US jobs data is the focal point for Thurs

Asia market update: Training wheels are being removed in terms of monetary and FX intervention policies; Q3 chip-maker volatility continues while Meta seeks to reduce AI-related costs; 5% US gov’t stakes in AI cos?; US jobs data is the focal point for Thurs.

General trend and developments

TECH: Shares of Meta rallied by >8% in NY trading. The move came as the co. is said to be building a cloud business to sell excess AI compute, which could ease concerns about the co’s costs [press]. Recent cost reduction news also circulated in The Information related to OpenAI on Wed.

-There was additional press speculation about Apple becoming the latest US tech firm to seek chip supplies from China Recall, HP, Dell, Acer, Asus were said to consider using Chinese chips for first time amid the chip shortage that threatened product launches [Nikkei report from Feb 4th].

-More details have surfaced about possible US government stakes in AI companies.

-Meanwhile, SoftBank has yet to receive its margin loan backed by its stake in OpenAI. The firm is said to have, however, renewed talks with lenders on securing a $10B margin loan backed by its OpenAI stake and repayment guarantee [press].

-Biotech and AI continue to collide. HK drug maker InSilico Medicine Cayman announced a $600M ‘AI drug discovery’ deal with Japans’ Takeda.

-Trade-sensitive Chinese names have seen gains after recent figures. BYD has rallied on monthly sales figures, while JL Mag Rare-Earth sees strong H1 and Q2 results,

-Berkshire continues to raise exposures to the trading companies in Japan, despite the firm’s leadership transition,

-Weaker demand seen at 10-year JGB auction after recent soft 20-year auction; JGB yields rise.

-Forward Guidance became the focal point on the last day of the ECB conference with the discussion driven by remarks from Warsh. The ECB Forum on Central Banking held in Portugal [attended by US Fed Chair Warsh, ECB Chief Lagarde, BOE Governor Bailey, and Bank of Canada Governor Macklem] reflected on previous interest rate decisions and recent economic metrics within respective economies highlighting inflation rates. ECB Chief Lagarde said she had ‘given up on forward guidance’. BOE Governor Bailey also noted ‘forward guidance becomes quite problematic after a while’, reflecting Warsh’s previous insights on moving away from forward guidance and dot plots.

-Meanwhile, Japan’s FX policy might become more unpredictable. Japan might shift away from telegraphing intervention risks in advance, according to a recent press report. Recall, in early Jun Japan’s Finance Minister Katayama said ‘we have certain phrases on FX warning, changing them will risk confusing markets.’ This news is particularly interesting ahead of Friday’s NY holiday.

-Japan’s PM Takaichi is currently visiting India. There has been press speculation that both countries will reach an agreement on 120 projects in total worth ¥2.00T. Prior reports suggested that the two countries could collaborate on ammonia and hydrogen production. Both sides are also said to be considering direct yen-rupee settlements [Nikkei from Jun 30th]. Nikkei also noted various Japanese financial institutions will lend up to $490M to India for the development of power grids, while Japan is further said to provide trade insurance to Reliance Industries [RIL.IN] on a ¥100B syndicated loan.

-US equity FUTs +0.1% to +0.2% during Asia trading.

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

-Mon June 29th: EU Jun Consumer Confidence.

-Tue June 30th: KR May Industrial Production & Retail Sales, JP May Industrial Production & Unemployment Rate, NZ Jun ANZ Business Confidence, AU RBA Meeting Minutes, CN Jun PMIs, UK Q1 GDP, (Tue night, US Jun Consumer Confidence, US May JOLTs).

-Wed July 1st: JP Q2 Tankan, KR Jun Prelim Trade Balance, EU & US Jun final S&P/HCOB Mnfg PMIs, CN June RatingDog Mnfg PMI, EU Jun Prelim CPI.

-Thu July 2nd: KR Jun CPI, AU May Trade Balance, JP 10-Year JGB Auction, EU May Unemployment Rate, (Thu night, US Jun Nonfarm Payrolls).

-Fri July 3rd: AU & JP Jun Final S&P PMIs, CN Jun RatingDog Svcs PMI, Global final Jun S&P/HCOB Services PMIs, (Note: “Independence Day (Observed)” – U.S. markets closed, reduced liquidity).

Holidays in Asia this week

-Wed July 1st: Hong Kong.

-Fri July 3rd: US Independence Day.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 opens -0.3% at 8,696.

-(AU) Australia May Trade Balance (A$): -3.0B v +2.2Be.

-(NZ) New Zealand Government 11-Month Financial Statements: Budget Deficit NZ$6.79B (NZ$3.04B narrower than expected).

-(NZ) New Zealand May Building Permits M/M: -4.0% v 10.9% prior.

-(NZ) RBNZ: Not seeking additional Monetary Policy Committee member [ahead of the NZ election].

-(NZ) RBNZ: Names 'Angus McGregor' Assistant Gov of financial stability, effective 'later this month'.

China/Hong Kong

-(CN) Shanghai Composite opens -1.4% at 4,054; (HK) Hang Seng opens +0.8% at 23,071.

