Market impact of Middle East weekend kinetic activity blunted by Qatar talks tomorrow

Asia market update: Market impact of Middle East weekend kinetic activity blunted by Qatar talks tomorrow; ECB’s Sintra Forum starts, with Fed’s Warsh on Wed.

General trend and developments

-Crude oil looked to be heading towards a higher open and US equity FUTs a lower open, until 20 minutes before the Monday reopenings, when Axios reported that the US and Iran would halt strikes and meet tomorrow in Doha, Qatar.

-Oil ended up only opening modestly higher by <1%, with US Nasdaq FUTs moving as high as 1.0% and S&P FUTs as high as 0.7% during Asia’s Monday session.

-Prior to this, US armed forces in the Middle East waited until the markets were closed in the weekend to retaliate against Iran for firing upon a Singaporean vessel last Thursday. The US initially struck mainly strategic military targets such as depots on Friday night, mainly in southern Iran, in and around the Strait of Hormuz. Iran then attacked Bahrain and Kuwait with missiles and drones on Saturday, leading to an even heavier bombardment of Iranian military facilities by the US on Saturday night. Iran said at the time that the violation of the ceasefire will result in the complete halt of diplomatic processes.

-Nikkei opened modestly higher but moved negative to be -1.0% during the session. Kospi underperformed again, adding as much as -2.6% losses to the nearly -8% lost on Friday, before paring some losses late in session. KR mega-tech weakness single-handedly outweighing gains in all other segments. However, notably the smaller tech KOSDAQ up +7% (**Note: Hynix and Samsung not part of the Kosdaq). Hang Seng outpeformed +1.7%, with Alibaba rebounding.

-ECB’s annual policy forum in Sintra, Portugal, kicks off today through Wed, July 1st. The theme this year is the somewhat contradictory title of "Shaping Europe's future: innovation, growth and stability". One highlight likely to be the attendance of new US Fed Chair Warsh, scheduled to speak on the final day, Wed, July 1st at 09:30am ET. Warsh will be part of a televised Q&A panel also featuring ECB's Pres Lagarde, BOE's Gov Bailey and BOC's Gov Macklem.

-China’s MOFCOM added a further 20 Japanese firms to its export control list, citing aiming to stop Japan's "remilitarisation and nuclear ambitions".

- Japan govt's draft policy said to aim to more than double annual real economic growth to more than >1% (Japan's average real growth rate over the last five years was 0.4%).

-Japan’s May retail sales also much stronger than expected, nearly +2% on the month when a -0.5% fall was expected with the y/y figure also a robust +5.0%. Comes days after blowout department store sales in Japan.

-Pres Trump late Friday threatened the EU and the UK with 100% tariffs on all goods from any European country that imposes a Digital Service Tax on US firms, part of an ongoing battle between the US and Europe.

-10, 20 and 30-year Japan JGB yields rose +5bps in curve steepening with the front end only slightly flat.

-China PBOC debuted its new Overnight reverse repos today (alongside its key policy 7-day reverse repos), injecting CNY300B with the rate reportedly set at 1.25%, which would be lower than the 1.35% market expectations. The use of the one-day tool aims to calm money markets through a typical half-year end funding crunch, rather than provide any clear policy signals. This may be why the PBOC withheld the price information. Fow now, PBOC overnight repos look to be a technical adjustment more than a significant policy change.

-In AI news late Friday, the US govt allowed Anthropic’s Mythos 5 to be redeployed to some US organizations, although Fable 5 remains banned to the wider public for now, despite its brief appearance in some developer’s IDEs (developer environments) for a day or two last week.

-China’s Zhipu / Z.AI continues to take token market share for its cheaper token consumption while being acceptably close to top model performance - and of course its Open Source nature makes it able to be cleaned and hosted locally around the world absent threat of backdoors to the CCP or Chinese competitors, proving insurance against any future frontier model lock-out.

-Amid growing clout and interest in Chinese biotechs, Hang Seng Biotech Index posted its largest intraday gains since March, 2022.

-As this update goes out for delivery, South Korea Pres Lee is in the process of formally announcing an expected KRW2,000T (~$1.29T) 10-year investment in Korean chips, AI and infrastructure out of Samsung and SK Group / Hynix.

