• APAC stocks initially saw directionless trade following a non-existent lead from Wall Street amid the Juneteenth market holiday.
• US President Trump offered Iran a two-week window to monitor negotiations before deciding on military action.
• APAC sentiment eventually turned mostly firmer with notable Israel-Iran newsflow on the lighter side.
• Japanese Core CPI printed above forecasts; PBoC maintained its 1-year LPR at 3.00% and its 5-year LPR at 3.50%, as expected.
• European equity futures are indicative of a firmer open with the Euro Stoxx 50 future +0.9% after cash closed -1.3% on Thursday.
• Looking ahead, highlights include UK PSNB, Retail sales, US Philly Fed Business Index, Leading Index Change, Canadian Producer Prices & Retail sales, EU Consumer Confidence, Quad witching, Chinese LPRs, Iranian Foreign Minister Araghchi meets with European Ministers, Speakers include ECB Governing Council Macroprudential Forum, BoJ's Ueda, Holidays in Sweden, Finland, New Zealand.

US TRADE - Closed for Juneteenth Holiday

NOTABLE HEADLINES

• US President Trump posted "Too many non-working holidays in America. It is costing our Country $BILLIONS OF DOLLARS to keep all of these businesses closed. The workers don’t want it either!"

TRADE/TARIFFS

• EU Economy Commissioner Dombrovskis said the EU was ready to take measures with the US if a solution could not be found, but noted that progress was being made in trade talks with Washington, according to Reuters.
• Canadian Prime Minister Carney said Canada would introduce a series of countermeasures to help it respond to Trump-era tariffs. He stated that Canada would adjust its existing counter-tariffs on US steel and aluminium products on 21 July. The level of Canadian counter-tariffs would depend on the progress of talks with the US on a new economic deal. He added that only Canadian producers and producers from trading partners offering Canada tariff-free reciprocal access would be eligible to compete for federal government procurement of steel and aluminium. Canada would adopt additional tariff measures to address risks associated with persistent global overcapacity and unfair trade in the steel and aluminium sectors. He also announced that Canada would establish new tariff rate quotas at 100% of 2024 levels on imports of steel products from non-free trade agreement partners, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks initially saw directionless trade following a non-existent lead from Wall Street amid the Juneteenth market holiday. Nevertheless, geopolitics remained in the spotlight as US President Trump now has to decide whether or not to join Israel’s offensive against Iran’s nuclear facilities within the next two weeks, contingent on negotiations. Sentiment eventually turned mostly firmer with notable Israel-Iran newsflow on the lighter side.
• ASX 200 was subdued with miners dragging on the index whilst losses in financials also kept upside capped.
• Nikkei 225 was buoyed by recent JPY weakness but came off best levels in tandem with USD/JPY after Japanese Core CPI topped expectations, whilst stale BoJ minutes (from two meetings ago) were also released.
• Hang Seng and Shanghai Comp were initially choppy with the indices trimming modest earlier gains despite relatively quiet newsflow. The PBoC LPR setting was a non-event, with the central bank maintaining the 1-year and 5-year LPRs as expected.
• US equity futures were softer and played catchup to some of the global equity declines on Thursday, but were well off the worst levels at the reopen, with immediate upside seen on the resumption of trade as participants reacted to US President Trump delaying his decision to strike Iran by two weeks to monitor negotiations. That being said, modest downticks were seen amid reports Trump's special envoy to the Middle East Witkoff will not attend the UK/France/Germany talks with Iran in Geneva on Friday.
• European equity futures are indicative of a firmer open with the Euro Stoxx 50 future +0.9% after cash closed -1.3% on Thursday.

FX

• DXY was subdued and back under 99.00 with some weakness emanating from haven outflow and from a sharp decline in crude prices after US President Trump offered a two-week window to Iran to monitor negotiation before military action.
• EUR/USD was bolstered above 1.1500 amid the aforementioned Dollar decline but with broader newsflow rather light overnight. EUR/USD eyes the 18th June high at 1.1530.
• GBP/USD was similarly a beneficiary of the weaker Dollar in the aftermath of yesterday's BoE, with price action in APAC hours largely dictated by the Buck.
• USD/JPY dipped as the JPY gained on firmer-than-expected Japanese Core CPI which printed the fastest Y/Y pace since January 2023. Stale BoJ minutes (from two meetings ago) were also released.
• Antipodeans saw choppy trade amid the lack of direction for sentiment, with newsflow for the Aussie and Kiwi on the lighter side overnight. AUD/USD and NZD/USD both dipped 0.1%.
• Yuan saw some strength on the PBoC fixing, which marked the strongest CNY fix since March 17th.
• PBoC set USD/CNY mid-point at 7.1695 vs exp. 7.1801 (prev. 7.1729); strongest CNY fix since March 17th

