PETER’S BUSINESS & FINANCE BRIEFING – Tuesday 15 July 2025, 06:00 Hong Kong
● China’s exports reach record high in H1 ● Japanese & German sovereign bonds sell off ● Bitcoin rises above $120,000
Tuesday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 24,300 +97 points +0.4%
Nikkei 225 (Japan) Projected Open: 39,485 +25 points +0.1%
Quick Summary - 4 Things To Know Before Asian Markets Open
China’s exports reached a record high in the first six months of the year, showing that factories have been able to ride out the trade war so far. They’ve been able to increase sales in other markets to compensate for the drop to the US. Shipments to the US fell 16.1% from a year earlier after slumping by over 34% in May. China’s trade surplus with the US expanded to US$26.57 billion in June, up from US$18 billion in May, even as both exports and imports with the US declined. Exports to the 10 Southeast Asian nations in the Asean group soared 17% from a year earlier, in particular Vietnam (18.8%) and Thailand (20.9%), as well as India (15.1%).
The European Union is preparing to step up its engagement with other countries hit by tariffs, including Canada and Japan. That could include the potential for coordination. EU competition chief Teresa Ribera said the bloc is looking to deepen trade agreements with India and other countries in the Asia-Pacific region, and highlighted the EU's continuing trade talks with India, which are expected to be completed by year's end. Over the weekend, Trump threatened to impose 30% tariffs on the EU and Mexico. German Chancellor Friedrich Merz said such a rate would hit exporters in his country “to the core.”
Japanese long-bonds extended a selloff on Monday. Yields on Japan's bonds from 10-year to 40-year spiked, with the 40-year yield leading the way, jumping 17 bps, amid signs of thin liquidity and increasing worries about higher government spending. 30-year yields are approaching May’s record high of 3.185%. The 20-year yield touched the highest since 2000. Pressure in the market is being heightened by concern that the outcome of a July 20 election might lead to more government spending. In Germany on Monday, long-term borrowing costs were on course to hit their highest since 2011 amid concern over tariffs and extra government spending. The rout in Japan’s and Germany’s debt market followed a tumble in US Treasuries on Friday as worries about inflation re-emerged. The moves are reemphasizing concerns that bond markets are fragile heading into critical US inflation data later today.
Bitcoin breached $120,000 for the first time, with investor optimism increasing almost daily. The token rose on the back of anticipation for what a Congressional committee dubbed “Crypto Week,” where lawmakers in the US Congress are expected to debate and possibly vote on key cryptocurrency legislation. The crypto market bellwether rose as much as 4.4% Monday to $123,194 before ending the New York trading session at $120,100, and is now up over 28% year-to-date. US policy developments such as fiscal expansion and expectations of further monetary easing have created a backdrop that is favourable for Bitcoin.
Week Ahead - July 14th to 20th
This week in the US, second quarter earnings season kicks off today and there are a slew of major economic data releases. Developments in US trade policy and their potential impact on global growth and financial markets will be considered. Donald Trump is expected to continue delivering letters to notify countries of new tariff rates.
Major US banks will dominate the earnings calendar with results due from JPMorgan, Bank of America, and Goldman Sachs, among others. Earnings are due from TSMC, J&J, ASML, Netflix, and 3M. Goldman Sachs predicts that, this quarter, US earnings will start to show the impact of the tariffs. The consensus estimate among analysts sees S&P 500 companies’ earnings-per-share growth decelerating to 4% this quarter relative to the same quarter last year, down from 12% in the first quarter.”
On the data front, major releases will be headlined by the US CPI, which is expected to accelerate, while retail sales are set to stagnate. The core consumer price index is seen accelerating on an annual basis for the first time since January, to 2.9%. There will also be the next reading of the University of Michigan’s Consumer Sentiment Index. The Fed’s Beige Book, published on Wednesday, will provide a clearer picture of economic fundamentals.
In Asia, a slew of data from China and Japan will be the focus. Later today, data is expected to show China’s GDP growth remained above the 5% target in Q2, coming in at 5.3%. Also this morning, numbers for China’s June new home sales, retail sales and unemployment will provide a snapshot of consumers. Industrial production figures are set to show the overall health of the Chinese economy.
In Japan, Thursday’s trade data is expected to also be weak. Inflation figures on Friday will highlight the challenge facing Japan’s central bank, with national consumer price data for June set to show the headline rate slipping to 3.3%.
Elsewhere in the Asia-Pacific region, India reports exports for June today. Malaysia releases second quarter GDP figures and export data after a weak May. Growth likely slowed to 3.5% year-on-year from 4.4% in the March quarter. South Korea’s export and import trade price weakness may continue into June amid weaker demand. Indonesia’s central bank is expected to cut its key benchmark rate by 25 bps to 5.25% on Wednesday, responding to a weaker domestic economy and a deteriorating outlook from consumers and businesses.
