Morning wrap (15.08.2023)

Monday's session on Wall Street brought gains in US indices. The Nasdaq gained 1.05% and the S&P500 was up 0.57%. One of the main drivers was Nvidia shares, which gained more than 7% yesterday after being hailed as Morgan Stanley's top pick.

Asia-Pacific (APAC) markets traded in mixed sentiment today in the face of disappointing data out of China and the decision on further interest rate cuts by China's PBoC. Japan's Nikkei 225 is currently gaining nearly 0.49%, the Hang Seng index is subtracting more than 0.76% and Korea's KOSPI has lost 0.79%.

Futures based on the German DAX and the European benchmark Eurostoxx point to a higher opening in today's European cash session.

China's July industrial production was +3.7% y/y (4.5% expected) and retail sales +2.5% (4.8% expected). The PBoC set the MLF rate (medium-term lending rate; 1 year) at 2.5%, a large reduction from the previous 2.65%. The Reverse-Repo rate was cut to 1.8% from the earlier 1.9%. Chinese state-owned banks intervened to buy the yuan, which was losing following the rate cut decision. The USDCNH pair is currently gaining close to 0.3%.

The RBA Minutes presented show that the central bank sees more and more obstacles to the continuation of the rate hike cycle. As the bankers added, the current level of the benchmark rate appears credible to bring inflation into the 2%-3% range. Australia's Q2 payrolls data came in at +0.8% q/q (+1.0% was expected). However, the dovish data did not prevent the Australian dollar from strengthening against other G7 currencies. 

Japan's Q2 GDP reading came as a positive surprise to the market, coming in at +1.5% q/q versus +0.8% q/q expected. A surge in exports more than offset the weaker-than-expected performance of both business investment and private consumption. On an annualised basis, GDP grew by 6% in the second quarter, the strongest growth since the last quarter of 2020, a figure that exceeded economists' forecast of 2.9%. Net exports contributed 1.8 percentage points to the expansion, compared with the consensus estimate of 0.9 percentage points. 

The dollar index (USDIDX) remains close to the 103 zone, the GBP leads the major FX currencies and the EUR/USD pair is slightly above 1,092.

A decision on the Grayscale Bitcoin ETF spot could come as early as today (closer to the start of the Wall Street session).