Nikkei plunges, Yen strength in continued risk-off mode amid countdown to “Liberation Day”

Asia Market Update: Nikkei plunges, Yen strength in continued risk-off mode amid countdown to “Liberation Day” (aka US tariffs) on April 2nd; Focus on RBA Rate Decision.

General trend

- Nikkei plunged as much as 4%, more than Wall St’s Friday losses, while Yen gained against all-comers amid general risk-off and Japan’s End of Month, End of Quarter and End of Financial Year (Mar 31st) plus the looming Pres Trump “Liberation Day”.

- Markets are fixated on April 2nd in the US (“Liberation Day”), with Pres Trump reportedly said to be pushing senior advisers to go bigger on tariff policy, including reviving the idea of a flat universal tariff single rate on most imports. Literally trillions of dollars in two-way trade with all US trading partners could be affected, with particular focus on the 15% of countries the Trump Admin sees as the ‘worst’ trading partners, comprising 90% of US imports. Trump also said he will be announcing pharmaceutical tariffs soon and will “absolutely” follow through on Canada tariffs; Deals on averting auto tariffs would come later on. Further complicated today by the Trump Admin said to consider ‘broader and higher’ tariffs.

- Despite the hotter than expected core and inline headline US PCE figures at the end of last week, US investors appeared to focus more on the lower than expected personal spending figures as a sign of economic weakness among consumers, with US-10-year bond yields accelerating earlier weakness to fall 12bps overall and Nasdaq plunging -2.7% (nearly to its Mar 13th low) and S&P500 -2.0%. Later on Fri morning the Final March Michigan Confidence did not help, registering its lowest reading since Nov 2022.

- Late Friday CK Hutchison (today -5%) reportedly Not to go ahead next week with deal to sell Panama Canal ports to US' BlackRock (Was expected to occur on Apr 2nd), with the parties said to be still actively discussing but a signing date has perhaps slipping by weeks or even months.

- Japan industrial output was up m/m, but countered by cooler Retail sales.

- In Australia hotter than expected Melbourne Institute inflation figures for March. RBA rate decision due tomorrow, expected to hold with only 8% probability of a cut.

- Elon Musk's AI startup xAi acquired social media platform X (formerly Twitter) in an all-stock transaction valuing xAI at $80B and X at $33B ($45B less $12B debt). The two companies will combine their data, models, compute, distribution and talent.

- China PBOC issued its first batch of CNY500B of special sovereign bonds this year to re-capitalize 4 core tier-1 banks in a bid to the boost economy.

- China March Manufacturing and non-manufacturing PMI picked up pace, as South Korea's industrial output rebounded strongly in February and Japan's Feb production output rose the most in 11 months.

- Thai stock market -1.7% at the open, lowest since Apr 2020, with JV partner of the collapsed building in Bangkok, Italian-Thai PCL -27% post-Friday’s quake [The other partner in JV construction China Railway Construction Co -5%].

- After experiencing a reversal day when the much-anticipated copper tariffs were finally announced late last week to record highs, Copper lost a further 0.6% as it wound its way back towards $5/lb.

- Spot Gold +1% to fresh record high of $3,115/oz.

- US equity FUTs -0.7% to -1.2% during Asian trading.

Looking ahead (Asian-weighted, on Asian time zone)

- Tue Apr 1st KR Mar Trade Balance, KR & TW Mar Mfng PMI, AU Feb Retail Sales, AU RBA Rate Decision, JP Tankan Indices; CN Mar Caixin Mnfg PMI (Tue eve EU Mar CPI, Tue night US Mar ISM Mnfg PMI, US Feb JOLTS).

- Wed Apr 2nd KR Mar CPI, CN Mar Caixin Services PMI.

- Thu Apr 3rd AU Feb Trade Balance, (Thu night US Mar ISM Mnfg PMI).

- Fri Apr 4th JP Feb Household Spending, (Fri night US Mar NFP, Fed Chair Powell).

Holidays in Asia this week

- Mon Mar 31st India, Indonesia, Malaysia, Philippines, Singapore.

- Tue Apr 1st Indonesia, Malaysia.

- Wed Apr 2nd Indonesia

- Thu Apr 3rd Indonesia, Taiwan.

- Fri Apr 4th China, Hong Kong, Indonesia, Taiwan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.3% at 7,955.

- Australia Mar Melbourne Institute Inflation M/M: +0.7% v -0.2% prior; Y/Y: 2.8% v 2.2% prior.