Globally, inflation data is due from the UK, while the spotlight in the Eurozone will be members' trade balances and industrial production.
On the geopolitical front, this year’s G20 meetings take place in South Africa. Finance ministers and central bank governors will meet in Durban from 14 to 18 July. However, US Treasury Secretary Scott Bessent will skip the meeting altogether, opting to head to Japan instead.
Chinese Exports Reach Record High In H1
China’s exports reached a record high in the first six months of the year, showing that factories have been able to ride out the trade war so far. They’ve been able to increase sales in other markets to compensate for the drop to the US. Exports rose 5.8% in June from a year earlier to US$325 billion, slightly above expectations of a 5.0% rise and accelerating from 4.8% growth in May. Notably, rare-earth exports surged 32% m/m, potentially reflecting progress from agreements reached in June to ease restrictions and restore global supply. For the first half of 2025, China’s exports rose by 5.9% y/y, totalling US$1.81 trillion.
Imports rose 1.1%, rebounding from a 3.4% fall in May, to grow for the first time since February, according to data from the General Administration of Customs on Monday. The latest result was slightly below economists’ estimates for a 1.3% gain. The upturn reflects the impact of Beijing’s support measures aimed at boosting domestic demand, coupled with temporary tariff relief. China ended the first half of the year with a record trade surplus of US$586 billion. In the first half of 2025, imports registered -3.9% y/y year-to-date contraction. As China's domestic auto companies continued to gain competitiveness and market share, auto imports fell sharply, down -37.9% y/y ytd.
Shipments to the US fell 16.1% from a year earlier after slumping by over 34% in May. China’s trade surplus with the US expanded to US$26.57 billion in June, up from US$18 billion in May, even as both exports and imports with the US declined. Chinese firms were able to increase their sales in other markets to compensate for the drop to the US, with exports to the 10 Southeast Asian nations in the Asean group soaring 17% from a year earlier, in particular Vietnam (18.8%) and Thailand (20.9%), as well as India (15.1%). Carlos Casanova, Senior Economist, Asia at Union Bancaire Privée, Hong Kong said, “this surge cannot be attributed to front-loading orders in anticipation of higher tariffs. The data raises doubts about the overall effectiveness of the US President's tariff policy.”
“China’s trade resisted pressure and progressed in the first half of the year,” Wang Lingjun, deputy head of the customs agency, said at a press briefing. “But we need to note that unilateralism and protectionism are on the rise globally, and the external environment is becoming more complex, grim and uncertain.”
Overall, exports have held up better than most forecasters expected through the first half of the year and contributed to first quarter GDP comfortably beating very downbeat forecasts from the start of the year. Official figures due today are expected to show GDP rose 5.1% year-on-year in the quarter ended June. Zhiwei Zhang, chief economist at Pinpoint Asset Management, said, “the strong exports help to partly offset the weak domestic demand and likely keep GDP growth around the government target of 5% in the second quarter.”
EU & Asian Economies To Seek To Broaden Trade Ties
The EU plans to team up with nations hit by Donald Trump’s tariffs and will reach out to Canada and Japan for possible cooperation, Bloomberg News reported Monday. EU competition chief Teresa Ribera said the bloc is looking to deepen trade agreements with India and other countries in the Asia-Pacific region, and highlighted the EU's continuing trade talks with India, which are expected to be completed by year's end. While there’s always regular contact with other countries, particularly among the Group of Seven, the risk of wider trade wars means “there is this new sense of urgency,” EU chief trade negotiator Maros Sefcovic told reporters Monday as he entered a meeting of trade ministers.
The EU will extend the suspension of trade countermeasures against the US until August 1 to allow for further talks, according to European Commission chief Ursula von der Leyen, who said the bloc will continue to prepare further countermeasures, while preferring a "negotiated solution". The current list of countermeasures would hit about €21 billion (US$24.5bn) of US goods, while the EU has another one ready of about €72 billion, as well as some export controls.
On Saturday, Trump threatened to slap a 30% levy on the bloc by August if they cannot negotiate better terms. German Chancellor Friedrich Merz said such a rate would hit exporters in his country “to the core.” Trade between the EU and US will be “almost impossible” if Donald Trump imposes the tariffs he has threatened, the bloc’s trade commissioner Maroš Šefčovič said. Other countries like Mexico, which has also been negotiating with the US, were surprised to receive similar letters.
