PETER’S ASIAN BUSINESS & FINANCE BRIEFING – Thursday 02 July 2026, 06:00 Hong Kong
● Japan Q2 business confidence highest since 2018 ● China factory activity grows faster than expected ● Yen weakens to 40-year low
Thursday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 23,183 +302 points +1.3%
Nikkei 225 (Japan) Projected Open: 69,500 -975 points -1.4%
Quick Summary - 4 Things To Know Before Asian Markets Open
Federal Reserve Chairman Kevin Warsh, in comments Wednesday at the ECB Forum on Central Banking in Sintra, Portugal, declined to give any signal as to what the central bank may do at its meeting later this month, but did note that inflation was too elevated. Warsh said he’s been encouraged by inflation expectations easing recently, but the current level still isn’t good enough.
China’s factory sector expanded faster than expected in June, with the official manufacturing PMI rising to 50.3 as surging global demand for high‑tech exports tied to the AI boom helped offset weak domestic consumption and a deepening property downturn. The non‑manufacturing PMI also edged up to 50.2, reflecting modest improvement in services despite ongoing real estate weakness. Economists say the recovery remains heavily reliant on external demand. However, China’s private sector factory activity eased slightly in June, with the private RatingDog Manufacturing PMI dipping to 51.7, a three‑month low.
Japanese business sentiment strengthened more than expected in the second quarter, with the Bank of Japan’s Tankan survey showing optimism among large manufacturers rising to 22, its highest level since early 2018 and well above economists’ forecasts. Confidence also improved among large non‑manufacturers, climbing to 37, a multi‑decade high, underscoring resilience in the face of an energy shock triggered by Middle East turmoil.
The Japanese yen tumbled to its weakest level against the dollar in nearly 40 years, sliding past ¥162 as the Federal Reserve’s hawkish shift and Japan’s slow pace of monetary tightening deepened pressure on the currency. The drop — the lowest since December 1986 — has revived speculation of fresh intervention after authorities spent a record ¥11.73 trillion (US$72bn) earlier this year to defend the yen.
Trump Reports At Least $1.4 Billion In 2025 Crypto Earnings
President Donald Trump reported earning at least US$1.4 billion in 2025 from crypto‑related ventures, according to a sprawling 927‑page financial disclosure that shows digital assets have become the single largest source of his income. The filing reveals that World Liberty Financial, his family‑run crypto firm, generated more than US$594 million, while his memecoin business CIC Digital LLC brought in US$636 million in royalties, alongside additional gains from stablecoin equity sales and crypto holdings worth over US$60 million. The disclosure also lists extensive stock trades, major licensing revenues, and gifts including tickets to the World Cup, US Open and Super Bowl, while reigniting concerns that Trump — who did not place his assets in a blind trust — may be profiting from industries affected by his administration’s policy decisions. Despite market volatility and ongoing legal judgments, the documents show Trump’s business empire expanding across real estate, digital assets and global trademarks, underscoring the scale of his financial activity during his return to the presidency.
US Says Witkoff & Kushner Had Positive Talks In Doha On Iran Deal
US negotiators Steve Witkoff and Jared Kushner held what officials described as “positive” discussions in Doha as Washington and Tehran worked to convert last month’s interim ceasefire into a permanent end to the war, though major obstacles remain — especially the future management of the Strait of Hormuz. A senior administration official said technical talks with Iran are making progress even as the two sides continue to disagree over Tehran’s insistence on exerting some control over maritime traffic and potentially charging transit fees, a proposal firmly rejected by the US, Europe and Gulf states. The Doha visit followed a halt in renewed attacks around Hormuz, but tensions resurfaced after Iranian state media reported a foreign vessel grounding on an “unapproved route.” While President Trump has ruled out resuming a broad military campaign and is open to negotiations extending beyond the Aug. 18 deadline, unresolved issues — including frozen Iranian funds and the future of Iran’s nuclear program — continue to complicate efforts to stabilize a waterway that once carried a fifth of the world’s oil and LNG.
