Asia Market Update: Liquidity squeeze continues as Equities, Gold, BTC & Mag7 price declines magnify circular liquidity trap.
General trend and developments
-The tone change in US equities since June 3rd when Broadcom was heavily sold off, not through poor earnings (which were solid enough), but through merely affirming their forward guidance, remains a turning point in sentiment on the charts, with coordinated heavy falls in Gold, Bitcoin, Mag7 stocks and now SpaceX’s massive IPO offering falling well below its market opening price on IPO day. Liquidity sensitive assets that are widely owned currently seem to operating as a circular liquidity trap as investors sell more of each in order to make up for losses on the other. Mag7 stocks suffered their worst day ever relative to the overall Nasdaq 100, with Microsoft on track for its worst month since Dec of 2000 – the depths of the dotcom crash.
-That the markets may be intuiting that the US Fed put may not be playing liquidity backstop so easily under new Fed Chair Warsh’s regime may also be fraying nerves.
-Equities once again volatile today on no specific driver; Indeed, the overall economic data out of the US remains broadly healthy.
-First, overnight NY session US equities fell like a stone on the cash open, despite a 2% rise in overnight FUTs on Micron’s outstanding earnings, wiping out the entire overnight move in less than 30 minutes. Losses were pared back by about half during the US session, with Apple weighing on 16-24% price hikes.
-Bitcoin overnight fell to $58K, the lowest since before the election of Donald Trump in late 2024.
-Gold again visited below $4,000/oz during Asia trading, with Silver remaining down at $56/oz
-Aussie dollar again underpeformed, -0.5% to 0.68766, the first time to drop below 0.69 since early May.
-Then it was Asia’s turn, again on no specific news: Kospi and Nikkei opened weaker by -1% to -2% but the bleeding kept going from there. and kept falling from there, with the Kospi down as much as -8% and the Nikkei off by -4.5%. CN and HK indices joined in, weighed down by Alibaba underperforming again, with both indices down by more than -2%.
-US equity FUTs continued to make fresh lows for the week during Asian trading.
-Note also the “oil down, stocks up” phenomenon from early April has also been broken since June 3rd, as plummeting oil prices (WTI $95 to $70/bbl) have offered little support for equities.
-Adding to liquidity concerns today, OpenAI reportedly is worried about waning retail investing enthusiasm particularly following the SpaceX record listing and subsequent stock volatility. The frontier AI lab may delay listing until 2027.
-South Korea reported 8 more South Korean vessels exiting the Strait of Hormuz, adding to the five reported yesterday (Thurs) and two reported back on Wednesday. However, there were reports overnight of at least three outbound ships turning back after a Singaporean vessel was fired upon (presumably by Iran’s IRGC).
-Meanwhile Pres Trump announced an agricultural package to Make America Healthy Again using new technologies and better practices but then added in comments afterwards that the US would include buying Iranian wheat, corn and soybeans with Iranian frozen funds.
-Tokyo inflation accelerated somewhat, keeping prospects of a further BOJ alive, however, the rate hike outlook for the BOJ now very much clouded by Japan’s government economic blueprint (see below).
-Tokyo May Core-core CPI (ex-fresh food and energy. close watched by the BOJ) rose to 1.9%, nearly at the 2.0% BOJ target, but Headline and Core at 1.7% and 1.6% respectively still well below the BOJ target for a fifth month.
-Japan PM Takaichi overnight signaled her government’s desire to move away from relying on extra budgets and emergency spending and instead consider annual bond issuance, while “assessing markets”. Comes as Fin Min Katayama proposes the creation of a new multiyear budget framework mandating that spending must be strictly tied to predictable revenue streams from tax, bonds and targeted spending cuts. Katayama herself describes it as “the biggest fiscal reform since World War II”. The plan pairs with targeted growth sectors within a ¥370T ($2.3T) 14-year investment roadmap for AI, chips, and energy. [Reminder that a leaked draft yesterday of the Takaichi govt’s long-term economic blueprint explicitly urges the Bank of Japan (BOJ) to align its decisions with the government’s growth focus].
–Booming retail numbers out of Japan for department stores in the month of May, largely fueled by foreign tourists hunting duty-free luxury bargains due to by a weakened Yen. Nationwide department store sales increase of 8.3% and Tokyo department stores of 10.9% are the highest since the Covid bounce back in Spring of 2021.
-US equity FUTs -0.8% to -1.4% during Asia trading.
Looking ahead (Asian-weighted focus, using Asian time zone)
-Fri Jun 26th.
Holidays in Asia this week
-Fri Jun 26th: India.
Headlines/economic data
Australia/New Zealand
-(AU) ASX 200 opens +0.2% at 8,764.