Over the weekend, the EU reached a tentative economic agreement with Indonesia, a country facing a 32% US tariff despite talks with Washington to lower that rate. Indonesian President Prabowo Subianto called the outcome with the EU a “breakthrough” after 10 years of trade negotiations and hopes to return to Brussels for the formal signing of the accord, known as the Comprehensive Economic Partnership Agreement.
For Trump, who has warned groups like the BRICS against teaming up against the US’s interests, the risk is that the trade realignment he’s trying to engineer turns away investment and forces countries to join forces, a fragmentation that could play into China’s hand. “We’re going to have to look for other partners to buy our products,” Brazil’s President Luiz Inacio Lula da Silva said last week after Trump threatened the country with a 50% tariff on its exports to the US for a reason unrelated to trade. The US is Brazil’s second-largest trading partner, following only China.
South Korea Eyes Tariff Deal with US Ahead of August Deadline
South Korea said Monday it may be possible to reach an “in-principle” trade deal with the US before the August 1 deadline. Following high-level talks in Washington, Trade Minister Yeo Han-koo noted that while 20 days aren’t enough for a comprehensive agreement, a basic framework could be finalized with further negotiations to follow. Seoul is seeking to avoid “unfair” US tariffs, particularly on steel and autos, which are key to South Korea’s industrial strength and cooperation with its top security ally. Yeo also hinted at potential concessions on agricultural access, stating a “strategic judgment” is needed, though sensitive areas may still require protection. The talks come amid pressure to avoid a 25% US tariff set to take effect August 1. Trump said Sunday, “South Korea wants to make a deal right now,” without detailing the terms.
Trump Criticizes Japanese Cars Again Ahead Of Bessent Visit
Donald Trump attacked the car trade imbalance between the US and Japan, saying, "they sell us millions and millions of cars a year. We sell them no cars because they won’t accept our cars." Trump announced that he will raise across-the-board tariffs on Japan to 25% on August 1, after months of negotiations yielded little progress. Prime Minister Shigeru Ishiba has said American cars are left-hand drive, large, and fuel inefficient, making them a tough sell in Japan.
US Treasury Secretary Bessent, one of the three negotiators leading the US efforts to reach global trade deals, is set to come to Japan to visit the World Expo in Osaka on July 19, but there has been no sign of a trade meeting on the sidelines so far. Bessent’s visit is also set a day before an upper house election that could deliver a punishing result for Ishiba’s minority government. About 9% of people said the tariff negotiations would inform how they vote, according to polls conducted by public broadcaster NHK. Around 80% of Japan’s trade surplus with the US is in cars and car parts, and the country has already been hit by 25% sectoral tariffs on autos.
Australian PM Touts Practical Cooperation During Shanghai Visit
It’s in Australia’s interests to engage with China to build a stable and secure region, Prime Minister Anthony Albanese said on Sunday in Shanghai. “We know that one in four Australian jobs depends on free and fair trade. And our biggest export partner is China,” Albanese said. Albanese told Shanghai Communist Party Secretary Chen Jining that Canberra hopes to further strengthen economic and trade cooperation and jointly promote green and low-carbon development. The prime minister is visiting China for the first time since being re-elected.
India’s Foreign Minister Makes First China Visit In 5 Years
India's foreign minister, Subrahmanyam Jaishankar, visited China for the first time in five years to hold a bilateral meeting with his Chinese counterpart Wang Yi and he attended the Shanghai Cooperation Organisation's council of foreign ministers yesterday in Tianjin. The two ministers were expected to discuss issues including rare earth supplies to India, the Dalai Lama's succession, and the resumption of direct flights between the two countries, people familiar with the matter said, according to Bloomberg News. Jaishankar's visit is part of efforts by both sides to repair strained ties following deadly border clashes in 2020, according to people familiar with the matter.
US To Send ‘Sophisticated’ Equipment To Ukraine
For the first time since returning to the White House, Donald Trump has pledged to make new weapons available to Ukraine. Donald Trump said Monday he is "very, very unhappy" with Russia as he announced plans to deliver "top-of-the-line" weapons to Ukraine, via Nato. These may include offensive weapons. The US president also said he will introduce "very severe" secondary tariffs of 100% if no ceasefire deal is reached within 50 days. The tariffs would be “biting” and “very, very powerful”. This means any country that continues to do trade with Russia will face a big tax to sell their products to the US.
Trump said he felt he had a deal with Russia on the Ukraine war "about four times. And here we are still talking". "I thought we should have had a deal done a long time ago, but it just keeps going on and on and on," he said. Nato chief, Mark Rutte, who was meeting Trump in the White House Monday, said it means Ukraine can get its hands on "really massive numbers of military equipment" for air defence, missiles and ammunition. He added that it's great news for Ukraine, thanking President Trump. The US president said "we're going to make top-of-the-line weapons" and send them to Nato. Nato will then send them where they are needed, adding “they will be paying for them.”
