End-of-quarter kicks off busy data week

Asia market update: End-of-quarter kicks off busy data week; Countries rush to complete US trade talks, incl. Canada backing down on digital tax; Nikkei outperforms again despite poor econ data; CB’s Sintra tomorrow.

General trend

- A busy week for data, starting with month and quarter-end in focus, followed by major Central Bank heads meeting in Sintra, Portugal, China manufacturing data for June, EU CPI for June, and a stack of important data out of the US later in a shortened US week with US May JOLTS, US June ISM Manufacturing & Services PMIs and US June Non-Farm Payrolls.

- US equity FUTs in early the Asian session traded up 0.5% to overtake the all-time-highs reached on Friday for the S&P500 and Nasdaq.

- Trade war fears, which had been ameliorating in recent weeks, returned to front of mind for the markets late Friday when Pres Trump suddenly ended all trade talks with Canada, citing Canada’s Digital Services Tax on US tech companies. However, today Canada rescinded the tax. Trade talks expected to resume, aiming for agreement.

- Pres Trump hinted he might not extend the various July 9th tariff deadlines if he doesn’t feel there is a fair deal to be made (in his Fox News interview on Sunday). Trump also said to be 'determined' to keep the 25% tariff on Japan autos, which Japan top officials have continually said is their red line for a deal.

- For Asia; India, Taiwan and Japan have all have made progress and/or are staying for further negotiations in the US. Thailand reps also to fly into the US tonight, while Indonesia has offered the US to jointly invest via its Sovereign Wealth Fund in Indonesian critical minerals.

- Meanwhile the UK govt trumpeted its trade deal with the US coming into effect today, duly slashing its 10% US tariffs to zero, as agreed for certain sectors such as aerospace and autos.

- US tariffs may have hit Japanese industrial output in May, with m/m well below estimates, taking the annualized figure into negative territory. Japan stats agency saw decreased production in Transport equipment (excl. motor vehicles), Inorganic & organic chemicals and Electronic parts. Further, sentiment among manufacturers is worsening over uncertainties in production environment.

- Nikkei outperformed again, advancing >1.5% for third day in a row. Early last week index at 38K, later pared gains to be +1.0% at 40.5K.

- China official June Manufacturing contracted for the third month in a row.

- South Korea industrial output unexpectedly dropped into negative territory in May. Likely to keep the BOK on dovish outlook for rates and the Korean govt determined to push through its KRW 30.5T stimulus package on July 3rd.

- CFTC Japanese Yen net long positions last week paused their pull back from their record ~179K net long contracts as at Apr 29th, edging up slightly to +132.3K contracts Net long as at Jun 24th.

- US Senate vote on Trump Admin’s ‘big, beautiful’ tax bill expected to start at 9 AM on Monday, with the House to vote on the Trump tax bill by as early as Wednesday.

- US equity FUTs +0.4% to +.5% during Asian trading.

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

- Mon Jun 30th (Mon eve DE Jun CPI).

- Tue July 1st JP Q2 Tankan Manufacturers Index, KR Jun Ex/Im, KR Jun PMI, JP Jun Consumer Confidence, CN Jun Caixin Mfg PMI, (Tue eve EU Jun CPI, JP BOJ Gov Ueda ( Sintra), Tue night US Jun ISM Mgf 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 13:00 ET.

- Fri July 4th US (Independence Day).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,520.

- Australia May Private Sector Credit M/M: 0.5% v 0.6%e; Y/Y: 6.9% v 6.7% prior.

- Australia Jun Melbourne Institute Inflation M/M: +0.1% v -0.4% prior; Y/Y: 2.4% v 2.6% prior.

- Australia PM Albanese reiterates US tariffs on Australia should be 'zero' - Press.

- Australia Foreign Min Wong to meet with US Sec of State Rubio in DC this week; To also partake in Quad meeting with US, India, Japan - financial press.

- New Zealand Jun ANZ Business Confidence: 46.3 v 36.6 prior.

- New Zealand May Filled Jobs M/M: +0.1% v -0.3% prior.

- RBNZ: New Zealand May Residential Lending +4.7% y/y.

China/Hong Kong

- Hang Seng opens flat at 24,274; Shanghai Composite opens flat at 3,423.

- China Jun Manufacturing PMI (Govt official): 49.7 V 49.6E (3rd contraction in a row); Non-manufacturing PMI: 50.5 v 50.3e (31st month of expansion).

- China PBOC said to signal less urgency to cut RRR and rates - China press.

- Follow up: General Miao Hua (one of Xi Jingping's appointments) confirmed to have been removed from China's top military body, the Central Military Commission; [Note: Miao was previously reported to have expelled from the National People’s Congress] - Xinhua (weekend update).

- China PBOC sets Yuan reference rate: 7.1586 v 7.1627 prior (Strongest since early Nov 2024).

- China PBOC Open Market Operation (OMO): Injects CNY332B in 7-day reverse repos; Net injects CNY111B v injects CNY365B prior.

Japan

- Nikkei 225 opens +1.1% at 40,570.

- Japan May preliminary Industrial Production M/M: +0.5% V +3.5%E; Y/Y: -1.8% V 1.6%E.

- Japan May Annualized Housing Starts: 529K v 723Ke; Y/Y: -34.4% v -14.6%e (lowest housing starts since at least Oct 2009).

- Japan Dep Chief Cabinet Sec Aoki: Confirms continues pursuing US-Japan tariff talks.

- US President Trump 'determined' to keep 25% tariff on Japan autos - Nikkei [update].

- Toyota to target July-Sept global output 2.56M, +9.4% y/y; July-Sept Japan output 820K units, +6.1% y/y.

