Equity softness persists – No change in Mid-East

Asia market update: Equity softness persists; No change in Mid-East; Markets look ahead to US Nonfarm Payrolls tomorrow.

General trend and developments

-US equity FUTs diverged upwards off their lows (compared to an all-red Asian equities session) after WSJ reported Pres Trump told aides that he would consider ending Iran ceasefire “only if US troops are killed". Trump’s seeming reluctance to reignite war against Iran was seen as a positive for equities. However, Nasdaq later in the session again fell to the overnight lows.

-Broadcom -14% and Crowdstrike -11% after-hours on modest forward guidance following their recent huge price rallies.

-Kospi and Nikkei both down between -1 to -2%, joined by the ASX and Hang Seng.

-Emerging market volatility. Korean FSC to hold an 'emergency' meeting with securities firms later today to discuss ways to 'revitalize' the Kosdaq market, seeking to increase investor inflows, while the ruling party DP dominated most local elections but lost the key mayoralty race in Seoul. Indonesia equity index declined by -5% and IDR hit a record low vs the USD yet again, now beyond 18,000.

-Notably the Dow Jones was the worst US performer overnight, amid strong US economic data, followed by the S&P500 with the Nasdaq least hit, still trading at levels seen at end of last week. US markets may be feeling overhang from Google’s record $80B equity raise (even more than SpaceX's $75B raise for its IPO) sucking liquidity out of the room.

- Selling of liquid assets for other opportunities may also be contributing to Bitcoin’s continued fall, in addition to Michael Saylor’s Strategy planned sales, falling as low as $61K in Asia today. If BTC falls <$60K it will be at levels not seen since mid-2024.

-No skirmishes today in the Middle East after yesterday’s Iranian attacks on Bahrain and Kuwait. The US State Dept issued a fairly inconclusive agreement between Israel and Lebanon to at least talk about implementing a ceasefire, but talks will not even start until the week of June 22nd.

-AU trade balance turned around from the prior deficit to a better-than-expected surplus on heavily reduced exports in April compared to March and a turnaround to the positive ledger for exports once again, driven by metal ores and minerals.

-BOJ’s Ueda last night left the door open for rate hikes by couching his usual “will continue to raise the policy interest rate at an appropriate pace,” with potential hike(s) particularly if the price pass-through stemming from the rise in crude oil prices outweighs downside economic risks. With the Yen at 160 PM Takaichi emphasized an even deeper international cooperation with the US, including on FX. OIS overnight chances of a BOJ rate hike mid-June rose up to 83% last night, compared to 75% Tuesday and July now at 95.5%, up from 89% Tuesday.

-Continued Asia reaction to USTR’s proposed additional duties on up to 60 countries on US imports linked to forced labor. China MOFCOM complained about that as well as an OECD report today on China’s industrial subsidies, with US Treas Sec Bessent saying that China spends 4% of its GDP on subsidies. Australia PM Albanese said that his country has “world-leading” legislation addressing forced labor and modern slavery while Malaysia’s Trade Minister downplayed any potential tariff imposition by saying that any action would only be imposed once USTR completed a full investigation process.

-Market data indicates that the Agricultural Development Bank of China, one of the key policy banks in China, cancelled a bond sale on June 3rd following a "fat finger" error in the auction.

-US equity FUTs -0.6% to -0.4% during Asia trading.

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

-Thu Jun 4th.

-Fri Jun 5th: JP Apr Household Spending, IN Rate Decision, (Fri night, US May Nonfarm Payrolls).

Holidays in Asia this week

-Mon Jun 1st: Indonesia, Malaysia, New Zealand, Western Australia & ACT, Thailand.

-Tue Jun 2nd: Malaysia.

-Wed Jun 3rd: Thailand.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens -0.8% at 8,720.

-(AU) Australia PM Albanese: Comments on Trump's new proposed tariffs noting Australia has a robust, comprehensive, and world-leading legislation addressing labor and modern slavery.

-(AU) Australia Apr Trade Balance (A$): 1.8B v 1.6Be.

-(AU) Blue Star Helium [BNL.AU]: has entered into an initial short-term (3 month) helium offtake agreement with a major US industrial gases purchaser, covering any and all production output from the Pinon Canyon Plant.

-(NZ) New Zealand Government 10-Month Financial Statements; Budget deficit narrower than forecast by NZ$3.23B to NZ$6.02B.

-(NZ) New Zealand Q1 Volume of All Buildings Q/Q: -3.5% v 1.5%e.

-(NZ) New Zealand May ANZ Commodity Price M/M: +0.7% v -0.8% prior.

-(NZ) China has banned 4 New Zealand MPs following Taiwan visit - Press [update].

China/Hong Kong

-(CN) Shanghai Composite opens -0.8% at 4,053; (HK) Hang Seng opens -0.7% at 25,465.

-(CN) China market liquidity to remain 'stable' despite the PBOC skipping OMOs, according to analysts: China Securities Journal.

-(CN) China's Commerce Ministry: Industrial subsidies comply with WTO rules (responds to OECD report).

