Nikkei surges to fresh records ahead of BoJ Ueda speech

Asia market update: Nikkei surges to fresh records ahead of BOJ Ueda speech; Weak AU GDP clouds hike trend; US May S&P Services PMI tonight.

General trend and developments

-Nikkei surged another 3%, well over 68K, ahead of BOJ Gov Ueda speech to come during the European session, which itself leads into the BOJ rate decision on June 16th. Meanwhile Hang Seng swung back to give back most of its Asia-leading gains yesterday.

-Comes as Japanese Yen pierced 160/USD for the first time since late Apr, 2026 (and subsequent JP intervention). Trading volumes for USD/JPY said to plunge as retail traders in Japan move to higher yielding currencies such as Aussie dollars.

-The red hot Kospi index closed today amid South Korea’s nationwide local elections - a test of voter support for President Lee a year to the day since winning the snap election of June 3rd, 2025. [A period that has seen the Kospi index well over triple, led by chip memory makers SK Hynix and Samsung (both companies joining the elite $1T market cap club during May].

-Japanese Final May Services PMI at flat confirmed the end of an 18-month expansion.

-Australia Final May Services PMI confirmed the move back into contraction after one month expansion, while Australia’s GDP was even weaker than expected at just 0.3% for Q1. Notably, AU GDP per capita fell to -0.1% for the quarter.

-China’s May RatingDog PMI Services rose to the 54 handle as it climbed to a 39th month of expansion, with total new business increased for the forty-first consecutive month.

-Japan battles with heavy rainfall from Tropical Storm Jangmi, shutting factories for Toyota, Suzuki and others while TEPCO deals with grid outages and ANA and JAL cancel flights while rail travel on Shinkansen severely disrupted.

-Fresh attacks by Iran on Bahrain and Kuwait, primarily aimed at US military facilities appeared to have been batted off by US and local defense systems. US struck back at some facilities on Iran’s Qeshm island, but apparently not aiming at any of Iran’s oil supplies there.

-Amid more hawkish central banks since the Middle East supply shock, Thai Central Bank Gov sees no need to raise rates to address inflation. Keep in mind that Thailand has been underperforming its South East Asian neighbors in terms of GDP growth in recent years - the Governor seeing 2% growth in 2026.

-China’s PBOC reached a new level of ‘stinginess’ in its Open Market reverse repos today, skipping any gross fund injection at all (i.e. precisely nil / zero) for the first time since Nov 2020. Once again appears to reflect the central bank’s new playbook of replacing quantity-based targets (such as credit growth) with the 7-day reverse repo rate as the primary anchor to guide market interest rates into a narrower corridor to assist in more stable borrowing costs, while on the macro-side preventing either a sharp Yuan depreciation or appreciation.

-Taiwan’s 1-year NCD auction notably failed to get away all of the indicated amount, with a bid-to-cover of only 0.93x.

-After yesterday’s 10% gains for Tencent on reports that it was approaching launch of its AI agent for its WeChat 1.4B user base, FT today reporting that the launch time frame was still uncertain saw Tencent give back -4% today.

-Bitcoin continued its slide in the first part of the Asia session, falling all the way to the $65K handle before recovering to $67K at time of writing.

-US equity FUTs flat "across the board" during Asia trading.

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

-Wed Jun 3rd: (Wed night, US May ADP Employment Change, US May S&P Svcs PMI).

-Thu Jun 4th.

-Fri Jun 5th: JP Apr Household Spending, IN Rate Decision, (Fri night, US May Nonfarm Payrolls).

Holidays in Asia this week

-Mon Jun 1st: Indonesia, Malaysia, New Zealand, Western Australia & ACT, Thailand.

-Tue Jun 2nd: Malaysia.

-Wed Jun 3rd: Thailand.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens +0.6% at 8,779.

-(AU) Australia Q1 GDP Q/Q: 0.3% v 0.4%e; Y/Y: 2.5% v 2.6%e.

-(AU) Australia May Final PMI Services: 48.7 v 47.7 prelim (confirms move back into contraction after one month expansion).

-(AU) Auckland May average house prices rose +2.3% m/m - Barfoot.

-(AU) The strength in Australia uranium shares has been attributed to Urenco USA’s plan to raise production capacity – US financial press.

