Australia 10-Year Bond Yield Eases Ahead of RBA Decision
Australia’s 10-year government bond yield fell toward 4.18% on Thursday, partially retracing the sharp rise seen in the previous session as investors positioned ahead of the Reserve Bank’s upcoming policy decision. The central bank is widely expected to lower its 3.85% cash rate by 25bps next week, as economic growth remained weak and inflation risks have faded. Adding to the dovish sentiment, Australia’s trade surplus on goods shrank to a near five-year low in May, as exports dropped while imports increased—signaling cooling external demand. That followed a disappointing report on retail sales on Wednesday, which pointed to subdued domestic consumption. The market also implies further easing to a floor of 2.85%, taking it under most estimates of neutral.
China 10-Year Yield Steady
China’s 10-year government bond yield held steady at 1.64% on Thursday, as investors assessed the latest PMI figures. The Caixin China General Composite PMI returned to expansion territory, reaching its highest level since March. This improvement was largely driven by a renewed increase in manufacturing activity, which helped offset a slowdown in the services sector that fell to a nine-month low. Earlier in the week, official PMI readings offered a slightly different view: the manufacturing PMI remained in contraction but showed signs of gradual recovery, while the non-manufacturing PMI recorded modest growth, reflecting China’s continued efforts to stimulate domestic demand and support its sluggish economy. Markets are now eyeing key economic data due next week, particularly inflation and trade figures. Meanwhile, attention is also shifting to this month’s Politburo meeting, where investors anticipate new stimulus measures amid persistent economic headwinds such as looming US tariffs.
BoJ Should Hike Rates After U.S. Tariff Impact: Board Member Takata
The Bank of Japan should resume rate hikes after a temporary pause to assess the impact of U.S. tariffs on Japan’s economy, board member Hajime Takata said in a speech Thursday. “My view is that the BoJ is currently only pausing its policy interest rate hike cycle,” he noted, adding the bank should shift away from its ultra-loose policy after a period of "wait and see". Takata said Japan is nearing the 2% inflation target, helped by strong corporate earnings, labor shortages, and rising wages. While he expects this outlook to remain “broadly” unchanged despite President Trump’s sweeping tariff announcement on April 1, Takata stressed the need to monitor risks. “Given uncertainties regarding various U.S. policies remain high, the BoJ must conduct monetary policy in a more flexible manner without being too pessimistic." He also warned that if the Fed resumes rate cuts, it could reduce the BoJ’s policy flexibility. Still, Takata sees no signs of a U.S. recession akin to past crises.
U.S. Rolls Back Chip Software Curbs on China
The Trump administration has lifted export license requirements for U.S. chip design software sales to China, easing a key trade restriction amid improving relations between the two nations. According to Bloomberg News, the U.S. Commerce Department notified leading chip design software firms — Synopsys, Cadence Design Systems, and Siemens — that government approval is no longer required for their business in China. The move follows progress in U.S.–China trade negotiations, with China conditionally agreeing to resume exchanges of rare earth materials and advanced technology as both sides work toward stabilizing economic ties.
Offshore Yuan Steady After PMI Data
The offshore yuan steadied around 7.16 per dollar on Thursday as investors digested the latest PMI data. The Caixin China General Composite PMI returned to expansionary territory, reaching its strongest level since March, primarily driven by a renewed increase in manufacturing activity that offset a slowdown in the services sector, which fell to a nine-month low. Earlier in the week, official PMI figures painted a slightly different picture: the manufacturing PMI remained in contraction, though it hinted at gradual improvement, while the non-manufacturing PMI rose marginally amid China’s ongoing efforts to stimulate domestic demand and bolster the sluggish economy. Investors are now turning their attention to a fresh wave of economic indicators due next week, particularly inflation figures and trade data. Meanwhile, attention is turning to this month’s Politburo meeting, where investors expect new stimulus measures amid mounting challenges such as the looming US tariffs.
