Volatility returns as BoJ raises by 15bps

Asia market update: Volatility returns as BOJ raises by 15bps; AU hit by weak CPI; Israel takes out Hamas leader; US tech and Asia earnings; US FOMC decision tonight.

General trend

- The day started mixed with after-hours US earnings from Microsoft and AMD seeing mixed results as Microsoft slightly beat expectations on the top and bottom line but Azure (i.e. AI Rev) came in below estimates.

- Other than the Nikkei, nervous at -0.6% prior to the BOJ decision later in the day, Asia had a positive morning. Prices including Nikkei continued up post-BOJ.
Samsung Electronics confirmed its Final Q2 earnings were back to healthy levels after a disappointing 2023 while HSBC bank Q2 earnings were steady.

- Australia trimmed mean CPI for Q2 came in less than expected, with the 6th quarter in a row of lower trimmed mean inflation. ASX 200 rose 1% on the news, with Aussie dollar falling 0.8%. At the same time, Retail sales volumes fell for the sixth time in the past seven quarters, reflecting that consumers continue to hold back on spending. AU 3 yr yield down 22.5bps.

- China PMI was less impactful, as China PMI Manufacturing suffered its 3rd consecutive contraction, while non-manufacturing PMI was just above expansionary lowest since Nov, 2023 of 50.2).

- WTI crude up 1.8% in Asia, on news that Israel had assassinated Hamas Chief Ismail Haniyeh was assassinated in a raid while he was visiting Tehran, Iran.

- The wait for the BOJ proved eventual, with 10-yr JGB yields +6bps in the morning to 1.055%. However, yields fell back to 1.03% after the decision to increase rates by more than expected, 15bps to 0.25%.

- Overnight analysts point out to China Politburo meeting lacked more detailed reform plans and property measures; China announced it plans to shift policy focus to consumption boost

- New Zealand Business Confidence and Activity bounced back to the highest since February.

- US equity FUTs +0.4% to +0.9% during Asian trading.

Looking ahead (Asian time zone)

- Wed 31st (Wed eve EU July flash CPI, Wed night US Fed rate decision + Presser).

- Thu 1st AU Balance of Trade, CN Caixin Mgf PMI, (Thu eve BOE rate decision, Thu night US ISM July Mfg PMI).

- Fri 2nd KR July CPI, AU Q2 PPI, (Fri night US July NFP).

Holidays in Asia this week

- Mon July 29th Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 7,952.

- Australia Q2 CPI Q/Q: 1.0% V 1.0%E; Y/Y: 3.8% V 3.8%E; Sixth quarter in a row of lower annual trimmed mean inflation.

- Australia Jun CPI Y/Y: 3.8% V 3.8%E.

- Australia Jun Retail Sales M/M: 0.5% V 0.2%E; Retail sales volumes fell for the sixth time in the past seven quarters.

- Australia Jun Private Sector Credit M/M: 0.6% v 0.4%e; Y/Y: 5.6% v 5.2% prior.

- New Zealand July ANZ Business Confidence: 27.1 v 6.1 prior; Activity Outlook: 16.3 v 12.2 prior; (highest since Feb of 34.7).

- New Zealand Jun Building Permits M/M: -13.8% v -1.9% prior (revised lower).

- New Zealand RBNZ: Explores techniques to help monitor financial stability - Press.

China/Hong Kong

- Hang Seng opens +0.4% at 17,070; Shanghai Composite opens -0.1% at 2,877.

- China July Manufacturing PMI (GOVT OFFICIAL): 49.4 V 49.4E (3rd straight contraction).

- China Vice Finance Min: To steadily implement consumption tax reform with regions in a step-by-step way - financial press.

- (US) Continues public comment review on China section 301 tariffs; Expects final determination in August [overnight update].

- China Pres Xi: Country can overcome challenges facing economy; To enhance positive trend of economic recovery overnight update].

- Tier1 analysts on China Politburo meeting: On monetary policy, the July Politburo highlighted "the implementation of various of monetary policy tools" instead of narrowly mentioning interest rate reduction and RRR cuts (as seen in the Apr meeting statement). FX stability was also emphasized. [overnight update].

