Focus on US Jan Nonfarm Payrolls

Asia market update: Volatile week comes to quiet close in Asia; JPY strong on hot data and hawkish talk; Focus on US Jan Non-Farm Payrolls

General trend

- The week came to a quiet end in Asia after trade war fears initially escalated with Pres Trump-induced volatility last weekend through confirming China, Mexico and Canadian tariffs; Some tit-for-tat actions by China against the US came mid-week, as USPS also briefly stopped accepting all packages from China/HK (reversed the next day, but 10% tariff still applies), with Chinese shippers’ prices suffering somewhat. Presidents Trump and Xi still to speak.

- As the week developed a primary theme was the strengthening of the Yen to 8 week highs v USD, breaking 152 on the back of higher yields following hotter than expected data releases; Including today’s blowout December household spending data (wages rose at fastest pace since Aug 2022), on top of the hot Labor cash earnings earlier in the week (largest rise since 1997). A series of former BOJ officials continued to make hawkish comments on the future of JP rates, capped off by Board member Tamura (hawk) who said he could see a neutral rate “above 1%” this year (OCR raised to 0.50% last week).

- Japan 5-year bond yields rose a further 2.5bps to 0.96%, 2-yrs up to nearly 0.80% and 10-years +2.5bps back to 1.292%, with the July BoJ OIS chance of 25bp hike now at 77.5% (v 75.5% day earlier).

- India Reserve Bank (RBI) cuts its Repurchase Rate for the first time since May, 2020, as expected.

- Asian equities in the red except for out-performance by Shanghai +1.7% and HK +1.4%.

- Chip-related Tokyo Electron ADRs +2.7% overnight after further earnings gains after the close yesterday and execs expecting record-high half-year sales in H2 FY2025. However, shares fell -4% during regular trading in Tokyo, perhaps in recognition that the company only affirmed guidance after having raised for much of the past year or two.

- Nissan +7% after Hon Hai (Foxconn) said to be seeking to work with Nissan.

- US equity FUTs -0.1% during Asian trading.

Looking ahead (Asian time zone)

- Fri Feb 7th US Jan Non-Farm Payrolls, Michigan Prelim Feb Consumer Sentiment.

Holidays in Asia this week

- Mon Feb 3rd China.

- Tue Feb 4th China.

- Thu Feb 6th New Zealand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1 at 8,509.

China/Hong Kong

- Hang Seng opens -0.2% at 20,858; Shanghai Composite opens flat at 3,269.

- China MOF sells 2-year and 30-year Bonds.

- China equities said to have seen ETF inflows of CNY34.0B during 2025 - China Sec News.

- Hong Kong Govt will continue to stop US postal service until further notice [overnight update].

- China PBOC: To lower financing costs of supply chain firms [overnight update].

- China PBOC sets Yuan reference rate: 7.1699 v 7.1691 prior.

- China PBOC Open Market Operation (OMO): Injects CNY184B in 7-day reverse repos; Net drains CNY100B v prior Net drains CNY205B.

Japan

- Nikkei 225 opens -0.4% at 38,920.

- Japan Dec Household Spending Y/Y: 2.7% v 0.5%e (rises at fastest pace since Aug 2022).

- Japan Dec Preliminary Leading Index: 108.9 v 108.3e; Coincident Index: 116.8 v 116.6e.

- BOJ: Jul BoJ OIS 0.6725%, chance of 25bp hike 77.5%, vs 75.5% yesterday.

- US Pres Trump and Japan PM Ishiba to discuss joint AI and chip development at a summit – Nikkei [overnight update].

- Japan PM Ishiba: Would like to agree with Trump on cooperation for free and open Indo-Pacific [overnight update].

- Japan reportedly seeks exemption from steel import tariffs being considered by India – press [overnight update].

- Former Bank of Japan (BOJ) Gov Kuroda: Not concerned normalization will ‘hit’ virtuous cycle - US financial press [overnight update].

- Bank of Japan (BOJ) announcement related to outright bond buying operations: 1-3 Years; 3-5 Years, 5-10 Years (Reduced purchase amounts inline with Dec guidance).

- Former BOJ 'top' Economist Kameda said the central bank is becoming more convinced that wages and services prices will keep rising, the language out of the BOJ backs up the case for additional rate hikes - financial press [update].

