Source: MNI - Market News/Bloomberg
UK
ENERGY (BBG): “The UK will make it easier to approve and build nuclear plants, as Prime Minister Keir Starmer seeks to boost economic growth and bring down power bills, while also pursuing ambitious decarbonization targets.”
POLITICS (BBC): “Sir Keir Starmer has come under fire at PMQs over the cost of the government's deal to hand over the Chagos Islands to Mauritius. Earlier, the UK said newspaper reports that the effective price tag has jumped from £9bn to £18bn were "entirely inaccurate".”
EU
FRANCE (BBG): “ French Prime Minister Francois Bayrou survived two no-confidence motions on Wednesday, assuring the adoption of a 2025 budget following months of political turmoil.”
UKRAINE (BBG): “US allies expect President Donald Trump’s administration to present a long-awaited plan to end Russia’s war on Ukraine at the Munich Security Conference in Germany next week, according to people familiar with the matter.”
GERMANY (DW): “Former German leader Angela Merkel has reiterated her criticism of chancellor candidate Friedrich Merz after he relied on votes from the far-right Alternative for Germany party (AfD) to pass a motion in parliament last week.”
IRELAND (BBC): “Taoiseach (Irish prime minister) Micheál Martin has insisted that housing is the "number one issue" for the Irish government.”
US
FED (BBG): “Treasury Secretary Scott Bessent said the Trump administration’s focus with regard to bringing down borrowing costs is 10-year Treasury yields, rather than the Federal Reserve’s benchmark short-term interest rate.”
FED (MNI BRIEF): The Federal Reserve can take its time to gauge the impact of any new policies coming from the Trump administration, including tariffs, before reacting because monetary policy is still exerting a drag on economic activity, Fed vice chair Philip Jefferson said Wednesday.
TARIFFS (MNI): President Donald Trump's second-term tariffs could have a bigger more long-lasting impact on inflation than those of his first term, Federal Reserve Bank of Chicago President Austan Goolsbee warned Wednesday, adding the Fed's policy response will depend on the detailed drivers of any inflationary pressures that emerge this year.
SERVICES ISM (MNI INTERVIEW): US Services Prices Trending Upward-ISM's Miller
MIDDLE EAST (BBG): “Aides to President Donald Trump sought to tone down his idea of depopulating and taking over Gaza after his suggestion that the US would “own” the war-ravaged territory was welcomed in Israel but widely condemned elsewhere.”
OTHER
CANADA (MNI BRIEF): Former BOC Governor Stephen Poloz sees the country's dollar dropping as much as 20% in a U.S. trade war, limiting the central bank's ability to cut rates and meet its inflation goal.
CANADA (MNI BRIEF): Investors have been slow to figure out Donald Trump's tariffs will boost inflation and interest rates, but markets and businesses will pressure the president to reconsider, Mark Carney said while campaigning to cement his lead in the contest to replace Justin Trudeau as Canada's prime minister.
JAPAN (MNI BRIEF): Bank of Japan board member Naoki Tamura said on Thursday that the BOJ needs to raise the policy interest rate to at least 1% by the second half of fiscal 2025, not only to contain upside risk to prices, but to achieve the 2% price target in a stable and sustainable manner.
CHINA
TARIFFS (MNI): Advisors discuss Beijing's approach to U.S. tariffs. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
PMI (MINSHENG BANK): “China's economic recovery needs further policy support after January PMI data weakened from the end of last year, according to Wen Bin, chief economist at Minsheng Bank. Facing external uncertainties, action was needed to stabilise domestic demand as soon as possible, Wen added.”
SPRING FESTIVAL (21ST CENTURY BUSINESS HERALD): “China saw 1.9 billion express parcels collected and delivered during the Spring Festival, up 31% from last year, Yicai reported, citing data from the State Post Bureau.”
POLICY (STATE COUNCIL WORK REPORT): “China must intensify counter-cyclical adjustments and balance the relationship between foreign and domestic factors, China's Premier Li Qiang said at a meeting held to discuss drafting this year’s State Council Work Report.”
TRADE (BBC): “China has accused the US of making "unfounded and false allegations" about its role in the fentanyl trade to justify tariffs on Chinese products. The complaint was lodged with the World Trade Organization (WTO) one day after US President Donald Trump raised border taxes on Chinese goods by 10%, a measure he said was intended to address an influx of illegal drugs.”
CHINA MARKETS
MNI: PBOC Net Drains CNY204.5 Bln via OMO Thursday
The People's Bank of China (PBOC) conducted CNY275.5 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY204.5 billion after offsetting the maturity of CNY480 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5667% at 09:28 am local time from the close of 1.8713% on Wednesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 45 on Wednesday, compared with the close of 46 on last trading day before Chinese New Year. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1691 Thurs; -1.02% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1691 on Thursday, compared with 7.1693 set on Wednesday. The fixing was estimated at 7.2663 by Bloomberg survey today.
