US tariff deal rush continues – BoJ holds

Asia Market Update: US tariff deal rush continues; BOJ holds; Peak earnings continue as META, MSFT power equity FUTs higher.

General trend

- Yesterday’s massive 8.8 magnitude Kamchatka earthquake in the northwest Pacific fortunately ended without any major tsunamis in the region, just swells and surges close to shore. Only relatively minor damage reported thus far. 112 aftershocks >4.0 magnitude [6.9 mag the highest} were recorded in the 20 hours following the initial shake.

Trade talks and outcomes

- South Korea closed its trade deal with the US, very similar to Japan’s, at a 15% tariff into the US with zero tariffs on US exports into Korea, and a commitment to invest $350B into the US, with $150B for shipbuilding and $200B to be allocated to chips, nuclear power and 'bio'. Finance package includes critical mineral sectors. Talks to continue over non-tariff barriers, such as food control and car safety rules. Agriculture will be open to US exports, but will Not include rice and beef. Additionally, South Korea will purchase $100B of LNG, or other Energy products.

- With Malaysia and Thailand rushing to finish US trade deals prior to Aug 1st, still waiting to hear from Australia, Taiwan and Singapore regarding Asian deals.

- Trump also slapped the threatened 25% tariff on all Indian goods plus threatened an additional penalty for buying Russian oil.

- Trump also confirmed a universal 50% tariff on copper imports but did Not include non-finished copper sources. [So with large amounts of copper already imported into the US ahead of the promised tariff, Copper fell -19%, the largest intra-day fall on record].

- Trump also ratcheted up Brazil’s overall tariff rate to 50%, citing persecution of former Pres Bolsanaro.

- Reportedly US Pres Trump will discuss Mexico deal with Mexico Pres Sheinbaum on Thur July 31st via phone call.

- Meanwhile Trump warned Canada that their chances of a trade deal went down with Canada’s decision to back statehood for Palestine.

Asian data releases today

- Japan BOJ held rates at 0.5%, as expected. Statement said risk to prices are now “generally balanced” (vs May 1st outlook which said risks to prices were “skewed to the downside”). Also raised a majority of CPI forecasts. Yen took back some of its recent losses against all major crosses, (JPY was back at April lows at 149.50 vs USD overnight, now ~148.70).

- Nikkei alone in positive territory, +1.1% amid a weaker Yen and BOJ on hold.

- South Korea Jun Industrial Production weaker than expected, while Samsung’s final Q2 results saw a 55% drop in Op profit due to delays in HMB chip shipments and US export curbs on advanced chip sales to China.

- Japan Industrial Production for June much stronger than expected, with further output gains seen for July. Japan Retail Sales also hotter than expected.

- China’s July Manufacturing PMI fell further, for a 4th month of contraction.

- Hotter than expected Australia Retail Sales for both June and Q2 as well as upward prior revisions. Rise in retail turnover was driven by discounts linked to sales and new product releases. Aussie Stats Agency reported turnover for electrical and gaming retailers was lifted further by the much-anticipated launch of the Nintendo Switch 2, which delivered record sales.

- Australia export and import price indices fell more than expected in Q2, with the fall in Australian iron ore and metallurgical coal export prices linked to a slowdown in Chinese steel production.

- Pres Trump suspended the de minimis exemption for smaller packages of goods into the US on a global basis, which will impact countries throughout the Asian region used to freely shipping all manner of goods into the US effectively tariff-free.

- Following the Stockholm talks, US Treasury Sec Bessent said that “China is a bit on its heels in trade talks”, and that trade talks can continue past Aug 1st at current tariff rates. Bessent doubled down on China, calling it “The most unbalanced economy since the 1800s, and China’s economic model is “starting to implode”, [Also had some choice words for Europe, calling it a “regulatory morass”].

- China’s July politburo meeting confirmed a Fourth Plenum in October, and affirmed many recent talking points such as “implementing special action to boost consumption, accelerating issuance and use of govt bonds, along with banning new hidden debt [no specifics as to whether includes local govt debt].

- [Note: Currently China is not only back on its heels with regards to US trade, as pointed out by Bessent, but before the CCP can make any lasting policy decisions it needs to sort out its leadership going forward, with increasing signs that Pres Xi, if not on the way out, has had a significant degree of his power hobbled by competing factions and the PLA military, which recently pulled its elite Beijing’s Northern 81st garrison out of the city and further north-east by General Zhang Youshia, towards his own stronghold and the area’s various military logistics centers amid the ongoing political wrangling in Beijing].

- META blew Q2 EPS out of the water, stock up 9% after hours. MSFT also outperformed EPS, stock +8% to fresh record highs with a 39% increase in Azure revenue and 25% increase in intelligent cloud revenue. Propelled NASDAQ FUTs to fresh record highs, despite the sharp downturn shortly beforehand from a more hawkish than expected Fed Chair Powell during Q&A.

