Markets still on edge as US attack on Iran expected 'in coming days'

Asia market update: Markets still on edge as US attack on Iran expected ‘in coming days’; Strong JP 5-yr auction; Focus on UK BOE Rate Decision; JP May CPI tomorrow.

General trend

- Asian stocks down across the board [Hang Seng -1.9%] and USD again stronger on risk-off sentiment after Pres Trump reportedly approved of, but did not (yet) pull the trigger on escalating the Iran conflict with direct US involvement, even as Israel now said to have free reign over the skies of Iran. Press reports during the Asian session said a US attack on Iran may come ‘in the coming days’, amid a fresh barrage of Iranian missiles launched against Israeli cities.

- As expected, the US Fed maintained a 'wait and see' stance, though the statement took a slightly more dovish turn, but at the same time reduced the projected amount of cuts next year (2026) to 25bps from 50bps prior, while keeping this year (2025) steady at 50bps cuts expected. Pres Trump late at night complained that Powell is the WORST, and is “Costing America $Billions!”

- Amid speculation that April might have seen selling of US Treasuries by countries such as China, EU or Japan. US TIC data for April revealed that China sold a net ~$8B while Japan a net ~$20B of USTs, however, made up for by the UK increasing its holdings by ~$28B.

- New Zealand first quarter GDP rose 0.8%, slightly better than expected, primarily on higher exports. Kiwi dollar -0.5% despite increased likelihood of RBNZ pausing in July on the hotter numbers.

- Japan FSA confirms to 'ramp up' scrutiny of banks' repackaged JGBs, after earlier in the year warning regional banks on risks of JGBs bundled with derivatives with no mark-to-market discipline.

- Japan 5-year JGB yield fell -4bps to 0.9650% after the strongest coverage in today's 5-year JGB auction in nearly two years.

- Aussie dollar briefly pared some of its earlier losses on Mid East geopolitical tensions after the Australia jobs data came out for May. However the Aussie continued to trade at session lows as the surprise loss of jobs against the gain expected may put more pressure on the RBA for a further rate cut at its July 8th policy meeting. (Yesterday's odds for a 25bp cut at 86%). Unemployment rate was steady but participation rate also fell slightly.

- Japan plans to cut super-long bond sales by 10%; follows the decision by BOJ to reduce quarterly purchases of JGBs to ¥200B per quarter next year. The revised issuance plan will be presented to JGB primary dealers for discussion at the planned meeting on Friday, Jun 20th.

- BOJ Gov Ueda also to give a speech tomorrow at a Shinkin bank event, around 06:40 GMT.

- The day after China PBOC Gov Pan talked up the Chinese Yuan as a challenge to USD dominance, China’s May Swift Global Payments came in only 2.9% [lowest since Oct 2024].

- Nippon Steel +4% as it finally got its US Steel deal over the line, with a Golden Share in the hands of the US govt the buffer necessary for the US to grant it management autonomy.

- Concerns of further political instability in Thailand once again, with the Thailand army chief expresses concern about 'political turmoil' (related to a leaked phone call of the Thai PM) as Thailand Stock Index falls to 2020 lows.

- Platinum continued its outsize gains the past several weeks, nearly touching $1,350, highest since 2014.

- US equity FUTs -0.3% during Asian trading.

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

- Thu Jun 19th (Thu eve BOE Rate Decision).

- Fri Jun 20th JP May CPI, CN Jun LPR.

Holidays in Asia this week

- Thu Jun 19th (USA Juneteenth).

- Fri Jun 20th New Zealand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 8,529.

- Australia May employment change: -2.5K V +21.2KE; unemployment rate: 4.1% V 4.1%E.

- New Zealand Q1 GDP Q/Q: 0.8% V 0.7%E; Y/Y: -0.7% V -0.8%E.

- New Zealand sells total NZ$450M vs. NZ$450M indicated in 2029, 2037 and 2051 bonds.

China/Hong Kong

- Hang Seng opens -0.4% at 23,620; Shanghai Composite opens -0.1% at 3,384.

- China May Swift Global Payments (CNY): 2.9% v 3.5% prior [lowest since Oct 2024].

- US Ambassador to China Perdue: US businesses have become too dependent on China suppliers; Have to rebalance trade relationship with China (inline) - financial press.

