Nikkei outperforms as markets move past tariffs

- Markets continued to be unfazed by Trump’s most recent tariff pronouncements: 100% tariffs on non-US produced chips, a doubling of India’s tariff to 50% and threats against India and China for purchases of Russian oil.

- Nikkei +2.2% with Topix banking index at a fresh all-time high, on a flat to down day for rest of the Asian bourses. Sony rose for a second day, +5% following good Q1 results with raised guidance. Softbank also +11% on better Q2 earnings.

- US Pres Trump again indicated a trip to China may on the cards before end of this year.

- Japan Trade Negotiator Akazawa and other senior officials said that they have assurances from the US that the currently stacked tariffs against Japan will be refunded later, as part of the US-Japan deal.

- Speculation around the next Fed Chair delayed for now as Trump nominated Council of Economic Advisors Chair Stephen Miran to temporarily fill the Fed Board seat left open by Gov Kugler, allowing Trump to further ponder his final Fed personnel selections, including Chair.

- WTI crude continued to lose ground to $63/bbl ($70 just a week ago), as Russia confirmed the potential of a meeting between Trump and Putin as early as next week.

- Gold hit a fresh all-time high of $3,534/oz during US trading.

- Earlier reports vindicated as Japan cut GFP forecast from FY26 from 1.2% to 0.7%.

- A relative lack of fresh news out of China recently, amid reported leadership struggles behind the scenes leading into the CCP “informal” summer meeting in Beidaihe. The MOF reiterated that the Chinese economy demonstrates “strong vitality” and will meet full-year economic targets.

- China’s giant chip-maker SMIC said that current demand is greater than supplies, yet some clients switched to other suppliers. [Note: Potentially indicates further China offshore decoupling taking place as China doubles down on its domestic efforts to compete in the global AI race].

- Looking out for the LDP Plenary session and a potential vote of no-confidence against PM Ishiba.

- BOJ Minutes from July 31st (held rates again at 0.5%) revealed further indecision for now, saying at least two to three more months are needed to assess the impact of US tariff policy. However, overall members said the BOJ should not become overly cautious and miss the opportunity to raise the policy interest rate.

- Adding to potential dovishness going forward, Japan household spending for June was only at half the level expected.

- Australia RBA rate decision next Tuesday, Aug 12th. Market probabilities of a further hold vs 25bps cut have been remarkably stable around the 50/50 level for the past few weeks. (** Reminder that the RBA left rates on hold on July 9th after having been expected to cut 25bps).

- In AI news, Tesla’s Musk affirmed stopping Dojo to focus all efforts on Tesla AI5, AI6 and subsequent chips (with TSMC and Samsung).

- US equity FUTs +0.2% during Asian trading.

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

- Sat Aug 9th CN July CPI/PPI.

Holidays in Asia this week

- N/A.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.5% at 8,790.

- Australia sells A$1.0B vs. A$1.0B indicated in 3.00% Nov 2033 bonds: Avg Yield: 4.0742% v 3.8725% prior; bid-to-cover 3.29x v 3.38x prior.

- New Zealand and Indonesia sign agricultural cooperation agreement.

China/Hong Kong

- Hang Seng opens -0.5% at 24,968; Shanghai Composite opens -0.1% at 3,634.

- Capital markets in China to 'step up' support for technology innovation - China Securities Journal.

- Treasury Sec Bessent: China tariffs can be on the table at some point [overnight update].

- China Finance Ministry (MOF) Economy demonstrates strong vitality and resilience; to meet full-year economic targets [overnight update].

- Cosco Shipping said to be seeking a stake of at least 20-30% in Ports deal - FT.

- China MOF sells 30-year Special Bonds: Yield 1.9576%.

- China MOF sells 7-year Bonds: Yield 1.6052%.

- Tier1 analysts: See upside risks to the existing 10% of reciprocal tariff rate to China; expect China's rate to be on the higher end at 20-25%; China could offer "F.I.R.E" as concession: Fentanyl crackdown, Imports from the US, Rare earth supply, and market Entry. [overnight update].

- US Pres Trump: Trip to China may be in the near future, possibly before the end of the year.

- CHINA JULY FOREIGN RESERVES: $3.292T V $3.28T [overnight update].

- S&P AFFIRMS CHINA SOVEREIGN RATING AT 'A+/A-1'; OUTLOOK STABLE [overnight update].

- GM Said planning to continue importing CATL batteries in spite of tariffs; Will use CATL batteries for Chevy Bolt for two years –WSJ [overnight update].

- China PBOC sets Yuan reference rate: 7.1382 v 7.1345 prior.

- China PBOC Open Market Operation (OMO): Injects CNY122B in 7-day reverse repos; Net drains CNY4B v drains CNY123B prior.

Japan

- Nikkei 225 opens +0.6% at 41,283.

- BANK OF JAPAN (BOJ) SUMMARY OF OPINIONS FOR JULY POLICY MEETING; Even with Japan achieving US trade deal does not impact overall situation.

- Japan July Bank Lending Y/Y: 3.2% v 2.8% prior.

