- The USD was under pressure early doors on BBG headlines that Trump economic advisors were considering a gradual tariff hike plan. Dollar indices were supported on dips though, as this hasn't been confirmed as policy yet.
- NZD/USD remained an outperformer though, aided by a sharp rise in onshore yields. The local market's performance appears to have been driven by the positive signals from the Q4 NZIER Business Opinion Survey and its influence on OIS pricing, which is tempering expectations for RBNZ easing. China and Hong Kong equities have also rebounded.
- The BoJ's Deputy Governor said the bank will discuss whether to raise the policy rate or not at the meeting on Jan. 23-24, based on the latest outlook for the economy and prices. JGB futures are sharply weaker, but this follows yesterday's holiday. USD/JPY is tracking unchanged so far today.
- The focus coming up will be the US PPI print (ahead of Wednesday's CPI outcome).
MARKETS
- Tsys futures are trading slightly higher today, although ranges are narrow. Long-end contracts are outperforming, however all the gains were made on the opened, and we have since been slowly pairing those gains are the session has progressed. TU is +01⅛ at 102-17¼, while TY is trading +06 at 107-13+
- The trend in Treasury futures is unchanged and remains bearish. Yesterday’s bearish start to the week, has once again, confirmed a resumption of the downtrend. Sights are on 107-04 next, a Fibonacci projection. Note too that moving average studies remain in a bear-mode position highlighting a dominant downtrend. Key short-term resistance is seen at 108-26, the 20-day EMA.
- Cash tsys yields are slightly lower today, although still remain near Friday's highs. The 2yr is -0.2bps at 4.377%, while the 10yr is -1.2bps at 4.766%. The 2s10s is 1bp lower at 38.408.
- Trump's economic team is considering a gradual rollout of tariffs, increasing 2-5% monthly, to enhance negotiating leverage while minimizing inflation risks.
- Projected rate cuts through mid-2025 continued to retreat on Monday, we have given back about 1bp of that move through to June, however firmed 2bps for July vs. late Friday levels ()*: Jan'25 steady at -0.7bp, Mar'25 -5.4bp (-6.3bp), May'25 -9.5bp (-10.5bp), Jun'25 -17.3bp (-18.2bp), Jul'25 -20.2bp (20.2bp).
- Later today we have PPI & Federal Budget Balance, focus will then turn to Wednesday’s US CPI.
JGBS: BoJ Dep. Gov Flags Hike Discussion At January MPM
JGB futures are weaker, -52 compared to settlement levels, after yesterday’s holiday.
- Outside of the previously outlined Current Account Balance, Trade Balance, and Bank Lending data, the market had a speech by BOJ Deputy Governor Himino to digest.
- "In conducting monetary policy, it is difficult but essential to judge the right timing," Deputy Gov. Ryozo Himino said in a speech to business leaders in Kanagawa prefecture, near Tokyo. He said the bank will discuss whether to raise the policy rate or not at the meeting on Jan. 23-24, based on the latest outlook for the economy and prices. Although the deputy governor didn't strongly signal a hike next week, he said the economy and prices are on track toward the bank's goal. (per BBG)
- Cash US tsys are 1-2bps richer in today’s Asia-Pac session. US PPI data will be released later today, ahead of CPI data tomorrow.
- Cash JGBs are 3-6bps cheaper across benchmarks. The benchmark 5-year yield is 4.1bps higher at 0.870% after today’s mixed auction demand metrics.
- Swap rates are flat to 4bps higher, with a steepening bias. Swap spreads are mixed.
- Tomorrow, the local calendar will see M2 & M3 Money Stock and Machine Tool Orders data alongside BoJ Rinban Operations covering 1-10-year and 25-year+ JGBs.
AUSSIE BONDS: Slightly Richer Ahead Of US PPI Data
ACGBs (YM +1.0 & XM +1.5) are slightly stronger on a data-light session.
- Outside of the previously outlined Westpac consumer confidence, there hasn't been much by way of domestic drivers to flag.
- Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s modest sell-off. US PPI data will be released later today, ahead of CPI data tomorrow.
- Cash ACGBs are 1-2bps richer with the AU-US 10-year yield differential at -15bps.
- Swap rates are 1-2bps lower.
- The bills strip is little changed.
- RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut is fully priced for April (102%), with the probability of a February cut at 68% (based on an effective cash rate of 4.34%).
