Asian equity markets traded in positive territory (NIKKEI +0.1%, S&P/ASX +0.3%, SHANGHAI COMPOSITE +0.2%) as risk sentiment was improved as tensions look to have eased slightly on the Korean peninsula, while markets also reacted favourably to comments from US President Trump who laid out the US’s strategy for Afghanistan. Despite earlier comments from US officials, Trump declined to comment on specific numbers of troops that will be deployed or on plans for further military actions, adding they will not say when we will attack, but we will attack. Trump did however call on both Pakistan and India to do more in the region. Meanwhile, US Defence Secretary Mattis said President Trump has provided strategic guidance for US-South Asia strategy after a rigorous interagency review, adding he has directed joint Chiefs of Staff to make preparations for the strategy to be carried out. In currency space, the US Dollar index held steady in Asian trade, while the Yen snapped a four-day winning streak amid the improving risk sentiment. Data wise, Australia’s weekly consumer confidence index declined to 109.2, its third fall in as many weeks. In other news, the PBoC set the yuan mid-point at 6.6597 against the Dollar, its strongest fixing in 11-months.
* Australia ANZ Roy Morgan Weekly Consumer Confidence Index (Aug 20) 109.2, previous 111.7
* US President Trump laid out the path forward on South Asia and Afghanistan. Trump said they concluded that security faced by the US in Afghanistan and the broader region are immense. Trump stated in Pakistan and Afghanistan, America’s interests are clear, we must stop the re-emergence of safe-havens that enable terrorists to threaten the US, adding we must stop nuclear weapons and from coming into the hands of terrorists. He also said the core pillar of the new strategy is a move from a time-based approach to one based on conditions. On specific numbers, Trump did not talk about plans for further military activities or numbers of troops, adding they will not say when we will attack, but we will attack. He mentioned it is up to the Afghan people to take ownership of their own future and the US will continue its support for the Afghan government, adding military power alone will not bring peace to Afghanistan, however, strategically applied force aims to create conditions for a political process to achieve lasting peace.
* The PBoC set the yuan mid-point at 6.6597 against the Dollar – Strongest setting since 22nd September 2016
• The PBoC injected 40 Bln yuan via 7-day reverse repos
• The PBoC injected 20 Bln yuan via 14-day reverse repos
* US Defence Secretary Mattis said President Trump has provided strategic guidance for US-South Asia strategy after a rigorous interagency review, adding he has directed joint Chiefs of Staff to make preparations for the strategy to be carried out. He said they will consult US allies, several of which have committed to increasing their troop numbers, and NATO.
Asian opening report
US stocks ended the session little changed. Energy shares lagged as oil prices turned negative with US crude futures settling down by $1.14 at $47.37 a barrel. Also playing their part was geopolitical tensions after the US and South Korea held a joint military exercise over the weekend – much to the annoyance of the North Korean government. In turn, perceived safe-haven assets benefitted with Treasuries, gold and the Japanese Yen all ahead. Another potential risk event, namely the US debt ceiling, is also coming into play and US officials made some remarks on the issue – US Treasury Secretary Mnuchin said they aim to work with congress to raise the debt limit, adding that they have a strong preference for a clean bill, while Senate majority leader McConnell stated there is zero chance that Congress would fail to raise the debt ceiling by late September.
Ahead of the Asian open, Kuwait’s Oil Minister said at the November meeting, OPEC will discuss extending or ending its production cuts, adding oil inventories over the past week declined more than expected, one week forecasts were 2 Mln barrels a day, down from 6.5 Mln. In later comments, he said an oil leak offshore has been detected and the source of the leak is being investigated, adding Iran and Saudi Arabia have informed Kuwait that they have not detected any oil spillage in their waters. Meanwhile, ahead of his address to the nation at 02:00 BST, a Senior US Official informed Fox News that President has signed off on sending an extra 4000 troops to Afghanistan.
Looking ahead, as mentioned US President Trump will deliver a speech to the nation at 02:00 BST, in which he is expected to lay out their strategy for Afghanistan. Data wise, we get Australia’s weekly consumer confidence index and Japanese supermarket sales.