- Australia Feb Private Sector Credit M/M: 0.5% v 0.5%e; Y/Y: 6.5% v 6.5% prior.

- Australia sells A$600M v A$600M indicated in 2.25% May 2028 Bonds: Avg Yield: 3.6498% v 3.9785% prior; bid-to-cover 4.42x v 3.93x prior.

- (AU) Australia RBA and regulator ASIC note 'deep' concerns with the co, including concern about speed and nature of ASX's remediation actions following initial incident (regarding CHESS).

- New Zealand Mar ANZ Business Confidence: 57.5 v 58.4 prior.

- RBNZ Chair Quigley: RBNZ to conduct evidence-based review of its capital regime with objective to boost competition in the banking sector - financial press

- RBNZ: Expands access to exchange settlement account system.

China/Hong Kong

- Hang Seng opens -0.9% at 23,207; Shanghai Composite opens -0.2% at 3,343.

- CHINA MAR MANUFACTURING PMI (GOVT OFFICIAL): 50.5 V 50.4E (second month of expansion; highest since Mar 2024).

- Follow Up: China to inject ~CNY500B (~$69.0B) into 4 big state banks - Press.

- China banks said to raise consumer loan rates in order to protect margins - Press.

- TTN Research Alert: China’s Dark Factories Harnessing 5.5G and AI to Redefine Manufacturing, While Casting a Long Shadow on Human Labor.

- China will certainly respond with countermeasures if US insists on harming China's interests with April 2nd tariffs - China state media [weekend update].

- CK Hutchison (1.HK) Reportedly will not go ahead next week with deal to sell Panama Canal ports to BlackRock consortium – press [weekend update].

- US State Dept: Not surprised that China would be upset at Panama ports agreement by US investors [weekend update].

- China PBOC reiterates to resolve financial risks in key areas - comments from 2025 Financial Stability Work Conf [weekend update].

- Former China PBOC official said delay in RRR cut is correct – US financial press [weekend update].

- China PBOC sets Yuan reference rate: 7.1782 v 7.1752 prior.

- China PBOC Open Market Operation (OMO): Injects CNY167B in 7-day reverse repos; Net injects CNY32B v drains CNY15B prior.

Japan

- Nikkei 225 opens -1.8% at 36,440.

- Japan Fin Min Kato: Reiterates to communicate closely with US counterparts on FX.

- JAPAN FEB RETAIL SALES M/M: +0.5% V -0.2%E; Y/Y: 1.4% V 2.5%E.

- JAPAN FEB PRELIMINARY INDUSTRIAL PRODUCTION M/M: 2.5% V 2.0%E; Y/Y: 0.3% V 1.2%E.

- Japan Feb Annualized Housing Starts: 805K v 777Ke; Y/Y: +2.4% v -2.2%e.

- Japan FSA to revise Financial Instruments and Exchange Act to give crypto assets legal status as financial products - Nikkei (update).

- Japan parliament's Upper House passes FY25 budget, as expected - financial press.

- JAPAN SELLS ¥2.6T VS. ¥2.6T INDICATED IN 2-YEAR JGB BONDS; AVG YIELD: 0.8630% V 0.8260% PRIOR; BID-TO-COVER: 3.41X V 3.16X PRIOR [highest yield in several years].

- US Sec of Defense Hegseth: Japan is an indispensable partner in deterring China; US will sustain a robust presence in the Indo-Pacific [weekend update].

- Japan, US and Philippines to conduct military exercises in South China Sea – press [weekend update].

- Japan PM Ishiba: Do not see tariff countermeasures as most effective now [weekend update].

Korea

- Kospi opens -1.7% at 2,513.

- South Korea Feb Industrial Production M/M: 1.0% v 0.8%e; Y/Y: 7.0% v 3.5%e.

- South Korea Fin Min Choi: Govt to commit KRW10T supplementary budget for recent wildfires and "slumping growth" - financial press.

Other Asia

- Thailand Industries Federation: Manufacturing and export not impacted by earthquake; logistics and transportation have seen no 'major' impact from the earthquake.

- Thailand Central Bank (BOT): Financial payment infrastructure and services operating normally following earthquake.

- Thailand suspends stock trading due to earthquake in Myanmar – press [late Friday update].

- Taiwan said planning to buy 6M tons/yr of LNG from US - press.

North America

- (US) Elon Musk: No plans for the [US] government to use Dogecoin.

