Nikkei outperforms on autos and travel/retail news; JP to increase JGB sales

Asia market update: Nikkei outperforms on autos and travel/retail news; JP to increase JGB sales; KR labors under continued political uncertainty; EU stays on holiday as US markets to reopen tonight (Dec 26th).

General trend

- Nikkei outperformed on further gains for Toyota +6.2% (reported yesterday to be aiming to double ROE to 20% by 2030), Honda +3.8% and Nissan +5.7% continued gains (Mitsubishi also +7.1%) following their merger news and travel/retail stocks up on the China-Japan travel pact announced by Foreign Ministers Wang Yi and Takeshi Iwaya yesterday in Beijing. [However, no further progress on resumption of seafood exports from Japan to China following the water releases from Fukushima nuclear power plant started back in 2023].

- Kospi was up initially, but then struggled (along with the Korean Won) following confirmation that the Korean opposition party DP will indeed pursue impeachment of PM Han, who took over as President from Pres Yoon following the failed imposition of martial law back on Dec 3rd. KRW trades at lows not seen since the GFC of 2008-09.

- Japan govt cut its FY24/25 GDP estimate to 0.4% (vs prior 0.7%).

- Japan to increase scheduled sales of JGBs to the market by ¥1.3T in FY25/26, the first issuance increase in 4 years. Will lower sales of the long-end 30 and 40 year bonds while raising sales of 5-year bonds. Benchmark 10-year as well as 2-year and 20-year JGB sales will remain unchanged. Also of note, Japanese banks now hold just 14% of the JGB market, down from 41% before the introduction of Gov Kuroda's stimulus.

- JP 2-year JGB yields +2.1bps after the well supported 2-year JGB auction today, with 10-year yields back above 1.09%, +2bps. USD/JPY held steady above 157.

- UST FUTs on 10-year yields +3bps to 4.62%, back at the May highs and threatening 2024’s absolute high of ~4.70% in late April.

- US equity FUTs +0.1% to +0.3% during the Asian session.

Looking ahead (Asian time zone)

- Thu Dec 26th (Thu night US weekly initial jobless).

- Fri Dec 27th JP Dec Tokyo CPI, Nov Industrial Production & Retail Sales, BOJ Summary of Opinions.

Holidays in Asia this week

- Wed Dec 25th Australia, Hong Kong, India, Indonesia, Malaysia, New Zealand, Philippines, Singapore, South Korea.

- Thu Dec 26th Australia, Indonesia, New Zealand.

Detailed holiday trading hours for the Christmas period

Thursday Dec 26th: (Boxing Day holiday).

- All Asian markets to open, other than Australia, New Zealand and Indonesia remaining closed.

Floor trading

CME/CBOT Regular close.

NYMEX/COMEX: Regular close.

NYSE: Regular close.

Electronic

Note: S&P futures resumed trading in electronic trade following Christmas break.

CME Globex: Regular close.

NYMEX: Regular close.

NYSE Liffe: Closed.

Eurex: Market Regular close (no trading for British equity products or cash payments in GBP).

Euronext - Regular close.

Cash Index.

FTSE - closed.

IBEX-35 - regular close.

CAC-40 - regular close.

Headlines/economic data

Australia/New Zealand

- Australia and NZ markets remain closed for Boxing Day (Dec 26th).

China/Hong Kong

- Hang Seng remains closed for holiday (reopens tomorrow Dec 27th); Shanghai Composite opens -0.1% at 3,389.

- Hong Kong press speculates USD/HKD peg may be 'at risk' under US Pres Trump's likely trade war with China - financial press.

- China News: Affirms MLF rate no longer carries policy intention (inline) [update].

- China 'removed' Wang Guanghua as Minister of Natural Resources, to be replaced by Guan Zhiou – update.

- China PBOC sets Yuan reference rate 7.1897 v 7.1868 prior.

- China PBOC Open Market Operation (OMO): Injects CNY106B in 7-day reverse repos; Net injects CNY26B v drains CNY195B prior.

Japan

- Nikkei 225 opens flat at 39,129.

- Japan to increase scheduled sales of JGBs to the market by ¥1.3T from this fiscal year's initial plan to ¥172.3T in FY25/26 [first issuance increase in 4 years] - financial press.

- Japan releases weekly flows data [period ended Dec 20th]: Foreign buying of Japan equities: -¥1.02T v -¥586.4B prior; Japan buying of foreign bonds: -¥919.2B v +¥708.7B prior.

- Japan sells ¥2.6T VS. ¥2.6T in 2-year JGB bonds; AVG yield: 0.6020% V 0.5820% prior; bid-to-cover: 3.95X V 3.63X prior.

- China Foreign Min Wang Yi Xmas Day meeting with Japan counterpart Iwaya in Beijing; No progress on Japan seafood exports resumption to China yet - financial press (update).

Korea

- Kospi re-opens +0.4% at 2,449.

- USD/KRW Hits fresh low of 1,464 following opposition party DP impeachment warning for PM Han (also acting Pres); Lowest since 2008-09 GFC.

- Follow up: South Korea Opposition Party to submit impeachment bill for acting Pres Han on Dec 27th, Friday - South Korean press.

- Follow up: South Korea PM Han (and acting Pres) confirms he will Not approve Constitutional judge's appointment today - TV address to the nation.

- (KR) Follow up: South Korea PM Han (and acting Pres) said to be unlikely to appoint court justices on today's Dec 26th vote in parliament - Korea press.

- South Korea ruling PPP [party] to boycott vote on constitutional judges - Yonhap.

- South Korea PM Han (and acting Pres) said to be likely to 'defy opposition' deadline on judges - Korea press.

- Follow up: South Korea to send third probe summons to Pres Yoon – press.

- South Korea announces measures to revive tourism industry.

- South Korea PM Han (and acting Pres) said to be likely to 'defy opposition' deadline on judges - Korea press.

Other Asia

- Thailand Central Bank (BOT): Affirms headline inflation seen within target in 2025 and 2026.

- Taiwan Presidential Office said to have conducted its first-ever "tabletop exercise" simulating a military escalation with China - financial press.

- Singapore Nov Industrial Production M/M: -0.4% v 0.9%e; Y/Y: 8.5% v 9.7%e.

North America

- (US) Intelligence Review on the origins of Covid said to have masked "deep divisions" among Govt scientists - WSJ.

- (US) Incoming Border Czar Tom Homan said Trump administration will need $86.0B to ‘start’ mass deportations – NY Post [update].

- (US) Pres Biden directs US DoD to continue weapons delivery surge to Ukraine (update).

Europe

- (EU) China Commerce Ministry (MOFCOM) said to extend anti-dumping probe related to EU brandy to Apr 5, 2025 - Press [update].

Levels as of 00:20 ET

- Nikkei 225 +1.4%, ASX 200 closed, Hang Seng closed; Shanghai Composite +0.2%; Kospi -0.5%.

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

- EUR 1.0393-1.0406; JPY 157.07-157.48; AUD 0.6233-0.6255; NZD 0.5638-0.5630.

- Gold +0.3% at $2,642/oz; Crude Oil +0.1% at $70.14/brl; Copper -0.1% at $4.0968/lb.