Focus on second day of US Fed Powell testimony

Asia Market Update: Less vol markets in Asia while digesting Israel-Iran ceasefire and following US session equities surge; Focus on 2nd day of US Fed Powell testimony.

General trend

- No further hostilities between Iran-Israel saw oil, currencies and US equity FUTs hold their levels from the US session. Asia positive, but smaller gains, (Hang Seng outperformed +0.8%). Signs that the incumbent Islamist regime in Iran is cracking down on dissent in an attempt to hold onto power, arresting ~700 people accused of working with Israel.

- As the July 9th deadline for US trade talks approaches, (Aug 12th in China’s case), a reminder that the US ‘may’ choose to be lenient on some countries, as foreshadowed by US Treas Sec Bessent on Jun 11th , that the US is “prepared to "roll the date forward" for trading partners negotiating in good faith”. A sentiment perhaps behind Japan Trade Negotiator Akazawa’s statement on Jun 19th that “July 9th is NOT the deadline for Japan-US trade talks” -

- BOJ hawk Tamura is becoming easier to spot as a strong dissenter in generic BOJ releases, with one member in the June BOJ Summary of Opinions stating it is possible to “boldly proceed with adjustment”.(Separately, the BOJ believes if it reduced the amount outright purchases of JGBs to ~¥1T per month, the market would likely no longer be so interested in the purchases).

- About an hour later Tamura in a speech (his first since Feb) made clear his position on the BOJ board by saying the BOJ may have to act 'decisively' on rates if upside price risk increases, adding that he does not think policy rate hit a 'wall' at 0.5%. However, Tamura tempered the timetable for rate increases, bringing forward outlook for next rate hike from April to Jan 2026.

- JPY briefly strengthened 0.2% but then gave back those gains to trade at session lows above 145. OIS changes of rate hikes in July and Oct were nearly unchanged 38.5% and 55.5% respectively (as at last night).

- A note that on Monday CHF/JPY rose above last year's levels at >180.75 that may only have been higher around the time Japan went off its USD peg at 360 in 1971.

- China offshore Yuan briefly rose further into Nov 2024 territory, as the PBOC again set a strong fix just below yesterday’s highest fix since November.

- Premier Li of China gave a long speech, in which among other things he vowed China would transition from a major manufacturing power to a 'mega' consumer market – something the US' Chief China negotiator Scott Bessent (US Tres Sec) has been calling for in US-China trade talks.

- Weaker than expected Australia CPI data saw Aussie dollar spike briefly lower to session lows but later pared losses. Headline just above 2% lowest since Oct 2024, while at 2.4% lowest annual trimmed mean inflation rate since Nov 2021. Lowest annual growth in rental prices since Dec 2022;

- True to form US Fed's Schmid (hawk) said the Fed has time to 'wait and see' what happens before rate cuts, following dovish comments from Waller, Bowman and Goolsbee over the past few days.

- US equity FUTs +0.1% during Asian trading.

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

- Wed Jun 25th Thai Rate Decision, (Wed night US Fed Powell Testimony - 2nd day).

- Thu Jun 26th KR Jun Business Confidence, (Thu night US Final Q1 GDP, US May Durable Goods).

- Fri Jun 27th JP May Retail Sales, (Fri night US May Core PCE).

Holidays in Asia this week

- Fri Jun 27th Malaysia, Indonesia.

Headlines/Economic Data

Australia/New Zealand

- ASX 200 opens +0.2% at 8,568.

- AUSTRALIA MAY CPI Y/Y: 2.1% V 2.3%E; CPI Trimmed Mean Y/Y: 2.4% v 2.8% prior.

- Australia Treasurer Chalmers: Notes progress on lowering inflation 'substantial' [follows softer May data].

- Australia sells A$1.0B v A$1.0B indicated in 3.50% Dec 2034 bonds: Avg Yield: 4.0895% v 4.4349% prior; bid-to-cover: 3.73x v 3.17x prior.

- New Zealand May Trade Balance (NZD): 1.2B v 1.3B prior.

China/Hong Kong

- Hang Seng opens +0.6% at 24,327; Shanghai Composite opens -0.1% at 3,419.

- Israel-Iran conflict said to make China reconsider Russian gas pipeline project - WSJ.

- China reported to vow a 'forceful response' to Taiwan's export curbs on Huawei - financial press.

- China Premier Li: Reiterates global economy and international cooperation confronted with new difficulties; global trade slowing down in traditional sectors.

- China Foreign Min Wang: France's Macron, Germany's Merz and the King of Spain to visit China later in 2025 - financial press.

- New freight container wave to beat China tariffs deadline begins at nation’s busiest ports - CNBC.

- (IR) China Foreign Minister Wang Yi: China supports realization of 'Real ceasefire' [overnight update].

- (US) Pres Trump: China can now continue to purchase Oil from Iran. Hopefully, they will be purchasing plenty from the U.S., also. It was my Great Honor to make this happen! [overnight update].

- China's top legislature National People's Congress Standing Committee (NPCSC) holds meeting; Vows efforts to consolidate fundamentals of economy – press [overnight update].

- China PBOC issues statement to use finance to increase consumption; To increase consumption capacity and demand – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1668 v 7.1656 prior.

- China PBOC Open Market Operation (OMO): Injects CNY365B in 7-day reverse repos; Net injects CNY209B v injects CNY209B prior.

Japan

- Nikkei 225 opens +0.3% at 38,896.

