Israel/Iran conflict escalation threatens a partial return to prior levels of violence?

Asia market update: Israel/Iran conflict escalation threatens a partial return to prior levels of violence?; Trump remains calm ; Oil trades only modestly higher, bond yields rise; Equity sentiment remains cautious after Fri’s rout.

General trend and developments

-Trump plays down Iran’s strike on Israel, deal talks appear to be continuing.

-That being said, Israel’s military has since Identified the launch of a missile from Yemen toward Israeli territory.

-Saudi officials are, also, monitoring Al-Kharj [near Riyadh].

-US equity FUTs improved as Asia progressed. Sentiment, however, remains cautious after Friday’s rout in AI names.

- Recall, US officials discussed taking financial stakes in ‘AI industry’; OpenAI CEO Altman said to have floated the idea in 2025 [WSJ from Jun 5th].

-Equity supply remains a focal point: Meta is reportedly considering a capital raise of tens of billions [of dollars] in stock offering [following successful Google equity sale this week], according to the FT [Jun 5th].

-Nonetheless, Nvidia’s CEO Huang remains optimistic. AI is ‘profitable’, as everyone has the opportunity to buy stocks at a ‘cheaper’ price, according to Huang. His co., also, announced a multi-year technology partnership with SK Hynix [comments from South Korea].

-Hon Hai reported May (NT$) Rev 859.4B +39.6% y/y; Q2 performance is tracking well above previously anticipated significant growth [Jun 5th].

-Japan’s Q1 GDP revision was mixed; GDP deflator was revised lower, The Capex decline was not as bad as feared. Meanwhile, bank lending growth continued to accelerate in May.

-China’s FX reserves rose in May on exchange rate conversion and asset price changes.

-USD/JPY has remained above ¥160; FX trading has been overall subdued, dealers assess US jobs data and geopolitical developments; Japan officials have been quiet, thus far.

-Overall, Indonesia and Japan assets see triple selling amid risk aversion.

-OPEC+ to raise output targets by an additional 188K bpd (as expected) starting in July, 2026.

-US equity FUTs -0.1% to +0.2% during Asia trading.

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

-Mon Jun 8th:

-Tue Jun 9th: AU May NAB Business Confidence, (Tue night, US Apr Trade Balance, CN May Trade Balance)-Wed Jun 10th: JP May PPI, CN May CPI, CN May PPI, (Wed night,

US May CPI, CA Rate Decision).

-Thu Jun 11th: KR May unemployment rate, US OPEC Monthly Report, (Thu night, EU Rate Decision, US May PPI).

-Fri Jun 12th: UK Apr GDP, (Fri night, US Jun Prelim Michigan Consumer Sentiment).

Holidays in Asia this week

-Mon Jun 8th: Australia.

-Fri Jun 12th: Philippines.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 closed for the "Reconciliation Day" holiday.

-(AU) Australia far right overtakes ruling party in Newspoll; the next federal elections are due to be held by 2028 – US financial press [update].

-(AU) Inpex [1605.JP]: Australia Offshore Alliance union: The co's Tokyo bosses have reversed the progress made in the bargaining talks with unions on Saturday.

China/Hong Kong

-(CN) Shanghai Composite opens -2.2% at 3,938; (HK) Hang Seng opens -1.5% at 24,582.

-(CN) China's President Xi officially departs from Beijing, China to North Korea - Xinhua.

-(CN) China's President Xi: To pursue multilateral, inclusive economic globalization - Comments before state visit to North Korea on Monday 8th June, 2026.

-(CN) China End-May FX Reserves: $3.442T v $3.411T prior; Gold Reserves value: $340.8B v $344.2B m/m; Gold Reserves 74.96 troy oz v 74.64 m/m [19th straight month of resumed purchases].

-(CN) China reportedly lets some banks offer higher rates on dollar deposits - press.

-(CN) China reportedly expand funds use for buying homes and repaying mortgages - press.

-(CN) China said overseas investment crackdown will not lead to forced liquidation; China also urged fund managers to support domestic innovation, but warned against speculation – financial press [update].

-(CN) China issues guidelines to strengthen risk management in private investment funds; Access mechanism needs to be improved - press.

-(CN) China PBOC sets the yuan mid-point at 6.8198 v 6.1857 prior.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY219B in 7-day Reverse Repos; Net injects CNY208B v injects CNY92B prior.