- Tomorrow, the local calendar is empty.
- AOFM Bond issuance will resume this week, with A$800mn of the 3.50% 21 December 2034 bond to be sold tomorrow and A$700mn of the 2.75% 21 November 2027 bond to be sold on Friday.
BONDS: NZGBS: Sharply Cheaper Outright & Relatively After Encouraging QSBO
NZGBs are significantly cheaper on both an outright and a relative basis. Benchmark yields have risen by 10–11bps, with the NZ-US and NZ-AU 10-year yield differentials widening by 9bps and 12bps, respectively.
- In contrast, cash US Treasuries and ACGBs are ~1bp richer during today’s Asia-Pacific session. The local market's underperformance appears to be driven by the positive signals from the Q4 NZIER Business Opinion Survey and its influence on OIS pricing, which is tempering expectations for RBNZ easing.
- To sum up, the survey showed that a net 16% of businesses expect the economy to improve, vs 1% expecting it to get worse in Q3. This was the first positive outlook since Q2 2021. After seasonal adjustment, a net 9% of businesses expect the economy to improve, vs a revised 4% expecting deterioration in Q3.
- Swap rates are 8-13bps higher, with the 2s10s curve flatter.
- RBNZ dated OIS pricing is 3-18bps firmer across meetings, with late 2025 leading. 45bps of easing is priced for February, with a cumulative 108bps by November 2025. The expected official rate for November has firmed 30bps since Friday’s close.
- Tomorrow, the local calendar is empty.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$175mn of the 3.50% Apr-33 bond and NZ$75mn of the 1.75% May-41 bond.
STIR: RBNZ Dated OIS Sharply Firmer After QSBO
It was a heavy session for the local market, with the move driven by the positive signals from the Q4 NZIER Business Opinion Survey. It had a significant influence on the OIS market, which tempered expectations for RBNZ easing.
- To sum up, the QSBO survey showed that a net 16% of businesses expect the economy to improve, vs 1% expecting it to get worse in Q3. This was the first positive outlook since Q2 2021. After seasonal adjustment, a net 9% of businesses expect the economy to improve, vs a revised 4% expecting deterioration in Q3.
- RBNZ dated OIS pricing closed 3-18bps firmer across meetings, with late 2025 leading.
- 45bps of easing is priced for February, with a cumulative 108bps by November 2025. The expected official rate for November has firmed 30bps since Friday’s close.
Figure 1: RBNZ Dated OIS Today vs. Yesterday (%)
Source: MNI – Market News / Bloomberg
FOREX: NZD Outperforms On OIS Re-Pricing, Steady Trends Elsewhere
The USD was under pressure at the NY/Asia Pac cross over, as headlines crossed from Bloomberg that Trump economic advisers were considering/studying a gradual tariff hike approach. This reportedly hasn't been present to incoming President Trump yet. The BBDXY opened at lows near 1314, not too far off pre NFP levels from last Friday, but we found some support and last track near 1317.1 (still off a little over 0.20%).
- NZD/USD has been an outperformer, rising over 0.40%, to put the pair back above 0.5605. We are still short of the 20-day EMA resistance level, which comes in around 0.5640.
- Outside of the above BBG article, which weighed on broad USD sentiment, NZD was aided by the more positive Q4 NZIER Business Opinion Survey. Whilst the survey warned of on-going recession risks, the outlook for 2025 is on the improve. RBNZ dated OIS pricing closed 3-18bps firmer across meetings, with late 2025 leading. The expected official rate for November has firmed 30bps since Friday’s close. This has aided NZ-US yield differentials.
- AUD/USD has risen, but lagged NZD moves, last near 0.6185, up around 0.15%.
- Yen has lagged NZD shifts and modest AUD gains, although GBP & EUR have given up earlier gains as well. USD/JPY spiked towards 158.00 as BoJ Deputy Governor Himino spoke. However, as Himino noted that a rate would be discussed at the upcoming meeting, along with noting real yields shouldn't stay negative when deflationary forces end, USD/JPY moved off highs. The pair was last near 157.50, little changed for the session.
- In the cross asset space, US equity futures are higher, regional equities are mostly firmer as well, led by China/HK. Japan has lagged as onshore markets return from yesterday's long weekend. US yield are down a touch.
- Looking ahead, we have US PPI in focus, along with some central bank speak.