-(NZ) New Zealand NZIER now expects RBNZ to raise OCR in July, Sept.

-(NZ) Fitch comments on New Zealand budget: Earlier Return to Surplus Still Hinges on Growth.

-(NZ) New Zealand Q1 Terms of Trade Index Q/Q: -2.0% v -1.0%e.

-(NZ) New Zealand Apr Building Permits M/M: +10.9% v -0.8% prior.

China/Hong Kong

-(CN) Shanghai Composite opens -0.2% at 4,068; (HK) Hang Seng opens -0.3% at 25,953.

-(CN) China May RatingDog PMI Services: 54.4 v 52.3e (39th month of expansion).

-(CN) CNY100T of government debt seen as ‘controllable’; says China's debt-to-gdp ratio is 68.2% which is 'far below' 200% for Japan and 120% for the US – China Daily.

-(CN) China Envoy Liu Xiaoming meets Russia's Vice Foreign Minister - US financial press.

-(CN) China AI firms "rush" towards A-share listing on policy, valuation - Chinese press.

-(CN) DEEPSEEK.IPO Deepseek confirms to raise up to ~$7.4B (CNY50B) in it's first funding round - Sources.

-(CN) Smaller banks in China have ‘missed’ the ‘boom’ in subordinated debt, cites weak demand – Chinese press.

-(CN) USDA says China is placing fresh soybean orders [follows the May talks between Trump and Xi] - WSJ.

-(CN) Chinese press sees stronger H2 for tin amid demand for AI and ‘tight’ supply.

-(HK) Hong Kong May PMI (whole economy): 50.4 v 48.6 prior (moves back into expansion).

-(CN) China PBOC sets the yuan mid-point at 6.8184 v 6.8187 prior.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY0B in 7-day Reverse Repos; Net drains CNY178B v drains CNY249B prior (Volume of China's reverse repos via market operations turns zero for the first time since 2015); reduced OMO volume to zero for the first time since 2024.

Japan

-(JP) Nikkei 225 opens +0.8% at 67,248 (fresh record high).

-(JP) Japanese Yen pierces 160/USD; First time since late Apr, 2026.

-(JP) Trading volumes for USD/JPY said to plunge, notes retail traders in Japan are moving to higher yielding currencies – Nikkei.

-(JP) Japan Fin Min Katayama: Reiterates will respond to FX moves as needed.

-(JP) Japan May Final PMI Services: 50.0 v 50.0 prelim (confirms flat reading after prior 18 months of expansion).

-(JP) Japan cabinet confirms ¥3.1T (~$19B) extra budget for Mid East response; To keep total bond issuance unchanged for FY26-27 (inline); confirms to keep total bond issuance unchanged on calendar basis.

-(JP) Japan PM Takaichi: Will consider reviewing gasoline subsidy.

-(JP) Japan PM Takaichi will reportedly decide this month on cutting food tax to 1% (from 8%) - Nikkei [US Market Close].

-(JP) Japan has issued a Level 3 heavy rain warning for the Tokyo area - US financial press.

-(JP) Japan raises heavy rain warning to Level 4 from Level 3 for Shinagawa (Tokyo); Japan Chief Cabinet Sec Kihara noted approx 60K households are being impacted by power outages related to the typhoon.

-(JP) Japan MOF to hold regular meeting of JGB primary dealers Jun 26th; JGB investors Jun 29th.

-(JP) Financial firms in Japan accelerate sales of strategic shareholdings – Nikkei.

-(JP) BOJ Outright Bond Purchase Operation for <1 year; 3~5 Years; 10~25 Years and >25 Years; (Inline with planned amounts for Q2, 2026).

-(JP) Bank of Japan (BOJ) Results related to today's outright bond buying operations.

Korea

-(KR) Kospi closed for the "Temporary Holiday" in response to the local elections.

-(KR) South Korea announces a temporary holiday on Wednesday June 3rd, 2026 - Global KRX.

Other Asia

-(TW) Taiwan sells NT$130B vs. NT$140B indicated in 1-year Certificates of Deposit (NCDs); Avg Yield: 1.523% v 1.275% prior; bid-to-cover: 0.93x v 1.12x prior.

