Markets contend with multiple uncertainties – SoCal wildfire fall-out grows

Asia market update: Markets contend with multiple uncertainties; SoCal wildfire fall-out grows; CN PBOC halts bond purchases; Taiwan Semi results due at time of publication; Focus on US Dec NFP tonight.

General trend

- US equity FUTs down considerably in early Asian trade, with many factors to contend with such as Chinese deflation, European debt and growth concerns (esp. UK), as well as US jobs data tonight and California wildfires. (However, losses substantially pared as the session continued).

- Another overall shady day for Asian equities, with only the Kospi eking out a flat day. Nikkei suffered with lower profits than expected in Q4 for large components such as Fast Retailing -7% and Seven & i. [Fast Retailing is the largest Nikkei component]. Seven & i later strongly reversed after Apollo offering to contribute ~30% to the Itoh family buy-out.

- Fall out from the California wildfires continue to flare. Estimates of $150B in damage and the WSJ reporting that an unnamed LA utility did not implement common wildfire safety measures. Edison International -10.2% at $69.50/shr in Wed trading as Co says it has been asked by insurance attorneys to preserve evidence for the Eaton wildfire.

- Japanese shipping companies again down today, Topix Marine Transportation index -1.3%, following the news of the US ports strike resolution the day before. (Europe's Maersk also -6% yesterday).

- China PBOC unexpectedly said it will ‘temporarily’ suspend purchase of govt bonds in the open market during January, due to a “short supply of treasury bonds and excess demand”. Initially China 30-yr bond yields +5.5bps, back up to 1.85% while 10-yr yields +4bps, back up to 1.67%. However, later 10-yrs fell back to be only 2bps up. [Reminder back in May last year PBOC-backed Chinese financial media said that the 'reasonable yield' on China 10-yr "should be" 2.5-3.0%].

- Highlighting the reversing fates of Chinese and Japanese bond markets, Japanese 10-year yields stayed strong again matching 2011 highs, 1.186% even slightly higher than yesterday’s fresh high.

- Australia RBA now forecast to cut as early as Feb by ANZ bank. AU Financials -1.6%, on the back of weaker trimmed mean CPI yesterday.

- On the US-China political front President Xi has decided not to personally attend Pres Trump’s inauguration and will instead send a “top-level China Envoy”.

- In the UK amid concerns about a return to 1970's style stagflation and attempts from officials to calm concerned markets, last night the BOE allotted a record £51.4B in 7-day short-term repos, with 10-year yields more than 4.8%.

- US equity FUTs initially down substantially during Asian trading but later pared most of those losses to be -0.3%.

Looking ahead (Asian time zone)

- Fri Jan 10th (Fri night CN New Yuan Loans, US Dec Non-Farm Payrolls, + Jan Michigan Consumer Sentiment).

- Sun Jan 12th CN Dec Trade Balance.

Holidays in Asia this week

- Thu Jan 9th (US time), market holiday for former Pres Carter state funeral.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,336.

- Australia Nov Household Spending M/M: 0.4% v 0.7%e; Y/Y: 2.4% v 2.5%e.

- (AU) ANZ: Now forecasting Feb RBA rate cut - financial press.

China/Hong Kong

- Hang Seng opens +0.5% at 19,328; Shanghai Composite opens flat at 3,211.

- *China PBOC says will temporarily suspend purchase of  government bonds in open markets during Jan - financial press.

- China PBOC, SAFE (FX regulator) to hold briefing on financial support for economy on Jan 14th - financial press; PBOC Dep Gov Xuan, SAFE Dep Chief Li to speak.

- Chinese economist warns aggressive easing bets - PBOC-backed Financial News.

- China President Xi to send top-level China Envoy to Trump inauguration – FT.

- Country Garden (2007.HK) Announces the key terms of its restructuring proposal; Reaches understanding with the co-ordination committee; If implemented, Restructuring Proposal will enable the Group to achieve significant deleveraging, with a targeted reduction of indebtedness up to $11.6B [overnight update].

- Evergrande (3333.HK) 'Key' unit [offshore subsidiary CEG] ordered to liquidate by court in Hong Kong - US financial press.

- Chinese hospitals reportedly treating more cases of flu than human metapneumovirus (HMPV) this winter, according to doctors at various hospitals around the country, downplaying foreign media reports that there has been a surge in cases – SCMP.

- PCA: Sees China's car sales +2% in 2025, NEV sales +20% y/y and to make up 57% of total China car sales [overnight update].

- China Commerce Ministry (MOFCOM): To ask EU for talks on foreign subsidy regulation [overnight update].

- China PBOC sets Yuan reference rate 7.1891 v 7.1886 prior.

- China PBOC Open Market Operation (OMO): Injects CNY4.5B in 7-day reverse repos; Net drains CNY15B v drains CNY21B prior.

Japan

- Nikkei 225 opens -0.1% at 39,550.

- Japan Nov Household Spending Y/Y: -0.4% v -0.9%e.

- Japan Dec Total Reserve Assets: $1.23T v $1.24T prior.

