JPM International Market Intell | Morning Briefing Aug 13

20 SECONDS: MOMO strength & higher participation of tech on way up. Retail buying returns, but flows shift towards secular & macro themes. SRI remains topical – Modern Warfare and Mercantilism in focus. JPY weakness and a nearing policy shift?

• Yesterday’s MOMO strength extending to APAC today, with Tech driving. US CPI largely non-event and markets continue to look past geopol escalation as Trump revives his “maximum pressure” playbook.

• We expect a higher participation of Tech on MOMO recovery up. This drove index-level divergence between US and EU yesterday, with short weakness weighing on EU as macro plays & broadening gains unwind. EU MOMO short strength is notable.

• Tech dispersion remains a key theme – markets returned to the Semis > Hyperscalers trade yesterday. This has supported the Korea rally, as vol continues to normalize. KOSPI entered a technical bull market and Positioning has not fully rebounded (LT L/S ratio at 78th percentile).

• Gokul flags Asian Semis revenue rose 134% YoY in June (vs 128% YoY in May) - the tenth consecutive month of acceleration and a new record for YoY growth.

• China Tech earnings in focus - Tencent report drove some concerns on AI spending.

• Retail buying returns, with flows rebounding to 64%ile from 4%ile last week. Notably, Tech was not the main driver of activity, with inflows more concentrated in Secular & Macro themes.

• Modern Warfare is a key focus for Security & Resilience Initiatives, and recent geopolitical conflicts (incl. Ukraine & Iran) reflect a clear shift in military/combat styles. The theme remains relevant: Bloomberg reports key US munitions are ‘dangerously low’, and EU Defence sector has rallied sharply since late June (though Positioning sees HFs selling into strength on our books).

• JPMAM’s Cembalest delves into China’s mercantilism in the Year of the Trojan Fire Horse, re-emphasizing the importance of SRI. The gift of inexpensive Chinese exports are not always beneficial, leading to supply chain dependencies and deindustrialization risks for receiving countries.

• Takaichi government reported to support faster BOJ rate hike over concerns on JPY weakness (75% chance of Sept hike priced in). Our FX strats flag Japanese retail have turned long both USD/JPY and cross JPY again. Could katsu curry be the new way to think about JPY weakness?

EU MOMO SHORT LEG (JPE1SMO INDEX) RALLY IS NOTABLE