- An interesting week coming up for US data prior to the July 5th holiday, with US Fed’s Warsh appearing on a high-powered panel (see above) at the ECB’s Sintra Forum (Wed July 1st at 9:30am ET), Jun Manufacturing ISM also on Wed ET and the Nonfarm Payrolls Jun jobs report on Thursday ET.

-US equity FUTs +0.6% during Asia trading.

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

-Mon June 29th: EU Jun Consumer Confidence.

-Tue June 30th: KR May Industrial Production & Retail Sales, JP May Industrial Production & Unemployment Rate, NZ Jun ANZ Business Confidence, AU RBA Meeting Minutes, CN Jun PMIs, UK Q1 GDP, (Tue night, US Jun Consumer Confidence, US May JOLTs).

-Wed July 1st: JP Q2 Tankan, KR Jun Prelim Trade Balance, EU & US Jun final S&P/HCOB Mnfg PMIs, CN June RatingDog Mnfg PMI, EU Jun Prelim CPI.

-Thu July 2nd: KR Jun CPI, AU May Trade Balance, JP 10-Year JGB Auction, EU May Unemployment Rate, (Thu night, US Jun Nonfarm Payrolls).

-Fri July 3rd: AU & JP Jun Final S&P PMIs, CN Jun RatingDog Svcs PMI, Global final Jun S&P/HCOB Services PMIs, (Note: “Independence Day (Observed)” – U.S. markets closed, reduced liquidity).

Holidays in Asia this week

-Wed July 1st: Hong Kong.

-Fri July 3rd: US Independence Day.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens +0.4% at 8,795.

-(AU) RBA Assist Gov Kent (Financial Markets): Board may have less tolerance for inflation below target - speech on Additional Monetary Policy Tools: Reflections and a New Framework.

-(AU) Australia is escalating enforcement of its under-16 social-media ban by proposing to double maximum penalties to A$99M and give the eSafety Commissioner stronger powers to demand compliance evidence from platforms and third-party age-assurance providers [weekend update].

-(AU) Australia ACCC (market regulator); Partly restores excise tax cut on fuel: Cut to be lowered from A$0.32/l to A$0.16/l from July 1st to Aug 2nd.

-(AU) Australia's APRA: To consult on changes to bank risk weights; Proposals include allowance of lower risk weight for large domestic public infrastructure exposures, others.

-(NZ) New Zealand May Filled Jobs M/M: 0.3% v -0.1% prior.

China/Hong Kong

-(CN) Shanghai Composite opens flat at 4,026; (HK) Hang Seng opens +0.7% at 22,828.

-(CN) China MOFCOM: China adds 20 Japan firms to export control list for links to Japan's military; Aimed at stopping Japan's "remilitarisation and nuclear ambitions".

-(CN) China PBOC Open Market Operation (OMO): Sells CNY300B in 1-day Overnight Reverse Repos (first operations in this tenor) - Statement.

-(CN) China May Industrial Profits Y/Y: 21.1% v 24.7% prior [weekend update].

-(CN) Follow up: China, Russia stage joint air patrol over sea of Japan, other waters (update).

-(CN) China's President Xi has met Belarussian President Lukashenko in Beijing - CCTV.

-(CN) China's FX Regulator (SAFE) Head Zhu Hezin met with Citigroup CEO Jane Fraser on June 26th - SAFE statement.

-(CN) China PBOC sets the yuan mid-point at 6.8175 v 6.8166 prior.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY158B in 7-day Reverse Repos; Net drains CNY19B v drains CNY16B prior.

Japan

-(JP) Nikkei 225 opens +0.4% at 69,534.

-(JP) Follow up: Japan's Govt draft policy aims to "entrench" annual real economic growth >1% - US financial press after seeing Draft Economic Policy Blueprint

-(JP) Japan May Retail Sales M/M: +1.9% v -0.5%e; Y/Y: 5.3% v 3.0%e prior.

-(JP) 30-year Japan JGB yields rises +5bps to 3.845%; 20-year Japan JGB yields rises +5bps to 3.56%; 10-year Japan JGB yields rises +5bps to 2.645%.

-(JP) Japan Chief Cab Sec Kihara: China ship activity near Yonaguni "unacceptable".

-(JP) Japan PM Takaichi cabinet approval rating rises +2ppts to 68% - Nikkei Poll.

