Markets gap at open, but take US weekend action against Iran in stride

Asia market update: Markets gap at open, but take US weekend action against Iran in stride; JP PM Presser tonight centers on US relationship?; Focus on Global flash PMIs; US May Existing Home Sales.

General trend

- Following the US strikes on Iranian nuclear facilities Brent oil opened up +5.5% but pared gains to around half that. USD showed strength at the Asian open, although paring gains as the session continued. US equity FUTs initially down -0.7% to -1.0%, but pared around 3/4 of losses. Gold similarly +0.8% but then drifted down to be below its Friday close. Over the weekend Bitcoin fell to 98K for first time since early May but recovered back to the $101K handle.

- Asian stocks opened down, but pared half or more of their early losses as the session continued.

- Saudi Arabia reported no radioactive traces detected in the Kingdom's environment or in other Arab states.

- In terms of potential impact to global oil supply Iran’s parliament did approve closure of the Strait of Hormuz, a body of water responsible for up to 20M bbls of oil per day (approx 20% of global oil supply). The decision needs to be ratified by Iran's top security body and would likely damage Iran’s own economy as much as any other. (Would also hurt China, which is said to take up to 90% of the crude oil that Iran exports).

- Too early to determine the extent of damage by the US strikes, particularly Fordow deep underground, with Iran claiming only superficial damage while Pres Trump claimed the damage to be “monumental”. Trump also hinted at regime change in a Truth Social post.

- Japan PM Ishiba to hold press conference at 9pm local time (12pm midday GMT), possibly related to a weekend FT story that the Japan govt will cancel its July 1st annual security meeting with US amid US requests for more defense spending to 3.5% of GDP (up from previous request of 3.0%). Comes at a critical time during US-Japan trade negotiations.

- Ishiba's LDP ruling party suffered a record-low result in Sunday's Tokyo assembly election (won by regional party leader and incumbent Gov Koike), seen as a prelude to the July 20th Upper House race.

- TSM down nearly 2% in US trading on Friday after the US Commerce Dept reportedly aiming to end export waivers currently enjoyed by TSM, Samsung and Hynix to sell equipment to China – and may be extended to USallies that have their own chip plants in China. Today Samsung -3.0%, Hynix -2%, Advantest -1.8%. Conversely, China chipmaker SMIC +5.5%.

- Australia June Prelim PMI for Manufacturing continued its 6th month of expansion, while Japan PMI Manufacturing at last headed back to growth, recording its first expansion in 12 months during June. Japan input prices rose at their slowest rate in 15 months, while overall employment increased at the quickest pace for nearly a year.

- Amid follow-up reporting late Friday that Japan plans to cut FY25 super-long JGB issuance by ¥3.2T and offset by boosting 2-year notes and T-bills issuance, and the Japan MOF meeting with primary dealers confirming it was Not working towards bond buybacks, JP 20-year yields +3bps to 2.36% ahead of the 20-year JGB auction tomorrow.

- Taiwan’s exports orders for May showed orders from the US surge 40%, most since 2021.

- South Korea Jun 1-20th also saw US exports +4%, while exports to China -1.0% even as exports and imports both saw significant growth (Chip exports +21.8% y/y).

- US Fed’s Waller underscored his recent dovish tone by saying that the Fed could be in a position to cut by as early as July. However, Fed’s Daly on Sunday maintained that the Fed ‘was in a good place’.

- Meanwhile reports that the US and EU may be close to a deal on non-tariff barriers, such as the EU’s DMA, US big tech in Europe, shipbuilding and more.

- US equity FUTs -0.2% to -0.3% during Asian trading.

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

- Mon Jun 23rd Global Flash PMIs, (Mon night US May Existing Home Sales).

- Tue Jun 24th KR Jun Consumer Confidence, (Tue eve DE Jun Ifo Business Climate, Tue night US Fed Powell Testimony).

- Wed Jun 25th NZ May Trade Balance, JP Summary of Opinions, AU May CPI, BOJ Tamura, Thailand Rate Decision, (Wed night US Fed Powell Testimony).

