Weekend News Round Up - Newsquawk Asia-Pac Market Open

US stocks and bonds moved off the Powell lows throughout the rest of Wall Street's choppy session, with stocks closing in the green while the Treasury curve flattened.
Powell largely towed a similar line to his July FOMC press conference - The Fed Chair warned that above-trend growth could warrant more Fed rate hikes, as could signs that the labour market is not cooling.
ECB President Lagarde said the ECB needs to set rates at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target.
BoJ Governor Ueda said underlying inflation is still below 2%, which is a reason to stick to the current monetary policy approach. He added that domestic demand is still on a healthy trend, although this needs to be confirmed by Q3 data
China's Finance Ministry said China will cut stamp duty on stock trading by half from August 28th, according to Reuters.
Looking ahead, highlights include Australian Retail Sales, Japanese Coincident Index and Leading Economic Index Final.

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US TRADE

US stocks and bonds moved off the Powell lows throughout the rest of Wall Street's choppy session, with stocks closing in the green while the Treasury curve flattened.
SPX +0.67% at 4,405, NDX +0.85% at 14,941, DJIA +0.73% at 34,346, RUT +0.40% at 1,853.
Click here for a detailed summary.

COMMODITIES

Tropical Storm Idalia is bringing heavy rains to portions of western Cuba and the Yucatan Peninsula. It is expected to become a hurricane over the eastern Gulf of Mexico, according to the NHC.
An oil leak has been found in a transmission pipeline linking the Kharg island to Iran's Genaveh port, according to Tasnim. The magnitude of the spill was not specified, according to Reuters.
Baker Hughes Rig Count: Oil -8 to 512, NatGas -2 to 115, total -10 to 632.

ASIA-PAC

NOTABLE HEADLINES

China's Finance Ministry said China will cut stamp duty on stock trading by half from August 28th, according to Reuters.
The Chinese Securities Regulator said China will slow the pace of IPOs and further regulate share reductions. The regulator added that exchanges will also lower margin requirements, according to Reuters.
China's Vice Commerce Minister hopes more businesses from China could come to India to do more business here on an equal basis, hopes Chinese companies will be treated on an equal basis in India without being discriminated against, according to Reuters.
PBoC unveiled guidance on relaxing residential housing loans, to adhere to the principle in China that houses are for living not for speculation. Banks should undertake policies for first-time homebuyers for those without a house in the household, according to Reuters.
Chinese companies pledge USD 1.4bln in share buybacks as the market sags, according to Nikkei Research.
The Chinese Securities Regulator met with foreign investors to alleviate concerns, according to Reuters sources.
China cabinet approves guidelines for the construction of affordable housing, according to state media.
China Evergrande (3333 HK) H1 2023 (CNY): Net -33bln (prev. -64.2bln YY). Revenue 128.2bln (prev. 89.3bln). Co. said its ability to continue will depend on a successful implementation of an offshore debt restructuring plan, and successful negotiations with the rest of the lenders on repayment extensions, according to Reuters.
Moody's downgraded Chinese property Co. Longfor to BAA3; placing rating on review for further downgrade.
India could introduce a floor price for basmati rice exports, according to Reuters sources; the floor price could be fixed at USD 1,200 per metric ton, according to Reuters.

DATA RECAP

Chinese Industrial Profits (Jul) YY -6.7% (Prev. -8.3%)
Chinese Industrial Profits YTD (Jul) -15.5% (Prev. -16.8%)

