No change in Middle East status

Asia market update: No change in Middle East status; KR BOK hikes as KR VOL continues; TSMC results due; CN World AI Conference July 17-21.

General trend and developments

- Not much change in the Middle East as Iran continues to strike out at what it says are US bases in the region, while the US continued to batter Iranian military targets, with further escalation (such as Kharg Island) said to be on the table. Crude Oil prices have not shifted in in two days now, with WTI in and around $80/bbl.

- Bank of Korea raised rates by 25bps today, as expected, in its first hike in three and a half years. Gov Shin defended the decision not to hike at the May meeting, saying that the data now justifies the hike and emphasizing that the AI boom is a major driver of stronger growth outlook. However, following on from Pres Lee’s comments yesterday that the South Korean stock market is “quite unstable”, the Korean Financial Services Commission (FSC) is holding emergency macroeconomic and financial meetings today to address the market volatility, and will soon announce steps on single, leveraged ETFs.

- Kospi jack-in-the-box volatility continued today, at its worst down almost as much as yesterday's stellar gains. Nikkei also soggy -2.5%, with the Hang Seng outperforming Asia today, +2.5%, ahead of China's AI Conference tomorrow (see below).

- Meanwhile, Japan Fin Min Katayama followed through again on making JGBs more broadly available by promising to unveil new bond products for individuals “ASAP“, as JP long-end yields ticked up +3-5bps.

-Taiwan Semi’s Q2 results due at the time of this Update’s release, to be followed by FY26 updated guidance.

- Earlier, US Fed rate hike probabilities at end-July fell further to just 11% as soft June PPI data backed up the soft CPI data yesterday.

- Nvidia CEO Jensen Huang in Tokyo today announced a series of Nvidia partnerships with Japanese firms, including on "Physical AI" and Sovereign AI initiatives alongside the Japanese government and tech partners like SoftBank, Hitachi, Omron, Fujitsu, Fanuc, Yasakawa, Kawasaki Heavy, Mitsubishi Heavy.

- However, Huang is not expected to attend the China World AI Conference/WAIC in Shanghai, starting tomorrow, July 17-21st. Pres Xi to keynote in his first attendance at the conference, signaling the growing priority Beijing places on AI to drive economic growth, technological competitiveness and global rule-setting. Xi is expected to emphasize open-source AI as a public good to challenge US technology dominance. Huawei expected to unveil its largest Ascend SuperPoD AI computing system, that operates independently of US chips, while Chinese chipmakers including Biren and MetaX would also release new "supernode" computing clusters. Ahead of the event, Chinese press has continued to hype up China’s ‘AI-related advantages’, such as AI token exports emerging as a new "growth engine" for China, along with China’s low-cost, open-weight models.

- Following on from China’s “data dump” yesterday, credit expansion such as Aggregate Financing and New Yuan Loans remained weak, reflecting the structural shift away from traditional debt-fueled growth. With households and corporations hesitant to borrow and government bond issuance slowing, capital flows into the real economy are still failing to meet targets.

- Aussie miner BHP fell -2.5% on weaker copper and iron ore output y/y, with a rise in energy coal output and every asset expected to within unit cost guidance preventing further blushes.

- Apple received Beijing's approval to roll out iPhone AI in China with Alibaba (+4.8%) and Baidu (+1.6%).

- US transportation company J.B. Hunt up nearly +8% after the bell after the close delivered a significant beat on both the top and bottom lines on tightened truckload capacity and structural cost reductions driving strong demand.

- US equity FUTs flat during Asia trading.

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

-Thu 16th July: UK May GDP & Trade Balance, (Thu night, US Jun Advance Retail Sales).

-Fri 17th July: MY Q2 Advance GDP & Jun CPI, EU Jun Final CPI, (Fri night, US Jun Housing Starts, US Jun Industrial Production, US July Michigan Prelim Consumer Sentiment).

Holidays in Asia this week

-No holidays in Asia this week.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens +0.2% at 8,855.

-(AU) Australia July Consumer Inflation Expectation: 4.7% v 5.5% prior [lowest level since Jan, pre-Iran war].

China/Hong Kong

-(CN) Shanghai Composite opens -1.1% at 3,912; (HK) Hang Seng opens +0.6% at 24,825.

-(CN) China Q2 GDP Sectoral breakdown: Real Estate, -0.2% y/y (v -0.1% prior); IT and Software sector +10.8% y/y.

-(CN) USTR Greer: China is living up to its soybean purchase commitments.

-(CN) Tier 1 US broker expects China Politburo to signal stronger easing rhetoric, leaders are expected to maintain their strategic focus on areas including high-tech sectors – US financial press.

-(CN) China liquidity support is ‘intact’ despite credit swings [follows weaker monthly bank lending data] – PBOC-backed Financial News.

-(CN) Follow Up: China tightens bank rediscount bill market with rate floor – Chinese press.

-(CN) AI token exports emerge as new "growth engine" for China - China Securities Daily.

-(CN) Follow up: US Senate bill said to be seeking to curb US reliance on China drug industry - SCMP.

