BONDS: NZGBS: Closed With A Modest Bull-Flattener

In what seems like a rarity of late, the major bourses across China all trended lower today following yesterday's strong gains.  This comes as data shows Chinese investors are borrowing a record amount of cash to buy local stocks, further fueling a liquidity-driven rally that shows few signs of stalling.  The outstanding amount of margin trades in China’s onshore equities market climbed to 2.28 trillion yuan ($320 billion) Monday, surpassing the previous record of 2.27 trillion yuan in 2015.  An interesting perspective to note though is despite the latest expansion of margin trades, the size of China’s stock market also has nearly doubled in the past decade. The amount of leveraged purchases as a proportion of total market capitalization was 2.2% as of Monday, slightly above the 10-year average but far below 2015’s peak of 4.6%.

• The Hang Seng is down -0.61% today, having finished yesterday up +2.15%.  The CSI 300 has lost ground by -0.91% after closing at new highs yesterday.  The Shanghai Comp is down -0.70% and Shenzhen down heavily by -2.3%.
• The NIKKEI has posted modest gains of +0.27%
• The TAIEX in Taiwan is flat today after finishing Monday lower.
• Following the weaker than expected CPI, the KOSPI is up +0.89% as investors begin to extrapolate a rate cut.  This following falls of -1.35% yesterday.
• The Jakarta Composite bounced back today as the Finance Minister re-assured markets and is up +1.05%.  
• The FTSE Malay KLCI is lower by -0.20% despite better than expected PMIs.  
• The NIFTY 50 has had two days of gains; up +0.45% Tuesday morning following +0.81% gains yesterday.  

The BBDXY has had a range of 1200.18 - 1202.53 in the Asia-Pac session, it is currently trading around 1202, +0.15%. The USD continues to find demand just above its pivotal support. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows. The USD is holding just above this support but continues to trade with a heavy tone, not sure we get a clear break though until the market sees what the NFP print is, in order to allocate more risk.

• EUR/USD -  Asian range 1.1692 - 1.1718, Asia is currently trading 1.1695. The pair is trading sideways for the moment. First support is back towards 1.1550, a break back above 1.1850 needed to regain upward momentum.
• GBP/USD - Asian range 1.3523 - 1.3549, Asia is currently dealing around 1.3525. The pair is consolidating just above the 1.3500 area. Back in the middle of its recent 1.3350-1.3650 range, the USD’s fate will have a direct impact on which side is tested.
• USD/CNH - Asian range 7.1323-7.1437, the USD/CNY fix printed 7.1089, Asia is currently dealing around 7.1420. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
• Cross asset : SPX -0.10%, Gold $3495, US 10-Year 4.245%, BBDXY 1202, Crude Oil $64.92
• Data/Events : Italy PPI, EZ CPI, France Budget Balance, Spain Unemployment

Fig 1: BBDXY Spot 2H Chart

Source: MNI - Market News/Bloomberg Finance L.P

Gold prices spiked to a new record high of $3508.73/oz earlier in today’s APAC session on increased expectations of a September Fed easing. It is also benefiting from concerns regarding Fed independence. It rose above the bull trigger at $3500.1, 22 April record, but has been unable to hold the break. Bullion is now up 0.6% to $3497.0 despite a stronger US dollar (BBDXY +0.2%) and slightly higher yields. 

• UBS believes that gold will continue trending higher driven by softening growth, rate cuts and geopolitical/economic uncertainty, according to Bloomberg.
• After rising 2.5% on Monday, silver is up another 0.3% to $40.82 today, holding just above initial resistance at $40.798. It reached a high of $40.850 after a low of $40.558. Bloomberg reported that in August ETF buying of silver rose for the 7th straight month.
• Silver has also been added to the US list of critical minerals. It is a key component of solar panels. The Silver Institute is expecting 2025 to be the fifth year the metal is in deficit, Bloomberg reported.
• Equities are mixed with the S&P e-mini slightly lower, Hang Seng down 0.6% but KOSPI up 0.8%. Oil prices are stronger again with WTI +1.4% to $64.92/bbl. Copper is little changed.
• Later the ECB’s Elderson and Machado appear. US August manufacturing PMI/ISM, July construction, euro area August CPI and July French budget data print.