Quiet day ‘disrupted’ by Trump 35% hit against Canada

Asia Market Update: Quiet day ‘disrupted’ by Trump 35% hit against Canada; UK fiscal pressures build; BTC new all-time high.

General trend

- Markets reversed from their bullish tone as Pres Trump announced he would impose a 35% tariff on Canadian goods in his latest letter to a US trading partner. USD/CAD spiked a Big Figure, while equities and BTC lost ground. [A US official later clarified that the Canada-Mexico USMCA goods exemption will remain in place, paring USD/CAD gains and equities / BTC recovering.

- Pres Lula of Brazil is not backing down on testing Pres Trump’s resolve, saying that Brazil is “not obliged to use the Dollar to trade”; and Trump “cannot act like he owns others”. [Lula did add that he is open to talks].

- CN/HK stocks led Asia, with Hang Seng outperforming +1.7% Asia ex-HK/CN was near flat.

- In other trade news a South Korean official said the quiet part out loud, claiming that the US has demanded South Korea join efforts to ‘curb China’. [Note: Pres Lee’s party has much closer ties to China than the previous administration of Pres Yoon]

- Japan reportedly accelerating its long process for resuming China beef exports, which have been halted since 2001 following a mad cow disease outbreak (BSE) in Japan.

- US Fed's Gooslbee admitted that since Apr 2nd "Liberation Day" tariffs the Fed is working through ‘ambiguity’ and ‘disruption’; An environment significantly differing from the Fed’s preferred focus on hard data. Also pushed back on the idea that Fed should cut rates to make govt debt cheaper - mandate is on jobs and prices.

- China PBOC fixed the yuan in the 7.14 handle for first time in 8 months. Offshore Yuan strengthened back into 7.16 handle.

- Further fiscal issues for the UK govt, with the National Audit Office estimating the cost to purchase F-35 fighter jets from the US has swollen to £71B (prior Ministry of Defense projection was £19B). Separately, UK Chancellor Reeves considering IMF recommendations that the UK reduce its frequent fiscal policy changes.

- Bitcoin continued to press back towards $117K handle, which it briefly spiked over after the US close.

- US equity FUTs mixed during Asian trading.

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

- Sat July 12th CN Jun Trade Balance.

Holidays in Asia this week

- Thurs July 10th Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.3% at 8,616.

- Australia sells A$1.0B vs. A$1.0B indicated in 2.75% Nov 2029 bonds; Avg Yield: 3.5512% v 3.5507% prior; bid-to-cover: 3.46x v 5.41x prior.

- New Zealand Jun Manufacturing PMI: 48.8 v 47.4 prior (2nd month of contraction).

China/Hong Kong

- Hang Seng opens flat at 24,033; Shanghai Composite opens +0.1% at 3,511.

- China MOF sells 2-year and 3-year bonds.

- China PBOC Advisor said to urge $209B stimulus to counter US tariffs - US press.

- China REIT market to expand as further monetary measures expected - China Securities Journal.

- Saudi crude oil supply to China for Aug set to rise to 51M bbls v 47M bbls in July, highest since 2023.

- China Foreign Minister Wang Yi: China economy showing resilience and potential.

- JPMorgan reportedly considering cutting China and India weightings in EM bond index – press [overnight update].

- China raises basic pension level by 2% on average – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1475 v 7.1510 prior (fresh 8-month strongest fix).

- China PBOC Open Market Operation (OMO): Injects CNY85B in 7-day reverse repos; Net injects CNY51B v injects CNY33B prior.

Japan

- Nikkei 225 opens +0.5% at 39,827.

- Japan Deputy Chief Cabinet Sec Tachibana: Accelerating process for resuming China beef exports.

- Japan upper house election candidates said to 'skirt' discussions related to defense spending – Nikkei.

- Japan sells ¥4.3T vs. ¥4.3T indicated in 3-Month Bills; Avg Yield: 0.4054% v 0.4264% prior; bid-to-cover: 3.76x v 4.09x prior.

Korea

- Kospi opens flat at 3,186.

- South Korea July 1-10th Exports Y/Y: 9.5% v 5.4% prior; Imports Y/Y: 1.8% v 11.5% prior; Chip exports +12.8% y/y.

- South Korea Trade official: US has demanded South Korea join efforts to 'curb China' - South Korean press.

- US said to 'show interest' in South Korea proposal related to shipbuilding and chip cooperation - Yonhap [update].

- South Korea, US, Japan Foreign Ministers to hold 3-way talks on Trump tariffs, on sidelines of ASEAN meeting in Malaysia - Korean press.

- South Korea minimum wage for 2026 to rise by 2.9% - South Korea press.

