South Korea AI Investment – Iran ceasefire breakdown

EU mid-market update: South Korea AI Investment; Iran ceasefire breakdown; UK's expected next PM Burnham to make 1st big speech; Warsh speech and US jobs report later this week.

Notes/observations

- 11-day ceasefire fractured over the weekend in a round of tit-for-tat strikes: the US hit the Hormuz area and Sirik Island after an Iranian attack on a commercial vessel, Iran fired missiles and drones toward Bahrain and Kuwait, and Trump ordered fresh strikes while threatening to "complete the job." Market reaction nonetheless stayed contained, as both sides reportedly agreed to stand down ahead of technical talks in Qatar on Tuesday, with vessels moving freely. Brent hovered near $72, down from Friday. Prevailing view is that neither side, especially the US, wants a full resumption, so a non-linear path toward détente remains base case, with the medium-term oil supply outlook skewed to expansion.

-UK data was soft across the board: May mortgage approvals missed at 56.2K (63.0K expected), net consumer credit was light at £1.7B, net lending undershot at £2.9B (£4.2B expected), and M4 eased to +4.3% y/y. Attention now turns to Andy Burnham - framed as the likely next PM - who gives his first economic keynote at 1130 BST in Manchester, with trailed focus on devolving tax and spending decisions to local authorities. Gilt yields edged up into the speech, the market is also watching for a new Chancellor appointment, and sterling held steady against the euro.

- Korean "Great Leap Forward" announcement landed with hard numbers. Samsung Chairman Jay Lee laid out a 2026-2040 roadmap, Gwangju as a chip production base, an HBM fab in Chungcheong, plus robotics in Gumi, bio in Incheon, batteries in Ulsan and substrates in Busan, building on last week's reported ~KRW1,000T (~$647B) ten-year group commitment, a clear step up from the prior $309B plan. SK Group went larger still: ~KRW1,000T (~$649B) for AI data centres and KRW1,100T (~$714B) for chips, including 15GW of domestic AI capacity, with SK Hynix alone earmarking ~KRW400T (~$260B) for a new cluster. The equity reaction was sharply split, with the KOSPI off around 2% while the KOSDAQ surged ~7%, triggering a sidecar and a five-minute programme-trading halt, and the won continued to lag the region on persistent outflows.

- AI, not Iran, remains the dominant market narrative: the BIS annual report warned of "exuberance" and bubble risk on $1T+ of hyperscaler capex through 2026, while commentary flags the pick-and-shovel versus hyperscaler trade nearing a breaking point (citing Oracle's >100% capex/revenue guidance and Micron's unsustainable ~85% margins). Some analysts expect global memory supply-demand gap to widen significantly through 2027, with 15–20% of consumer electronics memory capacity projected to shift to data centers in 2027, putting intense pressure on LPDDR supply for devices like iPhones.

- SpaceX CEO Musk described the upcoming Grok v9 foundation model (1.5T parameters) as a strong, reliable workhorse expected to perform at or above Claude Opus levels (he has not specified which version of Opus), with Grok 4.5 already in private beta at SpaceX and Tesla showing promising early results that are being further boosted by ongoing RL and daily harness improvements. He notes major engineering help from the Cursor team, and a significantly better 2T-parameter run (with vastly improved training data and recipe) that is scheduled to finish in late July for an August release — promising gains well beyond just the parameter increase. Musk promised even bigger leaps are expected in about three months once the entire training and inference stack is rewritten and massively simplified in C/C++, deeply optimized for the GB300, while SpaceX plans to release completely new trained-from-scratch models every month this year.

- As Anthropic’s Fable 5 said to be re-released this week, Chinese Claude token gray market reveals that the real prize is no longer the frontier model but the router acting as a shadow control plane. Operators use account pools, reverse relays, and quota arbitrage to turn Claude into a commoditized input behind local billing, blending, caching, and telemetry harvesting—especially valuable now that Claude Code provides rich, stateful developer workflow data. This dynamic lets Chinese routers learn precisely when to avoid expensive frontier calls, turning every request into substitution experiments that close the capability gap through orchestration rather than raw intelligence, while exposing serious security risks as malicious relays can manipulate agent actions downstream. Ultimately, the AI economy is unbundling from below: labs retain model prestige, but routers capture rent, demand control, and training data, previewing a future where knowing when to think matters more than raw thinking power.

