US assets fall on Trump/Powell tensions

Asia market update: US assets fall on Trump/Powell tensions; AU jobs disappoint; TSMC Q3 preview; JP election risk pre-weekend.

General trend

- US assets incl. USD fell heavily during US trading on media reports that Pres Trump had shown GOP members a letter for US Fed Chair Powell to be fired. Trump later said he would be "highly unlikely" to fire Powell. Markets recovered from their mini freak-out before the end of the regular US session.

- In trade-related news, USTR Greer confirmed China's cumulative tariff rate currently stands at 55% while Pres Trump thinks ‘we will probably live by the (tariff) letter with Japan, implying there may be no Japan deal by Aug 1st, and if so the latest 25% tariff rate will hold. The Japan govt later released a statement saying US-Japan were engaged in “deep interactions”.

- As for other countries, Pres Trump suggested to put “10-15%” tariff rate on 105 nations.

- Asian equities mildly positive overall, with ASX outperforming +0.8%.

- Japan trade balance for June fell ~31% y/y, with exports to China and the US down amid tariff uncertainty. US-bound exports registered a second-straight double-digit reduction y/y. Japan auto shipments in particular ‘plummeted’ in June. Marginally positive JP exports sent to Asia and Europe.

- Conversely, Singapore exports jumped in June.

- Australia 3-year yields fell -9bps after a worse than expected unemployment rate, rising above the multi-month hold at 4.1% up to 4.3%. Australia Stats Agency reported hours worked fell 0.9% in June, following a rise of 1.4% in May.

- Meanwhile Australia consumer inflation expectations for July fell back into the 4% handle after reaching 5% the prior month.

- RBA 'policy error talk' gains momentum in the press, with a former RBA official saying the RBA risks falling into persistent policy error.

- Amid increasing investor focus on Sovereign debt levels, the Bank of Korea reported seeing its sovereign yield curve “facing upward pressure”.

- Indonesia Central Bank overnight cut rates by 25bps, overall had been expected to hold.

- Seven & I’s $46B takeover by Canada’s *Allimentation Couche-Tard fell through, with ACT citing a lack of engagement. Seven & i stock -9.5% [Note: $46B would have been the biggest ever domestic M&A deal in Japan, with the prior highest domestic M&A being NTT's $40B buyout of DoCoMo in 2020 and Japan's highest ever foreign buyout being Takeda in 2018 acquiring Shire PLC for $62B].

- Along with Seven & i, US railroads have also been M&A focal points; CSX +5% after hours, UNP -3%; NSC +3%.

- House Speaker Johnson affirmed that the GOP “has a deal” to advance the stalled crypto bills, clearing a second procedural vote in House which took 9:45 of debate, beating out the nearly 8 hour prior record achieved with the One Big Beautiful Bill earlier in July. Floor debate can now take place.

- US Fed’s Williams affirmed hesitancy to support lowering interest rates ahead of next meeting.

- Corporate earnings in focus: Taiwan Semi guides Q3 at 01:30 ET (the time of this letter being sent).

- Chip names in Asia weak (Tokyo Electron -2.7%, Hynix -7.5% following ASML’s disappointing guidance last night.

- Samsung bucked the trend, +2%, upon full acquittal of the 10-year case against its Chairman Jay Y Lee.

- Pre-weekend risk ahead of JP elections; JP long-end yields quiet with <1bp moves; Nonetheless, Japan official commented on markets [pre-election for Upper House on Sunday July 20th, with all main opposition parties wanting to cut taxes, stoking fears of fiscal instability in Japan.].

- US equity FUTs -0.2% during Asian trading.

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

- Thu July 16th TSMC FQ2 earnings preview (Thu night US Jun Retail Sales).

- Fri July 17th JP National CPI, (Fri night US Jun Housing Starts, Michigan Consumer Sentiment).

Holidays in Asia this week

- N/A.

Headlines/Economic Data

Australia/New Zealand

- ASX 200 opens +0.5% at 8,601.

- Australia Jun employment change: +2.0K V +20.0KE; unemployment rate: 4.3% V 4.1%E.

- Australia July Consumer Inflation Expectation Survey: 4.7% v 5.0% prior.