-(CN) SCMP: As US AI costs soar, global businesses pivot to China low-cost, open-weight models [the commentary comes ahead of the Shanghai World Artificial Intelligence Conference (WAIC) between Jul 17th-20th].

-(CN) China said to seek to curb new bond sales by LGFVs with increased debt - financial press.

-(CN) China PBOC sets the yuan mid-point at 6.7909 v 6.7910 prior.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY626B in 7-day Reverse Repos; Net injects CNY616B v injects CNY412B prior.

-(HK) Syngenta $5B HK IPO said to face fresh delays; 2027 now seen as more likely due to agricultural markets volatility - US financial press.

Japan

-(JP) Nikkei 225 opens -1.2% at 67,900.

-(JP) Japan Fin Min Katayama: Will improve attractiveness of JGBs for individuals; No gap in view that broader JGB investor base is key; Aim to unveil new bond products for individuals ASAP - Parliamentary Comments.

-(JP) BoJ Exec Dir Nakamura: Delay in BoJ policy adjustment may weigh on economy - Parliamentary Comments.

-(JP) BOJ Jun Quarterly Survey: 90.4% of Japanese households expect higher prices in 12-month time.

-(JP) Japan to raise shareholding threshold to call an EGM up to 5% (v 3% prior) - Nikkei.

-(JP) Japan to introduce income-linked benefits in FY29 [economic blueprint could be released on Jul 21st] - Japan press-(JP) Japan sells ¥2.8T vs.

¥2.8T indicated in 12-Month Bills; Avg Yield: 1.2066% v 1.1583% prior; bid-to-cover: 4.01x v 3.36x prior.

-(JP) Japan sells ¥699B vs ¥700B indicated in Liquidity Enhancement Auction.

-(JP) Japan releases weekly flows data [period ended July 10th]: Foreign buying of Japan equities: +¥745.6B v -¥21.3B prior; Japan buying of foreign bonds: +¥1.1T v -¥217.5B prior.

-(JP) Japan PE fund Advantage said to seek $1.98B in economic security deals - US financial press.

Korea

-(KR) Kospi opens -4.4% at 6,961.

-(KR) Bank of Korea (BOK) raises 7-day repo rate by 25bps to 2.75%; as expected.

-(KR) Bank of Korea (BOK) Gov Shin: AI boom is major driver of stronger growth outlook - post rate decision press conference.

-(KR) SKHY South Korea considers FX fund purchases of SK Hynix ADR-listing proceeds - Daily.

-(KR) South Korea FSC Head: Will announce steps on single ETFs [no time frame specified].

-(KR) South Korea to release statement on leveraged ETFs on 4pm ET, Thursday 16th July, 2026 - FSC.

-(KR) Follow Up: South Korea to hold meeting on markets on Thursday afternoon - Ministry.

-(KR) Korea exchange activates sidecar following Kospi falling by -5%, programme trading halted for 5 minutes.

-(KR) Korea Exchange activates sidecar to halt Kosdaq 150 FUTs program selling after falling -6%.

-(KR) Follow up: MBK Partners Chairman: To guarantee supermarket chain Homeplus DIP if finalized.

Other Asia

-(IN) India Jun Unemployment Rate: 5.5% v 5.5% prior [EU market close].

-(IN) India raises taxes again on diesel and jet fuel exports by INR7/liter; Reduces the petroleum export duty from INR4/liter to INR2.5/liter (update).

-(IN) India May Current Account Balance: -$2.0B v +$4.7B prior.

North America

-(US) Jun PPI final demand M/M: -0.3% V 0.0%E; Y/Y: 5.5% V 6.2%E; PPI (ex-food/energy) M/M: 0.2% v 0.3%e; Y/Y: 4.7% v 5.1%e [US market close].

-(US) Fed Beige Book: Overall economic activity increased at a slight to modest pace in eleven of the twelve districts; one district reported no change [US market close].

-(US) Fed's Williams (moderate, voter): With inflation running high, it is imperative that we restore it to 2% goal on a sustained basis; Encouraging reasons to expect that inflation has peaked and should edge down in coming quarters [US market close].

-(CA) Bank of Canada (BOC) leaves interest rates unchanged at 2.25%; as expected; Drops reference to consecutive hikes and cuts [US market close].

-(US) House GOP releases budget for $95B emergency spending; Allows $12B for farm aid and $73B for Iran war - press [US market close].

-(US) US Fed Chair Warsh: Recent inflation data is an imperfect gauge of underlying inflation, but any central bank is happy when the data goes in the right direction - Q&A [US market close].

-(US) Fed's Cook (voter): There is reason to think disinflation will occur; Sees risks that price pressures will persist due to tariffs, the Middle East conflict, and AI investment [US market close].

-(US) MBA Mortgage Applications w/e July 10th: -2.7% v -2.2% prior [US market close].

-(US) JULY EMPIRE MANUFACTURING: 15.6 V 9.2E; New Orders: 22.2; Prices Paid: 52.3 v 61.0 prior [US market close].

