Asia Market Update: A reversal of Thurs’ session seen today for bonds; Lingering uncertainty leaves equities mixed; Therefore, markets seek guidance from Bessent on rates and Iran, setting up potential weekend risks; PMI data in focus.
General trend and developments
–US Treasury Sec Bessent is expected to outline the various economic sanctions against Iran at a press conference on Monday (timing is not clear). Markets had already been expecting strong non-military actions against Iran (Recall, Bessent had previously stated ‘we are soon going to apply measures that have never been seen on Iran in the history of economic isolation on a country’ [Aug 13th]). Importantly, Bessent added that large-scale combat operations against Iran are unlikely to resume.
-Amid the continued US/Iran uncertainty, geopolitical risks remain the primary drivers of oil markets. Hence, Strait of Hormuz ship crossings remain relatively subdued, hovering in only the single digits compared with the previous day’s levels. Thus, continuing to limit the immediate recovery in regional shipping activity and adding upside to shipping rates.
-For bond traders, Bessent has also been in focus; The recent ‘bull flattening’ seen yesterday has now reversed to ‘bear steepening’ as the UST plays with long-term rates; JGB yields have tracked USTs. The rally in Treasuries following the Treasury’s “mini-QE” announcement yesterday was largely reversed, with the 10-year Treasury yield rising back above 4.70% amid persistent inflation concerns, and the US national debt surpassing the $40 trillion milestone.
-Large US financial institutions [including JPMorgan] have, also, indicated that the Bessent buyback plan could raise concerns about the government institution’s credibility. These worries are coupled with the longstanding concerns about the Fed’s independence under the Trump administration. Recently, certain US Democratic lawmakers have even urged Fed Chair Warsh to reveal his recent exchanges with Trump [US financial press]
-On Thursday, Bessent addressed the bond market concerns and stated UST buybacks could exceed $4B. We ponder whether the Trump administration is also still considering MBS market intervention, as part of efforts to keep a lid on long rates. In Jan, it was reported that Trump had ordered Fannie Mae and Freddie Mac to purchase of $200B of mortgage bonds.
– The volatility in the UST market has kept Asian authorities on edge, though Japan has remained silent, thus far. Even South Korea’s Finance Min plans to closely monitor the rise in long-term rates/
-South Korea’s early August trade data suggests the possibility for Taiwan’s export orders to hit another record high in Aug: SK chip exports and shipments to China continued to rise at a blistering pace during Aug [chip exports ‘nearly tripled’ y/y, shipments to China ‘more than doubled’ y/y.] Taiwan’s export orders painted a similar picture. Specifically, Taiwan’s July export orders surged 61.9% year-over-year, beating 52.7% consensus, with China’s share jumping 10 percentage points to 47.2% from 37.2%, while U.S. orders remained strong at 88.9%, highlighting China’s rapidly growing demand for Taiwanese semiconductors amid intensifying US–China AI and chip tensions.
-That being said, shipping firms in Taiwan have outperformed on cargo surcharge increase. Domestic carriers are expected to increase cargo fuel surcharges by close to 14% [effective from Sept].
-Thus far, Japan’s early Q3 data has been better, after Q2 GDP disappointed a few days ago. M/M rises were seen in all of the Aug PMI components. Australia’s PMI was less stellar amid the less favorable cost environment. Japan’s Jul national CPI was consistent with the earlier released Tokyo figure.
-Struggles related to the US consumer: Walmart beat Q2 estimates with EPS of $0.81 (vs. $0.74 expected) and revenue of $187.9B (vs. $186.3B expected), but guided Q3 below consensus and reported its weakest U.S. same-store sales growth in over six years.
-Over the EU session, China and Switzerland agreed to a free trade agreement that will effectively remove tariffs on 99.7% (vs. ~50% prior) of Swiss exports to China. Meanwhile, Sweden’s Riksbank held its repo rate steady at 1.75% as expected while flagging a possible hike in 2026 amid Middle East supply risks, and euro-zone construction output fell 1.3% month-on-month in June.
-US equity FUTs +0.1% to +0.2% during Asia trading.
Looking ahead (Asian-weighted focus, using Asian time-zone)
-Fri Aug 21st: Fri night: Global S&P PMI.
Holidays in Asia this week
-Fri Aug 21st: Philippines.
Headlines/economic data
Australia/New Zealand
-(AU) ASX 200 opens -0.2% at 9,064.
-(AU) AUSTRALIA AUG PRELIMINARY MANUFACTURING PMI: 52.0 V 52.0 PRIOR (5th month of expansion).
-(NZ) New Zealand July Trade Balance (NZD): -1.9B v -0.2B prior.
-(NZ) RBNZ business survey two-year inflation expectation: 2.55%.
-(NZ) RBNZ: Q3 Nowcast GDP est at +0.9% [inline with prior].
