Iran conflict continues

Asia market update: Less VOL in Asia; Iran conflict continues; Fed Chair underscores new regimen; UK BoE, Apple & Amazon tonight + US Jun Core PCE, Prelim Q2 GDP.

General trend and developments

-The extreme volatility in Asia ended (particularly the brutal price declines in Korea’s Kospi over the past couple of days) with a semblance of price normality; Nikkei +1.0% and Kospi -0.4% amid quiet trading. Shanghai took a turn underperforming, -1.1%, continuing its now three-month downward grind.

-Samsung final Q2 recap: Stock flat today on Q3 guidance for DRAM in mid-single digits; Expects overall earnings to grow in H1 while guiding Q3 HBM4 Rev to 'more than triple' q/q as HBM4 production ramps up; Large customers are seeking long-term contracts amid spot vol; No CAPEX update or margin guidance; open in ADR in “mid to long-term”; Texas-based Taylor Fab 1 remains on track for 2026 ops, Fab 2 in 2030.

-Pure memory-maker SK Hynix could not catch a break even today, losing another -5% today with share price cratering -30% in just 5 days and a stunning -50% over the last month. (That the stock is still up +400% over the past 12 months just shows the incredible price advance it enjoyed since the current chip memory cycle accelerated in the second half of last year). Elsewhere Japan chip-related Advantest +11% on revised upwards guidance due to stronger-than-expected demand for AI inference-related ASICs, CPUs, and DRAM.

-At the end of the US session Meta was punished -8% as it missed on earnings amid soaring AI capex weighing on margins, coming as investors continue to display wariness of high AI spend against uncertain ROI in the short- to medium-term. Microsoft on the other hand rewarded +9% after hours, beating both EPS and Rev estimates as Cloud Rev passed $100B for the first time and profit jumping nearly 32%, demonstrating that at least some hyperscalers are getting returns by passing on their AI build to service clients. Xbox, however, continues to struggle. Qualcomm -5% after hours, continuing its torrid time since June, down more than -40%. Slightly missed earnings and a soft outlook the culprit, with the CEO blaming rising input costs from chips to advanced packaging squeezing margins.

- US military (with Saudi support) once again picked up the pace of heavy waves of airstrikes on multiple sites on Iran's Qeshm island and southern provinces after Pres Trump vowed a hard response to yesterday's attacks on US bases in Jordan. Came amid a fresh barrage of Iranian missiles and drones, with widening attacks impacting Egypt and Lebanon. Nevertheless, WTI Crude off its highs to settle in the early $80’s/bbl level.

-Meanwhile in another sign of potentially rising tensions ahead of Pres Xi’s trip to Washington in September, UK Press reported that China to send 400 rocket launchers to Iran in a “secret deal“.

-The US Fed’s “hawkish hold' with no material revisions to its brief statement amid three dissenters was notable for the message and tone struck by Chair Kevin Warsh at his press conference, who doubled down on his refusal to ”hand-hold“ markets. Warsh drew upon Goodhart's Law (when an economic measure becomes an official policy target, it ceases to be a reliable measure), as well the Lucas Critique (predicting the effects of a policy change based entirely on historical relationships is naive because a change in policy alters the public's expectations and behavior, making old data obsolete). Warsh instead said he wanted markets to “play the ball, not the referee”. Warsh pointed out the market has effectively raised by 2 hikes in recent months without the Fed having to move at the front end of the curve. Markets doubled down in reaction, with the 10-year yield rising nearly 10bps after his press conference started, and the 30-year yield spiking to an almost two-decade (2007) high right after the Fed presser concluded.

-Japan’s cabinet cut FY26 GDP growth to 0.9% (v 1.3% prior); citing higher oil prices, while raising FY26 CPI outlook to 2.2% (v 1.9% prior). Later, LDP party Sec Gen Suzuki quoted Japan PM Takaichi as saying that she has indeed ordered lowering of National Sales Tax on food to 1% from 8%, for two years from April, 2027.

-Japanese 2-year JGB auction a lot weaker coverage than the month prior, although the tail was narrow, 10-year yields as much as +6bps higher. Earlier, BOJ chances of an October rate hike fell to below 80% ahead of the BOJ July decision tomorrow (Fri). Foreigners came back into the Japanese stock market last week in a strong manner, pumping in nearly $1T yen but at the same time sold more than ¥1.5T in Japanese long-term bonds, a four month high amid the weak Yen.

-UK Bank of England widely expected to hold tonight, as is the BOJ tomorrow (Friday).

-Apple and Amazon to report after the bell on Thursday, along with US June Core PCE and US Prelim Q2 GDP before that.

