Mixed equities as Nikkei aims for ATH, Quiet trading as US holiday starts

Asia Market Update: Mixed equities as Nikkei aims for ATH; Quiet trading as US holiday starts; Focus on UK General Election tonight.

General trend

- Mixed equities in Asia following Wall St rally (post weak-ISM Services PMI), as Japan strives for March all-time-high of 41,087. Trading quiet as US markets finished early with no afternoon session ahead of the July 4th holiday (tonight, Asia time).

- Japan’s banking TOPIX index traded above yesterday’s record close to a fresh all-time high. Chief Cabinet Sec Hayashi said that will work to boost company earning power.

- Asian currencies held their strength against USD after US ISM Services PMI unexpectedly entered contraction.

- Australian Balance of Trade surplus came in slightly below estimates, with both exports and imports higher m/m.

- New Zealand continued its weak bond auction results, this week not even managing to cover the full $100M indicated in the 2041 tenor offered, with a bid-to-cover of just 0.94x). A total sold of only NZ$494M v NZ$500M indicated for the full action across all three tenors. Bid-to-covers in the other two tenors were 1.24x and 1.86x.

- Earlier, New Zealand home prices fall at steepest pace in 12 months.

- Korea three-year yields fell to their lowest since Feb 2023.

- US equity FUTs flat during Asian trading.

Looking ahead (Asian time zone)

- Thu July 4th (Thu night UK General Election).

- Fri Jul 5th (Fri night US Jun NFP).

Holidays in Asia this week

- Mon July 1st Hong Kong.

- Wed July 3rd Early close at 13:00ET for US markets (Wed night Asia time).

- Thu July 4th US Independence Day (Thu night Asia time).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 7,739.

- Australia May Trade Balance (A$): 5.8B v 6.3Be.

- AOFM (Australia debt agency) CEO: Hopes to issue another green bond in two years time; Issuance depends on funding and eligible expenditure.

- Australian Senator Fatima Payman quits the ruling Labor Party; Labour will require the support of all 11 Green and three other independent Senators to pass legislation in the upper chamber of Australia.

- New Zealand Govt issues 11-month Financial Statements (NZ$): -7.75B (1B narrower than forecast).

- *New Zealand sells total NZ$494M vs. NZ$500M indicated in 2031, 2034 and 2041 bonds.

- New Zealand Fin Min Willis: NZ Treasury Sec Caralee McLiesh will not serve a second term - NZ press.

- AUD/JPY Rises the highest level since 1991 [overnight update].

- New Zealand Jun CoreLogic House Prices M/M: -0.5% v -0.2% prior [overnight update].

China/Hong Kong

- Hang Seng opens +0.6% at 18,079; Shanghai Composite opens +0.1% at 2,984.

- China Pres Xi message to European Council's incoming Pres Costa: Willing to deepen mutual understanding with the EU - state media.

- (RU) Russia Pres Putin tells China's Xi that Russia/China relations are at their best period in history.

- (DE) German Econ Min Habeck: Must find solution to trade dispute with China by November [overnight update].

- China Jun Preliminary Retail Passenger Vehicle Sales Y/Y: -8.0% v -3.0% prior – PCA [overnight update].

- Apple: Reportedly files petition asking the China Supreme People’s Court to make tweaks to select sentences in a ruling that ended a dispute over the cut of app revenue it takes from most developers – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1305 v 7.1312 prior.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repos; Net drains CNY98B v net drains CNY248B prior.

Japan

- Nikkei 225 opens +0.4% at 40,747.

- JAPAN SELLS ¥900B VS. ¥900B INDICATED IN 30-YEAR JGB BONDS; AVG YIELD: 2.1900% V 2.1560% PRIOR, BID-TO-COVER: 2.97X V 3.59X PRIOR.

- Japan Chief Cabinet Sec Hayashi: Will work to boost cos' earning power after TOPIX high.

- Japan PM Kishida: Japan plans 4-way Summit with South Korea, Australia, New Zealand on the sidelines of next week's NATO meeting in the US - Japanese media, citing officials.

- Japan PM Kishida: Refraining from declaring a timeframe on end of deflation decision [overnight update].

- JAPAN SAID TO INTRODUCE A NEW TYPE OF FLOATING-RATE NOTE FROM FY26 THAT HELPS INVESTORS MITIGATE THE RISK FROM RISING BOND YIELDS - PRESS [overnight update].

