Labour Party wins UK election – Nikkei breaks intraday ATH amid poor JP data

Asia market update: Labour Party wins UK election; Nikkei breaks intraday ATH amid poor JP data; CN PBOC prepares for bond sales; Focus tonight on US Jun NFP.

General trend

- The UK election was predictably won by the left-wing Labour Party, although ongoing projections suggested they may have won a smaller-than-expected number of seats, ~405.

- The Nikkei opened and almost immediately took out its intraday ATH (All Time High), but along with other Asian equities fell back as the session progressed. By the afternoon session all major Asia markets were under water, with only the Kospi up (+1.7%), after a strong recovery in earnings from Samsung Electronics, with its stock hitting a three year high.

- Press continues to release details on PBOC bond borrowing plan.

- As anticipated earlier by South Korean officials, May’s Current Account balance was much improved, but the eventual surplus of $8.9B was much bigger than the small deficit expected, and the largest monthly surplus since Sep 2021.

- Japan Household spending for May fell into negative territory again, with the weakest figures since January. Officials attributed the weakness to higher food prices and the weak yen pushing down spending on overseas tour packages.

- US equity FUTs flat during Asian trading.

Looking ahead (Asian time zone)

- Fri Jul 5th: (Fri night US Jun NFP).

- Weekend: CN Balance of Trade, Ex/Im, New Yuan Loans, M2 Money Supply, Loan Growth.

Holidays in Asia this week

- Mon July 1st Hong Kong.

- Wed July 3rd Early close at 13:00ET for US markets (Wed night Asia time).

- Thu July 4th US Independence Day (Thu night Asia time).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 7,831.

- New beef export plant for meat group Dandenong approved for China market exports – statement.

- Australia sells A$900M vs. A$900M indicated in 2.25% May 2028 bonds; Avg Yield: 4.1383%% v 4.2116% prior; bid-to-cover: 4.08x v 3.88x prior.

China/Hong Kong

- Hang Seng opens flat at 18,035; Shanghai Composite opens -0.1% at 2,954.

- PBOC said to prep hundreds of billions of Yuan on open-ended, unsecured basis for bond selling capacity; Creates agreements with several major banks – press.

- China officially sets up special fund for 'revitalisation of state firm's land assets' worth CNY30B - China state media.

- China sells 30-year special Treasury Bonds; Avg Yield: 2.4989% v 2.4681% prior.

- China seen to have higher bond volatility as PBOC intervenes in bond market - Chinese press.

- China Commerce Ministry (MOFCOM): Anti-dumping probe into EU pork is still ongoing [overnight update].

- China Pres Xi: Calls on Russia to step up alignment on development and strengthen strategic coordination; We need to defend stability of supply and industrial chains - comments from Kazakhstan [overnight update].

- EU moves ahead with tariffs on China EV Imports, effective July 5th [overnight update].

- China PBOC sets Yuan reference rate: 7.1289 v 7.1305 prior.

- China PBOC Open Market Operation (OMO): Sells CNY2B in 7-day reverse repos; Net drains CNY48B v net drains CNY98B prior.

Japan

- Nikkei 225 opens +0.2% at 41,009.

- Nikkei 225 hits record intraday high of 41,008 (Note: Prior record intraday high of 41,087 on Mar 21st, 2024).

- Japan May Household Spending Y/Y: -1.8% v 0.3%e [weakest pace since Jan].

- Japan Jun Total Reserve Assets: $1.23T v $1.23T prior.

- Japan Fin Min Suzuki: Equity prices are determined by the market; weak yen is pushing up cost for imports and having impact on prices.

- Japan May Preliminary Leading Index CI: 111.1 v 110.9 prior; Coincident Index: 116.5 v 115.2 prior.

South Korea

- Kospi opens +0.4% at 2,836.

- South Korea May Current Account: +$8.9B v -$0.3B prior (largest surplus since Sep 2021).

- Samsung Electronics: Reports prelim Q2 (KRW) Op 10.4T v 8.6Te (+1,452% y/y), Rev 74.0T v 73.6Te (+23% y/y); Stock +2% to highest in 3 years.

- LG Electronics Reports prelim Q2 (KRW) Op 1.20T v 997.5Be; Rev 21.7T v 21.3Te y/y.

- Korea FSC (financial regulator) nominee Head Kim: sees risks in financial system; Household debt is within 'normal' range.

Other Asia

- Philippines Jun CPI M/M: 0.0% v 0.2%e; Y/Y: 3.7% v 3.9%; Philippines PSA Head: No clear signal inflation has peaked.

-Singapore May Retail Sales M/M: +2.4% v -2.7% prior; Y/Y: 2.2% v 0.2%e.

North America

- BTC/USD Bitcoin -6% to $54,000; ETH -8%.

- US Pres Biden: "I'm not going anywhere" - US press.

- Nvidia: Said to make be on course to sell $12B worth of AI chips in China this year despite US export controls - FT.

- Canada Jun Services PMI: 47.1 v 51.1 prior (returns to contraction).

- TTN Research Alert: Ahead of US jobs report, Goldman Sachs sees US jobs market at a potential inflection point; Yesterday, percentage of ISM Services respondents expecting higher new orders came at lowest since GFC, while “Mel Rule” recession indicator was triggered mid-spring.

Europe

- UK Elections: Victorious Labour Leader Starmer: We did it! Promises a 'changed' Labour Party; I don't promise it won't be easy; We have to get moving immediately - statement.

- (UK) Reform's Nigel Farage wins Clacton seat amid election surge for the party – press.

- (UK) According to exit polls, Labour is seen winning 410 seats in the 650 seat parliament - Press.

- ECB June meeting account (minutes): Some of the most recent data had been slightly less favourable than anticipated or hoped for in Mar and Apr; Some members felt that the data available since the last meeting had not increased their confidence that inflation would converge to the 2% target by 2025.

- Le Pen's National Party projected to win 190-220 seats [289 seats needed for absolute majority] in 2nd election round of French parliamentary elections this Sunday - first poll after Macron’s centre and the left parties formed the anti-RN pact.

- ECB’s Centeno (Portugal, dove): Economic policy decisions should be gradual.

- ECB's Stournaras (Greece, dove): Two more rate cuts possible this year; Rates should be restrictive even after two more cuts - press interview.

Levels as of 01:20 ET

- Nikkei 225, -0.2%, ASX 200 -0.2% , Hang Seng -1%; Shanghai Composite -0.8% ; Kospi +1.3%.

- Equity S&P500 Futures: flat; Nasdaq100 flat, Dax -0.1%; FTSE100 +0.2%.

- EUR 1.0824-1.0809 ; JPY 161.39-160.52 ; AUD 0.6738-0.6724 ;NZD 0.6125-0.6109.

- Gold +0.3% at $2,371/oz; Crude Oil -0.4% at $83.71/brl; Copper +0.2% at $4.5755/lb.