-(AU) ACCC (Australia competition regulator): Will begin monitoring supermarket pricing from 1st July, 2026.
-(AU) US State Dept approves potential sale of F/A-18F Super Horney and EA-18G growler aircraft training and related euip to Australia for $250M – press.
China/Hong Kong
-(CN) Shanghai Composite opens -0.5% at 4,098; (HK) Hang Seng opens -0.5% at 22,952.
-(CN) China’s Commerce Ministry: China Jan-May industry-wide foreign direct investment CNY506.95B, +3% y/y.
-(CN) China’s Commerce Ministry announces that it has released list of non-state Chinese companies eligible for oil imports.
-(CN) China PBOC sets the yuan mid-point at 6.8166 v 6.8209 prior.
-(CN) China PBOC Open Market Operation (OMO): Sells CNY232B in 7-day Reverse Repos; Net drains CNY16B v injects CNY123B prior.
Japan
-(JP) Nikkei 225 opens -1.0% at 71,696.
-(JP) Japan Jun Tokyo CPI Y/Y: 1.7% v 1.6%e; CPI (Ex-fresh food) Y/Y: 1.6% v 1.6%e.
-(JP) Japan PM Takaichi: Will move away from relying on extra budgets; Will mull annual bond issuance while assessing markets [EU market close].
-(JP) Follow up: Japan plans to fund proposed consumption tax reduction through review of subsidies instead of issuing deficit-covering bonds – TBS.
-(JP) Japan Jun 1-10 Exports Y/Y: +21.1%; Imports +30.4% (provisional).
-(JP) Japan NIED: Japan earthquake has preliminary magnitude of 6.0.
-(JP) BOJ Outright Bond Purchase Operation for 1~3 Years; 5~10 Years; >25 years and inflation-indexed bonds; (Inline with planned amounts for Q2, 2026).
-(JP) Bank of Japan (BOJ) Results related to today’s outright bond buying operations:
Korea
-(KR) Kospi opens -1.9% at 8,813
-(KR) South Korea President Lee: Three more ships to leave Strait of Hormuz over the weekend.
-(KR) South Korea Fin Min: South Korea plans to lower fuel price cap – South Korea press.
-(KR) South Korea’s Oceans Ministry: Eight more South Korean vessels exit Strait of Hormuz [time frame unspecified].
-(KR) Korea Exchange activates sidecar on Kospi following Kospi 200 FUTs falls -5%, programme trading halted for 5 minutes.
-(KR) North Korea’s Kim is overseeing tests of ‘important weapons’ including multiple rocket launcher and strategic ballistic missile – Korea press.
-(KR) South Korea Defense Minister: To rapidly expand drone, counter-drone forces.
-(KR) 005490.KR South Korea’s Labor Ministry announces search at Posco E&C offices for death of a worker – Korea press.
Other Asia
-(SG) Singapore May Industrial Production M/M: -0.7% v 2.0%e; Y/Y: 13.0% v 17.5%e.
North America
-(US) May PCE Price Index M/M: 0.4% v 0.5%e; Y/Y: 4.1% v 4.1%e; Core PCE Price Index M/M: 0.3% v 0.3%e; Y/Y: 3.4% v 3.4%e [US market close].
-(US) Q1 Final GDP Annualized Q/Q: 2.1% V 1.6% prelim; Personal Consumption: 0.5% v 1.4%e prelim [US market close].
-(US) May Personal Income: 0.7% v 0.4%e; Personal Spending: 0.7% v 0.6%e [US market close].
-(MX) Mexico Central Bank (BANXICO) leaves overnight rate unchanged at 6.50%; As expected; Anticipates headline inflation to converge at 3% target in Q2 OF 2027 [US market close].
-(US) Q1 Final GDP Price Index: 3.6% v 3.5% prelim; Core PCE Price Index: 4.4% v 4.4% prelim [US market close].
-(US) Dallas May Trimmed Mean PCE (m/m) +2.8% v +2.4% prior [metric favored by Warsh] [US market close].
-(US) May Preliminary Durable Goods Orders: -4.5% v -5.0%e; Durables (Ex-transportation): 1.3% v 0.6%e [US market close].
-(US) Initial Jobless Claims: 215K v 225Ke; Continuing Claims: 1.821M v 1.802Me [US market close].
-(US) Treasury $44B 7-year note auction draws 4.260% v 4.290% prior, Bid-to-cover ratio: 2.50 v 2.52 prior and 2.60 over the last 12 [EU market close].
-(US) Weekly EIA Natural Gas Inventories: +76 BCF vs. +72 BCF to +74 bcf indicated range [US market close].
