Nikkei leads losses in Asia and falls over 2%; Hong Kong also selling off as Fitch downgrades U.S.

The Bank of Japan has pushed back on speculation its recent policy adjustment marked the start of a tightening cycle.

Deputy Governor Shinichi Ichida on Wednesday reiterated the central bank’s flexible threshold for tolerance on long-term bond yields is merely a necessary modification to sustain its ultra-easy monetary policy position.

“The Bank’s decision to conduct yield curve control with greater flexibility aims at patiently continuing with monetary easing while nimbly responding to both upside and downside risks under extremely high uncertainties for economic activity and prices at home and abroad,” Ichida said in prepared comments for a public address in Chiba prefecture.

“Needless to say, we do not have an exit from monetary easing in mind,” he added.

For more, please read this story.

— Clement Tan

Manufacturing activity across the ASEAN region expanded at the softest pace in seven months, with the headline purchasing managers index at 50.8. in July.

This marked a third straight month of decline and pointed to a mixed picture across the ASEAN region, with only four of the seven constituents registering an improvement in operating conditions.

Indonesia displaced Thailand at the top of the PMI rankings with a PMI reading of 53.3 for July, while Thailand recorded a PMI reading of 50.7.

The Philippines and Myanmar rounded off the list of countries with improving manufacturing sectors, with PMI readings of 51.9 and 51.1 respectively.

In contrast, the countries that reported a deterioration in July were Vietnam, Singapore and Malaysia.

— Lim Hui Jie

Shares of Hong Kong property management services company Country Garden Services surged 20% after the company announced its intention to repurchase up to 337.31 million shares, representing 10% of its total issued shares as of May 25.

In a filing, the company said the shares have been trading at a price level which does not fully reflect its intrinsic value. The move is aimed at shoring up investor confidence.

However, the filing also cautioned that the share repurchase is subject to the sole discretion of the board “based on the market conditions and that no assurance can be given as to the timing, quantity or price of any repurchase.”

New Zealand’s unemployment rate rose to 3.6% in the second quarter, up from the 3.4% in the first quarter and higher than the 3.5% expected in a Reuters poll.

Most notably, job growth climbed 1% quarter on quarter, sharply higher than Reuters forecast of 0.5%.

The country’s participation rate also surprised expectations, coming in at 72.4% in the second quarter compared to the 72% seen in the first quarter.

— Lim Hui Jie

Asian currencies largely strengthened against the U.S. dollar after rating agency Fitch cut the U.S.’ credit rating from AAA to AA+.

IG market analyst Tony Sycamore said this will spark risk aversion flows, which means lower equities in Asia, as well as safe haven buying of treasuries and currencies such as the Japanese yen and Swiss franc against riskier currencies, such as the Australian and New Zealand dollars.

The Japanese yen, long considered a safe haven currency, strengthened 0.16% to trade at 143.1 against the greenback.

In contrast, the Australian dollar weakened marginally to trade at 1.51 against the greenback and the New Zealand dollar slid 0.31% to trade at 1.63.

— Lim Hui Jie

South Korea’s consumer price index rose 2.3% year-on-year in July, the lowest rate of growth since June 2021 and lower than the 2.4% expected by economists polled by Reuters.

The inflation print also marks its sixth straight month of decline. On a month on month basis, the country’s consumer price index rose 0.1%.

On Monday, minutes from the Bank of Korea revealed that board members were in favor of the benchmark rate being held at 3.5%, but “while closely monitoring real economic indicators, such as the inflation rate and financial stability conditions,” said one member.

— Lim Hui Jie

Despite concerns of an economic slowdown and rising rates, the stock market’s strong start to 2023 has been dubbed one of the “most hated rallies in recent memory” by some commentators.

The S&P 500 is up nearly 20% this year primarily due to the outperformance of stocks such as Apple, Microsoft, Nvidia, Amazon, Meta, Tesla, and Alphabet. Investment bank UBS had previously estimated that the index’s return would fall to only 1.6% without the top seven stocks.

Given this backdrop, investors with an investment budget of $100,000 might wonder where and how much to invest in each asset class. CNBC Pro sought advice from investment managers and wealth advisors on this matter.

CNBC Pro subscribers can read more here.

— Ganesh Rao

The world is in the early stages of a long process of electrification, and the competitive landscape will favor battery makers, according to Citi.

Citi names its top global pick, saying it looks well positioned to benefit from long-term growth in the global electric vehicle market. It also listed three others.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Fitch Ratings cut the United States’ long-term foreign currency issuer default rating to AA+ from AAA on Tuesday, citing an erosion of governance and expected fiscal deterioration over the next three years.

In particular, the agency called out brinksmanship in Washington around debt ceiling negotiations earlier this year. President Joe Biden signed a debt limit deal on June 2, just days prior to the X-date of June 5 – the expected date when the nation could default.

“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said.

Read more here.

-Darla Mercado

The S&P 500 finished its fifth straight winning month with Monday’s close. If history repeats itself, that honorific could signal there’s more good news ahead.

On average, the index is also higher one, three, six and 12 months after the fifth winning month concludes, according to historical data analyzed by the Carson Group. And those performances are usually strong when compared against baseline S&P 500 data.

The S&P 500 has notched monthly win streaks of this length just 29 times since 1950, the data shows. More than nine times out of 10, the S&P 500 was higher a year later. It was up more than four times out of every five at the six-month point.

To be sure, it’s not a perfect science. In 2021, which was the last time a streak of this length was reached, the index was down nearly 12% a year later. And the last time before that, which was in 2020, the S&P 500 finished the next month almost 4% lower.

— Alex Harring

The yield on the benchmark 10-year Treasury note reached its highest level since early July.

The 10-year yield reached a fresh high of 4.049%, its highest point since July 10 when it yielded as high as 4.092%.

Meanwhile, the spread between the 2-year and 10-year Treasury hit a high of -86.0. That’s the highest level since July 13, when the spread was as much as -82.30.

— Gina Francolla, Sarah Min

Job openings moved lower in June, according to data from the Labor Department released Tuesday.

Employment openings totaled 9.58 million for the month, edging lower from the downwardly revised 9.62 million in May, the department said in its monthly Job Openings and Labor Turnover Survey. It marks the lowest level of openings since April 2021 and below the 9.7 million estimate from FactSet.

Layoffs also moved down to 1.53 million, after totaling 1.55 million in May.

— Jeff Cox

The ISM manufacturing PMI came in at 46.4, lower than the StreetAccount estimate of 46.9. This marks the ninth straight month the index has been in contractionary territory. (A number above 50 indicates expansion; one below 50 indicates contraction).

However, the print is an uptick from June’s 46 number.

“Demand remains weak but marginally better compared to June, production slowed due to lack of work, and suppliers continue to have capacity. There are signs of more employment reduction actions in the near term to better match production output,” Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee, said in a statement.

— Fred Imbert