CENTRAL BANKS

FEDERAL RESERVE

Powell largely towed a similar line to his July FOMC press conference, but since then there has been a range of Fed views on whether the Fed has done enough. Fed's Harker towed the line of the Fed has "probably done enough" (Dovish), while Collins said the Fed "may be at or near that point" (Neutral), or Bowman's view (in early August) that additional hikes will "likely be needed" (Hawkish). Powell seems to have taken the Collins/Neutral approach, expressing that the Fed will proceed carefully when deciding to hike again or hold steady, stressing the Fed will decide the next rate moves based on data. One thing all Fed speakers, and Powell, appear to be in agreement that they intend to hold rates until they are confident inflation is moving sustainably down to 2%. There has been a lot of discussion on the neutral rate recently and whether expectations for that rate have shifted higher, Powell did not provide a concrete view on the matter, saying the Fed cannot be certain what the neutral rate level is. It is worth noting the June SEP's median longer run rate view remained at 2.5%, but the central tendency shifted higher to 2.5-2.8% from 2.4-2.6%, while the range increased marginally to 2.4-3.6% from 2.3-3.6%, and we are set to receive new projections at the September 20th meeting for a clearer view of the neutral rate among the whole FOMC. Within the speech, Powell was cognizant that monetary policy faces risks on both sides and stressed the economic uncertainty calls for agile monetary policymaking ahead. The Fed Chair warned that above-trend growth could warrant more Fed rate hikes, as could signs that the labour market is not cooling, however, he said that the Fed expect the labour market rebalancing to continue. Powell is also attentive to signs the economy is not cooling as expected, and he reiterated that lowering inflation will likely require softer labour markets, acknowledging there is evidence of tighter financial conditions contributing to slower growth in this cycle too. On wages, Powell said wage growth continues to slow, albeit gradually, but nominal wage growth must ultimately slow to a rate that is consistent with 2% inflation, noting real wage growth has been increasing as inflation falls. Powell did not want to commit to further rate moves, adding it is challenging to know when a sufficiently restrictive stance has been achieved and there are also uncertainties around the effects of policy lags, but stated the "wide range of estimates of these lags suggests that there may be a significant further drag in the pipeline". Meanwhile, he added that in the current cycle, the decline in job openings without an increase in unemployment is welcome, but historically unusual and appears to reflect a large excess demand for labour. Meanwhile, Powell stated that he sees evidence inflation is becoming more responsive to labour market tightness. He warned doing too little could allow inflation to become entrenched, and ultimately require more work to do on policy at a high cost to employment but also that doing too much could do unnecessary harm to the economy.
Fed's Goolsbee (2023 voter) said he still feels like there is a path to a soft landing, according to CNBC. He said nothing has happened in the last two months that makes him think the golden path is impossible. He said he does not like to speculate about upcoming Fed action (when asked if the Fed is done hiking). Goolsebee added the Fed debate is moving towards how long to keep rates up, rather than the overall level. He said Powell was 'properly sober' in Jackson Hole speech, and would be too premature to declare victory. Goolsbee so far doesn't see much economic drag from banking sector issues. He noted the rise in bond yields may not be an issue for the economy, and there is no obvious answer to full effect of policy lags, argues a bit for caution, and to keep eyes on inflation in the short run as cannot observe what lags are as you have to wait and see. He said it is interesting consumers have withstood Fed rate hikes so well. Goolsbee said the Fed Should not give up the inflation target. He said there has been an improvement in core inflation, but inflation remains too high and cannot declare victor, and you cannot change inflation target until you hit it, whist the Fed is willing to be patient in getting back inflation to 2% goal. Fed's Goolsbee (voter) said we have to keep getting good news on inflation, it is still higher than what we want. Goolsbee added that supply chain disruptions are part of the "confusing cloud", and there is no evidence of a wage-price spiral at this point. Goolsbee said they would need to meet a high bar to change the plan on QT, according to Reuters.
Fed's Harker (2023 voter) said data will dictate what FOMC does in September, according to Reuters.
Fed's Mester (2024 voter) said we are getting closer where we need to be with rates and need to see more evidence inflation is coming down, according to CNBC. She said the economy momentum has been stronger, and the Fed has made a lot of progress on inflation. She said there is still probably still have more work to do with rates, and she didn't have rate cuts pencilled in for next year in June SEPs, but will re-evaluate that in September. She said the main Fed debate is whether rates are restrictive enough, and recent numbers on inflation very welcome, but need some more progress. She said the Fed has to be patient with policy right now, and growth running stronger than expected not a concern, but has to take it into account, wants inflation back towards goal by the end of next year. She said there are concerns inflation gets entrenched, and we do not want that embedded in the economy. She said very likely below trend growth needed to lower inflation, and demand is slowing due to monetary policy. She said the labour market is stronger than she anticipated given Fed policy, and she is looking at data to determine next policy choice. Mester said under-tightening would be worse than overtightening and need to see moderation in the labour market. Mester said we might see some moderation in wage growth but we do not target wages, and see no evidence of a wage-price spiral, according to Reuters. Mester over the weekend said she wants to calibrate policy to achieve 2% inflation by the end of 2025 and not allow it to drift into 2026. She said she will want to re-evaluate her view from June's FOMC her view of rate cuts in H2 2024. "I do not want to be in a position of prematurely loosening policy," Mester said. She said the Fed's next and possibly last rate hike "doesn't necessarily have to be September, but I think this year," according to Reuters.
WSJ's Timiraos said, after Fed Chair Powell's speech on Friday, that markets were not expecting a September rate hike, and Powell did not try to change those expectations; he kept the door open to a Q4 rate hike highlighting hawkish elements paired with dovish ones.