-(US) Flexport Global Logistics Update: Trans-Pacific East Bound space remains constrained across all gateways; Global container demand reached record levels in April; Demand on Asia-Europe lanes remains strong.
-(US) Treasury Sec Bessent: The underlying economy is very strong – Fox News interview [US market close].
-(US) Fed’s Williams (moderate, voter): Delays hitting target 2% inflation from 2027 to 2028; Also targets 2028 with US growth at 2.25%, and unemployment down to 4% [US market close].
-(US) Fed’s Goolsbee (non-voter): Hard to get a throughline on inflation, how persistent or temporary it is; Reiterates inflation is going the wrong way, inflation side of the mandate is clearly the problem – CNBC interview [EU market close].
-(US) House Speaker Johnson says he is sending the bipartisan housing bill to the White House after his meeting with Trump today – Axios.
-(US) Pres Trump appoints Chris Klomp as next Dep Sec of HHS.
-(US) US Pentagon reportedly sees a ‘broader role’ of AI for setting military targets in the future – press.
-(US) AAPL Raises prices of iPads, Macs in response to increases in memory chip costs; “Reached a point where we need to begin raising prices on a number of products” [*Note: iPhones were not mentioned in the statement] [US market close].
-(US) OPENAI.IPO Reportedly considering 2027 for IPO debut citing SpaceX stock volatility, waning retail investor enthusiasm, among other recent developments – NYT [US market close].
-(US) OPENAI.IPO Reportedly Trump Admin has asked OpenAI to stagger release of new AI models due to security [US market close].
-(BR) Brazil Jun FGV Construction Costs M/M: 0.9% v 0.8% prior [US market close].
-(BR) Brazil mid-Jun IBGE Inflation IPCA-15 M/M: 0.4% v 0.5%e; Y/Y: 4.8% v 4.8%e [US market close].
-(VE) Venezuela Health Minister: 235 deaths recorded [thus far] at medical centers after earthquake – Interview with State TV.
-(VE) US Treasury announces issuance of Venezuela general licenses, authorizing transactions related to earthquake relief efforts.
Europe
-(EU) ECB’s Moulin (France): Recent developments have been good for French economy; ECB’s rate hike in June was ‘moderate’ [EU market close].
-(UK) Reportedly Ed Miliband emerges as one of three potential candidates for the role of UK Chancellor and the two men are close allies; His critics, including some cabinet ministers, argue he is not pro-business enough and risks undermining market confidence – press [EU market close].
-(UK) Jun CBI Retailing Reported Sales: -54 v -40e [EU market close].
-(UK) National Energy System Operator (NESO): Forecasts are showing tight margins on the electricity system for Friday evening.
Middle East
-(IR) Islamic Revolutionary Guard Corps attacked a Singapore-flagged cargo ship off Oman today – WSJ citing US senior officials [EU market close].
-(IR) Iran reportedly proposes charging “service fees” in the Strait of Hormuz with Gulf neighbors, which would net $40B a year for the states involved; Iran is looking at models in waterways around the world, including in the Dardanelles – WSJ [EU market close].
-(IL) Israel Defense Min Katz: Repeats Israel military will remain in Lebanon, Gaza and Syria security zones as long as needed and will not withdraw due to pressure [EU market close].
-(US) White House: Trump signed an agriculture related executive order; Comments from US President Trump; Will soon be buying wheat, soybeans and corn with Iranian funds.
-(US) Sec of State Rubio: Zero support from Gulf countries for tolls and fees on the Strait of Hormuz [US market close].
-(IR) Iranian Parliamentary Speaker Qalibaf: US falsely claims our unfrozen assets will buy their agriculture [EU market close].
-(IR) Iranian Revolutionary Guards Quds Force: If Israel does not withdraw from Southern Lebanon immediately; it will be force to [EU market close].
-(IR) IAEA Chief Grossi: Undeniable we have agreement that IAEA will have access to Iran for inspection; We hope to be in Iran soon.
-(QA) QatarEnergy issuing its first crude tender since the Iran war – press [EU market close].
Levels as of 01:20 ET
Nikkei 225 -4.3%; ASX 200 +0.1%; Hang Seng -1.6%; Shanghai Composite -1.6%; Kospi -6.4%.
Equity S&P500 Futures -0.8%; Nasdaq100 -1.4%; DAX -0.8%; FTSE100 -0.6%.
EUR 1.1378-1.1354; JPY 161.85-161.57; AUD 0.6918-0.6876; NZD 0.5659-0.5626.
Gold -0.3% at $4,013/oz; BTC -3.0% at $59,781; WTI Crude Oil -2.1% at $70.42/bbl; Copper -1.4% at $5.9798/lbs.
