Equities mostly negative as Nikkei sinks back below 40K in light holiday trading amid year-end flows

General trend

- Kospi pared a small amount of its recent losses, the only major Asian index to hold positive. Nikkei retreated from its 5-month high set on Friday.
[Note that only China/HK markets will be open among the major Asian indices tomorrow (Tue, Dec 31st). Hang Seng will be open for a half-day.].

- Amid quiet major currencies, commodity currencies Aussie and Kiwi outperformed, +0.4%, with both having significantly under-performed throughout Q4. Australian 10-yr yields +14bps.

- In light holiday trading, Japan Dec Manufacturing confirmed its 6-month of contraction.

- South Korea economic output for November added to the current politically-induced pall over the country, with Nov Industrial Production even worse than the negative figure predicted.

- Political quagmire in South Korea gets ever deeper; Late Friday newly-installed acting-Pres Han (who replaced Yoon due to failed invoking of martial law on Dec 3rd), was impeached and replaced by Fin Min Choi. The entire ruling party boycotted the impeachment vote, but with only a simple majority out of 300 votes needed, the opposition parties easily surpassed the threshold with a 192-0 vote in favor of impeaching Han. Due to a period of national mourning for yesterday’s Jeju Air plane crash, there may be some respite from the political drama, at least through Jan 4th, 2025

- Late Friday, BOJ cut amount of monthly bond buying operations, in-line with previously announced schedule (reduction of ~¥400B per quarter from July 2024’s ¥5.7T per month to ~3.0T by Jan-Mar, 2026.

- A warning in the chip space from Advantest CEO (Japan), who late Friday said that any slowdown in the data center build out by US Big Tech would have big reverberations in the supply chain.

- US equity FUTs down slightly during Asian trading.

Looking ahead (Asian time zone)

- Tue Dec 31st KR Dec CPI, CN Dec NBS Manufacturing PMI.

- Thu Jan 2nd AU Dec Final Manufacturing PMI, SG Adv Q4, GDP, Various Asia Dec Manufacturing PMIs, CN Dec Caixin Manufacturing PMI.

- Fri Jan 3rd KR Q4 Adv GPD, (Fri night US Dec ISM Manufacturing PMI).

Holidays in Asia this week

- Mon Dec 30th Philippines.

- Tue Dec 31st Australia, Japan, New Zealand, Philippines, Singapore, South Korea, Thailand (China markets will be open, HK to close early).

- Wed Jan 1st Global markets holiday.

- Thu Jan 2nd Japan, New Zealand.

- Fri Jan 3rd Japan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 8,252 [Final trading day for 2024; Reopens Jan 2nd, 2025].

China/Hong Kong

- Hang Seng opens +0.2% at 20,124; Shanghai Composite opens -0.1% at 3,395.

- China Finance Ministry: Proportion of NEVs for govt annual procurement shall not be <30%, 100% in urban areas – statement.

- China Auto Association (EV100): Expects 2025 sales and exports of NEVs to rise to ~16.5M units, up ~30% y/y.

- China ‘races’ to secure advanced US chip materials ahead of 2025, orders to suppliers such as DuPont, Entegris and Chemours said to have 'spiked' since Nov; cites sources briefed on the matter – Nikkei.

- China PBOC Gov reiterates sees room for further RRR cuts - People's Daily [update].

- China Foreign Min Wang Yi met with Iranian counterpart Araghchi in Beijing; China and Iran should continue to support each other on core interests and advance practical cooperation - financial press (update).

- China Finance Ministry to lower import tariff rates on ethane and some recycled copper and aluminum raw material, effective Jan 1st [weekend update].

- China Pres Xi: 2025 reform and development tasks will be 'arduous' - State TV [weekend update].

- China Commerce Ministry (MOFCOM): Starting investigation into imported beef between Jan 1st 2019 and June 30th 2024 [weekend update].

- China issues rules on the management of financial companies; effective from Mar 2025.

- China Q3 Final Current Account: $147.6B v $146.9B prelim [weekend update].