FOREX: Leveraged Funds Add to JPY & CAD Shorts In Week Ending Jan 7
The updated CFTC positioning data for FX markets, shows leveraged investor shifts in favor of the USD in the first week of January. The table below shows the weekly change and outright position for leveraged contracts and asset managers by currency. This is as at January 7th, so last Tuesday.
- A big shift was against JPY, with near -11k shorts added by leveraged names. Outright shorts stand at -53.2k, but this is short of 2024 extremes, which extended beyond -100k.
- CAD shorts were also added to, with -94.6k outright shorts the most as measured by leveraged investors. This is close to recent cycle lows for leveraged shorts.
- The bias for asset managers was generally in favour of the USD, albeit in smaller magnitudes compared to the leveraged side. The exception was the AUD, where current shorts were cut. CAD shorts were also cut but by a much more modest amount compared to the AUD.
Table 1: CFTC Positioning - By Currency & Investor Type
| Leveraged Contracts | Asset manager Contracts | |||
| Weekly Change | Outright Position | Weekly Change | Outright Position | |
| JPY | -10844 | -53162 | -1049 | -9579 |
| EUR | 252 | -41588 | -2598 | 151263 |
| GBP | -1795 | 47313 | -3156 | -58082 |
| AUD | -558 | -33788 | 14000 | -42846 |
| NZD | -1768 | -13547 | -1191 | -40443 |
| CAD | -9722 | -94579 | 1934 | -160295 |
| CHF | -4041 | -9808 | -85 | -36062 |
| MXN | -8353 | -6075 | 389 | 6945 |
Source: CFTC/Bloomberg/MNI - Market News
ASIA STOCKS: China & Hong Kong Equities Surge On Hope Of Gradual Tariff Hikes
Chinese stocks surged as the US considered gradual tariff hikes, boosting sentiment alongside pledges from Chinese authorities to stabilize markets. The CSI 300 has gained 2%, ending a four-day losing streak, while the Shenzhen Composite and Shanghai Composite are 2.7% and 1.9%, respectively. Major gainers included Beijing Kingsoft Office Software (+8.7%) and Hithink RoyalFlush Information Network (+8.8%). A gauge of Chinese stocks in Hong Kong climbed 1.6%, with the Hang Seng Index benefiting from oversold conditions, last up 1.70%. Investors anticipate positive measures from a regulatory briefing on financial support for economic development later today.
- Trump's economic team is considering a gradual rollout of tariffs, increasing 2-5% monthly, to enhance negotiating leverage while minimizing inflation risks. However uncertainty remains around trade policies is fueling global economic headwinds and driving up long-term borrowing costs, as per BBG.
- Chinese travel-related stocks, such as China Eastern Airlines and TongCheng Travel, gained after the government announced plans to boost tourism through the use of vouchers and expansion of its visa-free policy.
- Chinese pharmaceutical stocks rise after China vows to continuously adjust the country’s catalog of medicines covered by insurance to include qualified innovative drugs.
- GS is expecting the Chinese government to deploy extra monetary and fiscal easing and support for the home market.
- The HSI is likely benefitting from extreme oversold conditions as the HSI put/call ratio nears lows.
- Across the market, small-cap equities are outperforming large-cap today, with the CSI 1000 & 2000 up 3.55% & 4.10% respectively, while Tech stocks are the top performing sector in the CSI 300, financials & Property lagging. While in Hong Kong, the HS Tech Index is trading 3.65% higher while the Mainland Property Index is up just 1.15%.
- Some point through the session there will be a briefing from Chinese regulators, this could lead to positive headlines which could support Greater Chinese stocks.
ASIA STOCKS: Asian Equities Mixed As Japanese Equities Struggle
Asian markets traded mixed on Tuesday as global economic concerns and US policy developments influenced sentiment. Japan's Nikkei fell 1.5%, marking a fourth day of losses, with chip-related stocks like Advantest and Lasertec sliding after new US export restrictions on semiconductors. Chinese and Hong Kong equities led regional gains, buoyed by optimism over gradual US tariff rollouts and potential policy support for China's economy. The Australian market advanced, supported by energy stocks as oil prices hovered near a five-month high, South Korean shares initially dipped however the KOSPI now trades 0.40% higher while Taiwan’s Taiex rose 0.9%, driven by gains in semiconductor stocks, including a 1% jump from TSMC.
