PETER’S BUSINESS & FINANCE BRIEFING – Thursday 26 June 2025, 06:00 Hong Kong
● Trump refutes leaked intelligence on Iran’s nuclear programme ● Premier Li says China building a “mega-sized consumer powerhouse” ● Hong Kong intervenes to defend FX peg as local currency drops
Thursday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 24,339 -136 points -0.6%
Nikkei 225 (Japan) Projected Open: 39,000 +58 points +0.1%
Quick Summary - 4 Things To Know Before Asian Markets Open
Donald Trump insists nuclear sites in Iran were "completely destroyed" by US military strikes, despite an intelligence evaluation casting doubt on their success. Details of the initial damage assessment from the Pentagon's Defense Intelligence Agency were leaked to US media. Sources familiar with the assessment say Iran's centrifuges are largely "intact" and the impact was limited to aboveground structures. The anonymous sources told US media it is estimated the attack only set Iran back "a few months, tops". Meanwhile, a ceasefire between Israel and Iran seems to be holding, with both nations acknowledging it is in place.
Premier Li Qiang told the World Economic Forum’s annual meeting in Tianjin, also known as “Summer Davos,” that China would “open its doors still wider to the world” as he warned of the risk of “fragmentation” of global supply chains amid trade tensions. Li, Beijing’s second-highest ranking official, said China would make its technological advances available to other countries as he outlined a transition from a manufacturing power to a “mega-consumer market”.
The Hong Kong Monetary Authority bought the local currency for the first time since 2023 to defend the peg against the US dollar, purchasing HK$9.42 billion ($1.2bn) of local currency. In addition to pushing the currency back into its permitted trading range, the move will also make bearish bets more costly. It does this by draining liquidity from the financial system and driving up borrowing costs.
Beijing vowed to respond to Taiwan’s “technological blockades” after it blacklisted Chinese companies including Huawei Technologies, limiting their ability to develop cutting-edge artificial intelligence. “We will take forceful measures to resolutely safeguard the normal order of cross-strait economic and trade exchange,” Taiwan Affairs Office spokeswoman Zhu Fenglian said Wednesday at a regular briefing in Beijing. She was responding to a question about Taiwan’ recent curbs on Chinese companies, and didn’t elaborate on how Beijing would respond.
Trump Refutes Leaked Intelligence On Iran’s Nuclear Programme
A debate over the American airstrikes on Iran is escalating after President Donald Trump disputed an intelligence report that found the attack he ordered had only a limited impact on the Islamic Republic’s nuclear program, even though the assessment came from the Pentagon. Donald Trump insists nuclear sites in Iran were "completely destroyed" by US military strikes, despite the intelligence evaluation casting doubt on their success. Details of the initial damage assessment from the Pentagon's Defense Intelligence Agency were leaked to US media. Trump's special envoy to the Middle East, Steve Witkoff, called the leak "treasonous." Meanwhile, a ceasefire between Israel and Iran seems to be holding, with both nations acknowledging it is in place. President Trump said yesterday that he would speak with Iran “next week,” as the cease-fire between it and Israel entered a second day. It was unclear what format the discussions would take or if they would lead to limits on Iran’s nuclear program.
An early Pentagon intelligence assessment of America's attack on Iran on Saturday has cast doubt on the administration's claims that the nuclear programme was "obliterated". The US struck three nuclear facilities in Iran - Fordo, Natanz and Isfahan - with "bunker buster" bombs capable of penetrating 18m of concrete or 61m of earth before exploding. But sources familiar with the assessment say Iran's centrifuges are largely "intact" and the impact was limited to aboveground structures. The anonymous sources told US media it is estimated the attack only set Iran back "a few months, tops", and that any resumption of its nuclear programme may be based on how long it takes the country to dig out and make repairs. Sources also confirmed to US media that some of Iran's enriched uranium stockpile was moved before the strikes, according to the intelligence assessment.
In an interview with the BBC, US Congressman Brad Sherman, a Democrat, said Iran still retains their stockpile which would be roughly "enough for nine nuclear weapons". He added that nothing from the White House suggests that the US has eliminated the centrifuges that are vital for uranium enrichment.