MARKET DATA
AUSTRALIA DEC. TRADE SURPLUS A$5.085B; EST. +A$6.50B; PRIOR A$6.79B
AUSTRALIA DEC. EXPORTS +1.1% M/M; PRIOR +4.2%
AUSTRALIA DEC. IMPORTS +5.9% M/M; PRIOR +1.4%
SOUTH KOREA DEC. GOODS TRADE SURPLUS $10.434B; PRIOR $9.877B
SOUTH KOREA DEC. CURRENT ACCOUNT SURPLUS $12.368B; PRIOR $10.046B
JAPAN TOKYO OFFICE VACANCIES JAN. 3.83%; DEC. 4.0%
MARKETS
US TSYS: Tsys Steady, Ranges Narrow, Jobless Claims Later
- Tsys futures have traded in narrow ranges, headlines this morning coming out of the Bessent interview with Fox, and the Fed's Jefferson doing little to move rates. TU is -00+ at 102-28 3/8, while TY is -00+ at 109-23+.
- Overnight, In tsys options, notable flows included a large buyer of March puts, fading the rally and targeting a 10-year yield rise to approximately 4.55% ahead of Feb. 21 expiry
- Treasury futures extended the rally into Wednesday's session, hitting a weekly high at 109-27. The TY contract is building on recent gains having cleanly topped resistance at the 50-day EMA of 109-10. This strengthens the short-term bullish case and highlights potential for a stronger reversal. This would open 109.30, a Fibonacci retracement. On the downside, initial support to watch is 108-20+, Tuesday’s low. Clearance of it would signal a reversal.
- Cash tsys yields are trading roughly 1bps higher with the 10yr at 4.428%, after hitting a low of 4.400% overnight.
- Projected rate cuts through mid-2025 gain slightly vs. Wednesday levels (*) as follows: Mar'25 at -4.2bp (-4.1bp), May'25 at -11.9bp (-11.2bp), Jun'25 at -22.7bp (-22.1bp), Jul'25 at -29.1bp (-28.6bp).
- Later today we have Jobless claims followed by Non farms on Friday
JGBS: Hawkish BoJ Tamura Holds Short-End Steady As 30Y Rallies After Supply
JGB futures are stronger, +8 compared to settlement levels.
- Naoki Tamura, the BoJ’s most hawkish board member, suggests that the short-term interest rate should be at the 1% level by the second half of fiscal 2025. Tamura believes the bank needs to raise the rate in a timely and gradual manner to contain upside risks for prices and achieve the price stability target. (per BBG)
- Cash US tsys are ~1bp cheaper in today’s Asia-Pac session. After yesterday’s stronger-than-expected ADP employment in January, the focus has turned to Friday's headline employment data.
- Cash JGBs are flat to slightly cheaper out to the 5-year and 1-7bps richer beyond. The benchmark 30-year yield is 6.6bps lower at 2.27% after today’s supply.
- The 30-year bond auction delivered solid results, with the low price comfortably exceeding dealer expectations, according to a Bloomberg poll. The cover ratio edged higher to 3.7422x, the highest since 2020, up from 3.7227x. However, the auction tail widened to 0.07 from 0.02.
- Swap rates are flat to 4bps lower, with a flattening bias. Swap spreads are mixed.
- Tomorrow’s calendar will see Household Spending and Coincident/Leading Indices alongside BoJ Rinban Operations covering 1-10-year JGBs.
AUSSIE BONDS: Richer, Most Confident Of An RBA Cut Since Mar-2020
ACGBs (YM +3.0 & XM +5.5) are richer and near Sydney session highs.
- “The Australian economy has so far tracked the RBA’s narrow path to a soft landing, but we expect below-potential growth, sticky inflation, and global trade shocks to complicate the final descent,” said Nick Stenner, who worked at the RBA until 2024 and is now at BofA in Sydney.
- Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session after yesterday’s strong session. After yesterday’s stronger-than-expected ADP employment in January, the focus has turned to Friday's headline employment data.
- Cash ACGBs are 3-5bps richer with the AU-US 10-year yield differential at -12bps.
- Swap rates are lower with the 3s10s curve flatter.
- The bills strip has bull-flattened, with pricing flat to +3.
- RBA-dated OIS pricing is flat to 2bps softer across meetings today. A 25bp rate cut is more than fully priced for April (135%), with the probability of a February cut at 91% (based on an effective cash rate of 4.34%).
- The last time the market was this confident about a rate cut was in March 2020, when expectations proved correct—the RBA cut rates twice that month, once at the scheduled meeting and again on the 20th.
- Tomorrow, the local calendar will see Foreign Reserves data.