FIXED INCOME

• 10yr UST futures saw choppy trade following earlier weakness as participants reacted to news that US President Trump offered Iran a two-week window to monitor negotiations before military action.
• Bund futures briefly dipped under 131.00 in tandem with US counterparts on the aforementioned geopolitics before trading sideways as newsflow quietened down.
• 10yr JGB futures were softer in sympathy with the slight haven outflow seen across fixed income due to the aforementioned geopolitics coupled with hotter-than-expected Japanese CPI, while Japanese Finance Minister Kato said they have seen spikes in super-long JGB yields recently. Nothing official was seen from the MoF Bond Meeting.
• Australia sold AUD 800mln 1.00% 2030 bond, b/c 3.47x (prev. 4.64x), avg. yield 3.6145% (prev. 4.0469%)

COMMODITIES

• Crude futures saw weakness amid a risk premium unwind after US President Trump decided to wait two weeks and gauge negotiations before striking Iran. On that note, the UK, France, and Germany will hold talks with Iran in Geneva tomorrow – Trump's Middle East envoy Witkoff will not attend those talks, according to NBC.
• Spot gold saw softness despite a weaker Dollar but amid the unwind in risk premium as US President Trump decided to wait two weeks and gauge negotiations before striking Iran.
• Copper futures saw horizontal price action within tight ranges with newsflow light. The red metal failed to coat-tail on the eventual gains in the region.
• Citi said that if 1.1mln BPD of Iranian oil exports were disrupted—using May exports as a baseline—it estimated prices should rise by about 15–20%, compared with an average of USD 65/bbl in the month before the Iran-Israel conflict escalated on 12 June. A 1.1mln BPD disruption implied Brent prices should be in the USD 75–78/bbl range. Citi added that prices reaching USD 90/bbl—its current bullish case, short of a major escalation in oil transit—would imply a disruption of 3mln BPD over a multi-month period, according to Reuters.
• India restricted the import of alloys of palladium, rhodium, and iridium containing over 1% gold by weight, according to Reuters.

CRYPTO

• Bitcoin traded flat overnight and remained under USD 105k.

NOTABLE ASIA-PAC HEADLINES

• The PBoC maintained its 1-year Loan Prime Rate (LPR) at 3.00% and its 5-year LPR at 3.50%, as expected, according to Reuters.
• Japanese Finance Minister Kato said they had observed spikes in super‑long JGB yields recently, according to Reuters.
• Minutes from the BoJ's 30 April – 1 May meeting showed that many members said they must carefully scrutinise each nation's trade policy and its developments, given the heightening downside risks to the economy and prices, according to Reuters.
• PBoC injected 161.2bln via 7-day reverse repos with the rate maintained at 1.40%.

DATA RECAP

• Japanese CPI, Core Nationwide YY (May) 3.7% vs. Exp. 3.6% (Prev. 3.5%); fastest Y/Y pace since Jan 2023.
• Japanese CPI, Overall Nationwide (May) 3.5% (Prev. 3.6%)
• South Korean PPI Growth YY (May) 0.3% (Prev. 0.9%, Rev. 0.8%)
• South Korean PPI Growth MM (May) -0.4% (Prev. -0.1%, Rev. -0.2%)

