Widespread volatility sees Yen continue safe haven status

Asia market update: Asian names drop regardless of earnings reports after Wall St. losses; Widespread volatility sees Yen continue safe haven status; Another surprise PBOC rate cut; Focus on US Q2 Adv GDP.

General trend

- Red ink for global equities continued again in Asia. Nikkei fell >3% at one point, >10% down from its recent July peak, entering a technical recession. Chip-relateds particularly hard hit with shares in Japan’s Renesas limit down >16%, the most in a decade after cutting guidance. Tokyo Electron down 5% with shares of SK Hynix also down up to 9% after warning that PC memory chip demand recovery may be relatively weaker than initial expectations in H2, although Co said that AI chip demand still strong. SoftBank also down nearly 7%.

- The drops were not just confined to tech, with Aussie resources stocks such as Fortescue -6% and Sandfire -3% despite each reporting increased output for the quarter, with Fortescue reporting record output and positive guidance. Iron ore price declines and pessimistic China outlook are common themes. Financials also under pressure with Macquarie Financial -3.7% despite conditions remaining inline.

- Yen continued its steep rise of the past 2 weeks. USD/JPY dropped > one big figure for 2nd straight session, with overnight implied volatility rises above 14.3%; 10-year JGB yield rises by 2.5bps to 1.095%

- Aussie dollar also under pressure, down to May lows against USD.

- China equity markets also continued their decline despite further easing by PBOC with a surprise 20bps cut to the MLF rate; Property, Tech and Bank indices lagged. The latest PBOC cut is in addition to surprise cuts this last week to the LPR, SLF and 7-day Reverse Repo rates. Later, it was reported that the China PBOC was 'downplaying' the MLF as a policy interest rate and focus on using short-term rates as the benchmark.

- South Korea advance Q2 GDP saw its first contraction since Q4, 2022.

- US equity FUTs +0.2% to +0.3% during Asian trading.

Looking ahead (Asian time zone)

- Thu 25th (Thu eve DE July Business Climate, Thu 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 -0.4% at 7,931.

- COFCO International (1610.HK) ASIC (Australia regulator) sues COFCO International Australia Pty Ltd and COFCO Resources SA for futures market manipulation.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2029 and 2035 bonds.

China/Hong Kong

- Hang Seng opens -0.3% at 17,260; Shanghai Composite opens -0.4% at 2,891 (Lowest since Feb).

- China PBOC CUTS MLF RATE BY 20BPS: Conducts CNY200B MLF at 2.3% (2.5% prior - last cut back on Aug 15th, 2023).

- China PBOC said to 'downplay' MLF cut earlier today - PBOC-backed newspaper Financial News.

- Chinese Regional Steel Association urge delay on rebar standards, to take effect Sep 25th [overnight update].

- India reportedly considering to ease curbs on some China EV investments – press [overnight update].

- China's Foreign Min Wang: Continue to play constructive role in Ukraine/Russia ceasefire; To expand food imports from Ukraine [overnight update].

- China PBOC sets Yuan reference rate: 7.1321 v 7.1358 prior.

- China PBOC Open Market Operation (OMO): Sells CNY235.1B in 7-day reverse repos; Net drains CNY186.1B v net drains CNY203.9B prior.

Japan

- Nikkei 225 opens -1.6% at 38,524.

- Japan Jun PPI services Y/Y: 3.0% V 2.6%E (multi-year high).

- Japan releases weekly flows data [period ended July 19th]: Foreign buying of Japan equities: -¥49.0B v ¥227.8B prior; Japan buying of foreign bonds: -¥730.4B v -¥206.0B prior.

- Japan Fin Min Suzuki: Will watch developments on US domestic politics; Will Not comment on FX levels - comments after G-7 meeting in Brazil.

- Japan FSA and BOJ to "streamline" corporate loan data from 2025 - Japanese press.

- Japan Outgoing Top FX Diplomat Kanda: G-7 did not specifically discuss FX today in Brazil; Will not comment on specific situations - Japanese press.

- Further speculation Bank of Japan (BOJ) to consider rate hike next week; Reportedly 'long way to go' before rates are neutral; BOJ also set to unveil a plan to roughly halve bond purchases in coming years when it meets next week - press [overnight update].

- Further speculation Japan is considering raising minimum wage to ¥1,054/hr (prior speculation at >¥1,050, would be largest increase ever) - Japanese press [overnight update].

South Korea

- Kospi opens -1.4% at 2,721.

- South Korea Q2 advance GDP (1st of 3 readings) Q/Q: -0.2% V 0.1%E; Y/Y: 2.3% V 2.5%E (first contraction since Q4, 2022).

- South Korea Aug Business Manufacturing Survey: 72 v 75 prior.

- Bank of Korea (BOK) Affirms GDP growth 2.5% in 2024 (as per May forecast).

- Singapore MAS to impose minimum interest coverage on all REITs.

- Samsung Electronics: More press speculation that Nvidia to begin using high-bandwidth memory (advanced HBM3E) chips from Samsung - The Information [***Note: Nvidia has so far exclusively sourced such chips from SK Hynix] [overnight update].

Other Asia

- Taiwan to again suspend stock trading due to typhoon – press [overnight update].

North America

- (US) US Pres Biden speech on withdrawing from Presidential race.

- (US) Former NY Fed Pres Dudley: Fed should cut, preferably at next week’s policy-making meeting; Although it might already be too late to fend off a recession; I’ve long been in the 'higher for longer' camp; The facts have changed, so I’ve changed my mind.

- (US) Treasury $70B 5-year note auction draws 4.121% V 4.331% prior, BTC 2.40 V 2.35 prior and 2.43 over the last 12 (tailed WI by ~1BPS).

- (US) MBA Mortgage Applications w/e July 19th: -2.2% v +3.9% prior.

- (US) Jun preliminary wholesale inventories M/M: 0.2% V 0.5%E.

- (US) Jun advance goods trade balance: -$96.8B V -$98.7BE.

- (CA) Bank of Canada (BoC) cuts interest rates by 25bps to 4.50%; as expected.

- (US) July preliminary S&P Manufacturing PMI: 49.5 V 51.7E.

- (US) Jun New Home Sales: 617K V 640KE.

- (CO) Colombia Jun Retail Confidence: 8.6 v 12.5 prior; Industrial Confidence: -3.1 v -5.4 prior.

- (US) DOE CRUDE: -3.7M V -1.2ME; GASOLINE: -5.6M V -0.7ME; DISTILLATE: -2.8M V +1.1ME.

- (US) Philadelphia Fed: In Q1, share of credit card balances 30 days and 90 days past due climbed to the highest levels in data back to 2012.

Europe

- (DE) Germany Chancellor Scholz: To campaign again for Chancellor during autumn 2025 elections; Wages are still too low in Germany.

- (RU) Russia Energy Ministry: Will compensate OPEC for extra oil production in Oct-Nov 2024 and March-Sept 2025.

- (IL) Israeli PM Netanyahu: Israel does not want to resettle Gaza, but for the foreseeable future, we need overriding security control of Gaza - address to US Congress.

Levels as of 01:20 ET

- Nikkei 225 -2.8%; ASX 200 -1.2%; Hang Seng -1.6%; Shanghai Composite -0.5%; Kospi -1.6%.

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

- EUR 1.0835-1.0855: JPY 152.24-153.97; AUD 0.6540-0.6583; NZD 0.5913-0.5936.

- Gold -1.7% at $2,374/oz; Crude Oil -0.8% at $76.96/brl; Copper -0.6% at $4.0560/lb.