EM ASIA CREDIT: Freeport Indonesia: FCX may part with 12% share

Japan Q2 capex was a touch above market expectations. The headline figure rising 7.6%y/y, against a 6.1% forecast, while Q1's outcome was 6.4%. Ex software capex was also above expectations, up 5.2%y/y, against a 4.9% forecast, but down from Q1's pace of 6.9%. Company sales were up 0.8%y/y in Q2, against a 1.4% forecast and 4.3% prior. Profits were 0.2%y/y, against the -0.4% forecast and 3.8% gain in Q1. 

• The detail on the capex side should manufacturing up 16.4%y/y in Q2, with ex software up 17.0%y/y. In the quarter capex was up 1.6%, led by manufacturing's 6.3% rise.
• The chart below plots the headline capex result against the Tankan survey of capex estimates (which is the white line in the chart). This continues to paint a resilient backdrop, with the Q3 Tankan survey out at the start of Oct and likely to be a key watch point for the BoJ.
• On the profit side, weakness in manufacturing -11.5%y/y, weighed on the overall result.
• For sales, manufacturing and non-manufacturing slowed in y/y terms relative to Q1.  

Fig 1: Japan Capex & Tankan Capex Expectations 

Source: Bloomberg Finance L.P./MNI 

Gold prices rose 0.9% on Friday to $3447.95/oz after July US core PCE prices printed in line with expectations and August consumer confidence fell to a 3-month low lifting the pricing for a September Fed rate cut. Bullion rose 2.3% last week driven by further infringements on Fed independence and expectations for the resumption of easing in September. It finished up 4.8% in August.

• Whether Governor Cook can be removed by President Trump will be decided by the courts with the Fed saying it will abide by a legal ruling.
• Gold fell to $3404.41 before rising to a high of $3453.98 on Friday, breaking above initial resistance at $3439, 23 August high. It has started today holding above this level at $3444.0. The medium-term trend remains bullish and if this break is sustained then the bull trigger at $3500.1 is exposed. Initial support is at $3311.6, 20 August low.
• Silver outperformed rising 1.7% to $39.719 after reaching $39.971. It finished the week up 2.1% and was 8.2% higher in August. It is currently around $39.819, holding above initial resistance at $39.655 which opens $40.000. A clear break of the 50-day EMA at $37.449 is needed for a stronger short-term bearish threat.
• The US dollar and 2-year yield were slightly lower. Equities were weaker with the S&P down 0.6% and Euro stoxx -0.8%. The S&P e-mini has started today up 0.2%. Oil prices fell with WTI -0.9% to $64.01/bbl. Copper rose 1.1%. 

Oil prices finished August softer and were also lower on the month overall. They were down Friday as the excess supply outlook continued to weigh especially as August US consumer sentiment fell to the lowest since May adding to energy demand worries. 

• WTI fell 0.9% to $64.01/bbl after reaching $64.55. While the benchmark rose 0.6% on the week it finished August down 6.1%. It has started today around $63.93. The bear cycle remains intact with the bear trigger at $61.29. Key resistance is at $69.36.
• Brent was down 0.7% to $68.12/bbl after a high of $68.39 and a low of $67.90. It was down 5% in August. Short-term gains continue to seem corrective. Initial support is at $64.50, 30 June low, while key resistance is at $71.93.
• Ukraine hit two Russian refineries over the weekend that apparently provide fuel to the army. Strikes earlier in August cut Russian active capacity by around 13%, according to Bloomberg.
• Attacks on Ukraine intensified again last week, especially on its power infrastructure, putting into doubt any Zelenskyy-Putin meeting and therefore a truce and easing of sanctions on Russia. The EU discussed more sanctions on the weekend focussed on how it is avoiding current restrictions.