- US recession fears dominated early, but US equity futures and Tsy yields are away from session lows. In Canada, former central bank Chief Mark Carney will be the next Prime Minister.
- Japan labor earnings data was weaker than expected, but detail still showed resilient core pay outcomes.
- Sunday's softer China inflation data has weighed on CNH and broader China/HK equity risk appetite.
- Looking ahead, we have second tier EU data, while in the US it is just the NY Fed Survey of Consumer Expectations print on tap.
MARKETS
US TSYS: Cash Bonds Richer Across Benchmarks But Off Session Bests
TYM5 is 110-25+, +0-7+ from closing levels, but off the Asia-Pac session high of 111-00.
- Focus on technical support at 110-12.5/110-00 (Intraday low / High Feb 7); resistance above at 111-15 (Wed's high) followed by 112-01/02 (High Mar 4 / 1.382 proj of Jan 13-Feb 7-12 swing).
- Cash US tsys are 2-3bps richer across benchmarks in today’s Asia-Pac session as Asian traders digested Friday’s US jobs data and remarks from Federal Reserve Chair Jerome Powell.
- US payrolls rose by 151k in February, trivially below the 160k consensus estimate. Net revisions to previous months were negligible. The unemployment rate increased to 4.1%, from 4.0% in January.
- Fed Chair Powell said the central bank doesn’t need to hurry to ease policy further and the path to 2% inflation is expected to be bumpy. Fed governor Waller said he wouldn’t support a March cut but sees room to cut rates by two to three times this year.
JGBS: Sharply Weaker After Poor 5Y Auction, Q4 GDP Tomorrow
JGB futures are sharply weaker, -41 compared to settlement levels, after today’s 5-year auction result. The market opened stronger after weaker-than-expected Labor Earnings but that as quickly reversed.
- Today’s 5-year bond auction demonstrated weak demand metrics, with the auction price failing to meet expectations. Moreover, the cover ratio declined and the auction tail lengthened.
- These results aligned with the poor demand metrics observed at this month’s 10-year auction and came despite offering a yield 15-20bps higher than last month, marking a cyclical peak.
- “The US brokerage (JP Morgan) predicts BoJ rate hikes in June and December, but possible US moves may complicate the picture: if tariffs weigh on global economic growth, that might hinder the BOJ’s push to raise rates, but the central bank may have to rush a rate increase if Japan is accused of weakening the yen.” (per BBG)
- Cash US tsys are 2-3bps richer across benchmarks in today’s Asia-Pac session.
- Cash JGBs are 2-8bps cheaper across benchmarks. The benchmark 10-year yield is 5.5bps higher at 1.575%, just below the cycle high of 1.580% set today.
- Swap rates are 2-4bps higher.
- Tomorrow, the local calendar will see Q4 (F) GDP, Household Spending and Money Stock data, alongside BoJ Rinban Operations covering 1-3-year, 5-10-year and 25-year+ JGBs.
JAPAN DATA: Headline Labor Earnings Weaker, But Detail Firmer
Japan January labor cash earnings data mostly printed below expectations. The headline was 2.8% y/y, against a 3.0% forecast and revised 4.4% Dec outcome (originally reported as a 4.8% gain). In real terms, earnings were -1.8%y/y, against a -1.6% forecast and 0.3% prior for Dec (also revised down). See the chart below, headline earnings is the white line, real earnings in the orange line
- In terms of cash earnings, bonus payments fell to -3.7% y/y, versus a 6.2% gain in Dec. This likely weighed on the headline result. Scheduled pay still rose 3.1%y/y, up from 2.6% in Dec, which was a strong result.
- Scheduled cash earnings, on a same sample basis was well below expectations, rising 2.0%y/y, versus 3.5% forecast and 5.3% from Dec. Again though shifts in one-off payments look to be a factor, with special payments falling 10.2%y/y from a 7.5% gain in Dec.
- Scheduled full time pay, on a full time basis, rose to 3.0%y/y, versus 2.9% forecast and 2.8% prior. This metric is still showing firm trends (the green line on the chart below).
- This should help offset some of the negative sentiment around the weaker headline/real earnings results.
Fig 1: Japan Labor Earnings - Headline Y/Y Momentum Slowed In Jan
Source: MNI - Market News/Bloomberg
AUSSIE BONDS: Cheaper, Modest Ranges, Cons & Bus Confidence Tomorrow
ACGBs (YM -3.0 & XM -3.0) are cheaper and near the session’s worst levels on a data-light session.
