US-Iran conflict worsens with US deaths

Asia market update: US-IR conflict worsens with US deaths; AI value chain in flux from open source, CN & token commoditization; CN equities improve as CSRC to meet with market players later today about stabilization measures.

General trend and developments

-Kospi fell as much as -5% playing catch-up after the Korean holiday last Friday when it escaped the Asia tech rout. Japanese Yen trading mostly within its Friday range on today's Tokyo holiday, despite $2.9B in USD/JPY options expiration today. Nasdaq +0.5% and Bitcoin held onto its weekend highs ~$65K.

-WTI Crude opened the week 2% higher above $83/bbl, following weekend escalation in US-Iranian attacks on each other.

- Iran targeted ballistic missiles and drones late Friday on a US air base in Jordan, resulting in 2 US service members dead, 1 missing in action (MIA). US CENTCOM launched immediate and aggressive counter-offensives targeting infrastructure such as coastal surveillance installations, air defense facilities, maritime capabilities, and missile and drone storage sites. Sunday night (July 19th) marked the ninth straight night of US bombing, with Iran on Sunday also launching a fresh barrage of ballistic missiles aimed at US assets in Jordan. No further reports of serious damage on US bases or Gulf allies’ facilities since the Friday flareup.

- The US naval blockade of Iranian ports remains tightly enforced, while commercial transit through the Strait of Hormuz has effectively ground to a halt. No verified outbound commercial transits recorded over the past 24 hours, with Iran claiming today to have "blown up" two oil tankers passing near Yemen.

-China's NDRC AI action plan announced on Friday following on from Pres Xi's keynote to the World AI Conference in Beijing shifted China's AI trajectory from domestic development to outward, "open-source" globalization. By establishing subsidized compute networks and international data spaces, Beijing aims to position Chinese frameworks as the standard for global, particularly developing-nation markets, directly challenging US technological hegemony at the frontier of AI.

-At the same time Kimi K3’s release showing at least its listed benchmark results not far off the leading US frontier models, but at far lower cost (up to 100x cheaper to run than Claude’s Fable 5 token costs).

-Some AI market tone shifts may begin to occur this week, as the revenue assumptions based on current token-charging tables from Anthropic and OpenAI in particular may come under closer scrutiny. Not just from China’s opensource attack but also SpaceXAI and Meta’s cut-price token strategy to gain market share along with fresh US entrants to the open-weights AI ecosystem such as former OpenAI CTO Mira Murati’s open-weights model named Inkling through her startup, Thinking Machines. Ultimately, companies and other end-users have increasing choices to build their own verticalized AI ecosystem, protecting their IP without giving away their data secrets to frontier models.

-The entire AI value chain may be undergoing a significant shift at both ends, with topline chips from Nvidia likely to be in even greater demand, but also older chips capable of “doing enough" compute may come further into favor as companies investing into frontier AI models appear to be facing a future of token-commoditization.

-China said to be accelerating efforts to stabilize its equity market; with regulators (CSRC) expected to meet with key industry participants on the matter. State funds have also disclosed new equity market purchases. Comes as an unusually large number of mainland Chinese companies announce cash dividends and share buybacks and pledges by holders not to sell shares, indicating potential coordinated effort to support shares. Hang Seng +2%, Shanghai +1% despite the steep fall on Friday following various AI news pointing to China looking to commoditize global token prices as a national strategy.

-US Sec of State Rubio confirmed he anticipates China President Xi will visit the US in Sept, with China is sending teams to the US to prepare for the visit.

-On the Japanese holiday, PM Takaichi approval rating fell to a 2026 low of 53% in a Japan press poll.

-New Zealand’s prior monthly trade surpluses fell to flat in June on weaker exports.

-China as expected kept both LPR rates on hold again this month (last cut was in May, 2025).

-Andy Burnham is set to become the new UK PM on Monday after securing 379 nominations last week. Market focus now on the upcoming Chancellor appointment, which will determine whether economic policy remains orthodox or shifts to an expansionist stance.

-New Zealand Q2 CPI tomorrow (Tues).

-Tomorrow (Tues, July 21st) the Japan cabinet expected to approve the govt’s “Honebuto”("big-boned" national economic framework, which is also expected to have tax decision timing included.

-US earnings kick into high gear this week, headlined by Alphabet/Google, Tesla, Intel, American Express, 3M and Novartis among others.

-US equity FUTs +0.2% to +0.5% during Asia trading.

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

-Mon July 20th: (Mon night, CA Jun CPI).

-Tue July 21st: NZ Q2 CPI.

-Wed July 22nd: KR Jun PPI, JP Jun Trade Balance, UK Jun CPI & PPI, ID Rate Decision.

-Thu July 23rd: KR Prelim Q2 GDP, AU Jun Jobs, SG Jun CPI, TW Jun Industrial Production, (Thu night, EU Rate Decision, EU Prelim July Consumer Confidence).

