Aurelia Butler

TOKYO (Reuters) – Japanese automakers are getting much-needed cover from an old standby, as the weaker yen helps prop up profits amid declining sales in China and the increasingly tough shift to electric vehicles.Toyota, Honda and Nissan (OTC:NSANY) recently reported earnings that topped analyst estimates by 6% to 21% in the three months through June, and all cited the currency as a factor.”If the yen stays low, they clearly benefit but it doesn’t offset any other concerns,” said Satoru Aoyama, senior director at Fitch Ratings Japan.”They are struggling in the Chinese market,” he said. “They just don’t have an immediate solution” for their problems there, he added.Nissan late last month upgraded its full-year operating profit forecast, raising it by 30 billion yen ($208 million) to 550 billion yen. About 20 billion yen of that came from the currency, CFO Stephen Ma told a briefing.A weak yen has traditionally lifted profits for Japan’s big exporters, although it is no longer as large a boon for automakers that have increased their overseas manufacturing in recent years.Automakers’ shares are quick to react to swings in the yen, although the companies themselves tend to stick to conservative forecasts for the currency.For instance, Toyota has stuck to its forecast for an average exchange rate of 125 to the dollar this business year, a level not seen since April 2022, about a month after the U.S. Federal Reserve started raising interest rates. The yen was at 144 on Thursday.At smaller Subaru (OTC:FUJHY), a move of one yen against the dollar has a 20 billion yen impact on operating profit, CFO Katsuyuki Mizuma said earlier this month.On Wednesday, a Honda official said its April-June operating profit came in tens of billions of yen higher than expected, with the weak yen accounting for about half of that.”The yen wasn’t only weak against the dollar, but also against other currencies, including in Asia and Europe, so that comes through as a profit,” the official said.CHINA STRUGGLEThe yen’s cushion couldn’t come at a better time for Japanese automakers, which are struggling in China. The world’s largest auto market is increasingly being dominated by home-grown players. Nissan’s China sales to retail customers slumped 46% during the quarter and those of Honda were down 5%. Sales of Toyota, including of its Lexus luxury brand, rose over the period. For the first half of the calendar year, they declined almost 3%.Japanese automakers have also been slow to pivot to the growing global market for electric vehicles with competitive offerings.It is unclear how long the weak yen will last. Japan’s central bank recently tweaked its cap on bond yields, sparking expectations it could eventually exit the ultra-loose policy that has weighed on the currency.Influential former finance ministry official Eisuke Sakakibara told Reuters the yen could strengthen to 130 by the end of the year. Subaru has kept its forecast at 128 yen, CFO Mizuma said, citing the difficulty in predicting the currency.”We’re really closely watching exchange rates,” he said.($1 = 144.2400 yen) More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Asian markets will get key economic signals this week that could determine monetary policy in the continent’s two biggest economies – retail sales and industrial production and house prices from China, and Japanese GDP and inflation.Markets also will watch for interest rate decisions from New Zealand and the Philippines, inflation figures from India and major corporate earnings reports from China, including Tencent, Lenovo CNOOC (NYSE:CEO) and JD (NASDAQ:JD).com. The biggest fireworks on Monday’s economic data calendar could come from India. Annual consumer price inflation is expected to show a sharp rebound in July to 6.40% from 4.8%, and a slowdown in wholesale price deflation to -2.4% from -4.1%.The wider market mood will likely be one of caution after last week – the Nasdaq posted its first back-to-back weekly decline of the year, and the MSCI Asia ex-Japan equity index lost 2% on its way to a one-month low. Caution may morph into outright gloom on Monday, however, after China’s biggest privately-owned developer Country Garden said it will suspend trading of its 11 onshore bonds.The firm’s shares are at a record low, it didn’t pay two dollar bond coupons due on Aug. 6 totalling $22.5 million, it has liabilities of around $200 billion and last week warned it could report a loss of up to $7.6 billion for the first half.Investors are wondering how long Beijing will resist pressure to inject any kind of stimulus into an economy that is now officially in deflation with the weakest credit impulse since 2009. Another batch of sub-par data this week could force authorities’ hand. Investors and the Bank of Japan, meanwhile, will be paying close attention to Japanese inflation data later in the week. Economists polled by Reuters expect the annual rate of core CPI inflation to slow to 3.1% in July from 3.3% in June.A lower print could tempt the market to price in a more gradual change to the BOJ’s ‘yield curve control’ policy, stickier inflation could have the opposite effect. Either way, the yen will be under scrutiny – it slumped to a 15-year low against the euro lat week and is flirting with levels against the dollar that last year prompted massive yen-buying intervention from Japanese authorities.Asian stocks have badly underperformed this year, largely due to worries over China which is battling weak growth, deflation, and capital outflows. Chinese blue chip stocks are flat this year and Hong Kong’s Hang Seng index is down 4%.The MSCI Asia ex-Japan equity index index has now fallen two weeks in a row for the first time since April, and is up only twice in the last eight weeks.Here are key developments that could provide more direction to markets on Monday:- India consumer inflation (July)- India wholesale inflation (July)- Germany wholesale inflation (July) (By Jamie McGeever; editing by Diane Craft) More