- 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 -0.5% at 8,466.

- Australia Jun preliminary PMI Manufacturing: 51.0 V 51.0 PRIOR (6th month of expansion).

- Australia sells A$1.0B v A$1.0B indicated in 1.75% Nov 2032 bonds; Avg Yield: 3.9441% v 4.008% prior ; bid-to-cover: 3.35x v 3.21x prior.

- China Premier Li Qiang with New Zealand PM Luxon: China hopes to expand trade with NZ – CCTV [weekend update].

China/Hong Kong

- Hang Seng opens -0.8% at 23,335; Shanghai Composite opens -0.3% at 3,349.

- US stock exchanges 'go cold' on China listings; NYSE no China IPO since carmaker Zeekr in May 2024 - financial press.

- China May YTD Foreign Direct Investment (FDI) (CNY-denominated) Y/Y: -13.2% v -10.9% prior (2nd straight reacceleration in drop) [weekend update].

- China Passenger Car Association (PCA): China June retail auto sales were probably +13% y/y.

- China official: EU going down protectionist path using unilateral tools [weekend update].

- China May YTD Fiscal Revenues -0.3% y/y [weekend update].

- PBOC: China and Hong Kong to launch 'Fast Cross-Border Payment Connect" on Jun 22nd [weekend update].

- Hong Kong May CPI Composite Y/Y: 1.9% v 2.0%e [weekend update].

- Macau Tourism Office: May Visitor Arrivals: 3.372M v 3.093M prior [weekend update].

- China PBOC sets Yuan reference rate: 7.1710 v 7.1695 prior.

- China PBOC Open Market Operation (OMO): Injects CNY221B in 7-day reverse repos; Net drains CNY22B v drains CNY41B prior.

Japan

- Nikkei 225 opens -0.4% at 38,248.

- Japan Jun preliminary PMI Manufacturing: 50.4 V 49.4 PRIOR (First expansion in 12 months).

- Japan May Tokyo Condominiums for Sale Y/Y: -16.9% v +3.5% prior.

- Japan PM Ishiba will Not attend NATO Summit - Japanese press.

- Japan Chief Cabinet Sec Hayashi: the timing for the next US-Japan 2+2 meeting 'as yet undecided'; not true the US demanded 3.5% of GDP on defense spending [refutes press report].

- Japan govt said to cancel July 1st annual security meeting with US amid US requests for more defense spending to 3.5% of GDP from previous request of 3.0% - FT [weekend update].

- Reportedly Trump Admin wants to see Japan govt spending on defense rise to 5% of GDP – Nikkei [weekend update].

- Follow-up: Japan plans to cut FY25 super-long JGB issuance by ¥3.2T; More press reports that Japan to offset these cuts by boosting issue of 2-year notes and T-bills – press [weekend update].

- Japan MOF meeting with primary dealers: Not working towards bond buyback at this time; Heard views asking for cuts in 20-year bond issuance; will take more action in bond management if necessary [weekend update].

- BOJ Gov Ueda: Reiterates overall assessment that domestic economy is recovering moderately [weekend update].

Korea

- Kospi opens -1.0% 2,992.

- South Korea Jun 1-20th Exports Y/Y: +8.3% v -2.4% prior; Imports Y/Y: +5.3% v -2.5% prior; Chip exports +21.8% y/y; Auto exports +9.2% y/y, Petroleum % y/y, Ships +47.9% y/y.

- Bank of Korea (BOK): To take market stabilizing measures if volatility heightens 'excessively' - financial press.

- South Korea trade envoy to visit US from June 22-27th [weekend update].

Other Asia

- Singapore May CPI M/M: +0.7% v -0.3% prior; Y/Y: 0.8% v 0.8%e.

- India Jun Preliminary PMI Manufacturing: 58.4 v 57.6 prior (48th month of expansion).