-Fri July 24th: Global Prelim July PMI’s, JP Jun CPI, UK Jun Retail Sales, (Fri night US Prelim July S&P PMIs, US Jun New Home Sales).

Holidays in Asia this week

-Mon July 20th: Japan.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens +0.4% at 8,828.

-(AU) Australia investor Andrew Forrest to buy 16.8% stake in EQ Resources (Australian rare earths name) from Oaktree.

China/Hong Kong

-HK) Hang Seng opens +1.1% at 24,835; (CN) Shanghai Composite opens +0.7% at 3,791.

-(CN) China said to be accelerating efforts to stabilize its equity market; regulators are expected to meet with key industry participants on the matter later on Mon [Jul 20th] – US financial press.

- (CN) US Sec of State Rubio: Confirms anticipates China President Xi will visit the US in Sept; China is sending teams to the US to prepare for the Xi visit.
- (CN) China PBOC monthly loan prime rate (LPR) setting: leaves both leave 1-year and 5-year rate unchanged; as expected.

-(CN) China exporters selling dollar rallies said to have kept Yuan supported - press.

-(CN) China Development Bank issues new loans to stabilize trade - China press.

-MOONSHOT.IPO Reportedly looking to list in Hong Kong as soon as within 6 months - US financial press (weekend update).

-BABA Launches preview version of Qwen 3.8 Max model (update).

Japan

-(JP) Nikkei 225 closed for the "Marine Day (Umi no Hi)" holiday.

-(JP) Japan PM Takaichi approval rating declines to 53% - Asahi poll.

Korea

-(KR) Kospi opens -2.6% at 6,643.

-(KR) South Korea Fin Min Koo: To 'leverage' economic network to address risks related to trade - comments.

Other Asia

-(MY) Malaysia Jun Trade Balance (MYR): 14.9B v 41.0Be.

-(SG) Singapore Central Bank (MAS): To issue July monetary policy statement on July 27th.

-(TW) Foxconn Reportedly wins SpaceX order for over 13,000 AI servers for $52B (NT$1.7T) - Economic Times.

- (TW) Taiwan reports 55 Chinese govt vessel sightings in June, +120% y/y and up from 30 in May - US financial press.

North America

- (US) Pres Trump: Maybe Canada should pay some damages for wildfires; Spoke to Canada PM Carney on the fires - comments to press post-World Cup final.

- (US) Pres. Trump: Continues commentary on 2020's alleged election interference - Truth Social (update) [weekend update].

- (US) Treasury Sec Bessent said to assist with drafting the latest AI framework; Proposal is under review by White House Chief Wiles - press (update) [weekend update].

- SPCX CEO Musk: Our 2T model Grok 4.6, which is better than our 1.5T in every way, will finish initial training next week. It might be able to exceed Kimi, but with speed and token efficiency close to our 1.5T (aka Grok 4.5) [weekend update].

- SPCX Will target re-launch of Starship's 13th test flight as early as July 23rd.

Europe

- (CN) Chinese air-conditioner brands said to surge orders to Europe amid summer heatwave - China press.

- (RU) Pres Putin met with North Korea Foreign Min Choe in Moscow on Sunday (update) - Russian press.

Middle East

-(IR) US CENTCOM: Starts fresh wave of strikes against Iran (Note: will be the 9th night of consecutive strikes by the US); the strikes started on Sunday at 7 PM ET.

-(IR) US CENTCOM picks up pace of strikes on Iran after 2 US solders dead, 1 MIA from Iran missile attack on US air base in Jordan (update).

-(IR) IRGC: Two oil tankers were "blown up" after attempting to transit southern route in Strait of Hormuz.

-(IR) US Secretary of State Rubio: Reiterates the US remains open to a diplomatic solution in Iran; reiterates other countries must 'step up' to protect shipping in the Strait of Hormuz.

-(KW) Follow up: Kuwait Foreign Ministry: Condemns Iran attack on power, water desalination facility (Friday), civilian infrastructure; Iranian attacks caused "severe damage" (update).

-(UK) UKMTO: Receives report of incident 8NM Northwest of Oman's Kumzar; Vessel reported to be on fire.

Levels as of 01:20 ET

Nikkei 225 closed; ASX 200 +0.1%; Hang Seng +2.2%; Shanghai Composite +1.1%; Kospi -4.5%.

Equity S&P500 Futures +0.2%; Nasdaq100 +0.4%; DAX -0.1%; FTSE100 -0.2%.

EUR 1.1424-1.1446; JPY 162.31-162.58; AUD 0.6964-0.7000; NZD 0.5825-0.5861.

Gold -0.1% at $4,014/oz; BTC -0.7% at $64,319; WTI Crude Oil +2.0% at $83.31/bbl; Copper +0.2% at $6.2818/lbs.