- BANK OF JAPAN (BOJ) summary of opinions for Jun policy meeting.

- Japan BOJ Board member Tamura (hawk): Possible to act 'decisively' on rates if upside price risk increases; Does not think policy rate hit a 'wall' at 0.5% - speech in Fukushima.

- Japan BOJ Board member Tamura (hawk): Fog surrounding US tariffs is clearing somewhat but still hard to predict outlook - Q&A session.

- Japan Apr Final Leading Index CI: 104.2 v 103.4 prelim; Coincident Index: 116.0 v 115.5 prelim.

- Reportedly Japan is among countries lifting bans on some Chinese goods, China's trade restriction remains in place - press.

Korea

- Kospi opens 0.8% at 3,127.

- South Korea May Retail Sales Y/Y: 7.0% v 7.0% prior.

- Bank of Korea (BOK) continues to warn related to housing and debt risks - semi-annual report on the financial system.

Other Asia

- Indonesia Fin Min Indrawati; Affirms 2025 Indonesia budget gap at 2.5% of GDP - financial TV interview.

- TW) China's Taiwan Affairs Office: Taiwan's Pres Lai is "oppressing political opposition" with (his) tactics - financial press.

- Taiwan May Industrial Production Y/Y: 22.6% v 18.0%e.

North America

- (MX) Mexico Econ Min Ebrard: Mexico, US near deal on Aluminum and Steel tariffs - China press.

- (IR) US President Trump: Reiterates Iran nuclear sites are 'completely destroyed'.

- US judge blocks Trump Admin from withholding funds to 14 states in the US for EV charger infrastructure.

- US Commerce Dept: Released new procedures for including additional automobile parts articles to be subject to the 25% tariffs on imported auto parts.

- (US) Fed's Schmid (voter; hawk): Economy's resilience gives us time to observe prices; Fed has time to 'wait and see' what happens before rate cuts - keynote address on economic outlook at 2025 Ag Summit hosted by Kansas City Fed.

- FHFA Dir Pulte: US Fed Powell's spending on renovations warrant an investigation - post on X.

- Canada Ambassador to US Kirsten Hillman: US Pres Trump seems "intent" on putting tariffs on any Canadian trade deal - financial press.

- (US) Pres Trump: Do not want regime change in Iran; Regime change makes chaos; Will give definition of NATO Article 5 at NATO summit.

- (CA) Canada May CPI M/M: 0.6% V 0.5%E; Y/Y: 1.7% V 1.7%E.

- (US) Q1 current account: -$450.2B V -$445.5BE (record deficit).

- (US) Fed Chair Powell: We are well positioned for the time being to wait to learn more about the likely course of the economy before adjusting policy - House semiannual policy testimony prepared remarks.

- (US) Jun Philadelphia Fed Non-Manufacturing Activity: -25.0 v -41.9 prior.

- (US) APR FHFA HOUSE PRICE INDEX M/M: -0.4% V -0.0%E.

- (US) Apr S&P corelogic house price index (20-CITY) M/M: -0.3% V 0.0%E; Y/Y: 3.4% V 3.9%E.

-(US) Jun Richmond Fed Manufacturing index: -7 V -10E; Volume of new orders: -12 v -14 prior; Wages: 20 v 23 prior.

-(US) Jun Consumer Confidence: 93.0 V 99.8E; Those saying jobs are "hard to get": 18.1% v 17.5% prior.

- (US) House Speaker Johnson: On target to pass the tax bill by July 4th; Have to get SALT number right.

- (US) Fed's Barr (voter): I expect inflation to rise due to tariffs; Second round effects could make tariff inflation persist.

- (US) Weekly API Crude Oil Inventories: -4.3M v -10.1M prior.

Europe

- (IR) Iran Pres Pezeshkian: Iran has arrested ~700 people accused of working with Israel during the 12-day conflict - Iran press.

- (IR) US special envoy Witkoff: US and Israel have fulfilled their objectives with respect to Iran - financial press.

- (DE) Germany Chancellor Merz: Geopolitical turmoil threatens Germany's prosperity; Time has come to conclude a ceasefire for Gaza - comments to Parliament.

- (HU) Hungary central bank (MNB) leaves base rate unchanged at 6.50%; as expected.

- (PL) Poland May M3 Money Supply M/M: 0.9% v 0.7%e; Y/Y: 10.3% v 10.2%e.

- (EU) ECB's Kazimir (acting Slovakia member): Caution will be in first place in policymaking; Would not touch rates until situation clearer on trade

- (UK) BOE Dep Gov Ramsden (dissenter): Even at 4% I assess that monetary policy would remain clearly in restrictive territory; Attaching more weight to downside risks.

- (UK) BOE Gov Bailey: Very unpredictable where US import tariffs will end up; Trade tariff impact on inflation is more ambiguous than impact on economic growth.

- EU readies retaliatory tariffs to secure better trade deal with Trump - FT.

Levels as of 01:20 ET

- Nikkei 225 +0.3%, ASX 200 +0.1%, Hang Seng +0.8%; Shanghai Composite +0.4%; Kospi +0.3%.

- Equity S&P500 Futures +0.6%; Nasdaq100 +0.8%; DAX +0.3%; FTSE100 +0.1%.

- EUR 1.1604-1.1631; JPY 144.61-145.15; AUD 0.6488-0.6508; NZD 0.6004-6040.

- Gold +0.3% at $3,342/oz; Crude Oil +1.3% at $65.21/bbl; Copper -0.1% at $4.8945/lb.