US equities celebrate good data and “OBBB” tax bill, Asian equities less so

Asia Market Update: US equities celebrate good data and “OBBB” tax bill; Asian equities less so; Markets now squarely focused on uncertainty of July 9th trade deals.

General trend

- A large slice of US economic uncertainty ended along with all the drama surrounding Pres Trump’s One Big Beautiful Bill, eventually being passed by the House; Now on its way for Pres Trump’s signature on Friday, 4pm ET. Cements the single-biggest domestic economic objective for the Trump Admin this year.

- US equities earlier flew to fresh all-time-highs on better than expected Non-Farm Payrolls and ISM Services numbers (with new orders moving back into expansion), the overall mood helped as it became clear that the House numbers were present for the final vote to pass the bill (eventual 218-214 passage came after the cash close for equities).

- Markets now fully focused on tariff uncertainty ahead of July 9th deadline (ex-China), with Vietnam’s 20% direct & 40% trans-shipment rate showing that the 10% moratorium rate is likely a floor, not a ceiling. Treasury Sec Bessent reiterated that several trade deals will be announced soon.

- Thailand may be positioning itself as the third country after UK and Vietnam to close a trade deal with the US. Finance Minister Pichai left for the US on Monday for talks, at the time looking forward to a ‘win-win’ trade deal. Today, after two or three days of talks, Dep Fin Min Paopoom said that he hopes there will be “good news”.

- No other significant developments reported out of Asian nations regarding their US trade talks, following Vietnam’s deal yesterday. South Korea asking for more time, and Japan still digging in their heels on exemptions for autos and agriculture.

- Kospi underperformed -1.5%, with only the Shanghai showing decent gains in a mixed day for Asian equities.

- In other trade news China said it is reviewing applications for export licenses of controlled items. Follows US lifting some restrictions on chip-design exports to China. US trade balance for May showed China deficit continue to fall, down to -$14B v -$17.2B prior.

- Then toward the end of the Asia session Pres Trump said he will send out tariff letters to 10-12 countries on Friday (specific nations not mentioned), with tariffs ranging from "60-70%" or "10-20%", and those countries will start paying the (new) tariffs on August 1st.

- Following BOJ’s Takata’s ‘wait and see’ message yesterday, OIS chance of a 25bp BOJ rate hike in Oct fell to 38.5% (v 40.5% d/d) and Dec chances fell to 56.5% (v 58% d/d)

- However, JPY/USD rose 0.4% today, paring back half of the losses after the strong US data, following the fastest growth in Japan household spending (for month of May) in nearly three years. The component for wage-earner household spending sharply higher at +6.1% y/y.

- Australia May Household Spending also stronger than estimated, although RBA rate cut expectations for next week still at 97%.

- Hong Kong Jun PMI in the 47 handle was the lowest since March 2022.

- Market liquidity light due to US July 4th holiday having already started.

- US equity FUTs -0.3% during Asian trading, following the fresh record highs set during the US session.

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

- N/A.

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 flat at 8,602.

- Australia May Household Spending M/M: 0.9% v 0.5%e; Y/Y: 4.2% v 3.5%e.

- Australia sells A$1.0B v A$1.0B indicated in 2.25% May 2028 Bonds: Avg Yield: 3.3071% v 3.6498% prior; bid-to-cover 3.96x v 4.42x prior.

China/Hong Kong

- Hang Seng opens -0.7% at 23,900; Shanghai Composite opens -0.1% at 3,459.

- China Commerce Ministry (MOFCOM): China is reviewing applications for export licenses of controlled items.

- Hong Kong Jun PMI (whole economy): 47.8 v 49.0 prior (lowest since Mar 2022).

- China Jun Preliminary Retail Passenger Vehicle Sales M/M: +5% v +10.1% prior; Y/Y: +15% v +13.3% prior- PCA [overnight update].

- Reportedly China will cancel part of summit with EU leaders planned for later in July – press [overnight update].

- Trump Aides anticipate a future trip to China will include Trump with several unnamed CEOs – press.

- China Commerce Ministry (MOFCOM) Spokesperson: Hope to push for healthy US-China trade [overnight update] relations; Oppose any trade deals that infringe on China's interest (regarding US-Vietnam deal) [overnight update].

- China PBOC sets Yuan reference rate: 7.1535 v 7.1523 prior.

- China PBOC Open Market Operation (OMO): Injects CNY34B in 7-day reverse repos; Net drains CNY492B v drains CNY452B prior.

Japan

- Nikkei 225 opens +0.5% at 39,985.

- Japan May Household Spending Y/Y: 4.7% v 1.2%e (fastest annual pace since Aug 2022, fastest m/m rise since Mar 2021).

- Japan Dep Chief Cabinet Sec Tachibana: Japan's policy is unchanged for 'sincere tariff talks' with the US - financial press.

- Japan sells ¥4.3T vs. ¥4.3T indicated in 3-Month Bills; Avg Yield: 0.4264% v 0.4215% prior; bid-to-cover: 4.09x v 3.01x prior.

- Japan MOF: Japan FY24 General Account surplus: +¥2.26T, third largest surplus in history (update).

- Japan PM Ishiba: Appropriate price for rice is ¥3,000-3,999 per 5kg (~$20-28) [overnight update].

Korea

- Kospi opens +0.2% at 3,122.