Korea

- Kospi opens -0.2% at 2,532.

- Follow up: South Korea Acting Pres Choi: To communicate with parliament to pass ‘value-up' bill'; To closely monitor impact of US tariffs, DeepSeek - South Korea press.

- Bank of Korea (BOK) Gov Rhee: Reiterates monetary and fiscal policy both have room for more stimulus; policy board can 'change mind' on rate cut timing [overnight update].

Other Asia

- India central bank (RBI) cuts repurchase rate by 25BPS TO 6.25%; as expected; Maintains Cash Reserve Ratio (CRR) at 4.00%.

North America

- (US) Fed's Logan (non-voter): Trade policy and volatile financial conditions will add to uncertainties; Fed's path should be guided by need to keep inflation expectations anchored.

- (CA) Bank of Canada (BOC) Gov Macklem: World looks increasingly shock prone; Trade protectionism compounds vulnerabilities - conference comments.

- (US) Jan Challenger Job Cuts: 49.8K v 38.8K prior; Y/Y: -39.5% v 11.4% prior.

- (US) Redfin: New listings of U.S. homes for sale rose 7.9% from a year earlier during the four weeks ending February 2, the biggest increase since the end of last year; There are 5 months of supply on the market, up from 4.4 months a year earlier and the most in six years.

- (US) Initial jobless claim: 219K V 213KE; continuing claims: 1.89M V 1.87ME.

- (US) Q4 preliminary Nonfarm Productivity: 1.2% V 1.2%E; unit labor costs: 3.0% V 3.4%E.

- (US) Jan preliminary NA Class 8 Net Orders 24K, -28% m/m, +15% - FTRintel.com.

- (IR) US Treasury issues new Iranian sanctions, incl oil, shipping, and energy companies.

- (US) Weekly EIA Natural Gas inventories: -174 BCF VS. -168 BCF TO -170 BCF indicated range.

- (US) Trade Rep nominee Greer: Universal tariff should be studied and considered to see if it can reduce the US trade deficit.

- (US) Treasury Secretary Bessent: There's a lot of misinformation about DOGE and Treasury Depts; DOGE not tinkering with IRS or Treasury payment system - media interview

- (US) Federal judge temporarily stays Trump Admin buyout plan for federal workers; Pushes back deadline for govt employees to accept the buyout offer until a hearing on Monday, Feb 10th - press.

- (US) White House said to prepare executive order to cut thousands Dept of Health & Human Services workers - WSJ.

- (MX) Mexico central bank (Banxico) cuts overnight rate by 50BPS TO 9.50%; as expected; board not unanimous.

Europe

- (IE) Ireland Jan Unemployment Rate: 4.0% v 4.5% prior.

- (EU) ECB's Rehn (Finland): ECB should be ready to ease borrowing costs to below neutral level to boost growth - FT.

- (UK) Bank of England (BOE) cuts bank rate by 25BPS TO 4.50%; as expected; Notes careful approach to reducing rates further.

- (UK) BoE quarterly monetary policy report (staff projections): Raises short-term CPI and cuts 2025 GDP.

- (UK) BoE Feb minutes: Voted 7-2 to cut bank rate by 25BPS; Mann (hawk) and Dhingra (dove) both voted for larger 50bps cut.

- (CZ) Czech Central Bank (CNB) cuts 2-week repurchase rate by 25BPS to 3.75%; as expected.

- (UK) BOE Gov Bailey: MPC vote split is not a communication tool; Don't put too much weight on MPC member votes.

- (EU) ECB’s Vujcic (Croatia): We could have stagflation where we have higher inflation, but lower growth.

Levels as of 00:20 ET

- Nikkei 225 -0.5%, ASX 200 -0.1%, Hang Seng +1.4%; Shanghai Composite 1.7%; Kospi +0.8%.

- Equity S&P500 Futures -0.1%; Nasdaq100 -0.1%; Dax +0.1%; FTSE100 +0.6%.

- EUR 1.0374-1.0391; JPY 150.96-151.74; AUD 0.6273-0.6296; NZD 0.5672-0.5690.

- Gold +0.4% at $2,889/oz; Crude Oil +0.4% at $70.89/brl; Copper +0.8% at $4.4935/lb.