- Japan Jun Current Account Balance: ¥1.348T v ¥1.086Te.

- Japan Jun Household Spending Y/Y: 1.3% v 2.7%e.

- Japan July Eco Watchers Current Survey: 45.2 v 45.5e; Outlook Survey: 47.3 v 46.4e.

- Japan Trade Negotiator Akazawa: Regrettable that the US 'stacked' tariffs despite trade deal; have been able to confirm non-stacking stance from the US with US to pay back stacked levies later.

- Japan Fin Min Kato: Want to deepen talks with other parties (in reference to next FY budget) - financial press.

- Japan Economy Min Muto: If US levies chip tariff Japan 'not disadvantaged' vs 'others'.

- Japan govt confirms to cut GDP forecast for FY26 from 1.2% to 0.7%
[overnight update].

Korea

- Kospi opens -0.2% at 3,220.

Other Asia

- Indonesia July Consumer Confidence: 118.1 v 117.8 prior.

North America

- *CEO Musk: There is no sense for Tesla to scale two different chip designs; Affirms all efforts focused on Tesla AI5, AI6 and subsequent chips - press.

- US Pres Trump confirms Stephen Miran nominated to take Kugler's vacated Fed seat until Jan 31st; Will continue search for a permanent replacement.

- (US) Pres Trump said to sign an executive order today that aims to allow private equity, real estate, cryptocurrency & other alternative assets in 401(K)s - press.

- (US) Pres. Trump: I have instructed our Department of Commerce to immediately begin work on a new and highly accurate CENSUS based on modern day facts and figures and, importantly, using the results and information gained from the Presidential Election of 2024. People who are in our Country illegally WILL NOT BE COUNTED IN THE CENSUS.

- (US) Treasury Sec Bessent: Trade deals largely done; Regulation pushed US manufacturing offshore; Micron was visiting this week and going to put in $200B.

- (US) Q2 PRELIMINARY NONFARM PRODUCTIVITY: 2.4% V 2.0%E; ; UNIT LABOR COSTS: 1.6% V 1.5%E.

- (US) INITIAL JOBLESS CLAIMS: 226K V 222KE; CONTINUING CLAIMS: 1.974M V 1.95ME (back to near cycle-highs).

- (CA) Canada July Ivey Purchasing Managers Index: 55.8 v 53.3 prior.

- (US) Fed's Bostic (non-voter for 2025 & 2026): Ton of economic scenarios could play out, it's hard to assign probabilities; Economy likely to continue to slow; Likely to see upward pressure on prices for next 6-12 months, which puts pressure on the Fed - Q&A responses.

- (US) Reportedly Fed's Waller is favored as the potential candidate for Chair; Has met with Trump's team, but not the President - press

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: +7 BCF VS. +16 BCF TO +18 BCF INDICATED RANGE.

- (US) June NY Fed (NYFRB) 1-year Inflation Expectations Survey: 3.10% v 3.02% prior.

- (US) TREASURY $25B 30-YEAR BOND AUCTION DRAWS 4.813% V 4.819% PRIOR; BID TO COVER 2.27 V 2.31 PRIOR AND 2.42 OVER THE LAST FOUR AUCTIONS; 2 bps tail.

- (US) White House Council of Economic Advisers Chair Miran: Fed's Waller has built up an impressive track record and hasn't succumb to 'tariff derangement syndrome'.

- (US) White House official says Putin must meet with Zelenskiy before any meeting with Trump - Axios.

Europe

- (UK) BANK OF ENGLAND (BOE) CUTS BANK RATE BY 25BPS TO 4.00%; AS EXPECTED.

- (UK) BANK OF ENGLAND (BOE) AUG MINUTES: VOTED 5-4 TO CUT BY 25BPS; Greene, Lombardelli, Mann and Pill voted for unchanged.

- (UK) BANK OF ENGLAND (BOE) QUARTERLY MONETARY POLICY REPORT; Raises CPI outlook across all years and still not back to target until 2027.

- (CZ) CZECH CENTRAL BANK (CNB) LEAVES 2-WEEK REPURCHASE RATE UNCHANGED AT 3.50%; AS EXPECTED.

- (IL) Israel PM Netanyahu: Israel intends to take control of all of Gaza then hand it over to non-armed Arab forces; We don't want to keep Gaza, we want a security perimeter.

- (UK) BOE Gov Bailey: Domestic factors are main driver of decision to cut rates; Path is still downwards over time - TV interview.

- (UR) US Pres Trump: Russia Pres Putin doesn't have to meet with Ukraine Pres Zelenskiy before I do; Russia ceasefire/peace plan deadline up to Putin.

Levels as of 01:20 ET

- Nikkei 225 +2.0%, ASX 200 -0.3%, Hang Seng -0.9%; Shanghai Composite +0.1%; Kospi -0.7%.

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

- EUR 1.1647-1.1679; JPY 146.72-147.37; AUD 0.6512-0.6579; NZD 0.5949-5972.

- Gold +1.2% at $3,493/oz; BTC +1.7% at $116.670; Crude Oil -0.3% at $63.69/bbl; Copper +0.1% at $4.4172/lb.