Posting on Truth Social, Trump said CNN and the New York Times, which first reported the intelligence findings on Tuesday, “have teamed up in an attempt to demean one of the most successful military strikes in history.” Witkoff told Fox News, "it's outrageous, it's treasonous and it has to be investigated. Whoever's responsible for it should be held accountable.” He added that he has read all the damage assessment reports, saying there's "no doubt" that all three nuclear sites the US hit were "obliterated". Trump echoed Witkoff's comments by adding, “there's no doubt that it was OBLITERATED. So, the reporting out there that in some way suggests that we did not achieve the objective is just completely preposterous!”
Meanwhile, the ceasefire between Israel and Iran appears to be holding, with both acknowledging it is in place. It follows an angry intervention by US Trump who earlier accused both sides of violating the truce. The Israeli and the Iranian governments both claimed victory in their recent 12-day conflict. Donald Trump said Wednesday he doesn't think "they'll be going back at each other". However, many analysts say the ceasefire is more likely to mark a pause in hostilities, rather than the definitive new start that Trump is searching for.
Vance Outlines ‘Trump Doctrine’ Of Foreign Policy
Vice President JD Vance outlined what he called the “Trump doctrine” in a speech praising the president’s foreign policy at a Republican Party event in Ohio, describing a three-step approach that relies on diplomacy backed by “overwhelming” military power. “What I call the Trump doctrine is quite simple: No. 1, you articulate a clear American interest, and that’s in this case that Iran can’t have a nuclear weapon; No. 2, you try to aggressively diplomatically solve that problem; and No. 3, when you can’t solve it diplomatically, you use overwhelming military power to solve it, and then you get the hell out of there before it ever becomes a protracted conflict,” he said.
US Trade Deals With Asian Partners Hard To Come By
With only two weeks to go before Trump’s self-imposed deadline to reach deals with major US trading partners, progress appears to have stalled. The US may not announce any trade deals with foreign countries until Republicans’ massive tax and spending legislation passes Congress, a senior White House official said Tuesday. “We know that we’re very close to a few countries and are waiting to announce after we get the Big Beautiful Bill closed,” National Economic Council Director Kevin Hassett said on Fox Business, referring to Trump’s tax bill.
Hassett predicted a “sequence” of trade deals around July 4, the Republicans' aspirational deadline for passing the tax bill. But many lawmakers have suggested final passage will take longer. The administration has separately set a self-imposed deadline of July 9 to cut deals to avoid Trump's so-called "reciprocal" tariffs, but without inked deals, that deadline could also be pushed back.
Japanese negotiator Ryosei Akazawa is reportedly planning his seventh trip to the US as early as today to push for the removal of tariffs. Talks will reportedly focus on US duties affecting Japanese autos, the country’s key export sector. The 25% US tariff on cars and auto parts is expected to hit Japan's auto industry hard, with major automakers bracing for a collective hit of over US$19 billion this fiscal year. The tariffs threaten to derail Japan's economic recovery, with small and mid-size suppliers feeling the pain and considering layoffs, and the country's central bank warning about disruptions to supply chains and negative impacts on wages. The Japanese government is scrambling to contain the fallout, with Prime Minister Shigeru Ishiba seeking to defend Japan's economic interests and win concessions from the US, while automakers consider shifting production to the US and diversifying their businesses to survive.
Meanwhile, India and the US are trying to reach a trade deal before July 9, when higher US tariffs are set to take effect. Agriculture is one of the toughest parts of the negotiations, with the US demanding India open up its market to genetically modified crops, which India refuses to accept. India is pushing for the US to exempt it from existing sectoral tariffs on steel and automobiles, and reciprocal tariffs, and wants a fair and mutually beneficial deal.
South Korea's Trade Minister Yeo Han-koo reiterated the country's call to be exempted from US tariffs affecting key industries such as cars and steel after meeting with US counterparts. The two sides reaffirmed their commitment to reaching a mutually beneficial agreement, with Yeo pushing for discussions to move beyond tariffs to include broader cooperation in manufacturing and advanced technologies. South Korea's export-reliant economy has been hit by US tariffs, with the central bank slashing 2025 GDP growth forecast to 0.8% from 1.5%, and Yeo conveyed industry concerns about recent US export control policy developments.
Premier Li: China Is Building A ‘Mega-Sized Consumer Powerhouse’
The World Economic Forum’s annual meeting in Tianjin, also known as “Summer Davos,” has attracted global business executives and world leaders. Chinese Premier Li Qiang addressed the conference during the opening plenary on Wednesday and met with participants. Singaporean Prime Minister Lawrence Wong and Vietnamese Prime Minister Pham Minh Chinh are also scheduled to speak at the three-day event.