- Japan FSA said to examine the "sustainability" of Japanese regional banks: Nikkei.

- Fast Retailing (9983,jp) Shares decline by >7% following results/guidance [co. is the largest Nikkei component].

- Japan sells ¥4.5T vs. ¥4.5T indicated in 3-Month Bills; Avg Yield: 0.2402% v 0.2178% prior; bid-to-cover: 3.55x v 2.35x prior

Korea

- Kospi opens +0.3% at 2,528.

Other Asia

- (IN) Lenders in India said to seek liquidity easing measures from the central bank (RBI), including a further cut in the cash reserve ratio - US financial press.

North America

- (US) California wildfires follow up: Los Angeles utility [unnamed] reportedly did not implement common wildfire safety measures - WSJ, citing regulatory filings.

- (US) California wildfires follow up: Pres Biden says sending all possible resources to Southern California for wildfires; New brush fire threatening 50 acres in Woodland Hills; Pres-elect Trump comments - financial press & LA Fire Dept.

- Nvidia Follow up: Co says Pres Biden should Not 'preempt' Trump with policy; Criticizes Biden's 'country cap' policy - statement.

- (US) Flexport: With Lunar New Year around the corner, ocean carriers have implemented a General Rate Increase (GRI) effective January 1, along with mitigation starting this second week of January.

- (CA) Follow Up: Freeland may enter Canada Liberal leader race next week; the new leader may be chosen on Mar 9th - Canada press.

- Peru Central Bank (BCRP) cuts Reference Rate by 25bps to 4.75%; as expected.

- (US) Follow up: Pres Biden says sending all possible resources to Southern California for wildfires - financial press.

- *(US) Elon Musk: DOGE budget-cutting effort would most likely Not find $2T in savings; $2T figure was a “best-case outcome” and there was only a “good shot” at cutting half that - interview broadcast on X (update).

- (US) Fed's Bowman (voter, hawk): Continue to prefer a cautious and gradual approach to adjusting rates; Inflation is elevated with upside risks, and progress has stalled.

- (US) Fed’s Barkin (non-voter for 2025): Consumer debt burden is still well below 2018-2019 levels (update).

- (US) Fed's Schmid (non-voter for 2024; voter for 2025; hawk): Strength of the economy allows the Fed to be patient; Rates may be very close to the longer run neutral rate.

- (US) Fed's Collins (voter for 2025): Now is time for patient, gradual approach to rate cuts; Significant uncertainty over the outlook calls for moving forward cautiously with future rate cuts; Fed is not on the preset path, policy well positioned.

- (US) Fed's Collins (voter for 2025): Favor fewer rate cuts in 2025 than anticipated just a few months ago, following strong employment data and lingering inflation; It’s still appropriate to lower rates.

- (US) Fed's Harker (non-voter): Rates still on downward path, speed depends on data; On path to 2% inflation target but upside risks remain; Job market has stabilized.

- (US) Redfin: The median U.S. asking rent fell 0.3% year over year in December to $1,594—the lowest level since March 2022; Notes asking rents may not have much further to fall this year given that apartment construction has begun to slow.

- (US) Reportedly Pres-elect Trump during a closed-door meeting with Senate Republicans on Wed's night repeatedly used his “one big beautiful bill” line, mostly relying on Johnson’s talking points on why a one-bill strategy is best; Each time, Trump deferred to what Johnson had the ability to pass — a response that frustrated many Senate Republicans in the room; Trump was especially spun up during Graham’s speech - Punchbowl.

Europe

- (US) Trump comments on Russia Putin: He wants to meet and we are 'setting it up' - financial press.

- (UK) Treasury Min Jones: No need for emergency intervention; Financial markets continue to function in an orderly way; Only OBR forecast can predict impact of GILT moves on fiscal headroom.

- (UK) BOE allots £51.4B in 7-day short-term repo operation (STR) vs £46.2B prior (record high).

- (UK) UK Reform party joint top of a national opinion poll with ruling Labour party for the first time ever.

- (US) White House official: Pres Biden to unveil new sanctions targeting Russia's economy this week – press.

- Eurozone Nov Retail Sales M/M: 0.1% V 0.3%E; Y/Y: 1.2% V 1.7%E.

- (DE) Germany Dec CPI north RHINE WESTPHALIA M/M: +0.5% V -0.3% prior; Y/Y: 2.5% V 1.9% prior.

Levels as of 00:20 ET

- Nikkei 225 -1.0%, ASX 200 -0.4%, Hang Seng -0.7%; Shanghai Composite -0.6%; Kospi flat.

- Equity S&P500 Futures -0.3%; Nasdaq100 -0.3%; Dax +0.1%; FTSE100 +0.8%.

- EUR 1.0292-1.0305; JPY 157.94-158.42; AUD 0.6188-0.6107; NZD 0.5588-0.5603.

- Gold +0.2% at $2,696/oz; Crude Oil +0.5% at $74.31/brl; Copper +0.5% at $4.3347/lb.