- US equity FUTs +1.0% to +1.4% during Asian trading

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

- Thu July 31st (Thu night US Jun Core PCE).

- Fri Aug 1st KR July Ex/Im + PMI, AU PPI, CN Caixin July Manufacturing PMI, (Fri eve EU July CPI, Fri night US July NFP, US July ISM PMI Manufacturing).

Holidays in Asia this week

- Mon July 28th Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.5% at 8,714.

- Australia Jun Retail Sales M/M: 1.2% V 0.4%E; Q/Q: 0.3% V 0.1%E.

- Australia Jun Building Approvals M/M: 11.9% v 1.8%e.

- Australia Jun Private Sector Credit M/M: 0.6% v 0.5%e; Y/Y: 6.8% v 6.9% prior.

- Australia Q2 Export Price Index Q/Q: -4.5% v -3.0%e; Import Price Index Q/Q: -0.8% v -0.4%e.

- RBA's Hauser: Yesterday's CPI's data were 'Very welcome'.

- New Zealand sells total NZ$400M vs. NZ$400M indicated in 2030, 2034 bonds.

China/Hong Kong

- Hang Seng opens -0.8% at 24,982; Shanghai Composite opens -0.3% at 3,604.

- China July Manufacturing PMI (govt official): 49.3 V 49.7E (4th month of contraction).

- 1.HK Panama Comptroller General files 2 suits to the [local] Supreme Court against contracts held by Panama Ports Co [90% controlled by CK Hutchison of HK] to operate ports near the Panama Canal.

- Japan Trade Negotiator Akazawa: Believes ¥1.2Q (¥1,200T) Nominal GDP is possible in 2040.

- HKMA purchased HK$3.93B as the HKD hit the weak end of trading range - update.

- HKMA keeps base rate unchanged at 4.75% (post US Fed rate hold).

- China said to consider tighter rule on A-share cos' listings in Hong Kong - China Securities Times.

- (US) Treasury Sec Bessent: It's not overstating things to say that China is a bit on its heels in trade talks; Can keep negotiating on trade past Aug 1st if there are no deals - comments at forum [overnight update].

- China Foreign Min Wang Yi: Willing to strengthen contacts with US and avoid conflicts and miscalculations [overnight update].

- China PBOC sets Yuan reference rate: 7.1494 v 7.1441 prior.

- China PBOC Open Market Operation (OMO): Injects CNY283B in 7-day reverse repos; Net drains CNY48B v injects CNY159B prior.

Japan

- Nikkei 225 opens +0.2% at 40,714.

- Bank of Japan (BoJ) leaves target range unchanged at 0.50%; as expected.

- BoJ quarterly outlook for economic activity and prices (aka staff projections).

- Japan Jun Retail Sales M/M: 1.0% V 0.5%E; Y/Y: 2.0% V 1.8%E.

- Japan Jun preliminary industrial production M/M: +1.7% V -0.8%E; Y/Y: 4.0% V 1.3%E.

- Japan July Consumer Confidence: 33.7 v 35.0e.

- Japan Jun Annualized Housing Starts: 647K v 666Ke; Y/Y: -15.6% v -16.4%e.

- Japan releases weekly flows data [period ended July 18th]: Foreign buying of Japan equities: ¥743.3B v ¥571.9B prior; Japan buying of foreign bonds: -¥331.6B v ¥1.64T prior.

- Japan Trade Negotiator Akazawa: Believes ¥1.2Q (¥10.2T) Nominal GDP is possible in 2040.

- Japan lifts all tsunami warnings for all regions – press [overnight update].

Korea

- Kospi opens +0.7% at 3,278.

- US Pres Trump: South Korea agrees to 15% tariffs and to invest $350B in the US; US will have 0% tariffs charged by South Korea; Additionally, South Korea will purchase $100 Billion Dollars of LNG, or other Energy products.

- South Korea Jun Industrial Production M/M: 1.6% v 2.5%e; Y/Y: 1.6% v 2.6%e.

- Samsung Reports Final Q2 (KRW) Net 4.93T v 5.3Te, Op 4.68T v 4.6Te (v 10.4T y/y); Rev 74.6T v 74.1Te.

- Commerce Sec Lutnick: Copper was not included in the tariffs on South Korea.

- US Pres Trump: South Korea 25% right now, but they have an offer to buy down those tariffs; We're very busy today on working on trade deals [overnight update].

- South Korea govt ministers had trade meetings with Commerce Sec Lutnick and USTR Greer today [overnight update].

- South Korea Fin Min reportedly to meet US Treas Sec Bessent at 09:45 ET in Washington on Thurs, July 31st - press [overnight update].

Other Asia

- Follow up: Thailand Fin Min Pichai: Expects results of US tariff talks 'within 24 hours' - financial press.

- Malaysia said to be unveiling a US trade deal prior to Aug 1st deadline - financial press.

- (TW) US Sen Roger Wicker (R-MS) to lead US congressional delegation to Taiwan in August - FT.

