Eyes on Fed's Powell for rate clues

Asia market update: Eyes on Fed's Powell for rate clues as tariff-induced inflation concerns reemerge amid strong US PMI; Nvidia halts H20 production.

General trend

- Nvidia reported to halt its H20 chip production after China’s CCP put out a directive against using the chip in China. Company is working on a new AI Chip for China, the B30A, aiming for samples as early as Sept. Nasdaq initially fell -0.2% on the news. Japan chip-related Advantest -1.5% while China chipmakers and the CSI chip index up as much as 10%.

- Korean chipmakers Hynix (+2%) and Samsung (+0.9%) unaffected as the Kospi outperformed +1.0%.

- Shortly afterwards CEO Huang arrived in Taipei “for a few hours”, stating his main purpose to visit Taiwan Semi. Huang affirmed that while Nvidia will be offering a new product to China for AI data centers (the B30A), ultimately it it is not Nvidia’s decision (whether to be able to sell in China).

- Japan MOF will reportedly raise its long-term rates estimate to 2.6% in FY26/27's budget request (highest hike since 2008) and up from 2.1% in the current year. 20-year JGB yields ticked up a further 1.5bps to 2.655% Nov 1999 highs (its debut year), while the Japan 30-year JGBs hit a record high at 3.201%.

- Reports that the Trump admin is Not considering equity stakes in companies that increase their investments in the US. The decision may be influenced by Taiwan Semi saying they may return their CHIPS Act subsidies if the US Govt asked for stockholder status.

- Giant US retailer Walmart warned that tariff costs will continue to rise during H2, but have not yet seen a change in customer spending. Stock -4.5% with a slight miss in earnings due to margin pressures but small beat in Sales.

- Add in much stronger- than-expected S&P flash PMI readings for the US and all eyes are now even further focused on Fed Chair Powell’s speech Friday for clues as to whether the 25bps cut priced in at a 72.5% probability is still likely.

- With an employment-heavy focus, the US Fed’s 2025 Jackson Hole Symposium schedule shows Fed Chair Powell to speak as expected at 10am ET, Aug 22nd (Fri), with the following day (Sat Aug 23rd at 12:25pm ET) featuring a panel to include BOJ’s Gov Ueda, ECB's Lagarde, BOE Gov Bailey.

- Ahead of Powell’s speech WSJ’s Timiraos said that Powell may be planning a "U-turn" on an economic strategy ‘framework that "soured", but that it will not affect near-term policy. [Note: This may be what Panel Chair Dudley back in April referred to as "We recommend replacing the flexible average inflation targeting regime (FAIT) with an average inflation targeting regime (AIT) with the 2 percent inflation target on a time horizon that also takes into account its employment objective."

- A tsunami warning was issued for Chilean coast after a 7.5 mag earthquake struck the Drake Passage Region [between southern tip of South America and Antarctic Peninsula]. The warning was soon lifted.

- US equity FUTs flat to -0.1% during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Fri Aug 22nd (Fri eve UK July Retail Sales, US Fed Chair Jackson Hole speech).

Holidays in Asia this week

- Thu Aug 21st Philippines.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 9,025.

- Australia sells A$300M v A$300M indicated in 4.75% Jun 2054 Bonds; Avg Yield: 5.0560% v 5.0527% prior; bid-to-cover: 3.00x v 3.21x.

- New Zealand Parliament Inquiry releases recommendations: Says RBNZ should revisit prudential settings; capital increases for banks should be 'ceased'.

- RBNZ Chief Economist Conway said NZ business will 'get used to' global uncertainty - Press.

China/Hong Kong

- Hang Seng opens +0.4% at 25,205; Shanghai Composite opens flat at 3,772.

- Nvidia *orders halt to H20 production after china directive against using the chip – The information.

- China Guzngzhou Lithium Carbonate FUTs decline by >3.0%.

- China NEA July Power Consumption at over 1.0T KW (record high) +8.6% y/y v +4.4% in May; Notes surge was driven by multiple heatwaves and steady growth in industrial production.

- Hong Kong July CPI Composite Y/Y: 1.0% v 0.9%e.

- China PBOC sets Yuan reference rate: 7.1321 v 7.1287 prior.

- China PBOC Open Market Operation (OMO): Injects CNY361B in 7-day reverse repos; Net injects CNY123B v injects CNY124B prior.

Japan

- Nikkei 225 opens +0.2% at 42,667.

- Japan MOF will reportedly raise long-term rate estimate to 2.6% in FY26/27's budget request (highest hike since 2008) - Asia press.

- 20-year Japan JGB yield rises further 1.5bps to 2.655% to 1999 highs (debut year).

- Japan 30-year JGBs hit record high at 3.201%.

Korea

- Kospi opens +0.8% at 3,165.

- South Korea Fin Min sees 2025 GDP at 0.9% v 1.8% prior; Forecasts 2026 GDP at 1.8%.

