Asian equities again follow US equities higher with KR leading post-election

Asia Market Update: Asian equities again follow US equities higher with KR leading post-election; US SLX/ALUM tariffs take effect; Focus on US May Services ISM, CA BOC Rate Decision, US Fed Beige Book.

General trend

- Continued positive US mood again flowed through to Asian equities with tech and chip stocks strong; TSM and Foxconn in Taiwan +3.5% with Korea’s Hynix +6%.

- South Korea Presidential election ended with a win for opposition leader and pre-election front-runner Lee Jae-myung of the left-leaning Democratic Party, easing ahead of Kim Moon-soo of the conservative People Power Party (Pres Yoon’s former party; Yoon was impeached for imposing martial law in Dec last year, ultimately triggering the election). Lee was sworn in and said he plans to activate 'emergency' economic task force and revive the economy, with reports of an increased extra budget.

- South Korea’s Kospi welcomed the result, outperforming +2.6% and approaching its Aug 2024 highs, in a green day across the board in Asia. South Korea’s May CPI came in below the Bank of Korea’s target 2.0%, and lowest since Dec 2024. Korea 10-yr bond yields +9bps to 2.89% on the election outcome.

- If Korea's extra budget is larger, combined with a firmer Korean Won may mean an easier path for he Bank of Korea to cut further amid the softer CPI.

- Trade-related News: Reportedly Japan is forming a think tank to tackle Trump tariffs and Taiwan; Indonesia said to give the US 'preferential tariffs' on certain goods as part of US-Indonesia trade talks, with reports that Indonesia is “ready to accelerate the negotiation process” ahead of the implementation of reciprocal tariffs (July 9th). Despite the White House saying that reminders had been sent out to trade partners requesting their 'best offers' ahead of the July 9th end to the pause on reciprocal tariffs, Japan said it had not yet received a letter from the USTR. Also waiting to see if the rumored call between Trump-Xi takes place on Friday, Jun 6th.

- Doubling of US tariffs on Steel and Aluminum imports to 50% took effect at midnight ET.

- Softer than expected Australian first quarter GDP. AU 3-yr yield had been -5bps immediately post data, but then fell back to flat. Stats Agency said growth was relatively slow across most household spending categories following stronger than usual spending during the December quarter’s retail sales events, whilst weather impact particularly felt in mining, tourism and shipping. Nevertheless ASX extended gains to +0.9% post-data with ASX Financials reaching an all-time-high.

- Australia May Final PMI Services confirmed its 16th month of expansion (but lowest in 6 months), while Japan Final PMI Services confirmed its 7th month of expansion.

- Note that Japan's in-focus super-long 30-year JGB auction will again be offered tomorrow (Thursday).

- US equity FUTs slightly down during Asian trading.

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

- Wed Jun 4th (Wed night US May Services ISM, CA BOC Rate Decision, US Fed Beige Book).

- Thu Jun 5th AU Apr Balance of Trade, CN May Caixin Services PMI, (Thu night EU ECB Rate Decision).

- Fri Jun 6th JP Apr Household Spending, IN RBI Rate Decision (Fri US May Non-Farm Payrolls).

Holidays in Asia this week

- Mon Jun 2nd China, Malaysia, New Zealand.

- Tue Jun 3rd South Korea, Thailand.

- Fri Jun 6th Indonesia, Singapore, South Korea.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8.469.

- AUSTRALIA Q1 GDP Q/Q: 0.2% V 0.4%E; Y/Y: 1.3% V 1.5%E.

- Australia Treasurer Chalmers: Even weak growth welcome given global risks - comments post Australia Q1 GDP data (update).

- Australia May Final PMI Services: 50.6 v 50.5 prelim (confirms 16th month of expansion, but lowest in 6 months).

- Fonterra Global Dairy Trade Auction Dairy Trade price index: -1.6% v -0.9% prior.

China/Hong Kong

- Hang Seng opens flat at 23,499; Shanghai Composite opens +0.1% at 3,363.

- China PBOC said to be 'fine-tuning' liquidity due to "mid-year needs" - China Securities Journal.

- White House Press Sec Leavitt: Press Trump and China Pres Xi call to be very soon.

- (US) Unconfirmed reports circulating that Trump and Xi will speak on Friday - press.

- EU Trade Commissioner and Chinese counterpart to hold 4th round of trade talks this month, ahead of a EU-China summit in July.

- China Commerce Ministry (MOFCOM): EU curb on Chinese medical equipment is discriminatory [overnight update].

- (HK) China sells CNY12.5B vs CNY12.5B indicated of additional Sovereign Bonds in Hong Kong (as expected).

- China MOF sells 7-year Special Sovereign bonds.

- China PBOC sets Yuan reference rate: 7.1886 v 7.1869 prior.

- China PBOC Open Market Operation (OMO): Injects CNY215B in 7-day reverse repos; Net drains CNY0.6B v drains CNY376B prior.

Japan

- Nikkei 225 opens +0.7% at 37,693.

- Japan May Final PMI Services: 51.0 v 50.8 prelim (confirms 7th month of expansion).

- Japan PM Ishiba: Wants to maintain communication with South Korea; Wants to increase cooperation with South Korea - financial press.

- Japan Chief Cabinet Sec Hayashi: Japan has not received any letter from the USTR.

- Bank of Japan (BOJ) announcement related to outright bond buying operations: <1 Year; 1-3 Years; 3-5 Years; 10-25 Years; (Purchase amounts unchanged).

- Japan said to consider cooperating with US on its golden dome missile defense system.

- Reportedly Japan is forming a think tank to tackle Trump tariffs and Taiwan – Nikkei.

- Fast Retailing (9983.JP) Reports May Uniqlo Japan SSS +13.1% y/y [overnight update].

Korea

- Kospi opens +1.4% at 2,737; post-election win by new Pres Lee.

- South Korea President-elect Lee Jae-Myung takes oath; plans to activate 'emergency' economic task force.

- South Korea President-elect Lee Jae-Myung nominates his top campaign aide Kim Min-Seok as Premier.

- Bank of Korea (BOK): Inflation will be 'high 1%" level during H2; Jun CPI may rise on base effect

- South Korea Pres-elect Lee may speak to US Pres Trump by phone later on Wed - Yonhap..

- White House Official: South Korea election was a free and fair election, but the US is concerned about Chinese interference and influence.

- South Korea presidential candidate Kim Moon Soo concedes defeat to Lee and offers congratulations [overnight update].

Other Asia

- Indonesia said to give the US 'preferential tariffs' as part of US-Indonesia trade talks - financial press.

- India May Final PMI Services: 58.8 v 61.2 prelim (confirms 46th month of expansion).

- Hong Kong May PMI (whole economy): 49.0 v 48.3 prior.

- Singapore May PMI (whole economy): 51.5 v 52.8 prior.

- Thailand May PMI Manufacturing: 51.2 v 49.5 prior (1st expansion in 3 months).

- (VN) US govt said to have sent 'tough' list of requests to Vietnam on trade terms; US requested that Vietnam cut its reliance on China supply chains - press [overnight update].

North America

- (MX) Mexico Econ Min Ebrard: To ask US govt for exemption from steel tariffs, ahead of Washington DC talks on Fri - financial press.

- US Senate Majority Leader Thune says US House SALT deal "to change" - Politico.

- China Commerce Min and Canada Trade Min meeting in Paris - financial press.

- (US) Weekly API Crude Oil Inventories: -3.3M v -4.2M prior.

- (US) APR FACTORY ORDERS: -3.7% V -2.2%E.

- (US) APR FINAL DURABLE GOODS ORDERS: -6.3% V -6.3% PRELIM; DURABLES (EX-TRANSPORTATION): 0.2% V 0.2% PRELIM.

- (US) APR JOLTS JOB OPENINGS: 7.39M V 7.10ME, quits 2.0% v 2.1% prior; March revised higher.

- (US) Fed's Bostic (non-voter for 2025): Not in hurry to adjust policy; See possible path towards one rate cut this year - conference call with media.

- (US) Unconfirmed reports circulating that Trump and Xi will speak on Friday - press.

- (US) Fed's Goolsbee (voter): Have to wait and see tariff impact on inflation; Could see direct tariff effect on prices within a month.

- (US) Fed's Cook (voter): Evidence that trade policy starting to affect economy; Firms may be more willing to increase prices now relative to the past; Fed has to be open to all possibilities regarding rates - speech text.

- (US) White House Press Sec Leavitt: Confirms that White House sent letter to trade partners requesting deadline submissions; Wanted to remind countries that tariff. deadline soon; Confirms Pres Trump will sign executive order to double tariffs on steel and aluminum to 50% today, will take effect tomorrow (as expected).

- Elon Musk: US spending bill is massive, outrageous and pork-filled; Shame on those who voted for the bill - X.

- (US) House Speaker Johnson: Musk comments on tax/spending bill are very disappointing.

- (US) Treasury Sec Bessent is meeting at Capitol with Senate Majority Leader Thune and Finance Committee Chair Crapo on tax portions of tax/budget bill - Politico on.

Europe

- (UK) Follow up: US order exempting UK from fresh US Steel and Aluminum tariffs takes effect as rest-of-world tariff level for SLX and ALUM doubles to 50% [midnight Eastern Time in the US / 04:00 GMT].

- (EU) Reportedly EU didn't receive US letter requiring its best trade offers for negotiations - press.

- (US) Agriculture Sec Rollins: Had talks with Italy on getting more grains into EU - TV interview.

- (UR) Russia govt: Pres Putin ready for high-level contacts, but those must be well-prepared in advance.

- (DE) Germany automaker industry association VDA: Out industry highly affected by export restrictions on rare earths; Production delays and outages can no longer be ruled out.

- (IR) Iran Foreign Minister Araghchi: US nuclear deal proposal isn't clear.

- (IT) Italy May New Car Registrations Y/Y: -0.2% v 2.7% prior.

- (CH) SNB Board Member Tschudin: Our main task is price stability; We look a price stability in (medium) term, not next month.

- (EU) OECD updates its economic outlook; Cuts 2025 Global GDP growth forecast from 3.1% to 2.9%.

Levels as of 01:20 ET

- Nikkei 225 +0.8%, ASX 200 +0.8%, Hang Seng +0.7%; Shanghai Composite +0.4%; Kospi +2.6%.

- Equity S&P500 Futures -0.1%; Nasdaq100 -0.1%; DAX +0.3%; FTSE100 flat.

- EUR 1.1365-1.1393; JPY 143.68-144.28; AUD 0.6454-0.6481; NZD 0.5995-0.6015.

- Gold flat at $3,378/oz; Crude Oil -0.4% $63.14/bbl; Copper +0.1% at $4.8698/lb.