ASIA FX: Little Movement In SEA FX, IDR Not Impacted By BI Cut

Asian equity markets are mixed in the first part of Tuesday trade. Further gains in Hong Kong and China markets are a positive, but other major indices are down at this stage, including returning Japan markets. US equity futures are down modestly, while EU futures are down by more, Euro Stoxx futures off by around 0.50%.

• Japan markets have returned from the long weekend and following the weekend election result where the LDP coalition lost its majority. At this stage, the Topix is down 0.40%, while the NKY 225 is off by around 0.55%. Onshore bond yields are mixed, slightly firmer at the back end of the curve. Tomorrow, we have a 40yr bond auction, which will test market sentiment post the election outcome. Japan and US officials also spoke for around 2 hours on Monday as the two-sides try to reach a trade deal before the Aug 1 deadline.
• South Korea and Taiwan markets are faltering. The Kospi is down 1.5%, last near 3160, once again struggling to hold above the 3200 level. The Taiex is down around 1%, with the index also moving off recent highs. Recent sessions have delivered less positive offshore impetus, particularly in the tech space.
• China and Hong Kong markets are up modestly, the HSI above 25000 and the CSI 300 around 4100. Onshore media noted the strong buying of local China market ETFs from the sovereign wealth fund through Q2 of this year.
• In Australia, the ASX 200 is down modestly, while in SEA most markets are weaker as well, but this follows strong gains recently, particularly for the likes of Thailand and Indonesia.   

NZGBs closed 1-2bps richer after a subdued session of trading. 

• The NZ-US 10-year yield differential widened slightly to 19bps.
• Cash US tsys are slightly richer in today's Asia-Pac session after yesterday's rally.
• NZ posted a small merchandise trade surplus in June of $42mn, the fifth consecutive positive, after a downwardly revised $1082mn. There was a rise in the 12-month YTD deficit to $4.37bn from $3.93bn, but it is too early to say the trade improvement has stalled. Annual import growth rose sharply last month and was not as weak as exports in Q2.
• Swap rates closed flat to 4bps lower, with a flatter 2s10s curve.
• RBNZ dated OIS pricing closed little changed across meetings today but remains 5-9bps softer versus Monday’s pre-CPI levels. 21bps of easing is priced for August, with a cumulative 38bps by November 2025.
• Tomorrow, the local calendar will be empty.  
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.0% Apr-29 bond, NZ$175mn of the 2.75% Apr-37 bond and NZ$50mn of the 5.0% May-54 bond.

After rising close to 1.5% on Monday, gold is slightly lower today as the US dollar stabilises (BBDXY USD +0.1%). Bullion is down 0.2% to $3389.1/oz after rising to $3402.82 early in the session. It is off its intraday low of $3385.23 though. Continued uncertainty over the trade outlook and the future of Fed Chair Powell has supported gold recently.

• Trade negotiations with the US continue ahead of the August 1 deadline. Japan’s negotiator Akazawa met with US Commerce Secretary Lutnick for more than 2 hours to formulate a deal that would profit both countries, according to Reuters.
• Equities are mixed with the S&P e-mini flat, Hang Seng up 0.3% but Nikkei down 0.6%. Oil prices are lower with Brent -0.9% to $68.60/bbl. Copper is down 0.6%. Silver has fallen 0.4% to $38.78 after rising 2% on Monday.
• Later the Fed’s Powell will make opening remarks at a regulatory conference and Bowman appears too but with the blackout having begun ahead of the July 30 decision, monetary policy is unlikely to be covered. US July Philly and Richmond Fed indices, and the ECB’s bank lending survey are released. BoE Governor Bailey testifies on financial stability.