Korea

-(KR) Kospi opens -0.9% at 8,334.

-(KR) Japan, South Korea Defense Ministers reportedly agree to further cooperation and exchanged - Yonhap (update).

-(KR) Samsung, SK Group said to invest a total KRW2,000T over 10 years - Korea press (update).

-(KR) South Korea's Presidential Office: [Confirms] Samsung's Lee, SK Hynix's Chey to unveil investment plans today.

-(KR) Korea Exchange activates sidecar on Kosdaq as FUTs +6%, programme trading halted for 5 minutes; Comes as Kospi 200 FUTs falls -3%,

Other Asia

-(MY) Malaysia Economy Minister: Fertiliser costs expected to rise 15-20%, livestock feed costs seen rising 8%.

North America

-(US) Pres. Trump: Threatens 100% tariff on all goods from any European country that imposes a Digital Services Tax on US firms - Truth Social [weekend update].

-(US) ANTHROPIC.IPO US govt allows Mythos 5 to be redeployed to some US organizations; Anthropic is restoring access to those organizations quickly [weekend update].

-(US) AAPL Reportedly Apple has sought US govt clearance to purchase memory chips from CXMT, a China firm on the Pentagon blacklist, amid tight supply constraints - FT [weekend update].

-(US) Follow up: House Speaker Johnson: Will send Housing Bill over to Pres Trump on Monday - Fox News [weekend update].

-(US) President Trump to sign executive orders at 15:00 ET on Monday, 29th June, 2026.

-(US) Fed’s Barkin (non-voter): Inflation is too high but sees tentative signs that price pressures may moderate soon - comments in Aspen (update).

-(US) US DOJ closed a criminal probe into Abbott Laboratories over a baby formula plant, opting instead for civil penalties - WSJ.

-(US) US Sec of State Rubio to meet German Foreign Minister Wadephul in Washington, DC at 11am ET, 29th June, 2026.

-(VE) SPCX Starlink Mobile is offering free connectivity to Movistar Venezuela customers in La Guaira region - post on X [weekend update].

-(VE) Venezuela Interim President Delcy Rodriguez: Have managed to reconnect a large part of La Guaira State to the national electric system.

Europe

-(RU) Russia Pres Putin: Ukraine has offered a proposal to halt mutual strikes on each other's territory - Tass (update).

-(RU) Ukraine hits Crimea bridge causing Russian emergency declaration - WSJ [weekend update].

-(UK) OFSI Head Giles Thomson: UK poised to act over Iran sanction breaches - FT interview.

-(CH) BIS: AI-led market slump could have larger impact than previous busts.

Middle East

-(IR) US-Iran said to halt strikes and plan to meet Tuesday in Doha, Qatar - Axios (update).

-(IR) Iran has launched multiple missiles and drones toward Bahrain and Kuwait; Iran says it targeted US military sites in the region in response to recent US strikes - press [weekend update].

-(US) Pres. Trump: US aircraft just struck Iranian missile and drone storage locations and coastal radar "for violating the cease fire agreement again" (update 19:13ET) [weekend update].

-(US) Follow up: US Official: Technical talks with Iran are slated to continue on all areas of the Memorandum of Understanding, both sides will stand down for now and vessels can move freely.

-(IL) Israel Apr Manufacturing Production M/M: +29.8% v -17.5% prior (update) [weekend update].

-(IL) Israeli military confirms to have destroyed Hezbollah underground infrastructure in a village in Southern Lebanon - Israeli PM's Office (update).

-(PK) Pakistan reportedly says it carried out ground operation, strikes along Afghanistan border killing 29 militants - AP (update).

Levels as of 01:20 ET

Nikkei 225 -0.8%; ASX 200 +0.4%; Hang Seng +1.8%; Shanghai Composite +0.3%; Kospi -1.1%.

Equity S&P500 Futures +0.6%; Nasdaq100 +0.6%; DAX +0.3%; FTSE100 flat.

EUR 1.1394-1.1381; JPY 161.87-161.72; AUD 0.6898-0.6881; NZD 0.5650-0.5632.

Gold -0.9% at $4,052/oz; BTC -0.6% at $59,638; WTI Crude Oil +0.9% at $69.83/bbl; Copper -0.3% at $6.1915/lbs.