- Cash US tsys are 2-3bps richer across benchmarks in today’s Asia-Pac session as Asian traders digested Friday’s US jobs data and remarks from Federal Reserve Chair Jerome Powell.
- Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at +15bps.
- Swap rates are 1-2bps higher.
- The bills strip is flat to -2 across contracts.
- RBA-dated OIS pricing is little changed across meetings today.
- Nevertheless, pricing remains mixed compared to February’s pre-RBA Decision levels—meetings through May are 3-4bps firmer, while those beyond are flat to 14bps softer. A 25bp rate cut in April is given a 9% probability, with a cumulative 64bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Tomorrow, the local calendar will see Westpac Consumer and NAB Business Confidence data.
- This week, the AOFM plans to sell A$300mn of the 2.75% 21 May 2041 bond tomorrow and A$800mn of the 3.50% 21 December 2034 bond on Wednesday.
BONDS: NZGBS: Modestly Richer, Middle Of Ranges, Light Local Calendar
NZGBs closed in the middle of the day’s ranges, with benchmark yields 1bp higher, on a local data light day.
- “New Zealand banking leaders told a parliament committee that the Reserve Bank's capital requirements may be too onerous and have pushed up interest rates. The leaders suggested that the current capital settings, which are based on a one in 200 year expected event, may be too severe and that a more balanced approach is needed.” (per BBG)
- Swap rates closed flat to 1bp lower, with the 2s10s curve modestly steeper.
- RBNZ dated OIS pricing is flat to 3bps softer across meetings. 25bps of easing is priced for April, with a cumulative 72bps by November 2025.
- Tomorrow, the local calendar will see Mfg Activity Volume, ahead of Card Spending on Wednesday.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-34 bond and NZ$50mn of the 5.00% May-54 bond.
FOREX: Recession Concerns Fuel Safe Haven Demand
The USD BBDXY index sits up from earlier lows, last near 1268.5. Earlier we got to 1265.28, as dollar sentiment was weighed by US growth/recession concerns. Safe havens JPY and CHF have been the outperformers, although sit away from best levels.
- Weekend comments from US President Trump, which didn't appear to rule out a recession, given the large economic transitions the administration is embarking on, hurt US equity futures from the open. Eminis sunk more than 1%, but sit better now, last off -0.45%.
- US Tsy futures spiked, but likewise, sit off highs. US 10yr yields opened near 4.255%, but sit back near 4.28% now.
- USD/JPY got to lows of 147.09, but sits back at 147.60 in latest dealings, still 0.30% stronger in yen terms. USD/CHF was last near 0.8785, up around 0.15% in CHF terms.
- We had Japan labor earnings data, where the headline figures were below expectations. Weaker bonus payments compared to Dec appeared to be in play. Underlying details on core pay was still firm.
- AUD/USD and NZD/USD have been range bound. The A$ was last near 0.6305/10. Session lows were at 0.6296, with a weaker yuan/softer China/HK equity backdrop not helping sentiment. Weekend data on China inflation showed CPI and PPI in negative territory. NZD/USD was last at 0.5710/15.
- USD/CAD has been relatively steady, last around the 1.4365 level. The new Prime Minister for Canada will be Mark Carney the former head of the BOC and BoE.
- EUR/USD got to highs of 1.0871, but sits back in the 1.0830/35 region now, little changed. EU equity futures are up around 0.80%, continuing to highlight relative EU outperformance compared to the US.
- Looking ahead, we have second tier EU data, while in the US it is just the NY Fed Survey of Consumer Expectations print on tap.
FOREX: Yen & EUR In Favor, Commodity FX Not - Per CFTC Positioning
The table below updates the CFTC positioning update by currency and investor type for the week ending March 4 (last Tuesday). Yen saw the biggest shift in terms of aggerate positions. Leveraged investors exited shorts, adding +14.2k positions to the yen. This is the first outright long since Oct last year. Asset manager investors added to existing longs for the yen, +12k in terms of contract shifts. This is the largest net long since early 2021.
- Leveraged players still sit outright short EUR, although as EUR continued to rally post Tuesday last week, the next update may show fresh longs in this space. Elsewhere, leveraged investors mostly moved against the USD, albeit in fairly modest size. The exception was adding fresh shorts to MXN.