Other Asia

- Nvida CEO Huang arrives in Taipei; Main purpose is to visit Taiwan Semi; Offering a new product to China for AI data centers, the follow-on to the H20, is not our decision to make.

North America

- US) Fed Chair Powell said to plan "U-turn" on an economic strategy that "soured"; Will not affect near-term policy - WSJ's Timiraos.

- US Fed's Jackson Hole Symposium Schedule.

- (US) Fed's Collins: Rate cut may be appropriate soon if labor outlook worsens - WSJ.

- (US) Fed's Hammack (non-voter for 2025): Would not support a rate cut based on today's data; Inflation is moving in the wrong direction; Labor market is reasonably good and in balance - WSJ.

- (US) Reportedly Trump's administration is not considering equity stakes in companies that are increasing investments in the US, such as TSMC and Micron, but may consider others; TSMC execs held preliminary discussions on returning their subsidies if the US Govt asked for stockholder status - WSJ

- (UK) Aug GfK Consumer Confidence: -17 v -19e.

- (US) President Trump: We are leading the A.I. race; We have to increase electricity capacity to lead AI.

- (CA) Canada Aug CFIB Business Barometer: 47.8 v 51.5 prior.

- (US) US and EU joint statement: Lock in a framework trade deal reached last month that includes a 15% US tariff on most EU imports, including autos, pharmaceuticals, semiconductors and lumber.

- (US) Fed's Schmid (voter; hawk): Not in a hurry to cut rates; Labor market is solid; Inflation running closer to 3% than 2% so still some work to do.

- (US) Fed's Bostic (non-voter for 2025 & 2026): World is very much in transitional period; Fed policy has been positioned to return inflation to 2%; Inflation remains well above 2% target; Maintain view for one rate cut this year.

- (US) Aug Philadelphia Fed business outlook: -0.3 V 6.5E; New Orders: -1.9 v +18.4 prior; New Orders: -1.9 v +18.4 prior; Prices Paid: 66.8 v 58.8 prior.

- (US) Aug preliminary S&P Manufacturing PMI: 53.3 V 49.7E; Average prices charged for goods and services rose at the sharpest rate since August 2022 as firms passed higher costs on to customers.

- (US) July existing home sales: 4.01M V 3.92ME; Months supply: 4.6 v 4.7 prior.

- (US) July leading index: -0.1% V -0.1%E.

- (US) Weekly EIA Natural Gas inventories: +13 BCF VS. +15 BCF TO +33 BCF indicated range.

- (US) Fed's Hammack (non-voter for 2025): Both sides of the dual mandate are under pressure; Wholesale costs are going up, not necessarily being passed; We're not going to see the full tariff impact until next year.

- (CA) Canada PM Carney discussed trade challenges and opportunities with US Pres Trump today; Agreed to reconvene shortly - PM's office.

- (US) Pres Trump said to plan to reallocate $2B in CHIPS Act funds for critical minerals, giving Commerce Sec Lutnick more input into critical minerals funding decisions - press.

Europe

- UK) Aug GfK Consumer Confidence: -17 v -19e.

- (UK) AUG CBI INDUSTRIAL TRENDS TOTAL ORDERS: -33 V -28E.

- (DE) German Bundesbanbk Monthly Report: Economy is expected to stagnate in the current summer quarter.

- (RU) Russia Foreign Minister Lavrov: Discussed energy cooperation with Indian counterpart; Interested in joint energy projects; Ukraine directly shows it's not interested in sustainable and longstanding settlement - Russian state media.

- (EU) Trade Commissioner Sefcovic: US-EU joint statement on Framework is a 1st step and could grow over time to cover more sectors.

- (SE) Sweden Central Bank (Riksbanks) Dep Gov Breman: Inflation was higher than we expected over summer - comments from Stockholm.

- (EU) EURO ZONE AUG ADVANCE CONSUMER CONFIDENCE: -15.5 V -14.7E.

- (UR) Reportedly Russia Pres Putin demands for Ukraine include relinquishing Donbas region, no NATO accession and no Western troops - press [as expected].

- (CH) Swiss National Bank (SNB) Pres Martin: Domestic banks saw more credit demand following Credit Suisse exit.

Levels as of 01:20 ET

- Nikkei 225 -0.1%, ASX 200 -0.1%, Hang Seng +0.3%; Shanghai Composite +0.2%; Kospi +1.0%.

- Equity S&P500 Futures -0.1%; Nasdaq100 -0.2%; DAX -0.2%; FTSE100 -0.1%.

- EUR 1.1583-1.1617; JPY 148.25-148.78; AUD 0.6415-0.6431; NZD 0.5805-5823.

- Gold -0.3% at $3,371/oz; BTC -0.9% at $113,220; Crude Oil -0.1% at $63.48/bbl; Copper -0.2% at $4.4380/lb.