General Trend:
- On Friday (Aug 23rd), China announced plans to levy 5-10% retaliatory tariffs on $75B of US goods, effective on Sept 1st and Dec 15th
- Later on Aug 23rd, Trump announced the US is increasing tariffs on Chinese goods by an added 5% (to rates of 30% and 15%) in retaliation for new tariffs from China (comments from Aug 23rd post US close); Effective Oct 1st, the $250B of goods and products from China (currently being taxed at 25%), will be taxed at 30%; Additionally, the remaining $300B of goods and products from China, that was being taxed from September 1st at 10%, will now be taxed at 15%.
- Yuan and Asian currencies weighed down by trade concerns, USD/CNH rises above 7.17
- PBOC announces floor on mortgage rates after recent interest rate reform; Shanghai Property index drops over 1.5%
- China Hongqiao (largest global aluminum producer) declines over 5% after cutting production guidance
- New Zealand reports wider than expected trade deficit in July, butter exports to China declined
- US President Trump and France President Macron are expected to hold joint press conference at the conclusion of the G7 meeting (expected at 1330 GMT)
- UK markets closed today for bank holiday
Headlines/Economic Data
Australia/New Zealand
- ASX 200 opened -1.7%
- (AU) Australia sells A$400M v A$400M indicated in Nov 2029 bonds, avg yield 0.8841%, bid to cover 3.95x
- (NZ) New Zealand July Trade Balance (NZ$): -685M v -254Me
China/Hong Kong
- Shanghai Composite opened -1.7%, Hang Seng -3.3%
- (CN) President Trump ‘orders’ American companies to immediately start looking for an alternative to China (comments from Aug 23rd)
- (US) Pres Trump tweets: “For all of the Fake News Reporters that don’t have a clue as to what the law is relative to Presidential powers, China, etc., try looking at the Emergency Economic Powers Act of 1977. Case closed!”
- (CN) China ‘unreliable entity list’ said to be imminent; companies listed will face ‘severe punishment’ – Global Times (from Aug 23rd)
- (CN) China Vice Premier Liu He: China is willing to resolve trade dispute with US through calm negotiations; resolutely opposes trade war escalation; China has sufficient tools to ensure growth – China Press
- (CN) CHINA PBOC SETS YUAN REFERENCE RATE: 7.0570 V 7.0572 PRIOR
- (CN) Banks in China said to have been seen selling US dollars (USD) in order to support the yuan currency; the banks were said to sell USD near 7.1450 – US financial press
- (CN) China to reform individual housing loan interest rate formation, to set floor on mortgage rates; some view the move as an attempt to lower risks in the housing market – financial press
- (CN) China PBoC conducts CNY150B in 1-year Medium Term Lending Facility (MLF) operations at 3.3% v 3.3% prior
- (HK) Hong Kong police said to have arrested 36 people during the protests on Sunday – US financial press
Japan
- Nikkei 225 opened -1.9%
- (JP) US and Japan reach framework trade agreement – Nikkei
- (JP) Credit card companies in Japan are expected to offset sales tax increase with discounts – Japanese Press
Korea
- Kospi opened -1.7%
- (KR) South Korea Vice Min Kim: Closely watching China’s yuan; large KRW/CNY movements are not desirable; Won (KRW) is more influenced by CNY than before; will take step on FX regardless of currency level
Other
- (IN) India Fin Min Sitharaman: Global growth projections might be revised lower; to exempt some foreign portfolio investors from recently imposed higher tax; To release INR700B capital upfront (immediately) for State-run banks in recapitalization (comments from Aug 23rd)
North America
- (US) FED CHAIR POWELL: LOW INFLATION, NOT HIGH INFLATION, IS PROBLEM OF THE ERA; REITERATES WILL ACT AS APPROPRIATE TO SUSTAIN EXPANSION – JACKSON HOLE SPEECH (comments from Aug 23rd)
- (US) Fed’s Bullard (dove, voter): market has expectations for low inflation, TIPS breakeven suggest only 1% inflation over next 5-years; we should “take out more insurance against the downside risks”; expect “robust debate” about 50bps cut in Sept – TV interviews from Jackson Hole (comments from Aug 23rd)
- (US) Pres Trump criticizes Fed Chair Powell speech; hints at action to be ‘announced shortly’ related to the dollar and the Fed (comments from Aug 23rd)
- (US) US President Trump: Some reports on Iran and UK Johnson are wrong – G7 comments
Europe
- Iran Foreign Min Zarif said to have met with France President Macron on Sunday on the sidelines of the G7, the appearance by the Iranian official said to have surprised the US; France and
- Iran are said to have discussed ways to lessen the tensions between the US and Iran (financial press)
- (UK) BOE Gov Carney: collective effect of the US/China trade dispute will have effect of about 1ppt lower US GDP; spillover is starting to effect the UK economy and global confidence- CNBC from Jackson Hole (comments from Aug 23rd)
- (DE) ECB’s Weidmann (Germany): I do not see any current need for a major economic stimulus program – press interview
- (EU) EU said to consider softening debt reduction targets in rewriting of budget rule – FT
Levels as of 1:20 ET
- Nikkei 225, -2.2%, ASX 200 -1.7%, Hang Seng -3%; Shanghai Composite -1.3%; Kospi -1.6%
- Equity Futures: S&P500 -0.8%; Nasdaq100 -0.9%, Dax -0.6%
- EUR 1.1164-1.1132 ; JPY 105.80-104.45 ; AUD 0.6750-0.6689 ;NZD 0.6397-0.6341
- Gold +1% at $1,553/oz; Crude Oil -1.1% at $53.57/brl; Copper -0.5% at $2.514/lb
