MNI EUROPEAN OPEN: Japan Assets Rally On Pension Invt Call

Jul-10 05:15By: Jonathan Cavenagh

Europe

EXECUTIVE SUMMARY

US SAYS IRAN TECHNICAL TALKS TO CONTINUE DESPITE RECENT STRIKES - BBG
FED ANNOUNCES WARSH TASK FORCE LEADERS, OBJECTIVES - MNI
JAPAN URGES ITS PENSION FUNDS TO INVEST MORE AT HOME; YEN GAINS - BBG
MNI DISCUSSES THE BOJ’S CONCERNS ON THE DIRECTION OF POLICY - MNI POLICY
JAPAN JUNE CGPI RISES 7.1% Y/Y; IMPORT PRICE RISES - MNI BRIEF

Fig 1: Japan Import Prices & USD/JPY Y/Y (Assuming current USD/JPY Levels Hold To End July)

Source: Bloomberg Finance L.P/MNI

POLITICS (BBG): “Andy Burnham’s path to becoming the next UK prime minister looks certain after a vast majority of Labour MPs formally nominated him to be the next party leader.”

FISCAL (BBG): “Labour’s fiscal rules don’t work because they allow the national debt to ratchet ever higher, the main opposition Conservative Party’s Treasury spokesman, Mel Stride, said.”

SPAIN (BBG): "A Spanish bid to boost joint debt issuance by the European Union was met with skepticism from some of the bloc’s top economies."

FRANCE (EURONEWS): "Lagarde told Euronews that she is not "a candidate", while vowing to continue championing European ideals. Speculation that she could leave the ECB early to play an active role in the campaign is rife in Brussels and Paris."

US/IRAN (BBG): “ Technical talks between the US and Iran are continuing, according to a US official, following two days of clashes that threatened to shatter an already fragile ceasefire between the two nations.”

FED (MNI): The Federal Reserve on Thursday announced the leadership and objectives of the five task forces recently announced by Chair Kevin Warsh, setting up a system with three external members independently co-leading each task force that will be supported by Fed staff.

FED (MNI): Reserve management purchases of Treasury bills by the Federal Reserve can be adjusted month to month or paused if conditions warrant, New York Fed's System Open Market Account manager Roberto Perli said Thursday.

HOUSING (MNI): U.S. sales of existing homes fell 2.4% in June to a seasonally adjusted annual rate of 4.09 million, the National Association of Realtors said Thursday, below market expectations. Sales year-over-year are up 2.8%.

TRADE (BBG): “The US will not immediately impose tariffs on commercial aircraft, jet engines and parts following an investigation, with President Donald Trump instead directing the administration to negotiate with trading partners to adjust imports of those products.”

JAPAN

INVESTMENT (BBG): “Japan called on its pension funds, which includes one of the world’s largest, to invest in domestic assets, giving a boost to both bonds and the yen from levels near multi-decade lows.”

BOJ (MNI POLICY): MNI discusses the BOJ's concerns on the direction of policy. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.

BOJ (BBG): "The Bank of Japan’s independence must be respected, with decisions on specific monetary policy tools left to the central bank, Growth Strategy Minister Minoru Kiuchi said."

INFLATION (MNI BRIEF): Japan's corporate goods price index rose 7.1% y/y in June, the fastest pace since March 2023's 7.4%, accelerating from May's revised 6.6%, Bank of Japan data released on Friday showed.

OTHER

CANADA (MNI INTERVIEW): The drag from U.S. tariffs remains the key risk for Bank of Canada policymakers, likely delaying any rise in interest rates from Governor Tiff Macklem until late next year despite the inflation threat from higher oil prices, a former official from the country's largest province told MNI.

SOUTH KOREA (BBG): “SK Hynix Inc. raised $26.5 billion in its American depositary receipt offering, as the South Korean memory chipmaker powered through volatility to deliver the largest ever US first-time share sale by a foreign company.

