Asia Market Update: Asia follows US equities down and USD strengthens as Trump tariff factoring hits; Risk-off hits BTC; Focus on US Jan Core PCE.
General trend
– Markets’ consistent tail-risk pricing of tariffs “as likely to be later” therefore hard to price “now” came to a rude halt during US trading as Pres Trump confirmed the Mexico/Canada tariffs will go into effect on March 4th and will come alongside a new, additional 10% China tariff (now totaling 20%). Pres Trump dissatisfied with all three countries’ progress to date on stopping the flow of Fentanyl into the US.
– Nasdaq in particular was hard-hit, down nearly -3%. USD also rose against all currencies, especially Mexican peso and Canadian dollar. Once Asia opened, Malaysian Ringgit, Thai Baht and Indonesia Rupiah lead losses, with the IDR hitting its lowest since Apr 2020.
– Asian Chip-Related stocks fell sharply at the open: Hynix -3.9% , Advantest -9.2% (chip-testing equipment supplier to NVDA, which itself was down -8% overnight, but after hours +0.8%), with Kioxia -4.5%, SoftBank Group -4.9%.
– All indices were down heavily in Asia, with the Kospi and Nikkei competing to see which would be the worst performer, each -3.3% by late morning (Kospi ended up underperforming most, -3.5%).
– USD/JPY could not hold ¥150 after the softer Tokyo CPI with Yen rebounding +0.4% as BOJ Dep Gov Uchida spoke about potential cutting of JGB holdings. UST yields extended drop during Asia, JGB yields also moved lower into month-end amid safe-haven flows with JGB traders largely ignoring Uchida [5-year JGB yields test 1.00%, down -4bps].
– Bitcoin touches sub-$80K [first time since Nov 2024], now down >25% from its recent all-time highs, as the entire crypto sector continues to sell off heavily. [ETH ~$2,100].
– Japan Jan Industrial Production and Retail Sales both largely inline.
– US equity FUTs continued to slide -0.3% to -0.4% during Asian trading, beyond the steep lows reached in the US session. However, recovered late in the Asia session to be +0.1% at time of publishing.
Looking ahead (Asian time zone)
– Fri 28th (Fri night Feb DE CPI, US Jan Core PCE).
– Sat 1st (CN Feb NBS Mfg PMI).
Holidays in Asia this week
– Mon Feb 24th Japan.
– Tue Feb 25th Philippines.
– Wed Feb 26th India.
– Fri Feb 28th Taiwan.
Headlines/economic data
Australia/New Zealand
– ASX 200 opens -0.4% at 8,236.
– Australia Jan Private Sector Credit M/M: 0.5% v 0.6% prior; Y/Y: 6.5% v 6.5% prior.
– Australia sells A$700M v A$700M indicated in 1.75% Nov 2032 bonds; Avg Yield: 4.1959% v 3.8927% prior ; bid-to-cover: 3.48x v 2.79x prior.
– Australia underlying Cash Deficit A$37.1B (7 months through Jan) – financial press.
– New Zealand Feb ANZ Consumer Confidence: 96.6 v 96.0 prior (update).
– New Zealand Jan Filled Jobs M/M: 0.3% v -0.1% prior.
China/Hong Kong
– Hang Seng opens -0.4% at 23,616; Shanghai Composite opens -0.4% at 3,374.
– China reportedly has amended military regulations to emphasize “the need for war readiness” – SCMP (update).
– China Public Security Ministry: 7 new precursor chemicals added to the list of domestic control – financial press.
– China Ministry of Commerce (MOFCOM): Opposes Trump Mar 4th tariff threat on Chinese goods – Chinese state media.
– (US) Additional 10% tariff on China is on top of 10% announced earlier this year bringing total tariffs to 20%; Trump frustrated over lack of progress curtailing fentanyl – CNBC.
– China Commerce Minister: We are willing to work with US to create better environment for both countries.
– China to strengthen medium- and long-term loan support for upgrading of steel, nonferrous metals and petrochemical industries – press.
– China govt said to ‘step up’ scrutiny of capital flows amid yuan currency depreciation – financial press [update].
– China PBOC sets Yuan reference rate: 7.1738 v 7.1740 prior.
– China PBOC Open Market Operation (OMO): Injects CNY285B in 7-day reverse repos; Net injects CNY102B v prior injects CNY90B.
Japan
– Nikkei 225 opens -1.1% at 37,853.
– JAPAN JAN PRELIMINARY INDUSTRIAL PRODUCTION M/M: -1.1% V -1.1%E; Y/Y: 2.6% V +2.8%E.
– JAPAN JAN RETAIL SALES M/M: 0.5% V 0.6%E; Y/Y: 3.9% V 3.9%E.
– Japan releases weekly flows data [period ended Feb 21st]: Foreign buying of Japan equities: -¥1.04T v -¥351.9B prior; Japan buying of foreign bonds: -¥200.8B v ¥239.6B prior.
– Japan said to consider imposing anti-dumping duties on Chinese graphite electrodes; Citing damage to domestic industry – financial press.
– Bank of Japan (BOJ) Dep Gov Uchida: Japan economy is on a “moderate recovery”, although some weakness is seen; Cutting JGB buying inline with BOJ plans – Parliamentary testimony.