The US president expressed growing exasperation with Russian President Vladimir Putin saying he “talks nice” and then “bombs everybody in the evening.” Speaking on Sunday night, the US president confirmed the equipment will include Patriot missile defence systems, "which they Ukraine desperately need," and Ukraine will “pay us 100% for them.” Some reports suggest the US will also send offensive weapons. Ukraine's President Voldoymyr Zelensky said last week that the US had resumed military supplies to Ukraine, as Russian aerial attacks intensified. The moves signal a change of heart for Trump, who had held off approving any new weapons shipments to Ukraine since the start of his second term. Instead, he had sought to coax Putin to the negotiating table, arguing that he could get a halt to the conflict where his predecessor, former President Joe Biden, had failed.
Meanwhile, Emmanuel Macron plans to boost France’s annual defence budget to €64 billion (US$74.6bn) by 2027 as he listed a wide array of threats to Europe. He warned, Europe's liberty is facing a "greater threat" than at any time since the end of World War Two. In a speech to the armed forces in Paris, he said "we are living in a pivotal moment" due to complex geopolitics. Macron called for France's defence spending to rise by €3.5bn (US$4.1bn) next year and then by a further €3bn in 2027. Referencing the threat from Russia, he denounced "imperialist policies" and "annexing powers". "To be free in this world, you must be feared. To be feared, you must be powerful," he said in the speech, which fell on the eve of Bastille Day. He also referenced the US bombing of Iran, fighting between India and Pakistan and what he called the "ups and downs in American support for Ukraine".
White House Opens New Front In Attack On Fed Chief Jerome Powell
Allies of the US president are scrutinizing renovations at the Federal Reserve’s headquarters in Washington, DC as possible grounds to remove Jerome Powell. The White House has accused Jerome Powell of “grossly” mismanaging an “ostentatious” refurbishment of the Federal Reserve’s headquarters, opening a new front in its attack against the US central bank. Russell Vought, director of the Office of Management and Budget, said in a post on X that the Fed chair had “grossly mismanaged the Fed”. Vought, a Trump ally, accused Powell of presiding over a renovation of its headquarters that was US$700mn over budget. He claimed the US$2.5bn refurbishment of Washington’s Marriner Eccles Building cost almost as much as the Palace of Versailles in current dollars.
Vought’s criticism marks a fresh tactic in the Trump administration’s battle with the bank and its chair. The president has frequently attacked Powell over the central bank’s refusal to cut interest rates, calling him “a stubborn mule” and “a numbskull” but Vought’s comments mark the first direct attack from a close ally of Trump. Powell has described media reports regarding the excesses of the rebuild as “inaccurate”.
Deutsche Bank strategists warned Powell’s dismissal may spark a selloff in the US dollar and Treasuries. George Saravelos said if Trump were to force Powell out, the subsequent period would probably see a drop in the trade-weighted dollar and a fixed-income selloff, with the greenback and bonds carrying a “persistent” risk premium. Saravelos said investors would likely interpret such an event as a direct affront to Fed independence, and the consequences would reverberate far beyond US borders, according to him.
Trump has made clear that his next pick for what he describes as “the best job in government” will be based less on knowhow, and more on kowtowing to the White House. “Whoever’s in there will lower rates,” the US president said in the Oval Office in late June. “If I think someone is going to keep rates where they are, I’m not going to put them in.”
But Fed insiders believe Trump is underestimating the challenges his nominee might face once they enter an institution with a long history of independence from government. “The memory of the 1970s is seared into the institutional framework of the Fed,” said Diane Swonk, chief economist at KPMG US. “Even the janitor there knows who the worst Fed chair in history was,” she added, a reference to Arthur Burns, who cut rates following pressure from Richard Nixon ahead of the 1972 presidential election, only for inflation to soar and growth to collapse after the oil price shock the following year. Paul Volcker, now regarded as one of the most effective chairs, had to raise interest rates to double digits to tame inflation, enduring public opprobrium as unemployment topped 10%.
Japan’s Core Machinery Orders Decline Less Than Expected
Japan’s core machinery orders fell 0.6% in May from the previous month on a seasonally adjusted basis, according to data released by the country’s Cabinet Office on Monday. The decline was significantly smaller than April’s sharp 9.1% drop and better than economists' expectations for a 1.5% fall. Core machinery orders by the domestic private sector, which exclude volatile items like ships and electric power, are regarded as a key but volatile gauge of capital expenditure and reflect business confidence in buying more machinery and equipment.