- Follow up: China officially lifts ban on Japan seafood imports - Japanese press.

- LDP widens lead heading into Japan upper house elections [Jul 20th (Sun)] – Nikkei [update].

- Japan Trade Negotiator Akazawa confirms has met with Lutnick today; Continue working towards an agreement [weekend update]

Korea

- Kospi opens +0.6% at 3,072.

- South Korea May Industrial Production M/M: -2.9% v 0.5%e; Y/Y: 0.2% v 3.0%e.

- Bank of Korea (BOK): Confirms it will temporarily halt the preparations for CBDC testing [reason not disclosed; inline with press report].

- Bank of Korea (BOK) removes 14-year restriction on investment in kimchi bonds as part of move to improve foreign exchange liquidity - Press.

- South Korea to seek extra KRW30.5T budget on July 3rd - financial press.

- South Korea President Lee might visit the US during 4th week of July - South Korean press.

- Follow up: Bank of Korea (BOK) said to again halt digital currency stablecoins - financial press.

- Trump: I will get the conflict solved with North Korea leader Kim [weekend update].

Other Asia

- Indonesia Econ Min Hartarto: Offers US to invest in Indonesia critical minerals via brownfield project with Indonesia's Sovereign Wealth Fund Danantara (as part of US trade talks) - financial press.

- Indonesia Trade Min Cheong: Indonesia to ease import restrictions on 'some' goods; 10 commodities (comes ahead of US trade deadline) - financial press.

- Singapore May M2 Money Supply Y/Y: 7.3% v 6.4% prior.

- Taiwan said it made 'constructive progress' in the second round of US trade talks.

- India team has extended stay in the US, as 'trade talks gather pace'.

- Taiwan and UK sign Enhanced Trade Partnership agreements on energy, investments - statement by Taiwan Office of Trade Negotiations.

- Thailand Fin Min Pichai: Expects "win-win" US trade deal; To fly to US tonight (Mon night).

North America

- (US) Senate vote on tax bill expected to start at 9 AM [on Mon]; House to vote on the Trump tax bill by as early as Wed - Press.

- (CA) Canada rescinds digital services tax in order to advance trade talks with the US; Canada says trade talks with the US aim for deal by Jul 21st - Press.

- (US) President Trump 'now suggests' he won't extend Jul tariff deadline - NY Post [update].

- (CA) US Pres Trump: Confirms to have stopped trade talks with Canada until they drop certain taxes - Fox News Interview.

- (US) Senate passes procedural vote (51-49) to open debate on the 'big beautiful bill'; (Bill itself still to be voted on) - financial press.

- (IR) US Pres Trump: Make the deal in Gaza. Get the hostages back!!! - Truth Social post (update).

- (CA) Canada acts to support its steel producers and workers; Sets new tariff rate quotas (TRQs) for steel mill products imported into Canada from non-FTA partners.

- (US) Treasury Sec Bessent: Expect 301 investigation into Canada digital services tax; Expect ~$2B in retroactive DST from Canada - CNBC.

- *(CA) US Pres Trump: Ending all trade talks with Canada; will tell Canada its tariff level in coming days; cites digital tax

- truth social post [weekend update].

- (US) Senate rejects Democratic led effort to curb the President's war powers; Vote was 53-47 against the war powers resolution that would have required Congressional approval for any additional hostilities against Iran [weekend update].

- (US) Trump: Would love it if Fed Chair Powell would resign; I won't put in someone that wants to keep rates where they are [weekend update].

- FICO: US FHFA Dir Pulte: Doing full-scale review of credit bureaus - X post [weekend update].

- (US) Pres Trump: In talks with 4-5 other countries now on trade deals; Regarding July 9th trade deadline, for some countries that were ripping US off, tariffs will go up; Does Not answer/confirm trade deadlines moving later to Labor Day (Sept 1st); We can extend or shorten July 9th trade deadline [weekend update].

- (US) Jun final University of Michigan confidence: 60.7 V 60.5E [weekend update].

- (US) MAY PCE PRICE INDEX M/M: 0.1% V 0.1%E; Y/Y: 2.3% V 2.3%E [weekend update].

- (US) May personal income: -0.4% V 0.3%E; PERSONAL SPENDING: -0.1% V 0.1%E [weekend update].

- (CA) Canada APR GDP M/M: -0.1% V 0.0%E; Y/Y: 1.3% V 1.3%E [weekend update].

Europe

- UK govt: US-UK trade deal has come into effect; UK to slash US export tariffs for UK aerospace and auto sectors - statement.

- SNB Chief Schlegel said hurdles to negative rates are 'certainly' higher - Nikkei [update].

- (UK) Jun Lloyds Business Barometer: 51 v 50e [highest since Aug 2024].

- (IL) US Pres Trump: MAKE THE DEAL IN GAZA. GET THE HOSTAGES BACK!!! - Truth Social post (update).

- OPEC+ said planning another 411K bpd production increase for Aug at July 6th meeting – press.

Levels as of 01:20 ET

- Nikkei 225 +1.0%, ASX 200 +0.5%, Hang Seng -0.3%; Shanghai Composite +0.4%; Kospi +0.5%.

- Equity S&P500 Futures +0.4%; Nasdaq100 +0.5%; DAX +0.4%; FTSE100 +0.2%.

- EUR 1.1712-1.1739; JPY 143.84-144.76; AUD 0.6527-0.6552; NZD 0.6053-6086.

- Gold +0.4% at $3,299/oz; Crude Oil -0.4% at $65.23/bbl; Copper +0.5% at $5.1200/lb.