Global PMI day – Focus on ECB rate decision

Asia market update: JP sets a US trade template; Global PMI day; Focus on ECB rate decision.

General trend

- A full day after the announcement of the unexpectedly early Japan-US trade deal, global sentiment remains predominantly stabilizing and pragmatic. Avoidance of a full-on trade war and high tariff fears have been assuaged, and the deal may provide a template for other talks with Korea, China and the EU. However, there is push back from industry such as US automakers saying it could favor Japanese imports at the cost of domestic production paying higher effective tariff rates.

- Japan’s ‘model’ of investing in the US in order to win a lower tariff from the US now sees South Korea reportedly creating a >$100B fund to invest in US projects.

- Meanwhile, Vietnam’s 20% deal sees the country estimating that US tariffs will slash its export revenues by ~$37B, up to 1/3 of its total US exports.

- Yesterday’s US-Japan trade deal saw the expected jump in OIS chances of BOJ rate hikes; October now at 61.5% v 35.5% on Tuesday, while December hike probs jumped to 80.5% vs 54.5% Tuesday.

- Nikkei up another 1.6% after yesterday’s 3.6% rise, now only ~600 points from the all-time high of 42,426.77 (set July 11th, 2024).

- Japan PMI Manufacturing moved back into contraction while Australia PMI Manufacturing enjoyed its 7th month of expansion.

- South Korea Q2 GDP rebounded stronger than expected, in spite of US tariff headwinds, driven by strong exports and Central Bank (BOK) stimulus.

- Korean chipmaker Hynix +3% on good Q2 earnings and guidance.

- Aussie miner Fortescue +>5% after record Q4 shipments.

- Australia RBA’s Gov Bullock said that the Australia jobs market ‘has not fallen off a cliff’, in reference to the higher-than-expected unemployment rate last week. Reiterated the RBA’s stance of “a measured, gradual approach to monetary policy easing”.

- China offshore Yuan hits 7.14 handle for the first time since Nov 2024, as PBOC sets 7.13 handle for Yuan first time since early Nov, 2024

- Thai Baht also rose to strongest level since Feb 2022.

- DAX FUTs again +1.3%, ahead of ECB rate decision today.

- US equity FUTs +0.1% to +0.3% during Asian trading.

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

- Thu July 24th Global Flash PMIs, (Thu eve ECB rate decision).

- Fri July 17th (Fri night US Jun Durable Goods).

Holidays in Asia this week

- Mon July 21st Japan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.3% at 8,759

- Australia July preliminary PMI Manufacturing: 51.6 V 50.6 PRIOR (7th month of expansion).

- RBA Gov Bullock: Job market has moved closer to balance - speech on RBA's dual mandate at Anika Foundation annual conference.

- Australia removes biosecurity restrictions on US beef imports - Nikkei.

- Australia sells A$150M vs. A$150M indicated in indexed 2.50% Sept 2030 bonds; Avg Yield: 1.5912% v 1.5870% prior; bid-to-cover: 4.43x v 4.45x prior.

- Fortescue: Reports Q4 Iron-ore shipments 55.2 Mts, +3% y/y; Guides initial FY26 iron ore shipments 195-205Mts.

- RBNZ: Economic uncertainty can curb spending, investment - financial press.

- RBNZ Chief Economist Conway: Reiterates tariffs will mean weaker global economy and global demand - speech on tariffs.

- RBNZ Chair: Former Gov Orr 'lost his cool' with Treasury officials two weeks before he quit - NZ press.

China/Hong Kong

- Hang Seng opens flat at 25,528; Shanghai Composite opens -0.1% at 3,578.

- China Jun Swift Global Payments (CNY): 2.9% v 2.9% prior.

- China Commerce Ministry (MOFCOM) confirms Vice Premier He Lifeng to hold economic talks with US officials in Stockholm Sweden between July 27-30th.

- China Agriculture Ministry: Conducts meeting on development of pork industry; To stabilize prices of hogs and pork.

- China MOF sells 30-year Special Sovereign Bonds.

- China commodities are seeing price hikes due to anti-involution - China press, citing analyst.

- China sends complaint to WTO regarding its opposition to unilateral tariffs - China press.

- China SAMR (competition regulator): Reiterates to rectify excessive 'competition' - China state media.

- China PBOC sets Yuan reference rate: 7.1385 v 7.1414 prior (strongest since early Nov 2024).

- China PBOC Open Market Operation (OMO): Injects CNY331B in 7-day reverse repos; Net drains CNY120B v drains CNY370B prior.

Japan

- Nikkei 225 opens +1.2% at 41,647.

- Japan July preliminary PMI Manufacturing: 48.8 V 50.1 PRIOR; (Moves back into contraction).

- White House: Japan's investment deal will focus partly on semiconductor design and fabrication; Japan will purchase $8B in US goods, including corn, soybeans, fertilizer, bioethanol, and sustainable aviation fuel.

- White House: Tariffs on drugs and chips to be negotiated separately; Won't be any worse than (rates on) any other trading partners - press cites official.

- (US) Pres Trump: Remember, Japan is, for the first time ever, OPENING ITS MARKET TO THE USA, even to cars, SUV’s, Trucks, -and everything else, even agriculture and RICE, which was always a complete NO, NO. - Truth Social post.

- (US) Commerce Sec Lutnick: Japan will finance projects as part of trade deal; US will choose projects for financing; Japan deal may be model for EU trade deal - TV interview.

- White House: Japan to buy 100 Boeing aircraft and increase rise purchases by 75% and buy $8B of agricultural and other products.

- (US) Treasury Sec Bessent: Japan and US have one of the strongest overall relationships in the world; 15% level came after Japan proposed innovative solution to get around auto issues through a partnership.

- (EU) Commission Pres Von der Leyen: EU will work more closely with Japan to counter economic coercion and to address unfair trade practices – Tokyo [overnight update].

Korea

- Kospi opens +0.8% at 3,209.

- South Korea July Manufacturing Business Survey: 91.9 v 94.4 prior.

- South Korea Q2 advance GDP Q/Q: 0.6% V 0.4%E; Y/Y: 0.5% V 0.5%E.

- South Korea said to invest >$100B as part of US trade deal; Funds to come from major Korean conglomerates - Yonhap.

- Tier1 analysts: US-South Korea tariff meeting on July 25 suggests to us now a higher likelihood that a better deal could be reached as early as this week, if smooth negotiations ensue.

- SK Hynix Reports Q2 (KRW) Net 7.0T v 7.1Te; Op 9.2T v 9.0Te; Rev 22.23T v 20.5Te.

- South Korea Fin Min: 2 + 2 trade talks with US canceled; US proposed 'another talk' in immediate future - financial press.

Other Asia

- Vietnam says US tariffs will slash Vietnam's export revenues by ~$37B, up to 1/3 of its US exports - financial press.

- Thailand Jun Customs Trade Balance: $1.1B v $0.6Be.

- (US) Anti-dumping investigation into some steel imports from Vietnam and other countries finds industry harm.

- Taiwan Jun Industrial Production Y/Y: 18.7% v 22.8%e.

- AMD CEO Su: Chips from US TSMC plant cost 5-20% more than ones from Taiwan.

North America

- US Appeals Court rules that Pres Trump's Executive Order on birthright citizenship is unconstitutional; Upholds nationwide injunction - financial press.

- Brazil Fin Min Haddad: Possible to reach trade deal with US by Aug 1st, but depends on US; Brazil repeatedly trying to contact US on tariffs - financial press.

- Brazil Pres Lula: Said to propose talks to 'expand and amplify' Brazil-Mexico trade deal - statement on phone call with Mexico Pres Sheinbaum.

- (US) President Trump: Thought about breaking up the chip industry; Will sign EO fast-tracking AI infrastructure permits on larger projects, and an EO to expand US AI exports.

- US Pres Trump: We are in serious talks with the EU on trade; If the EU agrees to open up to US businesses we'll allow them to pay lower tariffs - AI Summit.

- (BR) Brazil govt said to see only a remote chance that US tariffs get postponed - press.

- (US) MBA Mortgage Applications w/e July 18th: +0.8% v -10.0% prior.

- (US) Treasury Sec Bessent: Amazon CEO told me last week he sees no price hikes.

- (US) Pres Trump: I will only lower tariffs if a country agrees to open its market. if not, much higher tariffs!

- (US) Jun existing Home Sales: 3.93M V 4.00ME (Record high median prices hold).

- (US) House Speaker Johnson: Working on an additional tax bill, seeking to pass in autumn 2025; Will be smaller in scope - press interview.

- (US) DOE CRUDE: -3.2M V -1ME; GASOLINE: -1.7M V -1ME; DISTILLATE: +2.9M V -0.5ME.

- (US) EPA reportedly planning to reverse a key scientific determination that greenhouse gas emissions endanger public health.

- (US) Treasury $13B 20-year bond reopening draws 4.935% v 4.942% prior, bid-to-cover 2.79 v 2.68 prior and 2.63 over last 8 auctions.

Europe

- EU's von der Leyen and Costa confirmed to meet China Pres Xi Jingping today in Beijing - China state media.

- (EU) US and EU said to be closing in on 15% tariff deal; EU and US would waive tariffs on some products, including spirits and medical devices.

- (US) White House trade adviser Navarro: Take the EU-US trade deal report with 'A grain of salt;' Japan trade deal should spur other deals along.

- (EU) Trade Commissioner Sefcovic: EU to merge lists of US trade countermeasures; To speak with US Commerce Sec Lutnick on Wed, July 23rd.

- (EU) EU said to plan hitting US with 30% tariff quickly in case of no-deal - press.

- (EU) Euro zone July advance consumer confidence: -14.7 V -15.0E.

- (IR) Iran Dep Foreign Minister Gharibabadi: Govt agrees to IAEA technical visit in coming weeks; IAEA technical team won't visit any of Iran's nuclear sites; Iran is willing to return to negotiations with the US "the sooner the better", but must be convinced the talks are not a pretext for more military strikes against Iran.

Levels as of 01:20 ET

- Nikkei 225 +1.6%, ASX 200 -0.3%, Hang Seng +0.8%; Shanghai Composite +0.5%; Kospi -0.1%.

- Equity S&P500 Futures +0.1%; Nasdaq100 +0.3%; DAX +1.3%; FTSE100 -0.1%.

- EUR 1.1762-1.1780; JPY 145.86-146.56; AUD 0.6597-0.6623; NZD 0.6042-6060.

- Gold -0.4% at $3,384/oz; BTC -0.8% at 117,780; Crude Oil +0.4% at $65.52/bbl; Copper +0.9% at $5.8923/lb.