Growing Oil Glut Spurs Asian Refiners To Offer Cargoes To The US
With the US–Iran ceasefire still holding, energy markets are reassessing global supply chains as rising ship traffic through the Strait of Hormuz fails to deter major buyers from diversifying away from Middle Eastern crude. Indian refiners, shaken by the war‑driven supply shock, have begun reducing their reliance on the region by snapping up temporary Russian cargoes and exploring new long‑term sources in Guyana, Brazil and the US. The shift comes even as rising global output raises fears of an emerging glut and China weighs easing export restrictions, while LNG flows could still match last year’s levels if Hormuz traffic normalizes. Asian refiners are pushing some crude to destinations as far afield as California. UAE grades are being marketed to places as distant as the US West Coast and Hawaii, potentially the first Middle Eastern oil to head there since 2018 if a deal goes through. Asian refineries are already well supplied, and the prompt barrels released from the Strait of Hormuz pushes the balances into an overhang, without China picking up on demand. Although many traders hope for a return to pre‑war patterns, others are preparing for structural changes that may reshape global energy flows for years.
Iran Sells Oil At 20% Premium As US Blockade Ends
Iran says it has exported more than 40 million barrels of crude in the two weeks since the US lifted its naval blockade, allowing shipments to surge through the newly reopened Strait of Hormuz and enabling Tehran to sell oil at a roughly 20% premium to pre‑war prices. The ceasefire agreement signed on June 17 reopened the vital waterway toll‑free for 60 days, though chief negotiator Mohammad Bagher Ghalibaf stressed that Iran will retain administrative control and “will not give up its rights” over the strait. Tanker tracking data suggests exports may already be closer to 50 million barrels, helping push Brent crude down to about $73, nearly 40% below its April peak. The rebound in Iranian shipments comes as both sides navigate a fragile negotiating window and debate how Hormuz will be governed once the toll‑free period expires, while Tehran also disputes US claims about how unfrozen assets will be used, insisting that billions will flow to its central bank for purchases “at any price and in any currency.”
Xi Casts China’s Ruling Party As Force For Global Prosperity
Chinese President Xi Jinping cast the Communist Party as a force for global prosperity and stability in a speech marking its 105th anniversary, signalling his ambition for China to play a more assertive role in shaping international affairs. Xi said the party was “creating a new form of human advancement” and had become a builder of world peace and defender of international order, while pledging to strengthen the military through reforms, technology and personnel training as part of his long‑standing push for “national rejuvenation.” He reiterated that resolving the “Taiwan problem” remains central to that vision, even as Taipei urged Beijing to pursue dialogue with its democratically elected government. Xi’s remarks also underscored his efforts to rally developing nations through blocs like BRICS and to purge corruption within the party, reinforcing his tightening grip over China’s political system.
The speech comes as Xi faces mounting economic challenges at home, with China lowering its 2026 growth target to 4.5%–5%, its least ambitious goal in decades, amid a prolonged property slump, weak consumer spending and a cooling job market. While exports tied to AI and advanced manufacturing have helped offset domestic weakness, Xi’s government has refrained from major stimulus, leaving policymakers to navigate slowing momentum and rising fiscal pressures. His anniversary address — the first since 2021 — sought to project confidence at a moment when China’s global ambitions are rising but its economic footing is increasingly strained, reinforcing Xi’s portrayal of the party as both the guardian of national strength and the engine of China’s future place in the world.
China Factory Activity Grows Faster Than Expected In June
China’s factory sector expanded faster than expected in June, with the official manufacturing PMI rising to 50.3 as surging global demand for high‑tech exports tied to the AI boom helped offset weak domestic consumption and a deepening property downturn. Production, new orders and export demand all strengthened, with high‑tech equipment manufacturing jumping to 53.5, while consumer goods output and construction activity remained subdued. The non‑manufacturing PMI also edged up to 50.2, reflecting modest improvement in services despite ongoing real estate weakness. Economists say the recovery remains heavily reliant on external demand — boosted by front‑loaded US imports and resilient shipments of advanced manufacturing goods — while policymakers have avoided meaningful stimulus and are expected to rely on incremental fiscal support rather than rate cuts. The imbalance between strong supply and muted domestic demand is likely to keep inflation pressures soft in the second half of the year, even as China’s broader business sentiment shows tentative signs of stabilisation.
China Private Sector Factory Activity Hits 3-Month Low
China’s factory activity eased slightly in June, with the private RatingDog Manufacturing PMI dipping to 51.7, a three‑month low but still comfortably above its long‑run trend and marking the strongest quarter since late 2020. Output and new orders remained solid — with orders rising for a thirteenth straight month — yet foreign sales declined again, underscoring uneven external demand. Employment improved for the first time in three months, reaching its strongest pace since August 2023, while delivery times lengthened only marginally. Input cost inflation cooled sharply from April’s four‑year high, even as output prices continued their six‑month climb, the longest streak since 2021. Despite resilient production and hiring, business sentiment slipped to a five‑month low, reflecting lingering caution amid soft global demand and persistent domestic headwinds.
