AI drives US-CN tech closer, even as politics remain poles apart

Asia market update: AI drives US-CN tech closer, even as politics remain poles apart; A$ up on strong jobs; GOOG, TSLA underperform on ever higher Capex; ECB tonight.

General trend and developments

- Increasing US-China tech entanglement versus the political divide, both due to AI, was further underscored by breaking news that Intel and AMD said to be signing long-term server CPU deals with Chinese buyers. Comes amid a surge in CPU prices this year due to the rise of agentic AI’s demands for complex multi-step workflows - shifting the ideal data center hardware ratio from 1 CPU for every 8 GPUs toward a 1:1 balance.

- Further, Uber said to cut 10% of customer service jobs, citing the "embracing of AI". [Note: Uber utilizes Alibaba's open-source Alibaba's AI Qwen model to power the global search of Uber Eats. Other notable users of Qwen include AirBNB; with Apple, Siemens and DoorDash, Coinbase using other Chinese models such as Kimi's GLM].

- Politically, the US FCC has closed a Chinese supply chain loophole by voting to bar the sales and authorization of any devices containing logic-bearing hardware from specific Chinese companies linked to national security risks. This targeted rule restricts equipment like chips and IoT modules from blacklisted entities such as Huawei, ZTE, Hikvision, Dahua, or Hytera, even if the finished product is assembled elsewhere.

- AU dollar bounced back +0.4% back above 70c and AU 3-years +6bps on much hotter June jobs of 75K, five times more than expected. However, the numbers unlikely to shift market sentiment much from current ~80% chances of a hold at the next RBA meeting, with softer inflation figures and expectations recently out of Australia. However, elevated oil prices once again may unwind some of these expectations.

- Europe’s ECB expected to hold tonight but guidance will be keenly watched to see if nearly the expectation of the nearly fully priced September hike holds.

- US CENTCOM completed its 12th consecutive night of Iran strikes, with Axios reporting that a B-1 bomber, capable of dropping the GBU-72 bunker-buster, was used the night before (Tuesday). However, no reports of any attacks on Iranian nuclear facilities thus far.

- Meanwhile the IRGC claimed that one of three oil tankers caught fire after an explosion in the southern part of the Strait of Hormuz. Separately Saudi media reported that a Saudi-owned vessel, the Encelia, was struck by the Houthis and a fire broke out in the Red Sea. Crew said to be safe. Came as news of two Chinese supertankers laden with Saudi crude oil headed to exit the Red Sea [timing uncertain],

- Both US Secretary of State Rubio and Foreign Minister Wang Yi agreed that their meeting in Manila overnight was constructive and positive while preparing for upcoming high-level exchanges. Rubio characterized the meeting as a platform to “manage great differences” and prepare for Pres Xi Jinping’s planned trip to the US in September, while Wang called on Washington to respect China's core interests and overcome obstacles.

- Russian Foreign Minister Lavrov said that he would also be meeting with Rubio on the sidelines of ASEAN today, which would be the first time for the two to meet since the UN in NYC last September.

- In Japan, US financial press reported overnight that BOJ officials are considering faster interest rate hikes, perhaps faster than every six months, to combat inflation risks stemming from the weak Yen. Although rates are expected to hold steady at next week’s July meeting, the BOJ said to be prepared to act sooner if necessary.

- Japanese yield curve keeps steepening on the week, although front-end edged relatively higher today with 2-years up as much as +5bps today, touching 1.50% for the first time since 1995. Little movement in Yen, continuing to hover just short of its 40-year lows.

- Indonesia Central Banks unexpectedly held rates at 5.75%, to evaluate its recent, rapid tightening (100bps in two months) while keeping inflation within target. The stance remains hawkish, featuring supportive measures focused on defending the under-pressure rupiah and drawing in foreign capital inflows. Note that Indonesia stocks now up 20% from their MSCI-induced June lows on fears of a downgrade later this year.