Good morning. An FT analysis has revealed that inflated shipping costs are enabling Russian companies to earn far more from crude oil sales to India than previously recognised. Russia has, until recently, appeared to comply on this route with western measures designed to curb its revenues which were introduced after its full-scale invasion of Ukraine last year. Its oil producers have been selling crude to India for below the $60-per-barrel price cap.But when freight costs are included, they and the traders with whom they work have charged much higher sums. The FT’s analysis of ships running directly from Russia’s Baltic ports to India suggests that this overcharging, combined with fees earned from shipping the oil on Russia-linked vessels, may have been worth $1.2bn in the three months to July.Benjamin Hilgenstock, an academic at the Kyiv School of Economics, which has been studying evasion of the price cap, said: “Inflated shipping costs are a major concern as they effectively create a leak in the price cap regime through which someone, somewhere can siphon off billions of dollars.” Read the full story.War in Ukraine: Russia’s invading forces shelled two villages in Ukraine’s Kherson region on Sunday, killing at least seven people including a newborn baby. Here’s what else I’m keeping tabs on today:Economic data: Inflation data is due in India. Economists predict the consumer price index accelerated to 6.4 per cent last month, breaching the central bank’s 2-6 per cent tolerance band for the first time in five months. (Reuters)Hong Kong: An appeals court is expected to rule on a challenge filed by seven prominent pro-democracy activists against their conviction and sentencing on charges of organising and taking part in an unauthorised protest nearly four years ago. Pakistan: Financial markets will be closed for independence day celebrations.Five more top stories1. Pakistan has appointed Anwar ul-Haq Kakar to serve as caretaker prime minister until elections are held in the coming months. The caretaker prime minister would normally hold office until elections are held, 90 days after a parliament’s tenure ends. But Kakar is set for a longer than usual interim rule amid growing expectations that the election will be delayed until next year. Here’s more on Pakistan’s political uncertainty. 2. Deloitte has resigned as the auditor of Indian tycoon Gautam Adani’s logistics unit, in a fresh blow for the billionaire’s business empire. The auditor cited concerns it could not thoroughly scrutinise transactions between companies in the group and the logistics unit, Adani Ports, one of India’s biggest commercial ports operators. The Indian conglomerate says Deloitte’s grounds for resignation are “not convincing”. Read the full story.3. Saudi Arabia has appointed its first ever ambassador to the Palestinians, amid a flurry of diplomatic activity as the US attempts to broker an agreement to normalise relations between Riyadh and Israel. Here’s more on the potential deal that would reshape the Middle East.4. Korean conglomerate Posco is leading a push to move production of battery materials from mainland China to South Korea, as companies around the world adapt to qualify for US subsidies — from US president Joe Biden’s Inflation Reduction Act — reshaping the global EV supply chain. Posco’s battery materials chief told the FT that the company is building a supply chain for Ira-compliant materials in which “nothing will be produced or sourced in China.” 5. Republican-controlled areas of the US are dominating a rush of clean technology project investment as President Joe Biden goads opponents for “claiming credit” for the jobs boom despite their efforts to block his landmark climate legislation last year. Read the FT analysis of the surge in green investment, a focus of Biden’s 2024 re-election bid. News in-depth

