Trump ratchets up trade threats vs EU/MX

Asia market update: Trump ratchets up trade threats vs EU/MX; CN/US trade surplus widens again m/m; BTC all-time high; JGB long-end yields higher; Focus on CN Q2 GDP & Jun ‘data dump’ & Trump announcement on RU.

General trend

- Pres Trump on Saturday added further fuel to US tariff uncertainty by threatening 30% tariffs from Aug 1st in letters to both the EU and Mexico. The tariffs would be in addition to all sectoral tariffs – Trump added that any counter tariff would simply be added to the 30% tariff. Leaders of Mexico and the European Commission affirmed their hopes for a negotiated settlement before the Aug 1st deadline.

- China exports for June continued to beat expectations in spite of the US trade war, with imports also rebounding for the first time in 2025. For Jan-Jun H1 China trade surplus with US was $141.7B with the June surplus at $26.6B, higher than that of May ($18.0B), and China implied exports to US -16.1% y/y (v -34.4% in May).

- Bitcoin rose to a fresh all time high of $122K.(Ethereum, XRP, Stellar, Solana also all up strongly ahead of US Crypto Week hearings in Washington DC this week).

- A quiet, if mostly positive day for Asian equities with Korea's Kospi outperforming +0.8% continuing towards its all-time highs of 2021.

- Singapore’s Q2 GDP growth rate came in nearly double the expectation, including that of the Central Bank (MAS) itself.

- New Zealand Services PMI better for June but continued to underperform after last month’s 16-month low. Meanwhile NZ Retail Card spending rose for first time in four months.

- Australia PM Albanese’s trip to China coincides with BHP signing deals with battery-maker CATL and automaker BYD’s battery unit.

- Japanese press reports the Japan ruling LDP coalition may its lose majority at the July 20th Upper House elections, potentially hampering the Bank of Japan’s goal to further raise rates. On the other hand, JGB 10-year and 20-year yields +5bps to highest since May 23rd. 30-year JGB yields +7bps to 3.11% and 40-years +6bps. Separately the BOJ said to be likely to 'consider' raising inflation forecast for FY25 at its next meeting July 31st.

- Taiwan Central Bank reportedly told foreign investors to stop violating capital controls.

- CFTC Japanese Yen net long positions last week continued to pull back from their record ~179K contracts as at Apr 29th, now down to +116.2K contracts Net long as at July 8th.

- The safety of fuel-switch locks in certain Boeing models may have implications for the company and the airline industry, with the preliminary report from the Indian govt finding that both engines had fuel cutoff switches flipped off and then on just before the crash.

- Note that the US Q2 earnings season kicks off this week with major banks, including JPMorgan, Citi, and Wells Fargo scheduled to report on Tuesday. Expectations are high, with strong past performance fueling higher estimates.

- Pres Trump said he may make a “major” announcement regarding Russia on Monday. Axios thinks it might include supplying offensive weapons to Ukraine.

- G20 Fin Min / Central Bank meeting from Jul 14-18 in South Africa.

- US Crypto Week hearings run from July 14-18.

- US equity FUTs -0.4% during Asian trading.

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

- Tue July 15th AU July Consumer Confidence, CN Q2 GDP & Jun ‘data dump’, (Tue night US Jun CPI).

- Wed ID BI Rate Decision (Wed night US Jun PPI, Fed Beige Book).

- Thu July 16th KR Jun Unemployment, AU Jun Jobs, JP Jun Trade Balance, (Thu night US Jun Retail Sales) TSM (TSMC) FQ2 earnings preview.

- Fri July 17th JP National CPI, (Fri night US Jun Housing Starts, Michigan Consumer Sentiment).

Holidays in Asia this week

- N/A.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 8,577.

- Australia Treasurer Chalmers: Already made clear budget repair is a priority; has not changed view on GST reform.

- Australia PM Albanese: Need to work together with China to address global excess steel capacity - financial press.

- Australia PM to weigh AI cooperation on China visit - Nikkei [update].

- New Zealand Jun Total Card Spending M/M: -0.2% v 0.3% prior.

- New Zealand Jun Performance of Services Index: 47.3 v 44.1 prior.

- RBNZ balance sheet contracts to the smallest since Nov 2020; total assets declined to NZ$72.4B v NZ$77.3B m/m - US financial press.

China/Hong Kong

- Hang Seng opens -0.2% at 24,100; Shanghai Composite opens +0.1% at 3,513.

- China Jun trade balance: $114.8B V $112.1BE.

- China Jun trade balance (cny-denominated): 826B V 750.0B prior.

