The Levels Letter – Morning Edition

2nd Edition | Wednesday, August 12, 2025

Asia-Pacific Risk-On Tone to Set the Stage for London Ahead of CPI,  Key Focus:  Asia-Pacific handover, London open positioning, U.S. CPI risk event

📌Asia-Pacific Session - Positive Handover, Risk-On Sentiment

The risk-on bias in Asia-Pacific equity markets is delivering a constructive handover to Europe, driven by resilient corporate earnings momentum, stabilising trade sentiment, and selective capital inflows into cyclical sectors.

• Nikkei 225: +2.45% — Broad-based gains, with industrials and technology leading on stronger export demand expectations.
• Nifty 50 (India): +0.91% — Domestic consumption resilience and foreign buying underpinning the move.
• S&P/ASX 200 (Australia): +0.13% — Financials and energy offsetting softer materials performance.
• Hang Seng (Hong Kong): –0.10% — Profit-taking in property stocks overshadowing strength in large-cap tech.

This backdrop positions the London open to follow the positive directional lead from Asia through the morning session, particularly in cyclicals and exporters.

📌London Open — Asia’s Momentum in Control Until CPI

With U.S. CPI data scheduled for 14:30 (+2 GMT), the London session is expected to initially trade on the Asia-Pacific impulse:

1. Directional Lead: Risk-on sentiment and constructive flows from Asia likely to carry over into Europe’s early hours.
2. Sector Rotation: Strength anticipated in industrials, exporters, and energy names; defensives may lag in the first half of the day.
3. Pre-CPI Risk Management: Approaching midday, trading activity may moderate as participants square positions ahead of the U.S. data.

Base Case: Positive open with steady risk appetite sustained through the London morning.
Risk Case: Any deterioration in geopolitical sentiment or unexpected macro headlines could dampen the Asia-led momentum before the CPI release.

📌U.S. CPI — The Defining Catalyst for the U.S. Session

• Consensus: Headline CPI +2.8% YoY; Core CPI +0.3% MoM.
• Market Pathways:
  • Below Consensus: Fuels expectations for a September Fed cut; potential acceleration in Russell 2000 and cyclical equity outperformance.
  • Above Consensus: Delays easing expectations; likely rotation back to defensives, pressuring higher-beta indices and commodities.

Given its timing, Europe will be open for the first wave of reaction, with the London afternoon potentially experiencing abrupt reversals depending on the print.

Index & Asset Watch

📌Key Takeaway

The risk-on posture in Asia-Pacific is expected to be the primary driver of European equity direction into the London midday, after which U.S. CPI at 14:30 (+2 GMT) becomes the dominant catalyst shaping global flows into the U.S. close.