South Korea

- Kospi opens +0.8% at 2,817.

- South Korea Pres Yoon: Names Vice Fin Min Kim Byeong-Hwan as new Financial Chief of FSC (financial regulator) - Korean press.

Other Asia

- Hong Kong Jun PMI (whole economy): 48.2 v 49.2 prior (second month of contraction; Close to 48.0 in Sept 2022).

- Philippines Armed Forces Chief: Philippines demands PHP60M compensation from China over the June resupply boat clash in South China Sea - press.

- China confirms to have detained Taiwan fishing boat under 'suspected illegal fishing' - State TV [overnight update].

North America

- (US) Democrat Governors upon meeting Pres Biden: "We have Biden's back" - press.

- (US) Texas Judge blocks Pres Biden Admin's FTC ban on worker 'noncompete' agreements.

- (US) Fed's Goolsbee (non-voter for 2024): 'It takes time' to bring inflation back to 2%; Keeping rates high too long is 'a danger' - BBC interview.

- (US) BOFA INSTITUTE: WEEK-TO-JUNE 29TH TOTAL CARD SPENDING +1.4% Y/Y V +0.7% AVERAGE IN MAY; Retail ex auto spending per HH came in at -0.5%.

- FOMC MAY MINUTES: Some officials said need to be ready to respond to unexpected weakness; Several members said might need to raise rates if inflation persists.

- (US) JUN ISM SERVICES INDEX: 48.8 V 52.7E; New Orders Index: 47.3 v 54.1 prior (only 2nd contraction in new orders since May 2020).

- (US) INITIAL JOBLESS CLAIMS: 238K V 235KE; CONTINUING CLAIMS: 1.858M V 1.840ME (highest since early March; 9th straight week of rise).

- (US) DOE CRUDE: -12.2M V -1ME; GASOLINE: -2.2M V -1ME; DISTILLATE: -1.5M V -0.5ME.

- (US) JUN ADP EMPLOYMENT CHANGE: +150K V +165KE; Notes June would have been a downbeat month without rebound in hiring in leisure and hospitality.

- (US) MAY TRADE BALANCE: -$75.1B V -$76.5BE.

- (US) VP HARRIS SAID TO BE THE TOP ALTERNATIVE TO REPLACE US PRES BIDEN IF HE DECIDES NOT TO CONTINUE HIS REELECTION CAMPAIGN - PRESS CITING SEVEN SENIOR SOURCES AT THE BIDEN CAMPAIGN.

Europe

- (EU) Reportedly a half dozen ECB members seek review of spillover effects of QE policies, questioning the commitment to act forcefully when rates are at the lower bound - press.

- (EU) EURO ZONE JUN FINAL PMI SERVICES: 52.8 V 52.6E (5th straight expansion); Demand for euro area goods and services decreases for first time since February.

- (DE) GERMANY JUN FINAL PMI SERVICES: 53.1 V 53.5E (4th straight expansion); Cost inflation lowest since March 2021.

- (FR) FRANCE JUN FINAL PMI SERVICES: 49.6 V 48.8E (2nd straight contraction); Output price inflation slows to marginal pace.

- (IT) ITALY JUN SERVICES PMI: 53.7 V 53.8E (6th straight expansion).

- (ES) SPAIN JUN SERVICES PMI: 56.8 V 56.4E (10th straight expansion); Higher employment did come at the additional cost of raising typical wage levels in June.

- (UK) JUN FINAL PMI SERVICES: 52.1 V 51.2E (8th straight expansion, but lowest since Nov 2023); Confidence dips slightly amid general election uncertainty.

- (UK) TTN Election Preview: July 4th's UK elections polls project the parliament that oversaw the conclusion of the Brexit negotiations, the Covid-19 pandemic, and the rise in inflation will come to an end.

Levels as of 01:20 ET

- Nikkei 225 +0.9%, ASX 200 +1.2%; Hang Seng -0.3%; Shanghai Composite -0.5%; Kospi +0.9%.

- Equity S&P500 Futures: flat; Nasdaq100 -0.1%, Dax -0.1%; FTSE100 +0.1%.

- EUR 1.0783-1.0795; JPY 161.14-161.71; AUD 0.6703-0.6722; NZD 0.6101-0.6118.

- Gold -0.2% at $2,364/oz; Crude Oil -0.6% at $83.36/brl; Copper -0.1% at $4.5198/lb.