Japan Q2 Business Confidence Highest Since 2018
Japanese business sentiment strengthened more than expected in the second quarter, with the Bank of Japan’s Tankan survey showing optimism among large manufacturers rising to 22, its highest level since early 2018 and well above economists’ forecasts. Confidence also improved among large non‑manufacturers, climbing to 37, a multi‑decade high, underscoring resilience in the face of an energy shock triggered by Middle East turmoil. The survey showed broad gains across machinery, metals and high‑tech sectors, while textiles rebounded and only a handful of industries, such as ceramics and processed metals, saw declines. Large firms now expect capital expenditure to jump 11.5%, a sharp acceleration from the previous quarter’s modest plans, suggesting companies remain willing to invest despite inflation pressures and global uncertainty. The Tankan is a closely watched poll that measures business sentiment among domestic companies.
South Korea June Exports Highest Since 1978
South Korea posted massive export growth in June, with shipments increasing 70.9% from a year earlier and marking its fastest rate of growth since 1978. The figure sharply beat the 61% growth expected by economists polled by Reuters. Imports increased 30.1% to US$66.10 billion in June, beating expectations of 26.3%. South Korea’s trade balance widened to US$36.15 billion, up from US$27.04 billion in May.
Indonesia Inflation Rate Above Estimates
Indonesia’s inflation accelerated more sharply than expected in June, rising to 3.3% year on year from 3.1% in May — the highest reading since March and above market forecasts — driven by broad-based price increases across food, transport, housing, healthcare and other key categories. Core inflation climbed to a 38‑month high of 2.8%, underscoring persistent underlying pressures even as headline inflation remained within Bank Indonesia’s 1.5%–3.5% target range. On a monthly basis, consumer prices rose 0.4%, the fastest pace since February, reflecting stronger transport costs and firmer demand ahead of mid-year holidays. While input price inflation eased from April’s four-year peak, output prices continued to rise, suggesting firms are still passing costs on to consumers.
India Manufacturing Growth Revised Lower
India’s manufacturing sector lost momentum in June, with the HSBC Manufacturing PMI revised down to 54.2 from the preliminary 54.5 and below May’s 55.0, marking the second‑weakest improvement in factory activity since mid‑2022. Output and new order growth slowed to some of their weakest rates in four years, while export orders rose at their softest pace since March 2023 amid subdued European demand. Softer conditions led firms to scale back purchasing, hiring and input inventory building, and finished goods stocks fell at the fastest pace in six months as production was aligned more tightly with current demand. Cost pressures eased, with input price inflation dropping to a four‑month low and output charge inflation slipping to a three‑month low, reducing the need for aggressive price hikes. Supplier delivery times improved only marginally, and business confidence weakened to a five‑month low as concerns over demand and market conditions weighed on the outlook.
US Private Payrolls Rise Less Than Expected In June
US private payrolls grew by 98,000 in June, below the Dow Jones consensus of 110,000 and down from 122,000 in May, according to ADP. Nearly half the job creation in June of 48,000 came from the education and health services sector, a consistent leader for payroll growth. All but 2,000 of the new jobs came from services. Annual pay gains for those staying in their jobs held steady at 4.4% while edging higher to 6.6% for job switchers.
“The pace of hiring is telling a story of both supply and demand. We know it’s taking people longer to find work, but there also are signs of labour supply constraints in certain industries,” said Nela Richardson, ADP’s chief economist. “For now, the overall effect is a slowdown in job creation.”
Fed Chair Kevin Warsh Says Inflation ‘Too High’
Federal Reserve Chairman Kevin Warsh, in comments Wednesday at the ECB Forum on Central Banking in Sintra, Portugal, declined to give any signal as to what the central bank may do at its meeting later this month, but did note that inflation was too elevated. Warsh said he’s been encouraged by inflation expectations easing recently, but the current level still isn’t good enough. “If there were people in the household or the business sector, in the financial markets, who thought that this central bank was going to be comfortable with an inflation objective above 2%, well, I guess they’d be disappointed,” he said. “We’re going to deliver price stability in the U.S.” The Fed’s preferred gauge showed core inflation at 3.4% in May, with the headline all-items index even higher at 4.1%.
