Trade uncertainty persists amid US-CN London trade talks

Asia market update: Trade uncertainty persists amid US-CN London trade talks and US court ruling allowing Trump tariffs to persist for longer; Focus on US May CPI.

General trend

- Little market reaction to the much-anticipated news out of London US-China trade talks; US equity FUTs jumped only very slightly on the news, then fell -0.2% to -0.3%. China released the first statement, confirming a consensus on the so-called “Geneva Agreement” back on May 11th, with the US side a few minutes later confirming a framework had been achieved for implementation with Commerce Sec Lutnick saying he would ask Trump for approval. Details still lacking, with technicals anticipated to come tomorrow amid continued talks, as Treas Sec Bessent returns for testimony in the US.

- In further trade news, as per the DOJ request the US Appeals Court has stayed the case brought by the Court of International Trade deeming the Trump tariffs 'illegal', almost guaranteeing that the tariffs will remain in place for many months to come as the case works its way through the Federal Circuit Courts.

- First signs of concrete progress from the trade talks regarding rare earths, with JL Mag (6680.HK) stating it had received approval to export magnetic materials to EU and US, "after rare earth measures put in place".

- Meanwhile, companies have found more certainty of late to provide guidance (Stanley Electric last night in Japan, and now today several US corporates pricing secondary offerings in NY overnight, after the US/CN trade comments. Potentially indicating some opening of the capital markets?

- Asia stocks modestly positive, with the Kospi outperforming +1.2% on a 6th straight winning session since the Presidential election early last week, reaching levels not seen since Jan 2022.

- ECB Chief Lagarde gave a lecture in Beijing, saying within a carefully worded speech that “Coercive trade policies are Not a sustainable option to today's trade tensions”. [Comments could be taken as equally against China as the US].

- Japan May PPI disappointed with the first monthly contraction since Aug 2024. However, closer examination sees a fall in oil and coal prices outweighing other general prices paid increases.

- Japan MOF said the recent July bond buyback speculation was 'Unrealistic" (re earlier media reports that the reduction in the monthly purchasing amount of JGBs might drop from $400B to a slower ¥200B per quarter).

- South Korean exports for the first 10 days of June saw a rebound to growth on a y/y basis for both exports and imports, with chip exports still strong +22% and exports to China, US and EU all up y/y.

- US equity FUTs -0.3% to -0.4% during Asian trading.

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

- Wed Jun 11th (Wed night US May CPI).

- Thu Jun 12th IN May CPI, (Thu night US May PPI).

- Fri Jun 13th NZ May PMI (Fri night US Jun Michigan Consumer Sentiment).

Holidays in Asia this week

- Mon Jun 9th Australia, Indonesia.

- Thu Jun 12th Philippines.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 8,600.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 86.7 v 86.4 prior.

- Australia sells A$1.0B v A$1.0B indicated in 1.75% Nov 2032 bonds; Avg Yield: 4.008% v 4.1959% prior ; bid-to-cover: 3.21x v 3.48x prior.

- RBNZ says Gov Orr resigned due to 'disagreement over funding' (less than Orr thought necessary) - financial press.

- New Zealand Apr Net Migration: 1.8K v 2.0K prior.

China/Hong Kong

- Hang Seng opens +0.1% at 24,191; Shanghai Composite opens flat at 3,385.

- US-China trade talks: US Commerce Sec Lutnick: Confirms reached framework for implementation; to go back to speak to Trump to approve agreement - Financial press.

- US-China trade talks: China Vice Commerce Min Li Chenggang: Two sides reached consensus on 'Geneva Agreement'; Both sides had 'in-depth' exchanges - financial press.

- JL Mag (6680.HK) Co to receive approval to export magnetic materials to EU and US, after rare earth measures put in place - statement.

- China President Xi plans to visit Kazakhstan between Jun 16-17th - Press.

- (US) White House: Talks are ongoing with Chinese Officials in London; Greer and Lutnick will continue as needed; We've had two days of productive talks.

- (US) Commerce Sec Lutnick on China talks: We'll try to finish things; Talks going really well, hope they can end this evening, could go into tomorrow if necessary - comments to media in London.

- China Commerce Min Wang: Met with UK Business Min Reynolds yesterday; UK companies welcome to invest in China - press cites MOFCOM [overnight update].

- China PBOC sets Yuan reference rate: 7.1815 v 7.1840 prior.

- China PBOC Open Market Operation (OMO): Injects CNY164B in 7-day reverse repos; Net drains CNY51B v drains CNY256B prior.

Japan

- Nikkei 225 opens +0.6% at 38,432.

- Japan May PPI (domestic CGPI) M/M: -0.2% v 0.2%e; Y/Y: 3.2% v 3.5%e.

- Japan MOF says July bond buyback speculation 'Unrealistic" - financial press.

- Tier1 analysts: Continue to forecast the BoJ to maintain its current plan for reduction of JGB purchases, announced in July 2024, to reduce JGB purchases through March 2026, and to extend the plan by one year from April 2026, but at a slower pace of reductions [overnight update].

