Trump slams non-US chips and India

Asia market update: Trump slams non-US chips and India; Toyota cuts guidance; Focus on BOE rate decision.

General trend

- Setting the tone for Asia, US stocks bounced back further towards last week’s all-time highs, with thus far a massive 96% of US tech stocks having beaten estimates as Q2 earnings season winds down. [82% of S&P 500 companies have also beaten estimates, highest in 4 years]. Other than the ASX taking a wee breather the rest of Asia was in the green, with Kospi outperforming +0.8%.

- Apple +6% in regular trading and a further +2.8% after hours after increasing its commitment to invest in US supply chains by a further $100B to total $600B, naming key suppliers such as Korea’s Samsung as partners to make it happen.

- After the close, Pres Trump threatened to impose a 100% tariff on foreign chips not built in the US. Countries such as South Korea and Taiwan scrambled to assure that Hynix +1.6%, Samsung +2.0% and TSMC +4.9% with Taiex share index +2%) were not affected due to their sizeable US investments ongoing. Other companies with relatively fewer US facilities such as Tokyo Electron in Japan fell -3.6% (now -22% in past month, also on IP probe against Taiwan employee).

- Trump Admin ratcheted up its attempts to kick India into line over its purchases of Russian oil, doubling the tariff on non-exempt goods up to 50% (in 21 days). (Does not include smartphones and PCs so Apple will not be affected). India govt’s initial response was defiance, promising to take actions to protect national interests.

- Leveraged equity market bets in China reportedly have rises to the highest level since 2015 [**Note: Aug 2015 happened to see a severe stock market crash in China, along with devaluation of the Yuan, roiling international markets].

- China’s July trade surplus with the US continued to fall.

- Hong Kong Monetary Authority being forced to defend the weak end of its USD peg on a near daily basis as the HK$ stubbornly stays pressed up against the 7.85 ceiling.

- JGB’s eased on weak BOJ outright results yesterday with high offers vs what actually willing to buy. Chances of a BOJ rate hike by Oct rose back up to 44% v 36% yesterday, and by Dec up to 64% v 55.5% yesterday.

- This month’s 30-year JGB auction was relatively smooth (had recently been troublesome), with a much narrower bid-to-cover than last month.

- Japan’s July 1-20 exports fell into negative territory, while imports collapsed by -12%.

- Q3 inflation expectations in NZ softened further, NZ 2-year yields –2bps.

- In European geopolitics (RU/UR), Trump hinted that special envoy Witkoff had a ‘highly productive’ meeting with Russia’s Putin. No details yet forthcoming, but hinted at a meeting between Putin and Zelenskiy ‘soon’, with Trump himself suggesting he may initially meet with Putin as soon as next week.

- Pres Trump confirmed he has started the interview process for a replacement to Fed Gov Kugler, affirming the "Two Kevins" (Warsh and Hassett) are very good”. Comes amid markedly more dovish comments from various Fed Governor comments regarding potential rate cuts this year.

- 15 minutes before midnight US Pres. Trump posted out that: “Reciprocal tariffs take effect at midnight tonight!”

- US equity FUTs +0.2% during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Thu Aug 7th (Thu eve UK BOE rate decision).

- Fri Aug 8th JP Jun Household Spending, BOJ Summary of Opinions.

- Sat Aug 9th CN July CPI/PPI.

Holidays in Asia this week

- N/A.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 8,838.

- Australia Jun Trade Balance (A$): 5.4B v 3.0Be.

- Australia PM Albanese: To visit New Zealand this Saturday - financial press.

- New Zealand Q3 Inflation Expectation Survey 2-year Outlook: 2.28% v 2.3% prior.

- New Zealand sells total NZ$450M vs. NZ$450M indicated in 2030, 2035 and 2041 bonds.

China/Hong Kong

- Hang Seng opens +0.3% at 24,982; Shanghai Composite opens +0.1% at 3,637.

- CHINA JULY TRADE BALANCE: $98.2B V $104.8BE.

- China July trade balance (CNY-denominated): 710B V 826B prior.

- Leveraged equity market bets in China said to rise to the highest level since 2015 - China Securities Times.

- US Pres Trump: Could put tariffs on China for purchases of Russian oil.

- Hong Kong Monetary Authority (HKMA) buys HK$8.4B to defend currency peg [overnight update].

- China PBOC sets Yuan reference rate: 7.1345 v 7.1409 prior (strongest fix since Nov 6th, 2024).

- China PBOC Open Market Operation (OMO): Injects CNY161B in 7-day reverse repos; Net drains CNY123B v drains CNY171B prior.

Japan

- Nikkei 225 opens -0.2% at 40,730.

- Japan July 1-20 Exports Y/Y: -2.8% v +0.7% prior; Imports -12.3% v -0.7% prior (provisional).

- Japan July Total Reserve Assets: $1.30T v $1.31T prior.

- Japan July Tokyo Avg Office Vacancies: 3.2% v 3.4% prior [another multi-year low].