“We’re all in the price stability business, that might not be our only business, but if there was a common thing I heard over the last couple of days, it was open-mindedness on these questions of AI, open-mindedness on productivity, but we’ve all looked around, and we’ve seen that prices are too high,” Warsh told CNBC. The new central bank leader also said some of the staffing for his five task forces that he unveiled last month to study the various functions of the Fed will be announced next week. “My hope, my aspiration, is that nine-12 months from now we’re going to be using new technologies to understand what’s happening in the real economy in a contemporaneous real-time way that positions us as central bankers to make better decisions,” Warsh added.
Warsh also insisted there would be “no changes” to US central bank independence. The new chair said on Wednesday that the Fed would remain committed to its 2% inflation target and “deliver price stability” regardless of potential pressure from the White House to lower interest rates. “We’ve been an independent central bank for a very long time, we’re going to be an independent central bank at this moment and you’re going to see no changes on that,” he told central bankers at the conference.
Global M&A Tops $2.5 Trillion After First-Half Deals Surge
Global mergers and acquisitions surged to US$2.6 trillion in the first half of 2026, a roughly 30% year‑on‑year jump that puts dealmakers on track to challenge the record set in 2021, as CEOs and boards pressed ahead despite war, political uncertainty and volatile markets. Companies announced 38 megadeals worth US$10 billion or more — the highest ever recorded in a six‑month period — spanning sectors from energy and property to consumer goods and technology. Landmark transactions included NextEra’s US$67 billion bid for Dominion Energy, a proposed US$50 billion tie‑up between AvalonBay and Equity Residential, and Unilever’s US$45 billion sale of its food division to McCormick. Bankers say a business friendly regulatory climate under President Trump, strong corporate earnings and a global push for scale in the age of artificial intelligence have all helped fuel the boom.
Cross‑border capital has also played a major role, with overseas buyers targeting US assets as AI innovation and fiscal stimulus lift valuations and liquidity. Dealmakers at Morgan Stanley, JPMorgan, Goldman Sachs and Citigroup say confidence is strong heading into the second half, with carve‑outs, portfolio rebalancing and smaller strategic deals expected to accelerate after the summer. Still, private equity remains a notable laggard, constrained by legacy investments made at peak valuations and low interest rates, and some ambitious combinations — from Puig–Estée Lauder to Brown‑Forman–Pernod Ricard — have already faltered. With elections looming and economic risks still present, bankers acknowledge potential headwinds but insist that 2026 is shaping up to be one of the most active M&A years in history.
Asian Markets Surge In H1
Asia markets closed mixed on Wednesday, with Japan’s Nikkei 225 ending the session 0.6% higher at 70,475. South Korea’s Kospi declined 2.0% to 8,303. Taiwan’s benchmark Taiex added 1.9% to 47,019. Australia’s benchmark S&P/ASX 200 was down 0.6% to 8,723. In India, the BSE Sensex rose 0.6% to 76,923.
For the month, the Nikkei 225 rose 5.6% taking its H1 gains to 39.2%. The Kospi was flat on the month but surged over 101% in the first six months of the year, making it the world’s best equity index. The Taiex notched a monthly gain of 5.1% and was up over 62% in H1. Australia’s ASX 200 rose 0.5% in June and was up 0.7% in H1. The BSE Sensex was a major underperformer, losing 9.7% in H1, although it did recover 2.9% in June.
Hong Kong Stocks Drop 11% In H1 On Fed Pivot, Lack Of AI Play
Hong Kong stocks delivered one of the weakest performances among major global markets in the first half of the year, with the Hang Seng Index down almost 11% and the Hang Seng Tech Index sliding 19%, as the Federal Reserve’s hawkish pivot and the city’s lack of pure-play AI leaders weighed heavily on sentiment. The Hang Seng China Enterprises Index slid into a bear market, down 21% from its most recent high in January.
