MNI Asia Pac Weekly Macro Wrap

EXECUTIVE SUMMARY

JAPAN

• The yen surged this past week, as several factors turned supportive (equity risk off, collapsing metals prices, Fed easing expectations and position overhang). The JPY TWI still remains low from an historical standpoint. Tokyo July CPI was mixed ahead of next week’s BoJ meeting.

AUSTRALIA

• The composite preliminary July Judo Bank PMI signalled that the economy stagnated at the start of Q3 with the manufacturing sector continuing to contract and services growth slowing. The concern though was that costs in the services sector rose further and were passed on at least in part to customers.
• Opinion polls continue to suggest that there will be a minority Labor government following elections due by May 2025.

NEW ZEALAND

• The YTD trade deficit narrowed in June with soft domestic demand driving lower imports but weak shipments to China weighed on exports.

SHORT TERM RATES

• The 75bp of RBNZ easing priced in by year end is looking stretched given that there are only three meetings left.

CHINA

• Policy stimulus surprises were delivered this week, which came after recent data disappointment and the Third Plenum. China onshore bond yields remain in a downtrend, but local equities are still struggling for much upside. USD/CNH has pulled back thanks to the strong JPY rebound. Dips in the pair should be supported though, given macro headwinds.

SOUTH KOREA

• This week’s Q2 GDP drop creates somewhat of a dilemma for the BOK. Domestic growth indicators have softened but house price sentiment has been a focus point. Something that could be inflamed if the central bank cuts.

REST OF ASIA

• In Singapore, not surprisingly, the MAS left policy settings on hold. In India focus was on the budget.

ASIA EQUITY FLOWS

• Tech outflows have been evident in the past week, as global headwinds in that space continue.

GLOBAL

• The sharp drop in copper prices this month may be signalling a softer industrial production growth outlook over the months ahead in line with weaker economic surprise indices and subdued manufacturing PMIs.
• The US trade deficit has widened considerably since the first year of Trump’s presidency in 2016 driven by NAFTA and the EU. While its largest bilateral deficit remains with China, it has narrowed since then, but China is likely to remain a focus of trade restrictions. Numerous Asian countries will be impacted by a blanket 10% tariff on US imports but more will feel the indirect effects from trade barriers on China.

See the attached below for more details.

weekly macro round up (July 26 2024) .pdf