- China Politburo holds meeting; China leaders set out economic priorities for H2 2024; China to shift policy focus to consumption; Reiterates prudent monetary policy stance; To accelerate use of special bonds; Urges better use of special sovereign bonds - press [overnight update].

- China PBOC sets Yuan reference rate: 7.1346 v 7.1364 prior.

- China PBOC Open Market Operation (OMO): Sells CNY252B in 7-day reverse repos; Net injects CNY186B v net drains CNY51B prior.

Japan

- Nikkei 225 opens -1.0% at 38,140.

- Bank of Japan (BoJ) raises target rate by 15BPS TO 0.25% (not expected); makes decision on bond buying taper; To cut JGB purchases by ¥400B yen each quarter to ~¥3T by Q1 2026.

- BoJ quarterly outlook for economic activity and prices.

- Japan Jun Retail Sales M/M: 0.6% V 0.2%E; Y/Y: 3.7% V 3.2%E.

- Japan Jun preliminary industrial production M/M: -3.6% V -4.5%E; Y/Y: -7.3% V -6.4%E.

- Toyota Motors (7203.JP) Japan Transport Ministry to issue further corrective orders to Co over certification procedures; Ministry to hold briefing at 07:00GMT - NHK.

- Japan Finance Ministry said to have tapped 12 brokerages to market JGBs - financial press.

- Japan top FX Diplomat Mimura: It's internationally agreed that measures including interventions are allowed when necessary [overnight update].

- BOJ board members will discuss raising rates to 0.25% this week - Japanese press [overnight update].

South Korea

- Kospi opens +0.3% at 2,745.

- South Korea Jun Industrial Production M/M: 0.5% v 0.8%e; Y/Y: 3.8% v 2.8%e.

- Bank of Korea (BOK) July Minutes: One member said risks from policy loosening have grown [overnight update].

Other Asia

- Taiwan's top financial regulator: A common concern that our market trading concentrated in certain sectors such as chips, but that is not rare phenomenon in international markets - financial press.

- (US) Sec State Blinken: To provide $500M of military aid to Philippines; Concerned about China's actions in South China Sea.

- Taiwan Pres Lai: Chinese threat to any individual country is a threat to the world - IPAC conf in Taipei [overnight update].

North America

- US Vice President Harris: Reportedly plans to hold a rally with her VP pick on Tuesday, in Philadelphia - US media, citing sources.

- (US) VantageScore June report: We are reaching a potential turning point in consumer credit health; Delinquencies remained slightly higher than a year ago across all DPD categories driven primarily by younger, low-income consumers, signaling continued stress; Originations across all product categories increased to their highest levels YTD.

- (US) May S&P corelogic house price index (20-CITY) M/M: 0.34% V 0.30%E; Y/Y: 6.81% V 6.50%E.

- (US) May FHFA house price index M/M: 0.0% V 0.2%E.

- (US) July Consumer Confidence: 100.3 V 99.7E.

- (US) Jun JOLTS Job openings: 8.184M V 8.000ME; Ratio of job openings to unemployed workers at 1.20 (calc) (Note: pre-pandemic was around 1.2).

Europe

- (UK) July Lloyds Business Barometer: 50 v 41 prior.

- (IE) Ireland July Preliminary CPI EU Harmonized Y/Y: 1.5% v 1.5% prior.

- (EU) ECB’s Vujcic (Croatia): Reiterates next rate move is a cut or hold; Sept decision will have 'much more' data to consider.

- (DE) Germany July preliminary CPI M/M: 0.3% V 0.3%E; Y/Y: 2.3% V 2.2%E.

- (IL) Loud blast said to be heard in Beirut, Lebanon - press.

Levels as of 01:20 ET

- Nikkei 225 +0.4; ASX 200 +1.5%; Hang Seng +2.2%; Shanghai Composite +2.0%; Kospi +0.7%.

- Equity S&P500 FUTs +0.4%; Nasdaq100 FUTs +0.9%, Dax +0.3%; FTSE100 +0.5%.

- EUR 1.0812-1.0831: JPY 151.63-153.89; AUD 0.6482-0.6545; NZD 0.5888-0.5925.

- Gold +0.3% at $2,466/oz; Crude Oil +2.0% at $76.20/brl; Copper +1.1% at $4.1348/lb.