Mainland Chinese equities outperformed sharply, with the CSI 300 up 7.5% in H1. They were buoyed by a bull run in AI hardware names such as Cambricon, dubbed China’s challenger to Nvidia, which exceeded 1 trillion yuan (US$147bn) in market capitalisation after a 76% gain this year. Hong Kong struggled with fears of capital outflows, rising US yields and investor scepticism toward the AI monetisation strategies of benchmark heavyweights like Alibaba and Tencent. A boom in IPOs further drained liquidity, with Hong Kong listings surging 84% to US$26.4 billion, second only to the Nasdaq. Goldman Sachs warned that US$274 billion in lock‑up expiries over the next year could add fresh pressure. As analysts caution that tighter global liquidity, IPO peaks and looming share releases will continue to cloud the outlook, the market’s biggest constituents showed stark divergence. HSBC gained 25%, while Alibaba fell 35% and Tencent dropped 28%.
European Markets Start Month In Negative Territory
European stock markets started the new month in negative territory. The pan-European Stoxx 600 was down 0.4%, with most regional sectors and major bourses trading in the red. London’s FTSE 100 closed 0.2% lower. In HI the Stoxx was up 8.4%, while the FTSE 100 rose 5.7%.
Eurozone annual inflation came in at 2.8% in June, below consensus estimates of 3.0% and down from 3.2% year-on-year in May, as energy price pressures caused by the Iran war appeared to ease. The European Central Bank last month raised its key interest to 2.25% — its first hike since 2023 — in a bid to combat growing inflationary pressure in the euro zone, which it said would average 3% in 2026.
The European Central Bank is in no rush to raise interest rates again next month after peace efforts in the Middle East sent oil prices lower and reduced inflation risks, according to Governing Council member Martins Kazaks. Markets are now pricing just 23 bps of monetary tightening by the end of 2026. Meanwhile, Bank of England Governor Andrew Bailey told CNBC the energy shock had been “frustrating” for policymakers as he struck a dovish note by emphasizing weak growth rather than above-target inflation.
US Stocks Close Out Strong First Half
On Wall Street Wednesday, the Dow touched a record high before retreating, while the Nasdaq Composite struggled amid declines in chipmakers. The Dow lost 14 points, or less than 0.1%, to close at 52,305. Earlier in the session, the Dow surged to a new intraday high of 52,742 before reversing as artificial intelligence beneficiary Caterpillar pulled back 6.9%. The S&P 500 dropped 0.2%, ending at 7,483. The Nasdaq Composite declined 0.7% to 26,040. The tech-heavy index fell as investors took profits on semiconductor names. Micron tumbled 10.6%, although it’s still up more than 260% in the year to date. Sandisk also shed 10.6%, but the stock is still holding an advance of more than 750% in 2026. Other Big Tech stocks reduced the Nasdaq’s decline. Meta Platforms rose 8.8% after the company said it would launch a cloud business and sell excess computing power — a move that could boost its revenue.
The major US stock averages closed out a strong first half of 2026. In the first six months of the year, the Dow climbed 8.9%, marking its best first half performance since 2021. The broad market S&P 500 rose 9.6%, and the Nasdaq climbed 12.8%. It was also the best quarter for those two indices in six years. The S&P 500 and Nasdaq have notched 24 and 20 record closes in 2026. The small-cap Russell 2000 surged nearly 22% to clinch its best first-half performance since 1991.
The Magnificent 7 Index is down 1.9% this year, falling well short of the S&P 500’s gain. Alphabet is the best performer among that cohort in 2026, while competing AI spenders Microsoft and Meta are at the bottom. Big Tech stagnated on fears that massive and increasingly leveraged AI spending wouldn’t generate satisfactory returns on investment.
Alphabet has had, by every measure, a very good 12 months. The stock price has more than doubled over the past year and the Google parent is now worth US$4.3 trillion, trailing only Nvidia. Its shares were added to the Dow Jones Industrial Average last month. However, the stock is now struggling. The shares lost 6% in June and have been in the red for four of the last five months, including drops of more than 7% in February and March. “This really shows the fickleness of the AI trade,” said Alec Young of research firm MoneyFlows. “Just a month or two ago Alphabet was the rock star.” The stock has been caught in a market rotation away from the biggest AI spenders and toward the chipmakers that are receiving much of that cash. In early June, Alphabet announced plans to raise about US$85 billion from equity sales to fund its capital expenditures.