Japan

-(JP) Nikkei 225 opens -0.9% at 66,009.

-(JP) Japan Q1 Final GDP Q/Q: 0.5% v 0.3%e; GDP Annualized Q/Q: 1.8% v 1.4%e; Business Spending Q/Q: -0.7% v -0.9%e.

-(JP) Japan Apr Current Account Balance: ¥3.908T v ¥3.119Te.

-(JP) Japan May Bank Lending Y/Y: 5.7% v 5.4% prior.

-(JP) Japan FSA said to target pre-emptive orders on ‘capital shortages’ – Nikkei [update].

Korea

-(KR) Kospi opens -8% at 7,445.

-(KR) Korea Exchange triggers circuit breakers on Kospi after index falls -8%; Korea Exchange activates sidecar on Kosdaq after Kosdaq 150 FUTs fall -6%.

-(KR) Korea Exchange reviews market volatility at emergency meeting.

-(KR) South Korea FX Authorities: FX moves excessive compared with fundamentals.

-(KR) South Korea President Lee: South Korea will become the first nation to fully integrate AI across industries.

-(KR) Follow up: South Korea President Lee: Orders thorough probe into the ballot shortage - post on X.

Other Asia

-(ID) Indonesia's Rupiah falls -0.8% to another new record low of 18,150/USD (v 18,030/USD prior).

-(PH) 8.2 magnitude earthquake strikes Mindanao, Philippines – GFZ; A tsunami warning was issued.

-(PH) Philippine Police: At least three reported dead, four people injured from magnitude 7.8 earthquake.

-(ID) Indonesia Fin Min Purbaya: Reiterates won't exceed 3% budget deficit cap; Deny rumors of leaving my post [weekend update].

-(ID) Deputy Governor: Indonesia Central Bank to guide FX market to ensure the exchange rate doesn't fluctuate too much.

-(ID) Indonesia's 10-year government bond yield rises +24 basis points to 7.142% - LSEG data.

-(ID) Indonesia end-May Foreign Reserves: $144.9B v $146.2B prior.

- (ID) Indonesia Geophysics Agency: Lifts tsunami warning after Philippines' earthquake earlier.

-(IN) Companies in India have been raising prices; India also raised cooking gas costs – financial press [update].

-(IN) India Markets Regulator Chairman: Reviewing framework for variable net worth requirements for stock brokers.

North America

-(US) Trump: Reiterates would like to see lower interest rates; Will leave Oct rate cut decision up to Fed Chair Warsh, wouldn't mind if Warsh cut rates [weekend update].

-(US) WHO: Nearly 500 confirmed Ebola cases in Central Africa outbreak amid swelling concern over the swelling scale of the pandemic - SCMP.

-(US) May change in Nonfarm-Payrolls: +172K v +88Ke [weekend update].

-(US) May Unemployment Rate: 4.3% v 4.3%e [weekend update].

-(US) May average hourly earnings M/M: 0.3% v 0.3%e; Y/Y: 3.4% v 3.4%e [weekend update].

-(US) Fed's Barr: Expects further bank deregulation, with liquidity requirements likely next [weekend update].

-(US) WSJ Timiraos said Fed Chair Warsh job just got a lot more complicated, cites the stronger than expected employment data - update.

-(US) Goldman Sachs now expects US FED to maintain interest rates unchanged for 2026, sees two 25bps rate cuts each in Jun 2027 and Dec 2027 [further pushes back call for rate cuts after US jobs data].

-(US) Pres. Trump: TrumpRx.gov is adding another 160 Prescription Drugs at highly discounted prices [weekend update].

-(US) US Official: Visa's issued for Iran to compete in the FIFA World Cup.

-(US) MRVL: Marvell Technology and Flex Set to Join S&P 500; Others to Join S&P MidCap 400 and S&P SmallCap 600 [weekend update].

-(US) ROKU: To be added to the S&P Midcap 400 with Coer Mining, Sanmina Corp, and Viavi Solutions, replacing Bellring Brands, Coty, Concentrix, and Blackbaud, effective June 22nd, 2026 [weekend update].

-(US) NFLX: Appoints Jay Hoag Chairman, effective immediately - filing [weekend update].

-(CA) Canadian Food Inspection Agency: will implement temporary import restrictions on livestock from entering Canada from affected areas in the US after confirmed screwworm case found in Texas [weekend update].

