Lots of data, little price action in Asia – Focus on US July Core PCE

General trend

- Little market reaction to lots of Japan data today. Tokyo CPI figures for August were all inline with estimates, while July Industrial Production figures were slightly weaker than expected while July Retail Sales stronger than expected. Later on Japan Consumer Confidence came in highest since Feb while July Housing Starts recovered somewhat from recent lows below 700K.

- Last night saw little change in OIS probabilities of a BOJ rate hike by October, staying around 53-54% area.

- Japanese borrowing costs continue to rise, with Japan MOF’s latest ¥32T request for debt servicing costs in FY26 now about 25% of Japan’s entire national budget (¥110-120T).

- Overall today the Japanese yield curve flattened, with 2-year JGBs +3.5bps following yesterday’s worst coverage in the 2-year auction since Sept 2009, while 30 & 40-year JGBs fell 1-2 basis points. USD/JPY went nowhere during the session.

- South Korea govt also planning its largest budget increase in four years, to be paid for with bond issuance.

- China Offshore Yuan (CNH) surged overnight through a key resistance line of 7.14 (as indicated on yesterday’s update) into the 7.11 handle, not seen since early Nov 2024. If 7.085 should be breached the next big target would be 7.00. Regardless, for now the days of the Yuan pressing the weak end of its life-of-contract lows ~1.40 earlier in April are well in the rear vision mirror. [However, note the relative strength of the Yuan is not replicated against the Euro, which is up ~11% this year against the Yuan]. CNH saw a slight correction today, losing -0.1% v USD following a slightly stronger fix deeper into the 7.10 handle.

- Further reports Nvidia trying to get US govt approval to sell its powerful Blackwell AI chips to China, purportedly offering the US a cut of that revenue.

- After an extended rally in Chinese stock this year, warnings out of Chinese press today against speculating on 'high risk stocks”, particularly those under the special treatment (ST) or probationary status. More than a dozen funds have either suspended or limited large-scale subscriptions and overall are restricting inflows.

- Giant battery maker CATL +11%, most since Oct 2024.

- Also today China AI-darling Cambricon stock fell 7% at the open following an unusual statement out of the company on the recent price run up (+134% in August) that "current price has risk of deviating from current fundamentals".

- Further warnings out of China to firmly avoid 'disorderly' competition – this time in AI development, even as the China Planning Agency (NDRC) said it would further assist the AI industry, including subsidies and lower R&D costs.

- Overall HK/CN stocks up today, Hang Seng outpeforming +0.5% with Nikkei, ASX and Kospi all down slightly.

- Amid the HK$ recovery from the weak end of the 7.75 to 7.85 peg, today Hong Kong’s HIBOR overnight interbank rate continued its rise to hit 4% for first time since May; August seeing the largest monthly rebound on record.

- FHFA Dir Pulte indicated Fed Gov Cook has a third mortgage which has now been referred to criminal referral.

- US equity FUTs -0.1% to -0.2% during Asian trading.

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

- Fri Aug 29th IN Q2 GDP (Fri night US July Core PCE).

Holidays in Asia this week

- Mon Aug 25th Philippines.

- Wed Aug 27th India.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 8,975.

- Australia July Private Sector Credit M/M: 0.7% v 0.6%e; Y/Y: 7.2% v 6.9% prior.

- RBA said to warn of financial stability risks from private market boom - Press.

- Australia sells A$1.0B vs. A$1.0B indicated in 2.75% Nov 2028 bonds; Avg Yield: 3.3840% v 3.4859% prior; bid-to-cover: 4.12x v 4.99x prior.

- New Zealand Aug ANZ Consumer Confidence: 92.0 v 94.7 prior.

- New Zealand said to consider home-buying ban for 'rich' foreigners - financial press.

China/Hong Kong

- Hang Seng opens +0.4% at 25,095; Shanghai Composite opens flat at 3,842.

- China NDRC [state planner]: China to firmly avoid 'disorderly' competition in AI development; aware companies' competition has 'intensified'.

- China Securities Daily: Warns against speculating on 'high risk stocks" that are under the special treatment (ST) or probationary status; these companies are at risk of being delisted; More than a dozen funds have either suspended or limited large-scale subscriptions and overall are restricting inflows.

- HK$ HIBOR overnight interbank rate continues rise to hit 4% for first time since May; August saw largest monthly rebound on record.

- US Sec Def Hegseth said to be seeking phone call with his China counterpart - Nikkei (update).

- Cambricon on the recent price run up: No comments on stock price: Recent increase has exceeded that of 'most' industry peers. Price has risk of deviating from "current fundamentals" - financial press.

- More press reports that Nvidia said to be⁩ in talks with us to sell Blackwell AI chip to China; Nvidia wants to give us cut of Blackwell China sales – fox [overnight update].

- USTR formally extends certain exclusions from China section 301 tariffs until Nov 29th, 2025, as expected [overnight update].

- China aims to complete building of modern cities for people by 2035; To foster new industries and upgrade housing – press [overnight update].

- China MOFCOM extends anti-dumping duties on US, EU, Japan, South Korea and Thailand phenol for 5 years – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1030 v 7.1063 prior (strongest since Nov 6th, 2024).

- China PBOC Open Market Operation (OMO): Injects CNY783B in 7-day reverse repos; Net injects CNY422B v drains CNY163B prior.

Japan

- Nikkei 225 opens -0.3% at 42,704.

- Japan July preliminary industrial production M/M: -1.6% V -1.1%E; Y/Y: -0.9% V -0.6%E.

- Japan July Retail Sales M/M: +0.3% V -0.2%E; Y/Y: -1.6% V 1.6%E.