- US Economic Data has been a main contributor of softer equity prices following stronger-than-expected US jobs data increased expectations that the Federal Reserve will delay rate cuts, weighing on growth stocks across the region, with the market now closly watching tonight PPI numbers.
- There is growing optimism Over Gradual US Tariff Rollouts after reports that the incoming US administration considering a measured increase in tariffs this provided a boost to Chinese and Hong Kong equities, easing inflation and growth concerns.
- Oil Prices and Energy Stocks have benefitted from oil prices hovering near a five-month high following tougher US sanctions on Russian oil producers.
- India’s Nifty 50 is nearing oversold territory, with its 14-day RSI approaching 30, a level that has previously signaled potential reversals but can persist below it for extended periods. The broader selloff, driven by rising oil prices and a weak rupee, has also pushed the Nifty Smallcap 250 index to its most oversold level since June 2022, marking its worst day since August.
- US Equity futures are edging higher throughout the session, with Dow eminis +0.15%, S&P 500 eminis +0.30% and NASDAQ 100 eminis +0.46%
ASIA STOCKS: Foreign Investor Dump Asian Semiconductor Stocks
Taiwan recorded its largest outflow since September as TSMC and Hon Hai saw heavy selling. It wasn't much better across the region with South Korea also recording a large outflow.
- South Korea: Recorded outflows of -$619m yesterday, contributing to a 5-day total of -$33m. YTD flows are positive at +$148m. The 5-day average is -$7m, better than the 20-day average of -$68m and the 100-day average of -$141m.
- Taiwan: Experienced significant outflows of -$1.62b yesterday, resulting in a 5-day total of -$3.16b. YTD flows are negative at -$2.21b. The 5-day average is -$632m, worse than the 20-day average of -$155m and the 100-day average of -$123m.
- India: Posted outflows of -$165m Friday, contributing to a 5-day total of -$1.92b. YTD flows are negative at -$2.13b. The 5-day average is -$383m, worse than the 20-day average of -$181m and the 100-day average of -$47m.
- Indonesia: Registered outflows of -$23m yesterday, with the 5-day total at -$97m. YTD flows are negative at -$205m. The 5-day average is -$19m, slightly better than the 20-day average of -$30m, but worse than the 100-day average of +$6m.
- Thailand: Recorded small inflows of +$3m yesterday, resulting in a 5-day total of -$55m. YTD flows are negative at -$59m. The 5-day average is -$11m, worse than the 20-day average of -$8m and the 100-day average of -$9m.
- Malaysia: Posted outflows of -$72m yesterday, contributing to a 5-day total of -$171m. YTD flows are negative at -$206m. The 5-day average is -$34m, worse than the 20-day average of -$24m and the 100-day average of -$14m.
- Philippines: Recorded outflows of -$12m yesterday, resulting in a 5-day total of -$38m. YTD flows are negative at -$37m. The 5-day average is -$8m, worse than the 20-day average of -$5m but equal to the 100-day average of $0m.
Table 1: EM Asia Equity Flows
COMMODITIES: Oil Consolidates, Gold & Metals Higher
Oil benchmarks sit a touch off recent highs, although more so for Brent than WTI. Brent was last around $80.75/bbl, off around 0.30% for the session so far. WTI was close to $78.70/bbl. Both benchmarks remain within striking distance of recent highs, which came post fresh US sanctions on Russia at the end of last week. Elsewhere, gold continues to trade with a positive bias, up nearly 0.30%. Metals are mostly positive as well, with copper and iron ore up.
- For WTI, upside focus is on $79.59, the Jul 5 ‘24 high, followed by $80.14, the Apr 12 ’24 high and a key medium-term resistance. Tanker rates have reportedly risen in response to US actions, while other measures of supply, like prompt spreads are also giving bullish signals for oil.
- Gold maintains its support on dips backdrop, last near $2670, up modestly in Tuesday trade to date. Recent resistance around $2700 remains intact. The softer USD backdrop is lending support to hold today, although better equity trends is likely aiding risk appetite (which can be a gold headwind).
- Copper has been aided by USD softness and the earlier reports of a gradual ramp up in tariffs by the returning Trump administration. CMX coper was last up 0.80% near $436.