-(SG) Singapore May Purchasing Managers Index (PMI): 51.0 v 50.7 prior [US Market Close].

-(ID) Indonesia's Rupiah falls to record low of 17,895/USD in early trade, yet again.

-(IN) Indian Central Bank "likely" selling US dollars to limit Rupee's losses - Traders.

-(IN) India May Final Services PMI: 59.8 v 58.9 prelim (confirms 58th month of expansion).

-(VN) Vietnam May CPI Y/Y: 5.6% v 5.8%e.

-(VN) Vietnam May Retail Sales Y/Y: 11.8% v 12.1% prior.

-(VN) Vietnam May Industrial Production Y/Y: 8.8% v 9.9% prior.

-(VN) Vietnam May Trade Balance: -$5.2B v -$4.0Be.

-(PH) Philippines President Marcos: Government considering supplemental budget; amendments to certain laws may also be needed to better aid those impacted by the oil shock.

-(PH) Philippine authorities have arrested local SEC officer, cites alleged extortion - Press.

-(ID) Indonesia benchmark equity index -3.7%; IDR has also traded at yet another record low vs the USD.

-(ID) Indonesia sovereign wealth fund Danantra is planning to sell USD-denominated bonds – financial press.

North America

-(US) White House: Trump signs EO promoting advanced AI innovation and security; US to select trusted AI partners within the next 60 days; US will have access to frontier models before they're released [US Market Close].

-(US) USTR: Proposes added duties on 60 investigated economies regarding imports made with forced labor; Proposed tariffs of 10% - 12.5%, with exceptions; Australia, China, UK, Switzerland, NZ and others failed to impose some labor rules.

-(US) Apr JOLTS Job Openings: 7.618M v 6.866Me [US Market Close].

-(US) SPCX Said to target price of $135/shr in $75B IPO offering, selling 555.6M shares - US financial press, citing sources.

-(US) Fed's Hammack (voter): Reasonable to keep rates steady for now given uncertainties; Fed may need to act soon if inflation trends don’t cool; Job market data points to stability [US Market Close].

-(US) USTR Greer: Seen very good results in exports from tariffs, ‘green shoots’ in manufacturing [US Market Close].

-(US) USTR seeks public comment on the US-China Board of Trade - Statement.

-(US) US Acting Attorney General Blanche: Confirms Trump admin plans to drop $1.8B weaponization fund (as expected).

-(US) US Appeals Trade Court reportedly orders broad IEEPA tariff refunds - press.

-(US) State Department approves possible military sale of C-130 sustainment services to Vietnam worth approximately $100M - US financial press.

-(US) National Economic Council Hassett: Gasoline prices are coming down; Will continue to drop as we receive more oil from the Gulf.

-(US) Bipartisan members introduce new House bill to protect creators from AI style theft - US financial press.

-(US) US CENTCOM: Today disabled a non-compliant unladen tanker in the Arabia Gulf.

-(US) Pres Trump to sign Exec Orders Wed 3pm ET.

-(US) Fed Chair Warsh reportedly picks Paul Winfree and Daniel Heil to work as 'temporary contractors' to support policy analysis and planning - WSJ.

-(US) Weekly API Crude Oil Inventories: -6.8M v -2.8M prior.

-(US) US Supreme Court allows Alabama to use Republican-friendly US House Map in elections - financial press.

-(US) USDA: Screwworm infestation in Mexico is now 25 miles from the US border [US Market Close].

-(US) Fed Chairman Warsh: Will have "clear-eyed" talks regarding reform while following the best of Fed's traditions; the article relates to the previously announced plan to review the strategies of the Fed - memo.

-(CA) Per USMCA treaty, Canada recommends extending the trade agreement for 16 years, through 2042 [US Market Close].

-(CA) Canada PM Carney: Making progress on trade issues with U.S - comments from Ottawa [US Market Close].

-(CA) Canada Intl Trade Min Leblanc: Had a positive meeting with US Trade Rep Greer; Canada presented specific proposals to Greer; Will continue discussions next week.

-(MX) Mexico recommends extending USMCA for 16 years, in alliance with Canada's proposal [US Market Close].