ECB

ECB President Lagarde said the ECB needs to set rates at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target, according to Reuters. She added that if we face both higher investment needs and greater supply constraints, we are likely to see stronger price pressures. She said we need to be open to the possibility that some of these changes could be longer-lasting, and added that we are likely to experience more shocks emanating from the supply side itself. Lagardee said the ECB is to set rates as high as necessary for inflation. ECB President Lagarde said ECB decisions will be taken on a meeting-by-meeting approach, depending on the data. The central bank will be very attentive to wage developments. Lagarde said it is critical that inflation expectations remain anchored at 2%, according to Reuters. President Lagarde said she is "pretty confident" that by the end of 2023, inflation numbers will look different. Regarding the inflation target, she said changing the rules would be "deceptive" and counter to anchoring expectations. Lagarde commented that German growth is "not broken" and is demonstrating resilience. She added the proximity to the war in Ukraine is part of the reason for the differing economic paths of the US and Europe. She noted disinflation has to be "timely" and "sustainable"
ECB's Kazaks said there are risks on both sides of monetary policy. Regarding tightening too much or too little, he would still err on the side of raising rates, according to Reuters. Kazaks said a rate pause would not mean stopping, and he is in no rush to say they are done on rates, adding that core inflation is still elevated. He noted the picture of the European economy is quite mixed, and stopping too early on rates is probably a bigger problem than cutting. Kazaks noted that it is likely that neutral rates are higher than they used to be, and if inflation consistently undershoots the inflation target, then the ECB would need to cut rates. Kazaks noted future rate cuts would be slower than increases and EZ should return to the 2% target sooner than end-2025. Lazals said the labour market is reason for concern over inflation.
ECB's Holzmann said he cannot give the all clear on inflation and the core rate remains very high. He said data will ultimately decide if ECB hikes again, and he suspects ECB will have to raise rates somewhat higher, according to Reteurs.

BOE/BOJ

BoE's Broadbent said policy will react to evidence on spare capacity and indicators of domestic inflation as it comes through, and policy may well have to stay in restrictive territory for some time yet. Broadbent added that it is unlikely that inflation second-round effects will unwind as rapidly as they emerged, according to Reuters. He added central banks should consider access for non-banks.
BoJ Governor Ueda said underlying inflation is still below 2%, which is a reason to stick to the current monetary policy approach. He added that domestic demand is still on a healthy trend, although this needs to be confirmed by Q3 data, according to Reuters. He added that for Japan, the US' strength is offsetting some of China's weakness, and the weakness in China appears to be centered on the property market.

GEOPOLITICS

Iraninan pressTasnim said "Although Iran and the United States are still far from each other regarding the nuclear program, they seem to have reached an agreement on the entry of Iranian oil into the world market". In this regard, American officials have implicitly acknowledged that they have lifted some sanctions related to the sale of Iranian oil, and Tehran has announced an unprecedented increase in oil production in the past 5 years, via X.
Russia's Investigation Committee confirmed Wagner leader Prigozhin was among those who died in the plane crash, according to Reuters.
Russian SU-30 plane escorted a US drone Reaper over the Black Sea, according to Ria.
US Trade Secretary Tai reported raised concerns with India over its new order mandating licenses for the import of some tech products such as personal computers, laptops, and tablets, according to a statement cited by Reuters.
Three US marines have died and five have been seriously injured after a helicopter crashed during a military exercise in Australia, according to Sky News.
China will hold the third China-Africa peace and security forum between August 28th and September 2nd, according to the Chinese Defence Ministry cited by Reuters.

EU/UK