Currency volatility amid equity losses in Asia

Asia market update: US Fri hot jobs flows through to Asia; Currency volatility amid equity losses in Asia.

General trend

- Late Friday night Asia time the hot US jobs numbers (post-Trump election win in November) saw UST yields again rocket higher 8bps to 4.77%, only 15bps short of their Oct 2023 highs. Japanese yields also continued their march higher +3.5bps breaking through 1.2% for the first time since April 2011. USD and JPY higher against all other currencies with particular weakness in Pound Sterling, trading at a 14-month low v USD today. US stocks were also down heavily, with Asian stocks following to the downside today.

- Prior to the above events late Friday, Japanese reported that the BOJ is still considering whether to raise rates at its Jan 24th policy meeting as well as discussing raising core-core view for FY24, FY25; JPY gained on the news. Reminder, BOJ Dep Gov Himino to deliver speech and hold news conference on Jan 14th [Tues].

- Today, in further moves to protect the level of the Yuan by allowing Chinese companies to make more loans abroad, China PBOC raised cross-border macro adjustment parameter for the first time since July 2023. China PBOC also pledged to strengthen FX market management and reaffirmed to raise fiscal deficit as well as the goal of 'reasonable equilibrium' level for Yuan and further asset allocation in Hong Kong.

- AUD clawed back some of its recent losses early on, as 10-year yields gained a further 10bps in Asian trading, but then followed other currencies down hitting the lowest against USD since Apr 2020.

- Euro falls to nearly $1.02, lowest since Nov 2022 after ECB's Lane indicated from Hong Kong that there is probably more monetary easing to come.

- Currencies everywhere struggled; India's Central Bank again seen selling dollars to limit depreciation of Rupee trading at fresh record lows of 86.35.

- A growing number of China real estate developers receiving winding-up petitions in Hong Kong, the latest being Shimao Group.

- Brent Crude Futs rise to the highest since late Aug amid further US sanctions on Russian oil.

- The California wildfire death toll over the weekend rose to 24, with the Palisades fire only 11% contained and strong winds forecast to last through Wed or Thur. Utility Edison (EIX) reported 62,662 customers without power through early Sunday, with some equipment damage delaying repairs.

- CFIUS threw the US Steel/Nippon Steel deal a lifeline with an extension until June 18th before having to abandon their proposed merger.

- US equity FUTs continued south following on from Friday, -0.5% to -0.6% during Asian trading.

Looking ahead (Asian time zone)

- Mon Jan 13th (Mon eve IN Dec CPI); Note: This will be the final week for US Fed speakers before the communications blackout is imposed ahead of the Jan 29th decision.

- Tue Jan 14th AU Jan Consumer Confidence, JP Current a/c, (Tue night US Dec PPI).

- Wed Jan 15th ID Rate Decision, (Wed eve UK Dec CPI, DE 2025 GDP, Wed night US Dec CPI).

- Thu Jan 16th AU Dec jobs, KR Rate Decision, (Thu eve UK Nov GDP, Thu night US Dec Retail Sales).

- Fri Jan 17th NZ Dec Business PMI, CN Dec GDP, Industrial Prod, Retail Sales (Fri night US Dec Building Permits).

Holidays in Asia this week

- Mon Jan 13th Japan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 8,204.

- Australia Dec Melbourne Institute Inflation M/M: 0.6% v 0.2% prior; Y/Y: 2.6% v 2.9% prior.

- Australia Dec ANZ-Indeed Job Advertisements M/M: +0.3% v -1.3% prior.

- New Zealand Nov Building Permits M/M: +5.3% v -5.2% prior.

China/Hong Kong

- Hang Seng opens -0.8% at 18,918; Shanghai Composite opens -0.6% at 3,148.

- *China PBOC raises cross-border macro adjustment parameter to 1.75 (prior raise was in July 2023).

- China PBOC Gov Pan Gongsheng: Reaffirms China to raise fiscal deficit; Reiterates goal of 'reasonable equilibrium' level for Yuan - financial press.

- China Customs: 2024 China two-way trade value at CNY43.85T, +5% y/y.

- China Dec trade balance: $104.8B V $100.0BE.

- China Dec trade balance (CNY-denominated): 752.9B V 692.8B PRIOR.

- (HK) HKMA: China to encourage listings and debt issuance in Hong Kong - financial press.

- China PBOC: Gov Pan Gongsheng met with Bank of England (BOE) Gov Bailey in Beijing on Sat; Discussed 'financial stability and cooperation' - statement [weekend update]

- China Vice Fin Min Liao: Will raise fiscal deficit scale sharply; Can expect more proactive fiscal policy in 2025; To raise basic pension for residents [weekend update].

- Reportedly senior Chinese scientist has revealed an ambitious plan to use super heavy rockets to build solar power stations in space, calling it “another Three Gorges Dam project above the Earth”; Would involve deploying a massive solar array one kilometre wide in geostationary orbit, 36,000 kilometres above Earth; The energy collected in one year would be equivalent to "the total amount of oil that can be extracted from the Earth" – SCMP [weekend update].

- BYTEDANCE.IPO, TikTok: In today's hearing US Supreme Court signals that it will likely uphold the US TikTok ban set to go into effect on Jan 19th – press [weekend update].

- China Commerce Ministry (MOFCOM): To keep tariffs on US polysilicon for solar cells [weekend update].