US chip stocks staged a historic rally in the second quarter as investors broadened their AI bets beyond Nvidia, sending Micron, Intel and AMD soaring and adding a combined US$2 trillion to their market value. Micron led the surge with a gain of more than 240%, powered by skyrocketing memory prices and a fourfold jump in quarterly revenue, while Intel climbed 216% amid renewed demand for CPUs and progress on its US fab build‑out. AMD rose 186%, benefiting from investor appetite for chips that complement Nvidia’s dominant AI processors. The rotation into “AI enablers,” as Barclays put it, also lifted other parts of the semiconductor ecosystem: Marvell jumped about 200%, Arm rose 134%, and the VanEck Semiconductor ETF rose 71% in the period, logging its best quarter since its 2000 debut. With hyperscaler stocks showing mixed performance and capital spending on AI data centres accelerating, investors are betting that the next leg of the AI boom will be driven by a wider range of chipmakers across memory, networking and processor design.
Treasury Yields Higher In H1
Treasury yields were up across the curve in H1, but particularly at the policy sensitive short end as US labour market data pointed to a slowing but not alarmingly weakening economy. Headline inflation reached 4.1%. This could continue to push the short end of the US yield curve higher but with softer pressure on longer-dated yields, as tighter monetary policy today helps ease longer-term inflation expectations.
The yield on the 2-year note stands at 4.18%, up 17 bps in June and 70 bps higher since the start of the year. The 10-year yield is at 4.47%, a gain of 3 bps in June but up 30 bps in H1.
Yields rose Wednesday after new Fed chair Kevin Warsh dodged questions about whether an interest-rate hike is in the cards this month, but said inflationary risks have eased since the last FOMC meeting. He took part in a panel discussion with the heads of the ECB, the Bank of England and the Bank of Canada in Portugal.
Dollar Strengthens Over Month & H1
The dollar strengthened over the month and in H1 as investors priced in higher-for-longer US interest rates, while ongoing uncertainty in the Middle East boosted demand for the currency’s safe-haven appeal. The US Dollar Index ended June at 101.32, marking a 2.4% rise on the month. For H1 of 2026 it was up 3.1%. On Wednesday, the dollar index rose 0.1% to 101.41.
Yen Weakens To 40-Year Low
The Japanese yen tumbled to its weakest level against the dollar in nearly 40 years, sliding past ¥162 to ¥162.54 as the Federal Reserve’s hawkish shift and Japan’s slow pace of monetary tightening deepened pressure on the currency. The drop — the lowest since December 1986 — has revived speculation of fresh intervention after authorities spent a record ¥11.73 trillion (US$72bn) earlier this spring to defend the yen. Chief Cabinet Secretary Minoru Kihara and Finance Minister Satsuki Katayama reiterated that Tokyo “stands ready to act.” Analysts say the yen’s decline reflects a widening interest rate gap. The Bank of Japan has lifted rates only modestly to 1%, while markets expect the Fed to raise rates again, encouraging investors to borrow cheaply in yen and chase higher yields abroad. The currency’s weakness has boosted exporters and helped propel the Nikkei 225 to record highs, but it is also swelling import costs — especially for oil and gas — intensifying inflation and threatening Prime Minister Sanae Takaichi’s political standing.
The slide comes amid broader concerns that Japan’s policy mix is increasingly misaligned, with a massive US$2.3 trillion investment programme announced by Takaichi raising fears of further fiscal expansion even as the BOJ moves cautiously on tightening. Traders warn that hedging linked to Japan’s stock market boom is adding downward pressure on the yen, while structural challenges — from an aging population to heavy public debt — complicate prospects for meaningful rate hikes. Although hopes for a US–Iran peace deal have eased oil price pressures, the yen remains vulnerable, and analysts expect Tokyo to continue intervening to prevent a “sell Japan” mindset from taking hold. With the currency now breaching levels last seen during Japan’s late‑1980s bubble era, markets are bracing for more volatility as policymakers weigh how far they can push back against global forces driving the yen’s historic slide.
Yuan Rally Bets Fade As Options Traders Turn Bullish On Dollar
The offshore yuan ended the first half of the year at RMB 6.79 per dollar. It was down 0.4% in June, reversing two consecutive months of gains as a stronger US dollar and a series of softer-than-expected daily fixings from the People’s Bank of China weighed on the currency. For the first half of the year, the yuan strengthened almost 3%.