FOREX: USD Index Sees Support Around 50-day EMA, JPY Still Outperforming
The USD BBDXY index has a little higher as Thursday's Asia Pac session unfolds. We were last above 1299, despite a firmer yen backdrop. USD/JPY sits back at 152.30/35, although dipped to 151.82 in earlier dealings (fresh lows back to Dec 12 last year).
- Yen was buoyed by hawkish remarks from BoJ board member Tamura, who stated rates should be at 1% in the second half of the 2025 fiscal year (so by end March 2026). Tamura, who is a known hawk, wanted to raise the rate to 0.50%, but his proposal was voted down by a majority of the board members. He added today, "...even if the policy rate is raised to 0.75%, it is far from the level that will restrict the economy as real interest rates stay at significantly negative zone”
- That Tamura is a known hawk, coupled with a broader USD rebound, has helped drag USD/JPY off its lows. US-JP yield differentials have steadied somewhat although are still down comfortably for the week. A solid debt auction also providing support to local bonds.
- Downside USD/JPY focus will rest at the low 151.00 region (151.06 76.4% retracement of the Dec 3 - Jan 10 bull leg). The RSI is getting close to oversold conditions.
- The USD has ticked higher elsewhere, without any obvious macro drivers. US yields are up a touch but gains aren't much beyond 1bps at this stage. US equity futures are higher, but only +0.20% firmer. Regional equities are mostly in the green, including China & HK bourses.
- Still, AUD and NZD still down 0.35-0.40% at this stage. AUD/USD last 0.6260/65, NZD under 0.5670. Higher USD/CNY levels may be weighing at the margin for these currencies.
- BBDXY Index support has held around the 50-day EMA in recent sessions, with the USD potentially consolidating after the recent sell-off (excluding further JPY gains).
- Later the Fed’s Jefferson, Waller and Logan speak and US January Challenger job cuts, jobless claims and Q4 productivity/ULC print. Oil markets will be focusing on Fridays’ January payroll data with consensus expecting a 170k rise in jobs. The BoE is expected to cut rates 25bp. Also German December orders, euro area December retail sales and Canada’s January PMI are released.
ASIA STOCKS: Asian Equities Push Higher Largely Erasing Monday's Sell-Off
Asian equities are higher today, tracking overnight gains on Wall Street as lower US Treasury yields and mixed economic data drove investor sentiment. Technology stocks in South Korea and Japan outperformed, while robotics-related names in China extended their rally. The yen strengthened further, buoyed by expectations of Bank of Japan policy tightening, which weighed slightly on Japanese equities. Meanwhile, Hong Kong stocks remained cautious ahead of Alibaba's earnings, which could provide a key directional catalyst. Chinese markets struggled amid ongoing trade tensions and economic concerns, despite a short-term boost from the US Postal Service reversing its decision to halt shipments.
- South Korea's KOSPI is 0.75% higher, led by gains in technology blue chips. Samsung Electronics (+1.13%) and SK hynix (+2.60%) outperformed, benefiting from positive global semiconductor sentiment. However, LG Energy Solution (-1.59%) weighed on the index, reflecting sector-specific weakness in EV-related stocks. Automakers traded mixed, while pharmaceutical stocks gained. Kakao (+3.47%) surged on strong investor interest, while Naver (-1.97%) and POSCO Holdings (-0.83%) declined.
- China's Robotics-related stocks extended their rally for a second session, fueled by enthusiasm from the Spring Festival Gala. Bethel Automotive (+8.1%), Shenzhen Inovance (+8%), and Jiangsu Guomao Reducer (+10%) led gains. Investors see humanoid robots as a key growth area amid China’s aging population. However, broader sentiment remains fragile due to trade tensions, with equities struggling to sustain gains. The USPS’s decision to reverse its shipping ban offered temporary relief to e-commerce stocks, but concerns over tariffs and economic uncertainty persist. The benchmark CSI 300 is 0.80% higher.
- The HSI is 0.55% higher, with investors awaiting Alibaba’s earnings on Friday, which could significantly impact sentiment. Alibaba’s recent outperformance compared to US tech peers has drawn attention, with a P/E ratio of 11 versus Nvidia’s 42 and Amazon’s 45. Trade tensions and policy uncertainty continue to cloud the outlook, but a strong earnings report could trigger renewed interest in Hong Kong equities.
- Japan's Topix (+0.3%) and Nikkei (+0.5%) extended their winning streak to a third day, supported by strong corporate earnings and falling US bond yields. Renesas Electronics (+15%) soared after exceeding earnings expectations, while Nomura Holdings (+8%) and Marubeni (+5%) posted strong gains following positive financial results. Investors remain cautious as the yen strengthened past 152 per USD, raising concerns about export-driven sectors. Expectations for a BOJ rate hike in April-May are rising, supporting the currency but potentially weighing on equities in the near term.
