Asia market update: Quieter day as CN returns from holiday and Trump/CN tariffs digested; USD/JPY weakens amid Trump announcing “Gaza to be owned by the US”; USPS bans parcels from CN/HK; Focus on US Jan ISM Services PMI; BOJ Hawk tomorrow.
General trend
– The market so far interpreting the respective tariffs put in place by US and China against each other not as severe as they could be (yet), both in quantum and in terms of what has been (and not been) tariffed.
– Shanghai Composite initially opened up after the extended Lunar New Year break, but along with the Hang Seng quickly turned negative. Separately, several partners of China’s DeepSeek jumped at the resumption of Chinese trading following the extended (incl Merit Interact, Philisense Tech, TRS Info Tech).
– Nikkei reversed early gains as bets increased on further interest rate hikes by BOJ (former BOJ official Hayakawa seeing maybe 2 more hikes in 2025) with the stronger yen today dampening sentiment,(Yen stronger against all currencies and highest in 6 weeks vs USD).
– Toyota shares +5.0% on earnings and higher guidance, also to build new EV battery factory in Shanghai. Results helped Nikkei turn positive again.
– Earlier weaker US tech earnings (GOOGL -7.3% A/H, AMD -8.8% A/H);
– Kospi outperformed Asia +1.3%.
– Japan 10-yr JGB yield continued its rise to hit 1.297%, highest since Apr 2011.
– US Pres Trump said that the US should take over the Gaza strip, own and develop it; A statement quickly rejected / opposed by Saudi Arabia and Australian leaders. (Yen’s major move happened to coincide with this statement, alongside earlier hotter Dec JP cash earnings and Hayakawa’s comments).
– US Postal Service announced it will temporarily suspend international package acceptance of inbound parcels from China and Hong Kong until further notice, from Feb 4th. [As per a TTN Research Alert on Feb 2nd, this may expose a vast vertically-integrated manufacturing and logistics scheme for Chinese companies selling into the US at the expense of the US taxpayer and US manufacturing industry – and the health of the US population (i.e. Fentanyl)].
– Spot Gold rose to record high of $2,848/oz.
– Japan stats agency attributed the Big Figure jump higher than expected in the Dec Cash earnings to a 6.8% jump in special payments, mainly on companies’ wintertime bonuses.
– Japan Final Services PMI was better than prelim.
– China Jan Caixin PMI Services maintained its 2-year expansionary streak, but was more than a Big Figure lower than expected and lowest since Sept 2024.
– South Korea CPI moved above target 2.0% for first time in 7 months. However, the BOK said it still expects inflation to show slowing trend going forward, stabilizing around target level.
– Kiwi dollar largely ignored the highest unemployment rate since Q3 2020 to trade higher, even as the data seen as likely to encourage the RBNZ to reach for a further 50bps cut when it meets for its first policy meeting in 3 months later in February.
– In US news Pres Trump continued on his federal cost-cutting mission, said to be considering revoking loans for the $400B Office of Clean Energy Demonstrations.
– Note that BOJ Hawk Tamura will speak tomorrow, for the first time since Sept, 2024.
– US equity FUTs -0.4% to -0.6% during Asian trading.
Looking ahead (Asian time zone)
– Wed Feb 5th (Wed night US Jan ISM Services PMI).
– Thu Feb 6th (Thu eve UK BOE Rate Decision).
– Fri Feb 7th IN RBI Rate Decision (US Jan Non-Farm Payrolls, Michigan Prelim Feb Consumer Sentiment).
Holidays in Asia this week
– Mon Feb 3rd China (HK is open).
– Tue Feb 4th China (HK is open).
– Thu Feb 6th New Zealand.
Headlines/economic data
Australia/New Zealand
– ASX 200 opens +0.1% at 8,385.
– Australia Jan Final PMI Services: 51.2 v 50.4 prelim (confirms 12th month of expansion) (update).
– AOFM [Australia debt agency]: Prices syndication of A$15.0B in 4.25% Mar 21st 2036 Treasury Bonds v indication of ~A$; Real yield to maturity: 4.46%.
– New Zealand Q4 Unemployment Rate: 5.1% v 5.1%e.
– New Zealand sells total NZ$500M vs. NZ$500M indicated in 2027, 2032 and 2051 bonds.
– Fonterra Global Dairy Trade Auction Dairy Trade price index: +3.7% v +1.4% prior [overnight update].
China/Hong Kong
– Hang Seng opens +0.2% at 20,827; Shanghai Composite reopens +0.6% at 3,270 (follows extended Lunar New Year break).
– China Jan Caixin PMI services: 51.0 V 52.4E (24th month of expansion, but lowest since Sept 2024).
– (HK) US Customs and Border Protection (USCBP) confirms 10% tariff against China also applies to Hong Kong – USPS website.
– SHEIN.IPO US Pres Trump considers adding Co and Temu to Forced Labor list – US press.
– (US) President Trump when asked about China tariffs says “that’s fine”; Will talk with Xi the right time, not in any rush.
– (US) White House: Trump Xi call will happen very soon, no other updates.
– (HK) China Finance Ministry to issue Yuan-denominated CNY12.5B bonds in Hong Kong on Feb 19th.
– China PBOC sets Yuan reference rate: 7.1693 v 7.1698 prior (first setting since Jan 27th and strongest level since Nov 8th, 2024).
– China PBOC Open Market Operation (OMO): Injects CNY697B in 7-day reverse repos; (first 7-day operation since Jan 21st).
Japan
– Nikkei 225 opens +0.5% at 38,979.
– Japan Dec labor cash earnings Y/Y: 4.8% V 3.7%E; real cash earnings Y/Y: +0.6% V -0.1%E.