- Nomura: RBA to cut rates by 3 times by Feb 2026.

- New Zealand Jun Food Prices M/M: 1.2% v 0.5% prior.

- Follow up: New Zealand reported to investigate 'alleged dumping' of Chinese peaches - financial press.

- New Zealand sells total NZ$450M vs. NZ$450M indicated in 2030, 2036 and 2041 bonds.

China/Hong Kong

- Hang Seng opens +0.1% at 24,547; Shanghai Composite opens -0.1% at 3,500.

- USTR Greer: US is losing on advanced manufacturing along with basic manufacturing; China's cumulative tariff rate stands at 55% [overnight update].

- China Foreign Ministry: Attach importance to Iran’s commitment not to develop nuclear weapons, respects Iran’s right to peacefully use nuclear energy - following meeting between Wang Yi and Iran FM [overnight update].

- China banks said to trim dollar loans to developing nations in Asia - Nikkei Asia.

- Reportedly US will ban Chinese tech in submarine communication cables – FT [overnight update].

- China Premier Li Qiang chairs State Council meeting; Reviewed report on EV market; Will deepen implementation of special initiatives aimed at increasing consumption – CCTV [overnight update].

- China PBOC sets Yuan reference rate: 7.1461 v 7.1526 prior.

- China PBOC Open Market Operation (OMO): Injects CNY451B in 7-day reverse repos; Net injects CNY361B v injects CNY445B prior.

Japan

- Nikkei 225 opens -0.5% at 39,482.

- Japan Jun trade balance: ¥153.1B V ¥353.9BE; Adjusted Trade Balance: -¥235.5B v -¥291.6Be.

- Japan Trade Negotiator Akazawa said to have held 'in-depth talks' with US Commerce Sec Lutnick - Japan govt statement.

- Japan Dep Chief Cabinet Sec Aoki: Reiterates important for currencies to move in 'stable' manner, reflecting fundamentals; to closely monitor how interest rates impact 'livelihoods'.

- Seven & i: *Allimentation Couche-Tard withdraws proposal [the deal was valued at $46.0B]; cites lack of engagement.

- Japan sells ¥3.2T vs. ¥3.2T indicated in 12-Month Bills; Avg Yield: 0.6164% v 0.5671% prior; bid-to-cover: 2.73x v 3.61x prior.

- Japan MOF sells ¥650B v ¥650B indicated of JGBs in liquidity enhancement auction; bid-to-cover: 3.51x v 2.00x prior.

- US Pres Trump: Think we'll probably live by the (tariff) letter with Japan [overnight update].

Korea

- Kospi opens +0.5% at 3,201.

- Bank of Korea report said to see sovereign yield curve facing upward pressure - Press.

- South Korea said to seek to increase LNG imports from the US - South Korea press.

- Samsung: Acquittal of Chairman Jay Y Lee upheld by South Korea Supreme Court - Press.

Other Asia

- Indonesia Official: Indonesia to keep negotiating "beyond tariffs" - financial press.

- Taiwan chip industry said to be "under attack" by China-linked hackers as Trump Admin tightens export controls to China - financial press.

- Singapore Jun Non-Oil Domestic Exports Y/Y: 13.0% v 5.0%e; Electronic Exports Y/Y: 8.0% v 1.6% prior.

- (ID) Indonesia central bank (BI) cuts bi-rate by 25bps to 5.25%; not expected [overnight update].

- (ID) Indonesia Dep Energy Min: Energy imports from US under tariff deal will be done through medium-long-term contracts and must be recorded as direct Indonesia-US trade [overnight update].

North America

- Follow up: Crypto bill clears second procedural vote in House [follows record 9:45 long debate]: Moves to floor for debate - financial press.

- (US) House Speaker Johnson: 'GOP has deal' to advance the crypto bills.

- Nvidia: (US) Trump Admin reportedly not planning to approve UAE firm G42 getting access to high-performance chips; May do so in the future - WSJ.

- (US) Fed's Williams (voter): A lower dollar will likely add inflationary pressure; Reluctant to support lowering interest rates ahead of next meeting.

- (US) President Trump: Will probably put 10-15% tariff rate on 105 countries; Tariffs on Aug 1 will be 'very substantial'.

