Asian equities traded mostly higher amid a pick-up in sentiment despite ongoing geopolitical concerns

JPY subsequently softened against its major counterparts with USD/JPY approaching 110.00

Looking ahead, highlights include regional and national German CPI, US ADP, PCE, DoEs and Fed’s Powell

ASIA

Asia equities traded mostly positive as the region followed suit from the improvement in sentiment seen in US, where markets ignored the geopolitical concerns and bought the dip. This saw a rebound in Asia stocks with Nikkei 225 (+0.6%) underpinned as the USD/JPY-risk relationship took full effect and with better than expected Retail Sales adding to the optimism. ASX 200 (+0.1%) lagged and was negative for most of the day as continued weakness in financials and hefty losses in telecoms dragged, with Telstra the worst performer as it traded ex-dividend and after the NBN rejected Co.’s monetisation plan. Elsewhere, Shanghai Comp. (Unch) and Hang Seng (+0.7%) benefited from the increased risk appetite and after a firmer liquidity operation by the PBoC, although gains in the mainland were later pared amid weakness in Chinese commodity prices. Finally, 10yr JGBs were lower amid flows into riskier assets, while a lukewarm BoJ Rinban announcement also failed to spur demand.

PBOC injected CNY 80bln via 7-day reverse repos & CNY 50bln via 14-day reverse repos. (Newswires)

PBoC CNY mid-point at 6.6102 (Prev. 6.6293).

Moody's raised China 2017 growth forecasts to 6.8% from 6.6% and raised 2018 forecast to 6.4% from 6.3%. (Newswires)

EUROPE/UK

UK BRC Shop Price Index (Aug) Y/Y -0.3% (Prev. -0.4%). (Newswires)

FX

JPY remained weak amid the improvement in risk appetite which saw USD/JPY approach closer towards the 110.00 handle. Antipodeans were also active with AUD supported following better than expected Building Approvals and Construction Work data, while NZD was hampered as AUD/NZD broke above 1.1000 after comments from RBNZ Governor Wheeler who reiterated a need for a weaker currency to raise tradable inflation and support balanced growth.

RBNZ Governor Wheeler stated that RBNZ has more room to change monetary policy than others, while he reiterated that lower NZD is required to raise tradable inflation and support balanced growth. (Newswires)

Australian Construction Work Done (Q2) 9.3% vs. Exp. 1.0% (Prev. -0.7%). (Newswires)

Australian Building Approvals (Jul) M/M -1.7% vs. Exp. -5.0% (Prev. 10.9%)

Australian Building Approvals (Jul) Y/Y -13.9% vs. Exp. -16.6% (Prev. -2.3%)

COMMODITIES

Oil ended Tuesday lower but well-off its worst levels, with the focus falling on disruption from Hurricane Harvey. Reuters estimated that the total refinery shut in is circa 3.0mln bpd while the BSEE pointed to around 18% of current oil production in Gulf of Mexico being shut-in, which equates to 319,523 barrels of oil per day. As a result, Wood Mackenzie estimated that Harvey will lower the Gulf of Mexico’s oil production by 100,000 bpd in August (in terms of a monthly average).

US API weekly crude stocks (21 Aug, w/e) -5780K (Prev. -3595K). (Newswires)

US largest Motiva Port Arthur refinery began a shut down due to flooding from Harvey, although there were later comments from Motiva that the refinery remains stable at a reduced capacity. (Newswires)

Iranian oil minister Zanganeh noted that the country has reached its pre-sanctions production levels and that in the month ending 22nd August Iranian production topped 3.8mln bpd, while exports topped 2.6mln bpd. (Newswires)

CME raised September RBOB gasoline margins to USD 3200 from USD 2800 per contract. (Newswires)

GEOPOLITICAL

North Korean Leader Kim stated that its missile drill is the first step of its Pacific military operation and prelude to containing Guam, while he added that it is necessary to conduct further ballistic missile drills targeting the Pacific. (KCNA)

UN Security Council said that North Korea’s missile launch was an outrageous tspaneat against Japan and demanded North Korea to not fire anymore missiles. UN Security Council also stated it is of vital importance North Korea take immediate and concrete steps to reduce tensions. (Newswires)

US

US Treasuries unwound the bulk of their gains tspanoughout the US session, although an uptick was seen in the wake of a stellar 7-year auction, the second such result coming from supply in the belly of the US curve over the last two sessions. US Sep’17 10y T-note futures settled at 127.06, up 6 ticks.

US President Trump's tax speech today is being drafted by Stephen Miller and not Gary Cohn, according to Twitter reports citing Politico. (Twitter)