– Japan Jan Final PMI Services: 53.0 v 52.7 prelim (confirms 3rd month of expansion).
– Japan BOJ Board Official (unnamed): Prices post-pandemic have been driven mostly by cost-push factors such as rising import costs from the weak Yen – financial press.
– Toyota Reports 9M Net ¥4.10T v ¥3.95T y/y, Op ¥3.68T v ¥4.24T y/y, Rev ¥35.7T v ¥34.0T y/y; Raises guidance and to establish EV battery subsidiary in China with capacity 100K units from FY27.
– Japan Economic Revitalization Min Akazawa: Govt focus is to eradicate Japan’s deflationary mind set with ambitious goal to boost minimum wages – financial press.
– Japan BOJ Board member Tamura (hawk): To deliver comments tomorrow (Feb 6th) at 01:30 GMT, presser 05:00GMT).
– Bank of Japan (BOJ) Dep Gov Uchida to hold press conference on Mar 5th, with local business leaders in Shizuoka, Japan.
– Former BOJ official Hayakawa said BOJ rate likely to go higher than consensus; notes the chance for 2 more rate moves in 2025 – US financial press [update].
– Japan Chief Cabinet Sec Hayashi: PM Ishiba to meet US Pres Trump during Feb 6-8th US visit [overnight update].
Korea
– Kospi opens +0.9% at 2,503.
– South Korea Jan CPI M/M: 0.7% V 0.5%E; Y/Y: 2.2% V 2.1%E.
– South Korea Jan Foreign Reserves: $411B v $415.6B prior (update).
– Bank of Korea (BOK): Inflation to show slowing trend going forward, stabilise around target level – financial press.
Other Asia
– Indonesia Q4 GDP Q/Q: 0.5% v 0.5%e; Y/Y: 5.0% v 5.0%e.
– Vietnam Jan CPI Y/Y: 3.6% v 2.9% prior.
– Vietnam Jan Industrial Production Y/Y: +0.6% v +8.8% prior.
– Philippines Central Bank (BSP): Balance of risks to inflation outlook continues to lean to upside.
– Philippines Jan CPI M/M: 0.5% v 0.3%e; Y/Y: 2.9% v 2.8%e.
– Follow up: Malaysia Trade Ministry: Imposes 21.7% anti-dumping duty on “other” China producers and exporters; Effective Feb 5th 2025 to Dec 24th 2026 – statement.
– Hong Kong Jan PMI (whole economy): 51.0 v 51.1 prior.
– Singapore Jan PMI (whole economy): 49.9 v 51.5 prior (moves back into contraction).
– Thailand reportedly mulls imports of ethane and soybean meal from US; Considers importing more US products to cut trade surplus – press.
North America
– *(US) Follow Up: US Postal Service will temporarily suspend international package acceptance of inbound parcels from China and Hong Kong until further notice; effective Feb 4th (reason not disclosed).
– US Senate confirms Pam Bondi as Pres Trump’s Attorney General – financial press.
– (US) Fed’s Jefferson (voter): Reiterates no hurry for further rate cuts; Sees gradual reduction – speech at Lafayette College in Easton, Penn.
– (IR) US official: Trump will sign a Presidential memo today to restore ‘maximum pressure’ on Iran.
– (US) White House: Trump Xi call will happen very soon, no other updates.
– (US) Dec factory orders: -0.9% V -0.8%E.
– (US) Dec final durable goods orders: -2.2% V -2.2%E; durables (ex-transportation): 0.3% V 0.3%E.
– (US) Dec JOLTS job openings: 7.600M V 8.000ME; Quits rate 2.0% v 1.9% prior.
– (US) RFK Jr. clears Senate Committee (14 to 13), will get full vote to head HHS.
– (MX) Mexico’s President Sheinbaum: Mexico looked for dialogue with US amid tariff issue.
– (US) Reportedly Senate Democrats are mulling delays on all Trump nominees in retaliation for his restructuring of USAID – Axios.
– (US) Fed’s Daly (non-voter for 2025): The economy is in a very good place and see continued momentum.
– (US) Trump’s AI Czar David Sacks: Feasibility of BTC reserve being studied.
– (US) Trump trade adviser Navarro: Trade actions under Trump will be data driven.
Europe
– (SA) Saudi Arabia rejects Trump’s attempts to displace Palestinians; Affirms its position to establish a Palestinian state is firm and unwavering and is “unnegotiable” – statement (In response to Pres Trump’s earlier comments with PM Netanyahu).
– (IL) US Pres Trump and Israel PM Netanyahu press conference: Gaza should not go through process of rebuilding and occupation by the same people; US will take over the Gaza strip, we’ll own it and develop it – financial press.
– (EU) Commission Pres Von Der Leyen: Into an era of hyper-competitiveness and hyper-transactional geopolitics.
– (ES) Spain govt said to reach an agreement to cut weekly working hours to 37.5 from 40 – financial press.
– (EU) ECB’s Villeroy (France): Nearing 2% inflation target; Reiterates will probably see more ECB rate cuts.
Levels as of 00:20 ET
– Nikkei 225 +0.2%, ASX 200 +0.5%, Hang Seng -0.9%; Shanghai Composite -0.5%; Kospi +1.2%.
– Equity S&P500 Futures -0.4%; Nasdaq100 -0.6%; Dax -0.1%; FTSE100 flat.
– EUR 1.0370-1.0387; JPY 153.10-154.46; AUD 0.6140-0.6161; NZD 0.5640-0.5663.
– Gold +0.3% at $2,883/oz; Crude Oil -0.4% at $72.44/brl; Copper +0.1% at $4.3680/lb.
