Yen gains further ground post-labor earnings

Asia market update: Yen gains further ground post-labor earnings; CNH testing 16-month highs; Asian equities turn weak as day continues; Focus on US ISM Services PMI.

General trend

- Overnight the US 'JOLTS' report showed fewest US job openings since 2021. Expectations of a 50bps cut by the US Fed in Sept moved up to 45%.

- Just before the US close Nvidia said it had Not been subpoenaed by the US DOJ. Renesas, Tokyo Electron & Advantest all -3%. However Korea’s SK Hynix +2.4% with Samsung largely flat

- Yen gained even further ground to nearly 143 after stronger than expected Labor Earnings across all measures for July. Headline Labor cash earnings rose well into the 3 handle, with real cash earnings also turning positive. Same Sample Base cash earnings and full time pay also beat estimates. Yen later pared its gains

- Uncertainty remains after BOJ's Tanaka said that the rate adjustment in July was justified. Added that stocks and FX have seen big volatility but we still see achievement of our inflation target in sight.

- The Nippon Steel attempted takeover saga continued with US Steel collapsing -17% after Biden said to be preparing to block the deal. However, after hours +2% on US Steel saying it would pursue all legal options in the deal as the CEO warned of Pennsylvania job losses and plant closures if the takeover bid fails as the nearly $3B that Nippon Steel has pledged to invest in the company's older mills is critical to keeping them competitive and maintaining workers' jobs. "We wouldn't do that if the deal falls through". Both Pres Biden and presidential nominee Kamala Harris are opposed to the deal.

- China said to be considering cutting proposed $5.4T mortgage rate rescue package for family homes in two steps to protect banks (Note that in June China’s banking industry average NIM fell to a record-low 1.54%, well less than the 1.8% threshold considered necessary for banks to maintain reasonable profitability).

- China PBOC set the Yuan reference rate at its strongest since Apr 15th, with USD/CNH breaking into 7.09 post-fix and close to testing last week’s lows, which were the lowest since mid-2023.

- Reserve Bank of Australia Gov Bullock added nothing new in her Annual speech at Anika Foundation, reiterating that it is premature to consider cutting rates – at odds with Treasurer Chalmers in what is increasingly becoming a public spat on Australia’s rate policy. (Chalmers said earlier this week that interest rates are ‘smashing’ the economy). Then in her Q&A comments, Bullock doubled down on the RBA point of view by saying that “If CPI does not come down, may need more restriction”. Aussie dollar and yields largely unmoved by it all.

- US equity FUTs -0.1% to -0.3% during Asian trading.

Looking ahead (Asian time zone)

- Thursday Sept 4th (Thu night US initial weekly Jobless Claims, US Aug ISM Services PMI).

- Friday Sept 6th AU July Home Loans (Fri night US Aug NFP).

- Saturday Sept 7th CN Aug Trade Balance.

Holidays in Asia this week

- Mon Sept 2nd Vietnam, (Mon night US and Canada).

- Tue Sept 3rd Vietnam.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 7,964.

- Australia July Trade Balance (A$): 6.0B v 5.0Be.

- Reserve Bank of Australia (RBA) Gov Bullock: Board does not expect rate cuts in the near-term; Q&A comments, “If CPI does not come down, may need more restriction”.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2030, 2034 and 2041 bonds.

- New Zealand Aug CoreLogic House Prices M/M: -0.5% v -1.0% prior [overnight update].

China/Hong Kong

- Hang Seng opens flat at 17,469; Shanghai Composite opens flat at 2,785.

- China President Xi: China willing to jointly become a model of global development; willing to deepen trade with countries in Africa; to give 'Africa' CNY210B credit line over 3 years, CNY360B in financial support to be provided to Africa over 3 years.

- (CN) China Vice Pres Zheng: Full of confidence in prospects for cooperation with Russia - following talks with Russia Pres Putin.

- China said to be considering cutting proposed $5.4T mortgage rate rescue package for family homes in two steps to protect banks - financial press [overnight update].

- China Aug Preliminary Retail Passenger Vehicle Sales M/M: +11%; Y/Y: -1.0% - PCA [overnight update].

- China PBOC sets Yuan reference rate: 7.0989 v 7.1148 prior (strongest since Apr 15th).

- China PBOC Open Market Operation (OMO): Sells CNY63B in 7-day reverse repos; Net drains CNY88B v net drains CNY277B prior.

Japan

- Nikkei 225 opens -1.4% at 36,536.

- Japan July labor cash earnings Y/Y: 3.6% V 2.9%E.

