Tentative move to risk-on as Trump extends by up to two-weeks

Asia Market Update: Tentative move to risk-on as Trump extends by up to two-weeks the chance of finding an off-ramp to the Iran nuclear program that doesn’t involve blowing it up.

General trend

- Extended oil prices plummeted -3% in early Asian trading while US equity FUTs (led by Nasdaq +0.9%) claimed back all of the past 24 hours’ losses following a closed US holiday session, following Pres Trump offering a two-week window to decide whether US will directly attack Iran or not. This gives time yet for some kind of solution to ending Iran’s nuclear ambitions rather than through bombing its nuclear facilities. Comes amid US concerns of potential Iran-backed sleeper cells as well as worries Iran may “make a bomb” if the underground Fordow nuclear facility is attacked. Gold also down $100 off Monday’s highs on tentative risk-on sentiment on hopes of a relatively peaceful end to the Israel-Iran conflict.

- Currencies other than the Japanese Yen regained some lost ground against the USD.

- Asian equities saw Hong Kong and Kospi outperforming +1.2%, with the Kospi's hot streak since the Presidential election on June 3rd blasting through the 3,000 barrier and last year's highs to reach levels not seen since 2021.

- Japan in May saw its Core CPI register the hottest annualized pace since Jan 2023 and Core-core CPI the hottest since Jan 2024, echoing the Tokyo May CPI a few weeks earlier. Today also saw a BOJ paper worry about 'slow' rate hikes potentially causing a 'wage-price spiral'.

- The BOJ Minutes from May 1st (2 decisions ago) saw a consensus that it would be appropriate to keep raising rates if the outlook is realized, while one member expressed confidence that underlying CPI would not decline going forward. A few members thought that underlying CPI was likely to lag behind previous projections by about a year – consistent with Gov Ueda’s May 1st presser comment on “stalling inflation”.

- Reminder later today Japan MOF will meet with JGB primary dealers to discuss bond market functioning and also discuss plans announced by the press yesterday to potentially cut super-long bond sales by 10% (follows the decision earlier this week to reduce quarterly purchases of JGBs to ¥200B per quarter from early next year).

- BOJ Gov Ueda also scheduled to give a speech today at a Shinkin bank event, around 06:40 GMT

- Japan Trade Rep Akazawa said that July 9th is NOT the deadline for Japan-US trade talks, consistent with recent Trump Admin declarations that countries negotiating in ‘good faith’ would have their deadlines extended.

- Recent stories on US-Japan shipbuilding collaboration took a potential deeper dive with reports that the Japan govt is considering to build a state-owned shipyard.

- The CEO’s of two (Mitsubishi Corp and Sumitomo Corp) of the five Japanese trading companies that Berkshire Hathaway have invested into in recent years said they are deepening ties with Buffet’s firm.

- China PBOC left its monthly LPR rate setting unchanged, and also set the Yuan fix in the 7.16 handle, strongest since mid-March. On the other hand HKD weakened to 7.85, the weak end limit of the HKD trading band.

- US Pres Trump celebrated US Treas Sec Bessent’s claim that Blue-collar wage growth under the Trump Admin’s first 5 months saw its largest increase in nearly 60 years (+1.7% to +2.0% in real terms). Bessent said the growth is due to Pres Trump's border crackdown, focus on increasing US manufacturing, as well as deregulation and tax reform. Note there is no independent access to the raw data yet to verify the claim.

- Late last night Philippines Central Bank Policy Statement saw the need for accommodative monetary policy. Would continue to assess impact of previous easing. Noted deceleration of global economic activity and sees slower growth domestically. Would safeguard price stability.

- Also last night Taiwan Central Bank Policy Statement noted that the decision to keep policy steady was unanimous. To cautiously respond to changes brought by US policies. Reiterated ready to step in when needed to maintain FX market order

- In what is shaping up to be an arena of legal battles in coming years between content producers and AI companies, the BBC threatens legal action against AI start-up Perplexity over alleged content scraping.