Japanese Yen Holds Steady on Trade Optimism
The Japanese yen stabilized around 143.7 per dollar on Thursday after facing some pressure in the previous session, as optimism over trade developments and a softer US dollar supported sentiment. Japanese officials reaffirmed their commitment to pursuing a “win-win” trade agreement with Washington, although they provided no details on potential concessions. President Donald Trump increased pressure on Tokyo, describing the negotiations as “really hard” and threatening tariffs of up to 35% on Japanese imports, citing dissatisfaction with Japan’s limited purchases of American rice and automobiles. Adding to the positive tone, the US finalized a trade deal with Vietnam that includes a 20% tariff on imports, boosting hopes for further trade breakthroughs. The yen also benefited from broad-based dollar weakness as investors looked ahead to the June US jobs report, which could strengthen the case for a Federal Reserve rate cut as early as July.
New Zealand Dollar Falls for 2nd Day
The New Zealand dollar dropped to around $0.607 on Thursday, extending losses from the previous session, with investors closely monitoring global trade developments. President Donald Trump had previously said he was not planning to extend the July 9 deadline for countries to negotiate trade deals, even as talks with key partner Japan failed to make headway. On Wednesday, Trump announced a deal with Vietnam that would allow US goods to enter the country duty-free, while Vietnamese exports to the US would face a 20% tariff—lower than the 46% announced in April. Meanwhile, investors geared up for the US non-farm payrolls report, due later today, for more clues on the Federal Reserve's next steps. On the domestic front, the Reserve Bank of New Zealand is widely expected to pause its easing cycle at next week's meeting, although investors still expect one or two additional 25bps cut later this year amid concerns over the impact of US tariffs.
Hong Kong Equities Under Pressure
Hong Kong shares dropped 257 points, or 1.1%, to 23,963 on Thursday morning, swinging from the prior session’s gains amid weak data from the mainland. A private survey showed China’s services activity expanded at the slowest pace in nine months in June. Caution also prevailed ahead of a key U.S. jobs report, along with uncertainty over the passage of a U.S. tax cut and spending bill, and a looming July 9 tariff deadline after President Trump ruled out extending the pause. Losses were tempered by record highs on the S&P 500 and Nasdaq overnight following Trump's trade deal with Vietnam. Local data also offered some support, with Hong Kong’s retail sales rising 1.9% yoy in May, ending 14 straight months of decline. Meanwhile, reports said Washington has removed export license requirements for U.S. chip design software to China, signaling a thaw in bilateral trade tensions. Top laggards included Huishang Bank (-8.6%), Kingsoft (-5.7%), Xiaomi (-3.0%), and Alibaba Health (-2.4%).
Aussie Dollar Dips on Lackluster Trade Data
The Australian dollar slipped to around $0.657 on Thursday, ending a three-session winning streak, weighed down by lackluster trade figures. Australia’s May trade surplus narrowed sharply to AUD 2.24 billion, well below expectations of AUD 5.09 billion and a revised AUD 4.86 billion in April. It was the smallest surplus in nearly 5 years, with exports hitting a 3-month low due to weaker US shipments affected by tariffs. Adding pressure, services PMI data from China, Australia’s top trading partner, fell to a 9-month low and missed forecasts. This came while markets grappled with rising US-led trade tensions, as uncertainty surrounds the new US-Vietnam trade deal and concerns grew over efforts to isolate China from key supply chains. Meanwhile, a weaker US dollar amid rising Fed rate cut bets, limited losses for the Aussie, keeping it near 8-month highs. Investors now await next week’s RBA decision, with markets nearly certain of a rate cut amid weak growth and easing inflation risks.
China Tech Stocks Rally as US Eases Chip Software Curbs
Chinese technology stocks rallied on Thursday, with the Shenzhen Component climbing 0.5% to above 10,460, following reports that the US has lifted certain export restrictions on chip design software to China. In May, US authorities had instructed several chip design software firms to seek licenses before exporting tools and semiconductor-related chemicals to Chinese companies. The easing of these restrictions comes as part of the recently announced US-China trade agreement, which includes provisions to resume trade in rare earths and advanced technologies. Chip-related stocks led the market higher, with notable gains from Foxconn Industrial (+8%), Luxshare Precision (+3.8%), Eoptolink Technology (+1.7%), and Victory Giant (+3.9%). Meanwhile, data showed that China’s services sector growth slowed to a nine-month low in June, contrasting with a stronger-than-expected rebound in manufacturing activity earlier in the week and underscoring ongoing uncertainty in the broader economy.