INDONESIA (BBG): “For roughly six decades, Indonesia’s political leaders and business elites enjoyed a near-symbiotic relationship, one that survived a transition from dictatorship to democracy. That’s now collapsing under President Prabowo Subianto, spurring a race among tycoons to move cash out of the Southeast Asian archipelago.”

CHINA

MNI China Press Digest July 10: AI, Competition, Property

MNI: PBOC Net Drains CNY43 Billion via OMO Friday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY20 billion via 7-day reverse repos, with the rate unchanged at 1.4%. The operation led to a net drain of CNY43 billion after offsetting the maturity of CNY63 billion 7-day reverse repos today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.3805% at 09:54 am local time from the close of 1.3779% on Thursday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 46 on Thursday, the same as the close on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Lower At 6.7989 Fri; +5.59% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.7989 on Friday, compared with 6.8036 set on Thursday. The fixing was estimated at 6.6938 by Bloomberg survey today.

MARKET DATA

JAPAN JUNE PPI M/M 0.4%; MEDIAN 0.4%; PRIOR 1.1%
JAPAN JUNE PPI Y/Y 7.1%; MEDIAN 6.8%; PRIOR 6.6%

MARKETS

US TSYS: Little Changed, Light Calendar Today

TYU6 is dealing at 109-08, -00+ from closing levels in today's Asia-Pac session.

Cash bonds are ~1bp richer in today's Asia-Pac session after yesterday's modest rally. There is no scheduled US data on tap today, with the focus on next week's CPI and PPI data on Tuesday/Wednesday, respectively.
ICYMI, NY Fed's Williams made comments in a moderated discussion Thursday to those he's made in recent weeks about inflation being too high now but expected to recede in the coming quarters.
MNI Techs: TYU6 currently +8 at 109-08 (10Y yld -.0420 at 4.5371%). Treasuries maintain a softer tone despite today's gains. This week's move lower reinforces a bear threat. The move down resulted in a breach of 109-06, the Jun 22 low, signalling scope for an extension towards 108-25, the Jun 8 low. Key support and the bear trigger is 108-08+, the May 19 low. Initial firm resistance to watch is 109-25+, the Jul 2 / 6 high. A break of it would be bullish and expose 110-10+, the Jun 26 high and bull trigger.

Bloomberg Finance LP

AUSSIE BONDS: Grinds Higher On data Light Day, AU-US 10Y Diff Back At 30bps

ACGBs (YM +2.5 & XM +3.0) are stronger, aligning with US tsys, on a data-light day.

Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s modest rally. There is no scheduled US data on tap today, with the focus on next week's CPI and PPI data on Tuesday/Wednesday, respectively.
Oil is up again Friday as fighting escalates again in Iran. Iran and US exchanged strikes again Thursday with the US saying it hit 90 military targets, some near the Strait. Iran says 14 people have been killed in the past two days.
Cash ACGBs are 3bps richer with the AU-US 10-year yield differential at +31bps.
The bills strip has bull-flattened, with pricing +1 to +3 across contracts.
RBA-dated OIS pricing shows modest tightening across all meetings, with the probability of a 25bp hike rising from 22% for August to 54% by December 2026.
On Monday, the local calendar will be empty, ahead of Consumer and Business Confidence measures on Tuesday.
Next week, ACGB supply will be greater than the recent average weekly issuance of $1000mn. The AOFM plans to sell A$400mn of the 5.00% 21 June 2036 bond on Tuesday, A$700mn of the 4.50% 21 April 2033 bond on Wednesday and A$700mn of the 2.50% 21 May 2030bond on Friday.

Bloomberg Finance LP

JGBS: Sharp Bull-Flattener After Fin Min Call To Invest Locally

JGB futures are sharply higher, +64 compared to settlement levels, but off session bests.