Premier Li Qiang said his country would “open its doors still wider to the world” as he warned of the risk of “fragmentation” of global supply chains amid trade tensions. Li, Beijing’s second-highest ranking official, said China would make its technological advances available to other countries as he outlined a transition from a manufacturing power to a “mega-consumer market”. “Economic globalisation will not be reversed; it will only carve out a new path,” Li told the Forum on Wednesday. “We will further integrate and connect with the global market.” “We will not and shall not return to closed off and isolated islands,” he added.
“Some countries and regions have interfered in market activity in the name of de-risking,” Li said, referring to a push by western governments to insulate their economies from China and echoing comments he made at the same forum two years ago, the first following Covid-19 pandemic closures. The world's “economic and trade system is becoming more diverse”, he added on Wednesday. The “global south is rapidly gaining strength”.
Li also said that “China’s innovation is open and open source”. The country’s top artificial intelligence groups DeepSeek and Alibaba have made their large language models available to developers around the world. “We are willing to share indigenous technologies,” Li added.
Li said it was “normal for countries to have differences and disagreements in their economic and trade relations”. But he added that China was “ready to make persistent efforts with all countries to build maximum consensus”. “The global economy is deeply integrated; no country can sustain its prosperity in isolation from the world,” he said.
He added that Beijing is confident in, and capable of, maintaining rapid economic growth. "We are also stepping up our efforts to implement the strategy of expanding domestic demand promoting China's growth into a major consumption powerhouse," he said, stressing that China is moving towards becoming a high-income country.
China Could See Over 100 Deepseeks
China could generate over 100 DeepSeek-like breakthroughs in artificial intelligence in the next 18 months, a development that “will fundamentally change” the Chinese economy, according to Zhu Min, a former deputy governor of the People’s Bank of China. Speaking at the World Economic Forum in Tianjin, Zhu said the new software products “will fundamentally change the nature and the tech nature of the whole Chinese economy.” Zhu, who also served as the deputy managing director at the International Monetary Fund, sees a transformation made possible by harnessing China’s pool of engineers, massive consumer base and supportive government policies.
The development of AI in China is expected to intensify competition with the US in cutting-edge technologies, despite ongoing trade tensions and economic challenges. The US sees China as a key rival in the field of AI, especially after DeepSeek shocked the global tech industry in January with its low-cost but powerful model. China's GDP growth is expected to slow to 4.5% this year, but the country's tech sector is seen as a bright spot, with high-tech contributions to GDP expected to exceed 18% in 2026.
China Is Working To Undermine UK Democracy, UK Government Says
A long-awaited UK government report warned that Beijing has been increasing efforts to spy on Britain and to undermine its democracy and economic security. However, the study also recommended increasing trading links with China to boost economic growth.
The report, published on Tuesday, said the UK should “seek a trade and investment relationship” that “supports secure and resilient growth”. However, it simultaneously warned that “instances of China’s espionage, interference in our democracy and the undermining of our economic security have increased in recent years”.
The military risks facing the UK were also laid out in the National Security Strategy, also published on Tuesday, which raised the prospect of a direct attack on British soil. “Some adversaries are laying the foundations for future conflict, positioning themselves to move quickly to cause major disruption to our energy and/or supply chains, to deter us from standing up to their aggression,” it said. “For the first time in many years, we have to actively prepare for the possibility of the UK homeland coming under direct threat, potentially in a wartime scenario.”
Foreign secretary David Lammy said that China represented the UK’s “most complex bilateral relationship” but said it needed a “consistent” relationship with the country that is its third-largest trading partner. “China’s power is an inescapable fact,” Lammy said in a statement to MPs. “Not engaging with China is therefore no choice at all.”
Chinese Firms Boost Exports To UK
Meanwhile, Chinese firms are boosting exports to the UK to levels not seen in years. Official data from both nations point to a pick-up in the value of Chinese exports to the UK after Donald Trump slapped hefty duties on products from the world’s second-largest economy before recently reducing them. Exports of small parcels and electronics have jumped in a sign of possible rerouting to avoid the US tariffs. Exports from China of small packages to the UK were up 66% in May from a year earlier, hitting a record of almost US$2 billion in the first five months of this year. Goods imports from China climbed to £6 billion (US$8.2bn) in April, up 11% from a year earlier and the highest in more than two years, according to seasonally adjusted figures from the UK’s Office for National Statistics. Non-seasonally adjusted data from Beijing also suggests exports sent to the UK in May were the highest since mid-2022 and running above levels normally seen for this time of year.