Gold Falls on Trade Optimism
Gold declined to around $3,340 per ounce on Thursday, giving back some of the gains from the previous session as optimism over trade developments reduced the metal’s safe-haven appeal. President Trump announced that the US had reached a trade agreement with Vietnam, under which some of the harsh tariffs on Vietnamese products would be lifted in exchange for greater access for American goods to the Vietnamese market. The deal also raised hopes for additional bilateral trade agreements in the pipeline. Meanwhile, losses were limited by ongoing weakness in the US dollar amid fiscal concerns and expectations of further monetary easing by the Federal Reserve. ADP data showed private-sector payrolls unexpectedly fell in June, marking the first decline in more than two years and raising fresh concerns over labor market strength, which supports the case for lenient monetary policy. Elsewhere, Iran halted cooperation with the UN nuclear watchdog, adding modest geopolitical risk.
Dollar Stabilizes Ahead of Key Jobs Report
The US dollar index held steady around 96.7 on Thursday, hovering near a more than three-year low as markets turned their focus to the upcoming June jobs report. Investors are closely watching the data for fresh signals on labor market health and the Federal Reserve’s next move on interest rates. A weaker-than-expected report could reinforce expectations for an earlier rate cut, potentially as soon as July. On Wednesday, ADP data showed a surprise decline in private payrolls, with employment falling by 33,000 in June, fueling concerns over a softening labor market. On the trade front, President Donald Trump announced on Truth Social that the US has reached a new agreement with Vietnam, which includes a 20% tariff on imports from the country. The deal raised hopes of additional bilateral trade agreements in the pipeline. Meanwhile, Trump’s proposed tax-and-spending package, estimated to add $3.3 trillion to the national debt, is facing resistance in the House of Representatives.
China Services Growth at 9-Month Low
The Caixin China General Services PMI declined to 50.6 in June 2025, down from May’s 51.1 and below market forecasts of 51.0. The latest reading marked the weakest expansion in the services sector since September 2024, as growth in new orders eased and foreign sales recorded their sharpest decline since December 2022 amid subdued global conditions. In response, employment fell marginally. Regarding prices, input costs rose slightly due to higher raw material and fuel prices, although overall input inflation eased to a three-month low. Meanwhile, selling prices declined for a fifth consecutive month, marking the steepest drop since April 2022 amid intense market competition. Finally, business sentiment improved for a second successive month on hopes of better economic conditions and stronger sales, but remained well below the long-run average.
China Composite PMI Hits 3-Month High
The Caixin China General Composite PMI rose to 51.3 in June 2025 from 49.6 in the previous month, marking the highest reading since March. Underlying data revealed that a renewed increase in manufacturing production had offset a softening of services activity growth. New business returned to growth despite continued weakness in exports. However, job shedding persisted, leading to the fastest buildup of backlogged work in a year. On the price front, average input costs dipped slightly after two consecutive months of increases. Firms passed on these savings to clients in an effort to boost sales, resulting in the steepest cut to average selling prices in over two years. Meanwhile, business optimism edged down slightly.
Australia Exports Hit 3-Month Low
Australia’s goods exports fell by 2.7% month-over-month to a three-month low of AUD 42.40 billion in May 2025, following a downwardly revised 1.7% decline in April. The drop was partly driven by weaker shipments to the United States, dampened by tariffs imposed under the Trump administration. Exports of non-rural goods fell by 2.4% to AUD 31.88 billion, due to lower sales of coal, coke & briquettes (-2.0%), other mineral fuels (-11.5%), other manufactured goods (-3.5%), other non-rural goods (-4.4%), and goods procured in ports by carriers (-11.6%). Shipments of rural goods also declined, falling 3.5% to AUD 6.28 billion, weighed down by sharp drops in meat & meat preparations (-15.7%) and wool & sheepskin (-16.5%). Additionally, exports of non-monetary gold fell by 3.4% to AUD 4.22 billion. Exports declined to the US (-5.5%), Japan (-3.8%), Hong Kong (-2.2%), Indonesia (-14.1%), and Singapore (-5.6%). In contrast, shipments to Australia’s top trading partner, China, rose by 1.9%.