Options traders are rapidly unwinding bullish positions on the Chinese yuan after the Federal Reserve’s hawkish June pivot, with derivatives markets now signalling a clear shift toward dollar strength as large USD/CNH call option volumes outpace puts and the one-month option skew flips in favour of hedging against a stronger dollar. The reversal marks the end of one of 2026’s most crowded macro trades, driven by fading conviction in China’s currency after a months‑long rally supported by Beijing’s tolerance for appreciation and resilience to oil shocks, while weaker Chinese data and expectations of a soft second quarter GDP print prompt investors to reassess. The People’s Bank of China has reinforced the trend by setting weaker daily reference rates, leading major asset managers to take profits or move to neutral, and demand for USD/CNH puts and digital options has collapsed as traders unwind downside bets. With positioning now largely neutral, strategists say dollar momentum has room to run into the third quarter as China’s macro-outlook softens and US policy tightens.
Won Slides Toward Weakest Since 2009 As Global Funds Sell Stocks
South Korea’s won slid toward its weakest level since the global financial crisis, leading a retreat in Asian currencies, as the dollar strengthened and overseas investors sold local equities. The won declined as much as 0.6% to 1,559.10 per dollar after depreciating to 1,562.20 last month, a level last seen in March 2009. Overseas investors sold a net 1.46 trillion won (US$938mn) of stocks in the Kospi index on Wednesday, in an eighth straight day of outflows. Wednesday’s foreign outflows follow a record US$58 billion in selling from the broader market last quarter, driven by global funds hitting exposure limits to Samsung and SK Hynix, alongside shifting sentiment toward the artificial intelligence trade.
Gold Notches Worst Quarter In More Than A Decade
Gold slid below $4,000 a troy ounce on Tuesday and has logged its worst quarterly performance in more than a decade, as expectations of higher US interest rates and fading retail enthusiasm bring an abrupt end to bullion’s record-breaking rally. Prices have dropped over 14% over the past three months, reversing a surge that took gold to almost $5,600 in January amid frenzied speculation. For the first half of the year, gold has lost over 7%. Bullion was up slightly Wednesday, rallying 0.6% to $4,031 an ounce.
Analysts say the hawkish stance of new Federal Reserve chair Kevin Warsh — and the prospect of further rate rises following inflation pressures linked to the Iran war — has driven investors out of non‑yielding assets and into Treasuries, AI stocks and even SpaceX’s blockbuster IPO. ETF outflows, a stronger dollar and new restrictions on precious metals trading by Chinese banks have added to the sell-off, though some analysts expect central bank buying to help establish a floor for prices as the “debasement trade” that once powered gold’s ascent continues to unwind.
Brent Crude Nearly 40% Below Its April Peak.
Oil prices fell Wednesday after Donald Trump said US talks with Iran in Qatar are going well. Brent crude futures for September lost 1.9% to $71.57 a barrel. US West Texas Intermediate futures for August lost 1.3% to settle at $68.58 per barrel.
Brent crude is nearly 40% below its April peak. It settled on the final day of the month at $72.95 a barrel, down almost 21% in June, its biggest monthly decline since March 2020. In Q2 it was down over 38% which has reduced its H1 gain to 20%. At the war’s peak, Brent topped $126.
Bitcoin Drops To 21-Month Low
Bitcoin stabilized after falling to a 21-month low on the prospect of higher interest rates and concerns that Strategy Inc. may no longer be a consistent buyer. Bitcoin dropped as much as 1.5% to $57,742 in Asia trading on Wednesday, its lowest level since Sept. 17, 2024. It later pared some of its losses and was trading at around $59,900 in New York.
Investors pulled more than US$4 billion from US-listed Bitcoin exchange traded funds in June, the most since they launched two years ago. That drove the price of the cryptocurrency down almost 20% last month. In H1, Bitcoin tumbled almost 33%. Bitcoin has now fallen more than 50% from its record high above $126,000 in October last year.
Peter Lewis’ Money Talk Podcast
On Thursday’s “Peter Lewis’ Money Talk” podcast, I’ll be joined by Andrew Freris, the CEO of Ecognosis Advisory and Sam Faveur, CEO at Mandarin Capital. In the second part of the show, we look at some of the latest developments in emerging markets and FinTech with Yanan Wu, the Chairman and CEO of Surfin Group.
The podcast is also available on Apple Podcasts, YouTube Studio and Spotify.
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https://www.youtube.com/playlist?list=PLnwqOJD9ie5gHH29bNfuG1Nscy8rdJo6O
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This podcast is sponsored by Surfin Group, which is headquartered in Singapore and offers online financial services to 90 million customers across 10 countries. You can find out more about them by going to their website www.surfin.sg