© Lam Yik/Bloomberg

With more than 12,000 lawyers and hundreds of law firms including dozens of foreign practices, Hong Kong has long enjoyed a reputation as a global legal hub. But legal practitioners, including corporate lawyers, are concerned the broadening scope of a sweeping national security law could jeopardise the independence of the city’s legal system, as Beijing tightens its grip. We’re also reading . . . China’s psycho-political funk: Worries over China’s political direction are crimping people’s desire to spend, writes James Kynge. No more cheap streaming: Hollywood’s largest studios are turning the screws on customers with prices rises that rival expensive cable TV bundles. More cricket, less Bollywood: As the Indian Premier League adapts to the digital age, Hindi films lose fans thanks to stale scripts and ageing stars.Graphic of the dayAt least 93 people have died in wildfires on the Hawaiian island of Maui, as authorities battle to control what has become the US’s deadliest wildfire outbreak in more than a century. The fires began on Tuesday, engulfing the historical town of Lahaina as it was fanned by strong winds from Hurricane Dora, which passed hundreds of miles south of Hawaii. Take a break from the newsRussia investigator Christo Grozev of Bellingcat joined Edward Luce to discuss exposing assassinations and Vladimir Putin’s plots, and why warlord Yevgeny Prigozhin “will either be dead or there will be a second coup.” Read the latest Lunch with the FT.

© James Ferguson More

Hello and welcome to the working week. Wednesday will be the standout day in this week’s UK calendar when the Office for National Statistics is set to release a clutch of data, including inflation readings for July. Data for June were more encouraging than expected, with headline inflation dropping to 7.9 per cent. Another dip is expected as the Bank of England’s tight monetary policy seems to finally be working. Data from China on national retail sales and industrial output is out on Tuesday, which will be closely watched given that the country’s economy has fallen into deflation after consumer prices declined in July. In Spain, MPs will return to parliament on Thursday for the first time after the country was thrown into political limbo after an inconclusive election in July. The political wrangling between parties to form a coalition has caused Spanish business to worry that the country will grind to a halt at a particularly difficult economic time. The political mess could also mean a resurgence for the Catalan separatist movement, which is being courted by acting prime minister Pedro Sánchez as a way to maintain his grip on power. Several other countries are reaching important points in their electoral processes, particularly in Latin America. In Ecuador, political violence threatens next Sunday’s general election after Fernando Villavicencio, one of the candidates running for president was shot dead at a campaign event. Villavicencio, as with most other candidates, was running on a platform of cracking down on crime — the country is grappling with an explosion of violence fuelled by drug trafficking. On the corporate side the US retail sector will be in focus. Home Depot releases second-quarter earnings on Tuesday, while Walmart is up on Thursday. Foxconn, the company responsible for manufacturing Apple’s iPhone in China, reports on Monday. One more thing . . . I always look forward to covering this newsletter for two reasons. The first is that after trawling all the upcoming events and data drops I feel incredibly prepared for what’s coming, the second reason is all the weird and wonderful events you discover. Did you know there’s a European tree of the year? Currently the title is held by the Oak Fabrykant in Poland, which you can see below.