- (US) Follow up: Pres Trump: Not putting on oil sanctions 'right now' - financial press.

- US Pres Trump to visit Saudi Arabia in May - Axios.

- (US) Goldman Sacs now sees US recession probability at 35% v 20% prior - Press.

- (US) Trump Administration said to consider ‘broader and higher’ tariffs – WSJ.

- (US) Trump trade adviser Navarro: Auto tariffs to raise about $100B with other tariff to raise about $600B/year.

- (US) Pres Trump: Putin's comments on Zelenskiy were not going the right direction; Was "very angry, pissed off" about Putin’s recent comments suggesting ways to install new leadership in Ukraine; Will put secondary 25-50% tariffs on all Russian oil if there is no Ukraine deal and I think it is due to Russia’s fault.

- (US) PRES TRUMP: WILL NOT RULE OUT 3RD TERM; THERE ARE WAYS TO DO IT - NBC.

- Softbank (9984.JP) Reportedly mulls building AI industrial parks in the US and could invest $1T; May soon discuss plan with US officials - Nikkei.

- (MX) Pres Sheinbaum: We are in talks with US to protect jobs in Mexico; GM, Ford and Stellantis factories are impacted by the tariffs [weekend update].

- XAI.IPO xAI has acquired X (formerly Twitter) in an all-stock transaction valuing it at $33B ex-debt - Elon Musk tweet [weekend update].

- (US) Pres Trump said to be pushing senior advisers to go bigger on tariff policy as they prepare for the “Liberation Day” on April 2nd; Pres Trump reportedly revived idea of flat universal tariff single rate on most imports – WaPo [weekend update].

- (US) President Trump: Will be announcing pharmaceutical tariffs soon; Deals on averting auto tariffs would come later on.

- (US) Pres Trump: Absolutely will follow through on Canada tariffs; Had 'very good talk' with Canada PM Carney.

- UAW Pres Fain: Praise Trump's move to impose tariffs on vehicles and auto parts imported into the U.S., while noting that "tariffs aren't the total solution" - financial press.

- (VE) US plans to revoke authorization to foreign partners of Venezuela's PDVSA energy company that allowed them to export oil – press [weekend update].

- (US) FEB PERSONAL INCOME: 0.8% V 0.4%E; PERSONAL SPENDING: 0.4% V 0.5%E; Real Personal Spending (PCE): 0.1% v 0.3%e [weekend update].

- (US) FEB PCE PRICE INDEX M/M: 0.3% V 0.3%E; Y/Y: 2.5% V 2.5%E; Core PCE Price Index M/M: 0.4% v 0.3%e; Y/Y: 2.8% v 2.7%e [weekend update].

-(US) FDIC clarifies that FDIC-supervised institutions may engage in permissible crypto-related activities without receiving prior FDIC approval.

Europe

- (UK) Mar Lloyds Business Barometer: 49 v 49 prior.

- Follow Up: Russia and the US started talks related to rare earth metals and other projects in Russia - RIA.

- (US) Pres Trump: If they Iran do not make a deal, "there will be bombing"; Considering punishing Iran with “secondary tariffs”; US and Iranian officials are talking – NBC.

- (UR) Reportedly serious preparations are now underway for Ukraine Pres Zelenskiy to run for presidency for a second time; Zelenskiy said to have tasked his team with organising a vote after a full ceasefire, aiming for summer 2025 - The Economist.

- (FR) France Foreign Min Barrot: Have been told that China investigation of cognac market will be delayed 3 months, giving industry breathing room on potential tariffs.

- (EU) Russia Pres Putin extends ruble gas payments to any Russian bank through July 2025.

- (UR) Pres Zelenskiy: Too soon to comment on draft of new minerals deal; New draft received from US is entirely different that the previous framework; Ukraine will not recognize US military aid as loans.

Levels as of 00:20 ET

- Nikkei 225 -4.0%, ASX 200 -1.7%, Hang Seng -1.4%; Shanghai Composite -0.6%; Kospi -3.0%.

- Equity S&P500 Futures -0.7%; Nasdaq100 -1.2%; DAX -0.8%; FTSE100 -0.5%.

- EUR 1.0764-1.0846; JPY 148.73-151.22; AUD 0.6270-0.6314; NZD 0.5694-0.5746.

- Gold +1.0% at $3,142/oz; Crude Oil -0.5% at $69.04/brl; Copper -0.7% at $5.0955/lb.