- Calendar is heavy: Sintra is underway with Lagarde today, Eurozone CPI lands Tuesday and US jobs Thursday, and Spanish CPI ran hot at 3.2% y/y as Spain lifted its 2026 GDP forecast to 2.6%. TTN Reminder: U.S. Supreme Court is in its final week of the term and could rule as early as today (June 29) on whether President Trump can fire Fed Governor Lisa Cook — the first time a president has tried to remove a sitting governor — after lower courts blocked the dismissal citing "for cause" removal protections.

- M&A stayed busy with the confirmed BT–Verizon 50:50 JV ($625M equalization payment), Persistent/Nagarro, Fortum/Elmera and Ipsen/Kartos, alongside reports BAT will cut roughly a fifth of its workforce.

- Finally, the standout geopolitical wildcard is Russia rather than Iran: Ukraine's strikes have forced a Crimea state of emergency and are disrupting Russian fuel supply, raising the risk of unpredictable escalation from Moscow. This weekend, Putin and Belarus’s Lukashenko held unannounced one-on-one talks at Putin’s Valdai residence. The timing matters because it came amid heightened Ukraine-Belarus tensions and recent Ukrainian claims that Belarus-linked equipment used to assist Russian drone strikes had stopped operating after Kyiv pressure. The meeting looks broadly in line with recent expectations that Moscow and Minsk would coordinate on security, especially after May Russia-Belarus nuclear drills and earlier Russian-Belarus defense talks, but the secrecy/no-statement format makes it more notable than routine diplomacy.

- Asia closed mixed with Hang Seng outperforming +1.6%. EU indices -0.4% to +0.2%. US futures +0.3-1.0%. Gold -0.9%, DXY -0.1%; Commodity: Brent +1.0%, WTI +1.3%; Crypto: BTC -0.7%, ETH -0.3%.

Asia

- Japan Retail Sales M/M: +1.9% v -0.5%e; Y/Y: 5.3% v 3.0%e.

- Japan’s government expected to urge the BOJ to maintain “appropriate” monetary policy,

- China’s PBoC central bank launched its first overnight reverse repo operation without initially revealing the interest rate (**Note: later revealed at 1.25% v 1.35%e). The 7-day rate was held steady at 1.40%.

- RBA Assist Gov Kent noted that RBA would be better prepared to respond to next crisis.

- Australia Treasurer Chalmers noted that inflation was expected to peak lower than previously forecast at around 4.25% mid-year.

Global conflict/tensions

- Weekend saw US hit back at Iranian military targets in response to attacks on commercial shipping.

- US and Iran agreed to halt military attacks for to meet in Qatar on Tuesday for technical talks aimed at resolving tensions over the Strait of Hormuz.

- Hezbollah leader Naim Qassem rejected the U.S.-brokered Lebanon-Israel security agreement.

Europe

- Bank of International Settlements (BIS): AI-led market slump could have larger impact than previous busts.

Americas

- Fed’s Barkin (non-voter): Inflation was too high but saw tentative signs that price pressures might moderate soon.

- S&P affirmed US sovereign rating at AA+; Outlook Stable.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.11% at 635.20, FTSE -0.20% at 10,487.06, DAX -0.08% at 24,661.74, CAC-40 -0.40% at 8,351.54, IBEX-35 -0.28% at 19,371.15, FTSE MIB +0.22% at 51,378.50, SMI -0.23% at 14,139.70, S&P 500 Futures +0.68%].

Market focal points/key themes: European indices opened mixed with a downward bias that was maintained through the early part of the session; Malta closed for holiday; flare up in US-iran tensions over the weekend weighs on risk appetite; outperforming sectors include technology and communication services; while materaisl and real estate are among the sectors leading to the downside; BATS weighing on consumer stables sector after job cuts; BT and Verizon enter JV for international business; Humana receives takeover offer from Ambea; Ipsen acquires Kartos Therapeutics; no major earnings expected in the upcoming US session.

Equities

- Industrials: Barratt Redrow [BDRW.UK] -2.5% (UK mortgage data), Airbus [AIR.FR] -1.0% (CFO comments), Mercedes-Benz [MBG.DE] -1.5% (analyst upgrade).

- Technology: STMicroelectronics [STM.FR] +3.5% (SK Hynix and Samsung announce big investments; Fable 5 model could be re-released this week), Prosus [PRX.NL] +2.5% (earnings), Trustpilot [TRST.UK] +5.0% (Shopify partnership).

Speakers

- BOE’s Pill (chief economist, hawkish dissenter) noted that BOE was still experimenting with scenarios in external presentations.

- Spain govt said to raise 2026 GDP growth forecast from 2.2% to 2.6%.

- Iran Dep Foreign Min Gharibabadi stated that held its 1st joint committee meeting with Oman regarding Strait of Hormuz.

- Iran Pres Pezeshkian reiterated stance that $6B out of $12B of Iranian assets in Qatar should be released.

Currencies/fixed income

- USD was a touch softer as the trading week began. Focus remains on the ceasefire arrangement between US & Iran as both sides exchanged skirmishes. Tensions were toned down as both sides agreed to hold technical talks on Tuesday in Qatar.

- EUR/USD inched back above the 1.14 level as initial EU Jun inflation data proved to be hoter then expected. The region will see a plethora of CPI data in coming days with Germany and France on Tues, EU region on Wed. ECB recent rhetoric had previosuly noted the need to continue rate hikes to ensure that inflation moves back to target. Dealers noted that recent ECB communication shifted somewhat to a more cautious direction due to falling oil prices following the US-Iran ceasefire agreement.

- USD/JPY continue to hover near 40-year highs. Recent Japanese CPI data likely to keep BOJ on the hike path but sentiment not helping the yen currency at this time. Recent BOJ rhetoric continued to skew hawkish but dealers noted that recent Fed speak continued to note upside risks from inflation as well.

- 10-year German Bund yield last at 2.85%, France 10-year Oat at 3.63% and 10-year Gilt yield at 4.74% 10-year Treasury yield: 4.37%; 10-year JGB: 2.63%.

Economic data

- (FI) Finland Jun Consumer Confidence: -5.3 v -10.5 prior; Business Confidence: 4 v 3 prior.

- (SE) Sweden May Trade Balance (SEK): +2.9B v -8.4B prior.

- (FI) Finland Apr Final Trade Balance: -€0.3B v -€0.3B prelim.

- (ES) Spain Jun Preliminary CPI M/M: 0.6% v 0.4%e; Y/Y: 3.2% v 3.0%e.

- (ES) Spain Jun Preliminary CPI EU Harmonized M/M: 0.6% v 0.6%e; Y/Y: 3.6% v 3.4%e; CPI Core Y/Y: 2.9% v 3.0%e.

- (ES) Spain May Adjusted Retail Sales Y/Y: 1.3% v 0.0% prior; Retail Sales (unadj) Y/Y: -0.4% v +0.2% prior.

- (TR) Turkey Jun Economic Confidence: 98.9 v 97.2 prior.

- (EU) Euro Zone May M3 Money Supply Y/Y: 3.2% v 2.7%e.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 474.7B v 471.9B prior; Domestic Sight Deposits: 440.6B v 437.5B prior.

- (UK) May Net Consumer Credit: £1.7B v £1.8Be; Net Lending: £2.9B v £4.2Be.

- (UK) May Mortgage Approvals: 56.2K v 63.0Ke.

- (UK) May M4 Money Supply M/M: 0.1% v 0.2% prior; Y/Y: 4.3% v 4.5% prior; M4 (ex-IOFCs) 3-month annualized: 6.0% v 6.4% prior.

- (PT) Portugal Jun Consumer Confidence: -25.9 v -27.1 prior; Economic Climate Indicator: 2.8 v 2.7 prior.

- (EU) Euro Zone Jun Economic Confidence: 95.0 v 94.3e; Industrial Confidence: -7.7 v -7.2e; Services Confidence: 3.2 v 2.8e; Consumer Confidence (final): -17.7 v -17.7 prelim.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3-month Bills.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- (EU) ECB Forum on Central Banking in Sintra.