Other Asia

- Philippine Pres Marcos to meet US Pres Trump at White House on July 22nd - White House official.

- Singapore Trade Min: Aims to discuss pharma with the US, then chips [overnight update].

North America

- Google reported to agree to a cloud discount for US govt as it 'squeezes' big tech - WSJ.

- (CA) Canada PM Carney: Committed to work with the US on trade talks to revised deadline of Aug 1st - statement on X.

- *(CA) TRUMP TO IMPOSE 35% TARIFF ON GOODS FROM CANADA; cites tariff letter.

- US Pres Trump: We are just going to say to all remaining countries they are going to pay (tariffs), whether it is 20% or 15% - NBC News.

- (US) Fed's Gooslbee (voter): Before the Apr 2nd "Liberation Day" tariffs the hard data on the economy was looking 'solid'; Since then there has been potential disruption, ambiguity, that the Fed needs to resolve - CNN interview.

- (BR) Brazil Pres Lula: We are not obliged to use the Dollar to trade; Pres Trump cannot act like he owns others - TV interview.

- (US) Pres. Trump: It is very important that all Republicans adhere to my Recissions Bill - Truth Social post.

- (PE) Peru Central Bank (BCRP) leaves Reference Rate unchanged at 4.50%; as expecte.

- (US) White House trade adviser Navarro: US will raise trillions from tariff revenue.

- (US) BOFA INSTITUTE: JUNE TOTAL CARD SPENDING +0.2% Y/Y V +0.8% ON AVERAGE IN MAY; Notes it's possible that some of the acceleration in June retail spending in the BAC card data was due to tariff-driven inflation.

- (UR) US Sec State Rubio: Pres Trump disappointed there hasn't been more flexibility from Russian side regarding Ukraine; Need to see roadmap on how Ukraine conflict can conclude; Stronger sanctions on Russia is available option - comments after meeting with Russia Foreign Min Lavrov in Malaysia.

- (BR) Brazil Jun IBGE Inflation IPCA M/M: 0.2% v 0.2%e; Y/Y: 5.4% v 5.3%e.

- (US) INITIAL JOBLESS CLAIMS: 227K V 235KE; CONTINUING CLAIMS: 1.965M V 1.97ME (matches ~3.5-year high).

- (BR) Reportedly former Brazil Pres Bolsonaro is considering asking Trump to reverse tariffs against Brazil - CNN Brasil.

- (BR) Brazil Fin Min Haddad: Trump's tariff decision is purely political; US tariff threats not based on any economic rationale.

- (US) Fed's Musalem (voter): Some upside risk to inflation; Monetary policy is modestly restrictive.

- (US) TREASURY $22B 30-YEAR BOND REOPENING DRAWS 4.889% V 4.844% PRIOR; BID TO COVER 2.38 V 2.43 PRIOR AND 2.41 OVER LAST 8 REOPENINGS.

- (US) Fed’s Daly (non-voter): It's time to think about adjusting the interest rate; See two cuts in 2025; Fed has ability to restore price stability gently given state of economy - Q&A repsonses.

- (US) Fed’s Waller: The Fed holds too many long-maturity assets; Should consider shifting holdings more toward Treasury Bills over time.

Europe

- (RU) Russia Dep FM Ryabkov: New round of talks with US on bilateral issues could take place before end-Summer - Russia media.

- (UK) Chancellor (Fin Min) Reeves said to be considering IMF recommendations that UK aims to 'reduce pressure' for frequent fiscal policy changes - FT.

- (UK) UK govt's cost to purchase F-35 fighter jets has swollen to £71B (prior MoD projection £19B) - UK auditor (update).

- (IL) Israel Jun Consumer Confidence: 49 v 62 prior.

- (IE) Ireland Jun CPI M/M: 0.5% v 0.0% prior; Y/Y: 1.8% v 1.7% prior.

- (UR) Germany Chancellor Merz: Fully support European reconstruction fund for Ukraine.

- OPEC+ SAID TO BE IN TALKS TO PAUSE PRODUCTION HIKES FROM OCT 2025 AFTER ITS NEXT MONTHLY HIKE - PRESS.

Levels as of 01:20 ET

- Nikkei 225 flat, ASX 200 flat, Hang Seng +1.7%; Shanghai Composite +0.9%; Kospi +0.1%.

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

- EUR 1.1665-1.1708; JPY 146.4-147.18; AUD 0.6556-0.6596; NZD 0.6008-6043.

- Gold +0.6% at $3,345/oz; Crude Oil +0.3% at $66.77/bbl; Copper -0.8% at $5.5795/lb.