Trump follows through on higher tariff threats (ex-EU), also affirmed deadline delay

Asia Market Update: Trump follows through on higher tariff threats (ex-EU), also affirmed deadline delay [from yesterday], Asia equities take in stride; RBA surprises by holding rates; RBNZ rate decision tomorrow.

General trend

- President Trump confirmed letters to key trading partners Japan and South Korea, threatening to essentially raise tariffs from Aug 1st on those two countries back towards the original Liberation Day levels of 25%.

- Overall, Trump so far to impose 25% tariff on Japan, South Korea, Malaysia, Kazakhstan and Tunisia on any or all products, separate from all sectoral tariffs, with 30% on South Africa, Bosnia & Herzegovina, 32% on Indonesia, 35% on Bangladesh and Serbia, 36% on Cambodia and Thailand and 40% on Myanmar, and Laos. [Note: All tariff rates are of a similar range to each nation’s April 2nd Liberation Day announcement, providing incentive for each to close a deal with the US that may lessen their rates, with US Treas Sec Bessent saying a lot of countries are reaching out to negotiate].

- During the Asia session multiple Asian nations said they were actively engaged in further talks with the US.

- Following the news Japanese stocks and the Nikkei were only marginally lower at the open, despite JP automaker ADRs and index ETFs being down -3% to -4% during late US trading.

- Further, prior to the Asia open Pres Trump said the tariff letters are "more or less" final offers, and Aug 1st is firm, “but not 100% firm”. And “If we like different ideas from countries, I'll do it”. [Reiterated close to a deal with India]

- Within a few minutes after the open all losses were reversed. (Reminder that a few days ago Trump had threatened a higher rate of “30-35%” tariffs against Japan; PM Ishiba later framed today's lesser 25% rate as a relative win for Japan.

- Korea’s Kospi outperformed +1.8%. Most indices higher (Singapore to fresh record high), with only Australia's ASX lagging.

- A US letter to the EU was missing from the above list, but Euro +0.3% as US reportedly to offer the EU just a 10% base tariff, ‘with caveats”. [EUR/JPY traded at the highest since Jul 2024, and GBP/JPY to 8-month high].

- Japan long-end of the curve steepened again today, with ultra-long 30 yr JGBs +12.5bps and 40-yrs +7bps. Nevertheless JP 5-year auction at the shorter end of the curve was well supported, with the strongest tail demand since January.

- Samsung -2% after a bad Q2 Op earnings miss, but recovered to be around flat later in the session.

- CFTC Japanese Yen Net long positions last week continue to edge back from their record ~179K Net long contracts as at Apr 29th, down to +127.4K contracts Net long as at July 1st. Japanese Yen -0.3% as USD retook 146 handle for first time in nearly 3 weeks.

- Australia saw better Business and Consumer confidence figures today, with business confidence in particular returning back to be well above the neutral mark.

- AU RBA Rate Decision surprised in a 6-3 vote by holding rates at 3.85% when a 25bp cut was expected. Board says it is now focused on its dual mandate to deliver price stability and full employment, whereas prior only price stability was focused upon. Aussie dollar spiked 1% with AU 3-yrs +13bps.

- US equity FUTs flat to +0.1% during Asian trading.

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

- Wed July 9th CN Jun CPI, RBNZ Rate Decision, (Wed night US FOMC Minutes).

- Thu July 10th KR BOK Rate Decision.

- Fri July 11th NZ Jun Business PMI, SG Q2 GDP.

- Sat July 12th CN Jun Trade Balance.

Holidays in Asia this week

- Thurs July 10th Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.3% at 8,559.

- Australia Jun NAB Business Confidence: 5 v 2 prior; Business Conditions: 9 v 0 prior.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 88.6 v 87.2 prior.

- Follow up: APRA (Australia regulator) now consulting on certain amendments to phase out AT1 capital - financial press.

- Australian economist Warwick McKibbin says global tariff disruption is 'opportunity' for Australia to lower its trade barriers - Xinhua.

- Australia Jun Foreign Reserves (A$): 101.9B v 105.6B prior [overnight update].

China/Hong Kong

- Hang Seng opens +0.2% at 23,927; Shanghai Composite opens +0.1% at 3,474.

- China PBOC says will support more onshore investors to invest in offshore bonds - financial press.

- HKMA Chief Yue: Confirms Southbound Connect to include brokerage and insurance firms.

- Hong SFC [securities regulator] Chief Julia Leung: Working with mainland for offshore Treasury FUTs.

- China’s first batch of sci-tech innovation bond ETFs raised a total of CNY30B in a single day (institutional investors as the main buyers) - Shanghai Securities Journal.

- China Premier Li Qiang: China has resources to 'counter external headwinds' - financial press.

- CHINA JUN FOREIGN RESERVES: $3.317T V $3.313TE [overnight update].

- China govt said to consider doubling southbound Bond Connect to $139B – press.

- China Pres Xi: Stresses need to develop real economy to build up national strength - Xinhua.

- China PBOC sets Yuan reference rate: 7.1534 v 7.1506 prior.

- China PBOC Open Market Operation (OMO): Injects CNY69B in 7-day reverse repos; Net drains CNY62B v drains CNY225B prior.

Japan

- Nikkei 225 opens -0.2% at 39,510.

- Japan May Current Account Balance: ¥3.436T v ¥3.006Te.

- Japan Jun Bank Lending Y/Y: 2.8% v 2.4% prior.

- Japan Jun 1-20 Exports Y/Y: +0.7%; Imports -0.7% (provisional).

- Japan Jun Eco Watchers Current Survey: 45.0 v 45.0e; Outlook Survey: 45.9 v 45.3e.

- JAPAN SELLS ¥2.4T VS. ¥2.4T INDICATED IN 5-YEAR JGB BONDS; AVG YIELD: 0.9890% V 0.9820% PRIOR; BID-TO-COVER: 3.54X V 4.58X PRIOR.

- Japan PM Ishiba: Seeks deal with US ASAP; Have not been able to reach agreement because Japan has kept defending what needs to be defended; As a result of past talks, we were able to avert hike in tariffs to 30-35%.

- Japan Fin Min Kato: To work on negotiations with the US on tariffs.

- US Pres Trump: To impose 25% tariff on Japan on any or all Japanese products, separate from all sectoral tariffs, effective Aug 1st, 2025; Has sent a letter to Japan's PM Ishiba - Letter published on Truth Social.

- Toyota: Importing US cars to Japan 'among ideas' to avoid Trump tariffs – Nikkei.

- Japan METI: Guides Q3 Japan Steel Output 20.1Mt, -2.3% y/y.

Korea

- Kospi opens +0.4% at 3,071.

- Follow up: South Korea Presidential Advisor: National interests are more important than swift consultations with the US.

- South Korea Trade Min Cheong meets with US Commerce Sec Lutnick - South Korea press.

- South Korea: Will step up trade negotiations with the US to win mutually beneficial results and clear up uncertainties caused by tariffs.

- US Pres Trump: Imposing 25% tariff on any or all South Korea products, separate from all sectoral tariffs, effective Aug 1st - Truth Social post of letter to South Korea Pres Lee; 25% rate roughly equal to rate published on Apr 2nd Liberation day.

- Samsung: Reports prelim Q2 (KRW) Op 4.60T v 6.83Te (-56% y/y); Rev 74.0T v 76.3Te (flat y/y).

Other Asia

- Indonesia top Trade Rep Hartarto to meet USTR in DC; Still have room to negotiate tariffs - Indonesia official.

- Taiwan Cabinet: Taiwan still in talks with the US on tariffs; Has Not received a US notice on tariffs yet - financial press.

- Malaysia Trade Min: To continue engaging with the US on tariffs.

- Thailand Finance Min Pichai: Should 'wrap up' [trade] talks by the Aug 1st deadline; 36% tariff rate is 'a bit shocking'.

- Vietnam Central Bank (SBV): Notes global uncertainties to remain and impact Vietnam.

North America

- (CA) Canada Fin Min François-Philippe Champagne requests Cabinet members find 'tens of billions of dollars' in spending cuts - financial press.

- (US) White House Official: Tariffs announced today won't stack atop other tariffs.

- (US) White House Press Sec Leavitt: Twelve more trade letters coming from White House to various countries, which will be posted to Truth Social; Will be additional letters beyond those twelve; Pres Trump will sign order delaying tariffs to Aug 1st.

- (US) Reportedly Trump administration will not immediately impose new 10% tariffs, but will proceed against BRICS members that take action on 'anti-American' policies - press.

- (US) Treasury Sec Bessent: Expect several trade announcements in next 48 hours; My mailbox is full with new trade offers – CNBC.

- (US) White House Trade Adviser Navarro: Rates should be lower; Chairman Powell blunders will not be kind to him when history is written - CNBC.

Europe

- (IE) Ireland Jun Construction PMI: 48.6 v 49.2 prior.

- *(EU) US REPORTED TO OFFER EU 10% TARIFF DEAL "WITH CAVEATS" - Politico, citing EU official.

- (EU) Reportedly EU won't receive letter from US Pres Trump indicating higher tariff rates to be paid – press.

- (DE) Germany Govt Spokesperson: Time is money when it comes to tariff negotiations.

- (PL) Poland Central Bank (NBP) Member Duda: See one more 25bps cut in 2025.

- (EU) ECB statement on macroprudential policies: Main priority is to preserve bank resilience.

- (IL) ISRAEL CENTRAL BANK (BOI) LEAVES BASE RATE UNCHANGED AT 4.50%; AS EXPECTED.

- (EU) European Commission Pres Von der Leyen: Europe must show strength in trade negotiations with US.

- (EU) Reportedly looking into possible deal on cars to offset US car exports against imports - press – press.

- (EU) Reportedly EU will complete deals that will give Canada and UK access to defense loans from €150B loan pool by end-July - press.

Levels as of 01:20 ET

- Nikkei 225 +0.3%, ASX 200 -0.3%, Hang Seng +0.8%; Shanghai Composite +0.7%; Kospi +1.8%.

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

- EUR 1.1708-1.1750; JPY 145.83-146.45; AUD 0.6490-0.6558; NZD 0.5994-6036.

- Gold flat at $3,343/oz; Crude Oil -0.5% at $67.59/bbl; Copper +0.3% at $5.0225/lb.