JAPAN DATA: Offshore Investors Continue To Cut Back On Japan Equity Holdings
The standout from Japan's weekly flow update (to Sep 19, last Friday) was further net selling by offshore investors of local stocks. We have now seen net selling by these investors in 4 out of the last 5 weeks. We have seen nearly ¥5trln in net selling over this period. This follows a very strong period of net inflows, dating back to the start of April this year. Indeed, including the most recent outflows, net inflows since the start of April still stand at +¥6.6trln. Japan equities remain firmly higher for Sep, but momentum has slowed somewhat in terms of recent trends. Offshore investors added to local bonds last week, but only very modestly.
- In terms of Japan outbound flows, were saw continued net buying of overseas bonds by local investors. In the past four weeks we have seen just under ¥4trln in net buying of overseas bonds. The focus will be on whether this trend continues for this week, given global bond returns are off recent highs (as US Tsy yields have rebounded somewhat).
- Local investors also bought overseas equities but in very modest size.
Table 1: Japan Offshore Weekly Investment Flows
| Billion Yen | Week ending Sep 19 | Prior Week |
| Foreign Buying Japan Stocks | -1747.5 | -2032.8 |
| Foreign Buying Japan Bonds | 53.3 | 1188.6 |
| Japan Buying Foreign Bonds | 817.2 | 1479.7 |
| Japan Buying Foreign Stocks | 16.7 | 29.7 |
Source: Bloomberg Finance L.P./MNI
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US STOCKS: S&P(ESU5) - Dips Buyers Help It Move Back Towards 6500
The S&P(ESU5) overnight range was 6435.00 - 6487.50 closing +0.41%, Asia is currently trading around 6484, +0.03. The ESU5 contract once again found buyers on the dip as the market concentrates selectively on the positives of a potentially more dovish Fed. The S&P remains in a bullish uptrend and dips will continue to be bought while above 6200/6300, as the market ignores what is normally a very poor seasonal period.
- (Bloomberg Economics) - Trump Could Give Lockheed the Intel Treatment: The Trump administration is weighing an unprecedented move: taking an equity stake in defense companies — specifically Lockheed Martin — to boost munitions production. Such direct government intervention in a publicly traded defense company would be unprecedented.
- Lance Roberts on X: “Consolidated and discretionary investors have not ramped up exposure as dramatically as systematic traders during the recent rally. However, I suspect we will see the laggards dragged back into the market before long.”
- RenMac on X: “Consumers see increasing slack in the jobs market. The Labor Differential continues to soften, falling to a fresh low of 9.7 in August. In particular, we saw a notable jump in those saying “jobs hard to get.” See Fig.1 Below
- (Bloomberg) - “Traders are looking ahead to Nvidia’s earnings and a key inflation report later this week for further insight on the artificial intelligence euphoria that has powered US stocks to records on the potential profit growth, and the path of interest-rate cuts.”
Fig 1: US Labor Market Differential
Source: MNI - Market News/Renaissance Macro Research
LNG: European Refilling Proceeding, Supply Outlook Uncertain
European gas fell 1.6% to EUR 33.24, the intraday low, on Wednesday in line with the sell-off in oil, which was driven by softer risk appetite following further political interference in the Fed. It is now down 5.8% this month. The supply outlook remains uncertain though with a high chance of unplanned extensions to Norwegian maintenance and the prospect of a Ukraine peace deal fading.
- The Kremlin said that it will have to agree to any security guarantees and also seems hesitant to have a Zelenskyy-Putin meeting. It is likely that if it is to take place Trump will also need to participate.
- The US Department of Homeland Security issued a notice that India will face a 25% punitive tariff as of Wednesday because it continues to purchase Russian oil. Trump has also threatened Russia with more sanctions again.
- European storage is now around 76.2% up from a low of 33.6% at the end of March. The target is 90% by November 1.
- US gas rose 1.4% to $2.734, close to the intraday high, but is down 12% in August. The market sold off this month on soft cooling demand and ample supply. The weather forecast continues to suggest below average temperatures in much of the US at the start of September.
- WhiteWater Midstream will build a pipeline from the Permian Basin to Houston which will ship more gas for liquefaction. US LNG exports are expected to increase over the coming years.
US TSYS: Cash Open
TYU5 is trading 112-04+, down 0-02 from its close.
- The US 2-year yield opens around 3.65%, down 0.03 from its close.
- The US 10-year yield opens around 4.265%.
- Andrew Ackerman on X: “The Fed has deferred any decision on Cook's status because they are expecting a quick decision from a court on Cook's coming request for a judicial order/TRO, according to a Fed official. Would note the Fed has no board meetings scheduled for this week, while Cook is in limbo.”
- “Trump says he may shift Stephen Miran into Lisa Cook’s Fed seat—while the White House has also probed whether Miran can serve at the Fed without leaving the White House. Senate Republicans balked, I was told, but the idea may not be dead. https://www.washingtonpost.com/politics/2025/08/26/trump-fed-control-lisa-cook-economy/”
- 10-Year Yields found buyers above 4.30% again overnight. While the 4.35% area continues to hold, bounces should be met with demand, with the 30-Year taking the brunt of the selling related to challenging the Fed independence. First target is the recent lows around 4.18% then the bottom of the range towards 4.10% comes back into focus.
- Data/Events: MBA Mortgage Applications