Japan's corporate goods prices rose 7.1% in June from a year earlier, the fastest pace since early 2023.
(Bloomberg) “ Japan's finance minister called for the nation's massive pension funds to increase investments in domestic assets. The remarks led to a jump in the yen and a drop in bond yields, with the yen strengthening and bonds rallying. Any changes to the Government Pension Investment Fund's investment strategy would have to go through an established process and could have broad implications, including a potential boost for the yen and Japanese equities.”
The prospect that Japan's GPIF could bring funds home to buy JGBs is helping to send yields lower across the curve amid heavy short covering in JGB futures.
Cash US tsys are also 1-2bps richer in today's Asia-Pac session, extending yesterday's rally amid a tapering of concerns regarding a re-escalation of the US-Iran conflict. There is no scheduled US data on tap today, with the focus on next week's CPI and PPI data on Tuesday/Wednesday, respectively.
Cash JGBs are flat to 11bps richer, with the long-end leading.
Swap rates are 1-2bps higher. Longer swap spreads are sharply wider.
On Monday, the local calendar will be empty.

Bloomberg Finance LP

FOREX: USD - BBDXY Testing 1216-1218 Support As Asia Sells USD's

The BBDXY has had a range today of 1216.23 - 1220.17 in the Asia-Pac session; it is currently trading around 1218,-0.20%. The USD dropped very quickly in our session as the market reacted to the GPIF headlines and the move lower in USD/JPY. The mess in the Middle-East continues to be fluid but for now risk seems to be happy to ignore it. Leveraged assets like Gold and Bitcoin both seem to be trying to find a base which again points to risk potentially stabilising and building for a move higher again. Does London go with this indiscriminate USD selling or do some of these moves get walked back ? Firstly the GPIF strategy needs to be confirmed and secondly if it is to be implemented it has huge implications for Cross-Yen and the Carry-trade. The first support which continues to hold remains 1216-1218 and through here the 1208-1212 area comes back into play. Having touched the initial target toward the 1225-1230 area, I thought we could see some sort of a pullback but I remain skewed toward fading a dip around 1210, looking for a retest of the highs at some point.

EUR/USD - Asian range 1.1429-1.1461, Asia is currently trading 1.1440. The pair is challenging the 1.1450-1.1460 area as the USD gets sold across the board in our session. On the day, I am watching to see if the market's reaction to sell USD’s and ask questions later is the correct response. Should Japan get the GPIF to change its allocation of foreign/domestic assets, the numbers involved could have a significant impact on both the “Carry-trade” and global risk. I remain skewed in favour of fading rallies with initial resistance right here 1.1450-1.1465 and then the more pivotal 1.1495-1.1535 area, looking for the pair to turn lower again at some point.
GBP/USD - Asian range 1.3401-1.3452, Asia is currently dealing around 1.3430. The pair continues to squeeze higher back toward 1.3450 in our session. I continue to err on the short-side but I suspect this move lower will need to top out pretty soon to keep the bears in control. On the day, price is challenging some important resistance around the 1.3420 area, through here and 1.3500 comes back into play. I am looking for the move to top out somewhere up here and retest the 1.3000-1.3150 area at some point.
Data: Germany June CPI, France June CPI (F)

Fig 1: GBP/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

JPY: USD/JPY - GPIF Flow Would Be A Game-Changer, But Will They Follow Through

The USD/JPY range today has been 161.29-162.43 in the Asia-Pac session, it is currently trading around 161.55, -0.50%. The pair collapsed back through 162.00 on headlines that Japan is looking to promote investment in Japanese financial assets by the GPIF and other similar funds. The GPIF allocation of assets always seems to be the Joker card that Japan plays when it feels the “Carry-Trade” is getting out of hand. Should Japan get the GPIF to change its allocation of foreign/domestic assets, the numbers involved could have a significant impact on both the “Carry-trade” and global risk. It amounts to Quasi-Intervention but the reverberations should they actually follow through with it have far-reaching implications. Do they have the fortitude to blow up one of the key reasons risk has soared to such lofty heights, time will tell. On the day, the first support is toward between 161.00-161.50 and then the 160.00 area. This is a slow burn trade though and should not have an immediate effect on price, though if confirmed I have no doubt those sitting long to their eye-balls will be told to start paring back. That's when the exit door together with liquidity shrinks very quickly.