-(CN) Mainland China equities open sharply lower, led by tech-heavy Shenzhen; CSI Semis index -5.5%; CSI AI index -3.7%.

-(CN) A record number of public funds in China said to have doubled their AI-related returns – China Securities Journal.

-(CN) China companies increase stock buybacks after price declines – Chinese press.

-(CN) China AI start-up Vast closes $150M funding round – US financial press.

-(HK) 3696.HKConfirms to sign AI-powered drug discovery collaboration with Takeda worth $600M, including $60M in upfront and near-term payments - WSJ.

-(CN) China PBOC sets the yuan mid-point at 6.8088 v 6.8067 prior.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY289B in 7-day Reverse Repos; Net drains CNY82B v drains CNY1.16T prior.

Japan

-(JP) Nikkei 225 opens -0.6% at 70,017.

-(JP) Japan sells ¥2.6T vs. ¥2.6T indicated in 10-year JGB bonds; Avg yield: 2.7920% v 2.649% prior; Bid-to-cover: 3.13x v 3.53x prior.

-(JP) Berkshire continues to raise stakes in the Japan trading cos. - update.

-(JP) Japan shifts away from telegraphing intervention risks in advance, focusing on hitting speculators - US financial press [citing sources].

-(JP) Japan's [final] tax revenue for last fiscal year expected to be ~¥84.00T (strongest level in 6 consecutive years) - NHK.

-(JP) Weak yen has ‘pushed’ bankruptcies in Japan to the highest level since 2022 – US financial press [update].

-(JP) Japan Chief Cab Sec Kihara: Seek closer strategic ties with India; China coast guard demanded halt to Japan EEZ survey; Protested China demand, survey continued.

Reminder 29th June: (JP) Japan's PM Takaichi to meet India's PM Modi on a '3-day visit'.

-(JP) Japan, India set to agree on 120 projects in total worth ¥2.00T - Yomiuri.

-(JP) Japan Jun Monetary Base End of Period: ¥560.0T v ¥571.9T prior; Y/Y: -13.7% v -12.2% prior.

-(JP) Japan releases weekly flows data [period ended Jun 26th]: Foreign buying of Japan equities: -¥1.82T v ¥451.3B prior; Japan buying of foreign bonds: -¥280.1B v ¥202.1B prior.

-(JP) Follow Up: BOJ releases the comprehensive Q2 Tankan data.

Korea

-(KR) Kospi opens -4.5% at 7,933.

-(KR) South Korea Jun CPI M/M: 0.1% v 0.1%e; Y/Y: 3.2% v 3.2%e.

-(KR) Bank of Korea (BOK): July CPI inflation to ease from June's - Statement.

-(KR) South Korea Vice Foreign Min Chang: South Korean authorities have sufficient capacity for Won steps; South Korea to immediately take steps to stabilize Won if needed.

-(KR) Korea Exchange activates sidecar to halt Kospi program selling, programme trading halted for 5 minutes.

-(KR) Korea Exchange activates sidecar to halt Kosdaq program selling.

Other Asia

-(IN) Reserve Bank of India (RBI) Gov affirmed India is not likely to raise the official inflation target – financial press [update].

-(IN) India Central Bank 'likely' sold US dollars pre-market open to shore up the Rupee - Traders.

-(TW) China reiterates that the US should handle Taiwan will the ‘utmost’ caution – SCMP [update].

-(TW) Top US Diplomat in Taiwan: For Taiwan, drones represent a game-changing opportunity to enhance Taiwan's security and reinforce peace in the broader Indo-Pacific region.

-(VN) Vietnam Central Bank Vice Governor: Global risks put pressure on Vietnam Central Bank management of policy; Banks' liquidity pressure rising.

-(MY) Malaysia Deputy PM: Retiring power stations will be used to house new industries - Press Conference.

-(MY) Malaysia Transport Minister: Finalizing detailed financing structure of elevated autonomous rapid transit project - Parliamentary Comments.

North America

-(US) Fed Chair Warsh: Not going to give forward guidance; Charting a new course so we can make better decisions; Looked around and see that prices are too high; Inflation risks have come down [US market close].

-(US) Jun ISM Manufacturing: 53.3 v 53.9e; New Orders: 56.0 v 57.0e; Prices Paid: 73.0 v 77.5e [US market close].

-(US) USTR Greer: USMCA is shifting to rolling talks, no renewal; The key to USMCA talks is fixing up trade deficits [US market close].

-(CA) Bank of Canada (BOC) Gov Macklem: We are at the bottom end of neutral range, about the right level to keep inflation contained [US market close].

-(US) Jun Monthly ADP Employment Change: +98K v +120Ke; Notes signs of labor supply constraints in certain industries [US market close].

-(US) Jun S&P Final Manufacturing PMI: 53.9 V 55.7E (confirms 10th month of expansion) [US market close].

- (US) US Pres Trump: Will not let China take over Panama Canal; Cuba is coming our way [US market close].

-(US) Atlanta Fed GDP Now: Cuts Q2 GDP estimate 70.3% from 2.5% to 1.2% [US market close].