The Oak Fabrykant in Łódź, Poland © Jakub Kubka

This Tuesday the Woodland Trust will release its shortlist for the UK’s tree of the year. A public vote will decide the winner, which will go on to compete for the crown of Europe’s best tree of 2023. Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week. MondayPoland: consumer price data for July India: consumer price data for July Results: Altus Power Q2, Contact Energy FY, Foxconn (also know as Hon Hai Technology Group) Q2, Getty Images Q2, JBS Q2, Niu Technologies Q2, Plus500 H1, Roivant Q1, Rumble Q2TuesdayColombia: second-quarter growth figures Canada: CPI data for July China: data including national retail sales, industrial output and foreign direct investmentJapan: preliminary GDP figures for the second quarter of 2023Results: 888 Holdings H1 interim results, Alcon Q2, Cardinal Health FY, Carlsberg H1, China Airlines Q2, Home Depot Q2, Just Group H1, Legal & General H1, Mercury Systems Q4, National Australia Bank Q3 trading statement, Pandora H1, SQM Q2WednesdayEU: Flash GDP estimatesUK: The Office for National Statistics releases several important pieces of data on how the economy performed in July, including inflation data, house price index and monthly employment figures Results: Admiral Group FY, Aviva H1, Avnet Q4, Balfour Beatty, Carlsberg H1, Cisco Q4, Essentra H1, JD.com Q2, Target Q2, Tencent Q2, Synopsys Q3ThursdayNorway: the central bank decides on whether to increase its interest rate from 3.75 per cent. When the bank set the current rate in June it warned that another increase would be “most likely” in AugustUK: The Office for National Statistics releases its profitability of UK companies for the first quarter of 2023Results: ASX FY, Bilibili Q2, Dole Q2, Embracer group Q1, Farfetch Q2, Kahoot! Q2, Lenovo Q1, Origin Energy FY, Rank group FY, Telstra FY, Walmart Q2 FridayMalaysia: GDP figures for the second quarter of the yearMoody’s is due to release its updated ratings for Switzerland, Moldova; Fitch is due to update its rating for the Netherlands, and S&P for EstoniaResults: Deere & Co Q3, Estée Lauder Q4, Kingspan H1, Madison Square Garden Entertainment Q4, ZTE H1 interim results World eventsFinally, here is a rundown of other events and milestones this week. MondayThe FT releases its business book of the year long listUK: fifth anniversary of Westminster bridge attack Pakistan: independence day celebrations, financial markets are closedJames Bullard steps down as head of the Federal Reserve Bank of St Louis. Bullard is a hawkish member of the Fed’s rate-setting committee and has frequently advocated for rate raises TuesdayAssumption day, financial markets are closed in several countries including Chile, Greece, Italy and LebanonVJ day, the date that Japan surrendered to allied forces, ending the war in the Pacific and bringing the second world war to an endUK: the Adam Smith Institute’s cost of government day, which is the day taxpayers stop paying for both government expenditure and national borrowing. This is the latest date the day has fallen in the year on recordUK: Woodland Trust releases its shortlist for tree of the year Paraguay: the inauguration of new president Santiago Peña of the Colorado party. Peña’s victory is a rare triumph for a ruling party, opposition parties have taken power in almost all recent elections in the region 75th anniversary of the partition that created the states of Pakistan and India WednesdayThailand: The country’s constitutional court is expected to rule on Wednesday on the legality of a move to block Pita Limjaroenrat, the leader of the progressive Move Forward party that prevailed in May’s election, from being renominated for prime minister, after he fell short of the support needed in parliament on his first attempt last month. Meanwhile, Pita’s former coalition partner Pheu Thai, Thailand’s traditional opposition force, is assembling a new governing coalition without Move Forward, and may look to nominate its own candidate for prime minister.The second of the Palio di Siena horse races is held in Siena, Italy. The race usually lasts for less than 90 seconds, but is famously brutal with horses frequently injured. ThursdaySpain: parliament reconvenes with no single party or coalition of parties holding a governing majority after inconclusive elections in July. Indonesia: the country celebrates its independence day, financial markets are closed. UK: A-level results are published FridayNetherlands: The Lowlands festival starts in the province of Flevoland. Headline acts include Billie Eilish and Florence and the Machine. The festival will run until August 20US: Joe Biden hosts a trilateral leaders summit with Japanese prime minister and South Korean president at Camp David. Top of the agenda will be the threat posed by North Korea in the regionSaturdayAfghanistan: 104th anniversary of the country gaining independence from BritainG20 joint meeting of health and finance ministers takes place in India. Third anniversary of Apple becoming the US’s first $2tn company. SundayEcuador: voters go to the polls to elect a new parliament and president following a snap election called by the country’s current leader Guillermo Lasso after he faced impeachment chargesGuatemala: presidential elections run-off between conservative Sandra Torres and progressive Bernardo Arévalo, who was the surprise runner-up in June’s first round of voting. More

