ASIA: APAC Equities Head Higher, Asia Tech Leading The Way
Asian stocks rebounded on Thursday after a steep selloff, with the MSCI Asia Pacific Index rising 0.8%. South Korea’s Kospi and Taiwan’s Taiex jumped over 1% early, led by chipmakers, while benchmarks in China and Hong Kong opened higher. The recovery comes as traders await US payrolls data, which could influence the Federal Reserve's next move on rate cuts. Global financial markets have been reacting sharply to US economic data, with doubts growing over the Fed’s ability to achieve a soft landing. Japanese stocks swung between gains and losses, with domestic-focused companies rising due to strong wage data, while exporters declined amid yen strength.
- Japanese equities are mixed today, Topix is outperforming up 0.35% with Industrials contributing the most to gains while healthcare is the worst performing. The Nikkei is now trading down 0.40% with Tokyo Electron falling 1.75%.
- Taiwan's Taiex is 1.65% higher, with TSMC up 2.50% leading the way higher. Later today we have Taiwan's CPI, which is expected to show a drop to 2.27% for August from 2.52% in July according to bbg consensus.
- South Korean equities are slightly higher today, SK Hynix is the top performer up 4% today although it did drop over 8% yesterday, Samsung is trading 0.30% higher. Earlier 2Q GDP was in line with expectations at 2.3%. The KOSPI is 0.25% higher while the KOSDAQ 0.75%.
- Australian equities are slightly higher today, Financials are the top performers with Healthcare & Industrials struggling. Earlier, the Trade surplus widened, beating expectations after exports rose 0.7% m/m driven by rural goods, while imports fell 0.8% m/m due to fuels. The ASX200 is 0.25% higher.
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JPY: Range Near 300pips So Far Today, Yen Crosses Stumble Ahead Of Monday Highs
USD/JPY is comfortably off earlier highs, the pair last near 144.90. Earlier we got to 146.36, so not too far from early Monday highs. We still sit down in yen terms for the session (-0.50%). Early lows in the pair were at 143.63, leaving the pair with a 273pip range so far today.
- Cross asset wise, regional equities are firmly higher, albeit off best levels, likewise for US equity futures. Japan markets are +9% firmer, so not offsetting yesterday's -12% fall. US yields higher up by 3-5bps, with the back end outperforming.
- The yen is still down against higher beta plays like AUD and NZD, but away from earlier lows. AUD/JPY got to 95.50 earlier (which was just short of Monday's 95.65 high) but is now back to 94.40. It has been a similar backdrop for NZD/JPY.
- Japan officials have been on the wires talking up the surge in real wages, stating that more gains should spread to other part of the economy (per RTRS). This followed the earlier stronger than expected June labour earnings data.
AUSTRALIA: Mixed Inflation Information Likely To Keep RBA “Vigilant”
In June, the RBA repeated that it needs to “remain vigilant to upside risks to inflation”. While Q2 CPI printed close to its May forecasts, other inflation indicators were mixed since the June 18 meeting. Thus, we do not expect the Board to change its tone regarding inflation risks and to maintain its flexibility by “not ruling anything in or out” today.
- Q2 headline CPI increased 3.8% y/y up from 3.6%, while the trimmed mean moderated to 3.9% from 4.0%. Domestically-driven services rose 0.2pp to 4.5% y/y but core moderated 0.2pp to 4.1%. Monthly June inflation remained elevated but key measures moderated.
- The Melbourne Institute inflation gauge for July fell to 2.8% y/y from 3.2% and is now inside the 2-3% band for the first time since December 2021. Trimmed mean eased to 2.9% from 3.4%. Inflation expectations though remain above 4% and at 4.3% in July are above May’s 4.1%.
- SEEK June advertised salaries remained elevated at 4.3% y/y but down from 2023’s 4.9% peak. The minimum wage rose 3.75% on July 1 significantly less than last year but labour costs remain cited in business surveys as adding to overall cost pressures. Strong Q2 hours worked also signal that productivity growth was likely weak.
Source: MNI - Market News/SEEK
- Surveys have also been mixed with the June NAB business survey showing a moderation in price/cost components except retail prices, but there had been a significant pick up in the 3-month rate in May.
Source: MNI - Market News/Refinitiv
- The July Judo Bank services PMI noted that selling prices picked up to their highest rate in almost a year due to increased wage, material and transport costs. Manufacturing costs also rose but weak demand meant that output inflation was unchanged. Global container rates rose strongly in July but are lower in August to date.
- Q2 PPI remained robust rising 1.0% q/q bringing the annual rate to 4.8% y/y from 4.3%. Import prices rose 1% q/q to be up 1.1% y/y after three negative quarters.
CHINA PRESS: PBOC Likely To Add Liquidity In Late August
The People’s Bank of China will likely increase liquidity injections later in August to offset maturing medium-term lending facilities and meet accelerated government bond sale demand, China Securities Journal reported, citing analysts. Government bond net issuance will reach a yearly high of CNY1.6-1.8 trillion this month, according to analysts from HUAXI Securities. The PBOC should deal with the large amount of maturing MLF funds this year by increasing MLF injections or cutting the reserve requirement ratio to release medium- and long-term liquidity, the Journal said.