GEOPOLITICS

MIDDLE EAST

US Involvement

• The White House said, “message directly from the President – based on the fact that there is a significant chance of negotiations with Iran in the near future – I will make a decision on whether to launch [an attack] in the next two weeks.”
• US President Trump had been briefed on both the risks and benefits of bombing Fordow and his mindset was that disabling it was necessary due to the risk of weapons being produced in a relatively short period of time, according to CBS.
• Broadcasting Authority, citing an Israeli source, reported that the US had asked Israel to defer its attack on the Fordow nuclear facility.
• Kann News reported that there was a "possible attack at Fordow": according to sources, the US had asked Israel to wait until negotiations with Iran had been exhausted.
• US President Trump is to attend a National Security Meeting at 11:00 EDT on Friday.
• US law enforcement officials had stepped up surveillance of Iran-backed operatives in the US, according to CBS sources.
• The White House said Iran was able to produce a nuclear bomb within "a couple of weeks".
• A White House official told Fox's Heinrich that the US military had no doubt about the efficacy of bunker busters in eliminating the site at Fordow, and also denied that any options—including tactical nuclear weapons—had been taken off the table.
• The White House Press Secretary said there were no signs that China was getting involved militarily in Iran, according to Reuters.
• The US reportedly believed Iran would build a nuclear bomb if Supreme Leader Khamenei were assassinated and the Fordow facility was attacked, according to The New York Times.

Strikes

• There were reports of Israeli strikes in the Lavizan area of Tehran, where Iranian Supreme Leader Khamenei was reportedly hiding in a bunker, according to i24 journalist Stein.
• An Israeli military spokesman said Israel had attacked the special forces headquarters of the internal security apparatus in Tehran within the last 24 hours, according to Reuters.
• Journalist Horowitz said on X that opposition sources were circulating "unconfirmed" reports claiming that the head of Iran's military, Abdolrahim Mousavi, had been killed in an Israeli strike.
• The Fars News Agency said Iran had used a new generation of precision missiles in its attack on Israel on Thursday morning, according to Fars.
• The Norwegian Foreign Ministry said an explosion had occurred on Thursday evening in Tel Aviv at the residence of the Norwegian ambassador to Israel, according to Reuters.
• The Jordanian army said an explosives-laden drone had fallen in the Azraq area after it “fell short of its range,” according to Al Hadath.
• Iranian media reported that air defences were activated in Isfahan, according to Al Arabiya.

Diplomacy

• Britain, France, and Germany are to hold talks with Iran’s Foreign Minister on Friday in a last-ditch effort to avert an escalation of conflict in the Middle East and a possible US intervention, according to FT.
• Iran's Foreign Minister had reached out to European foreign ministers, requesting a meeting with them on Friday, Jerusalem Post reported.
• Trump administration officials are pitching the president’s two-week timeline as an opportunity to allow diplomacy to play out. Special Envoy Witkoff and Iran’s Foreign Minister Araghchi had been in communication in recent days, though there were no plans for the two to meet yet, according to ABC.
• Trump's special envoy to the Middle East Witkoff will not attend the UK/France/Germany talks with Iran in Geneva on Friday, according to White House officials cited by NBC.
• An Iranian source denied reports of a phone call between Iranian Foreign Minister Araghchi and US presidential envoy Witkoff following Israel’s aggression, according to Iran Nuances.
• The White House Press Secretary said they would see how the EU meeting with the Iranians went tomorrow, according to Reuters.
• US officials said no date had been set for a meeting between US and Iranian officials yet, according to Axios.

US Military and Deployment

• Over the next 10 to 14 days, there were expected to be two aircraft carriers in the Middle East and a third operating in the Mediterranean Sea, according to ABC.

Iranian Actions

• A senior IRGC official said that before the Israeli airstrikes, all enriched uranium had been transferred from the nuclear sites to secret hiding locations, according to i24 journalist Stein.
• Iran’s Tasnim News Agency, quoting an Iranian official, said intelligence had thwarted a major Israeli plot against Iranian Foreign Minister Araqchi in Tehran, according to Sky News Arabia.
• Iraq’s Hezbollah threatened to target US bases and close the Strait of Hormuz if Washington joined strikes on Iran, according to Al Hadath.
• An Israeli official said Iran could likely sustain the current rate of missile fire at Israel for up to five months, provided their missile launchers were not destroyed, according to NBC.
• Israel anticipated attacks from Iran’s proxies across the Middle East, according to Israel Channel 14.
• An Israeli intelligence official said the imminent collapse of the Iranian regime was far from the truth, according to NBC.

OTHERS

• A Japanese destroyer sailed through the Taiwan Strait after a Chinese jet approached it, according to Nikkei.
• China President Xi met with New Zealand PM Luxon in Beijing, according to CCTV.

EU/UK

DATA RECAP

• UK GfK Consumer Confidence (Jun) -18.0 vs. Exp. -20.0 (Prev. -20.0)