Stock Market Update

U.S. equity futures remain modestly higher as investors weigh a Bank of Japan rate hike and a softer European session.

Equity indices in the Asia-Pacific region ended the week on a mostly higher note with South Korea's Kospi (+2.7%) returning to little changed for the week. The U.S. will reportedly delay the implementation of tariffs on excess manufacturing capacity until after the visit of China's President Xi. China is targeting CNY3.5 trillion in pharmaceutical revenue by 2030. The Bank of Japan raised its policy rate by 25 basis points to 1.25%, as expected, though two policymakers voted against a change, inviting some pressure on the yen. Separately, Reserve Bank of Australia Governor Bullock said that the rise in global bond yields has not been disorderly, but he conceded that some upside risks to inflation are materializing.

• In economic data:
  • China's August FDI was -5.3% YTD (last -6.2%).
  • Japan's August National CPI was up 0.1% m/m (last 0.5%) and 1.9% yr/yr (last 1.9%).
  • Japan's August National Core CPI was up 1.7% yr/yr (expected 1.8%; last 1.8%).
  • South Korea's August PPI was up 0.2% m/m (last -0.4%) and 7.9% yr/yr (last 7.7%).
  • New Zealand's August FPI was up 0.3% m/m (last 0.1%).
  • New Zealand's August trade deficit narrowed to NZD1.35 bln (expected deficit of NZD1.775 bln; last deficit of NZD2.118 bln).

---Equity Markets---

• Japan's Nikkei: +1.4%
• Hong Kong's Hang Seng: +0.6%
• China's Shanghai Composite: +0.9%
• India's Sensex: UNCH
• South Korea's Kospi: +2.7%
• Australia's ASX All Ordinaries: +0.1%

Major European indices are on course for a lower finish to the week. Iran reportedly struck another tanker operating in the Strait of Hormuz, but oil has retreated, nonetheless. French Prime Minister Lecornu said that he is looking for EUR54 bln worth of savings in the budget for 2027, which should keep the deficit below 5.5% of GDP. British Chancellor Healey is lobbying EU officials to include the U.K. in its "Made in Europe" policy. A couple ECB officials spoke about the importance of avoiding second-round effects of inflation while ECB President Lagarde said that rate decisions will be made on a meeting-by-meeting basis.

• In economic data:
  • The eurozone's July current account surplus was EUR27.6 bln (expected surplus of EUR30.7 bln; last surplus of EUR35.1 bln).
  • The eurozone's July construction output was unchanged m/m (last -1.53%).
  • U.K. August retail sales were up 0.5% m/m (expected -0.2%; last -0.5%) and 2.4% yr/yr (expected 1.9%; last 1.2%).
  • U.K. August core retail sales were up 0.6% m/m (expected -0.2%; last -0.9%) and 2.7% yr/yr (expected 1.9%; last 1.8%).
  • Germany's August PPI was up 1.1% m/m (expected 0.6%; last 1.1%) and 4.6% yr/yr (expected 4.1%; last 3.0%).

---Equity Markets---

• STOXX Europe 600: -0.9%
• Germany's DAX: -1.2%
• U.K.'s FTSE 100: -1.1%
• France's CAC 40: -1.2%
• Italy's FTSE MIB: -1.4%
• Spain's IBEX 35: -0.7%