-(CN) China May PPI likely sustained recovery on factors including low base effect and imported inflation; PPI rise is estimated to accelerate to 3.6% y/y – China Securities Daily.

-(CN) A Chinese bank said to have canceled bond sale, cites 'suspected' error related to the yield - US financial press.

-(CN) China AI demand drives domestic prices for copper foil [follows a similar report related to tin demand] – Shanghai Securities News.

-(CN) China PBOC sets the yuan mid-point at 6.8203 v 6.8184 prior.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY0B in 7-day Reverse Repos; Net drains CNY101B v drains CNY178B prior (Volume of China's reverse repos via market operations turns zero for the first time since November 2020); reduced OMO volume to zero for the first time since 2024.

Japan

-(JP) Nikkei 225 opens -0.6% at 68,003.

-(JP) BOJ reportedly said to mull June hike with another possible in FY2026; BOJ sees less need to cut bond purchases at the same pace as FY2027 - US financial press [citing people familiar with the matter].

-(JP) Japan Chief Cab Sec Kihara: Refrain from comment on BOJ gov. Ueda's statements.

-(JP) Japan PM Takaichi: Believe market is watching bond issuance amount.

-(JP) Follow up: Japan PM Takaichi: Have strong desire to fulfill pledge on food tax cut - comments in parliament.

-(JP) Japan PM Takaichi to visit India early July - Japan press.

-(JP) Japan releases weekly flows data [period ended May 29th]: Foreign buying of Japan equities: -¥491.2B v +¥1.08T prior; Japan buying of foreign bonds: -¥184.8B v +¥12.9B prior.

Korea

-(KR) Kospi opens -2% at 8,624.

-(KR) Follow up: South Korea DP (ruling party) candidate Chong concedes defeat to PPP's Oh Se-hoon [current mayor] in Seoul mayoral race.

-(KR) South Korea Financial Authority seeks ways to revive the KOSDAQ index; FSC to hold an 'emergency' meeting with securities firms later today to discuss ways to 'revitalize' the Kosdaq market, seeking to increase investor inflows; notes the gap between the Kospi and Kosdaq - The Korea Daily.

-(KR) Follow Up: South Korea ruling Democrat party wins ‘landslide’ in local elections, despite the loss in the Seoul mayoral race – Yonhap.

-(KR) South Korea PPP Oh Se-hoon [current mayor] said to have overtaken DP Chong Won-o in Seoul mayoral race, leading 48.66% v 48.62%, according to Yonhap; The ruling Democratic Party said to be leading in 13 out of 16 metropolitan and provincial mayoral elections nationwide, says Chosun.

-(KR) Follow up: South Korea's FSS to fine 5 banks KRW600B over China-tied ELS - Yonhap.

-(KR) South Korea Fin Min Koo: To "take action" if one-sided movement seen in currency markets; To closely monitor the bond market in case of "excessive volatility"; To strengthen risk checks on stock trading via borrowing.

-(KR) China and South Korea agreed to add 70 flights per week - Yonhap [update].

-(KR) South Korea's Joint Chiefs of Staff: North Korea's nuclear facility is uranium-enriching facility.

-(KR) North Korea Leader Kim: Will exponentially strengthen national nuclear capabilities.

Other Asia

-(ID) Indonesia Deputy Governor: Indonesia Central Bank has continued with increased intensity to intervene in FX markets.

-(ID) Indonesia's Rupiah weakens further to record low of 18,030/USD.

-(MY) Malaysia Trade Ministry: Any tariff rate on Malaysia will only be imposed after USTR completes full investigation process, issues a formal determination.

-(ID) Indonesia equity index declines by >4% and IDR hits record low vs the USD, yet again.

-(ID) Indonesia Ministry: Indonesia coal production in Jan-April at 234M metric tons, exports at 150.9M metric tons.

-(ID) Indonesia Deputy Speaker: Indonesia parliament passes "sweeping" finance bill into law.

-(IN) India govt said to have instructed public sector banks to build added buffers - US financial press.

-(SG) Singapore May PMI (whole economy): 56.7 v 57.9 prior.

-(TW) Taiwan Foreign Ministry: Strongly condemns China's retaliatory measures against New Zealand parliamentary delegation following their visit to Taiwan in May.

-(TW) Taiwan President Lai: Taiwan will always stand with those striving for freedom - post on Facebook.

-(TH) Thailand tightens power bank rules for air travel - US financial press.

North America

-(US) FED Beige Book: Overall economic activity increased at a slight to modest pace in 10 of 12 districts; Non-labor input costs continued to rise faster than selling prices, contributing to broader concerns about margin compression [US Market Close].

-(US) May ISM Services Index: 54.5 v 53.8e; New Orders Index: 57.3 v 53.4e; Prices Paid: 71.3 v 72.3e [US Market Close].

-(US) DOE Crude: -8.0M v -3ME; Gasoline: +3.4M v +0.5Me; Distillate: +1.5M v -1Me; **Petroleum inventories drop to lowest level since May 2025 [US Market Close].