-US equity FUTs +0.2% to +0.5% during Asia trading.

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

-Thu July 30th: EU Prelim Q2 GDP, (Thu night, UK BoE Rate Decision, US Jun Core PCE, Prelim Q2 GDP).

-Fri July 31st: KR Jun Industrial Production & Retail Sales, JP July Tokyo Core & CPI, JP Jun Retail Sales & Prelim Industrial Production & Unemployment Rate, AU Q2 PPI, CN July PMIs, JP BoJ Rate Decision, TW Prelim Q2 GDP, HK Prelim Q2 GDP, EU Prelim Jul CPI.

-Sat Aug 1st: OPEC Meeting.

Holidays in Asia this week

-Tue July 28th: Thailand.

-Wed July 29th: Thailand.

Headlines/economic data

Australia/New Zealand

-AU) ASX 200 opens -0.2% at 9,018.

-(AU) Reserve Bank of Australia (RBA) Sarah Hunter (Chief Economist): CPI downside surprise came from fuel, travel; Aside from fuel, not too many surprises in CPI data; Don't want higher inflation expectations to be embedded; Q2 inflation was a 'touch' softer than we thought, not going to speculate on the Aug RBA decision.

-(AU) Australia Jun Building Approvals M/M: +7.2% v -0.5%e.

-(AU) Australia Q2 Export Price Index Q/Q: 1.1% v 0.8%e; import prices had the largest rise since Dec 2021.

-(NZ) New Zealand July ANZ Business Confidence: 56.1 v 36.6 prior.

China/Hong Kong

-(CN) Shanghai Composite opens -0.4% at 3,812; (HK) Hang Seng opens +0.3% at 25,876.

-(CN) China reportedly to send 400 rocket launchers to Iran in 'secret deal' - UK Press (update).

-(CN) Follow up: China Commerce Ministry (MOFCOM): [On robots] Measures discriminate and suppress Chinese companies and products.

-(HK) HKMA leaves rates unchanged at 4.00% (as expected), tracking the US Fed.

- (HK) Hong Kong property firm Parkview said to miss loan interest payment – US financial press.

-(CN) China PBOC sets the yuan mid-point at 6.7892 v 6.7899 prior (strongest since Feb 10th, 2023).

-(CN) China PBOC Open Market Operation (OMO): Sells CNY600B in 1-day Overnight Reverse Repos (as expected).

-(CN) China PBOC Open Market Operation (OMO): Sells CNY271B in 7-day Reverse Repos; Net injects CNY67B v injects CNY731B prior.

Japan

-(JP) Nikkei 225 opens -0.4% at 61,240.

-(JP) LDP Gen Sec Suzuki quotes Japan PM Takaichi that she has ordered lowering of National Sales Tax on food to 1% from 8% (as expected, from April 2027) - NHK.

-(JP) Japan cabinet cuts FY26 GDP growth to 0.9% (v 1.3% prior); cites higher oil prices - US financial press.

-(JP) Japan Fin Min Katayama: Proposal for not placing ceiling for next year's budget requests came from Ministry of Finance official; Need to do year-on-year comparisons in budget size as initial budget could be larger than previous years, market could over react to that [following Kumamoto earthquake].

-(JP) Japan PM Takaichi: Will be transparent in market dialogue to ensure trust.

-(JP) Japan Chief Cab Sec Kihara: 5 dead after rescue from Aeon mall Kumamoto.

-(JP) Japan Jun Final Machine Tool Orders Y/Y: 52.7% v 52.8% prelim [EU market close].

-(JP) Japan sells ¥2.8T vs. ¥2.8T indicated in 2-year JGB bonds; Avg Yield: 1.483% v 1.407% prior; Bid-to-cover: 3.63x v 4.82x prior.

-(JP) Japan sells ¥3.8T vs. ¥3.8T indicated in 3-Month Bills; Avg Yield: 1.0036% v 0.9907% prior; bid-to-cover: 3.07x v 2.48x prior.

-(JP) Japan July 1-10 Exports Y/Y: +22.3%; Imports +31.8% (provisional).

-(JP) Japan releases weekly flows data [period ended July 24th]: Foreign buying of Japan equities: +¥912.1B v -¥81.9B prior; Japan buying of foreign bonds: -¥811.4B v -¥723.7B prior.

Korea

-(KR) Kospi opens +0.3% at 5,681.

-(KR) Bank of Korea (BOK): To closely monitor risk factors and impact on domestic economy, markets.

-(KR) South Korea Vice Fin Min: to closely monitor external factors and impact on domestic economy, markets (follows US Fed decision).