- (IR) China approved shipment of nearly 3M bbl of oil stockpiled for Iran; Reportedly the proceeds could be used to fund allied mhilitias in the Middle East – press [weekend update].

- China PBOC sets Yuan reference rate 7.1885 v 7.1891 prior.

- China PBOC Open Market Operation (OMO): Injects CNY25B in 7-day reverse repos; Net injects CNY11B v drains CNY15B prior.

Japan

- Nikkei 225 closed for holiday.

- Japan Foreign Min Iwaya to attend Pres-elect Trump's inauguration on Jan 20th "as Tokyo's representative" - NHK (update).

- Mizuho analysts: BOJ officials likely to discuss raising their inflation outlook at a policy meeting this month supports the case for an interest-rate hike [weekend update].

- BoJ reportedly still carefuly assesing options for rate decision this month; No decision on raising rates has been made so far; BOJ likely to discuss raising core-core view for FY24, FY25 [Late Friday update].

Korea

- Kospi opens -0.3% at 2,508.

- South Korea Jan 1-10 Exports Y/Y: +3.8%; Imports: +2.6%.

- South Korea Acting President Choi: Asks Presidential Security and Police to refrain from using violence concerning the Yoon arrest warrant.

- Donkuk Steel and Hyundai Steel to expand construction-steel output cuts - Korea press.

- South Korea seeks to lower the tax burden for 'large' EV buyers - South Korea press.

- Boeing (KR) South Korea Transport Ministry: Two black boxes from the crashed Jeju Air jet stopped recording 4 minutes before crashing into the embankment [weekend update].

- South Korea Acting President Choi calls for agreement on special counsel bill in order to avoid 'clash' [weekend update].

Other Asia

- (TW) Taiwan Minister of Economic Affairs Kuo Jyh-huei: Taiwan will support the move of supply chains of information, communications and technology, and that of the auto industry, to the US [weekend update].

- USD/INR (IN) India Central Bank (RBI) again seen selling dollars to limit depreciation of Rupee (INR); Rupee trading at fresh record lows of 86.35 - traders.

North America

- (US) Sec of Defense Lloyd Austin: $926B defense budget needed, $55.0B over current plan (comments to OMB) - financial press.

- US Steel: CFIUS has granted an extension until Jun 18th of a requirement that Nippon Steel and US Steel abandon their proposed merger - update.

- *(US) Dce change in Nonfarm Payrolls: +256K V +165KE (above all analysts' estimates).

- *(US) Dec unemployment rate: 4.1% V 4.2%E.

- *(US) Dec average houry earnings M/M: 0.3% V 0.3%E; Y/Y: 3.9% V 4.0%E.

- *(US) Jan preliminary university of  Michigan confience: 73.2 V 74.0E.

- (US) Fed's Goolsbee (voter for 2025): Today's jobs report was strong makes me comfortable employment market is stabilizing at something near full employment.

- *(US) USDA world agriculture supply demand estimates (WASDE) crop report.

- *(US) BOFA INSTITUTE: Dec total card spending +2.2% Y/Y V +0.6% IN NOV; Calendar shifts continue to confound; Notes the inexorable shift toward online spending; Unfavorable seasonal factor for nonstore retailers, which now account for nearly 1/3 of the control group, creates downside risks.

- (US) Senate confirmation hearing for Treasury Sec nominee Bessent expected on Jan 16th – Politico.

- NVDA TTN Reminder: Biden Admin plans additional curbs on exports of AI chips from Nvidia and AMD, with 3-tier system of trade curbs on chips could be announced as soon as Fri, Jan 10th; The result would be an expansion of chip trade curbs to most of the world; Also the new rules to limit the export of closed AI model weights [weekend update].

- (BR) Brazil central bank: We have taken the necessary measures to ensure inflation reaches target; Expect 100 bps hikes at next two meetings.

- (CA) Canada reportedly planning broad tariff retaliation if Trump begins a trade war - financial press.

Europe

- (FI) ECB’s Rehn (Finland): Europe must not get caught "off guard" on trade war - speech at AFF in Hong Kong.

- (EU) ECB's Lane (Ireland, chief economist): Probably more monetary easing to come; Europe's economy still in recovery from pandemic - speech at AFF in Hong Kong.

- CNA.UK (UK) Statement: Gas reserves in UK are at “concerningly low” levels as freezing temperatures grip the country; Less than a week of demand in store.

- (FR) France Fin Min Lombard: Ministers to make budget proposals to PM Bayrou on Sat (Jan 11th).

- (DK) Denmark govt sent private messages to Trump team expressing a willingness to discuss increased US military and security presence in Greenland – Axios.

- (RU) Russia Foreign Ministry: New US sanctions against energy sector are an effort to harm Russia's economy at the cost of risking destabilization of global markets; Russia will respond to Washington's hostile actions.

Levels as of 00:20 ET

- Nikkei 225 closed for holiday, ASX 200 -1.2%, Hang Seng -1.3%; Shanghai Composite -0.4%; Kospi -1.4%.

- Equity S&P500 Futures -0.5%; Nasdaq100 -0.6%; Dax -0.2%; FTSE100 -0.3%.

- EUR 1.0208-1.0250; JPY 157.27-157.97; AUD 0.6131-0.6163; NZD 0.5548-0.5672.

- Gold flat at $2,714/oz; Crude Oil +1.8% at $77.08/brl; Copper +0.1% at $4.2927/lb.