How far will UK inflation fall?The stakes are high for the UK’s July inflation print, which will be published on Wednesday, after the Bank of England slowed its tightening campaign last week by lifting interest rates by 0.25 percentage points, a smaller increase than the half-point rise the previous month. Economists polled by Reuters expect the annual inflation rate fell to 6.7 per cent in July, slightly lower than the BoE’s 6.8 per cent forecast, and a significant drop from 7.9 per cent in June. Beyond the headline rate, investors will be closely watching core inflation, which strips out volatile food and energy prices and is viewed as a better gauge of underlying price pressures, and has been slower to retreat. Edging down only slightly last month to 6.9 per cent, economists polled by Reuters expect a rate of 6.8 per cent in July.The central bank was given some breathing space last month when June’s ion came in below forecasts, following four consecutive months of hotter than expected prints. July’s inflation release brought good news for the US Federal Reserve this week with a headline rate of 3.2 per cent, slightly lower than analysts had expected. But stronger than expected UK GDP growth in the second quarter published on Friday has left some doubt among analysts about the extent to which tighter policy is feeding through. “I believe that wage growth data will surprise the Bank of England to the upside next week,” said Tomasz Wieladek, chief European economist at T Rowe Price.Attention will be paid specifically to UK services inflation next week, which the BoE monitors as an indicator of medium-term inflationary pressures and has been consistently sticky, easing only to 7.2 per cent in June from a peak of 7.4 per cent in May. Mary McDougallWhat will the Fed minutes say about the outlook for rate rises?Investors will be watching the release on Wednesday of the Federal Reserve’s minutes from its July meeting for insight into the deliberations officials have had about whether the central bank should raise interest rates again this year. After pausing in June the Fed raised its crucial policy rate to a range of 5.25 per cent to 5.5 per cent at its July meeting, when it maintained that inflationary pressure remained “elevated” and cited the hot jobs market and consistent economic growth. While the likelihood of a recession in the US in the near term remains low, inflation has since cooled further. Headline inflation rose less than expected in July, with the core inflation category, which strips out the volatile food and energy components of the calculation, increasing at 0.2 per cent, the same pace as in June. The annual rate was 4.7 per cent, down from 4.8 per cent in June, and the lowest level since October 2021.This points to the Fed having some leeway to hold off from a further rise at its September meeting. Kate DuguidWill China’s latest economic data lighten the gloom?Deflation, declining trade and surging debt — there has not been much in the way of good economic news out of China since the abrupt abandonment of strict Covid-19 controls late last year. Investors who only a few months ago tipped China to rebound from the pandemic in explosive fashion now face growing evidence of slowing momentum across the world’s second-biggest economy. Industrial output and consumer spending figures due to be published on Tuesday by the National Bureau of Statistics will provide another glimpse of the state of China’s recovery.After retail sales increased by 3.1 per cent in June, economists polled by Reuters are forecasting a year-on-year rise of 4.7 per cent in July, though that would still mark a sharp slowdown from 12.7 per cent growth in May. Annual industrial output for July is expected to have increased 4.4 per cent, in line with growth the previous month. Analysts at investment bank China International Capital Corporation expect both measures of economic activity to improve from June, even as the pressure of a “financial down-cycle” weighs on activity. Fresh high-frequency data shows a pick-up in hotel occupancy rates, box office revenue at cinemas and domestic flights, all of which should “enhance” sales of goods including clothing, cosmetics and jewellery, said CICC analysts Wenlang Zhang, Wenjing Huang and Yuchi Zheng.However, they added that retail sales growth of other goods may decelerate in July “due to a high base for comparison”, with sharp declines forecast for car sales and home appliances.Manufacturing activity also contracted in July, albeit at a slower rate than in June. A marginal improvement in demand may help industrial output rebound by 5.2 per cent, according to CICC. George Steer More

BEIJING (Reuters) -China’s State Council issued guidelines on Sunday that it said would further optimize the country’s foreign investment environment and attract more foreign investment.The State Council said in a document containing 24 guidelines that authorities should increase protection of the rights and interests of foreign investors, including strengthening enforcement of intellectual property rights.The document also announced guidelines to increase fiscal support and tax incentives for foreign-invested enterprises, such as temporarily exempting withholding income tax for foreign investors’ reinvestment of their profits into China. The State Council said it would explore a “convenient and secure management mechanism” for cross-border data flows. The proposal comes amid tensions between authorities and international enterprises, including global accounting firms, over data security. China has sought to court foreign capital as its economic recovery from the COVID pandemic slows in the face of weak export demand from key trade partners and ongoing tumult in the country’s property market.However, Beijing has so far struggled to attract foreign enterprises and investors, which are wary of political risk in an environment that increasingly prioritises national security measures, and concerned about the impact of deteriorating relations between China and many Western countries on their operations. More