverse repos; Net drains CNY203.9B v net drains CNY408.7B prior.

Japan

- Nikkei 225 opens -0.7% at 39,336.

- Japan July preliminary Manufacturing PMI: 49.2 V 50.0 prior (first contraction in 3 months); Services PMI rebounds to 53.9.

- Japan sells ¥699.7B VS. ¥700B indicated in 40-year JGB bonds; yield at lowest accepted price: 2.420% V 2.270% prior; bid-to-cover: 2.20X V 2.21X prior.

- Japan Jun BOJ Core CPI Y/Y: 2.1% v 2.1% prior – update.

- Russian Foreign Min: Russia permanently bans Toyota, Denyo and Rakuten execs (13 Japanese nationals in all) from entering country, in retaliation for recent Japan sanctions against Russia - financial press.

- Japan Jun Final Machine Tool Orders Y/Y: 9.7% v 9.7% prelim [overnight update].

South Korea

- Kospi opens -0.7% at 2,755.

- South Korea Jun Consumer Confidence: 103.6 v 100.9 prior.

Other Asia

- Thailand Fin Min Pichai: Unveils ~$12.5B Digital Wallet (cash handout) details; Affirms handout is to help tackle slow growth and household debt.

- (IN) India Central Bank (RBI) said to have sold dollars at 83.70 level to support Rupee – traders.

- (IN) India July Preliminary PMI Manufacturing: 58.5 v 58.3 prior.

- Sri Lanka Central Bank (CBSL) cuts Key Rates by 25bps; Not expected.

- Taiwan Jun Industrial Production Y/Y: 13.2% v 17.0%e [overnight update].

North America

- (US) VP Harris leads Trump ‘slightly’ by 44% to 42% margin; cites Reuters/Ipsos poll conducted between Jul 22-23rd– financial press [update].

- (US) Former US President Trump to stop holding large outdoor campaign rallies - US press.

- (US) House Oversight Committee Chair Comer (R-KY): PBMs are increasing costs for consumers and industry needs significant reform - CNBC ahead of Congressional hearing.

- (US) July Philadelphia Fed Non-Manufacturing Activity Regional Index: -19.1 v 2.9 prior.

- (US) July Richmond Fed Manufacturing index: -17 V -7E; New orders -23 v -16 prior.

- (US) Jun existing Home Sales: 3.89M V 3.99ME; Months supply: 4.1 v 3.7 prior (first time above 4 since May 2020).

- (US) Pres Biden speech on withdrawing from race set for tomorrow at 8PM ET - Washington Post.

- (US) Treasury $69B 2-year note auction draws 4.434% V 4.706% prior; bid-to-cover ratio: 2.81 V 2.75 prior and 2.65 over the last 12; Stops through when issued signaling strong demand.

- (US) VP Harris confirms she has enough delegates to get Democratic nomination.

Follow up: Former President Trump says willing to debate Harris, and happy to do more than one.

Europe

- UK PM Starmer, EU's Von der Leyen to meet to drive UK-EU 'reset' - FT.

- (EU) ECB cyber stress test reportedly reveals material deficits at some banks - press.

- (TR) Turkey Central Bank (CBRT) leaves one-week repo rate unchanged at 50.00%; as expected.

- (RU) Russia Dep PM Novak: Russia to reinstall gasoline exports ban from Aug 1st; Considering extending the restriction into the autumn.

- (HU) Hungary Central Bank (MNB) cuts base rate by 25bps to 6.75%; as expected.

- (EU) Eurozone July advance consumer confidence: -13.0 V -13.5E.

Levels as of 01:20 ET

- Nikkei 225 -1.1%; ASX 200 -0.2%; Hang Seng -0.8%; Shanghai Composite -0.1%; Kospi -0.7%.

- Equity S&P500 FUTs -0.6%; Nasdaq100 FUTs -0.9%, Dax -0.4%; FTSE100 -0.3%.

- EUR 1.0841-1.0855: JPY 154.37-156.00; AUD 0.6583-0.6618; NZD 0.5914-0.5961.

- Gold +0.3% at $2,415/oz; Crude Oil +0.3% at $77.20/brl; Copper -0.6% at $4.1427/lb.