- China PBOC sets Yuan reference rate 7.1889 v 7.1893 prior.

- China PBOC Open Market Operation (OMO): Injects CNY89B in 7-day reverse repos; Net drains CNY21B v injects CNY6B prior.

Japan

- Nikkei opens +0.1% at 40,325 [Final trading day for 2024; Reopens Jan 6th, 2025].

- Japan Dec Final Manufacturing PMI: 49.6 v 49.5 prelim (confirms 6th straight contraction).

- Bank of Japan (BOJ) announcement related to outright bond buying operations for Jan: Cuts monthly purchases from ¥4.91T to ¥4.5TCuts monthly purchases from ¥4.91T to ¥4.5T [weekend update].

- Advantest [6857.JP] CEO: Watching for any sign of slower spending on AI by big US tech groups; Any slowdown in the data centre buildout is going to have big reverberations in the supply chain; Demand for AI smartphones was “kind of slow” but could take off rapidly; Everyone is holding their breath, waiting for the killer app with the AI handsets - FT (update) [**Note: Advantest is a key supplier of testing equipment for Nvidia’s high-end graphics processing units] [late Friday update].

Korea

- Kospi opens -0.3% at 2,397 [Final trading day for 2024; Reopens Jan 2nd, 2025].

- South Korea Nov Industrial Production M/M: -0.7% v -0.5%e; Y/Y: 0.1% v 0.5%e.

- Follow up: South Korea acting Pres Choi orders investigation by Transport Ministry into entire airline operational systems once crash recovery work is completed for Jeju air crash - statement.

- South Korea govt to 'monitor financial markets closely' - financial press (joint statement with Finance Ministry).

- Follow up: South Korea govt declares national mourning period until Jan 4th over Jeju Air plane crash - US financial press.

- Plane crash at Muan airport in South Korea kills 28 passengers (Update: Death toll rises to at least 167).

- South Korea Fin Min Choi assumes acting Presidency following impeachment of Han – press [weekend update].

- South Korea parliament passes motion to impeach acting president Han [weekend update].

Other Asia

- (SG) China and Singapore free trade agreement (FTA) protocol to be further upgraded on Dec 31st - financial press.

North America

- CDC says H5N1 bird flu sample shows mutations that may help the virus bind to cells in the upper respiratory tracts of people; The mutations likely developed post-infection - StatNews [weekend update].

- (US) Treasury Sec Yellen: 'extraordinary measures' to prevent a US default will start between Jan 14-23rd [weekend update].

- (US) President-elect Trump backs Musk in support for H-1B immigration visas for highly skilled workers, which may upset some MAGA hardliners - NY Post [weekend update].

- (US) Cleveland Fed’s Inflation Nowcast forecasting Dec US CPI Y/Y to accelerate again to 2.9% from 2.7% and Dec US CPI M/M to come at 0.4%; Truflation proxy of US aggregated Inflation Index at 2.9% v 3.0% w/w, which was near highest since early autumn 2023 [weekend update].

Europe

- (FR) France new Fin Min Lombard 'eyes' 2025 budget deficit 'slightly above 5.0%' in order to protect growth [higher than the 5.0% targeted by the last gov't] - financial press [update].

- (EU) ECB Holzmann (Austria) said the central bank could consider waiting longer before the next interest rate cut [inline] - financial press [update from Dec 28th].

Levels as of 00:20 ET

- Nikkei 225 -0.9%, ASX 200 -0.3%, Hang Seng -0.3%; Shanghai Composite flat; Kospi +0.2%.

- Equity S&P500 Futures -0.2%; Nasdaq100 -0.1%; Dax flat; FTSE100 -0.1%.

- EUR 1.0421-1.0434; JPY 157.70-157.99; AUD 0.6214-0.6244; NZD 0.5628-0.5659.

- Gold +0.1% at $2,634/oz; Crude Oil +0.1% at $70.70/brl; Copper +0.5% at $4.1455/lb.