- US equity FUTs +0.7% to +0.9% during Asian trading.

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

- Fri Jun 20th.

Holidays in Asia this week

- Thu Jun 19th (USA Juneteenth).

- Fri Jun 20th New Zealand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,526.

- Australia Treasurer Chalmers said to consider 'new taxes' (ahead of productivity roundtable in August) - AFR.

- (US) Australia funds said to be 'moving to reduce' exposure to Treasuries - US financial press [update].

- Australia sells A$800M v A$800M indicated in 1.00% Dec 2030 bonds, Avg Yield: 3.6145% v 4.0469% prior, bid to cover 3.47x v 4.64x prior.

- Follow Up: New Zealand PM plans to talk trade and security with China President Xi; the officials are scheduled to meet in Beijing later on Fri - Nikkei.

- China Foreign Ministry: On New Zealand pausing funding to Cook Islands over China deal: Both New Zealand and Cook Islands are important cooperation partners - NZ press.

China/Hong Kong

- Hang Seng opens +0.2% at 23,291; Shanghai Composite opens -0.1% at 3,358.

- CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: Leaves rates unchanged.

- HKD weakens to 7.85 (weak end limit of trading band) – Press.

- China NDRC: Continues to transfer central funds (CNY138B) for trade-in program – Xinhua.

- China MOF sells 20-year ultra-long special Treasury bonds: Avg Yield: 1.8727% v 1.9909% [prior from May 16th].

- China MOF sells 3-year bonds: Yield 1.366% v 1.46% prior [from May 23rd].

- China reportedly to cooperate with US in drug control and illegal immigrants [overnight update.

- China reportedly urges EV makers to ensure product safety; Vows to punish EV markets for safety violations [overnight update.

- (HK) Follow Up: Hong Kong to study China monetary policy, weigh 'risks' before issuing yuan stablecoins; cites comments made by Hong Kong Treasury Chief at the recent Luijiazui Forum - SCMP.

- (IR) China Pres Xi: Ceasefire is an 'urgent priority' in Middle East; Urge conflicting parties, especially Israel, to stop overnight update].

- China Vice Premier He Lifeng: Reiterates vow to continue opening up economy - comments from Qingdao Summit [overnight update].

- China PBOC sets Yuan reference rate: 7.1695 v 7.1729 prior (strongest since Mar 17th).

- China PBOC Open Market Operation (OMO): Injects CNY161B in 7-day reverse repos; Net drains CNY41B v injects CNY84B prior.

Japan

- Nikkei 225 opens -0.1% at 38,478.

- JAPAN MAY NATIONAL CPI Y/Y: 3.5% V 3.5%E; CPI (EX-FRESH FOOD) Y/Y: 3.7% V 3.6%E [hottest annualized pace since Jan 2023].

- Japan Fin Min Kato: Have recently seen spikes in super-long JGB yields since April - financial press.

- Bank of Japan (BOJ) May 1st Monetary Policy Meeting Minutes (2 decisions ago): Reiterates that if the outlook for economic activity and prices is realized, it would be appropriate for the Bank to raise rates.

- Japan govt said to consider building a state-owned shipyard – Nikkei.

- Japan Trade Negotiator Akazawa: Will not comment on trade talk details with the US; July 9th is NOT the deadline for Japan-US trade talks.

- BOJ Outright Bond Purchase Operation for 1~3 Years; 5~10 Years and 10-25 Years maturities; Leaves purchase amounts unchanged.

- Japan sells ¥4.4T vs. ¥4.4T indicated in 3-Month Bills; Avg Yield: 0.4207% v 0.4317% prior; bid-to-cover: 4.05x v 4.05x prior.

- BOJ said to use Generative AI to analyze data – Nikkei [overnight update].

Korea

- Kospi opens +0.3% at 2,986.

- South Korea May PPI Y/Y: 0.3% v 0.8% prior.

Other Asia

- Follow up: Thailand Dep PM: All Thailand coalition parties still support Shinawatra as PM - financial press.

- Malaysia PM Anwar: May consider reintroducing GST when avg income hits ~MYR4.0K; Ringgit currency (MYR) could weaken if Iran/Israel conflict 'escalates'.

- Philippines Central Bank (BSP) Gov Remolona: Could do yet another rate cut in August - CNBC Interview.

- (PH) Philippines Central Bank (BSP) cut Overnight Borrowing Rate by 25bps to 5.25% (as expected).

- (TW) Taiwan Central Bank (CBC) left Benchmark Interest Rate unchanged at 2.00% (as expected).

North America

- PERPLEXITY.IPO BBC threatens legal action against Co over content scraping - FT.

- US said to boost monitoring of potential Iran-backed sleeper cells in the US - CBS.

- (CA) Canada PM Carney: To impose tariffs on steel and aluminium imports in response to Trump's 50% US tariffs "to protect Canadian workers" - WSJ (update).

- (US) Pres Trump gives two-week window to decide whether US will directly attack Iran or not - financial press (update).

- (US) Pres. Trump: “Too Late” Jerome Powell is costing our Country Hundreds of Billions of Dollars... We should be 2.5 Points lower, and save $BILLIONS on all of Biden’s Short Term Debt.

- (US) Pres. Trump: The Wall Street Journal has No Idea what my thoughts are concerning Iran!

- X.IPO CEO Yaccarino: Users will soon be able to make investments or trades on X; Also exploring the introduction of an X credit or debit card, which could come as soon as this year - FT.

Europe

- (UK) Jun GfK Consumer Confidence: -18 v -20e (highest since Dec 2024 of -17).

- (IR) Israel PM Netanyahu: Up to Iranian people whether to bring down regime.

- (UK) BOE’s Lombardelli: Weakening in UK labour market is in line with what we expected in May [overnight update].

- (UK) BOE Gov Bailey: Statement that rates remain on gradual downward path is not a prediction for August meeting.

- *(UK) BANK OF ENGLAND (BOE) MAY MINUTES: VOTE WAS 6-3 (Ramsden joins Dhingra & Taylor as dovish dissenter to vote for cut) [overnight update].

- *(UK) BANK OF ENGLAND (BOE) LEAVES BANK RATE UNCHANGED AT 4.25%; AS EXPECTED; Maintains gradual and careful stance [overnight update].

- (RU) Russia Pres Putin reportedly spoke with China Pres Xi and discussed Iran-Israel conflict - Russian press [overnight update].

- *(IR) IRAN'S PARLIAMENTARY NATIONAL SECURITY COMMITTEE BOARD MEMBER: IRAN HAS MANY OPTIONS TO RESPOND TO AGGRESSION, INCLUDING CLOSING THE STRAIT OF HORMUZ.

- *(CH) SWISS NATIONAL BANK (SNB) CUTS POLICY RATE BY 25BPS TO 0.00%; AS EXPECTED; To charge banks 0.25% if sight deposits above threshold.

- *(NO) NORWAY CENTRAL BANK (NORGES) CUTS DEPOSIT RATE BY 25BPS TO 4.25%; NOT EXPECTED; Notes rate to be reduced further in 2025.

Levels as of 01:20 ET

- Nikkei 225 flat, ASX 200 -0.3%, Hang Seng +1.2%; Shanghai Composite +0.2%; Kospi +1.2%.

- Equity S&P500 Futures +0.7%; Nasdaq100 +0.9%; DAX +0.7%; FTSE100 +0.1%.

- EUR 1.1490-1.1532; JPY 145.13-145.57; AUD 0.6463-0.6595; NZD 0.5976-6008.

- Gold -1.2% at $3,368/oz; Crude Oil -2.0% at $73.78/bbl; Copper -0.8% at $4.7692/lb.