- 05:30 (BE) Belgium Jun CPI M/M: No est v -0.1% prior; Y/Y: No est v 4.1% prior.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (PT) Portugal May Retail Sales M/M: No est v -1.5% prior; Y/Y: No est v 4.3% prior.

- 06:00 (IE) Ireland May Retail Sales Volume M/M: No est v -0.2% prior; Y/Y: No est v -0.5% prior.

- 06:00 (BE) Belgium Debt Agency (BDA) to sell €2.6-3.0B in 2034, 2041 and 2056 OLO Bonds.

- 06:00 (RO) Romania to sell 7.9% 2038 Bonds.

- 06:00 (NO) Norway announcement on upcoming bond issuance (held on Wed).

- 06:00 (IL) Israel to sell combined ILS2.8B in 2030, 2031, 2034, 2035 and 2052 bonds (6 tranches).

- 06:30 (IN) India May Industrial Production Y/Y: 4.5%e v 4.9% prior.

- 06:30 (UK) Labour MP Burnham speech in Manchester on devolution and the economy.

- 07:00 (BR) Brazil Jun FGV Inflation IGPM M/M: -0.5%e v 0.8% prior; Y/Y: 3.2%e v 1.95% prior.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 07:30 (BR) Brazil May Total Outstanding Loans: No est v 7.245T prior; Outstanding Loans M/M: No est v 0.3% prior; Personal Loan Default Rate: No est v 7.2% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 08:30 (BR) Brazil May Central Govt Budget Balance (BRL): -53.2Be v +25.2B prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.6-7.2B in 3-month, 6-month and 12-month bills.

- To sell €3.1B in 3-month bills (13 weeks).

- To sell €0.5B in 3-month bills (14 weeks).

- To sell €1.9B in 6-month bills.

- To sell €1.7B in 12-month bills.

- 10:30 (US) Jun Dallas Fed Manufacturing Activity: 1.0e v 0.4 prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 13:30 (EU) ECB chief Lagarde in Sintra.

- 15:00 (AR) Argentina Apr Economic Activity Index (Monthly GDP) M/M: No est v 3.5% prior; Y/Y: 3.3%e v 5.5% prior.

- 16:00 (US) Weekly Crop Progress Report.

- 19:00 (KR) South Korea May Industrial Production M/M: +0.5%e v -0.7% prior; Y/Y: 3.6%e v 1.5% prior; Cyclical Leading Index Change: No est v 0.6 prior.

- 19:01 (UK) Jun BRC Shop Price Index Y/Y: 1.3%e v 1.2% prior.

- 19:01 (UK) Jun Lloyds Business Barometer: 48e v 47 prior; Own Price Expectations: No est v 56 prior.

- 19:30 (JP) Japan May Jobless Rate: 2.5%e v 2.5% prior; Job-To-Applicant Ratio: 1.18e v 1.18 prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 72.8 prior.

- 19:50 (JP) Japan May Preliminary Industrial Production M/M: 0.7%e v 0.5% prior; Y/Y: 1.3%e v 2.0% prior.

- 21:00 (NZ) New Zealand Jun ANZ Business Confidence: No est v 10 prior; Activity Outlook: No est v 25.6 prior.

- 21:00 (PH) Philippines May Trade Balance: -$5.2Be v -$6.0B prior; Exports Y/Y: 5.5%e v 6.3% prior; Imports Y/Y: 19.6%e v 22.4% prior.

- 21:30 (AU) Australia RBA Jun Minutes.

- 21:30 (CN) China Jun Manufacturing PMI (Gov Official): 50.1e v 50.0 prior; Non-manufacturing PMI: 49.9e v 50.1 prior; Composite PMI: No est v 50.5 prior.

- 21:30 (AU) Australia May Private Sector Credit M/M: 0.6%e v 0.7% prior; Y/Y: No est v 8.0% prior.

- 22:00 (SG) Singapore May M1 Money Supply Y/Y: No est v 9.2% prior; M2 Money Supply Y/Y: No est v 5.5% prior.

- 23:00 (TH) Thailand Central Bank to sell THB65B in 3-month bills.

- 23:35 (JP) Japan to sell 2-Year JGB Bonds.