- Japan Aug TOKYO CPI Y/Y: 2.6% V 2.6%E; CPI (EX-FRESH FOOD) Y/Y: 2.5% V 2.5%E.

- Japan July Jobless Rate: 2.3% v 2.5%e.

- Japan Aug Consumer Confidence: 34.9 v 34.2e [highest since Feb].

- Japan Finance Ministry (MOF) seeks ¥32.4T in debt servicing costs from FY26 budget (interest payments and debt redemption; ~25% of national budget ¥110-120T) – press [overnight update].

- Japan Fin Min Kato: Aware of rising interest rates; will continue to engage with bond market participants and manage debt policies appropriately.

- Japan trade negotiator Akazawa: Staff members are in the US to discuss trade matters - comments from Tokyo.

- Japan sells ¥4.3T vs. ¥4.3T indicated in 3-Month Bills; Avg Yield: 0.4742% v 0.4508% prior; bid-to-cover: 3.45x v 2.94x prior.

Korea

- Kospi opens +0.4% at at 3,208.

- South Korea July Industrial Production M/M: 0.3% v 0.2%e; Y/Y: 5.0% v 3.9%e.

- South Korea government plans KRW728T budget for 2026, +8.1% y/y [largest increase in 4 years]; guides 2026 bond issuance at KRW232T.

- South Korea Pres Lee: It is time for fiscal policy to play 'an active role' - financial press.

Other Asia

- Philippines Central Bank (BSP) Gov Remolona: Might Not need another rate cut if data stays the same - financial press.

- Philippines Central Bank Gov: Policy rate at Goldilocks level; Less dovish than before - post rate decision press conference [overnight update].

- Philippines central bank (BSP) cuts overnight borrowing rate by 25BPS to 5.00% [overnight update].

North America

- (US) Follow up: FHFA Dir Pulte said to increase scrutiny on Fed Gov Cook with criminal referral on third mortgage - US financial press

- (VE) Pres Maduro: There's no way the US can enter Venezuela; Venezuela has support from China, Russia, and India.

- Canada reportedly does not expect US Pres Trump to drop all tariffs on Canada – FT.

- (US) Fed's Waller: There's no set sequence on how fast to cut rates; Doesn't comment on Gov Cook's suit, those matters are now in the hands of the courts - Q&A.

- *(US) Fed's Waller (voter, dovish dissenter): Supports 25bps cut at Fed's Sept meeting; Anticipates more cuts over next three to six months after Sept; Does not believe a bigger Sept cut is needed, unless Aug jobs report shows substantial weakening and inflation stays well contained.

- (US) Q2 preliminary GDP annualized Q/Q: 3.3% V 3.1%E; personal consumption: 1.6% V 1.6%E.

- (US) Q2 preliminary GDP price index: 2.0% V 2.0%E; core PCE price index Q/Q: 2.5% V 2.5%E.

- (US) Initial jobless claims: 229K V 230KE; continuing claims: 1.954M V 1.97ME (off cycle-highs).

- More press reports that Nvidia said to be⁩ in talks with US to sell Blackwell AI chip to China; Nvidia wants to give US cut of Blackwell China sales - fox.

- (US) Fed Gov Cook files lawsuit to block Pres Trump attempted firing [as expected].

- (US) July pending Home Sales M/M: -0.4% V -0.2%E; Y/Y: +0.3% V 0.1%E.

- (US) Weekly EIA Natural Gas inventories: +18 BCF VS. +20 BCF TO +38 BCF indicated range.

- (BR) Mexico Econ Min Ebrard: Mexico is not pursuing a free trade agreement with Brazil.

- (US) Lisa Cook hearing in DC court scheduled for 10AM ET tomorrow - CNBC.

- (US) Treasury $44b 7-year note auction results: draws 3.925% V 4.092% prior, bid-to-cover ratio: 2.49 V 2.79 prior and 2.64 over the last 12.

- (CA) Canada Industry Min Joly: Looking at stricter measures to combat steel dumping.

Europe

- (UK) Aug Lloyds Business Barometer: 54 v 52 prior.

- (IR) Iran Foreign Min: Iran is ready to resume diplomatic negotiations over nuclear program provided that other parties demonstrate seriousness and goodwill.

- (UR) EU Commission Pres Von der Leyen: Russia strike in Kyiv overnight damaging our EU diplomatic mission; I'm outraged by the missile and drone attack on Kyiv, killing men, women and children.

- (IN) Reportedly Russian oil exports to India are set to rise in September; India to raise Russian oil purchases by 10-20% m/m in Sept - press.

- (PL) Poland National Bank (NBP) July Minutes: CPI likely to return to target.

- (EU) Commission Pres Von der Leyen: Must secure peace deal for Ukraine with credible security guarantees ‘that will turn the country into a steel porcupine’.

- (EU) European Commission: Proposes tariff reductions to unlock 15% auto duty, which would retroactively begin on Aug 1st.

- (UR) Germany Chancellor Merz: Seems clear that there will be no meeting between Russia Pres Putin and Ukraine Pres Zelenskiy - comments to media in France with Pres Macron.

Levels as of 01:20 ET

- Nikkei 225 -0.2%, ASX 200 -0.2%, Hang Seng +0.5%; Shanghai Composite +0.2%; Kospi -0.3%.

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

- EUR 1.1656-1.1684; JPY 146.77-147.11; AUD 0.6527-0.6543; NZD 0.5880-5895.

- Gold -0.2% at $3,468/oz; BTC -1.3% at $111,470; Crude Oil -0.7% at $64.17/bbl; Copper +0.1% at $4.5497/lb.