- China H1 Yuan (CNY) denominated Exports Y/Y: +7.2%; Imports -2.7% y/y- China MOF sells 20-year, 30-year Special Sovereign Bonds.

- Nvidia CEO Huang: No need for US govt to worry about China military using Co's AI chips; China "unlikely" to use due to the risks associated with doing so - financial press.

- China Foreign Minister Wang Yi: China and ASEAN have agreed to complete consultation on the 'code of conduct in the South China Sea' within 2026 [weekend update].

- Senators Warren (D-MA) and Banks (R-IN) have sent CEO Huang letter regarding upcoming China trip, saying it could undermine US export curbs – press [weekend update].

Japan

- Nikkei 225 opens -0.3% at 39,443.

- Japan May Tertiary Industry Index M/M: 0.6% v 0.1%e.

- BOJ said to be likely to 'consider' raising inflation forecast for fiscal 2025 at Jul 30-31 [Thurs] meeting - US financial press.

- Bank of Japan (BOJ) holdings of stocks bought from banks has fallen to zero – statement.

- BOJ Japan Households Inflation Expectation Survey: 85.1% of households expect prices to rise one-year from now, v 86.7% prior.

- Japan ruling LDP coalition may lose majority at July 20th Upper House elections - Japan press.

- Japan election could further 'hamper' BOJ drive to raise rates - financial press.

- Bankruptcies of Japan used car dealerships are increasing - Nikkei [update].

- (EU) Draft documents show Japan and EU seek to develop a joint satellite network – Nikkei [weekend update].

- China PBOC sets Yuan reference rate: 7.1491 v 7.1475 prior.

- China PBOC Open Market Operation (OMO): Injects CNY226B in 7-day reverse repos; Net injects CNY120B v injects CNY51B prior.

Korea

- Kospi opens flat at 3,175.

- South Korea Trade Min Yeo: South Korea needs to make strategic choice on agricultural sector during US trade talks - Korean press.

- South Korea President Lee says China's Xi will attend the APEC summit (Oct 31-Nov 1, in Gyeongju, South Korea) - Korean press [weekend update].

Other Asia

- Thailand Finance Min Pichai: Considering offering zero tariffs on additional US imports - financial press.

- Malaysia Trade Ministry: Exports, trans-shipments of high performance AI chips of US origin now subject to strategic trade permits; Effective immediately.

- Taiwan Central Bank (CBC) said to have told foreign investors to stop violating capital controls - FT.

- SINGAPORE Q2 ADVANCE GDP Q/Q: 1.4% V 0.8%E; Y/Y: 4.3% V 3.6%E.

- (IN) India govt releases prelim report on air India crash: Both engines had fuel cutoff switches flipped off and then on just before the crash; No recommended actions to Boeing or GE at this point - press.

North America

- (US) Follow up: Pres Trump: "EU is talking to us on trade"; South Korea wants to make a deal - financial press.

- US Pres Trump expected to announce 'aggressive' US weapons plan to Ukraine, May include offensive weapons - Axios.

- SpaceX said to invest $2.0B in xAI - WSJ, citing investors close to the companies (update).

- Tesla CEO Musk: Will have shareholder vote on potential Tesla investment in xAI - financial press.

- (US) Pres Trump to visit UK in Sept 17-19th (the second state visit of his second term) - Palace statement.

- *(US) Trump sends trade letters to EU and Mexico, threatening 30% tariffs from Aug 1st [weekend update].

- (US) Trump issues statement of support for AG Pam Bondi, who has been under attack by some MAGA activists including Laura Loomer; Says they should "not waste Time and Energy on Jeffrey Epstein" [weekend update].

Europe

- (UR) US Pres Trump expected to announce 'aggressive' US weapons plan to Ukraine, that is expected to include offensive weapons - Axios.

- (FR) France Pres Macron announces extra military spending of €6.5B over next 2 years - financial press.

- Follow up: EU Competition Commissioner Ribera: Rare earths should not be a bottleneck - financial press interview.

- (IR) Iran Foreign Min Araghchi: We are carefully assessing options for talks with the US [weekend update].

Levels as of 01:20 ET

- Nikkei 225 flat, ASX 200 +0.1%, Hang Seng +0.6%; Shanghai Composite +0.3%; Kospi +0.8%.

- Equity S&P500 Futures -0.4%; Nasdaq100 -0.4%; DAX -0.7%; FTSE100 flat.

- EUR 1.1662-1.1698; JPY 146.86-147.57; AUD 0.6558-0.6588; NZD 0.5979-6015.

- Gold +0.3% at $3,373/oz; Crude Oil +0.2% at $68.59/bbl; Copper -0.4% at $5.5830/lb.