-(CO) Pres. Trump: Congratulations to Colombian Presidential Candidate, “El Tigre (THE TIGER),” Abelardo de la Espriella.

-(BO) Follow up: Bolivia Defense Min reportedly resigns amid protests - Bolivia press.

Europe

-(EU) EA's Bosoni (Head of Oil Markets Division): Reopening Hormuz could take 6-8 months in best case from today; Global oil inventories could hit critical or historically low levels just ahead of the peak summer demand period if stock draws continue at their current pace [US Market Close].

-(EU) EU AI gigafactory plans under pressure due to delays and funding issues - press [US Market Close].

-(EU) ECB's Wunsch (Belgium): Iran peace deal won't derail case for ECB hike - FT.

-(UK) BOE Gov Bailey: Policymakers are facing growth and inflation tradeoff; Inflation overshoot is entirely due to events in the Gulf [US Market Close].

-(UK) BOE’s Greene: Case for interest rates hikes grows as Iran war drags on; Can't rely on tightened-curve alone; The risk of acting is less severe than of failing to act [US Market Close].

-(PL) Poland Central Bank (NBP) leaves base rate unchanged at 3.75%; As expected [US Market Close].

-(PL) Poland Central Bank (NBP): Rates were kept on hold due to geopolitical risks and their impact on economy; Reiterates may intervene in FX market - post rate decision statement [US Market Close].

-(RU) Local governor: Russia downs three drones over the Leningrad region.

-(RU) Local Governor: Drones hit Michurinsk in Central Russia's Tambov region.

-(CH) SNB Chair Schlegel: Raised readiness to intervene to deal with with overvaluation pressure on Swiss Franc due to Middle East escalation; SNB has no FX target for Swiss Franc [US Market Close].

-(EG) Egypt May PMI: 47.1 v 46.6 prior [5th straight contraction].

Middle East

-(IR) US Sec of State Rubio: Iran deal could happen today, tomorrow, or next week; We are in talks with Iran; There is a prospect that Iran has agreed to negotiate aspects of the nuclear program that they previously refused to mention in discussions - Senate panel testimony [US Market Close].

-(IR) Pres. Trump: Iran talks continue; News outlets reporting otherwise are erroneous [US Market Close].

-(IR) US CENTCOM: Iran launched several ballistic missiles toward neighbors [no mention of ceasefire].

-(IR) Iran Fars New Agency: Message exchange between Iran and U.S. to reach an MOU has stopped 'a few days ago' [US Market Close].

-(IR) IRGC: Attacked US fifth fleet headquarters with missiles and drones - Iranian Media.

-(IR) Iran's Qeshm island hit by likely projectile strikes - IRIB.

-(IR) Bahrain: Sirens has been sounded [follows recent reports related to Kuwait and Iran's Qeshm Island].

-(IR) Trump said to be pushing Iran to make firmer nuclear commitments; Wants concessions in writing from Iran; Iran previously provided verbal assurances - ABC.

-(IL) Israel Central Bank (BOI) Gov Yaron: As inflation expectations decline, this favors a more expansionary monetary policy and at faster rates [US Market Close].

-(IL) Hezbollah will not accept a partial ceasefire with Israel - press [US Market Close].

-(IL) Lebanese and Israeli officials met today in Washington D.C., U.S. - NYT.

-(KW) Kuwaiti Army: Air defenses currently intercepting hostile missile and drone attacks - State News Agency.

-(KW) US Military: Downed multiple Iranian drones attacking forces in Kuwait.

-(PK) Pakistan budget presentation expected to be delayed from Jun 5th to Jun 10th [reason not initially disclosed] – financial press.

Levels as of 01:20 ET

Nikkei 225 +3.0%; ASX 200 +1.0%; Hang Seng -1.7%; Shanghai Composite +0.5%; Kospi closed.

Equity S&P500 Futures flat; Nasdaq100 flat; DAX -0.1%; FTSE100 flat.

EUR 1.1634-1.1620; JPY 160.00-159.82; AUD 0.7183-0.7167; NZD 0.5936-0.5911.

Gold -0.4% at $4,469/oz; BTC -4.7% at $66,985, Crude Oil +1.3% at $94.93/bbl; Copper -0.3% at $6.6553/lbs.