Broad gains in US equities continue through to Asia and fresh Nikkei highs

Asia market update: Broad gains in US equities continue through to Asia and fresh Nikkei highs; BOK dovish-hold; Focus on US CPI tonight.

General trend

- Continued momentum in US equities post-US Fed Powell's second testimony in two days carried over to Asia, starting with the Nikkei that saw another fresh record, touching 42,460.

- Bank of Korea left rates unchanged, as expected. However, the Board said it will examine the timing of a rate cut. Board also paid attention to financial stability, including housing prices in Seoul and surrounding areas and household debt levels. Gov Rhee reiterated financial stability concerns, while specifically stating that the BOK is preparing to 'switch lanes' in policy direction. Two members now said to be open to a rate cut below 3.5% (only 1 member prior in May).

- Korea’s Kospi index briefly touched the 3,000 level, levels last seen in Nov, 2021. (Record high in May 2021 of ~3,300).

- New Zealand Sovereign bond auction returned to healthy bid-to-covers across all three tenors after struggling in recent weeks, helped no doubt by the dovish signaling out of the RBNZ yesterday for potential rate cuts this year. NZ 2 yr yields saw 4.59%, spiking down a further 4bps from yesterday. Kiwi dollar however, outperformed the greenback, clawing back about half of its losses from yesterday's dovish-hold by the RNBZ.

- Continued speculation and disagreement around the viability of US Pres Joe Biden to remain on the Democrat presidential ticket by senior Democrats and party donors, with conflicting statements of support vs requests for him to step aside.

- US equity FUTs -0.1% during Asian trading.

Looking ahead (Asian time zone)

- Thu July 11th (Thu eve UK May GDP, Thu night US Jun CPI).

- Fri July 12th CN Jun Balance of Trade, SG Q2 GDP, (Fri night US Jun PPI, US July Michigan Consumer Conf).

Holidays in Asia this week

- Mon July 8th Malaysia

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 7,831.

- Australia Jun Consumer Inflation Expectation Survey: 4.3% v 4.4% prior.

- Australia Jun CBA Household Spending M/M: 0.6% v 1.1% prior; Y/Y: 3.9% v 4.3% prior.

- New Zealand Jun Food Prices M/M: +1.0% v -0.2% prior.

- ANZ: Heavy Traffic Index (HTI) fell a sharp 5.2% m/m on top of a fall in May.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2029, 2034 and 2037 bonds.

China/Hong Kong

- Hang Seng opens +0.9% at 17,629.

- Follow up: China CSRC: Implements concrete measures to limit program trading - Chinese media.

- (EU) Goldman Sachs strategists: Investors should sell European stocks that derive the bulk of their sales from China due to sluggish consumption and heightened trade tension; Prefer US-exposed firms as US dollar may strengthen [overnight update].

- China Commerce Min (MOFCOM): To investigate EU anti-subsidy probe amid probes on Chinese firms - financial press [overnight update].

- Financial press poll: China's PBOC seen cutting RRR by 25bps in Q3 and cutting one-year LPR by 10bps also in Q3 [overnight update].

- China PBOC sets Yuan reference rate: 7.1339 v 7.1342 prior.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repos; Net CNY0B v net CNY0B prior.

Japan

- Nikkei 225 opens +1.2% at 42,343; Shanghai Composite opens +0.6% at 2,957.

- Japan May Core Machine Orders M/M: -3.2% v 0.8%e; Y/Y: 10.8% v 7.1%e.

- Japan Jun Tokyo Avg Office Vacancies: 5.2 %v 5.5% prior.

- Japan releases weekly flows data [period ended July 5th]: Foreign buying of Japan equities: ¥603.7B v ¥185.0B prior; Japan buying of foreign bonds: +¥237.7B v -¥254.2B prior.

- Reportedly Japan is planning additional tankers and imports to tackle jet fuel shortage – Nikkei.

- Japan Chief Cabinet Sec Hayashi: Reiterates that equity prices have many factors (speaking of new Nikkei 225 highs) - press.

- Reportedly many Japanese private banks who met with Bank of Japan (BOJ) on July 9th urged it to halve its bond buying plan to ¥3T - press [**Note: Currently ~¥6T per month] [overnight update].