-(NZ) RBNZ: New Zealand July Credit Card Spending M/M: +1.4% v -1.3% m/m; Y/Y: 5.3% v 3.1% y/y [update].
-(NZ) RBNZ explores issues facing New Zealand’s payments system.
China/Hong Kong
-(CN) Shanghai Composite opens -0.3% at 9,831; (HK) Hang Seng opens +0.4% at 25,808.
-(CN) China is preparing new round of economic talks with Canada – US financial press.
-(CN) China Vice Finance Minister: Based on economic development trends, timely planning and introducing incremental policies; Maintains the continuity and stability of macro policies, and conduct precise calculations and allocation of fiscal resources over longer cycles. – press conference.
-(CN) China, Indonesia agree to expand joint-military exercises.
-(CN) China NEA July Power Consumption at over 1.04T KWh +1.7% v +8.6% y/y.
-(CN) China Finance Ministry (MOF) sells 2-year and 5-year bonds.
-(CN) PBOC announces issuance of CNY-denominated bills in Hong Kong [two tranches]; To issue CNY30B in 3-month and 1-year bills.
-(CN) BABA Reports Q1 (CNY) 8.52 v 11.28e, Rev 269.0B v 268.5Be; AI product revenue triple-digit growth for 12th quarter; Strategic re-alignment starting from this quarter; Zhenwu chips achieved broad commercial adoption [EU market close].
-(HK) 1.HK Panama canal to limit capacity/slots in September, 2026 due to El Nino – US financial press.
-(HK) 3333.HK Guangzhou (China) court accepts Evergande’s $8.5B PwC real estate liquidation case – US financial press.
-(CN) China PBOC sets the yuan mid-point at 6.7817 v 6.7808 prior.
-(CN) China PBOC Open Market Operation (OMO): Sells CNY95B in 7-day Reverse Repos; Net injects CNY95B v drains CNY327B prior.
Japan
-(JP) Nikkei 225 opens -1.0% at 65,562.
-(JP) JAPAN JULY NATIONAL CPI Y/Y: 1.9% V 1.9%E; CPI (EX-FRESH FOOD) Y/Y: 1.8% V 1.8%E (highest level of this year, 2026).
-(JP) JAPAN AUG PRELIMINARY MANUFACTURING PMI: 55.1 V 54.5 PRIOR (8th month of expansion).
-(JP) Japan protests Russia missile drill notification – Kyodo [citing senior official at Japan’s Foreign Ministry].
-(JP) Japan PM Takaichi plans cabinet reshuffle in mid-to-late Sept [inline] – Yomiuri.
-(JP) Japan sells ¥3.70T vs. ¥3.70T indicated in 3-Month Bills; Avg Yield: 1.0816% v 1.0919% prior; bid-to-cover: 3.87x v 3.52x.
-(JP) Japan panel to review the sustainability of postal service – US financial press [update].
-(JP) 7270.JP ACCC [Australia competition regulator] commenced federal court proceeding against co.
Korea
-(KR) Kospi opens -1.4% at 6,760.
-(KR) South Korea Aug Exports 1-20 Days Y/Y: 56.0% v 52.3% prior; Imports Y/Y: 19.0% v 20.0% prior; Exports to the US +59.4%; Exports to China ‘more than doubled’ y/y; Chip exports ‘nearly tripled’ y/y (v +180.6% m/m).
-(KR) South Korea July PPI Y/Y: 7.7% v 8.5% prior.
-(KR) Follow up: Japan, US, South Korea held phone call on North Korea missile launch.
-(KR) Bank of Korea (BOK) Senior Deputy Governor Kwon: Growth improving more than expected; Inflation exceeding target, financial stability risks also remain; USD/KRW exchange rate to ‘fundamentally head downwards’; does not want to be characterized as ‘hawk or dove’ – Speech.
-(KR) South Korea Finance Min: To monitor domestic Treasury bond market conditions; to closely monitor the impact of rising long-term interest rates.
-(KR) Deposit insurance fee increase faces pushback from financial companies in South Korea – Korea Times [update].
-(KR) Korea Exchange activates sidecar on Kosdaq following Kosdaq 150 FUTs falling by -6%, programme trading halted for five-minutes.
-(KR) 005930.KR [Confirms] Plans as much as $72B in shareholder returns; To hold Board meeting on Friday – Nikkei.
-(KR) SKHY [Confirms] Planning to build memory chip plant in Miyagi, Japan [timing of the plant’s operations is not certain]- Hankyoreh.
Other Asia
-(TW) Taiwan July Export Orders Y/Y: 61.9% v 52.7%e [EU market close].
-(TW) Taiwan Q2 Current Account Balance: $58.5B v $62.5B prior [EU market close].
-(TW) Taiwan carriers to raise cargo fuel surcharges in Sept – Press [update].
-(IN) India Aug Preliminary Manufacturing PMI: 52.9 v 53.5 prior (62nd month of expansion).
-(IN) India Central Bank (RBI) said to be likely selling USD through state-run banks – traders.