-(US) May Monthly ADP Employment Change: 122K v 120Ke; "Hiring was more broad-based in May than we've seen in the last few years [US Market Close].

-(US) Fed's Williams (moderate, voter): Higher energy prices are driving up costs and inflation; Inflation is up 'quite a bit', notably in goods, energy and tech driven by AI; Not worried about persistent inflation right now [US Market Close].

-(US) White House: New proposed tariffs on steel, aluminum and copper to be effective on June 8th until Dec 31st, 2027 [US Market Close].

-(US) President Trump: If you add the largest Tax and Regulation Cuts in U.S. History, $5000 to $10,000 per family, coupled with falling prices across the board from the Sleepy Joe Biden years, “TRUMP” & THE REPUBLICANS WIN THE AFFORDABILITY WARS by record numbers!

-(US) Pres Trump expected to "as soon as tonight" nominate Acting Attorney General Todd Blanche to full role as US Attorney General - CNN.

-(US) Follow up: White House aide posts video of President Trump saying he'll pick Todd Blanche as AG - US financial press.

-(US) Top AI CEOs seeks new laws for protection against biological weapons - WSJ.

-(US) MBA Mortgage Applications w/e May 29th: -2.5% v -8.5% prior [US Market Close].

-(US) Follow up: USDA: Confirms screwworm in Texas cattle; Setting control measures in area of detection.

-(US) Texas official: Unconfirmed case of screwworm in Texas calves sent to USDA lab for testing [US Market Close].

-(US) Follow Up: President Trump to make announcement on the subject of "coal" at 3pm ET (on Thursday 4th June, 2026) - US financial press.

-(US) Sec of State Rubio to meet with Kuwait Foreign Minister at 09:30AM ET (on Thursday 4th June, 2026).

-(US) Agriculture Sec Rollins: Additional United States Department of Agriculture [USDA] personnel arrived in South Texas.

-(CA) Canada May Services PMI: 50.6 v 49.2 prior [US Market Close].

-(BR) Brazil May Services PMI: 50.4 v 52.3 prior [US Market Close].

-(BR) Follow up: Raizen note holders approve recovery plan - Brazil press.

Europe

-(LT) Lithuania reportedly in talks with U.S to host nuclear weapons - Politico (Note: would be 7th in Europe) [US Market Close].

-(UK) Govt responds to USTR proposed tariffs around 'forced labor' [US Market Close].

-(DE) Germany May New Car Registrations 239.4K +0.1% y/y - KBA [US Market Close].

-(RU) Moscow-Installed Governor: Three dead, seven injured in Ukraine attack on Simferopol in Russia-annexed Crimea.

-(UR) Ukraine seeks dozens of extra patriot missiles from Germany - US financial press.

-(LV) Latvian General: Russia could invade Nato states by end-2028 - FT.

-(NL) Netherlands Mar Trade Balance: €10.7B v €9.9B prior.

-(IE) Ireland May PMI Services: 50.8 v 49.7 prior (moves back into expansion after one month contraction).

Middle East

-(IL) Israel PM Netanyahu: Iran always lies and cheats; Need to make sure they never get a nuclear weapon - CNBC [US Market Close].

-(IL) US State Department: Israel and Lebanon agreed to implementation of ceasefire - Joint Statement within the Readout.

-(IR) IAEA report said to note the nuclear risk in Iran is higher than before conflict began - press [US Market Close].

-(IR) Iran proposes 4-stage outline for a deal, which has yet to be delivered to the US; Talks still ongoing, with no final decisions made; Will not enter any agreement that ignores Lebanon - Iranian press (FARS) via Telegram [US Market Close].

-(IR) Pres Trump: Reiterates once again "working on a deal" with Iran; Could have blockade of Iran lifted by Labor Day (Sept 7th) - comments from Pod Force One (Note: TTN database shows Trump has indicated "working on deal" with Iran more than 50 times since March) [US Market Close].

-(IR) Pres Trump said to have told aides that 'he would consider ending Iran ceasefire only if US troops are killed"; US officials say Pres is "reluctant" to reignite Iran war - WSJ.

-(IR) US House of Reps passes war powers resolution on Iran, in a rebuke of Pres Trump.

-(IR) IDF: Sirens sounded in area of Arab Al-Aramshe.

-(IL) Hezbollah: Will continue to defend its people and land in Lebanon [US Market Close].

-(IL) FT: US President Trump and Israel PM Netanyahu ‘replay’ 1982 Beirut stand-off.

Levels as of 01:20 ET

Nikkei 225 -1.5%; ASX 200 -1.3%; Hang Seng -1.4%; Shanghai Composite -0.5%; Kospi -1.3%.

Equity S&P500 Futures -0.4%; Nasdaq100 -0.6%; DAX -0.3%; FTSE100 -0.6%.

EUR 1.1614-1.1595; JPY 160.09-159.62; AUD 0.7140-0.7123; NZD 0.5877-0.5859.

Gold +0.9% at $4,474/oz; BTC -5.4% at $63,671; Crude Oil -0.6% at $95.44/bbl; Copper -0.3% at $6.4638/lbs.