-(MX) US is reportedly proposing strict new rules aimed at squeezing Chinese parts out of North America’s cars in USMCA trade talks with Mexico - FT [weekend update].

-(PE) Fujimori leads the Peru Presidential vote with ~52.7% [approx. 10% of votes counted].

Europe

-(RU) Russia Pres Putin: Sees no sense in meeting with Zelenskiy now; We need lasting peace agreements; Skimmed through Zelenskiy's letter; Doesn't understand why Ukraine does not want Trump admin as guarantor of peace talks [from Jun 5th] [weekend update].

-(EU) NATO allies weigh new €70B military aid pledge for Ukraine – Politico [update].
-(EU) E3 Leaders Meeting: Leaders discussed how to use the G7 summit, next meeting of coalition of willing, and NATO summit to best coordinate further support for Ukraine.

-(UR) Ukraine President Zelenskiy: Our long-range strikes are effective but it is "extremely important" to have protection against ballistic threats - Comments following the E3 Leaders Meeting.

-(AM) Armenian PM Nikol Pashinyan declares win in parliamentary election - Livestream.

-(UK) The majority of UK people do not want to undo Brexit powers – London Telegraph [update].

-(UK) According to former IMF Chief Economist Rogoff the UK is ‘staring’ into a £3T debt abyss – London Telegraph [update].

Middle East

-(IR) Iran's Mehr: Explosions heard in Tehran - Semi-official YJC News Agency.

-(IL) Israeli Military: Identified the launch of a missile from Yemen toward Israeli territory.

-(SA) OPEC+ to raise output targets by an additional 188K bpd (as expected) starting in July, 2026.

-(IR) Reportedly US planning to make frozen Iranian assets available to Gulf allies to support rebuilding and repairs for future damage caused by Iran, and potentially for past damages as well - press [weekend update].

-(IR) US military: Early Saturday Iran fired 7 missiles as well as drones toward Kuwait and Bahrain; Drones were also fired toward 4 commercial ships in the Strait of Hormuz; US intercepted multiple missiles and drones [weekend update].

-(IR) Pakistan Interior Min to visit Tehran on Saturday - Iranian press [weekend update].

-(IL) Israel struck a Lebanese military vehicle in South Lebanon after identifying it as a 'threat' to IDF forces; Two Lebanese officers and a soldier were in the vehicle; Israel says the incident is under review [weekend update].

-(IR) Iran's Foreign Ministry: Strikes came following repeated violations of the ceasefire and actions by Israel against Lebanon.

-(IR) Follow up: Iran's Provincial Official to FARS: Karun petrochemical plant in Mahshahr has been hit and damaged by Israeli projectile.

-(IR) Iran suspends flights at Imam Khomeini Airport until further notice - IRNA.

-(IL) President Trump: Netanyahu will have "no choice" but to accept a deal with Iran and Iran's strikes had not changed his desire to conclude the US-Iran negotiations, according to the FT; Separately Axios quoted Trump reiterating we are very close to a final deal with Iran; Trump added on Iran would say a deal will be signed on Mon, Tues or Wed, and now this takes place.

-(IL) Israeli Military Chief of Staff: The military will strike "the enemy" with determination as soon as the order is given.

-(IL) Israeli Military: Identified missiles launched from Iran toward the territory of Israel.

-(IL) Reports Israel May Foreign Currency Reserves: $238.68B v $235.73B m/m.

-(SA) Saudi Civil Defense: Early warning issued in Al-Kharj to alert of potential danger.

-(SA) Saudi Arabia ARAMCO issues July prices for Arab Light Crude: The price for the US at plus $12.60/bbl vs ASCI.

Levels as of 01:20 ET

Nikkei 225 -4.1%; ASX 200 -0.7%; Hang Seng -1.4%; Shanghai Composite -1.7%; Kospi -6.6%.

Equity S&P500 Futures -0.1%; Nasdaq100 +0.2%; DAX -1.3%; FTSE100 -0.6%.

EUR 1.1540-1.1508; JPY 160.39-160.20; AUD 0.7063-0.7024; NZD 0.5809-0.5783.

Gold -0.5% at $4,310/oz; BTC +1.3% at $62,736; Crude Oil +4.1% at $94.22/bbl; Copper -0.1% at $6.2730/lbs.