- South Korea Q2 GDP figures stronger than expected y/y although down on prior Q1, but overall justifying the recently raised 2026 GDP guidance out of the Bank of Korea and Ministry of Finance.

- Telsa slid -4% after missing adjusted EPS estimates despite beating on strong top-line revenue. The market uneasy about tightening automotive margins and negative free cash flow as the company continues to heavily pivot resources into physical AI and robotics. Management confirmed full-year Capex will be "more than $25B" marking a nearly threefold increase over the $8.5B spent in 2025.

- Google also fell -3% despite beating earnings & cloud revenue. The market also nervous as Google raised its already-massive Capex guidance to an eye-popping $195-215B is it builds out its AI capabilities.

- OpenAI also raised its projected cloud spending through 2030 by 25% up to $750B (from $600B).

- US equity FUTs -0.2% during Asia trading.

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

- Thu July 23rd: TW Jun Industrial Production, (Thu night, EU Rate Decision, EU Prelim July Consumer Confidence).

- Fri July 24th: Global Prelim July PMI’s, JP Jun CPI, UK Jun Retail Sales, (Fri night US Prelim July S&P PMIs, US Jun New Home Sales).

Holidays in Asia this week

-Mon July 20th: Japan.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens +0.6% at 8,898.

-(AU) Australia Jun Employment Change: +76.3K v +15.0Ke; Unemployment Rate: 4.4% v 4.4%e.

-(AU) Australia's ASIC to simplify sell-side research guidance - Statement.

-(AU) ASX.AU ASX: ASX collateral resumes normal operation.

-(NZ) New Zealand Stats Agency: New Zealand to publish first monthly CPI in July 2027 - Statement.

China/Hong Kong

-(CN) Shanghai Composite opens flat at 3,868; (HK) Hang Seng opens +0.3% at 24,966.

-(CN) China's NDRC issues it's five-year plan for renewable energy; this is the official roll out of the plan, according to Xinhua - Statement.

-(CN) China Foreign Min Wang Yi: Asks Sec State Rubio for the US to respect China's Core interests and to address China's legitimate concerns [EU market close].

-(CN) US FCC votes to bar sales of devices in the US that contain components from Chinese companies posing national security risks [US market close].

-(CN) China Coast Guard: Two Philippine vessels 'intruded into' waters off Scarborough Shoal on July 23rd despite warnings.

-(CN) China conducts live-fire military drills in some areas of Taiwan Strait Thursday, Friday - CCTV.

-(CN) Follow Up: China has hinted at regulations on quants and AI usage; cites government paper - US financial press.

-(CN) China Jun Swift Global Payments (CNY): 3.1% v 2.8% prior.

-(CN) China Finance Min Lan Fo'an notes the new fiscal-financial policy package has proposed encouraging results – People’s Daily.

-(CN) China investors said to 'rush' into private funds, with $1.2T invested into certain securities - SCMP.

-(CN) China consumer trade-in programs generate sales of CNY1.1T in H1 - Press.

-(CN) China embodied AI startup PsiBot raises at EV $1.48B.

-(CN) China targets ‘breakthroughs’ in traditional medicine by 2030 - Press.

-(CN) China PBOC sets the yuan mid-point at 6.7906 v 6.7933 prior (strongest since Feb 10th, 2023).

-(CN) China PBOC Open Market Operation (OMO): Sells CNY204B in 7-day Reverse Repos; Net drains CNY422B v drains CNY351B prior.

Japan

-(JP) Nikkei 225 opens +0.5% at 66,923.

-(JP) BoJ said to be close to stage of anchoring inflation and not spurring it; Open to raising rates faster than every 6 months - press [EU market close].

-(JP) Japan Chief Cabinet Sec Kihara: Japan remains committed to non-nuclear principles.

-(JP) Japan Fin Min Katayama: Reiterates won't comment on specific Forex levels; Will take appropriate action as needed.