On a year-on-year basis, core orders grew 4.4%, beating the 3.4% rise forecasted. Meanwhile, the total value of machinery orders received by 280 manufacturers operating in Japan increased by 3.8% in May from the month before on a seasonally adjusted basis, government data showed.
Japan Industrial Output Revised Lower
Japan’s industrial production fell 0.1% month-over-month in May, defying flash estimates of a 0.5% increase and following a 1.1% decline in April. It marked the second consecutive monthly drop, driven mainly by steep declines in transport equipment excluding motor vehicles (-19.2% vs -4.1% in April), electronic parts and devices (-14.8% vs 5.1%), and information and communication electronics equipment (-5.4% vs 11.4%). On a year-on-year basis, industrial output contracted 2.4%, reversing a 0.5% rise in April and marking the first annual decline in five months.
China New Bank Loans Beat Expectations In June
Chinese banks issued Rmb 2.24 trillion (US$312.5bn) in new yuan loans in June, the highest in three months, up from Rmb 620 billion in May and well above expectations of Rmb 1.8 trillion. The figure also exceeded the Rmb 2.13 trillion recorded in June 2024, supported by a seasonal surge in lending and a pickup in government bond issuance. June typically sees strong credit expansion as banks accelerate lending to meet quarterly targets. This year, the government’s front-loaded bond sales further boosted overall financing activity. Total social financing, which is a broad gauge of credit and liquidity in the economy, rose by Rmb 4.2 trillion, up from Rmb 2.29 trillion in May and Rmb 3.3 trillion a year earlier, and well above forecasts of Rmb 3.65 trillion. Meanwhile, outstanding loan growth held steady at 7.1%, hovering at the lowest levels since 1998 but slightly exceeding expectations of 7%. M2 money supply growth also picked up, rising to 8.3% from 7.9% in May and ahead of forecasts of 8.1%.
Singapore Dodges Recession
Singapore’s economy grew at 1.4% in the second quarter of 2025, avoiding a technical recession as it reversed the 0.5% contraction recorded in the first three months of the year. On a year-over-year basis, the country’s economy expanded 4.3% in the second quarter of 2025, accelerating from 4.1% in the first three months and beating expectations. A Reuters poll of economists had forecasted 3.5% growth. GDP growth was led by the manufacturing sector, which expanded 5.5% year-over-year, up from 4.4% in the first quarter of 2025. The sector makes up about 17% of the country’s economy. The construction sector expanded 4.4% in the second quarter, a reversal from the 1.8% contraction in the first three months of the year.
Despite the GDP beat, Singapore’s Ministry of Trade and Industry said in its release that “there remains significant uncertainty and downside risks in the global economy in the second half of 2025 given the lack of clarity over the tariff policies of the US”. Back in April, MTI had downgraded the country’s GDP growth to 0%-2% for 2025, down from its previous forecast of 1%-3%. Singapore recorded a full-year GDP growth figure of 4.4% in 2024.
Song Seng Wun, economic advisor at CGS International, attributed the reversal in GDP growth to the pause on “reciprocal tariffs” till August 1, which were announced at the start of April. Shivaan Tandon, markets economist at Capital Economics, said he expects this boost to fade, and “Singapore’s export-oriented services sector will drop back and manufacturing activity will continue to struggle.” Besides the front-loading of exports, Singapore’s economy also benefited from the de-escalation in the US-China tariff war, falling interest rates and a construction boom, said Chua Hak Bin, economist at Maybank Investment Banking Group.
India’s Inflation Cools To More Than 6-Year Lows
India’s consumer inflation continued to ease in June, hitting a lower-than-expected 2.10%, government data showed on Monday. The consumer price index dropped for an eighth straight month in June. It was the lowest level since January 2019, down from 2.82% in May. Economists polled by Reuters had forecast June inflation at 2.5%. The headline inflation rate extended its slide after dropping to a more than six-year low in May as growth in food prices continued to decline. Food inflation came in at -1.06% in June, compared with 0.99% in May, the first annual decrease since early 2019. On a monthly basis, consumer prices rose 0.62% compared to May.
India’s wholesale prices unexpectedly fell by 0.13% y/y in June, missing forecasts of a 0.52% increase and reversing from 0.39% growth in May, marking the first annual decline in wholesale prices since October 2023. The decline was primarily driven by a drop in food prices, which fell for the first time since June 2023 (-0.26% vs 1.72% in May), weighed down by sharp decreases in onions (-33.49%), potatoes (-32.67%), and vegetables (-22.65%).
“Aided by a good weather outcome, we expect inflation to average about 2.5% over the next six months. A high base over the last three years and strong cereal production will help keep food inflation lower for longer,” HSBC said in a note on June 30. “A good monsoon will help contain inflation, boost real wages, and raise the purchasing power of informal sector consumers,” HSBC said.