“Japan Urges Its Pension Funds to Invest More at Home; Yen Gains.” - BBG https://blinks.bloomberg.com/news/stories/THXRGCKK3NY8
“JAPAN'S GPIF SPOKESPERSON: AWARE OF FINANCE MINISTER KATAYAMA'S COMMENTS, DECLINE TO COMMENT - [RTRS]"
MNI POLICY: Weak Yen Adds Risk To BOJ's Policy Direction. Bank of Japan officials are concerned that only a weaker yen will persuade Prime Minister Sanae Takaichi that further rate hikes are necessary, but if markets begin dictating monetary policy, the eventual tightening cycle could prove steeper than if the BOJ responded primarily to economic and inflation developments, MNI understands
Options : Close significant option expiries for NY cut, based on DTCC data: 161.00($645m). Upcoming Close Strikes : 160.50($3.42b July 13), 160.50($1.73b July 15), 163.00($1.61b July 13) - BBG.
The USD/JPY Average True Range(ATR) for the last 10 Trading days: 61 Points

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

AUD/USD - Trying To Break Above 0.6960 As USD/JPY Drags The USD Down

The AUD/USD has had a range today of 0.6934-0.6970 in the Asia- Pac session, it is currently trading around 0.6960, +0.30%. The AUD/USD surged higher attempting to break back above the 0.6960 area as the USD got indiscriminately sold across the board in reaction to USD/JPY’s moving lower thanks to the GPIF headlines. I am watching to see if the market's reaction to sell USD’s and ask questions later is the correct response. Should Japan get the GPIF to change its allocation of foreign/domestic assets, the numbers involved could have a significant impact on both the “Carry-trade” and global risk, though it is a slow burn and would take awhile to truly have an impact. On the day, I will be watching to see if the AUD can build on this move above the 0.6960 area or will London walk it back ? Should it hold above there then the 0.7000-0.7050 area will come back into play. I continue to be skewed toward fading a rally above 0.7000 at first asking, looking for another test of the 0.6850 support at some point.

Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6900(AUD572m). Upcoming Close Strikes : 0.6875(AUD625m July 13), 0.6900(AUD849m July 15), 0.6960(AUD474m July 14) - BBG
The AUD/USD Average True Range for the last 10 Trading days: 34 Points

Fig 1: AUD/USD spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

NZD/USD - Extends Rebound, Challenging The 0.5800 Area

The NZD/USD had a range today of 0.5748-0.5793 in the Asia-Pac session; it is currently trading around 0.5780, +0.40%. The NZD has extended higher again today touching just short of 0.5800 as the USD got sold across the board in Asia today. Having broken higher overnight it has very quickly moved toward the next level which should offer some tougher resistance. The market though has been caught quite short and with liquidity always at a premium in the NZD there is a risk the bounce could be higher than most expect. On the day, pivotal resistance is in this 0.5770-0.5820 area which should prove to be tough at first asking and I would be skewed toward fading this bounce on its initial attempt.

“Japan Repatriation Push Puts Global Assets on Notice. The government-backed repatriation from the GPIF would trigger an institutional domino effect, establishing a structural bid for JGBs and, to a lesser degree, support for the yen.” - BBG
Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5770(NZD338m July 15) - BBG
The NZD/USD Average True Range for the last 10 Trading days: 42 Points

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

ASIA STOCKS: Tech Lead Vol as AI ETFs Under Microscope in Korea

Tech heavy bourses in broader Asia are sitting on losses for the week with the KOSPI the worst performer for the week, despite a solid rebound Friday.

Japanese equities losses were capped despite bouts of global risk aversion, with investors increasingly rotating beyond AI-related stocks into defence, infrastructure and industrial names. Semiconductor equipment stocks remained volatile as investors reassessed AI valuations, although the long-term AI investment cycle continues to support earnings expectations. The weaker yen continued to underpin exporters, while expectations surrounding the Bank of Japan's July meeting remained an important macro focus. The NIKKEI is up +1.85% Friday, but holding onto weekly losses of -1.05%

The KOSPI Vol has been extreme with the leverage in the system on full display. Authorities have woken up to the impact of the 2x leveraged AI ETFs and are now talking bans, helping the KOSPI to jump +5.3% Friday, whilst holding onto weekly losses of -5.06%. Expect the volatility to continue into next week as the BOK meets on the 16th and is expected to raise rates. This will feed into further vol and weigh on KOSPI performance and could be heightened should the outlook be hawkish.

