Global Market Quick Take: Asia – July 01, 2025

Global Market Quick Take: Asia – July 1, 2025

Key points:

• Macro:  Canada withdraws proposed digital services tax with US
• Equities:  S&P 500 rose 0.5% to new highs; Oracle gained 4% after $30b cloud deal
• FX: USD weakens due to poor Chicago PMI data
• Commodities: Gold rose for the second consecutive day, while oil prices remained steady.
• Fixed income: 10- and 30-year yields reached their lowest levels since early May

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Disclaimer: Past performance does not indicate future performance.

Macro: 

• Canada withdrew its proposed digital services tax to ease trade tensions with the US. Markets await new trade agreements with key US partners before President Trump’s 90-day reprieve on reciprocal tariffs expires.  
• Germany’s annual consumer price inflation fell to 2.0% in June 2025, below May's 2.1% and market expectations of 2.2%. This is the lowest since October 2024 and aligns with the European Central Bank’s target for the first time since then.
• EU is willing to accept the 10% universal tariffs but wishes for lower rates on key sectors like automobiles, car parts, steel and aluminium. 
• Bank of Japan’s index for large manufacturers increased to 13 in Q2 2025 from 12 in Q4, surpassing market forecasts of 10, amid rising U.S. tariffs.
• Dallas Fed’s Texas manufacturing index improved to -12.7 in June 2025 from -15.3 in May, indicating a fifth month of contraction but with easing signs. Output remained flat, with the production index steady at 1.3.

Equities:

• US - S&P 500 and Nasdaq 100 both increased by 0.5%, continuing their all-time highs, while the Dow advanced by 207 points, driven by strong performances from Big Tech firms like Microsoft and Meta, which also hit new highs. Apple rose 2% after weighing the use of AI from Anthropic or Open AI to power Siri while Oracle popped 4% after it signed a cloud deal worth $30b in annual revenue. Investors are focused on the July 9 deadline for the potential expiration of President Trump's tariff reprieve, hoping more trade deals will prevent tariff hikes. Treasury yields fell amid expectations for Federal Reserve rate cuts later this year, benefiting equities.
• EU - The STOXX 50 fell by 0.4% to 5,305, and the STOXX 600 decreased by 0.4% to 542. US officials reported progress in negotiations with major partners like China and the EU, while Canada cancelled its Digital Services Tax after President Trump announced he would end all trade talks with Canada. Monday also marked the official start of the UK-US trade deal arranged last month. Data showed German inflation unexpectedly slowed to 2% in June, aligning with the ECB target, whereas Italian inflation rose slightly to 1.7% as anticipated. Corporate performance varied, with L'Oréal rising 2.3% as Siemens and Schneider both dropped 1%.
• HK - The Hang Seng fell 0.9% to 24,072 on Monday, marking its third consecutive decline as all sectors retreated. HK is closed for a holiday today. Sentiment was weakened by China's manufacturing downturn, now in its third month, ahead of similar private survey results expected Tuesday. Significant declines included Bank of China Hong Kong (-5.5%), Li Auto (-3.3%), Meituan (-2.9%), and Tencent (-1.5%). On a positive note, Laopu Gold hit a record high, driven by high gold prices, despite its IPO lockup period ending. Meanwhile, Chinese Premier Li Qiang reiterated China's commitment to stimulating consumption and tackling deflation through strong policy measures.

Earnings this week:

FX:

• USD weakened during the US session due to a poor Chicago PMI, with focus on Washington's "One Big Beautiful Bill" vote, trade updates, and President Trump's remarks.  EUR rose to 1.1700 despite weaker German data, as attention shifts to the ECB Sintra Forum. The GBP remained flat with UK GDP numbers as expected. The JPY strengthened amid narrowing US-Japan yield differentials and discussions on Japan buying US oil, while tariff talks with the US continued.

Commodities:

• Oil prices are stable near their lowest since early June, with focus on OPEC+'s upcoming output quota increase. The group is expected to approve a 411,000 barrel-per-day hike, with another increase likely next month.
• Gold climbed for the second day on hopes of Federal Reserve rate cuts, with bullion near $3,310 an ounce. Investors are watching US trade talks ahead of the 9 July tariff deadline, while Thursday's jobs report could lower Treasury yields, benefiting gold.

Fixed income:

• Treasuries maintained curve-flattening gains, outperforming European bonds, with vigorous buying pushing 10- and 30-year yields to their lowest since early May. The market recorded its best monthly performance since February, as traders look to Thursday’s jobs report for further gains. The 10-year yield fell below 4.24%, while Korea Investment Corp. continues to hold US Treasuries for their liquidity and stable returns. Futures indicate gains in Japanese bonds ahead of a survey and auction, as central bank chiefs prepare to speak today. 

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