OPEC+ increases output as RU-CN energy ties deepen

Asia market update: Japan PM resigns; OPEC+ increases output as RU-CN energy ties deepen; CN exports slow; Focus on French PM no-confidence vote.

General trend and developments

- The Nikkei surged as much as 1.8% and the TOPIX hit a fresh record high while the Yen was weaker (Euro and Pound at one-year highs) at the open following Japan PM Ishiba resigning at a press conference on Sunday. With his leadership under increasing pressure Ishiba said he wanted to avoid a "decisive split" in the LDP. An emergency “full spec” LDP party leadership vote will take place likely on Oct 4th. Ishiba will stay on as caretaker PM until the new leader assumes office. - All market eyes now turn to the substantial monetary and fiscal policy differences between the leading candidates for new PM, Sanae Takaichi and Shinjiro Koizumi. (Motegi also remains in the leadership mix).

- Sanae Takaichi is a monetary and fiscal policy dove (apparently willing to accept a lower Yen to keep interest rates low in Japan and with less BOJ balance sheet run-off) and is a right-wing hawk on domestic and foreign policy issues. She aligns closely with many of former PM Abe’s policies.

- Shinjiro Koizumi is seen as more likely to stay the course on gradual BOJ rate hikes & JGB tapering, maintain a firmer Yen (increasing subsidies to compensate Japan Inc.), and is more moderate on domestic and foreign policy issues.

- Additionally, US trade relations (the two sides were still working at completing a fully signed agreement), Japanese foreign policy and flash-point domestic issues such as the cost of living, depopulation, social cohesion and immigration are now in uncertain territory, depending on who assumes the PM role.

- Even prior to the Ishiba news, last Friday OIS probabilities of a 25bps in October had fallen to 31% v 36.5% day before, and Dec hike chances had fallen to 55% vs 59.5% day before.

- Note that JGBs not too excited by Ishiba's resignation, with the long-end steepening by up to 3bps, but not sharply, as Ishiba's resignation likely had already been discounted.

Other news

- WTI oil prices moved steadily higher by 1.2% despite the ceiling production boost from eight OPEC+ members, by a further 137K bpd in October (inline with pre-weekend estimates).

- Meanwhile Pres Trump said at the White House he is ready to move to the ‘second stage’ of sanctions on Russia.

- Japan final GDP for Q2 figures along with most components came in significantly stronger than expected, with the annualized rate double that expected, although had little effect on bonds or FX.

- Australia’s ASX lagged with Energy -2.2% and consumer names Woolworth and Coles both facing significant regulatory fines.

- China export growth slowed in August, nearly half the prior months growth in CNY-denominated terms. China's US exports continued to accelerate their fall, -33% y/y, while its surplus with the US now down to $20.3B for the month (was $27.1B back in March).

- Reportedly US-China trade talks have made little progress toward a deal recently due to an impasse on the fentanyl issue.

- Last Friday’s arrest of up to 475 workers by US ICE at a Hyundai Motors and LG Energy battery plant in Georgia turned into an international incident, with personal attention by Pres Trump and Hyundai Motors today suspending all US business trips for its employees and Korea’s Foreign Min to fly to the US.

- US Nonfarm payrolls on Friday were even weaker than the soft JOLTS and ADP earlier in the week. Unemployment also ticked up to four year highs. The cooling jobs market further baked in Fed rate cuts, priced to total 75bps by year-end, with a 10~11% chance of a 50bps at next week’s meeting, 25bps at 89% and zero chance of no cut.

- Having settled the reduction in Japanese auto tariffs to 15%, trade rep Akazawa said trade issues around most favored nation status for pharmaceuticals and semiconductors still to be settled, amid US Commerce Sec Lutnick reiterating that “Trump has total discretion on Japan's $550B investment”.

- Late Friday, after the close, Pres Trump signed an Exec Order exempting gold, tungsten and uranium from global tariffs from Sept 8th. Gold and especially Silver prices were soft today.

- Thailand’s political uncertainty ended for now as Anutin Charnvirakul of the conservative Bhumjaithai Party comfortably won the Thai parliament’s vote to take over as Prime Minister from the displaced Shinawatra, receiving 311 votes due to Anutin managing to win the support of the parliament’s largest party, the People’s Party. Bhumjaithai and the People’s Party formed a new coalition, beating out the Pheu Thai party’s candidate, Chaisaksem Nitisiri.