- Japan releases weekly flows data [period ended Aug 30th]: Foreign buying of Japan equities: -¥824.4 v -¥442.6B prior; Japan buying of foreign bonds: ¥1.64T v ¥1.56T prior.

- Japan sells ¥900B VS. ¥900B indicated in 30-year JGB bonds; AVG yield: 2.0430% V 2.2290% prior; bid-to-cover: 3.40X V 3.47X prior.

- Bank of Japan (BOJ) Board member Takata: Was appropriate to adjust easing in July.

- Japan Digital Min Kono: Need to regain fiscal discipline given yields - financial press.

- Japan's largest banks will begin utilizing blockchain and SWIFT for instant international payments - Nikkei.

- Japan Ministries said to request ¥117.9T in FY25 budget - financial press [overnight update].

South Korea

- Kospi opens +0.7% at 2,598.

- South Korea q2 preliminary GDP Q/Q: -0.2% V -0.2%E; Y/Y: 2.3% V 2.3%E (2nd reading).

Other Asia

- (MY) Malaysia PM Anwar: The area disputed by China in the South China Sea we have ascertained is Our territory - financial press.

- Thailand Aug CPI M/M: 0.1% v 0.2%e; Y/Y: 0.4% v 0.4%e.

- Philippines Central Bank (BSP): Reiterates balance of risks to the inflation outlook continues to lean toward the downside for 2024 and 2025.

- Philippines Aug CPI M/M: 0.1% v 0.3%e; Y/Y: 3.3% v 3.6%e.

- (TW) US Diplomat: Will not rule out possibilities of joint weapons supply production with Taiwan [overnight update].

North America

- (US) Fed’s Daly (voter): Need to cut policy rate because inflation is falling and the economy is slowing - financial press interview.

- (US) Aug MBA Mortgage Applications w/e Aug 30th: 1.6% v 0.5% prior.

- (US) July trade balance: -$78.8B V -$79.0BE.

- (CA) Canada July INT'L merchandise trade (CAD): 0.68B V 0.7BE.

- (CA) Bank of Canada (BoC) cuts interest rates by 25BPS TO 4.25%; as expected.

- (US) July factory orders: 5.0% V 4.8%E.

- (US) July final durable goods orders: 9.8% V 9.9%E; durables (ex-transportation): -0.2% V -0.2%E.

- (US) July JOLTS job openings: 7.673M V 8.100ME; Ratio of job openings to unemployed workers (VU) at 1.07 v 1.20 prior month.

- (US) Fed's Bostic (hawk, voter for 2024; Labor market continues to weaken but is not weak.

- (CA) BOC Macklem: There was strong consensus for the 25 bps cut today.

- (US) Fed beige book: On balance, prices increased modestly; Economic activity grew slightly in 3 Districts, 9 Districts reported flat or declining activity.

- (CA) NDP Leader: Canada's NDP pulls out of deal propping up PM's Trudeau Govt, which means that Trudeau will need to find support from other opposition legislators to continue governing.

- (CA) Canada opposition plans to call for confidence vote against PM Trudeau.

Europe

- (UK) SMMT: Aug New Car Registrations at 84.0K, -1.5% y/y.

- (US) US, Britain and Brussels said to sign agreement on AI standards - FT.

- STLA Said to have paused production at three factories in recent days - WSJ, citing sources.

- (IL) US negotiators to present new Gaza ceasefire proposal - financial press.

- Visa said to 'revamp' systems for handling of £3.7T of UK bank payments - financial press.

- (RU) US Treasury: To impose sanctions on 10 individuals and 2 entities over Russian efforts to influence 2024 US election.

- (IE) Ireland Aug Unemployment Rate: 4.3% v 4.7% prior.

- Reportedly OPEC+ discussing delay to planned oil output hike in October - press.

- Japan's largest banks will begin utilizing blockchain and SWIFT for instant international payments - Nikkei.

Levels as of 01:20 ET

- Nikkei 225 -1.1%; ASX 200 +0.2%; Hang Seng -0.6%; Shanghai Composite -0.1%; Kospi -0.3%.

- Equity S&P500 FUTs -0.1%; Nasdaq100 FUTs -0.3%, Dax -0.1%; FTSE100 -0.2%.

- EUR 1.1075-1.1086: JPY 143.19-143.91; AUD 0.6714-0.6733; NZD 0.6179-0.6204.

- Gold -0.1% at $2,524/oz; Crude Oil +0.3% at $69.42/brl; Copper -0.5% at $4.0695/lb.