- Fitch: Japan's major banks face further capital ratio pressure from Basel III implementation [overnight update].

- Japan sells ¥1.0T vs. ¥1.0T indicated in 20-year JGB bonds; AVG yield: 1.930% V 1.8430% prior; bid-to-cover: 3.80X V 3.27X prior (Jun 24th).

South Korea

- Kospi opens +0.7% at 2,888.

- Bank of Korea (BoK) leaves 7-day repo rate unchanged at 3.50%; as expected.

- South Korea July 1-10 Exports Y/Y: +33.8%; Imports: +26.7% (chip exports +85.7% y/y).

Other Asia

- Thailand Jun Consumer Confidence: 58.9 v 60.5 prior.

- (IN) India Trade Min Goyal: Trade deal with UK said to be 'very close' - FT.

- Thai Court to resume Thailand PM Srettha ethics case on July 24th - financial press [overnight update].

North America

- (US) Former US Pres Trump said to consider plans to cut intel sharing with NATO - US press, citing foreign officials informed of Trump's NATO plans.

- (US) Fed's Cook (voter): US data so far seems consistent with a soft landing - comments from speech in Australia.

- (AR) Argentina Pres Milei: Regarding dollarization, Argentina will pick a fixed of floating FX rate when the CPI is near zero - financial press.

- (US) Senate Majority Leader Chuck Schumer (D-N.Y.): Said to be open to replace Biden as Presidential nominee - Axios.

- (US) MBA Mortgage Applications w/e July 5th: -0.2% v -2.6% prior.

- US Sec State Blinken: F-16 jets will be flying in the skies of Ukraine this summer; jets are en route from Denmark to Ukraine.

- (US) Announces new steps with Mexico fight circumvention of U.S. tariffs on steel and aluminum by China and other countries - press.

- (US) DOE crude: -3.4M V -1.1ME; Gasoline: -2.0M V -1.4ME; distillate: +4.9M V +0.2ME.

- (US) Freeport LNG reportedly set to resume processing by Thursday following hurricane Beryl - press.

- (US) Fed Chair Powell: Monetary policy helping bring supply and demand into balance - Semi-Annual testimony.

- (US) Treasury Offical Shambaugh: We may need to take further defensive action to protect against China's overcapacity; More creative approaches maybe needed.

- (US) Treasury's $39B 10-year note reopening draws 4.276% V 4.438% prior; bid-to-cover ratio: 2.58 V 2.67 prior and 2.48 over last 8 reopenings.

Europe

- (UK) Jun RICS House Price Balance: -17% v -15%e.

- (DE) Germany Chancellor Scholz: Will be a big task to continue with what is necessary for Ukraine - NATO Summit comments.

- (UK) BOE Chief Economist Huw Pill: "When-rather-than-if" characterization of prospective bank rate cuts still seems appropriate, but BOE should remain cautious.

- (IL) Axios' reporter Barak Ravid: CIA Director Bill Burns is currently meeting in Doha with Qatari Prime Minister Mohammed bin Abdel Rahman Al Thani, Egyptian Intelligence Chief Abbas Kamal and Mossad Director Dedi Barnea to discuss the hostage deal.

- (RU) Russian Foreign Min: Plans to deliver F-16 fighter jets to Ukraine show that Washington is leading 'The War Gang'.

- (RU) Russia Jun CPI M/M: 0.6% v 0.8%e; Y/Y: 8.6% v 8.7%e.

- (UK) BOE's Mann: Supply side of economy growing very slowly, still see labor market tightness.

Levels as of 01:20 ET

- Nikkei 225 +1.2%; ASX 200 +0.9%; Hang Seng +1.5%; Shanghai Composite +0.8% ; Kospi +0.7%.

- Equity S&P500 FUTs -0.1%; Nasdaq100 FUTs -0.1%, Dax +0.2%; FTSE100 +0.2%.

- EUR 1.0827-1.0840 JPY 161.47-161.71; AUD 0.6744-0.6764 NZD 0.6079-0.6099.

- Gold +0.3% at $2,387/oz; Crude Oil +0.8% at $82.76/brl; Copper +0.5% at $4.6173/lb.