Another area where trade is realigning is in electronics, with Chinese exports of smartphones to the UK rising 26% in the first five months of this year, while the value of shipments to the US fell 18%. Shipments of computers to the UK increased 11% while slipping 25% to the US over the same period.
The surge in Chinese exports to the UK could have important consequences for inflation, potentially putting downward pressure on core goods. The shift in trade could bring both benefits (lower inflation) and drawbacks (undercutting domestic manufacturers on pricing), with UK officials monitoring for trade diversion effects and potential dumping on the market.
China Vows ‘Forceful Measures’ After Taiwan’s Huawei Export Curbs
Beijing vowed to respond to Taiwan’s “technological blockades” after it blacklisted Chinese companies including Huawei Technologies, limiting their ability to develop cutting-edge artificial intelligence. “We will take forceful measures to resolutely safeguard the normal order of cross-strait economic and trade exchange,” Taiwan Affairs Office spokeswoman Zhu Fenglian said Wednesday at a regular briefing in Beijing. She was responding to a question about Taiwan’ recent curbs on Chinese companies, and didn’t elaborate on how Beijing would respond.
Taiwan added Huawei and Semiconductor Manufacturing International Corp. to its entity list, barring island firms from doing business with them without a license. Beijing condemned Taiwan's decision as "despicable" and claimed it displayed President Lai Ching-te's loyalty to the US government. The new restrictions are likely to, at least partially, cut off Huawei and SMIC’s access to Taiwan’s plant construction technologies, materials and equipment essential to build AI chips, like those made by Taiwan Semiconductor Manufacturing Co. for the likes of Nvidia.
US Think-Tank: China Has Influence Over Ports Across Latin America
Chinese companies have built or operate 31 active ports in Latin America and the Caribbean, many more than previously thought, according to research by a Washington-based think-tank. The US has grown increasingly concerned about the implications for its national security of Beijing’s leverage over critical infrastructure in Latin America as Chinese groups have bought up power companies, mines, telecoms networks and ports over the past two decades.
Research by the Center for Strategic and International Studies (CSIS), shared with the Financial Times in advance of publication, found Chinese involvement in more than twice as many ports across the region from Mexico to Chile as had previously been reported by US researchers. The CSIS count included seven active ports run by Hong Kong’s CK Hutchison. It found four more port projects involving Chinese companies had been cancelled and two others were currently inactive.
Donald Trump’s administration has been particularly vocal about the risks it says are posed by Chinese control over ports at each end of the Panama Canal. CK Hutchison subsequently agreed to sell its global port operations to subsidiaries of US giant BlackRock and the Geneva-based Mediterranean Shipping Company. But CSIS said its research found ports in Jamaica and Mexico represented a bigger risk to US national security, when scored on metrics including the amount of US trade passing through them, US naval activity and proximity to American military facilities or strategic chokepoints.
Australia Calls To Add YouTube To Under-16s Social Media Ban
Australia is reviewing whether to expand its groundbreaking social media ban for under-16s to include YouTube, after the country’s internet safety regulator said the Google-owned video sharing website was where children suffered the most online harm. Australia passed legislation late last year aimed at preventing anyone under the age of 16 from registering to join social media platforms including Instagram, X, Facebook and Snapchat. The law puts the onus on technology companies to enforce the age limit or face significant fines. YouTube was exempt from the ban, which will come into effect by December, on the basis of its wide-ranging role in formal education as well as children’s entertainment, hosting videos from performers such as popular Australian musical act The Wiggles.
Julie Inman Grant, Australia’s eSafety Commissioner, who is charged with enforcing the ban, wrote to the government this month to call for YouTube to be included, after she submitted new research about the harmful effects of social media on children. Speaking in Canberra on Tuesday, Inman Grant said that YouTube was the most frequently cited platform in the regulator’s research with almost 40% of the 2,600 children aged 10-16 surveyed encountering harmful content on the site.
Australia’s Inflation Rate Hits 6-Month Low
Australia’s monthly inflation rate came in at 2.1% in May, hitting its lowest level since October 2024. This was below the 2.3% expected by economists polled by Reuters, and also down from the 2.4% in April. Data from the Australian Bureau of Statistics revealed that food and housing inflation also softened from the month before, while transport prices continued to decline.
