ASIA STOCKS: Japan Rebounds, HK Down, China Shrugs Off Weaker July Data
Stock trends are mixed in Asia Pac markets for the first part of Friday trade, although more markets are up than down at this stage. US equity futures sit little changed, while EU futures are painting a positive tone, up around 0.35% at this stage.
- China and Hong Kong markets are mixed. The HSI is off over 1%, while the CSI 300 and Shanghai Composite are up close to 0.50%. Disappointment on earnings appears to be weighing on Hong Kong markets, while July China data activity outcomes were all below market expectations. July home prices also fell again in m/m terms.
- This hasn't impacted onshore China equity market sentiment though. The authorities noted flood and higher temperatures impacted July activity. The outcomes may also encourage fresh stimulus. Focus this week has been on subsidy plans on loan interest for individuals and businesses aimed at improving consumption. Another proposal considered would see state owned enterprises purchasing unsold homes. The CSI 300 real estate sub index is up around 1.6% so far today.
- Elsewhere, Japan markets are rebounding from yesterday's losses. Both the Topix and NKY 225 are up around 1.15%. Earlier data showed Q2 GDP growth better than expected led by capex. USD/JPY is lower but still around 100pips above Thursday's lows.
- South Korean markets are closed today, while Taiwan's Taiex is up around 0.30%.
- In South East Asia, Indonesia's JCI hit record highs above 8000 earlier, but is away from best levels now. Focus is on President Prabowo's annual address, while the 2026 fiscal outlook will also be discussed later. Aiming for better growth, but along with fiscal responsibility, will market watch points.
- Singapore, Malaysia and the Philippines are weaker elsewhere in South East Asia.
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CHINA: Bond Futures Mixed in Morning Session
- China's key bond futures are moving in opposite directions in a quiet morning session.
- Having finished yesterday higher by +0.19, the 10yr future is lower by just -0.02 today at 108.865.
- The 10yr remains between the 50-day EMA of 108.90 and the 100-day EMA of 108.80
source: Bloomberg Finance LP / MNI
- The 2yr future is lower by -0.01 today at 102.42, having finished yesterday higher by +0.03.
- The 2yr future remains below all major moving averages with the 20-day above at 102.45.
- The CGB 10yr is at 1.66%
STIR: RBA Dated OIS Remains Sharply Firmer Than Pre-RBA Levels
RBA-dated OIS pricing is modestly firmer across meetings today and remains 17–21bps above levels seen prior to 8 July RBA decision.
- The RBA held the cash rate steady at 3.85%, defying market expectations that had assigned a 92% probability to a 25bp rate cut.
- Markets now assign an 87% probability to a 25bp cut in August, with a total of 54bps of easing priced in by year-end—down from 75bps ahead of the RBA decision.
Figure 1: RBA-Dated OIS – Current Vs. Pre-RBA
Source: Bloomberg Finance LP / MNI
US: Is The Fed Chair Being Sacked Underpriced ?
A post on X from Congresswoman Anna Paulina Luna alluding to the imminent firing of Jerome Powell is adding fire to the situation. For the moment the market seems to be brushing this off and should it materialise is massively underpriced. What if the only way Trump can actually get yields lower is to replace the Fed Chair with someone who is willing to cut, and cut a lot. Should this happen it would further erode trust in US Assets and the USD would freefall once more. You would think the knee-jerk reaction would be higher in the Long-End but should an Uber Dove be appointed this could drive yields lower albeit with the front-end leading the charge and the curve steepening further.
- Rep. Anna Paulina Luna on X: “Jerome Powell is going to be fired. Firing is imminent.”
- (Bloomberg) -- “I think it sort of is,” President Donald Trump says when asked whether the renovations at the central bank were a fireable offense for Federal Reserve Chair Jerome Powell.
- Jim Bianco - “The betting market of “Will Trump fire Powell in 2025” has responded and the uptrend continues. See Graph Below.
Fig 1: Polymarket Betting - Will Trump Fire Powell In 2025
Source - @biancoresearch/Polymarket/Bloomberg