- (US) Pres. Trump: India will be paying a tariff of 25%, plus a penalty for Russia support, starting on august 1st (**Note: higher end of prior reports; earlier India reportedly was preparing for US tariffs between 20-25%).

- Thailand Jun Manufacturing Production Y/Y: 0.6% v 1.3%e [overnight update].

- Indonesia govt said to raise income tax on crypto transactions and scrap VAT – press [overnight update].

North America

- Reportedly US Pres Trump will discuss Mexico plan to cut trade deficit with Mexico Pres Sheinbaum on Thur July 31st, ahead of Aug 1st deadline - press.

- JPM US Pres Trump and CEO Dimon said to be in discussion on trade and financial regulation - WSJ.

- (CA) Canada PM Carney: May not conclude trade talks with US by the Aug 1st deadline; Negotiations are ongoing and constructive.

- (BR) Brazil central bank (BCB) leaves selic target rate unchanged at 15.00%; as expected; unanimous decision.

- (US) Q2 advance GDP annualized Q/Q: 3.0% V 2.6%E (biggest Q/Q rise since Q3 2024; imports recorded big drop); personal consumption: 1.4% V 1.5%E.

- (US) Q2 ADVANCE GDP PRICE INDEX: 2.0% V 2.2%E; CORE PCE PRICE INDEX Q/Q: 2.5% V 2.3%E..

- (US) TREASURY QUARTERLY FUNDING ANNOUNCEMENT: TO SELL $58B IN 3-YEAR NOTES; $42B IN 10-YEAR NOTES AND $25B IN 30-YEAR NOTES;

- (CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 2.75%; AS EXPECTED.

- (US) JUN PENDING HOME SALES M/M: -0.8% V 0.2%E; Y/Y: -0.3% V -2.1%E.

- (US) JULY ADP EMPLOYMENT CHANGE: +104K V +76KE; Notes its hiring and pay data are broadly indicative of a healthy economy.

- (US) DOE CRUDE: +7.7M V -1.5ME; GASOLINE: -2.7M V -1ME; DISTILLATE: +3.6M V 0ME.

- (US) FOMC LEAVES TARGET RANGE UNCHANGED BETWEEN 4.25-4.50%; AS EXPECTED; Vote was 9-2.

- (US) Fed Chair Powell: Have not made a decision on the Sept meeting; We've two full rounds of employment and inflation data to examine before the Sept meeting; Really hard to say if data will be clear by the next meeting -post rate decision Q&A.

- (US) White House: Pres Trump signed proclamation to address effects of copper imports on US national security; Imposes universal 50% tariffs on imports of semi-finished copper products and copper-intensive derivative products from Aug 1st.

- (BR) US White House: Implements additional 40% tariff on Brazil, effective total tariff rate is 50%, citing Bolsonaro 'persecution' as cause; New tariff rate will take effect in seven days.

- (US) White House: Pres Trump suspends de minimis exemption for commercial shipments globally.

- (US) White House NEC Dir Hassett: US GDP data show strong growth; Data show prices of imported goods dropped; Fed is very data-dependent, expect they will catch up soon; We 100% respect Fed independence.

Europe

- (UK) July Lloyds Business Barometer: 52 v 51 prior.

- (FR) FRANCE Q2 PRELIMINARY GDP Q/Q: 0.3 V 0.1%E; Y/Y: 0.7% V 0.5%E.

- (DE) GERMANY JUN RETAIL SALES M/M: 1.0% V 0.5%E; Y/Y: 4.6% V 4.5% PRIOR.

- (DE) GERMANY Q2 PRELIMINARY GDP Q/Q: -0.1% V -0.1%E; Y/Y: 0.4% V 0.2%E (1st positive Y/Y growth since Q4 2022).

- (ES) SPAIN JULY PRELIMINARY CPI M/M: -0.1% V -0.4%E; Y/Y: 2.7% V 2.4%E (highest annual pace since Feb and 4th straight month of reacceleration).

- (IT) Italy Q2 preliminary GDP Q/Q: -0.1% V +0.1%E; Y/Y: 0.4% V 0.6%E.

- (EU) EURO ZONE July economic confidence: 95.8 V 94.5E.

- *(EU) EURO ZONE Q2 ADVANCE GDP Q/Q: 0.1% V 0.0%E; Y/Y: 1.4% V 1.2%E.

Levels as of 01:20 ET

- Nikkei 225 +1.1%, ASX 200 -0.2%, Hang Seng -0.7%; Shanghai Composite -0.9%; Kospi -0.7%.

- Equity S&P500 Futures +1.0%; Nasdaq100 +1.4%; DAX +0.2%; FTSE100 -0.1%.

- EUR 1.1546-1.1572; JPY 147.85-148.53; AUD 0.6503-0.6529; NZD 0.5952-5972.

- Gold -0.2% at $3,385/oz; BTC +0.4% at $118,590; Crude Oil -0.3% at $69.81/bbl; Copper -19% at $4.4390/lb.