-(KR) 005930.KR Reports Final Q2 (KRW) Net 71.3T v 68.36Te (v 4.93T y/y), Op 89.4T v 85.63Te (v 4.68T y/y); Rev 171.5T v 74.6T y/y; Q2 dividend 374/share v 367 y/y.

Other Asia

-(PH) Philippines Jun Trade Balance: -$4.9B v -$5.3Be.

North America

-(US) FOMC leaves target range unchanged between 3.50-3.75%; as expected; vote was 9-3 [US market close].

-(US) Fed Gov Warsh: There is no soft inflation target; Markets are learning to play the ball, not the referee; Where necessary and appropriate the Fed will not hesitate to act - post rate decision press conference [US market close].

-(US) Fed Gov Warsh: Trying to get an unfiltered message from the markets; Trying not to interfere with market signals; Markets are reacting to events much more directly in the last 42 days - Q&A post rate decision press conference [US market close].

- (US) DOE crude: -7.2M v -1.5Me; Gasoline: 0.0M v -0.5Me; Distillate: +1.1M v 0Me.

- (US) Weekly API Crude Oil Inventories: +3.3M v +2.6M prior.

-(US) US 30-year Treasury yield rises to 5.2348%, highest since Mid-2007.

-(US) Cloud Capital Launches New Data Center ABS Master Trust, Completes $520M Triple-A Rated Issuance.

-(US) AAPL US Lawmakers have sent a letter to Apple's CEO Tim Cook on the topic of China memory chips.

Europe

-(EU) ECB Wage Tracker: Maintains 2026 expected wage growth at +2.6% [EU market close].

-(DE) Germany Jun Import Price Index M/M: -0.7% v -0.7%e; Y/Y: 6.1% v 6.0%e [EU market close].

-(UK) Jun Net Consumer Credit: £1.8B v £1.7Be; Net Lending: £7.7B v £3.9Be [EU market close].

-(UK) Jun Mortgage Approvals: 58.2K v 57.1Ke [EU market close].

-(UK) Jun M4 Money Supply M/M: 0.8% v 0.1% prior; Y/Y: 5.0% v 4.3% prior; M4 (ex-IOFCs) 3-month annualized: 4.9% v 6.2% prior [EU market close].

-(IT) Italy May Industrial Sales M/M: +0.6% v -0.2% prior; Y/Y: 5.3% v 2,7% prior [EU market close].

-(CH) Swiss July UBS Expectations Survey: +10.0 v -25.0 prior [EU market close].

-(RU) Mayor: Russia strikes Ukraine's Kyiv with ballistic missiles, urges people to seek shelter.

-(PL) Poland sends fighter jets into air amid Russian air strikes on Ukraine - post on X [Polish Air Force].

-(UK) SMMT: UK vehicle output stabilized in Q2, -0.1%.

-(UK) LBTYA Virgin Media O2 owners consider options to slash £22B debt pile including cutting VMO2's dividend - FT.

-(FR) EDF exploring sales of stakes in it's modular reactor subsidiary [no terms disclosed] - FT.

Middle East

-(US) President Trump: We've hit Iran very hard; We'll finish off Iran pretty soon - Telle-Rally [in support of Ty Masterson's gubernatorial campaign in Kansas].

-(US) Pres Trump: We'll be hitting Iran hard; US strikes will take place against Iran in response to attacks on US targets in Jordan - Fox News [US market close].

-(IR) CENTCOM: US forces completed a heavy wave of strikes against Iran - post on X.

-(IR) CENTCOM confirms to have launched strikes against Iran at 8pm ET.

-(IR) US Military is conducting air strikes in Iran - Axios.

-(IL) Israel PM Netanyahu: It's Trump's decision; Think Iran is weaker than ever before - Recorded ABC Interview.

-(QA) Qatar reportedly ships first LNG shipment through Hormuz for 3 weeks - press.

-(SA) Pres Trump met with Saudi Defense Min on Wed - Axios.

-(IR) Jordan gives update on recent attacks from Iran.

Levels as of 01:20 ET

Nikkei 225 +0.7%; ASX 200 -0.9%; Hang Seng -0.5%; Shanghai Composite -0.8%; Kospi -0.8%.

Equity S&P500 Futures +0.2%; Nasdaq100 +0.5%; DAX -0.3%; FTSE100 -1.0%.

EUR 1.1475-1.1448; JPY163.55-163.21; AUD 0.6969-0.6947; NZD 0.5813-0.5789.

Gold -0.6% at $4,044/oz; BTC -0.3% at $63,925; WTI Crude Oil +0.3% at $84.70/bbl; Copper +0.1% at $6.3513/lbs.