BoJ Maintains Cautious Stance Amid Inflation & Market Risks
The Bank of Japan emphasized that any future rate hikes will depend on whether its economic and price outlook materializes, the summary of opinions from its June Monetary Policy Meeting showed. It added that while inflation has slightly exceeded expectations, economic growth is expected to slow, and CPI improvement may be sluggish. Given risks from global trade tensions and geopolitical instability, board members see it appropriate to keep the current accommodative stance. It also noted that rice prices have nearly doubled from a year ago, pushing up CPI and affecting inflation expectations, warranting close monitoring. The BoJ aims to gradually reduce its Japanese government bond purchases to allow long-term interest rates to be market-driven but warns that moving too quickly could destabilize markets.
BoJ Tamura Urges Timely Rate Hikes As Inflation May Hit Target
Bank of Japan board member Naoki Tamura said the central bank should consider further interest rate hikes without delay, as inflation may reach its 2% target sooner than expected. “There is a good possibility that the price stability target will be achieved earlier than expected,” he told business leaders in Fukushima. Tamura emphasized that policy should be adjusted “in a timely and appropriate manner without haste or delay,” based on data and developments in economic activity and prices. He also warned that inflation could rise faster than BoJ forecasts, requiring decisive action despite global uncertainties. Known for his hawkish stance, Tamura dissented at the board’s June 16–17 meeting, opposing the plan to slow the pace of bond purchase reductions.
Japan Leading Index Revised Upward
Japan’s leading economic index, which reflects the outlook for the coming months based on indicators such as job offers and consumer sentiment, was revised up to 104.2 in April from a preliminary estimate of 103.4. However, the latest reading was down from a final 107.6 in March, marking the lowest level since August 2020, as annual household spending fell in April, reversing the growth seen in March. Total employment dropped to a six-month low in April, although the unemployment rate remained steady at 2.5%. On the other hand, consumer sentiment improved slightly, rising to 32.8 in May from April’s more than two-year low of 31.2.
Bank of Thailand Holds Rates Steady
The Bank of Thailand kept its benchmark interest rate unchanged at 1.75% during its June monetary policy meeting yesterday, as widely expected. The Monetary Policy Committee voted 6-1 in favour of maintaining the current rate, which remains at its lowest level since April 2023. Headline inflation is projected to stay at just 0.5% in 2025 and 0.8% in 2026, while core inflation is also expected to remain low, at 1% for 2025 and 0.9% in 2026. The Committee noted that the economic outlook remains highly uncertain but reaffirmed its readiness to adjust monetary policy as needed in response to evolving economic conditions, risks, and inflation dynamics.
Consumer prices in Thailand fell by 0.57% in May 2025, marking the second consecutive month of deflation. Meanwhile, the Thai economy is forecast to grow by 2.3% in 2025 and 1.7% in 2026. The economy expanded by 3.1% year-on-year in the first quarter of 2025, exceeding expectations of 2.9%, but easing from a revised 3.3% growth in the previous quarter.
US Home Sales Fall The Most In 3 Years
Data released Wednesday showed new US home sales came in at the slowest pace since October 2024. Sales of new single-family homes in the United States tumbled by 13.7% from the previous month, erasing the downwardly revised 9.6% increase in April. The result was sharply below expectations and was the largest decline since June 2022, as higher mortgage rates and uncertain economic conditions drove households to wait before buying homes.
Powell Maintains Cautious Tone On Rates During Senate Testimony
Federal Reserve Chair Jerome Powell in his second day of Capitol Hill testimony stuck to his cautious approach to tariffs and inflation, saying there will be room for rate cuts if the impact is temporary. In an appearance before the Senate banking committee, Powell said the central bank is taking a more cautious approach to the effects of President Trump’s tariff increases than it did in 2019 because recent increases in tariff rates are much larger and because the economy is coming off a period of much higher inflation. As he did during his testimony Tuesday before the House Financial Services Committee, Powell would not put a timetable on when he thinks further interest rate cuts will be possible, despite heavy pressure from Donald Trump to get the Fed to cut rates. The Fed cut rates three times in 2019 to cushion the economy against the risks of a sharper slowdown as a trade war with China hurt business sentiment. Inflation was running below the Fed’s 2% target at that time.
