Asia equities mixed and USD weakness continues amid end-game US trade talks

Asia market update: Asia equities mixed and USD weakness continues amid end-game US trade talks; Focus on EU Jun CPI, US Jun ISM Mfg PMI, US May JOLTS.

General trend

- With US trade talks top of mind, Korea’s Kospi +2.0% outperformed Asia (later pared to +1.0%) on hopes for revision to South Korea’s Commercial Act and extra budget (KRW30.5T) to be approved by Korea govt this week. Touched up against last week’s multi-year highs and has all time 2021 high of 3,346 in its sights again after a correction late last week. (**Note: The Kospi was up a stunning 38% in just 11 weeks from its 2,286 low on April 8th to a high of 3,154 on Jun 25th).

- Conversely, following three strong days of gains, Nikkei under-performed Asia with warning signs out of the US-Japan trade talks as Akazawa confirmed the two sides are not on the same page on 'some' matters. (**Note: Autos are a known sticking point, but Pres Trump now also putting pressure on Japan to accept US rice exports).

- Japan Tankan for large manufacturers in Q2 came in better than expected, for both index and outlook with Large manufacturers index highest since Dec 2024, although non-manufacturers index was lowest since Dec 2024. Also noteworthy; large firms expect to increase Capex this year despite the impact of US tariffs.

- China Caixin Manufacturing (unlike the official govt figures yesterday) for June moved back into expansion. Media reports that “fierce” market competition left manufacturers with few choices but to cut prices to boost sales.

- For Asian June PMI’s, Japan confirmed its first expansion in a year, while most other Asian nations continued multi-month contractions, including South Korea and Taiwan.

- Another well-supported JGB auction for Japan 10-years after the worries back in May. 10-year JGBs -3.5bps.

- Euro continued advancing to 2021 highs, briefly touching 1.18. Euro also hit 2014 highs vs China’s offshore Yuan. USD fared better against commodity currencies Aussie and Kiwi.

- South Korea June trade surplus beat estimates mainly due to a record amount of chip exports, nearly $15B for the month. EU exports +14% made up for smaller falls in exports to the US and China.

- New Zealand’s recent run of schizophrenic economic data continued today, with a 10% jump in building permits after the prior month’s steep fall.

- Further evidence that Pres Xi may be losing effective power, with an announcement out of the CCP Politburo that it will establish a Central Party Coordination Body to "improve efficiency of decision-making". [In other words, shared decision-making, which would indicate an end to Xi’s one-man-rule.].

- Musk/Trump war reignites; Birth of a new political party in America this week? Elon Musk posted on X, "If this insane spending bill passes, American Party will be formed the next day". Trump retorted later suggesting a DOGE inspection of all of the subsidies that Musk's various companies have received.

- Sign of the future as Amazon reported to now have >1M robots in its facilities, with more robots than humans likely soon. (As at Q1 2025. Amazon had 1.56M workers globally, including part-time, with ~1.1M in the US).

- Japan BOJ Gov Ueda remarks at Sintra, Portugal (EU's Central Bank forum) due 09:30am ET on Tue July 1st.

- US equity FUTs -0.1% during Asian trading.

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

- Tue July 1st (Tue eve EU Jun CPI, JP BOJ Gov Ueda ( Sintra), Tue night US Jun ISM Mfg PMI, US May JOLTS).

- Wed July 2nd KR Jun CPI, AU May Retail Sales, ECB Sintra Forum.

- Thu July 3rd AU May Trade Balance, JP BOJ Takada speech, CN Jun Caixin Services PMI, (Thu night US Jun NFP, US Jun ISM Services PMI).

- Fri July 4th JP May Household spending.

Holidays in Asia this week

- Tue July 1st Hong Kong.

- Thu July 3rd US early close 13:00ET.

- Fri July 4th US (Independence Day).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,548.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 87.2 v 86.7 prior.

- Australia Jun Final PMI Manufacturing: 50.6 v 51.0 prelim (confirms 6th month of expansion).

- Australia Jun Cotality Home Value M/M: 0.6% v 0.5% prior [overnight update].

- New Zealand May Building Permits M/M: +10.4% v -14.6% prior.

