Muted reaction to BoJ Gov Ueda’s testimony

Asia market update: Muted reaction to BOJ Gov Ueda’s testimony; All eyes on Fed Chair Powell tonight

General trend

- Japan BOJ's Gov Ueda was called to testify at both Japan’s Lower and Upper Houses of parliament, in what had been anticipated might be a grilling about the bank’s recent rate hikes and the path of normalization, given recent market turbulence caused by a sharp unwinding of the Yen carry trade. At first, Ueda added little new concerning monetary policy outlook and FX levels.

- Equities were soft at the Asian open, and were not particularly exacerbated by Ueda’s remarks. JPY did gradually strengthen +0.8% against USD during the first hour of Ueda’s testimony, but came off those worse levels by the end to be up only +0.4% overall, with yields little affected. After Ueda’s Lower House testimony finished, Asian equities bounced back by about +0.5%, perhaps in relief nothing major had changed.

- In further testimony three hours later, JPY lost -0.3% in a few minutes as Ueda reiterated that there is no difference with (Dep Gov) Uchida on his policy views. It was Uchida’s comments back on Aug 7th that the BOJ “will not raise rates while markets are unstable” that saw JPY/USD lose three Big Handles in a matter of minutes. Japanese equities, however, continued to make gains.

- Japan National CPI for July was inline overall, with a slight tick up in the headline number; although at 1.9% Core-core CPI (ex-fresh food and energy) was below the BOJ’s 2.0% target for the first time since Sept 2022. July Services prices also saw the slowest growth since Feb, 2023.

- China's Commerce Ministry held an industry meeting which appeared to be about preparing tariffs for large-engined gasoline cars, which back in June had been threatened as a tit-for-tat against EU tariffs on Chinese EVs.

- In US politics, VP Harris accepted the Democratic Party’s nomination for President at the DNC Convention and spoke about wanting to build the middle class as her goal for the Presidency.

- New Zealand Retail Sales for the second quarter at -1.2% continued its miserable showing for the past eight quarters of declining trend. Eleven of the 15 retail industries had lower sales volumes q/q.

- Tonight US Fed Chair Powell will give his much-anticipated Jackson Hole speech.

- US equity FUTs +0.3% to +0.5% during Asian trading.

Looking ahead (Asian time zone)

- Fri Aug 23rd (Fri night US Fed Powell Jackson Hole speech).

Holidays in Asia this week

- Wed Aug 21st Philippines.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 8,017.

- New Zealand Q2 Retail Sales (Ex Inflation) Q/Q: -1.2% v -0.9%e.

- Australia Treasurer Chalmers: We are prepared to limit Parliament's override power over RBA; Confirms all current members of RBA Board to move to new Monetary Policy Board, unless they request not to.

- Australia sells A$700M vs. A$700M indicated in 2.75% Nov 2028 bonds; Avg Yield: 3.551% v 3.9319% prior; bid-to-cover: 4.23x v 4.44x prior.

China/Hong Kong

- Hang Seng opens -0.7 at 17,521; Shanghai Composite opens -0.1% at 2,844.

- China Housing Ministry: Has identified 3.96M apartments already sold that need to be completed by year-end - Chinese press.

- Amazon (CN) State-linked Chinese entities claimed to use AWS cloud unit to access restricted AI chips and models - US Press, citing tenders.

- (HK) Macau Q2 GDP Y/Y: 6.9% v 25.7% prior.

- CAAC: July China Air Passenger Traffic: 69.1M, +10.8% y/y.

- Nikkei: China property developers’ loss warnings exceed $8.0B in the past week alone [overnight update].

- Russia and China reportedly agreed to develop payments infrastructure – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1358 v 7.1228 prior.

- China PBOC Open Market Operation (OMO): Sells CNY379B in 7-day reverse repos; Net injects CNY242B v net drains CNY218B prior.

Japan

- Nikkei 225 opens +0.2% at 38,278.

- Japan July national CPI Y/Y: 2.8% V 2.7%E; CPI ex fresh food (CORE) Y/Y: 2.7% V 2.7%E.

- Bank of Japan (BOJ) Gov Ueda: Concerns over US economy a factor for recent market rout - Lower House special session testimony.

- Japan Fin Min Suzuki: Reiterates Japan has not yet fully defeated deflation.

- LDP leadership candidate Koizumi said to be leading polling with 23%; To announce candidacy Aug 30th – Nikkei.

- Japan sells ¥4.9T vs. ¥4.9T indicated in 3-Month Bills; Avg Yield: 0.0974% v 0.1119% prior; bid- to-cover: 3.46x v 3.46x prior.

- Japan said to be looking to keep companies honest about cross-shareholding – Nikkei [overnight update].

- BOJ said to mull adding wage-related items to Tankan survey, which would reflect on monetary policy decision - press [overnight update].

South Korea

- Kospi opens -0.6% at 2,690.

- Follow up: South Korea said to inspect 5 savings banks on rising delinquencies - Korean press.

- South Korea to announce measures to increase consumption next week - South Korea press.

Other Asia

- Singapore July CPI M/M: -0.3% v -0.1%e; Y/Y: 2.4% v 2.5%e.

- (IN) India Central Bank (RBI) Aug Minutes: Vote to keep policy steady was not unanimous (4-2); dissenter Goyal and Varma sought a 25bps cut [overnight update].

- Taiwan’s top security officials make secret trip to US for talks – FT [overnight update].

North America

- (US) Vice Pres Harris: History will show Pres Biden's record to have been extraordinary - Democrat Presidential Nominee acceptance speech at DNC Convention in Chicago.

- (US) Kansas City Fed releases Jackson Hole Symposium 2024 Agenda.

- (CA) Canada Labor Min: Has ordered Canada's two largest railway companies to enter in binding arbitration with Teamsters Union.

- (US) Fed's Schmid (non-voter for 2024; voter for 2025; hawk): Payrolls revisions do not change how I think about policy; Need more data before supporting rate cut; Could still see a demand pickup if Fed is not careful.

- (US) July Chicago Fed National Activity Index: -0.34 v +0.03e.

- (US) Initial jobless claims: 232K V 232KE; continuing claims: 1.863M V 1.870ME.

- (US) Fed's Collins (non-voter for 2024; voter for 2025): Regarding BLS benchmark revisions, the data still tells a consistent story; Will soon be appropriate to begin cutting rates - Fox Business interview.

- (US) Fed's Harker (non-voter): Continues to watch commercial real estate sector; Ready to start the process of cutting rates.

- (US) Aug preliminary S&P Manufacturing PMI: 48.0 V 49.5E (2nd month of contraction); Manufacturing output fell for the first time since January; Prices charged for goods and services registering the smallest rise since June 2020.

- (US) July existing Home Sales: 3.95M V 3.94ME (first increase in 5 months); Months supply: 4.0 v 4.1 prior.

- (US) Weekly EIA Natural Gas inventories: +35 BCF VS. +28 BCF to +30 BCF indicated range.

- (US) Aug Kansas City Fed Manufacturing Activity: -3 v -9e.

Europe

- (UK) Aug GfK Consumer Confidence: -13 v -12e.

- (EU) Eurozone Aug advance consumer confidence: -13.4 V -12.6E.

- (UK) Aug CBI industrial trends total orders: -22 V -25E.

- (IL) Israel July Leading ‘S’ Indicator M/M: 0.0% v -0.3% prior.

- (EU) ECB account of July meeting (minutes): Volatility remained contained without signs of systemic stress; Waiting for more data before adjusting rates.

Levels as of 01:20 ET

- Nikkei 225 +0.4%; ASX 200 -0.1%; Hang Seng -0.3%; Shanghai Composite -0.1%; Kospi -0.1%.

- Equity S&P500 FUTs +0.3%; Nasdaq100 FUTs +0.5%, Dax +0.2%; FTSE100 +0.3%.

- EUR 1.1108-1.1128: JPY 145.30-146.34; AUD 0.6702-0.6725; NZD 0.6133-0.6156.

- Gold +0.6% at $2,530/oz; Crude Oil +0.1% at $73.06/brl; Copper +0.6% at $4.1615/lb.