- New Zealand DMO to price by syndicate a 2050 inflation-indexed bond tomorrow.

- Reminder that today, Sept 8th, sees the French PM no-confidence vote, as well as the expiration of new 60 days Israel PM Netanyahu deadline for US diplomacy to remove Iran threat.

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

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

- Tue Sept 9th AU Westpac Sept Consumer Confidence & Aug Business Confidence.

- Wed Sept 10th KR Korea Aug Jobs, China Aug CPI, (Wed eve US Aug PPI).

- Thu Sept 11th (Thu eve ECB Rate Decision, US Aug CPI).

- Fri Sept 12th NZ Aug Business PMI, (Fri eve UK July GDP, US Michigan Sept Consumer Sentiment).

Holidays in Asia this week

- No holidays in Asia this week.

Headlines/economic data

Australia/new zealand

- ASX opens -0.2% at 8,848.

- New Zealand DMO: Notes launch of 20 September 2050 Inflation-Indexed Bond announced.

China/Hong Kong

- Hang Seng opens flat at 25,440; Shanghai Composite opens flat at 3,811.

- China Aug trade balance: $102.3B V $99.5BE.

- China Aug trade balance (CNY-denominated): 730B V 710B PRIOR.

- China Pres Xi: To drive trade, investment liberalization - CCTV, citing letter to China International Investment, Trade Fair.

- China logistics firms raise fees as part of 'anti-involution' push; the price increases started in Aug after regulators in the Guangdong Province set a floor on prices at CNY1.4 for packages below 0.3kg - China Economic Information Daily.

- Mercedes-Benz CEO: No plans to change China strategy; Co to maintain "premium approach" - financial press.

- China reportedly to re-open its domestic bond market to Russian energy firms to sell Panda Bonds – FT.

- Shenzhen relaxed home purchase limits and will no longer differentiate between first and second homes in terms of mortgage rates - press [update].

- CHINA AUG FOREIGN RESERVES: 3.322T V $3.292T PRIOR [weekend update].

- (US) Reportedly China trade talks have made little progress toward a deal; Impasse hit on fentanyl issue – WSJ [weekend update].

- (US) Trump Admin plans rules targeting imports of Chinese drones and heavy-duty vehicles - press.

- China Securities Regulator (CSRC) reportedly to lower subscription fees for public funds [weekend update].

- Nomura analysts: Concern over a stock-market bubble may discourage China’s central bank from easing its monetary policy in September [weekend update].

- *(US) Pres. Trump: Looks like we’ve lost India and Russia to deepest, darkest, China. May they have a long and prosperous future together! [weekend update].

- China MOFCOM preliminary results on EU pork probe: To collect security deposit of up to 62.4%, effective Sept 10th [weekend update].

- China MOFCOM: Extending anti-dumping probe on certain rubber products from Canada, Japan and India to Mar 14th 2026 [weekend update].

- China reportedly seeks views on facilitating FX settlement; Plans to expand scope of cross-border trade [weekend update].

- China PBOC sets Yuan reference rate: 7.1029 v 7.1064 prior (strongest since Nov 6th, 2024).

- China PBOC Open Market Operation (OMO): Injects CNY192B in 7-day reverse repos; Net injects CNY8.8B v drains CNY595B prior.

Japan

- Nikkei 225 opens +0.9% at 43,423.

- Japan Q2 final GDP Q/Q: 0.5% V 0.3%E; GDP annualized Q/Q: 2.2% V 1.0%E.

- Japan July Current Account Balance: ¥2.684T v ¥3.354Te.

- Japan Aug Bank Lending Y/Y: 3.6% v 3.2% prior.

- Japan Aug Eco Watchers Current Survey: 46.7 v 45.6e.

- Japan LDP leadership election to be "full spec" (i.e. votes from up to 1M "rank and file" party members to be included in the election) - Japanese press.

- Japan PM Ishiba resigns; To remain in office until ruling-party LDP votes for new leader (likely within the next few weeks) - financial press.

- Japan MOF sells ¥599B v ¥600B indicated of JGBs in liquidity enhancement auction.

- (US) Commerce Sec Lutnick: Trump has all sorts of other authorities after tariff ruling; Trump has total discretion on Japan's $550B investment [weekend update].

- Japan PM Ishiba: Will compile economy package this autumn [weekend update].

-Japan to increase minimum pay by record amount; prefectures nationwide will raise the minimum pay by avg of ¥66 per hour, effective from the current fiscal year [weekend update].