- For asset managers, EUR longs were added to by +20.5k.
- Trends were mixed elsewhere though, with commodity currencies remaining out of favor, with shorts in AUD, NZD and CAD all added to.
- Capital flow shifts to the EU following the recent fiscal news, coupled with global growth/tariff concerns is likely weighing on appetite for commodity currencies.
Table 1: CFTC Positioning Update By Currency & Investor Type - March 4
| Leveraged Contracts | Asset manager Contracts | |||
| Weekly Change | Outright Position | Weekly Change | Outright Position | |
| JPY | 14270 | 2550 | 12007 | 83769 |
| EUR | -2926 | -8222 | 20547 | 211724 |
| GBP | 1682 | 33750 | 2659 | -44639 |
| AUD | 2179 | -28373 | -8081 | -45370 |
| NZD | 5816 | -8919 | -9015 | -51528 |
| CAD | 2297 | -64580 | -8797 | -147153 |
| CHF | 1005 | -15096 | 3012 | -35812 |
| MXN | -11074 | -16685 | -2891 | 7208 |
Source: CFTC/MNI - Market News/Bloomberg
ASIA STOCKS: China’s Equity Markets Lower as Regional Markets Mixed.
Over the weekend, data out showed that the Chinese economy is mired in deflation with both the PPI and CPI now in negative territory. PPI has been stuck firmly negative for multiple years now, showing the challenges companies face after 29 consecutive months of decline. For CPI it was the first time it had fallen back into deflation in over a year.
- China’s main indexes were all lower with the Hang Seng down the worst performer down -2.1%, CSI 300 down -0.83%, Shanghai down -0.59% and Shenzhen down -0.44%.
- Korea’s KOSPI ignored the down day in China to post a +0.43% gain as it approaches key technical levels.
- Malaysia’s FTSE Malay KLCI took the lead from China, falling -0.19% continuing last week’s trend that saw a decline of -1.74%.
- Indonesia’s Jakarta Composite too was dragged lower by -0.54%, despite putting in one of the weeks in recent memory rising +5.8%.
- Other key markets were mixed with Singapore’s FTSE Straits Times down -0.16%, Thailand’s SE Thai down -1.00% whilst The Philippine Stock Exchange Index is up 1.00%.
- India’s NIFTY 50 is opening in a positive mood, up +0.33%, following on from last week’s gain of +1.93%.
ASIA STOCKS: Large Outflows Continue to Dominate.
Large outflows for Taiwan and India capped off a poor week for Asian equity flows as uncertainty continues around tariffs and the impact on Asian economies.
- South Korea: Recorded inflows of +$73m Friday, bringing the 5-day total to -$1445m. 2025 to date flows are -$4,035m. The 5-day average is -$289m, the 20-day average is -$150m and the 100-day average of -$117m.
- Taiwan: Had outflows of -$990m Friday, with total outflows of -$4765m over the past 5 days. YTD flows are negative at -$9911m. The 5-day average is -$953m, the 20-day average of -$361m and the 100-day average of -$159m.
- India: Saw outflows of -$303m as of the 6th, with a total outflow of -$2,834m over the previous 5 days. YTD outflows stand at -$15,230m. The 5-day average is -$567m, the 20-day average of -$326m and the 100-day average of -$214m.
- Indonesia: Posted outflows of -$49m as of Friday , bringing the 5-day total to -$28m. YTD flows are negative at -$1,368m. The 5-day average is -$6m, the 20-day average is -$45m the 100-day average of -$33m.
- Thailand: Recorded inflows of +$42m as of Friday, totaling +$74m over the past 5 days. YTD flows are negative at -$256m. The 5-day average is -$26m, the 20-day average of -$18m the 100-day average of -$18m.
- Malaysia: Experienced outflows of -$70m Friday, contributing to a 5-day outflow of -$199m. YTD flows stand at -$1,396m. The 5-day average is -$40m, the 20-day average of -$32m the 100-day average of -$29m.
- Philippines: Saw inflows of +$3m yesterday, with net inflows of +$7m over the past 5 days. YTD flows are negative at -$252m. The 5-day average is +$1m, the 20-day average of -$8m the 100-day average of -$7m.
Oil Markets Grasp With Deflation in China.
- Oil markets are coming to grips with the realization that China is in the grips of deflation, according to data out over the weekend. Whilst PPI had been stuck in negative territory for some time, February’s CPI has now slipped negative, posing questions about the sustainability of China’s GDP 5% forecast.