Korea

- Kospi opens +0.5% at 2,887.

- South Korea Jun 1-10th Exports Y/Y: +5.4% v -23.8% prior; Imports Y/Y: +11.5% v -15.9% prior.

- South Korea May Total Bank Lending to Households (KRW): 1,155T v 1,150T prior.

- South Korea Pres Lee: Will seek various steps to vitalize the capital markets; Requests review over system for detecting "unfair stock trades" - financial press.

- South Korea Pres Lee said to visit South Korea stock exchange today - South Korean press.

- South Korea govt said to be seeking to set up 'bad (debts) bank' for small business owners' debt restructuring; To be funded with extra budget - South Korea press, citing sources.

- South Korea May Unemployment Rate: 2.7% v 2.7%e.

Other Asia

- Indonesia govt creates $1.5B stimulus package; includes cash and rice handouts; Said to be in response to US tariffs - financial press.

- (IN) India and US have held talks on market access and digital trade; Discussions progressing well - press cites official [overnight update].

North America

- (US) Los Angeles to impose curfew for 'some parts of downtown' from 8 PM local time to 6 AM local time – CNN.

- *(US) Follow up: US Appeals Court pauses case in which Trump tariffs were deemed 'illegal' by the CIT; Case to be fast-tracked to Federal Circuit court for July 31st - financial press.

- Reportedly Pres Trump plans to repeal Biden's curbs on power plant pollution - press.

- (CA) Canada Industry Min Joly: Canada will bring back EV subsidies.

- (US) May NFIB Small Business Optimism: 98.8 v 96.0e.

- (US) Reportedly DOJ to resume investigating foreign-bribery cases after four-month review - WSJ.

- (US) BOFA INSTITUTE: MAY TOTAL CARD SPENDING +0.8% V +1.0% ON AVERAGE IN APRIL; Notes May weakness in spending partly reflects declining gasoline spending, some payback from earlier tariff-related "buying ahead", and the impact of relatively poor weather; There are several signs these rising costs of living are putting financial pressure on some younger consumers.

- (CO) Colombia reportedly approves activating escape clause for suspension of enforcement of fiscal rule - press.

- (US) Sen Graham (R-SC) said to be preparing back up GOP tax and spending bill, in case some major provisions get squeezed out during the reconciliation process; Believes Republicans may need three bills to achieve Trump's agenda – Semafor.

- (US) TREASURY'S $58B 3-YEAR NOTE AUCTION RESULTS: DRAWS 3.972% V 3.824% PRIOR; BTC 2.52 V 2.56 PRIOR AND 2.59 OVER THE LAST 8 AUCTIONS.

- (IR) Trump: Iran is getting much more aggressive in nuclear talks - Fox News interview [excerpt from interview with Bret Baier].

- (US) Senate Reublicans said to send House counterparts list of fatal flaws in Pres Trump's tax/budget bill - Politico.

-(US) Senate Reublicans said to send House counterparts list of fatal flaws in Pres Trump's tax/budget bill - Politico.

- (US) Science & Tech Advisor Sacks: China only 3-6 months behind US in AI.

- (US) White House: Bloomberg's report on Bessent as potential for next Fed Chair is false.

Europe

- (EU) ECB Chief Lagarde: Coercive trade policies are Not a sustainable option to today's trade tensions - lecture at PBOC event in Beijing.

- (EU) EU said to target Nord Stream and Russian oil cap in 18th sanctions package before the end of July; Reportedly include lowering the existing oil price cap from $60 to $45 per barrel, as well as banning the use of Russian energy infrastructure - FT.

- (EU) ECB’s Vujcic (Croatia): Can't say if US tariffs are disinflationary of inflationary; Hopefully we'll have more tariff clarity by Sept - TV interview.

- (US) World Bank lowers 2025 GDP growth forecast to 1.6% from 2.0%; Lowers Eurozone 2025 GDP growth forecast to 0.7% from 1.0%.

- (RU) European Commission Pres Von der Leyen: EU formally proposes 18th Russia sanctions package; Confirms price cap on Russian oil to be set at $45/bbl (prior: $60/bbl); Confirms proposes restrictions on Nord Stream II gas pipeline; Proposes SWIFT ban for 22 Russian banks.

- (UR) NATO said to include Ukraine funds in new spending target - press.

Levels as of 01:20 ET

- Nikkei 225 +0.5%, ASX 200 +0.2%, Hang Seng +0.9%; Shanghai Composite +0.5%; Kospi 1.2%.

- Equity S&P500 Futures -0.3%; Nasdaq100 -0.4%; DAX -0.5%; FTSE100 flat.

- EUR 1.1406-1.1440; JPY 144.66-145.16; AUD 0.6498-0.6532; NZD 0.602860.6062.

- Gold +0.5% at $3,361/oz; Crude Oil flat at $65.00/bbl; Copper +0.3% at $4.9018/lb.