Earlier in the day, Trump called Powell “terrible” in a talk with reporters, and said he has three or four candidates in mind as a replacement. “I know within three or four people who all I’m going to pick,” Trump said during a press conference at the NATO summit in The Hague. “He goes out pretty soon, fortunately, because I think he’s terrible.” Powell’s term as Fed chair doesn’t end until 2026. Trump didn’t say who he’s considering for the job.
BIS Warns On Stablecoins
A tokenized unified ledger incorporating central bank money, commercial bank deposits and government bonds will lay the foundations of a tokenized monetary and financial system based on the time-tested principles of sound money, the Bank for International Settlements (BIS) said Tuesday, as it called on central banks and public authorities to pave the way for this next phase. Tokenization, the digital representation of assets on programmable platforms, integrates messaging, reconciliation and settlement into a single seamless operation, and can transform cross-border payments and securities markets, ushering in a new era for the financial system. In its Annual Economic 2025, the BIS encourages building on the principles of the unified ledger by laying out a more detailed blueprint for how this concept can combine the "trilogy" of tokenized central bank reserves, tokenized commercial bank money and tokenized government bonds, while maintaining the core elements of a sound monetary system based on trust in central bank money. The BIS said, “tokenization can enhance efficiency and open new possibilities in cross-border payments, securities markets and beyond, while maintaining the key principles of sound money: singleness, elasticity and integrity.”
However, the BIS warned Stablecoins as a form of sound money fall short, and without regulation pose a risk to financial stability and monetary sovereignty. Stablecoins are a type of cryptocurrency designed to maintain a constant value, usually a 1:1 dollar peg, backed by real-world assets such as US Treasuries or gold. Dollar-pegged coins currently account for 99% of the market, which is estimated to have over US$260 billion worth of coins in circulation. The BIS said in its report, “while stablecoins may eventually play a subsidiary role in the hinterland of the financial system if adequately regulated, they do not deliver singleness of money (acceptance for payment at par), elasticity (timely discharge of obligations, preventing gridlock) and integrity (safeguarding against financial crime). Therefore, besides acting as a gateway to the crypto ecosystem, their future role is unclear.”
Asia - Pacific Markets Firmer
Stocks in the Asia-Pacific region rose on Wednesday following the easing of Middle East tensions which helped push up US stocks overnight. The Nasdaq 100 climbed 1.5% to notch its first record since February. And there was good news on the oil front too, with Brent crude plunging almost 15% over two sessions. US Treasury yields fell on balanced comments from Federal Reserve Chairman Jerome Powell about prospects for interest rate cuts.
Japan’s benchmark Nikkei 225 rose 0.4% to 38,942. South Korea’s Kospi climbed 0.2%. Australia’s S&P/ASX 200 was flat.
In Mumbai, the BSE Sensex rose 0.9% to a nine-month high of 82,756. Indian billionaire Gautam Adani is pressing ahead with major investment plans despite the threat from US criminal charges, telling shareholders yesterday that his conglomerate’s governance met global standards. The Adani Group chair announced capital spending of US$15bn to US$20bn a year for the next five years, at the infrastructure-focused company’s annual meeting. Shares of Adani Enterprises added 0.9%.
Hong Kong Stocks Hit 3-Month High
Stocks in Hong Kong rose for a fourth day, amid a slide in global oil prices. The Hang Seng ended the day 298 points higher, or 1.2%, at a three-month high of 24,477. The Hang Seng Tech Index jumped 1.2%. On the mainland, the CSI 300 climbed 1.4% to 3,960.
Shares of gaming firms NetEase (+0.7%) and Tencent (+0.6%) rose Wednesday after China’s gaming regulator approved 158 publishing licenses in June, the largest number this year.
European Stocks Decline But Defence Outperforms
European stocks declined across the board Wednesday, although a rally in defence stocks helped limit losses. The Stoxx Europe 600 index fell 0.7%. Regionally, the UK’s FTSE 100 was lower by 0.5%.
European defence stocks outperformed, with many names expected to be big beneficiaries of the NATO deal that will see allies more than double their defence spending target from 2% of GDP to 5% by 2035. The regional Stoxx Aerospace and Defense index was 1.3% higher. Year-to-date, the index has gained close to 50%.
Shares of British defence contractor Babcock surged 11.5% after the company announced an unexpected share buyback program and raised its medium-term growth forecast. Chief Executive David Lockwood said, “I think it’s clearly a new era for defence if you look at what’s going on at NATO.” The stock is up more than 115% over the past year.