- WTI had opened at $67.11 this morning in Asia, trending lower at the open before stabilizing at $66.67.
- Brent opened at $70.49 trending to a low of $69.84, before stabilizing at $70.01
- It was reported that Russia is open to a pause in fighting which oil markets see as a pathway back for oil exports.
- The USD softened into the back end of last week, also helping oil recover from losses last week but was overcome by the China news putting downward pressure in Asia.
- US Energy Secretary Chris Wright is planning to seek US$20bn in funding to replenish the US strategic oil reserves according to reports, a move that was part of Trump’s campaign.
- A major oil refinery near St. Petersburg was hit by drone causing significant damage and saw President Putin saying “The latest strikes by Ukraine show that Moscow’s intention in the country remain the same.”
- Khazakstan has asked their oil companies to reduce output to ensure compliance with OPEC+ reduced production goals.
- China’s import of energy fell in early 2025 with crude oil imports down 5% in January and February.
GOLD: Gold Prices Steady as Central Bank Buying Continues
- Gold consolidated today with prices oscilating around where they started the trading day.
- Opening at $2,912.42 gold did very little all day reaching a high of $2,917.33 before giving back those gains to $2,912.56.
- The World’s largest gold-backed ETF, the SPDR Gold Trust, saw it holdings rise to a multi-month high and is reflective of the general level of demand currently for gold.
- Jordan’s Central Bank has announced an increase in gold reserves by more than 10% year on year.
- Data out from China shows the PBOC added to its gold reserves in February, marking four straight months of a rise in their gold reserves.
CHINA: CPI and PPI Now in Deflation.
- Over the weekend China’s February PPI and CPI was released showing deflation is firmly entrenched in the economy.
- PPI has been stuck firmly negative for multiple years now, showing the challenges companies face after 29 consecutive months of decline.
- For CPI it was the first time it had fallen back into deflation in over a year.
- Data across the region has been distorted by an earlier than usual Lunar New Year impacting the year on year data.
- Despite this consumer inflation is still at lows in recent months with core down and services inflation in decline.
- CPI declined -0.7%, down from 5% in January, worse than consensus of -0.4%.
- Food prices declined -3.3%, consumer goods down -0.9%, services down -0.4% and new energy vehicles down 6%
- China has set its inflation target at the lowest level in two decades at 2% for 2025 as authorities recognizes the challenges ahead.
- The numbers put pressure on the authorities to act with a fiscal and monetary response and it is anticipated that policy changes could be announced soon.
- The Government has set the GDP target for 2025 at 5% with increased spending and bond issuance for regional governments agreed.
CHINA: Xi’s Shift Clear at National Party Congress.
- Economists and industry experts at the NPC have said that China has sent a strong signal in support of the private sector and expect that targeted policies will be rolled out aimed at helping private companies face the difficulties before them in the current environment to create a more dynamic, fairer business environment in China.
- President Xi has in the past, cracked down on the power of private companies yet now sees them as “the main force in nurturing new quality productive forces, and promoting the development of strategic emerging industries and future-oriented industries.”
- “China's unswerving support for the private sector will significantly boost confidence and expectations among entrepreneurs, and revitalize the growth of the world's second-largest economy, while motivating private enterprises to play a bigger role in driving technological innovation and industrial upgrades, “ said economists, industry experts and company executives on the sideline of the ongoing two sessions.
- During the symposium, Xi, who is also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, said the new journey in the new era has provided abundant new opportunities and greater space for the development of the private sector, and it is a prime time for private enterprises and entrepreneurs to give full play to their capabilities.
ASIA FX: USD/Asia Pairs Higher, Inflation Data Weighs On The Yuan
USD/Asia pairs have spent most of the first part of Monday trade tracking higher. Negative spill over has been evident from a weaker yuan trend, while regional equity markets have been mixed. This leaves the region somewhat underperforming softer USD trends against the majors, although aggregate moves have been modest, with G10 currencies away from best levels against the USD and dollar indices up from session lows.
- USD/CNH has firmed back above 7.2600. Earlier dips sub 7.2400 were supported. The USD/CNY fixing rose, despite weaker USD index levels from Friday, while Sunday's inflation data for China reminded markets of the still challenging economic backdrop. headline and core CPI slipped back into deflation. China and HK equities have also been weaker. Upside focus for USD/CNH may rest at the 50-day EMA near 7.2750.
- Spot USD/KRW has gravitated higher, following the weaker yuan and ignoring the firmer yen trend. The pair was last in the 1454/55 region, off around 0.35% in won terms. Local equities are higher but only modestly. Trade/US recession fears are likely weighing at the margin on KRW sentiment in recent sessions as well.
- USD/THB is back to 33.80, off around 0.45% in baht terms. The local FinMin continued to reiterate a desire for a weaker FX to boost tourism and export flows. We are currently close to the 20-day EMA resistance point, while the 100-day day is higher, near 34.10.
- USD/INR got to 87.32 in the first part of trade, but sits back lower now, near 87.20/25. This is still 0.40% weaker in INR terms. USD/IDR is up to 16335/40, off by 0.25% in IDR terms.
- USD/SGD and USD/PHP have tracked higher, but have been relative outperformers in the past month in the Asia FX space. USD/SGD was last near 1.3325/30, while USD/PHP tracked close to 57.35/40. SGD's high beta with respect to G10 FX moves has been evident in the past month.
INDIA: Country Wrap: GST Cut Close - Fin Min.
- India’s Finance Minister has indicated that the Modi Government is very close to reducing the GST rate, following the income tax cuts announced in February (source: BBG)
- As India and the US huddle to finalize the contours of a wide-ranging bilateral trade agreement, the two sides now appear inclined to ink a preliminary trade agreement first, two people aware of the matter said on the condition of anonymity. The preliminary agreement is being deliberated while keeping sensitive issues like immigration policies and intellectual property (IP) transfers off the table. As for what may likely be in, tariff concessions have been proposed for lentils, almonds and advanced technology products in the pharmaceutical sector, among others. (source: MINT NEWS India)
- India’s NIFTY 50 is opening in a positive mood, up +0.33%, following on from last week’s gain of +1.93%.
- INR: The rupee is opening weaker, down -.397% in morning trading at 87.23
- Bonds: India’s 10YR government bond is opening up marginally weaker having rallied 5bps last week.
SOUTH KOREA: Country Wrap: KDI Warns on Korean Growth.
- South Korea's economy is facing "increasing" downside risks due to a prolonged slump in the construction sector and worsening export conditions amid concerns over a global trade war, a state-run economic think tank said Monday. "Recently, the domestic economy has shown signs of mounting downside risks due to sluggish construction and deteriorating export conditions," the Korea Development Institute (KDI) said in its monthly economic assessment report. (source: Yonhap)
- Korea ranked seventh in the world in terms of domestic vehicle output last year, an industry association said Monday, down one notch from a year earlier due to a drop in output amid an economic slowdown. The country's domestic car production fell to 4.13 million units in 2024 from 4.24 million a year ago as local consumption slowed, according to a report released by the Korea Automobile & Mobility Association (KAMA). (source: The Korea Times)
- Korea’s KOSPI ignored the down day in China to post a +0.43% gain as it approaches key technical levels.
- KRW: the won is one of the weaker currencies today, down -.355% at 1,454.29.
- Bonds: Government bonds have sold off also with yields up to 3bps higher in the 5 year maturity and the KTB 10YR 2.79% (+1bp)
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 10/03/2025 | 0700/0800 | *** |  NO | CPI Norway |
| 10/03/2025 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 10/03/2025 | 0700/0800 | ** |  DE | Trade Balance |
| 10/03/2025 | 0700/0800 | ** | DE | Industrial Production |
| 10/03/2025 | 0900/1000 | ** |  IT | PPI |
| 10/03/2025 | - | *** |  CN | New Loans |
| 10/03/2025 | - | *** | CN | Money Supply |
| 10/03/2025 | - | *** | CN | Social Financing |
| 10/03/2025 | 1500/1100 | ** |  US | NY Fed Survey of Consumer Expectations |
| 10/03/2025 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 10/03/2025 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 11/03/2025 | 2330/0830 | ** |  JP | Household spending |
| 11/03/2025 | 2350/0850 | *** | JP | GDP |
| 11/03/2025 | 0001/0001 | * |  GB | BRC-KPMG Shop Sales Monitor |
| 11/03/2025 | 1000/0600 | ** | US | NFIB Small Business Optimism Index |
| 11/03/2025 | 1255/0855 | ** | US | Redbook Retail Sales Index |
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