New World Misses Target Date For $2bn Loan
Struggling Hong Kong developer New World missed a self-imposed target to complete an up to HK$15.6 billion (US$2bn) loan led by Deutsche Bank, according to people familiar with the matter, as challenges persist even after the firm closed a major refinancing deal last month. The latest deal hasn’t been completed yet, as some of New World’s existing financiers have expressed little interest in further increasing their exposure to the beleaguered developer, according to Bloomberg News sources. The loan is backed by Victoria Dockside, one of the company's most valuable properties, and the proceeds are to be used to repay debt, which could help take some financial pressure off the builder. New World set a July 11 deadline for lenders to finalize their commitments. However, in the syndicated loan market, it is common for such deadlines to be extended, and borrowers often have flexibility to finalize deals on a timeline that suits the progress of negotiations.
Jane Street Sets Aside $564mn As India Probe Continues
Jane Street has deposited 48.4 billion rupees (US$564mn) in an escrow account to comply with an order from India’s securities regulator, part of an ongoing probe into allegations of market manipulation by the US trading giant. While Indian authorities had previously indicated the deposit would allow Jane Street to return to local markets after a ban imposed on July 3, the regulator’s statement didn’t clarify whether the firm has a green light to resume trading. The Securities and Exchange Board of India has accused Jane Street of manipulative transactions involving local options and shares, allegations that the firm has denied. Bloomberg News reported a person familiar with the matter as saying Jane Street doesn't intend to immediately return to India's options market.
China Approves $35bn Synopsys Chip Software Deal
China’s antitrust regulator has conditionally approved a $35bn takeover by US tech company Synopsys of smaller rival Ansys, with its decision coming soon after the Trump administration quietly eased restrictions on exports of chip design software tools. Monday’s green light comes after China’s State Administration for Market Regulation (SAMR) paused the approval process in May. The US$35bn deal between the two American software groups was announced in January last year and had already been given the go-ahead by authorities in the US and Europe. It was in the final stage of SAMR’s approval process before it was held up. The U-turns demonstrate how trade negotiations affect policy decisions on a broad range of issues and that a new trade deal between the world’s two superpowers is beginning to take effect.
Taiwan’s Central Bank Warns Foreign Investors Over Capital Controls
Taiwan’s central bank has warned “a few foreign investors” against violating its capital controls as it seeks to contain volatility in its rapidly appreciating currency. In a statement to the Financial Times, the Central Bank of the Republic of China said it had “strengthened communication with a few foreign investors” and “asked them to self-regulate and make necessary improvements” after finding that foreign capital inflows were not being invested in domestic securities. It did not name the investors.
The warning comes as the central bank seeks to rein in the New Taiwan dollar’s sharp rally without being labelled as a currency manipulator by the US. The Taiwan dollar has strengthened more than 10% this year, threatening an economic model built around the country’s enormous trade surplus.
Asian Shares Mainly Lower
Asian shares edged lower Monday amid the tariff tensions, while Bitcoin surged to all-time highs. Japan’s Nikkei 225 lost 0.3% to close at 39,460. Meanwhile, South Korea’s Kospi index increased by 0.8% as South Korea’s Trade Minister Yeo Han-koo said Monday it may be possible to reach an “in-principle” trade deal with the US before the August 1 deadline. Australia’s S&P/ASX 200 benchmark ended the day 0.1% lower.
In India, the Sensex index dropped 0.3% to 82.253, hitting a fresh three-week low and extending losses for a fourth straight session. The declines came despite data showing consumer inflation in India slowed for the eighth straight month to a six-year low of 2.1% in June, reinforcing expectations of further easing by the Reserve Bank of India. The Indian rupee hovered around 85.7 per USD, near its lowest level in three weeks.
Japanese long-bonds extended a selloff on Monday. Yields on Japan's bonds from 10-year to 40-year spiked, with the 40-year yield leading the way, jumping 17 bps, amid signs of thin liquidity and increasing worries about higher government spending. 30-year yields are approaching May’s record high of 3.185%. The 20-year yield touched the highest since 2000. Pressure in the market is being heightened by concern that the outcome of a July 20 election might lead to more government spending. "Government spending is huge," said Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors Pte, adding that rising JGB yields are also a worry for stocks, as inflation is up and wages are up. Miki Den, senior rates strategist at SMBC Nikko Securities, said, “with few buyers expected before the election and ongoing selling flows, super-long-term bonds are experiencing large price fluctuations and are being sold off.”