- Iron ore has recaptured the $100/ton handle. A better China equity backdrop, amid multiple supports, is a positive, while since Q4 last year, Iron ore has been supported sub $100/ton. Yesterday's bumper iron ore import number for China for Dec is another positive.
INDONESIA CENTRAL BANK: MNI BI Preview: Jan 2025: IDR Stability Remains In Focus
EXECUTIVE SUMMARY:
- Bank Indonesia (BI) meets on January 15 and is likely to keep rates at 6.0% again, as it was very clear in its December meeting statement that the “the focus of monetary policy is on strengthening Rupiah stability” given current economic uncertainties especially from the US.
- USDIDR is back above 16200 and is higher than the December 18 meeting when policy was on hold. President-elect Trump’s inauguration is on January 20 and so BI is unlikely to determine this month that FX and economic developments allow them to ease again.
- The strong sell-side consensus is also for no change at tomorrow's policy meeting.
FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK:
ASIA FX: Mostly Higher Against the USD, Won Firms On Reports NPS Is Hedging
Asian currencies have mostly traded on the front foot against the USD, in line with softness for the dollar against the majors (USD BBDXY index down 0.25% to 1316.5). Regional equity market sentiment has been more positive, although stronger gains have been evident for China/HK markets. US yields have ticked down by a little over 1bps.
- USD/CNH got to lows of 7.3342 in early trade, on BBG headlines Trump economic advisers were considering/studying a gradual tariff hike approach. This reportedly hasn't been present to incoming President Trump yet. The pair sits back near 7.3470 in latest dealings. USD/CNY spot is a touch lower but still above the 7.3300 level at this stage. Onshore equities are notably higher, the above tariff story helping, along with regulators saying they will support markets further.
- The won is an outperformer, up 0.45%, but at 1461, USD/KRW remains within recent ranges. Headlines crossed earlier that the National Pension Service was selling USDs as part of its strategic hedging program. BBG stated late last year, such flows could emerge if USD/KRW sustained above the 1450 level (see this link for more details). Spot USD/TWD is little changed, holding near 33.09.
- In SEA FX markets, we are seeing softer USD trends to various degrees. THB is up around 0.25%last near 34.70. We had Dec consumer confidence figures earlier, which continued to tick higher, but we remain sub 2024 highs.
- USD/IDR is slightly lower at 16265. Tomorrow the BI meets and we expect it to remain on hold due to recent FX weakness.
- PHP is up around 0.30% to 58.55/60, while USD/MYR is down 0.20%, to be last near 4.5000.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 14/01/2025 | 0735/0835 |  EU | ECB's Lane speech on Europe, Asia and the Changing Globe | |
| 14/01/2025 | 0830/0830 |  GB | BOE's Breeden speech on Financial Stability | |
| 14/01/2025 | 0900/1000 | * |  IT | Industrial Production |
| 14/01/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 14/01/2025 | 1000/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 14/01/2025 | 1100/0600 | ** |  US | NFIB Small Business Optimism Index |
| 14/01/2025 | - | *** |  CN | Money Supply |
| 14/01/2025 | - | *** | CN | Social Financing |
| 14/01/2025 | - | *** | CN | New Loans |
| 14/01/2025 | 1330/0830 | *** | US | PPI |
| 14/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 14/01/2025 | 1500/1000 | US | Fed's Schmid | |
| 14/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 15/01/2025 | 0315/0415 | EU | ECB's Lane in fireside chat at GS global macro conference | |
| 15/01/2025 | 0700/0700 | *** | GB | Consumer inflation report |
| 15/01/2025 | 0700/0700 | *** | GB | Producer Prices |
| 15/01/2025 | 0700/0800 | *** |  SE | Inflation Report |
| 15/01/2025 | 0745/0845 | *** |  FR | HICP (f) |
| 15/01/2025 | 0800/0900 | *** |  ES | HICP (f) |
| 15/01/2025 | 0800/0900 | EU | ECB's De Guindos at 15th Spain Investors Day | |
| 15/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 15/01/2025 | 1000/1100 | ** | EU | Industrial Production |
| 15/01/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 15/01/2025 | 1330/0830 | ** |  CA | Monthly Survey of Manufacturing |
| 15/01/2025 | 1330/0830 | ** | CA | Wholesale Trade |
| 15/01/2025 | 1330/0830 | *** | US | CPI |
| 15/01/2025 | 1330/0830 | ** | US | Empire State Manufacturing Survey |