Asia Morning Bites: Focus on Tug of War Between Markets and PBoC, PMI Reports Dominate Macro Data

Asia Morning Bites

The tug of War between markets and the PBoC will remain a focus in Asia today. Macro data is dominated by PMI reports from major economies.

 

Global Macro and Markets

• Global markets:  Tuesday was a nothing-day for US stocks as we creep closer to the US Jackson Hole event. US stocks opened up but then slid for most of the session. Chinese stocks, in contrast, managed a rare day of gains. The Hang Seng index rose 0.95% while the CSI 300 rose 0.77%.  US Treasury yields were mixed. The 2Y yield rose to 5.046%, a gain of 4.5bp, though the 10Y yield edged slightly lower by 1.4bp to 4.324%. EURUSD dropped to 1.0847, which looks like a lagged move to respond to Monday’s US yield increases. The AUD pushed slightly higher though, rising to 0.6452, while Cable looked stronger for most of Tuesday before sliding in late trading to return to the 1.2730 area. The JPY looked a bit more solid and strengthened slightly to 145.79. The tug-of-war between markets and the PBoC continued on Tuesday. There was another very strong fix below 7.20 combined with higher funding costs for offshore yuan, though these have now normalized, raising the question of what today's PBoC strategy will be. But the CNY remains just below 7.30 at 7.294, a slight rise from this time yesterday. The THB was the region’s best-performing currency yesterday as the political soup cleared a little with the appointment of a Prime Minister. The KRW also made decent gains. At the other end of the pack, the VND lost about 0.5%  and the PHP was off 0.37%.

 

• G-7 macro:  Yesterday’s macro calendar was devoid of any interest. But today, we have a plethora of PMI releases across the globe, as well as some new home sales data for the US.

 

• Australia:  August PMI data shows the Australian economy slowing further. The service sector PMI, which fell below the breakeven 50-level in July, slid further in August, dropping to 46.7. There was also a slight decline in the manufacturing PMI too, which fell to 49.4 from 49.6, making it the sixth consecutive reading below 50. After the recent softness in labour data, we will have to consider whether to trim out the additional rate hike we still have pencilled in for later this year. We'll leave it for now, but it is looking less obvious.

 

• Singapore:  Singapore reports July inflation today.  The consensus points to a sustained deceleration in inflation with the headline number expected to dip to 4.2%YoY from 4.5%.  Meanwhile, the core number is expected to slip to 3.8%YoY (from 4.0%).  Despite the moderation, inflation remains elevated and we expect the Monetary Authority of Singapore to take this into consideration ahead of its policy meeting in 4Q23.   

 

 

What to look out for: Jackson hole conference

• South Korea business survey (23 August)

• Singapore CPI inflation (23 August)

• Japan machine tool orders (23 August)

• Taiwan industrial production (23 August)

• US new home sales MBA mortgage applications (23 August)

• South Korea PPI inflation and BoK policy meeting (24 August)

• Indonesia BI policy meeting (24 August)

• Hong Kong trade balance (24 August)

• US initial jobless claims and durable goods orders (24 August)

• Japan Tokyo CPI inflation (25 August)

• Malaysia CPI inflation (25 August)

• Singapore industrial production (25 August)

• US Univ of Michigan Sentiment (25 August)

• Jackson hole conference (25 August)