ASIA STOCKS: Tech Related Inflows Dominate, Indian July Outflows Over $2bn

The ESU5 overnight range was 6224.25 - 6265.50, Asia is currently trading around 6255. So much for the huge Month-end and Quarter-end selling as the dip finds demand once more and new highs are seen. This morning has seen US futures open pretty flat in our session ESU5 +0.02%, NQU5 +0.02%. 

• Andreas Steno Larsen on X: "US exceptionalism is back in equity markets but NOT in FX markets” 
• Lance Roberts on X: ”One of the great narratives of late has been that investors are fleeing US assets. Weekly data suggests this is hardly the case in both stocks and bonds where net fund flows remain positive just at a slower pace than 2024” See Graph below.
• “Conerns from Deepseek to Tariffs are now just a distant memory as stocks crank out new highs. But with markets heading back into more exuberant levels, a risk of short-term pullback increases.”
• Zerohedge on X: “Hedge Funds Buy Stocks For 8th Straight Week: Pile Into Financials, Dump Energy.”
• The market has been caught underweight and with momentum type funds(CTA’s) adding through all-time highs these reluctant PM’s are being forced to return to the market. 
• Short-term this does look a little overdone but dips should find demand, first support is back towards the 6100 area.

Fig 1: Global Net Flows To US Equity Funds

Source: MNI/@LanceRoberts/Morgan Stanley Research

The Q2 Tankan survey delivered some positive upside surprises. The large manufacturing index rose to 13, versus 10 forecast and 12 prior. The outlook for this segment was also better than forecast, printing at 12 (9 was forecast and 12 was the Q1 outcome). The all industry capex estimate was also stronger than expected, coming in at 11.5%, versus 10.0% forecast (3.1% was the prior outcome). For large non-manufacturing firms, the results were slightly less positive, with headline index at 34, in line with forecast, while prior was 35. The outlook printed at 27, below the expected 29 outcome (28 was recorded in Q1). 

• For smaller firms, manufacturing sentiment levels remained below levels recorded for non-manufacturing firms. Both sectors saw outcomes close to forecasts, 1 for small manufacturing firms, 15 for non-manufacturing firms.
• The first chart below plots the headline large manufacturing and non-manufacturing indices versus y/y Japan GDP growth, which is the orange line on the chart. In the face of external headwinds, particularly in terms of the tariff threat, today's results point to a resilient backdrop. Both Tankan measures for large firms are just off recent highs.
• The second chart below plots the capex estimate from the Tankan survey the white line on the chart) against the capital investment, which is only out for Q1. This is pointing to a firmer capex backdrop for Q2, which again will please the authorities in the face of external headwinds. 

Fig 1: Q2 Tankan Survey Results Paint Resilient Backdrop 

Source: Bloomberg Finance L.P./MNI 

Fig 1: Q2 Tankan Capex Estimate & Capex Y/Y 

Source: Bloomberg Finance L.P./MNI 

TYU5 is trading 112-02, down 0-02 from its close. 

• The US 2-year yield opens around 3.72%, unchanged from its close.
• The US 10-year yield opens around 4.23%, almost unchanged from from its close.
• MNI Interview - Atlanta Federal Reserve President Raphael Bostic told an MNI Connect event Monday the potential for tariffs to create inflation pressure into next year means going slow on cutting interest rates with one this year and three in 2026, expressing a broader caution until there's clarity around U.S. fiscal policy and global conflicts.
• “Goldman said the first rate cut may come in September, sooner than it had forecast.”(BBG)
• (Bloomberg) - Treasury Secretary Scott Bessent’s indication that his department is less keen on borrowing at longer tenors opens up the door to more bill issuance. That’s a sentiment echoed by President Donald Trump in comments last week, although his notion of only issuing debt of less than nine months’ maturity is highly unlikely to happen.
• The 10-year yield has accelerated through its support, this should clear the way for a move lower with the 4.10% area the first target. 10-year yields should now find demand on any bounce back to the 4.35/40% area.
• Data/Events: S&P Global US Man PMI, Wards Total Vehicle Sale, ISM Manufacturing, Construction Spending, JOLTS, Dallas Fed Services Activity