­- Japan trade negotiator Akazawa: Cannot say that trade issues with US have been resolved; US Presidential order on auto tariffs has been issued, but no orders yet on most favored nation status for pharmaceuticals and semiconductors [weekend update].

- Japan to increase minimum pay by record amount; prefectures nationwide will raise the minimum pay by avg of ¥66 per hour, effective from the current fiscal year [weekend update].

Korea

- Kospi opens 0.1% at 3,209.

- Hyundai Motors / LG Energy: Follow up: South Korea agrees with US to repatriate Hyundai Motors', LG Energy's Georgia, US plant detainees (update).

Other Asia

- India Chief Economic Adviser (CEA) comments on the impact of US tariffs: Coming quarters to reflect impact of the 50% US tariffs; expects the tariffs to impact GDP by 0.5-0.6% this year.

- Thailand Bhumjaithai Party leader Anutin reportedly poised to win enough Parliament votes for Thai PM: Note: 3rd PM in two years for Thailand [weekend update].

North America

- (US) Follow Up: President Trump exempts gold, tungsten and uranium from global tariffs, effective Sept 8th; cites the executive order that was signed on Fri - Press [update].

- (US) Pres. Trump: Everyone wants the Hostages HOME. Everyone wants this War to end! The Israelis have accepted my Terms. It is time for Hamas to accept as well - post on Truth Social (update).

- (US) Treasury Sec Bessent on Aug jobs report: August is the noisiest month; We’re not going to do economic policy off of one number; If in fact these numbers are true, it shows that President Trump was right about the Federal Reserve; They are too late.

- US, EU trade deal said to be at risk of 'unraveling' due to the expanded 50% metals tariff increasing the agreed 15% overall tariff - WSJ (update).

- (US) Pres. Trump: Amazing phenomenon — Any Country that relies on Windmills is DEAD - post on Truth Social (update).

- Microsoft reports disruptions to Azure cloud services, due to multiple undersea fiber optic cables being cut in the Red Sea.

- (US) President Trump: Though I am generally unwilling for framework agreements to narrow the scope of the reciprocal tariffs or modify any relevant section 232 tariff before the conclusion of a final agreement, final agreements with the United States may include such modifications - White House Presidential Action (update).

- (US) Aug change in Nonfarm Payrolls: +22K V +75KE; June payrolls revised to -13K from +14K (first negative reading since Dec 2020).

- (US) Aug average hourly earnings M/M: 0.3% V 0.3%E; Y/Y: 3.7% V 3.8%E.

- (US) Aug unemployment rate: 4.3% V 4.3%E (highest since 2021).

- (US) White House NEC Dir Hassett: This jobs number was a disappointment for now, but need to think about whole economy; Will probably be revised up by 70K jobs - TV interview [weekend update].

- (CA) Canada PM Carney: Announces 'buy Canada' policy for federal procurement; $5B fund to support tariff hit firms and expanded loan programs [weekend update].

Europe

- EU Pres: Europe has 'turned the page' with Pres Trump - FT.

- (CH) SNB Chief Schlegel: SNB has "high bar" to next interest-rate cut - financial press.

- Follow up: Eight OPEC+ members agree to again boost oil output, by a further 137K bpd in Oct, as expected - financial press (update).

- (RU) US Pres Trump: Ready to move to second stage of Russia sanctions - financial press (update).

- Mistral.IPO: Follow up: ASML said to invest $1.5B (€1.3B) in Mistral at EV ~11.7B (€10.0B), becoming Co's largest holder - financial press, citing sources.

- (US) Reportedly OPEC+ agrees in principle to boost oil production by at least 135K bpd starting in Oct – press [weekend update].

- (UR) Ukraine Pres Zelenskiy: Rejects Putin invitation for meeting in Moscow; He can come to Kyiv [weekend update].

Levels as of 01:20 ET

- Nikkei 225 +1.6%, ASX 200 -0.3%, Hang Seng +0.3%; Shanghai Composite +0.1%; Kospi +0.1%.

- Equity S&P500 Futures +0.1%; Nasdaq100 +0.2%; DAX +0.4%; FTSE100 +0.3%.

- EUR 1.1704.1721; JPY 147.94-148.58; AUD 0.6546-0.6568; NZD 0.5882-5905.

- Gold -0.7% at $3,624/oz; BTC +0.3% at $111,060; Crude Oil +1.2% at $62.63/bbl; Copper +0.1% at $4.5555/lb.