CNH: USD/CNY Fixing Bias Remains Close To Neutral

Japan equities fell sharply enough to trigger a circuit breaker in the first part of trade on Monday. Topix and Nikkei losses got to 6-7% range. The Nikkei also sits more than 20% off its July high, so has corrected into bear market territory.

• Nasdaq futures were off 2% at one stage, as we continue to see global tech underperform. This is weighing on Japan equity performance as the continued rise in the yen.
• JGB futures also triggered a circuit breaker after surging in opening trade.
• These trends look to be a carry over from Friday's risk off, as the weaker US data in terms of the unemployment rose fed recession fears.
• Headlines earlier of US Secretary of State Blinken warning of an attack on Israel (to the G7) hasn't helped the risk mood, although oil prices sit off earlier highs.
• For US Tsys, the 10yr future has made fresh highs.
• In the FX space, yen gains dominate, up 0.75% against the USD. USD/JPY last near 145.40, back to early January levels. CHF is also rallying, while AUD and NOK are down 0.30-0.40%.

Natural gas prices rose on Friday with Europe and Asia posting a solid weekly gain. European LNG rose 0.4% to EUR 37.11, close to the intraday high, to be up 11.3% last week. Even though inventories remain seasonally high, Europe remains vulnerable to disruptions since its move away from Russia and the threat of an Iranian strike on Israel has pressured prices. The US has warned that a strike could occur within 24 hours (Axios).

• The escalation of tensions in the Middle East may have implications for natural gas. If Iran disrupts shipping flows through the Strait of Hormuz, then LNG shipments from Qatar would be impacted. There are also facilities in Israel.
• The deal for Russian flows through Ukraine expires at year end but market participants believe that a solution will be found even though Ukraine has said it won’t negotiate with Russia.
• US natural gas prices rose 0.5% to $1.98 to be down 3.6% on the week. Today they are already down sharply at 2% to $1.93. There remains ample supply and inventories as a result, especially as cooling demand has been moderate in recent weeks. Northern parts of the US are forecast to see cooler weather to August 11, according to Atmospheric G2.
• Lower-48 gas production was up2 % y/y to around 103.7 bcf/day on Friday but demand was +11.1% y/y but still below supply at 84.3 bcf/day, according to BNEF data.
• North Asian prices rose 0.8% to be up 7.3% last week as cooling demand remains robust.