JAPAN DATA: Exports Down Y/Y But Above Forecast, US Exports Down 13.8%y/y
Japan headline Aug trade figures were mixed. Exports were -0.1%y/y, against a -2.0% forecast (-2.6% was the July outcome). On the import side, we fell -5.2%y/y, against a -4.1% forecast and -7.4% prior outcome. The trade deficit was -¥242.5bn, against a -¥512.6bn forecast, while July's print was -¥118.4bn. In seasonally adjusted terms the trade deficit was -¥150.1bn, which was also better than forecast, but sub recent cycle highs for the balance (+¥166.5bn in Feb).
- Tariff impact was seen, with exports to the US down -13.8%y/y. To the EU exports rose 5.5%y/y, while to China exports were down a modest -0.5%y/y. The trade surplus Japan has with the US narrowed to ¥324bn. In Feb this year the surplus was at ¥918.5bn.
- Automobile exports fell 7.9% in August, the fifth consecutive decline following an 11.4% fall in July. Iron and steel exports dropped 14.9%, easing from July’s 21.0% fall. Auto exports to the US fell by 28.4%.
- Export growth for Japan was down in y/y terms for the fourth straight month. The chart below shows export growth for key Asian economies (Japan is the red line). Outside of Taiwan, which is the standout, the trends are broadly similar, albeit with China and South Korea managing to maintain positive y/y growth in recent months.
Fig 1: Key Asian Economy Export Growth Trends - Y/Y
Source: Bloomberg Finance L.P./MNI
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US TSYS: Cash Open
TYU5 is trading 111-20+, up 0-01+ from its close.
- The US 2-year yield opens around 3.753%.
- The US 10-year yield opens around 4.316%.
- Fed Jackson Hole Symposium - The Federal Reserve's annual Jackson Hole Economic Policy Symposium takes place over Aug 21-23. While Fed officials and multiple global central bank/policy figures will be in attendance, the focus as always will be the keynote speech by the Fed Chair, with Powell speaking at 1000ET Friday Aug 22 on the "Economic Outlook and Framework Review". Attention will of course mostly be on any nod to a potential September Fed rate cut, but as the speech title indicates, a large portion of his comments will touch on the findings from the Fed's policy framework review.
- (Bloomberg) -- Asset managers broadly added to net long positioning in Treasury futures during the week up to Aug. 12, according to CFTC data. In the long-end there was a decent amount of duration extension in long-bond and ultra-long bond futures from asset managers, along with 10-year note futures. Hedge funds added to net short position in 10-year note futures.
- Yields extended higher on Friday, approaching the pivotal resistance area within the greater 4.10%-4.65% range. The 4.35% area in 10-Year yields should still see demand initially, but the way the market keeps bouncing off levels just below 4.20% will be disconcerting for longs.
- Data/Events: New York Fed Services Business Activity, NAHB Housing Starts
GOLD: Gold Starts Week Lower As Ukraine Talks Continue
Gold prices have started the week’s trading lower at $3327.7/oz as geopolitical risks around Ukraine at this stage appear to be easing. US President Trump meets with Ukraine’s President Zelenskyy and other European leaders on Monday to discuss the results of his talks with Russia’s President Putin, which the market is now focusing on. Bullion range traded on Friday ahead of the Putin-Trump meeting to be down 1.8% last week pressured by a significantly higher US PPI.
- Russia is apparently offering to hold its frontlines in Kherson and Zaporizhzhia in exchange for the Donbas. US special envoy Witkoff said that the US/European security guarantee could “effectively offer Article-5 like language” (NATO), as reported by the BBC. Ukraine has to hold a referendum though to agree to changes to its territory.
- Gold has been range trading and is up only 1.5% this month. It is currently below the 50-day EMA at $3334.8 and a sustained break would signal scope for a deeper retracement. The bear trigger is at $3248.7. Initial resistance is at $3409.2, 8 August high.
- Silver is down 0.3% to $37.875 so far today after being little changed on Friday. It was almost a percent lower last week but still up 3.5% in August. It continues to trade between initial support at $36.216 and resistance at $39.655.
- The USD index was down 0.25% and US yields were slightly higher. Equities were mixed with the S&P down 0.3% but Euro stoxx up 0.3% and today the S&P e-mini is +0.1%. Oil prices were lower with WTI -1.3% to $63.14/bbl. Copper rose 0.2%.
JGBS: Futures Weaker Overnight Friday, Light Local Calendar
In post-Tokyo trade on Friday, JGB futures closed weaker, -32 compared to settlement levels, after US tsys bear-steepened, with yields 2-5bps higher.
- While July retail sales appeared solid in our view (and led to a slight upgrade to the Atlanta Fed's GDPNow est for Q3), the August prelim UofM survey was decidedly stagflationary with weaker sentiment and higher inflation expectations, while industrial production was uninspiring and import price inflation was a little firmer than expected despite lower revisions.
- This week's US calendar includes residential sector data (housing starts, homebuilder sentiment, existing home sales) and flash August PMI data as well as a few Fed speakers (notably Waller and Bowman) ahead of Friday’s keynote speech by Fed Chair Powell as part of the annual Jackson Hole symposium Aug 21-23.
- (Bloomberg) -- "Japan, the European Union, and South Korea are waiting for the US to implement concessions on tariffs, with Japan's chief trade negotiator Ryosei Akazawa saying "the bleeding hasn't stopped" for the country's car industry."
- "Japan plans to tighten oversight of foreign workers with specialist expertise, after reports some are engaged in work not permitted by their visas, Kyodo said." – BBG
- Today, the local calendar will see the Tertiary Industry Index.