- (US) Treasury Sec Bessent said to be planning on meeting Chinese officials in about three weeks' time - NY Post.

- (HK) HKMA keeps base rate unchanged at 4.75% (post US Fed rate hold) [update].

- China Premier Li Qiang: Will create good environment for foreign firms in China; Should make good use of consumer goods trade-in program [overnight update].

- China reportedly to facility cross-border trade and investment – press [overnight update].

- Certain cities in China ‘pause’ car-buying subsidies, funds said to ‘run out’ – Press [overnight update].

- China PBOC's Wang: Multipolar currency is better than US dollar reliance [overnight update].

- China reportedly to expand ETF options trading to foreign investors from Oct 9th [overnight update].

- China PBOC sets Yuan reference rate: 7.1729 v 7.1761 prior [strongest since Mar 19th].

- China PBOC Open Market Operation (OMO): Injects CNY204B in 7-day reverse repos; Net injects CNY84B v drains CNY7.7B prior.

Japan

- Nikkei 225 opens -0.1% at 38,837.

- Japan releases weekly flows data [period ended Jun 13th]: Foreign buying of Japan equities: ¥473.4B v ¥179.8B prior; Japan buying of foreign bonds: +¥1.57T v -¥453.6B prior.

- (JP) Japan sells ¥2.4T VS. ¥2.4T indicated in 5-year JGB bonds; AVG YIELD: 0.9820% V 0.9800% prior; bid-to-cover: 4.58X V 3.19X PRIOR [Highest coverage ratio since July 2023].

- Japan sells ¥3.2T vs. ¥3.2T indicated in 12-month Bills; Avg Yield: 0.5671% v 0.5702% prior; bid-to-cover: 3.61x v 3.08x prior.

- Japan PM Ishiba: Asking opposition parties for cooperation on US talks.

- Japan CDPJ's Leader (opposition) Noda: PM Ishiba said US Pres Trump is very focused on auto trade gap - financial press.

- Japan to cut scheduled JGB sales to market by ¥500B from initial plan to ¥171.8T in FY25/26 - press citing revised draft.

- Japan plans to cut super-long bond sales by 10% - press, citing draft.

- Nippon Steel (5401.JP) CEO: US govt deal for US Steel ensures two essential elements; Management autonomy and profitability - News Conference for US Steel deal consummation.

- Follow Up: 60% of Japanese firms said to want cut to sales tax; 2/3 say govt should Not issue bonds to counter sales tax cut - financial press survey.

- Japan FSA confirms to 'ramp up' scrutiny of banks' repackaged JGBs [overnight update].

Korea

- Kospi opens +0.6% at 2,989.

- South Korea Acting Fin Min: Will closely monitor markets, respond if necessary - financial press.

- South Korea Spy Agency Chief Nominee: Believes US will strike North Korea if they launch nuclear attack against South Korea - Nomination hearing.

Other Asia

- Malaysia PM Anwar: Malaysia-US tariff talks went 'very well' - financial press.

- Thailand army chief expresses concern about 'political turmoil', as Thailand Stock Index falls to 2020 lows.

- INDONESIA CENTRAL BANK (BI) LEAVES BI-RATE UNCHANGED AT 5.50%; AS EXPECTED [overnight update].

- Indonesia Central Bank (BI) Gov Warjiyo: Q2 GDP aided by front loading of exports due to US tariffs - pre-rate decision press conference [overnight update].

North America

- (IN) Pakistan Army Chief, Field Marshall Munir: US Pres Trump expressed keen interest in forging a mutually beneficial trade relationship with Pakistan; Exchanged views on prevailing tensions between Iran and Israel - financial press, post-meeting at White House.

- US) Pres Trump: Hopes US House 'moves fast' to pass the stablecoin "GENIUS" Act to make US the world leader in cryptocurrency.

- (IR) "Vulnerable" US Middle East assets reportedly moved out of Iran attack vector - US financial press post on.

- (US) Apr total net tic flows: -$14.2B V $254.3B prior; net long-term tic flows: -$7.8B V $161.8B PRIOR.

- (BR) Brazil central bank (BCB) raises selic target rate by bps to 15.00%; not expected; decision was unanimous ; The risks to the inflation scenarios, both to the upside and to the downside, continue to be higher than usual.