Chinese Stocks Outperform
Chinese stocks outperformed the malaise across most of the rest of the Asia-Pacific region. The mainland’s CSI 300 index was up 0.1% at 4,018. Hong Kong’s Hang Seng Index added 64 points, or 0.3%, to close at 24,203. The Hang Seng Tech Index jumped 0.7% higher. Adding to the optimism, new yuan loans accelerated more than expected in June, lifted by a seasonal surge in loan issuance and robust government bond sales. However, advances were capped by caution ahead of China’s Q2 GDP data due today.
The Hang Seng Biotech index soared 2.2% Monday. The index, which reflects the performance of the 50 largest such companies listed in Hong Kong, has returned almost 65% so far this year, well ahead of the 20.7% return on the Hang Seng index. Chinese biotech shares are surging this year on growing optimism over innovative cancer treatments being licensed to western pharmaceutical companies. The rapid pace of innovation in Chinese pharmaceuticals and their significantly lower research costs have prompted investors to reconsider the sector after an anti-corruption campaign in China’s medical sector in 2021 and regulatory changes made drug sales less profitable. There is particular excitement around new variations of PD-1 immunotherapy treatments under development by some Chinese biotechs. New therapies known as PD-1 VEGF have recorded strong clinical results showing they stimulate an enhanced immune response to cancer. “The reason people are crazy about PD-1 is that it is supposed to treat almost every type of cancer indication,” said Cui Cui, head of Asia healthcare research at Jefferies.
European Stocks Slip After Donald Trump’s Tariff Threat
Trump’s weekend threat to impose 30% tariffs on the European Union and Mexico, following a series of escalated trade measures against multiple partners last week, pushed European markets lower Monday. The pan-European Stoxx 600 closed 0.1% lower. Tariff-sensitive autos stocks led losses, with the Stoxx Europe Automobiles index shedding 0.9%. London’s FTSE 100 bucked the regional trend to close 0.6% firmer at a record high. A sharp drop in sterling against the US dollar and euro on Monday helped boost some of the index’s internationally oriented firms.
Shares of Volvo Cars tumbled 4.4% in late trade after the Swedish automaker said it would face a one-off, non-cash impairment charge of 11.4 billion Swedish kronor (US$1.19bn) in the second quarter related to two models. The firm said Monday that its upcoming Volvo EX90 electric SUV will have a “reduced lifecycle profitability” due to previous launch delays and additional development costs. Meanwhile, it is not currently able to sell its new all-electric Volvo ES90 saloon profitably in the US due to import tariffs.
EU trade ministers met in Brussels yesterday to discuss their response to the US president’s threat which, he said, will come into force on August 1. Analysts say a much sharper sell-off is likely if 30% levies come into force. “The market will generally think this is mostly a negotiation tactic,” noted Deutsche Bank strategist Jim Reid. “However, at some stage someone’s bluff could be called. If huge tariffs do get imposed on August 1, in thin holiday markets, we could get a sizable market reaction.”
The Bank of England is prepared to make larger interest rate cuts if the job market shows signs of slowing down, its governor said. In an interview with the Times, Andrew Bailey said "I really do believe the path is downward" on interest rates. Interest rates currently stand at 4.25% and will be reviewed at the Bank's next meeting on 7 August, when many economists expect the rate will be cut.
In Germany on Monday, long-term borrowing costs were on course to hit their highest since 2011 amid concern over tariffs and extra government spending. The rout in Japan’s and Germany’s debt market followed a tumble in US Treasuries on Friday as worries about inflation re-emerged. The moves are reemphasizing concerns that bond markets are fragile heading into critical US inflation data later this week.
US Stocks Await Inflation Data & Earnings
US stocks posted small gains Monday, with investors awaiting US inflation data later today to see if tariffs have prompted companies to start raising prices. The second quarter earnings season will also kick off today. The core consumer price index is seen accelerating on an annual basis for the first time since January, to 2.9%, according to a Bloomberg survey of economists.
On Wall Street Monday, the S&P 500 added 0.1% to close at 6,269. The Nasdaq Composite rose 0.3% to settle at a record high of 20,640. The Dow gained 88 points, or 0.2%, ending at 44,460.
In just three months, US stocks have swung from a dramatic April selloff to new highs. Now, traders are about to see if Corporate America’s report cards justify the optimism priced into equity markets. As the second quarter earnings season kicks off, six of the largest US lenders are forecast to show increases in trading revenue. Wall Street is bracing for the weakest earnings season since mid-2023. Analysts see second-quarter profit growth of 2.5% for companies in the S&P 500, Bloomberg Intelligence data show. The full-year growth forecast for the index has dropped to 7.1% from 9.4% in early April.
Max Kettner, Chief multi-asset strategist, HSBC said, “we absolutely believe the recent bullish price action in risk assets makes sense. Bear in mind this is no longer just equities but spreading across virtually all risk assets. So if anything, we’d argue investors are once again under-exposed and continue to fight the rally.”