-(US) DOE CRUDE: -1.7M V -2.6ME; GASOLINE: -1.5M V -0.8ME; DISTILLATE: +4.6M V +0.1ME [US market close].

-(US) USTR Greer: Moving quickly on 301 probes, which are on their own track; We can take action fairly quickly, within the next couple of weeks - US financial press interview.

-(US) Follow up: Senior US Trade Official: US to exempt certain energy products from Brazil tariffs; To tariff ethanol at 25%.

-(US) US, South Korea, Japan reaffirm trilateral security cooperation - statement.

-(US) US Treasury's dividend tax deduction limits said to be struck down - press.

-(US) NY 'buy now, pay later' companies hit with credit card rules - US financial press.

-(US) Said to consider $100K bond for some green card applicants abroad - press.

-(US) NY Governor: Over 100K N95-style masks to be made available [amid NY heatwave].

-(US) Former Fed Adviser Rogers gets 3 years in prison in relation to China secrets case – US financial press [update].

-(US) FAA extends DFW ground stop citing staffing issues.

-(US) Fed's Musalem (non-voter) does not comment on monetary policy: - Welcome remarks before a Homer Jones Memorial Lecture event, St. Louis, MO - update.

-(BR) Brazil May IBGE Services Volume M/M: -0.4% v -0.1%e; Y/Y: 0.4% v 0.5%e [US market close].

-(BR) Brazil Government: Rejects US tariffs - Statement.

-(BR) US Sec State Rubio: Lula's policies bad for Americans, Brazilians.

-(CL) Chile Government cuts 2026 GDP growth estimate to 1.8% v 2.1% prior.

-(NG) Nigeria Jun CPI Y/Y: 15.9% v 15.9% prior.

Europe

-(EU) EU Commission is set to unveil a series of decisions against Google over the coming week; The enforcement action is set to also include the threat of daily penalty payments and fresh regulatory orders under the Digital Markets Act (DMA) - FT [EU market close].

-(DE) German Chancellor Merz: US tariffs have badly damaged German economy; Govt has received different proposals for the debt brake reform; Germany’s credit rating is not at risk [EU market close].

-(FR) France Central Bank (BdF) Chief Moulin: ECB needs to be ready for any eventuality on inflation; Must avoid snowball effect on debt; It's very important to reduce France's deficit [EU market close].

-(FR) US Trade Rep Greer: France in talks with U.S to avoid drug price probe - Politico [US market close].

-(UR) Ukraine Pres Zelenskiy: Nominates Sergii Koretskyi as PM following Ukrainian PM Svyrydenko resignation.

-(RU) Russia cancelled planned issuance of weekly OFZ Bond auction.

-(PL) Poland Jun YTD Budget Balance: Level (PLN): -123.7B v -108.2B prior.

-(SE) Sweden Jun PES Unemployment Rate: 3.6% v 3.4% prior.

-(NL) Netherlands Jun Unemployment Rate: 3.8% v 3.9%e.

Middle East

-(IR) Reportedly US Pres Trump considers expanding military ops in Iran; Discussed seizing Kharg Island in situation room meeting yesterday; No final decision has been made - WSJ [US market close].

-(IR) CENTCOM: Completed latest strikes against Iran; Ended strikes against Iran at 9pm ET - post on X.

-(IR) US CENTCOM: Began another wave of attacks on Iran from 06:00 ET (10:00 GMT) [US market close].

-(IR) IEA Chief Birol: Markets 'nervous' about renewed Iran conflict - BTV Interview in Colorado.

-(IR) Sounds of two explosions heard East of Bandar Abbas in Southern Iran - Iran State Media.

-(IR) Pres. Trump: Iran has allowed an American Citizen, who was wrongfully detained in December of 2024 under the “pre... - post on Truth Social.

-(IR) IRGC: Targeted early-warning radar system at Ali Al Salem air base in Kuwait in missile and drone attack - State Media.

-(IR) Kuwaiti Army: Kuwait air defenses responding to 'hostile drone threats'.

-(IR) Bahrain Interior Ministry: Sirens sound in Bahrain.

-(IR) Iran Air defenses activated in Tehran to counter "hostile threats" - MEHR.

-(IL) Israel Jun CPI M/M: 0.0% v -0.1%e; Y/Y: 1.6% v 1.6%e [EU market close].

-(SA) BAESY US approves proposed $1.96B weapons system sale to Saudi Arabia; BAE Systems will be the main contractor.

Levels as of 01:20 ET

Nikkei 225 -2.6%; ASX 200 flat; Hang Seng +2.0%; Shanghai Composite -0.9%; Kospi -4.8%.

Equity S&P500 Futures +0.2%; Nasdaq100 +0.2%; DAX +0.1%; FTSE100 -0.3%.

EUR 1.1475-1.1460; JPY 162.22-162.03; AUD 0.7011-0.6986; NZD 0.5857-0.5834.

Gold -0.8% at $4,028/oz; BTC -0.2% at $64,898; WTI Crude Oil -0.3% at $79.38/bbl; Copper +0.5% at $6.4150/lbs.