- Boeing: Some officials believe criminal authorities should review Air India crash evidence; Prelim reports didn't say whether turning was accidental or deliberate - WSJ.

- (US) MBA Mortgage Applications w/e July 11th: -10.0% v +9.4% prior.

- (CA) Canada Jun Annualized Housing Starts: 283.7K v 262.5Ke.

- (US) JUN PPI final demand M/M: 0.0% V 0.2%E; Y/Y: 2.3% V 2.5%E (lowest annual pace since Sept 2024); PPI (ex-food/energy) M/M: 0.0% v 0.2%e; Y/Y: 2.6% v 2.7%e; May revised higher; Prior PPI (ex-food/energy) YoY revised higher from 3.0% to 3.2%.

- (US) July New York Fed Services Business Activity: -9.3 v -13.2 prior.

- (US) Rep Hill (R-AR): House has votes to advance all three crypto bills (incl. GENIUS Act, CLARITY Act) - CNB.

- (US) Jun Industrial Production M/M: 0.3% V 0.1%E.

- (US) Fed's Hammack (non-voter for 2025): Doesn't comment on monetary policy or economic outlook.

- (US) USTR Greer: US is losing on advanced manufacturing along with basic manufacturing.

- (US) DOE CRUDE: -3.9M V 0ME; GASOLINE: +3.4M V -1ME; DISTILLATE: +4.2M V 0ME.

- (US) White House NEC Dir Hassett: Reiterates that Fed has been 'very, very slow'; Inflation data has been fine; Fed needs to get back on curve where rates should be - Fox Business.

- (US) Pres Trump reportedly asked House Republicans if he should fire Fed Chair Powell; Reps in the room 'voiced approval' and several said Trump indicated he will do it - CBS.

- (US) White House Officials: Trump will likely fire Fed Chair Powell soon - press.

- (CA) Canada PM Carney: There's no change to current steel measures with the US; To tighten steel quotas on some foreign countries; Introduces tariff-rate quote of 100% if 2024 volumes for steel products from free trade partners, ex. US.

- (US) US Pres Trump: Denies drafting a letter to fire Powell, but did talk about the concept with GOP lawmakers; Highly unlikely to fire Powell, unless there fraud with the Fed renovation.

- (US) House Speaker Johnson: New leadership would be helpful at the Fed; Believes new leadership would be helpful for the Fed.

- (US) Fed releases Beige Book: Prices increased across districts, with seven characterizing price growth as moderate and five characterizing it as modest, mostly similar to the previous report; activity increased slightly from May to July.

Europe

- UK said to be pushing US to drop a key "sticking point" in the steel deal - FT.

- (EU) EU said to 'stall' probe into Musk's X social media platform amid US trade talks - FT.

- (EU) Trade Commissioner Sefcovic: On way to Washington for trade talks with USTR Greer and Commerce Sec Lutnick.

- (DE) German Bundesbank Monthly Report: Inflation seen around 2% in coming months.

- (TR) Turkish court sentences former Istanbul Mayor Ekrem Imamoglu to 1 year and 8 months in prison – press.

- (EU) Portugal reportedly set to replace ECB's Centeno (Note: considered most dovish on council) - press.

- (PL) Poland Jun CPI Core M/M: 0.3% v 0.3%e; Y/Y: 3.4% v 3.4%e.

- (IL) Israel military: Won't allow military buildup on its border with southern Syria; Reiterates won't allow massacre of Druze in Syria.

- (UK) BOE's Mann (hawkish dissenter): Going to take some effort to get inflation down; Without supply-side growth, demand is a sugar high, and it doesn't end well - press interview.

Levels as of 01:20 ET

- Nikkei 225 +0.2%, ASX 200 +0.8%, Hang Seng +0.1%; Shanghai Composite +0.1%; Kospi flat.

- Equity S&P500 Futures -0.2%; Nasdaq100 -0.2%; DAX +0.5%; FTSE100 +0.1%.

- EUR 1.1614-1.1643; JPY 147.73-148.66; AUD 0.6473-0.6534; NZD 0.5912-5953.

- Gold -0.4% at $3,346/oz; Crude Oil +0.5% at $66.70/bbl; Copper flat at $5.198/lb.