- NZIER: NZ Quarterly Business Opinion Survey: Business Expectations +22% v 19% q/q.

- BNZ bank [private bank]: expects RBNZ will pause rate cuts in July.

- New Zealand RBNZ names former Dep Gov Grant Spencer to board; Reappoints Byron Pepper - NZ Fin Min Willis statement.

China/Hong Kong

- Hang Seng closed for holiday; Shanghai Composite opens +0.1% at 3,445.

- China Jun CAIXIN PMI Manufacturing : 50.4 V 49.3E (moves back into expansion after one month contraction).

- Tesla China to raise price of Model 3 Long Range to CNY285.5K (Prior CNY271.9K, approx ~5% increase) - financial press.

- Xpeng 9868.HK Reports Jun Vehicle Deliveries 34.6K units, +224% y/y.

- (HK) Macau Jun (MOP) Casino Rev Y/Y: 21.1B, +19% y/y.

- China Jun top 100 developers see sales +14.7% m/m v -10% prior - China Real Estate Information Corp (CRIC) [overnight update].

- China reportedly to offer extra tax relief for overseas investors – press [overnight update].

- Hong Kong May M3 Money Supply Y/Y: 9.5% v 6.6% prior [overnight update].

- China holds Politburo meeting; To establish Central Party Coordination Body to "improve efficiency of decision-making" – Xinhua.

- Reportedly China is planning to invite US Pres Trump to a military parade scheduled for Sept 3rd in Beijing's Tiananmen Square to mark the 80th anniversary of the end of World War II - Japanese press.

- China PBOC sets Yuan reference rate: 7.1534 v 7.1586 prior (strongest since Nov 8th, 2024).

- China PBOC Open Market Operation (OMO): Injects CNY131B in 7-day reverse repos; Net drains CNY276B v injects CNY111B prior.

Japan

- Nikkei 225 opens -0.4% at 40,310.

- Japan Q2 Tankan large Manufacturing index: 13 V 10E; large Manufacturing outlook: 12 V 9E.

- Japan Jun Consumer Confidence: 34.5 v 33.5e.

- Japan Jun Final PMI Manufacturing: 50.1 v 50.4 prelim (confirms 1st expansion in 12 months).

- Japan sells ¥2.6T VS. ¥2.6T indicated in 10-year JGB bonds; AVG YIELD: 1.4420% V 1.5120% prior, bid-to-cover: 3.51X V 3.66X prior.

- Japan Trade Negotiator Akazawa: Confirms the two sides [US and Japan] are not on the same page on 'some' matters.

- Japan Agriculture Min Koizumi refuses to comment on US Pres Trump posts on Japan rice imports from the US.

- BOJ: New board member Masu to hold inaugural news conference at 17:00 local time [8 GMT].

- Japan to start extracting deep-sea rare earths as early as next year - Nikkei.

- Japan tax revenue seen to be record >¥75T - NHK.

- Japan PM Ishiba reportedly mulls US Pres Trump suggestions that Japan should buy US oil – Nikkei [overnight update].

- Japan Trade Negotiator Akazawa: Japan and US are continuing talks in earnest; July 9th date is a milestone in negotiations [overnight update].

- (US) Pres Trump plans to send a tariff letter to Japan - Truth Social post [overnight update].

Korea

- Kospi opens +0.6% at 3,089.

- South Korea Jun Trade Balance: $9.1B v $8.4Be.

- South Korea Jun PMI Manufacturing: 48.7 v 47.7 prior (6th straight contraction).

- South Korea considering separate tax on dividend income - Korean press.

- South Korea senior trade ministry official: South Korea’s priority in its negotiations with the US over trade at this point is seeking the extension of the tariff grace period; Negotiations will have to continue past the July 8 deadline [overnight update].

Other Asia

- India Jun Final PMI Manufacturing: 58.4 v 58.4 prelim (confirms 48th month of expansion).

- Taiwan Jun PMI Manufacturing: 47.2 v 48.6 prior (4th straight contraction).

- Indonesia Jun PMI Manufacturing: 46.9 v 47.4 prior (3rd straight contraction).

- Malaysia Jun PMI Manufacturing: 49.3 v 48.8 prior [13th month of contraction].

- Thailand Jun PMI Manufacturing: 51.7 v 51.2 prior [2nd month of expansion].

- Vietnam Jun PMI Manufacturing: 48.9 v 49.8 prior [3rd month of contraction].

- Philippines Jun PMI Manufacturing: 50.7 v 50.1 prior [3rd month of expansion].

- Singapore Q2 Preliminary URA Private Home Prices Q/Q: 0.5% v 0.8% prior.

- Singapore MAS to release October policy statement by Oct 14th.

- Indonesia Jun CPI M/M: 0.2% v 0.1%e; Y/Y: 1.9% v 1.8%e.

- Taiwan Financial Supervisory Commission; Ease rules to help the island’s insurers access additional reserves to offset foreign currency losses; effective immediately [overnight update].

North America

- (US) Elon Musk: "If this insane spending bill passes, American Party will be formed the next day" - X post.

- (US) White House NEC Dir Hassett: Expect trade frameworks will come after July 4th; Regarding Japan trade deal: Nothing is over, there will be discussions - Fox Business.

- (US) White House Press Sec Leavitt: Pres Trump meeting with trade team this week to set country tariff rates; Commerce Sec Lutnick and Pres Trump working on India deal recently, will hear soon about India trade deal.

- (CA) PM Carney: Making progress towards deal with US - comments to media.

- (US) Pres Trump plans to send a tariff letter to Japan - Truth Social post.

- (US) Treasury Sec Bessent: Remains confident that the tax bill will pass; This is just the start of addressing debt; We're going to bring levels down by bending the curve.

- (US) Jun Chicago purchase managers index (PMI): 40.4 V 42.9E (19th straight month in contraction).

- (MX) Mexico Pres Sheinbaum: US remittance tax proposal is down to 1%.

- (US) Fed's Bostic (non-voter for 2025 & 2026): Advance warning on tariffs have allowed firms to manage the process; Still lot of uncertainty where trade policy will go; Labor markets are quite solid - conference comments.

- (US) White House NEC Dir Hassett: Still on track for July 4th tax bill deadline; Trump has strong views that the Fed could lower interest rates - CNBC

- (US) Jun Dallas Fed Manufacturing activity: -12.7 V -12.0E.

- (US) Reportedly House GOP wants Senate to make significant changes to their reconciliation bill with a wrap-around amendment at the end of today's vote-a-rama - Punchbowl.

Europe

- (IE) Ireland Jun PMI Manufacturing: 53.7 v 52.6 prior (6th month of expansion).

- (UK) Jun BRC Shop Price Index Y/Y: +0.4% v -0.1% prior (highest since May 2024 of +0.6%).

- (PT) Portugal Jun Preliminary CPI M/M: 0.1% v 0.3% prior; Y/Y: 2.4% v 2.3% prior.

- (IE) Ireland Jun Preliminary CPI EU Harmonized Y/Y: 1.6% v 1.4% prior.

- (EU) EU spokesperson: Digital Services Tax (DSA) not on the table in trade talks with US.

- (EU) ECB’s Lane, (Ireland, chief economist): Reiterates may face larger deviations from 2% inflation target in both directions - presentation of strategy assessment.

- (DE) Germany Jun preliminary CPI M/M: 0.0% V 0.2%E; Y/Y: 2.0% V 2.2%E (lowest annual pace since Oct 2024).

- (EU) EU said to accept US Pres Trump's universal tariff but seeks key exemptions - press.

- (EU) EU spokesperson: Digital Services Tax (DSA) not on the table in trade talks with US.

- China to continue anti-dumping duties on EU and UK steel products - press.

Levels as of 01:20 ET

- Nikkei 225 -1.0%, ASX 200 flat, Hang Seng closed; Shanghai Composite +0.2%; Kospi +1.0%.

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

- EUR 1.1778-1.1807; JPY 143.44-144.08; AUD 0.6554-0.6584; NZD 0.6076-6098.

- Gold +1.0% at $3,340/oz; Crude Oil -0.5% at $64.81/bbl; Copper -0.5% at $5.1000/lb.