- Indonesia Central Bank (BI): Intervening in the offshore and onshore markets; relates to the spot, offshore and domestic NDF, bond markets.

- Thailand bourse imposes temporary curbs on stock's daily movement; To trim daily price limit change to 15% - financial press.

- (MY) Follow up: Malaysia Trade Ministry: To maintain anti-dumping duties on China and Japan imports of flat rolled product of iron alloy or non-alloy steel of width more than 1,300nm - financial press.

- India’s Tata Motors” Chairman says working with India govt to seek 'alternative sources' for magnets given Chinese restrictions [weekend update].

- Taiwan may export orders Y/Y: 18.5% V 19.4%E; Orders from US surged most since 2021; Sees June export orders +16.3-20.7% y/y [weekend update].

North America

- US State Dept issues worldwide alert for US citizens abroad; Advises increased caution - statement.

- (US) Fed’s Daly (non-voter): Policy is in a "good place" now - financial press, Q&A following speech in San Francisco (update).

- (IR) US Pres Trump: Iran's nuclear facilities have been obliterated; Iran must now make peace or they will face 'far greater' future attacks - National address.

- *(IR) US Press Trump: We have completed our very successful attack on the three nuclear sites in Iran, including Fordow, Natanz, and Esfahan - post on truth social (update).

- (US) Trump: I HATE “GREEN TAX CREDITS” IN THE GREAT, BIG, BEAUTIFUL BILL. They are largely a giant SCAM. - Truth Social (update) [weekend update].

- (US) Fed's Waller (voter): Fed could be in position for cuts as early as July; Have room to bring down Fed funds rate; Fed has a mandate to worry about unemployment and inflation, not to provide cheap financing for federal govt - CNBC.

- TSM *US commerce dept said to seek to end export waivers for Samsung, SK HYNIX, AND TSMC – WSJ [weekend update].

Europe

- (IR) Senior advisor to Iran's Supreme Leader: Uranium stockpile 'intact' despite US strikes - Turkish press.

- (IR) US Pres Trump: It’s not politically correct to use the term, “Regime Change,” but if the current Iranian Regime is unable to MAKE IRAN GREAT AGAIN, why wouldn’t there be a Regime change??? MIGA!!! - Truth Social post (update).

- (IR) US Pres Trump: The damage to the Nuclear sites in Iran is said to be “monumental.” The hits were hard and accurate. Great skill was shown by our military. Thank you! - Truth Social post (update).

- (IR) US Pres Trump: It’s not politically correct to use the term, “Regime Change,” but if the current Iranian Regime is unable to MAKE IRAN GREAT AGAIN, why wouldn’t there be a Regime change??? MIGA!!! - Truth Social post (update).

- (IR) US Pres Trump: The damage to the Nuclear sites in Iran is said to be “monumental.” The hits were hard and accurate. Great skill was shown by our military. Thank you! - Truth Social post (update).

- (IR) Iran parliament approves closure of Strait of Hormuz; Decision needs to be ratified by Iran's top security body (Iran's Supreme National Security Council) - financial press (update).

- (SA) Saudi nuclear regulator: No radioactive traces detected in the Kingdom's environment or in other Arab states following the US bombing of Iran's nuclear facilities.

- (EU) Reportedly EU-US negotiators are nearing a deal on non-tariff trade barriers; Draft document does not directly address Trump's threatened tariffs or EU's threatened response – WSJ [weekend update].

Levels as of 01:20 ET

- Nikkei 225 -0.2%, ASX 200 -0.4%, Hang Seng +0.2%; Shanghai Composite +0.1%; Kospi -0.3%.

- Equity S&P500 Futures -0.2%; Nasdaq100 -0.3%; DAX -0.4%; FTSE100 flat.

- EUR 1.1456-1.1508; JPY 146.15-147.09; AUD 0.6398-0.6449; NZD 0.5917-5967.

- Gold -0.4% at $3,373/oz; Crude Oil +1.2% at $74.72/bbl; Copper -0.3% at $4.8183/lb.