- (US) Fed Chair Powell: Economy is in a solid position; Near term inflation expectations have moved up recently, based on surveys; Inflation has come down a great deal, but running somewhat above our 2% objective.

- (US) Fed Chair Powell: Rate cuts could come quickly or could not come quickly; Many companies expect to pass on tariff related costs to the consumer; We can't assume that inflation related to tariffs will be a one time hit; Economic uncertainty has diminished, but remains elevated; It peaked in April, and has since then come down.

- (US) FOMC summary of economic projections (SEP) for Jun: maintains median forecast projection for 50 bps of rate cuts in 2025, REDUCES TO 25 BPS of rate cuts in 2026 (PRIOR 50 BPS).

- (US) FOMC leaves target range unchanged between 4.25-4.50%; as expected; Unanimous vote; Uncertainty.
- (US) MBA Mortgage Applications w/e Jun 13th: -2.6% v 12.5% prior.

- (US) May housing starts: 1.256M V 1.350ME (lowest since May 2020) led by 30% decline in multifamily; BUILDING PERMITS: 1.393M V 1.422ME.

- (US) Initial jobless claims: 245K V 245KE; continuing claims: 1.945M V 1.94ME (near 3.5-year high); 4-week average initial claims highest since Aug 2023.

- (US) DOE CRUDE: -11.5M V -1.5ME; GASOLINE: +0.2M V +0.5ME; DISTILLATE: +0.5M V +0.5ME.

- (CA) Bank of Canada (BOC) Gov Macklem: Rate cut could be needed if effects of US tariffs and uncertainty continued to spread through the economy and cost pressures on inflation were contained; Tariff cost pass-thru depend on demand and CPI expectations.

- (IR) Pres Trump: Regarding Iran strike, I may, I may not; Iran wants to negotiate, should have negotiated; Iran has reached out, told them it's very late to be talking.

- (US) Pres Trump: Would like to see rate 2.5pts lower; If Fed would lower rates, we would buy debt for a lot less; Fed Chair Powell probably won't cut today; (Powell has) done a poor job - comments to media.

- (US) White House Chief of Staff Wiles Said to have told Senate Republicans to pass tax bill next week – Punchbowl.

- (IR) Pres Trump: Iran wants to meet and we may do that; A deal could still happen; There'll be a situation room meeting in an hour on the Israel/Iran situation; Have not made a final decision yet.

- (IR) Reportedly Foreign Ministers of Germany, France, Britain and a 'top EU diplomat' will hold nuclear discussions with Iranian counterpart on Friday in Geneva - press.

- Mid-June TTN innovation & corporate confidence index (ICCI): 111.3 v 110.5 prior.

Europe

- (IR) Follow up: Area near heavy water facility of Iran's Khondab nuclear facility was targeted by Israel - Iran press.

- (IL) Israel IDF: Identified fresh launch of missiles from Iran towards Israel; Defensive systems operating to intercept threat.

- (IE) Ireland Central Bank Quarterly Bulletin: Raises 2025 GDP forecast to 9.7% (prior 4.0%); Cuts 2026 GDP forecast to 2.7% (prior 4.0%).

- (RU) Russia Pres Putin: Ready to meet with the Head of Ukraine at the final stage of negotiations; Plan to conduct military drills with China this year.

- (IR) Reportedly Trump privately approved attack plans for Iran, but withheld final order - WSJ.

- (IR) Iran Supreme Leader Khamenei: Will not accept an imposed peace or war; US military incursion will result in damage - televised address.

- (IR) IAEA Dir Gen Grossi: Important above-ground facilities at Iran's Natanz nuclear facility have been hit badly.

- (EU) ECB’s Centeno (Portugal, dove): Very worried about growth in Europe.

Levels as of 01:20 ET

- Nikkei 225 -0.8%, ASX 200 flat, Hang Seng -1.9%; Shanghai Composite -0.7%; Kospi -0.2%.

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

- EUR 1.1450-1.1489; JPY 144.74-145.22; AUD 0.6475-0.6512; NZD 0.5982-6034.

- Gold -0.5% at $3,390/oz; Crude Oil +0.1% at $73.54/bbl; Copper -0.3% at $4.8383/lb.