-(JP) BOJ Outright Bond Purchase Operation for 1~3 Years; 5~10 Years; 10~25 Years (Inline with planned amounts for Q2, 2026).

-(JP) Bank of Japan (BOJ) Results related to today's outright bond buying operations.

Korea

-(KR) Kospi opens +2.4% at 6,963.

-(KR) South Korea Q2 advance GDP Q/Q: 0.6% v 0.4%e; Y/Y: 3.7% v 3.5%e.

-(KR) South Korean's Won strengthens to as much as KRW1,470/USD, strongest level since 11th May 2026.

-(KR) South Korea Foreign Min Koo: To continue to make every effort to achieve peaceful coexistence with North Korea by resuming dialogue.

Other Asia

-(ID) Indonesia Central Bank (BI) leaves BI rate unchanged at 5.75%; Not expected [EU market close].

-(ID) Indonesia Jun M2 Money Supply Y/Y: 8.7% v 10.8% prior.

-(ID) Indonesia aims to boost white sugar output to 3M tons in 2029.

-(IN) India PM Modi: Decided to set up fast-track courts to ensure swift and stringent punishment for those involved in [exam] paper leaks; Directed concerned authorities and officials to take all necessary steps in this regard; Nothing is more important than the welfare and future of our youth - post on X.

-(IN) India "Cockroach" Movement: Eductaion Minister must resign in response to PM Modi's fast-track courts announcement.

-(IN) India's regulator SEBI said to consider buy-side relief to lift market turnover.

-(IN) ONGC.IN Co. said to plan to create India's first reserve for natural gas - India press.

-(IN) Power Grid of India approves raising borrowing limit to INR350B for FY27.

-(MY) Malaysia to table budget 2028 in early October - The Star.

North America

-(US) Sec State Rubio: Iran is in a lot of trouble; Talked with China Foreign Min Wang a lot about China Pres Xi's planned trip to US; Would love to reach diplomatic settlement with Iran if it were possible - comments from ASEAN summit [EU market close].

-(US) Sec State Rubio: No nation has right to restrict flow in Taiwan Strait; No nation has right to restrict flow in international waterways - Remarks at the ASEAN Summit in Manila, Philippines.

-(US) DOE Crude: +2.0M v -1Me; Gasoline: +0.8M v -1.5Me; Distillate: +1.4M v +1Me [US market close].

-(US) President Trump to speak on ratepayer protection pledge at 2:30pm ET on Thursday 23rd July.

-(US) FHFA Dir Pulte: We had a perfect Board meeting today at Fannie Mae.

-(US) FDA says it is investigating another outbreak of cyclosporiasis; cites an announcement made on Wed – financial press [update].

-(US) GOOGL Raises FY26 Capex 8% at the midpoint to $195-205B (prior: $180-190B) - earnings call comments [US market close].

-(US) OPENAI.IPO Raises projected cloud spending 25% to $750B from $600B through 2030 - WSJ [US market close].

-(US) AMD Signs major chips and investment agreement with Anthropic; To invest $5B into Anthropic, while Anthropic to use 2GW of AMD chips - WSJ [US market close].

-(US) INTC *Intel, AMD said to sign long-term server CPU deals with Chinese buyers amid price surge - financial press, citing sources.

-(US) UBER Said to cut 10% of customer service jobs; Cites "embracing AI" - US financial press.

-(AR) Argentina Jun UTDT Leading Indicator: -0.1% v 0.1% prior.

-(DRC) Democratic Republic of Congo: Number of confirmed Ebola cases rises to 2,536 (v 2,423 prior), including 1,033 (v 967 prior) deaths - (update).

Europe

-(UK) UK PM Burnham said to be facing growing pressure to explain how he would finance his policy agenda after urging ministers to explore “all possible ways” to tackle the cost-of-living crisis [EU market close].

-(RU) Russia Foreign Min Lavrov: To meet with US Sec of State Rubio today, in Manila (sidelines of ASEAN).

-(UK) Jun CPI M/M: 0.1% v 0.1%e; Y/Y: 2.6% v 2.7%e; CPI Core Y/Y: 2.6% v 2.5%e; CPI Services Y/Y: 3.6% v 3.5%e; CPIH Y/Y: 2.8% v 2.8%e [EU market close].

-(UK) Jun PPI Input M/M: -2.0% v -0.8%e; Y/Y: 7.3% v 8.2%e [EU market close].

-(UK) Jun RPI M/M: 0.3% v 0.3%e; Y/Y: 3.0% v 2.9%e; RPI-X (ex-mortgage Interest Payments) Y/Y: 2.9% v 3.0% prior; Retail Price Index: 416.5 v 416.4e [EU market close].

-(NL) Netherlands Jun House Price Index M/M: 0.6% v 0.6% prior [EU market close].

-(NL) Netherlands July Consumer Confidence: -35 v -39 prior.

-(EU) EU27 Jun New Car Registrations: 13.6% v 3.2% prior.

-(HU) Hungary July Business Confidence: -5.3 v -8.4 prior.

Middle East

-(SA) Saudi-owned vessel Encelia targeted while sailing in Red Sea, fire breaks out at front of ship, crew safe - Saudi State News Agency.

-(IR) Two Chinese supertankers laden with Saudi crude oil head towards Bab El-Mandeb Strait for exit from the Red Sea - [timing uncertain]; cites data - financial press.

-(IR) Iran Interior Min: Currently no negotiations with US exchange of messages is possible - Mehr News [EU market close].

-(IR) Pres. Trump: From this point forward, any time the Islamic Republic of Iran shoots at a ship in the Strait of Hormuz, whether it be by missile, rocket, drone, or any other device or weapon, the United States will bomb and destroy one bridge or power plant [EU market close].

-(IR) Iranian Parliamentary Speaker Qalibaf: The equation of this war is clear, either all or none: In a region where Iran does not sell oil then no one will sell oil [US market close].

-(IR) US Sec of State Rubio says US still willing to negotiate over Iran crisis [US market close].

-(IR) Iran stated that US and its allies’ interests in the region would be targeted if US attacked Iran nuclear sites. Stressed that if the US attacked nuclear sites, it would be an expansion of war in the region [US market close].

-(IR) CENTCOM: US completes latest strikes against Iran; US completes latest strikes against Iran at 10:30pm ET - post on X.

-(IR) CENTCOM: US forces launched new strikes against Iran on Wednesday - post on X.

-(IR) IRGC: One of three oil tankers caught fire after explosion South of Strait of Hormuz.

-(IR) US used B-1 long-range bomber on Iran targets on Tuesday 21st July, 2026 - Axios [citing US official].

-(IR) Iran's Army: Attacked US bases in Kuwait including Arifjan and Doha camps - State Media.

-(KW) Kuwaiti Army: Air defenses currently intercepting 'hostile' Iranian drone threats.

-(QA) QatarEnergy prepares to extend LNG force majeure into Oct [US market close].

-(SA) UKMTO reports incident in the Red Sea, tanker struck by an unknown projectile; Crew is fighting a fire onboard; No casualties or environmental damage reported [US market close].

Levels as of 01:20 ET

Nikkei 225 +0.7%; ASX 200 +0.4%; Hang Seng +1.3%; Shanghai Composite -0.1%; Kospi +3.6%.

Equity S&P500 Futures -0.2%; Nasdaq100 -0.2%; DAX -0.3%; FTSE100 -0.1%.

EUR 1.1436-1.1406; JPY 163.15-163.00; AUD 0.7022-0.6987; NZD 0.5823-0.5809.

Gold -0.2% at $4,121/oz; BTC -0.5% at $65,706; WTI Crude Oil +1.7% at $88.27/bbl; Copper +0.5% at $6.5207/lbs.