Tension on trade deals ratchets up amid signs of Apr-May front-loading

Asia Market Update: Tension on trade deals ratchets up amid signs of Apr-May front-loading; Nikkei 40K amid JP soft data; Focus on US May Core PCE.

General trend

- Prior indications that July 9th may not be a hard deadline for many countries’ US trade deals was given credence by the White House today stating "Pres Trump can pick and choose". [Comes on the back of US Treas Sec Bessent on Jun 11th saying the US is “prepared to "roll the date forward for trading partners negotiating in good faith”, and Japan’s Trade Rep Akazawa on Jun 19th claiming “July 9th is NOT the deadline for Japan-US trade talks”].

- US Commerce Sec Lutnick remains confident of a 'bunch' of trade deals in the next week or so, including the EU and some elements of a China deal.

- Overall increased maneuvering from major US trading partners such as the EU, Asian and LATAM countries as the July 9th deadline approaches.

- Gold fell 1%, testing three week lows below $3,300/oz.

- Unexpectedly soft inflation-related data out of Japan, with Tokyo’s June CPI below estimates across all figures (weakest annualized pace since March) and also weak May retail sales, with the monthly retail number in the negatives. JPY/USD weaker into the figures but in the end the dollar only slightly higher from the start of the session.

- Of interest, a former BOJ official (Atago) criticized the BOJ of using '"obscure" and 'fuzzy logic'

- Despite yesterday’s strong 2-year JGB auction, last night’s OIS probability of a Japan BOJ October rate hike ticked up slightly to 41%, and December up to 58.5%.

- Two Japanese companies, Stanley Electric and Round One, now feeling confident enough to guide again as the recently-ended quarter’s earnings season gets underway. [Note: Mazda withheld guidance in prior quarter, while trading houses such as Mitsubishi and Sumitomo provided cautious forecasts. Toyota and Honda gave guidance, but estimated significant hits to profits due to tariffs].

- Nikkei strong again today, alone in Asia - led by tech stocks - past 40K for first time since Jan 27th and set to set to post biggest weekly gain (4.8% at time of writing) in 9 months.

- Toyota saw its largest ever gain for month of May Global Vehicle Sales:+7% y/y. Front-loading responsible (?) as US exports up a stunning +23% y/y. Comes as Japan also saw a rebound in Jun 1-10 exports versus the fall in May.

- Nike [+10% after hours] guidance also helped by front-loading? [** Reminder: on Jun 20th China manufacturers said to receive early orders related to Christmas].

- Like yesterday, Kospi again under-performed Asia, -0.8%, halting its stellar advance since the Jun 3rd election win by Pres Lee. (**Note that the Kospi was up a stunning 38% in just 11 weeks from its 2,286 low on April 8th to a high of 3,154 just a couple of days ago).

- Tokyo Electron’s CEO expressed confidence that its chip tooling technology lead vs China rival tool makers is set to widen, despite China's investment of billions of dollars.

- China May Industrial Profits plummeted -9.1% y/y, worst fall since Oct 2024.

- Australia ASX unusually strong out the gate (+0.6%) today and approaching the all-time-high recorded a couple of week back, led by Resources sector,+2.3% [BHP +2.1, Rio Tinto +1.7%, Fortescue +2% Lynas Rare Earths +2.4%]. Also Copper prices overnight >$5 again, with Copper miner Sandfire +3%. However, ASX fell into negative territory as the session continued.

- Significantly stronger New Zealand Jun Consumer Confidence, with Household inflation expectations lifted 0.3%, the highest in two years.

- As the Israel-Iran ceasefire continues to hold Iran says it has no intention of hosting the IAEA for nuclear inspections.

- US equity FUTs +0.1% during Asian trading.

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

- Fri Jun 27th (Fri night US May Core PCE).

Holidays in Asia this week

- Fri Jun 27th Malaysia, Indonesia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.6% at 8,601.

- Australia FY Underlying Cash Deficit to end-May (A$) 5.5B.

- New Zealand Jun ANZ Consumer Confidence Index: 98.8 v 92.9 prior; NZ confidence data: Household inflation expectations lifted 0.3%pt and are the highest in two years.

China/Hong Kong

- Hang Seng opens +0.5% at 24,451; Shanghai Composite opens +0.1% at 3,450.

- China May Industrial Profits Y/Y: -9.1% v 3.0% prior (lowest since Oct 2024).

- Hong Kong May Total Gold exports 57.8Mt v 58.6Mt m/m.

- Kura Sushi: To exit mainland China and close all stores – Nikkei.

- China PBOC to strengthen credit support for private cos, enhance 'observation' on loan fund flows – Press.

- China MOF (CNY): May Net Local Government Debt Issuance: 491.9B; Net local gov't special bond issuance: 443.2B.

- Reportedly two weeks after China promised the U.S. it would ease the exports of rare-earth magnets, Chinese authorities are dragging out approval of Western companies' requests for the critical component [overnight update].

- China said to start issuing rare earth export licenses to European companies - SCMP (update).

- Hong Kong May Trade Balance (HKD): -27.3B v -14.0Be [overnight update].

- China PBOC sets Yuan reference rate: 7.1627 v 7.1620 prior.

- China PBOC Open Market Operation (OMO): Injects CNY526B in 7-day reverse repos; Net injects CNY365B v injects CNY306B prior.

Japan

- Nikkei 225 opens +0.8% at 39,858.

- JAPAN MAY RETAIL SALES M/M: -0.2% V 0.3%E; Y/Y: 2.2% V 2.5%E.

- JAPAN JUN TOKYO CPI Y/Y: 3.1% V 3.3%E; CPI (EX-FRESH FOOD) Y/Y: 3.1% V 3.3%E [slowest annualized pace since Mar]; CPI (ex-fresh food/energy) Y/Y: 3.1% v 3.3%e.

- Japan May Jobless Rate: 2.5% v 2.5%e.

- Japan Jun 1-10 Exports Y/Y: +1.8%; Imports +4.9% (provisional).

- BOJ: Japan end-Q1 Household Assets at ¥2,195T, -1.8% y/y; Household Assets in Stocks -3.9% - Quarterly Flow of Funds report.

- Japan BOJ said to be "zooming in" on "obscure" underlying financial trends as it uses 'fuzzy logic' - financial press, citing former BOJ official Atago.

- Japan Fin Min Kato: To closely communicate with relevant authorities to prevent trade of illegal drugs, including Fentanyl; will continue cautious consideration of possibility of buybacks of previously issued bonds.

- Tokyo Electron CEO: Co's chip tool technology lead vs China rival tool makers is set to widen; despite China's investment of billions of dollars - financial press.

- Toyota Reports May Group Global Sales Vols: 955.5K units, +7.5% y/y; group global production: 907.0K units, +0.8% y/y.

- May Global Vehicle Sales: +6.9% y/y [largest gain 'ever' for the month of May.].

- Japan sells ¥4.4T vs. ¥4.4T indicated in 3-Month Bills; Avg Yield: 0.4215% v 0.4207% prior; bid-to-cover: 3.01x v 4.05x prior.

Korea

- Kospi opens flat at 3,077.

- Follow up: South Korea to halve total household loan target for financial companies; To mobilize all available tools to stabilize home prices - financial press.

- Follow up: South Korea govt holding emergency meeting on household debt - financial regulator in Korea.

- South Korea Fin Min: Will issue more FX stabilization bonds in H2 if necessary - statement.

- South Korea to announce steps in July to cool down home prices – press [overnight update].

Other Asia

- Vietnam Central Bank (SBV) allowed to offer zero-interest rate loans to 'troubled' banks - Press.

- Follow up: Taiwan Finance Ministry: To impose anti-dumping duties on Chinese beer and some China steel goods - statement.

- India-US trade talks said to be in deadlock ahead of the July 9th deadline - financial press.

- Thailand Fin Min: Will not propose name of new Thailand Central Bank (BOT) Gov to Cabinet next week [overnight update].

North America

- (US) Follow up: US Energy Dept: SPR reserve deliveries not to be completed until Dec - financial press.

- (US) Fed's Kashkari (non-voter): We do our best to make decisions based on data and analysis, not politics - Town hall and Q&A in Montana.

- (US) Congressional Republicans to remove Section 899 from the tax bill - press.

- White House NEC Dir Hassett: Has high confidence in "BBB" tax bill passing by July 4th - Fox News interview.

- (MX) Mexico May Trade Balance: $1.0B v $0.4Be.

- (BR) Brazil Mid-Jun IBGE Inflation IPCA-15 M/M: 0.3% v 0.3%e; Y/Y: 5.3% v 5.3%e.

- (US) Def Sec Hegseth: Iran nuclear capabilities decimated - press conference.

- (US) MAY PRELIMINARY WHOLESALE INVENTORIES M/M: -0.3% V +0.2%E.

- (US) MAY ADVANCE GOODS TRADE BALANCE: -$96.6B V -$86.1BE; Exports M/M drop registered biggest drop since 2020.

- (US) Q1 FINAL GDP ANNUALIZED Q/Q: -0.5% V -0.2% PRELIM; PERSONAL CONSUMPTION: 0.5% V 1.2%E.

- (US) MAY PRELIMINARY DURABLE GOODS ORDERS: 16.4% V 8.5%E; DURABLES (EX-TRANSPORTATION) 0.5% V 0.0%E; Capital Goods Orders (non-defense/ex-aircraft): 1.7% v 0.1%e.

- (US) INITIAL JOBLESS CLAIMS: 236K V 243KE; CONTINUING CLAIMS: 1.974M V 1.95ME (3.5-year high).

- (US) Q1 FINAL GDP PRICE INDEX: 3.8% V 3.7%E; CORE PCE PRICE INDEX Q/Q: 3.5% V 3.4%E.

- (US) Fed's Goolsbee (voter): Jobs data shows full employment, steadyish state and nothing has changed at this point - CNBC.

- (US) Fed’s Barkin (non-voter for 2025): Businesses still in pause mode amid uncertainty; Inflation will be pressured higher by tariffs; Fed faces risks on both job and inflation mandates - speech text.

- (US) Fed’s Daly (non-voter): Data confirms US labor market data is solid; Still waiting for more information on inflation - TV interview.

- (IR) US Pres Trump: Nothing was taken out of Iranian nuclear facility [Fordow, before US bombing] - Truth Social post.

- (IR) EU intelligence said to suggest that Iran moved uranium prior to US strikes - FT.

- (US) MAY PENDING HOME SALES M/M: 1.8% V 0.1%E; Y/Y: -0.3% V -3.5% PRIOR.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: +96 BCF VS. +87 BCF TO +89 BCF INDICATED RANGE.

- (MX) MEXICO CENTRAL BANK (BANXICO) CUTS OVERNIGHT RATE BY 50BPS TO 8.00%; AS EXPECTED; Dep Gov Heath voted to leave rates unchanged.

- (US) TREASURY $44B 7-YEAR NOTE AUCTION RESULTS: DRAWS 4.022% V 4.194% PRIOR, BID-TO-COVER RATIO: 2.53 V 2.69 PRIOR AND 2.63 OVER THE LAST 12.

- (US) Commerce Sec Lutnick: Will announce a 'bunch' of trade deals in the next week or so; I have become optimistic about a European deal; Confirms some details of China deal - media interview.

- (US) White House Press Sec Leavitt: July 9th tariff deadline not critical; Pres Trump can pick reciprocal tariff rate if deals fail; No plan to change July 9th deadline; Changing it is Pres Trump's decision.

Europe

- (IR) Follow up: Iran says it has no intention to host IAEA Dir Gen Grossi for nuclear inspections - financial press.

- (UK) May Vehicle Production 49.8K units, -32.8% y/y (75 year low) - SMMT.

- France Pres Macron: All tools at our disposal must be used on US tariffs; In favor of quick, balanced EU-US trade deal - financial press.

- European Commission Pres Von der Leyen: EU is assessing the latest US trade proposal; EU is ready to do a deal, but will also be prepared if no satisfactory deal can be reached - financial press.

- (DE) German Chancellor Merz: EU leaders have called for the EU President to quickly reach a trade deal with the US.

- EU said to consider lowering tariffs on US imports to entice Pres Trump - WSJ.

- (IR) US discussed easing Iran sanctions - CNN.

Levels as of 01:20 ET

- Nikkei 225 +1.4%, ASX 200 -0.2%, Hang Seng -0.4%; Shanghai Composite -0.4%; Kospi -1.0%.

- Equity S&P500 Futures +0.1%; Nasdaq100 +0.1%; DAX +0.6%; FTSE100 flat.

- EUR 1.1681-1.1711; JPY 144.20-145.81; AUD 0.6540-0.6562; NZD 0.6049-6077.

- Gold -1.2% at $3,307/oz; Crude Oil +0.6% at $65.65/bbl; Copper +0.1% at $5.0590/lb.