-(US) Palantir Tech CEO: Enterprises in this country trust and love us and are livid with LLM companies; Why are AI companies charging for tokens if it is so valuable - CNBC [US market close].

-(US) META Said to be building cloud business to sell excess AI compute - press [US market close].

-(US) SPCX Reportedly xAI to develop prototype of AI handset device using a Qualcomm Snapdragon chipset - WSJ.

-(US) DOE Crude: -3.8M v -5.0Me; Gasoline: -2.3M v -1Me; Distillate: +2.5M v -0.5Me [US market close].

-(US) MBA Mortgage Applications w/e Jun 26th: 0.0% v 1.0% prior [US market close].

-(US) White House accelerates plans for AI model standards - FT.

-(US) Pres. Trump: Just as I promised, Oil Prices are plummeting FAST, and Gas Prices at the pump are dropping too, but not as fast as they should be - post on Truth Social.

-(US) OPENAI.IPO Proposes handing Trump Administration 5% stake, To ease Washington pressures - FT.

-(US) AAPL To launch 5 new iPhone models - Nikkei.

-(US) SEC is probing alleged insider options trades that impacted Susquehanna – US financial press.

-(MX) Mexico Jun IMEF Manufacturing Index: 47.3 v 48.9e [US market close].

-(BR) Brazil Jun Manufacturing PMI: 50.8 v 49.1 prior (moves back into expansion) [US market close].

-(DRC) Democratic Republic of Congo: Number of confirmed Ebola cases rises to 1,406, including 438 deaths.

-(CL) Chile Jun Business Confidence: 46.0 v 46.7 prior.

-(PE) Peru Jun CPI M/M: 0.2% v 0.0%e; Y/Y: 4.0% v 3.8%e.

Europe

-(EU) ECB Chief Lagarde: Reiterates ECB has “given up on forward guidance” calling it her “one regret”; Europe is not in stagflation [EU market close].

-(UK) BOE Gov Bailey: Decision not to raise rates was based on softening UK economy; Rate cuts are off the table at the moment [EU market close].

-(RU) Defense Minister: Russia strikes military, energy facilities in Ukraine's Kyiv in retailiation for Ukrainian strikes - Russian Newswires.

-(UK) PM Starmer: Defense spending gap of £1B per year is covered by fiscal headroom [EU market close].

-(UK) BOE to push ahead with plan to limit hedge fund leverage - FT.

-(DE) German Chancellor Merz: Germany seeking cooperation with US on weapons production; We do not want national unilateral actions within NATO [EU market close].

-(CH) Swiss National Bank [SNB]: The economic environment and conditions on the financial markets remain challenging for the Swiss financial sector - Financial Stability Report.

-(UR) Ukraine's Capital Kyiv under ballistic missile, drone attack - US financial press [citing witness].

-(PL) Polish Army: Poland scrambles fighter jets amid Russia's attack on Ukraine - post on X.

-(PL) Follow up: Polish Armed Forces: Poland ends earlier fighter jets flights amid Russian attack on Ukraine, no airspace violation recorded - post on X.

-(FI) Finland Defense Forces: Finland issues temporary aviation restriction zone in the Eastern Gulf of Finland - post on X.

-(EU) EU considers weaker data center climate rules - FT.

-(PT) Portugal May Industrial Production M/M: +0.9% v -2.7% prior; Y/Y: -2.3% v 0.0% prior [EU market close].

Middle East

-(IR) Trump: Everything is going well in Iran talks, had very good meetings; Iran has come a long way [US market close].

-(IR) Reportedly Iran requested in Doha talks the implementation of the MOU in phased timelines; Technical teams in Doha investigated maritime security issues and the nuclear file - Al-Arabiya [EU market close].

-(IR) Iran Foreign Min Araqchi: Trump committed to keeping Israel at bay; if ignored Iran will school them [EU market close].

-(IR) VP Vance: The US has options if Iran attempts to rebuild its nuclear program; We can't drop bombs for the sake of dropping bombs [US market close].

-(IR) US Official: US sees 10M barrels via the Strait of Hormuz as diminishing Iran's oil leverage [US market close].

-(IR) Qatar Foreign Ministry Spokesperson: The parties agreed to continue discussions over the coming period with the next meeting to be scheduled at the earliest possible time following the funeral processions of former Iranian Supreme Leader Khamenei on July 4-9th.

-(IR) US resumes dollar transfers to Iraq after months long suspension - NYT.

-(SA) OPEC+ said to likely raise Aug oil production quota by 188K bpd at the upcoming meeting [EU market close].

Levels as of 01:20 ET

Nikkei 225 -1.4%; ASX 200 flat; Hang Seng +0.7%; Shanghai Composite -1.2%; Kospi -5.1%.

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

EUR 1.1389-1.1375; JPY 162.60-162.36; AUD 0.6902-0.6884; NZD 0.5685-0.5668.

Gold +0.7% at $4,060/oz; BTC +2.7% at $60,785; WTI Crude Oil -1.0% at $67.88/bbl; Copper -0.2% at $6.1453/lbs.