Crypto-related stocks rose Monday as Bitcoin traded at a record high. Circle Internet (+9.3%), MicroStrategy (+3.8%), Coinbase (+1.8%), Robinhood (+1.7%), Hut 8 (+1.3%), and Cipher Mining (+2.7%), all benefited.
US Treasuries Lower
Concern over Donald Trump’s intensifying trade war sent US Treasuries lower. The yield on the US 10-year Treasury note rose 3 bps to 4.44% on Monday, its highest level in nearly a month. The two-year yield was up 1 bp at 3.90%.
Bond investors were all but certain that the Fed would resume cutting interest rates by September, but that confidence has been wavering. A batch of strong jobs figures in early July led traders to rule out a rate cut at the Fed’s gathering this month. They also now see about a 70% chance that officials ease at the central bank’s September meeting, whereas a reduction by then was viewed as a certainty as recently as late June. Today’s CPI figures “could set the tone for the direction of the Fed and risk sentiment for the second half of the year,” said Zachary Griffiths, head of investment-grade and macroeconomic strategy at CreditSights. Tracy Chen, a portfolio manager at Brandywine Global Investment Management, said, "I don't see how the Fed can cut in September" due to the resilience of the job market and the frothy risk asset market.
US Dollar Steady
The US dollar index held steady around 98 on Monday, maintaining its recent gains as investors assessed the latest developments in global trade. It ended the day 0.2% firmer at 98.09. However, for 2025 so far, the dollar is down almost 10% against a basket of six peer currencies.
HSBC strategists led by Paul Mackel wrote in a research note, “it was not long ago that a strong USD bubble was evident, but the opposite is occurring: an ‘anti bubble’ of sorts,” the strategists wrote. “‘Bubbly-like’ characteristics exist, which is a warning sign that a USD bottom may not be far away.” Like all bubbles, it will eventually pop, according to the HSBC strategists.
The Japanese yen was down 0.2% at ¥147.73 per dollar on Monday, as investors responded to renewed global trade concerns.
The offshore yuan traded around Rmb 7.17 per dollar on Monday, adding to a three-session winning streak last week, supported by better-than-expected trade data. China’s trade surplus widened to US$1.14 trillion in June, beating forecasts as exports rose 5.8% year-on-year, driven by front-loaded shipments ahead of August tariff deadlines.
Gold Pares Gains After Touching 3-Week Highs
Gold prices trimmed early gains to trade 0.3% lower at $3,344 an ounce on Monday, as persistent trade uncertainty continued to weigh on market sentiment. Meanwhile, Silver rallied above $39 an ounce, riding bullion’s coattails to an almost 14-year high before paring gains as investors sought alternatives to a near-record gold price.
Oil Falls Amid Sanction Disappointment
Brent crude oil futures fell 1.7% to $69.14 per barrel on Monday after Donald Trump announced new sanctions on Russian oil, disappointing markets that had anticipated tougher action. While Trump did warn of potential 100% secondary tariffs on Russia if a ceasefire isn’t reached within 50 days, the absence of immediate measures weighed on prices.
Bitcoin Hits New Record High
Bitcoin breached $120,000 for the first time, with investor optimism increasing almost daily. The token rose on the back of anticipation for what a Congressional committee dubbed “Crypto Week,” where lawmakers in the US Congress are expected to debate and possibly vote on key cryptocurrency legislation.
With other risk assets such as stocks back around record highs, Bitcoin has also resumed its push higher. According to George Mandres, a senior trader at XBTO Trading LLC, this shift signals a maturing perspective on Bitcoin as a macro hedge and a structurally scarce store of value. Rachael Lucas, a crypto analyst at BTC Markets, said the real test for Bitcoin is $125,000, and that the uptrend has fuel driven by strong demand from exchange traded funds.
The crypto market bellwether rose as much as 4.4% Monday to $123,194 before ending the New York trading session at $120,100 and is now up over 28% year-to-date. Bitcoin more than doubled last year. US policy developments such as fiscal expansion and expectations of further monetary easing have created a backdrop that is favourable for Bitcoin.
Peter Lewis’ Money Talk Podcast
On Tuesday’s “Peter Lewis’ Money Talk” podcast, I’ll be joined by Mark Michelson, Chairman of the Asia CEO Forum at IMA Asia, Christopher Lee, partner at Farron, Augustine & Alexander Investments, and in Washington D.C., our US Economics Correspondent, Writer & Broadcaster, Barry Wood.
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 60 million customers across 10 countries. You can find out more about them by going to their website www.surfin.sg