- Japan releases weekly flows data [period ended Aug 1st]: Foreign buying of Japan equities: ¥193.0B v ¥743.3B prior; Japan buying of foreign bonds: -¥526.3B v -¥326.3B prior.

- Japan sells ¥700B VS. ¥700B indicated in 30-year JGB bonds; AVG yield: 3.0890% V 2.8080% prior, bid-to-cover: 3.43X V 3.58X prior.

- US White House Official: US to add 15% tariff on All Japanese imports, but US will Not apply exemptions for products that already have tariffs >15% - Japanese press.

- Japan Trade Negotiator Akazawa met with Commerce Sec Lutnick; Akwazawa called to quickly implement the deal and auto tariff reductions – press [overnight update].

Korea

- Kospi opens +0.5% at 3,214.

- South Korea Jun Current Account Balance: $14.3B v $10.1B prior.

- South Korea Trade Min Koo: Samsung, Hynix will Not be subject to the threatened 100% US tariffs - Korean press.

Other Asia

- Philippines Q2 GDP Q/Q: 1.5% v 1.3%e; Y/Y: 5.5% v 5.4%e.

- Taiwan govt notes TSMC exempt from 100% US chip tariffs, as expected - financial press.

- (TW) Follow up: Taiwan says US has expressed 'willingness' to continue with tariff talks - financial press, citing National Development Council Min Liu.

- Taiwan July CPI Y/Y: 1.5% v 1.4%e [overnight update].

- (IN) India Govt: Will take actions to protect national interests; Tariffs are unfair, unjustified, and unreasonable [overnight update].

- (IN) White House confirms US Pres Trump's additional 25% tariff on non-exempt goods from India (implies total rate of 50% due to purchases of Russian oil) [overnight update].

North America

- (US) Pres. Trump: Reciprocal tariffs take effect at midnight tonight! (15 min from now) - post on Truth Social.

- (CA) Canada govt upholds regulatory decision on 'wholesale internet' - Canada Industry Min statement.

- (MX) Mexico Pres Sheinbaum: Blackrock to invest more in Mexico following meeting - financial press.

- (UR) US Pres Trump: Good chance of meeting with Ukraine Pres Zelenskiy and Russia Pres Putin very soon; This is not a breakthrough (on war); We'll determine tariffs on Russian purchases; Will see so much more secondary sanctions.

- FNMA Citi CEO Fraser and BoA CEO Moynihan each met with Trump to discuss public offerings for Fannie and Freddie - press.

- (US) Pres Trump has started Fed interview process; Probably down to three candidates; Don't think Treasury Sec Bessent would take job; Temporary Fed governor to be named in next few days.

- (US) MBA Mortgage Applications w/e Aug 1st: +3.1% v -3.8% prior.

- (US) Fed's Kashkari (non-voter): Confidence real underlying economy is slowing; May be appropriate in near term to adjust policy – CNBC.

- (US) Fed’s Daly (non-voter): See likely need to adjust policy in the coming months.

- (US) Fed's Cook (voter): The latest jobs report is concerning; Big jobs revisions are somewhat typical of turning points.

- (US) Fed's Collins (voter): It's key to understand how uncertainty impacts the economy; Uncertainty is notable in areas where long-term investment is happening.

- (CA) Canada July Services PMI: 49.3 v 44.3 prior (8th month of contraction).

- (US) DOE CRUDE: -3.0M V 0ME; GASOLINE: -1.3M V -1ME; DISTILLATE: -0.6M V +0.5ME.

- (BR) Brazil govt has filed request for WTO consultation regarding US tariffs - press.

- (US) Treasury's $42b 10-year note auction draws 4.255% v 4.342% prior; bid-to-cover ratio: 2.35 v 2.60 prior and 2.50 over last 4 auctions.

Europe

- (RU) US Pres Trump: My Special Envoy, Steve Witkoff, just had a highly productive meeting with Russian President Vladimir Putin. Great progress was made! - Truth Social post.

- (PT) Portugal Q2 Unemployment Rate: 5.9% v 6.6% prior.

- (RU) Russia said to plan increase of oil exports to west to almost 2M bpd in Aug following drone strikes on refineries - press.

- (CH) Swiss Pres reportedly to leave DC without reaching a trade deal - press.

Levels as of 01:20 ET

- Nikkei 225 +0.6%, ASX 200 -0.2, Hang Seng +0.6%; Shanghai Composite +0.1%; Kospi +0.8%.

- Equity S&P500 Futures +0.2%; Nasdaq100 +0.1%; DAX +0.7%; FTSE100 +0.2%.

- EUR 1.1650-1.1677; JPY 147.31-147.75; AUD 0.6496-0.6518; NZD 0.5923-5952.

- Gold +0.3% at $3,444/oz; BTC +0.3% at $114.650; Crude Oil +0.7% at $64.82/bbl; Copper +0.1% at $4.4195/lb.