ASIA STOCKS: Tech Related Inflows Rebound, Thailand Sees Outflows

TYU5 is trading 111-23+, down 0-01 from its close. 

• The US 2-year yield opens around 3.75%.
• The US 10-year yield opens around 4.308%.
• (Bloomberg) - “Bloomberg Economics expects Federal Reserve Jerome Powell to unveil changes to the central bank's monetary policy framework, including axing flexible average inflation targeting (FAIT) and returning to a balanced 2% target.”
• “If the Fed re-weights its dual mandate in the revised framework, that could reset the bar for future rate cuts, and markets may be too confident about a rate cut at the September FOMC meeting.”
• Yields are still firmly within its wider 4.10%-4.65% range. The 4.35% pivot area in 10-Year yields found solid demand overnight helped by the S&P rating, the market will now be waiting for any clues from Powell's upcoming Jackson Hole speech.
• Data/Events: MBA Mortgage Applications, FOMC Meeting Minutes

Japan June core machine orders were better than forecast. We rose 3.0%m/m, versus -0.5% forecast and -0.6% prior. The y/y print was 7.6%, against a 4.7% forecast and 4.4% prior. The chart below overlays y/y core machine orders (the white line on the chart) against capex for Japan in y/y terms (ex Software). Today's machine orders print continues to paint a resilient capex picture for Japan's economy.

• We don't get the full capex read for Q2 until the start of Sep. Still, the recent Q2 GDP print (preliminary) showed business up 1.3% in Q2, which was above forecasts (+0.7%). So today's core machine orders result is consistent with that backdrop. 

Fig 1: Japan Core Machine Orders & Capex Y/Y (Ex Software) 

Source: Bloomberg Finance L.P./MNI 

Gold fell 0.5% to $3315.78/oz on Tuesday, close to the intraday low, as markets position themselves ahead of Fed Powell’s speech on Friday. Not a quite full 25bp Fed Funds cut is priced for September 17 and this appearance will be watched closely for the Chair’s thinking on the immediate policy outlook. Meanwhile, President Trump continues to put pressure on Powell. The US dollar was stronger with the BBDXY up 0.15% but Treasury yields slightly lower. Bullion has started today around $3314.7.

• Gold continues to range trade between support at $3268.2, 30 July low, and resistance at $3409.2, 8 August high, but appears to be corrective. However, moving average studies continue to signal that the metal remains in a bull mode.
• Silver underperformed dropping 1.7% to $37.393 after a low of $37.280. It had reached $38.149 before the decline. It is currently around $37.370. Technicals continue to signal that silver is in an uptrend. A clear break of the 50-day EMA at $37.077 is needed to strengthen the short-term bearish threat. Initial resistance is at $39.655.
• Equities were mixed with the S&P down 0.6% but Euro stoxx up 0.9%. The S&P e-mini is so far slightly lower today. Oil prices continued falling with WTI -1.4% to $62.51/bbl. Copper is down 0.9%.