-(ID) Indonesia Q2 Current Account Balance: -$12.5B v -$11.7Be.
North America
-(US) Treasury Sec Bessent: Confirms that buybacks could be more than $4B; Regarding the buyback program expansion, this is a thinly traded area of the market – CNBC interview [US market close].
-(US) Fed’s Musalem (non-voter, hawk): Strong growth investment is influencing the bond market; Want to see inflation down to 2% target within 18 months; I did recommend raising rates at July meeting – CNBC interview [US market close].
-(US) INITIAL JOBLESS CLAIMS: 206K V 210KE; CONTINUING CLAIMS: 1.799M V 1.79ME [US market close].
-(US) WEEKLY EIA NATURAL GAS INVENTORIES: +16 BCF VS. +16 BCF TO +20 BCF INDICATED RANGE [US market close].
-(US) JULY LEADING INDEX: 0.2% V 0.1%E [US market close].
-(US) AUG PHILADELPHIA FED BUSINESS OUTLOOK: 47.4 V 24.8E [US market close].
-(US) TREASURY $8B 30-YEAR TIPS AUCTION DRAWS 2.973% V 2.473% PRIOR, BTC 2.82 V 2.75 PRIOR [US market close].
-(US) Fed’s Daly (non-voter, dove): Rising bonds yields do not give signal on policy; No evidence calling for a preemptive rate hike [US market close].
-(CA) State Dept: Sec of State Rubio and Canada Foreign Min Anand reaffirmed shared hemispheric priorities.
-(US) Flexport Global Logistics Update: Global shipping rates diverge from US tariff actions.
-(US) President Trump to participate in MAGA Inc. meeting at 1:30pm ET on Saturday 22nd August, 2026.
-(US) Flexport Global Logistics Update: Global shipping rates diverge from US tariff actions.
-(US) White House: Pres Trump signs memo to help boost US space launches.
-(US) SPCX CEO Elon Musk: Reported SpaceX deal to acquire Spectrum “not true” – post on X.
Europe
-(UR) Starlink: Ukraine seeking Starlink-equipped drones against ballistic missiles – FT.
-(CH) China and Switzerland agree to free trade agreement, effectively removing tariffs; 99.8% of Swiss exports to China will be exempt vs the previous ~50% [EU market close].
-(SE) Sweden Central Bank (Riksbank) left Repo Rate unchanged at 1.75%; as expected [EU market close].
-(SE) Sweden Central Bank Policy Statement reiterated stance that probability remained that the Key Rate to be raised in 2026. Risk of underlying inflation becoming too high in wake of supply disruptions in Middle East remains [EU market close].
-(EU) Euro Zone Jun Construction Output M/M: -1.3% v +0.2% prior; Y/Y: -0.7% v +0.7% prior [EU market close].
-(DE) Germany July PPI M/M: 1.1% v 0.6%e; Y/Y: 3.0% v 2.5%e [EU market close].
-(NL) Netherlands July Unemployment Rate: 4.0% v 3.8% prior [EU market close].
-(UK) Aug GfK Consumer Confidence: -14 v -17 prior (strongest level since August, 2024).
-(NL) Netherlands Aug Consumer Confidence: -34 v -35 prior.
-(NL) Netherlands July House Price Index M/M: 0.5% v 0.6% prior; Y/Y: 3.9% v 4.1% prior.
Middle East
-(IR) Treasury Sec Bessent: Will have a press conference on Monday to discuss actions on Iran; Unlikely to restart large scale combat ops against Iran – CNBC interview [US market close].
-(IR) Al Arabiya: Trump informed his team of the possibility of launching intensive attacks on Iran if economic pressure fails; Also Trump said to see chances of reaching an agreement with Iran have become slim; Trump administration briefed on reports of an Iranian plot to resume attacks on ships [EU market close].
-(IR) US issues new Iran related sanctions, and Cuba-related general license; Also authorizing transactions for sale of Lukoil [US market close].
-(IR) President Trump: Iran has some missiles, drones but low capacity to build.
-(IR) Strait of Hormuz ship crossings slow from previous day, hovering at single-digits (vs. 9 prior); 7 commodity ships sailed along the Strait of Hormuz on Thursday; cites data from Kpler – Data.
Levels as of 01:20 ET
Nikkei 225 -0.6%; ASX 200 +-0.3%; Hang Seng +0.8%; Shanghai Composite -0.1%; Kospi +1.3%.
Equity S&P500 Futures +0.1%; Nasdaq100 +0.2%; DAX flat; FTSE100 flat.
EUR 1.1701-1.1676; JPY 159.14-158.87; AUD 0.7145-0.7108; NZD 0.5974-0.5939.
Gold +0.3% at $4,533/oz; BTC +8.4% at $75,292; WTI Crude Oil -0.6% at $86.32/bbl; Copper +0.9% at $6.5408/lbs.
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