South Korea Shares Recover on Currency Support Measures
The benchmark KOSPI rose 1.05% to around 3,100 on Thursday, recouping from a 0.4% loss in the previous session, as investor optimism was lifted by renewed efforts from the Bank of Korea to stabilize markets. On Wednesday, the central bank issued two-year currency stabilization bonds worth KRW 2.33 trillion, slightly above its target of KRW 2.30 trillion, in a move aimed at shoring up the won, restoring market confidence, and benefiting export-heavy and foreign-sensitive sectors. In the corporate space, gains were led by heavyweight technology and automotive firms such as Samsung Electronics (2.47%), LG Energy Solution (1.49%), Kia Corporation (0.50%), and Hyundai Motor (0.47%).
Australia Trade Surplus Smallest in Near 5 Years
Australia’s trade surplus in goods narrowed to AUD 2.24 billion in May 2025, down sharply from a downwardly revised AUD 4.86 billion in April and well below market expectations of AUD 5.0 billion. This marked the smallest trade surplus since August 2020, as exports declined while imports increased. Exports fell by 2.7% month-over-month to a three-month low of AUD 42.40 billion, following a downwardly revised 1.7% drop in April. The decline was driven in part by a 5.5% fall in shipments to the United States, impacted by tariffs imposed under the Trump administration. In contrast, exports to China—Australia’s top trading partner—rose by 1.9%. By commodity category, exports declined for rural goods (-3.5%), non-rural goods (-2.4%), and non-monetary gold (-3.4%). Meanwhile, imports rose by 3.8% to a record high of AUD 40.16 billion, accelerating from an upwardly revised 1.6% increase in April, mainly driven by stronger demand for capital goods.
Australia Imports Notch Record High
Australia’s goods imports rose 3.8% month-over-month to a record high of AUD 40.16 billion in May 2025, strongly accelerating from an upwardly revised 1.6% gain in the prior month. The surge came amid the impact of U.S. President Trump’s 90-day suspension of reciprocal tariffs, which helped boost trade flows. Purchases of consumption goods grew 3.0% to AUD 12.98 billion, lifted by non-industrial transport (7.9%), food and beverages, mainly for consumption (5.1%), and consumption goods n.e.s. (0.4%). Also, arrivals of capital goods jumped 8.6% to AUD 10.20 billion, buoyed by capital goods n.e.s (19.6%), machinery and industrial equipment (6.1%), and industrial transport equipment n.e.s. (15.4%). Purchases of intermediate and other merchandise goods added 1.8% to AUD 15.49 billion, mainly led by fuels and lubricants (3.2%), processed industrial supplies n.e.s (2.6%), and parts for transport equipment (5.5%). Further, imports of non-monetary gold went up 0.2% to around AUD 1.49 billion.
Oil Slips on Signs of Soft US Demand
WTI crude oil futures fell below $67 per barrel on Thursday, trimming gains from the previous session, as a build in US crude stockpiles spurred concerns over weak demand from the key consumer. Official data showed crude inventories rose by 3.85 million barrels last week, defying forecasts for a 2 million barrel decline and marking the largest increase in three months. Adding to the pressure, OPEC+ also appears set to raise production by 411,000 bpd in August, bringing 2025’s total increase to 1.78 million bpd, equivalent to over 1.5% of global demand. Meanwhile, oil prices climbed more than 3% on Wednesday after Iran halted cooperation with the UN nuclear watchdog, adding a modest risk premium despite no actual supply disruptions. Adding further support, the US announcement of a trade deal with Vietnam reduced trade risks and boosted optimism for further negotiations that could influence energy outlook, with hopes for additional agreements before next week’s deadline.
Japanese Shares Edge Higher on Trade Optimism
The Nikkei 225 rose 0.1% to around 39,800 on Thursday, snapping a two-day losing streak as optimism over trade developments helped steady market sentiment. Japanese authorities reiterated their commitment to pursuing a “win-win” trade agreement with the US, though they provided no specifics on possible concessions. US President Donald Trump ramped up pressure on Tokyo, calling negotiations “really hard” and threatening to raise tariffs on Japanese imports to as high as 35%, citing dissatisfaction with Japan’s limited purchases of US rice and automobiles. Adding to the optimism, the US finalized a trade deal with Vietnam that includes a 20% tariff on imports from the country—down from the 46% rate imposed in April. Gains were led by major tech and electronics names, including Fujikura (+1.5%), Tokyo Electron (+1%), Advantest (+1.1%), Nintendo (+0.9%), and Socionext (+2.8%).
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