US Stocks Mixed
On Wall Street Wednesday, US stocks closed mixed but hung near record highs. The S&P 500 was unchanged at 6,092. The Nasdaq Composite edged up 0.3% to 19,974. Both indices are about 1% from their all-time highs. The Dow slipped 107 points, or 0.3%, settling at 42,982. Week to date, the S&P 500 is up more than 2% after a tamer-than-expected Iranian response to US attacks over the weekend. Equities were boosted as investors breathed a sigh of relief that the conflict wouldn’t disrupt global crude supply. At one point in April, the S&P 500 was more than 20% below its record high with investors fearing rising tariffs from the US would tip the global economy into a recession. However, labour and inflation data has held up despite those concerns.
Shares of Nvidia jumped 4.3% to close at a record high as the AI chipmaker once again became the world’s most valuable company. The stock is up about 14% in June after jumping 24% last month and finished at an all-time high for the first time since January. Investors have moved back into the company as they gain confidence that China export controls won’t dampen the company’s prospects in AI. Nvidia CEO Jensen Huang said in May that the “US$50 billion China market is effectively closed to US industry.”
Treasury Yields Near 7-Week Low
The yield on the 10-year US Treasury bond fell 1 bp to 4.29% on Wednesday, remaining around seven-week lows, as markets assessed the Fed's policy outlook. Jerome Powell maintained his cautious rhetoric on the second day of testimony before Congress, stressing that the central bank requires less economic uncertainty before delivering rate cuts, but hinting that it may be appropriate to loosen policy if tariffs are not as aggressive as feared in early April. The yield on the policy sensitive 2 -year note fell 4 bps to 3.78%.
Dollar Holds Decline Amid Easing Geopolitical Risks
The US Dollar Index remained below 98 on Wednesday after falling for two straight sessions, weighed down by reduced haven demand amid easing geopolitical risks in the Middle East. The index ended the session 0.2% lower at 97.74.
The Japanese yen was 0.3% weaker at ¥145.28 per dollar on Wednesday as markets digested the Bank of Japan’s latest Summary of Opinions. Policymakers maintained a cautious stance on future policy adjustments, citing heightened uncertainty in the economic outlook. The central bank reiterated that any rate hikes would depend on whether its projections for economic growth and inflation are realized, while several members stressed the importance of maintaining an accommodative stance amid ongoing global trade tensions and geopolitical risks.
The offshore yuan weakened 0.1% toward Rmb 7.17 per dollar on Wednesday, breaking a four-session winning streak. Investors are now turning their attention to the upcoming July Politburo meeting for potential indications of further economic stimulus.
The Hong Kong Monetary Authority bought the local currency for the first time since 2023 to defend the peg against the US dollar, purchasing HK$9.42 billion ($1.2bn) of local currency. In addition to pushing the currency back into its permitted trading range, the move will also make bearish bets more costly. It does this by draining liquidity from the financial system and driving up borrowing costs.
Gold Edges Higher
Gold prices edged 0.3% higher to $3,333 per ounce on Wednesday, recovering slightly from a two-week low after falling over 1% in the previous session.
Oil Prices Climb After 2 Sessions Of Declines
Oil prices climbed Wednesday after two sessions of declines. Brent was up 0.8% at $67.83 per barrel. That still leaves it below the level of $69.36 it was trading at before Israel launched its attack on Iran, having given up a risk premium of almost 15% at its peak last week.
Traders are betting that a ceasefire between Israel and Iran will hold and the risk of a major crude supply disruption has faded. While there has been a brief recovery, the sharp decline in oil prices indicates the “continuing dominance of bears in the market,” said Alex Kuptsikevich, FxPro’s chief market analyst.
Oil prices could slide further if the current range of $64 per barrel to $65 is breached, according to Piper Sandler. “The news of a ceasefire between Israel and Iran resulted in oil retreating further to $64-$65, and testing new support at last week’s breakout point,” chief market technician Craig Johnson wrote in a note. “If it fails to hold here, then a further decline below $60 is likely.”
Bitcoin Rallies
Bitcoin was up 1.7% over the past 24 hours, trading at $107,800.
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 Alex Frew McMillan, a free-lance writer and Asia columnist for TheStreet.com. With a view from Taiwan is Ross Feingold, Director of Research, Caerus Consulting, Taiwan.
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