- Australian equities followed Wall Street higher with the ASX 200 up 1.10%, supported by falling US yields and a weaker USD. Local bond yields declined early Thursday, reflecting global rate expectations. Energy and mining stocks remained in focus, particularly amid Saudi Arabia’s decision to raise crude prices to Asia, which could impact demand dynamics in the region.
OIL: Crude Holds Onto Losses As Outlook Remains Highly Uncertain
Oil prices are moderately higher today after selling off around 2% on Wednesday. WTI is up 0.2% to $71.16/bbl after a high of $71.32. Brent is 0.1% higher at $74.68/bbl following a peak of $74.85. The USD index is up 0.1%.
- Markets remain concerned that increased trade protectionism will weigh on global growth and thus demand for fuel.
- The impact of US policy on the oil outlook remains highly uncertain. The prospect of tariffs has increased flows from Canada, which has boosted US inventories. A plan for peace in Ukraine may result in increased exports from Russia but at the same time a tougher attitude towards Iran could reduce theirs. Also, President Trump wants to see higher US crude output.
- Excluding these factors, the market was forecast to be in surplus in 2025. Bloomberg is reporting that Brent’s prompt spread has narrowed signalling some easing in the market.
- Later the Fed’s Jefferson, Waller and Logan speak and US January Challenger job cuts, jobless claims and Q4 productivity/ULC print. Oil markets will be focussing on Fridays’ January payroll data with consensus expecting a 170k rise in jobs (see MNI US payrolls preview). The BoE is expected to cut rates 25bp. Also German December orders, euro area December retail sales and Canada’s January PMI are released.
Gold Steadies after New Records Hit.
- Gold hit new highs today, continuing the strong upward trend of recent days.
- Opening at US2,867.24, gold consolidated throughout the day touching $2,873.34 before moderating to $2,869.45.
- Ongoing tariff headlines continue to drive demand for gold as traders seek it’s ‘safe-haven’ status.
- Rising economic and political risks in the region are likely to keep gold demand elevated.
- Gold has delivered yet another strong week with over 2% of gains to be up over 6.5% year to date.
- With evidence that key Central Banks (who have been absent from gold markets for some time) returning to purchase bullion, the outlook from the demand side looks positive for the near term.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 06/02/2025 | 0645/0745 | ** |  CH | Unemployment |
| 06/02/2025 | 0700/0800 | ** |  DE | Manufacturing Orders |
| 06/02/2025 | 0700/0800 |  SE | Flash CPI | |
| 06/02/2025 | 0830/0930 | ** |  EU | S&P Global Final Eurozone Construction PMI |
| 06/02/2025 | 0930/0930 | ** |  GB | S&P Global/CIPS Construction PMI |
| 06/02/2025 | 1000/1100 | ** | EU | Retail Sales |
| 06/02/2025 | 1200/1200 | *** | GB | Bank Of England Interest Rate |
| 06/02/2025 | 1200/1200 | *** | GB | Bank Of England Interest Rate |
| 06/02/2025 | 1230/1230 | GB | BOE MPR press conference | |
| 06/02/2025 | 1330/0830 | *** |  US | Jobless Claims |
| 06/02/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 06/02/2025 | 1330/0830 | ** | US | Preliminary Non-Farm Productivity |
| 06/02/2025 | 1400/1400 | GB | Decision Maker Panel data | |
| 06/02/2025 | 1500/1000 | * |  CA | Ivey PMI |
| 06/02/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 06/02/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 06/02/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 06/02/2025 | 1900/1400 | *** |  MX | Mexico Interest Rate |
| 06/02/2025 | 1930/1430 | US | Fed Governor Christopher Waller | |
| 06/02/2025 | 2200/1700 | CA | BOC Governor speech at BIS conference | |
| 06/02/2025 | 2210/1710 | US | Dallas Fed's Lorie Logan | |
| 07/02/2025 | 2330/0830 | ** |  JP | Household spending |
| 07/02/2025 | 0700/0800 | ** | DE | Trade Balance |
| 07/02/2025 | 0700/0800 | ** | DE | Industrial Production |
| 07/02/2025 | 0745/0845 | * |  FR | Foreign Trade |
| 07/02/2025 | 0745/0845 | FR | Wages Data for Q4 | |
| 07/02/2025 | 0800/0900 | ** |  ES | Industrial Production |
| 07/02/2025 | 0845/0945 | EU | ECB's De Guindos remarks in 'VI Encuentro Economico-Asegurador' conference | |
| 07/02/2025 | 1215/1215 | GB | BOE's Pill at National MPC Agency briefing | |
| 07/02/2025 | - | EU | ECB to publish report on R* | |
| 07/02/2025 | 1330/0830 | *** | CA | Labour Force Survey |
| 07/02/2025 | 1330/0830 | *** | US | Employment Report |