Asia Markets Fall

***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 during Asia trading, with Silver remaining down at $56 - Aussie dollar again underpeformed-0.5% to 0.68766, 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 Asia. -Note also the “oil down, stocks up ” phenomenon from early April has been broken also since June 3rd, as plummeting oil prices (TWI $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.

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.

Core measure (ex-fresh food). -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 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