Markets continue to press on through tariff uncertainty – RBNZ holds

Asia market update: Markets continue to press on through tariff uncertainty; RBNZ holds; CN inflation mixed; FOMC Minutes tonight.

General trend

- Asian stocks were mixed as Pres Trump promised another minimum 7 trade letters to be sent out tomorrow morning US time. Markets seem to be less reactive to the recent tariff pronouncements.

- Earlier, at a cabinet meeting, Trump teased upcoming tariff announcements for pharmaceuticals (“200%”), semiconductors and a likely 50% tariff on copper imports that sent spot prices up ~10% to all-time-highs [45% of all copper consumed in the US is imported].

- Reports that EU may be ready to sign a "temporary framework" accepting US Pres Trump's 'reciprocal" 10% tariff, while talks continue.

- Aussie dollar overnight pared about half of the gains yesterday following the unexpected pause by the RBA when a 25bps cut had been priced in. Today Australia REITs -1.1% on disappointment at higher rates for longer. AU 3-yr yields gained another 7bps on top of yesterday's 10-11bps. Aussie Treasurer Chalmers also expressed concern about Trump’s threat of pharma tariffs on what it might do to Australian pharma co’s.

- New Zealand RBNZ left rates on hold, its first pause in 7 decisions, as widely expected by the market. [Odds of a further cut in August sit closer to 60% prior to the decision). However the RBNZ statement did say that it expects inflation to rise to the top of target (1-3%) in coming quarters. NZ 2 yr yield ended -2bps after a small spike post-decision and the Kiwi dollar fell to near 3-week lows.

- China headline inflation came in slightly positive on an annualized basis, but fell on a m/m comparison, whereas producer prices paid fell most in almost two years, for its 33rd month of negative reads. China remains firmly in deflationary mode overall. Note also that falling inflation in Southeast Asia fuels 'fears' over demand; likely exacerbated by China’s exporting away its low domestic demand.

- BOJ's Koeda warned that rises in Japan's food, rice prices are stronger than expected at time of the BOJ's last policy meeting in May. Nikkei +0.7% at open, but then fell underwater within 40 minutes.

- Nevertheless the Yen continues to weaken against all-comers, not helped by OIS chances of a 25bp hike by October falling to 23.5% (vs 30.5% Monday) and chances of a hike by December falling to 39% (vs 47.5% Monday). Euro/Yen hit July 2024 highs. Long-end of the JP yield curve consolidated after the sharp rises Mon and Tue. [20-year auction tomorrow].

- US Treasury Sec Bessent to visit Japan next week as part of the US exhibition at the Osaka 2025 World Expo.

- Increasing press coverage of White House NEC Dir Kevin Hassett emerging as a prime contender to be the next Fed Chair.

- Nissan fell a further 3% (-45% over the past year) after it was reported to have halted multiple models and plant production on three separate locations over the past 24 hours around the world. [Comes a week after the company said to be seeking to delay supplier payments ‘to free up cash’]

- US equity FUTs flat to slightly down during Asian trading.

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

- Wed July 9th (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 -0.2% at 8,569.

- Australia sells A$1.2B vs. A$1.2B indicated in 4.25% Dec 2035 bonds; Avg Yield: 4.3442% v 4.255% prior; bid-to-cover: 2.65x v 3.10x prior.

- RBA Dep Gov Hauser: Reiterates 'enormous' amount of global economic uncertainty - Q&A comments.

- Australia Treasurer Chalmers said to be 'urgently' seeking detail on Trump drug tariff 'threat'; says Australia's pharma industry is 'much more exposed' to the US - US financial press.

- New Zealand central bank (RBNZ) leaves official cash rate (OCR) unchanged at 3.25%; as expected.

China/Hong Kong

- Hang Seng opens -0.4% at 24,061.

- China JUN CPI Y/Y: +0.1% V -0.1%E [first rise since Jan]; - PPI Y/Y: -3.6% v -3.2%e (33rd month of negative readings; largest decline since Jul 2023).

- China NDRC [state planner] Chair: Expects the size of China's economy to exceed CNY140T in 2025.

- China Securities Journal: Uncertainties in H2 due to 'challenging' trade outlook - cites analysts.

- China reportedly plans to revise EV safety requirement - press.

- Reportedly China will study more forceful policies for companies expanding overseas – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1541 v 7.1534 prior.

- China PBOC Open Market Operation (OMO): Injects CNY76B in 7-day reverse repos; Net drains CNY23B v drains CNY62B prior.

Japan

- Nikkei 225 opens +0.7% at 39,957.

- Japan Jun M2 Money Stock Y/Y: 0.9% v 0.6% prior.

- Japan sells ¥3.5T vs. ¥3.5T indicated in 6-Month Bills; Avg Yield: 0.4283% v 0.4938% prior, bid-to-cover: 3.75x v 3.44x prior.

- Follow up: Japan BOJ said to be considering timing of ETF sales as it completes stock divestment - Nikkei Asia.

- BOJ's Koeda: Recent rises in Japan's food, rice prices are stronger than expected at time of BOJ's May policy meeting; We're watching developments carefully [overnight update].

- US Treasury Sec Bessent to visit Japan next week with US delegation for Osaka 2025 World Expo - press [overnight update].

- Nissan: 1) Said to scale down plans for new Leaf EV due to China export limits on rare earths; 2) Also reportedly to postpone the production of two electric vehicles in the US for up to a year; Production was scheduled for 2028, but is now delayed to the end of 2028 or early 2029; 3) Halts production of three vehicle models for Canada market and two plants in the US (Tennessee, Mississippi) - Nikkei.

Korea

- Kospi opens +0.3% at 3,123.

- South Korea Jun Total Bank Lending to Households (KRW): 1,162T v 1,155T prior (biggest monthly increase since Aug 2024).

- South Korea Central Bank: Jun Foreign investment in local bonds +$2.81B v +$7.83B m/m.

- South Korea to establish joint team to deal with equity market manipulation - Press.

- Bank of Korea: South Korea FX trading grew in Q2; cites strong demand for the US dollar and FX derivatives; Q2 daily avg transactions of FX and derivatives in the domestic inter-bank market hit $40.5B v $35.0B q/q.

- Follow up: South Korea said to grant start-up benefits to crypto firms through 'reclassification' - financial press.

Other Asia

- Thailand Jun Consumer Confidence: 52.7 v 54.2 prior.

- Vietnam Dep Trade Min: Vietnam seeking to expand export markets to reduce reliance on the US.

- Malaysia Trade Min Aziz: Trans-shipments are a non-issue for Malaysia; Still optimistic about getting trade deal with US - financial press.

- Indonesia Econ Min Hartarto: State energy firm Pertamina signed MoU on US purchases of LPG, gasoline and crude oil from US [overnight update].

- Taiwan Jun CPI Y/Y: 1.4% v 1.6%e [overnight update].

- Taiwan Jun Trade Balance: $12.1B v $11.9Be [overnight update].

North America

- Pres Trump said to have extended trade deadlines after Treas Sec Bessent requested "more time on deals" – WSJ.

- White House NEC Dir Hassett said to have met with Trump "at least twice" in June about US Fed job – WSJ.

- White House officials said to be 'concerned' about DOGE officials’ loyalty to Musk - WSJ.

- (US) Pres. Trump: We will be releasing a minimum of 7 Countries having to do with trade, tomorrow morning - post on Truth Social.

- US Supreme Court blocks judge's order that halted Trump Admin's mass layoffs of Federal agencies - press.

- (US) Jun NFIB Small Business Optimism: 98.6 v 98.6e.

- (US) White House Council of Economic Advisers Chair Miran: We could see more trade deals by end of this week - Fox News.

- (US) June Manheim wholesale used vehicle Index: 208.5 v 208.7 prior; +1.3% m/m; +6.3% y/y.

- (CA) Canada Jun Ivey Purchasing Managers Index: 53.3 v 48.9 prior.

- US FHFA Dir Pulte: Fannie and Freddie allowing lenders to use Vantage 4.0 score with no current requirement to build new infrastructure - X post.

- (US) US Pres Trump: TARIFFS WILL START BEING PAID ON AUGUST 1, 2025. There has been no change to this date, and there will be no change - Truth Social.

- (US) June NY Fed (NYFRB) 1-year Inflation Expectations Survey: 3.02% v 3.20% prior.

- (US) Treasury's $58B 3-year note auction results: draws 3.891% V 3.972% PRIOR; BTC 2.51 V 2.52 prior and 2.60 over the last 8 auctions.

- (US) Pres Trump: Today we're doing copper tariff at 50% (45% of all copper is imported).

- (US) Pres Trump: Will announce something on pharma very soon; Threatens 200% tariffs; Will give them year or year and a half to 'come in' - Comments at Cabinet meeting.

- (US) Pres Trump: Will announce something on chips very soon - comments at Cabinet meeting.

- (US) US Pres Trump: Fed Chair Powell should resign immediately.

- (US) Commerce Sec Lutnick: Expect 15-20 additional letters on tariffs over next 2 days - CNBC.

- (US) FTC Warns Companies to Comply with 'Made in USA' Requirements; Sent letters to Amazon and Walmart, among others.

- (US) Agriculture Sec Rollins: USDA will be limiting farmland purchases by 'foreign adversaries' including China.

Europe

- EU said to be ready to sign a "temporary framework" to accept US Pres Trump's 10% tariff as 'reciprocal' - FT.

- (UK) UK reportedly will miss 9th July deadline to finalise US metals trade deal, risking tariff hike from 25% to 50% on steel and aluminium exports - Sky News.

- (DE) Germany Econ Min Reiche: Structural reforms are a requirement for German economy to grow again.

- (EU) Economy Commissioner Dombrovskis: Tariff uncertainty weighing on economy and investment - comments from Brussels.

Levels as of 01:20 ET

- Nikkei 225 +0.3%, ASX 200 -0.5%, Hang Seng -0.8%; Shanghai Composite +0.4%; Kospi +0.1%.

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

- EUR 1.1702-1.1730; JPY 146.53-147.18; AUD 0.6510-0.6545; NZD 0.5976-6015.

- Gold -0.4% at $3,304/oz; Crude Oil -0.3% at $68.15/bbl; Copper +8.0% at $5.6615/lb.