com Asia Market Update: Directionless trading seen into month and quarter-end; US/Iran to talk in Qatar, but will markets be impacted?; CN P

***General Trend and Developments*** -The Japanese Yen remains slightly offered amid quarter-end and Gotobi. However, Japan 2-year bond traders seem unfazed given the stronger demand at auction -The PBOC continued to use its overnight reverse repo tool to support quarter-end liquidity demand. - - -US equity FUTs +0.2% to +0.4% during Asia trading - ***Looking ahead (Asian-weighted focus, using Asian time zone)*** -Mon June 29th: EU Jun Consumer Confidence -Tue June 30th: KR May Industrial Production & Retail Sales, JP May Industrial Production & Unemployment Rate, NZ Jun ANZ Business Confidence, AU RBA Meeting Minutes, CN Jun PMIs, UK Q1 GDP, (Tue night, US Jun Consumer Confidence, US May JOLTs) -Wed July 1st: JP Q2 Tankan, KR Jun Prelim Trade Balance, EU & US Jun final S&P/HCOB Mnfg PMIs, CN June RatingDog Mnfg PMI, EU Jun Prelim CPI -Thu July 2nd: KR Jun CPI, AU May Trade Balance, JP 10-Year JGB Auction, EU May Unemployment Rate, (Thu night, US Jun Nonfarm Payrolls ) -Fri July 3rd: AU & JP Jun Final S&P PMIs, CN Jun RatingDog Svcs PMI, Global final Jun S&P/HCOB Services PMIs, (Note: “ Independence Day (Observed)” – U.S. markets closed, reduced liquidity ) - ***Holidays in Asia this week*** -Wed July 1st: Hong Kong -Fri July 3rd: US Independence Day - ***Headlines/Economic Data*** Australia/New Zealand -(AU) ASX 200 opens 'flat' at 8,830 -(AU) Australia RBA Jun Minutes: Judged financial conditions were now ‘somewhat restrictive’ -(AU) ACCC [Australia competition regulator] announces issuance of class exemption for global supply chain disruptions Statement -(AU) APRA publishes findings of inaugural system risk stress test Statement -(AU) Australia May Private Sector Credit M/M: 0.7% v 0.6%e; Y/Y: 8.2% v 8.0% prior -(AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 75.9 v 72.8 prior -(NZ) New Zealand Jun ANZ Business Confidence: 36.6 v 10.0 prior -(NZ) New Zealand LGFA: Targets FY27 gross bond issuance at NZ$4.66B, NZ$4.77B in FY28, NZ$4.80B in FY29 - China/Hong Kong -(CN) Shanghai Composite opens -0.4% at 4,058; (HK) Hang Seng opens flat at 23,008 -(CN) China MOFCOM: China, EU agrees to maintain global supply chain stability, continue consultations on trade, and solve some intellectual property issues Statement -(CN) China Jun Manufacturing PMI (Gov Official): 50.3 v 50.1e (4th month of expansion) -(CN) China's debt burden reportedly tops 300% of GDP [the figure includes household, government and corporate debt] Press [update] -(CN) Follow up: China May EV exports worldwide rises to 278.7K units, +48% y/y and +9% m/m -(CN) China PBOC overnight repo signals stronger liquidity support [inline], the tool is expected to support quarter-end liquidity conditions Chinese press -(CN) China scrutinizes issuance of dollar-denominated bonds yielding over 5%; the article focuses on the high-yield market and issuance in offshore currencies US financial press -(CN) AI accelerates the march of China factory robots into new sectors FT -(CN) China f

**Notes/Observations** - Month-end data flow was broadly constructive for the eurozone but added to the ECB's policy dilemma. French preliminary June CPI surprised to the downside at 1.8% y/y (vs 2.0%e), bringing headline inflation back to target for the first time in three months, while French consumer spending (+0.5% m/m) beat. German May retail sales jumped 1.1% m/m (vs flat expected), unemployment unexpectedly fell (-1.0k vs +5.0k expected), and the early North Rhine-Westphalia CPI print eased to 2.1% y/y ahead of the national figure. The main inflation watch-out came from German import prices, up 6.8% y/y - the strongest annual rise since December 2022. Elsewhere, Italian PPI cooled sharply, Swiss KOF beat (101.2 vs 99.0e), and Finland's GDP indicator firmed - On the ECB itself, the messaging skewed hawkish. Lagarde opened the Sintra forum arguing Europe is now more resilient to shocks, characterizing June's quarter-point move as a deliberate, unanimous decision rather than an "insurance hike." Chief Economist Lane reinforced this, calling it a "robust decision" and flagging that oil prices may stay above pre-war levels for a couple of years, keeping a cost-push impulse in the system. Nagel said it was too early to commit on further hikes but stressed vigilance and warned inflation could stay well above target; Wunsch went further, saying another hike may be needed and he'd rather move quickly. With energy prices having retreated rapidly, press sources suggest the upcoming eurozone inflation print (tomorrow) could put a July hike back on the table. Separately on trade, Sefcovic and China's Wang held "constructive" talks, and the EU and China set an October deadline to reset trade ties via a joint statement on new consultations. - UK macro was softer. Final Q1 GDP held at 0.6% q/q but the annual rate was revised down to 0.9% (from 1.1%), nudging gilt yields lower and reinforcing expectations that BoE rate-hike odds are fading as growth slows. The current account deficit came in slightly wider at -£22.1B, BRC shop price inflation held at 1.2%, business confidence dropped, and Zoopla flagged a 7% fall in sales agreed. Sainsbury's Q1 update was modestly ahead with guidance affirmed. - Headline UK event is the Defence Investment Plan (DIP), to be published today and framed as one of Starmer's final acts before he stands down. The expected funding settlement of roughly £14.5B falls well short of the ~£28B officials say is needed. Key pre-briefed elements: a £5B push into drones and autonomy (pitched as the UK's largest-ever such investment, drawing on Ukraine and Iran lessons); naval shipbuilding via a new "common combat vessel" and amphibious ships, reviving the Anglo-Dutch Project Catherina to replace the retired Albion class (work spread across Babcock Rosyth, BAE Barrow/Govan and others); 12 nuclear-capable F-35A jets plus continuation of the Global Combat Air Programme with Italy and Japan; and new Commando Force capabilities aimed at a combi