China's bourses are leading the region with the Hang Seng up +1.8% today and +4.8% for the week whilst the CSI 300 and Shanghai hold onto modest weekly gains. China’s equity and bond markets have fundamentally decoupled from global macro trends (a thematic we have noted for some time). June CPI out this week showed that authorities have successfully protected the economy against the perils of oil related global inflation.

OIL: Largest Weekly Gain Since May; VOL to remain high

Oil is up again Friday as fighting escalates again in Iran.
Iran and US exchanged strikes again Thursday with the US saying it hit 90 military targets, some near the Strait. Iran says 14 people have been killed in the past two days.
US military officials explicitly confirmed to Al Jazeera and the BBC that the United States has not conducted any airstrikes within Iran in the last several hours.
Despite President Trump previously declaring the interim ceasefire memorandum over, US officials note that technical negotiations remain ongoing. International mediators from Pakistan and Qatar are actively working to bring both nations back to the negotiating table.
Brent is up +0.62% Friday to US$76.75 and is now up +6.4% - its largest weekly gain since May.
WTI is up +0.60% to US$72.52 and has delivered weekly gains of +5.5%
The weekend will see focus on whether bombing resumes or talks dominate.
The outlook for oil over the coming days is for increased volatility as geopolitical risks stand off against global macroeconomic signals. What is likely is that prices stabilize near to $76 for Brent and $72 for WTI.
Whilst geopolitical signals will be derived from military action, the next macro signal will come from June CPI in the US out 14th. CPI YoY is forecast to moderate to +3.8% from +4.2%. Whilst the FED does not have a CPI target, current inflation metrics are well above targets and an upside surprise could bring forward rate hike expectations

GOLD: Steadies Near Key EMA; Outlook Hinges on Geopolitics in ST

Gold is trending sideways in Asia Friday and holding onto week to date losses.
Despite a +1.14% rally in the US trading day Thursday, at US$4,123 and down -1.1% for the week.
Gold's rally stalled near to the 20-day EMA of $4,151 which it has trended below since early May.
Despite oil prices resuming their rally today, gold appears (for now) set to trend near to the EMA. There is some evidence of upward momentum building - given the MACD line above the Signal line.
Looking ahead to next week - gold's outlook may likely hinge on actions in Iran which at this stage remain elevated and will ultimately feed inflation expectations.
US markets have brought forward their rate hike pricing to almost a full hike in October and a rapid decline in the geopolitical outlook could see October priced in and September in focus. This environment could see gold break lower and back to near term lows

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
10/07/2026	0600/0800	***	DE	Germany CPI (f)
10/07/2026	0600/0800	***	DE	Germany CPI (f)
10/07/2026	0615/0815		EU	ECB Vujcic Panel at Greece Annual Economist Roundtable
10/07/2026	0645/0845	***	FR	HICP (f)
10/07/2026	0700/0300	***	CZ	Czech Republic Final CPI
10/07/2026	0800/1000	*	IT	Industrial Production
10/07/2026	-	***	CN	Money Supply
10/07/2026	-	***	CN	New Loans
10/07/2026	-	***	CN	Social Financing
10/07/2026	1200/0800	**	BR	Brazil Final CPI
10/07/2026	1200/0800	*	US	NY Fed SOFR
10/07/2026	1230/0830	*	CA	Building Permits
10/07/2026	1230/0830	***	CA	Labour Force Survey
10/07/2026	1230/0830	***	CA	Labour Force Survey
10/07/2026	1300/0900	*	US	NY Fed EFFR
10/07/2026	1600/1200	***	US	USDA Crop Estimates - WASDE
10/07/2026	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
10/07/2026	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
10/07/2026	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly