- Oil prices extended Friday's gain, which added to the equity risk off mood. Regional equities are down sharply, and US equity futures remain in the red.
- The USD is mostly higher, with GBP, EUR, AUD, making fresh lows. Yen has outperformed. There has been no US cash Tsy trading today as Japan markets are out.
- There was also a raft of headlines from China focused on yuan stability and preventing FX overshooting. Further macro prudential support for the yuan was also enacted. PBoC Governor Pan reiterated the policy bias around further RRR and interest rate cuts. China trade data saw exports rise more than forecast, although front loading ahead of end 2024 may have been a factor.
- The calendar is light on today, with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance in focus.
MARKETS
US TSYS: Tsys Futures Edge Lower, Cash Trading Remains Closed
- Not surprisingly it has been a quiet session for Tsys with cash trading closed with Japan out. Short-end tsys futures have broken below Friday's lows, however ranges have remained tight. TU has traded sideways since this morning, last -00⅞ at 102-15+, while TY is -04+ at 107-08.
- There was a decent flattening across curves on Friday, with the 2s10s dropping 4.5bps to 38bps, while the 5s30s & 2s30s both fell about 10bps. The 10yr closed at 4.759%, breaking above the 2024 highs, with sights now on the 2023 highs of 5.01%.
- Former Fed Vice Chair Randal Quarles dismissed concerns over the Fed's independence under Trump, emphasizing its structural resilience to political pressure. He noted that tariffs are unlikely to drive inflation significantly and predicted limited labor market impacts from potential deportations. With US inflation progress stalling and a resilient labor market, the markets are now expect just one Fed rate cut in 2025 and not until October/December meetings.
- Projected rate cuts through mid-2025 have cooled slightly throughout the session vs. Friday morning levels*: Jan'25 at -0.7bp (-1.7bp), Mar'25 -5.1bp (-10.1bp), May'25 -9.2bp (-15.9bp), Jun'25 -16.9bp (-25.6bp), Jul'25 -18.7bp (25.5bp).
- The calendar is light on today, with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance, focus will turn to PPI & CPI later in the week.
STIR: $-Bloc Markets Firm After Stronger Than Expected NFPs
In the $-bloc, rate expectations through December 2025 have firmed by 11–17bps following Friday’s stronger-than-expected US non-farm payrolls data for December. The firming has been led by Canada and Australia, where December pricing strengthened by 17bps and 15bps, respectively. The US market saw a 14bps increase, while New Zealand has risen by 11bps.
- Looking ahead to December 2025, the projected official rates and cumulative easing across the $-bloc are as follows: US (FOMC): 4.05%, -28bps; Canada (BOC): 2.82%, -43bps; Australia (RBA): 3.75%, -57bps; and New Zealand (RBNZ): 3.02%, -123bps.
Figure 1: $-Bloc STIR (%)
Source: MNI – Market News / Bloomberg
AUSSIE BONDS: Short End Leads Market Lower, US CPI On Wed & AU Jobs On Thu
ACGBs (YM -15.0 & XM -10.0) are sharply weaker and hovering near Sydney session cheaps.
- Outside of the previously outlined MI Inflation Index and ANZ-Indeed job advertisements, there hasn't been much by way of domestic drivers to flag.
- There have been no cash dealings in US tsys in today’s Asia-Pac session with Japan out for a holiday. TYH5 is, however, weaker at 107-07+, -0-05 from NY closing levels. This week, CPI and PPI inflation measures are on Wednesday and Thursday respectively. The scheduled Fed speaker docket is muted with the Fed Blackout on Friday.
- Cash ACGBs are 10-14bps cheaper, led by the short end.
- Swap rates are 9-12bps higher, with the 3s10s curve flatter.
- The bills strip has sharply bear-steepened, with pricing -5 to -15.
- RBA-dated OIS pricing is 3-16bps firmer across meetings today. A 25bp rate cut is now less than fully priced for April (97%), with the probability of a February cut at 65% (based on an effective cash rate of 4.34%).
- Tomorrow, the local calendar will see Westpac Consumer Confidence data.
- AOFM Bond issuance will resume this week, with A$800mn of the 3.50% 21 December 2034 bond to be sold on Wednesday and A$700mn of the 2.75% 21 November 2027 bond to be sold on Friday.
BONDS: NZGBS: Heavy Session But Outperformance Vs. ACGBs
NZGBs closed at session cheaps, with benchmark yields 7bps higher. The NZGB 10-year did, however, outperform ACGBs, with the NZ-AU yield differential 6bps narrower.
- There have been no cash dealings in US tsys in today’s Asia-Pac session with Japan out for a holiday. TYH5 is, however, weaker at 107-07, -0-05+ from NY closing levels.
- Outside of the previously outlined building approvals and filled jobs data, there hasn't been much by way of domestic drivers to flag.
- Swap rates closed 7-8bps higher, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed 2-7bps firmer across meetings, with October leading. 49bps of easing is priced for February, with a cumulative 126bps by November 2025.
- Tomorrow, the local calendar will see the results of the NZIER Business Opinion Survey.
- 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.
FOREX: Fresh Lows For GBP, EUR, & AUD, Yen Outperforms
The USD remains on the front foot, particularly against GBP and EUR, which typically don't move much during the Asia Pac time zone. The USD BBDXY index was last above 1321.7, above intra-session highs from Friday's US session.
- As the session has unfolded GBP losses have accelerated. GBP/USD was last near 1.2130/35, off a little over 0.60% and the worst G10 performer so far today. This is fresh lows in the pair back to 2023.
- There don't appear any fresh catalysts for the move, other than continuation of losses from last week, amid financial stability/twin deficit concerns.
- EUR/USD is back to 1.0210, testing under Friday lows as well. This puts the pair back to levels last seen in 2022. We are around 0.30% weaker against the USD. SEK is off around 035% as well, last near 11.26 against the USD.
- AUD and NZD initially showed some resilience but this hasn't been sustained. AUD/USD was last sub 0.6135, fresh lows back to 2020. NZD/USD is close to 0.5550. We had Australian and NZ data prints, but they didn't shift the sentiment needle.
- Equity sentiment has been weak throughout the region, following losses in US markets on Friday (weighed by higher US yields post NFP). There has been no US Tsy cash trading so far today, with Japan markets out.
- Yen is benefiting from the risk averse tone, with USD/JPY upticks towards 158.00 sold. We were last near 157.50, around 0.15% stronger in yen terms.
- There were a raft of headlines earlier around PBoC support for the yuan, but this didn't support CNH greatly.
- Looking ahead, it is relatively quiet with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance on tap.
ASIA STOCKS: Foreign Investors Selling Asian Equities To Kick The Year Off
Another large outflow from Taiwan on Friday, this follows the US plans more chip restrictions, which look to hurt Taiwan more than other nations. India has had a tough start to the new year will almost $2b in outflows so far.
- South Korea: Recorded outflows of -$84m Friday, resulting in a 5-day total of +$730m. YTD flows are positive at +$767m. The 5-day average is +$146m, better than the 20-day average of -$40m and the 100-day average of -$136m.
- Taiwan: Saw significant outflows of -$503m Friday, with the 5-day total at -$2m. YTD flows are negative at -$595m. The 5-day average is $0m, better than the 20-day average of -$84m and the 100-day average of -$91m.
- India: Registered heavy outflows of -$819m Thursday, bringing the 5-day total to -$2.1b. YTD flows are also negative at -$1.96b. The 5-day average is -$417m, worse than the 20-day average of -$193m and the 100-day average of -$47m.
- Indonesia: Posted outflows of -$12m Friday, with the 5-day total at -$131m. YTD flows are negative at -$181m. The 5-day average is -$26m, slightly better than the 20-day average of -$29m but worse than the 100-day average of +$7m.
- Thailand: Recorded outflows of -$32m Friday, contributing to a 5-day total of -$40m. YTD flows are negative at -$62m. The 5-day average is -$8m, better than the 20-day average of -$11m and the 100-day average of -$9m.
- Malaysia: Registered outflows of -$15m Friday, resulting in a 5-day total of -$112m. YTD flows are negative at -$134m. The 5-day average is -$22m, slightly better than the 20-day average of -$25m but worse than the 100-day average of -$12m.
- Philippines: Saw outflows of -$1m Friday, bringing the 5-day total to -$26m. YTD flows are negative at -$25m. The 5-day average is -$5m, matching the 20-day average of -$5m and worse than the 100-day average of +$1m.
Table 1: EM Asia Equity Flows
EQUITIES: Asian Equites Fall Following US Jobs
Asian markets declined as stronger-than-expected US jobs data dampened hopes for further Fed rate cuts, with the MSCI Asia Pacific Index down 1.1% and benchmarks in Hong Kong, Taiwan, and South Korea leading losses. Chinese stocks extended declines despite record-high exports, with investors awaiting more pro-consumption policies. Brent crude rose above $81 a barrel after aggressive US sanctions on Russia, adding inflationary pressure for central banks.
- India's Nifty 50 and Sensex slumped to multi-month lows, pressured by surging oil prices, rising Treasury yields, and weak earnings growth, with financial services stocks driving the decline.
- GS strategists remain bullish on Chinese stocks, predicting a 20% rise by year-end despite recent market turmoil. They expect sentiment and liquidity to improve by late Q1 2025 due to better tariff and policy clarity. Goldman recommends government consumption proxies, exporters benefiting from a weaker yuan, and select tech, infrastructure, online retail, media, and healthcare stocks, while upgrading consumer services to overweight.
- Apple's Chinese suppliers saw their shares drop after analyst Ming-Chi Kuo projected 2025 iPhone shipments at 220-225m units, below Wall Street's 240m consensus. Apple shares fell 2.4% on Friday following the report. Key suppliers, including AAC Technologies (-3.8%), Hon Hai (-4.1%), Quanta (-3.7%), and GoerTek (-2.6%), experienced declines here in Asia
- Traders now expect limited Fed rate cuts in 2025, with fed fund futures now pricing in just a single rate cut around the Oct/Dec meetings the markets remain cautious ahead ahead of key US inflation data this week.
- APAC markets: Japanese equities closed, South Korea's KOSPI is -1%, KOSDAQ -1.20%, Taiwan's TAIEX -2.10%, Hong Kong's HSI -1.15%, China's CSI 300 -0.45%, Australia's ASX200 -1.30%, New Zealand's NZX50 -0.55%
OIL: Building On Friday Gains, Multi Month Highs Post Fresh US Sanctions
Monday oil trends are seeing an extension of Friday's gains. Brent crude was last comfortably above $81/bbl, in terms of the active contract. WTI was around $78.2/bbl in latest dealings, with both contracts up around 2%. We were up over 3.5% in Friday trade for these oil benchmarks.
- For WTI, the stronger reversal to the upside has resulted in a breach of key short-term resistance at $76.41, the Oct 8 high. Clearance of this hurdle strengthens a bull theme and opens $79.59, the Jul 5 ‘24 high. For Brent, mid August highs from 2024 around $82.40/bbl may be an upside focus point.
- Sentiment is being supported by fresh sanctions from the US administration on Russia, with the U.S treasury issuing details on a widely speculated list of further sanctions on Russian oil entities. Still, BBG notes they are quite comprehensive relative to what was already in place (see this link).
- The new US sanctions on Russian crude and products is bullish for oil globally, but history has shown Russian barrels generally find markets despite sanctions, Platts said.
- Data today showed softer China oil import volumes, which were down in y/y terms for Dec last year, but this has done little to impact positive sentiment at this stage.
GOLD: Uptrend Continues, Equity Vol Offsetting Higher USD/Yields
After getting close to $2700 on Friday, gold sits slightly lower in the first part of Monday trade. We were last sub $2690, off modestly versus end NY levels from Friday. Still, we remain very much in buy the dip mode, with the firmer US yield/USD backdrop post NFP on Friday not upsetting the recent uptrend in bullion. Last week's +1.88% gain was the best since late Nov last year.
- Working in gold's favor has been more risk aversion emanating from equity markets. US futures continue to track lower in Monday trade so far, down 0.44% for Eminis and 0.60% for Nasdaq futures. The US VIX index tested above 20% on Friday as well.
- A clean break above $2700 could see mid Dec 2024 highs above $2726 targeted.
CHINA DATA: Exports End 2024 Firmer, But Uncertain 2025 Outlook
China Dec trade figures were better than expected. Exports rose 10.7%y/y against a 7.5% forecast 6.7% prior. Since a trough in March last year, exports have mostly been on a modestly improving trend. 2025 remains much more uncertain though, given the returning Trump administration to the White House Imports also beat expectations, up 1.0%y/y (versus -1.0% forecast and -3.9% prior. The trade surplus was near $105bn, against a $100bn forecast.
- On the export side, shipments to the US rose 15.7%y/y, up from 7.3% in Nov. In levels terms, exports to the US were the highest since Q3 2022. Exports to Taiwan also bounced to 14.2% and were quite firm ASEAN economies (+19.2%) and the EU (+8.8%y/y).
- The trade surplus with the US eased a touch to $33.50bn, but is still elevated by recent standards.
- On the import side, commodity import volumes were mixed. Oil and coal were both down in Dec from a volume standpoint, coal was still a healthy +14.4%y/y, but oil was off 1.9%. Iron ore import volumes surged to over 112mln tones (up over 10% in m/m terms. Natural Gas volumes were also stronger in m/m terms and up close to 10%y/y.
Fig 1: China Export & Import Trade Trends Y/Y
Source: MNI - Market News/Bloomberg
ASIA FX: CNH & KRW Outperform, SEA FX Weakens Amidst Higher US Yields
In Asia FX markets, the yuan and won have outperformed stronger USD trends evident against the majors (although yen has outperformed again). In South East Asia and India, USD gains have been evident playing catch up to Friday's move.
- For USD/CNH we got to lows 7.3508, but sit higher now, last near 7.3560. This keeps us within recent ranges, with late 2024 highs intact near 7.3700. There have been a raft of headlines from the PBoC, which followed an FX meeting in Beijing. Keeping the yuan basically stable is still the clear aim, with FX overshoots to be avoided. The central bank also raised the cross-border macro prudential rule to 1.75 from 1.50. This allows local companies to raise more funds offshore and is designed to alleviate pressure on the yuan (by boosting the supply of offshore currencies onshore).
- PBoC Governor Pan echoed yuan stability comments and stated the offshore yuan market would be further developed in Hong Kong. Stimulus efforts should be aimed at the consumer Pan added. Further RRR and interest rate cuts will also transpire to support the economy.
- USD/KRW spot has been relatively steady, last near 1470, with upticks in the pair faded on moves through 1474, around Friday evening highs. USD/TWD has surged through 33.00, playing catch up with USD gains from Friday.
- In SEA FX markets, some markets have seen larger USD losses, showing greater sensitivity to US yield shifts. IDR has lost 0.60, with USD/IDR back close to 16300, although BI rhetoric has also risen.
- THB is down 0.60%, USD/THB up to 34.80, fresh highs since Nov last year. PHP is down 0.50% to 58.65/70, while MYR has fallen 0.30% to 4.5100.
- USD/INR has also spiked, the pair rising through 86.00 to 86.40, fresh record highs. This is further evidence of greater FX volatility under the new central bank leadership.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 13/01/2025 | - | *** |  CN | Money Supply |
| 13/01/2025 | - | *** | CN | Social Financing |
| 13/01/2025 | - | *** | CN | New Loans |
| 13/01/2025 | 1600/1100 | ** |  US | NY Fed Survey of Consumer Expectations |
| 13/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 13/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 13/01/2025 | 1900/1400 | ** | US | Treasury Budget |
| 14/01/2025 | 0500/1400 |  JP | Economy Watchers Survey | |
| 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 | 1330/0830 | *** | US | PPI |
| 14/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |