Asia markets to fall as investors look ahead to China inflation data

Indonesia’s gross domestic product for the second quarter expanded 5.17% year-on-year, higher than analyst forecasts of a 4.93% growth, according to Refinitiv data.

On a quarterly basis, the Southeast Asian nation’s GDP grew 3.86%.

—Lee Ying Shan

Thailand’s headline CPI inflation grew 0.38% compared to a year ago, lower than Reuters’ analyst expectations of a 0.64% rise, the country’s government data showed.

The reading compared with the 0.23% year-on-year increase in June, is the third straight month that inflation remained below the country’s central bank target range of 1% to 3%.

—Lee Ying Shan

The Bank of Japan said it still has a “significantly long way to go” before revising its stance on its negative interest rate policy, adding that its yield curve control framework still needs to be maintained.

During its last meeting in July, the BOJ maintained its benchmark interest rate at -0.1%, but pledged to conduct YCC with “greater flexibility, regarding the upper and lower bounds of the range as references, not as rigid limits.”

In its summary of opinions for its July 28 meeting, the BOJ noted “strictly capping 10-year Japanese government bond (JGB) yields at the 0.5% level could affect the functioning of bond markets and the volatility in other financial markets.”

As such, the central bank added it needs to continue with monetary easing so as to achieve its inflation target of 2%, elaborating that “it is necessary for the Bank to keep supporting the momentum for wage hikes through continuation of monetary easing.”

— Lim Hui Jie

Morgan Stanley has identified three Asia Pacific stocks as “high conviction” and actionable trade ideas.

According to the Wall Street bank, the trade ideas are effective for 13 weeks from July 30, when they were first shared in a note to clients.

The bank said the three stock ideas highlight “actionable, high-conviction calls” made by its equity research team in the preceding week.

CNBC Pro subscribers can read more here.

— Ganesh Rao

Analysts at JPMorgan named five global stocks in a sector they described as being in “pole position,” following the Federal Reserve’s latest rate hike.

They expect the stocks to outperform in the next six to 12 months, including them on a list of top European picks.

CNBC Pro subscribers can read more here.

— Lucy Handley

Morgan Stanley has downgraded MSCI China while upgrading their view on India.

The analysts expect the Chinese stock market volatility to remain relatively high due to swings in investor hopes and disappointments about government policy.

But they’re still recommending a few consumer and industrial names in China.

CNBC Pro subscribers can read more here.

— Evelyn Cheng

Though the economic data of late suggests otherwise, market pricing still indicates the U.S. is heading for recession, according to a New York Federal Reserve gauge.

The central bank compares the difference in yields between 3-month Treasurys and the 10-year note. When that curve inverts, it has been a tell-late recession sign, according to data going back to 1969.

An update Friday morning taking the yield spread at the end of July puts the recession probability in the next 12 months at 66%. The inversion at the end of the month was near 1.5 percentage points.

While the recession probability is down from the peak of 70.8% in May, it still is a strong market indicator that a contraction is coming.

—Jeff Cox

Equity markets have been boosted by a better-than-expected earnings season and hopes for a soft landing, says Bank of America. The firm added that Chinese equities notably outperformed.

Nonetheless, the firm still prefers bonds over equities.

“Despite the declines in inflation and troughing of leading indicators, the regime model maintains its medium-term horizon bearish tone – preferring bonds to equities. Since last month the model moves overweight credit by reducing the US high yield underweight (and increasing equity shorts) and is underweight across all 3 commodity sub-indices,” analyst Alex Saunders said in a Friday note.

— Hakyung Kim

Nonfarm payrolls increased by 187,000 in July, coming in lower than the Dow Jones estimate for 200,000. The unemployment rate fell to 3.5%, against a consensus estimate that the jobless level would remain steady at 3.6%.

Average hourly earnings rose 0.4% in July.

— Hakyung Kim

The U.S. economy added 187,000 jobs in July, up from 185,000 in June. That market the smallest increase in nonfarm payrolls since December 2020.

The unemployment rate ticked lower to 3.5% from 3.6% in June and showed the second consecutive month decline and lowest level since April, when unemployment hovered at 3.4%.

The labor force participation rate for prime-age workers fell to 83.4% in July after hitting the highest level since May 2002 in June.

— Gina Francolla, Samantha Subin