- South Korea May Current Account Balance: $10.1B v $5.7B prior.

- South Korea Trade Min Yeo: US demanding improved market access to Korea's digital sector; To depart for US on Friday (today) for tariff talks with the US - Ministry statement.

Other Asia

- Thailand corporate bond issuance forecast to fall -12% this year - bond market group.

- Thailand Dep Fin Min Paopoom: Confirms Thailand held trade talks with US, hopes there will be 'good news' - financial press.

- Philippines Central Bank (BSP): Inflation is projected to remain below lower end of target for 2025; Emerging risks to inflation from rising geopolitical tensions and external policy uncertainty will require closer monitoring.

- Philippines Jun CPI M/M: 0.1% v 0.2%e; Y/Y: 1.4% v 1.5%e (4th month with annual pace below target range).

- Indonesia Central Bank (BI) : We've cut rates twice and we will cut again.

- Vietnam reportedly still working on details of trade deal with US - press [overnight update].

North America

- *(US) Pres Trump: Will send 10-12 countries tariff letters on Friday, ranging from 60-70%, 10-20%; Countries to start paying (new) tariffs on Aug 1st – press gaggle on way home from Iowa.

- (US) House Speaker Johnson: We will have a second reconciliation package in the Fall - Fox News Interview.

- (SA) Saudi Arabia Defense Min met with Pres Trump at White House earlier today - Fox News.

- (US) Pres. Trump: The Republicans in the House of Representatives have just passed the “ONE BIG BEAUTIFUL BILL ACT.” Official signing at 4pm Friday at White House - post on Truth Social.

- Treasury Sec Bessent: Reiterates that several trade deals will be announced soon; Markets signal that the tax bill is fiscally prudent and pro-growth; Expects that stablecoin legislation will boost demand for US treasuries; Very difficult to predict debt 10 years out; Debt-to-GDP will be well into the 90% range by the end of Trump's term.

- (US) HOUSE VOTES PASSES THE ONE BIG BEAUTIFUL BILL ACT (OBBBA) BY A VOTE COUNT OF 218-214.

- (US) BOFA INSTITUTE: WEEK-TO-JUNE 28TH TOTAL CARD SPENDING +0.2% Y/Y V -0.5% PRIOR WEEK V +0.8% ON AVERAGE IN MAY; Relative to last week, in our sectors, department stores, general merchandise & clothing saw the biggest rise in y/y spending.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: +55 BCF VS.+50 BCF TO +52 BCF INDICATED RANGE.

- (US) JUN FINAL S&P SERVICES PMI: 52.9 V 53.1E (confirms 29th month of expansion).

- (US) JUN ISM SERVICES INDEX: 50.8 V 50.6E.

- (US) JUN AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.3%E; Y/Y: 3.7% V 3.8%E.

- (US) MAY FACTORY ORDERS: 8.2% V 8.2%E.

- (US) JUN UNEMPLOYMENT RATE: 4.1% V 4.3%E (off 3.5-year high).

- (US) Treasury Sec Bessent: Warn countries not to drag out trade discussions; Tariffs can cantilever back up to April 2 levels; Meeting with EU negotiator today - Fox Business.

- Global Logistics Updates: July demand is projected to remain largely flat, with no significant uptick in volume. This suggests a potential softening compared to the surges seen in late Q2; Capacity remains at 84%-91% overall, indicating an oversupply relative to current demand.

Europe

- (IL) US Pres Trump: We will know within 24 hours if Hamas agree to ceasefire deal; Will be many more joining the Abraham Accords - press.

- (UK) Chancellor (Fin Min) Reeves: To announce review of workplace pension contributions – FT.

- (EU) ECB’s Nagel (Germany): No reason to 'rush' on next rate cuts - financial press interview.

- Russia Pres Putin to Trump: "Russia to achieve goals in conflict with Ukraine - Russian state media.

- (UK) Jun New Car Registrations Y/Y: +12.8% v +1.6% prior.

- (CH) SWISS JUN CPI M/M: 0.2% V 0.0%E; Y/Y: +0.1% V -0.1%E.

- (IT) ITALY JUN SERVICES PMI: 52.1 V 52.5E (7th month of expansion).

- EURO ZONE JUN FINAL SERVICES PMI: 50.5 V 50.0E (confirms 1st expansion in 3 months).

- GERMANY JUN FINAL SERVICES PMI: 49.7 V 49.4E (confirms 3rd month of contraction, but highest since March).

- (EU) European Commission Pres Von der Leyen: All instruments are on the table if do not reach trade deal with US; Ready for a deal with US.

- (IR) US Middle East envoy Witkoff said to plan nuclear talks with Iran Foreign Minister Araghchi next week in Oslo - Axios.

Levels as of 01:20 ET

- Nikkei 225 +0.1%, ASX 200 flat, Hang Seng -0.1%; Shanghai Composite +0.9%; Kospi -1.5%.

- Equity S&P500 Futures -0.3%; Nasdaq100 -0.3%; DAX -0.3%; FTSE100 -0.2%.

- EUR 1.1753-1.1785; JPY 144.33-144.98; AUD 0.6563-0.6580; NZD 0.6063-6082.

- Gold +0.3% at $3,351/oz; Crude Oil flat at $67.00/bbl; Copper -0.4% at $5.1160/lb.