– Japan Fin Min Kato: Planning to spend ¥106.8B in budget reserves for earthquake-related reconstruction in Noto – Press.
– Japan Chief Cabinet Sec Hayashi: Cabinet approves new law on AI – financial press.
– Japan sells ¥4.5T vs. ¥4.5T indicated in 3-Month Bills; Avg Yield: 0.3255% v 0.3096% prior; bid-to-cover: 2.73x v 2.93x prior.
– BOJ Gov Ueda: Notable that many countries warned of high uncertainty regarding global economic outlook – G-20 comments.
– BOJ Gov Ueda: When there are sharp moves in long-term rates that deviate from usual moves, we stand ready to use flexible market operations as an exceptional response; Will conduct bond operations in exceptional cases – G-20 comments.
Korea
– Kospi opens -1.4% at 2,585.
– South Korea Acting Pres Choi: South Korea FX and financial markets ‘face uncertainties’ – press.
– South Korea Acting Pres Choi exchanged views (online) with US Treas Sec Bessent – statement.
Other Asia
– Taiwan Jan Monitoring Leading Indicator: 34 v 38 prior.
– Thailand govt said to be working on a master plan to achieve 3.5% GDP growth.
North America
– Mexico and US agree on joint effort to combat illegal Fentanyl and arms trafficking – press.
– (US) Treasury Sec Bessent: I am open to the idea that other countries tariffs could come down or go away.
– (US) JAN PRELIMINARY DURABLE GOODS ORDERS: 3.1% V 2.0%E; DURABLES (EX-TRANSPORTATION): 0.0% V 0.3%E; Capital Goods Orders (non-defense/ex-aircraft): 0.8% v 0.3%e.
– (US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 2.3% V 2.3%E; PERSONAL CONSUMPTION: 4.2% V 4.1%E.
– (US) INITIAL JOBLESS CLAIMS: 242K V 221KE; CONTINUING CLAIMS: 1.862M V 1.87ME.
– (US) Q4 PRELIMINARY GDP PRICE INDEX: 2.4% V 2.2%E; CORE PCE PRICE INDEX Q/Q: 2.7% V 2.5%E.
– (US) Fed’s Barkin (non-voter for 2025): ‘So far so good’ on slowing inflation without a slump; Moving to 3% inflation target would hurt Fed credibility – Q&A event in NC
– (US) PRES TRUMP: PROPOSED TARIFFS SCHEDULED TO GO INTO EFFECT ON MARCH FOURTH WILL, INDEED, GO INTO EFFECT, AS SCHEDULED. CHINA WILL LIKEWISE BE CHARGED AN ADDITIONAL 10% TARIFF ON THAT DATE. THE APRIL SECOND RECIPROCAL TARIFF DATE WILL REMAIN IN FULL FORCE AND EFFECT.
– (US) Fed’s Schmid (voter; hawk): More cautious on inflation given lack of progress; May need to rethink concept of core inflation given that once-volatile food prices now behave like other goods.
– (US) Nevada reports Jan casino gaming Rev $1.44B, +12.5% y/y, Las Vegas strip Rev $840.1M, +22.5% y/y.
– (CN) Additional 10% tariff on China is on top of 10% announced earlier this year bringing total tariffs to 20%; Trump frustrated over lack of progress curtailing fentanyl – CNBC.
– (US) JAN PENDING HOME SALES M/M: -4.6% V -0.9%E; Y/Y: -5.2% V -1.1%E (hits record low).
– (US) WEEKLY EIA NATURAL GAS INVENTORIES: -261 BCF VS. -265 BCF TO -267 BCF INDICATED RANGE.
– (US) Fed’s Bowman (voter, hawk): Calls for more pointed regulation around community banks.
– (MX) Mexico Deputy Econ Min: Mexico is analyzing other measures after imposing tariffs on low-cost imports.
– (US) Fed’s Hammack (non-voter for 2025): Over longer run, economy can adapt to higher interest rates; Likely to hold rates steady for some time.
– (CA) Canada PM Trudeau: We will have an immediate and extremely strong response to US tariff.
– (US) Kevin Hassett Dir of White House National Economic Council: Confirms Donald Trump will decide on tariff policies for all countries including Mexico and Canada after a study comes out on April 1 – CNBC.
Europe
– (UK) Feb Lloyds Business Barometer: 49 v 37 prior.
– (UK) Energy Min Ed Miliband to visit Beijing, China Mar 17-19, To restart UK- China energy dialogue and meet with Chinese investors – financial press.
– (EU) ECB ACCOUNT OF JAN. 29-30 POLICY MEETING (AKA MINUTES): Clear case for a further 25 basis point rate cut.
– (UR) Senior Trump Admin official: Confirms the economic partnership with Ukraine does not include specific guarantee of funding for future warfighting.
– (RU) Reportedly OPEC+ is hesitant on going ahead with planned April output due to uncertainty over sanctions and tariffs – press.
Levels as of 00:20 ET
– Nikkei 225 +-3.1%, ASX 200 -1.2%, Hang Seng -2.6%; Shanghai Composite -1.3%; Kospi -3.5%.
– Equity S&P500 Futures +0.1%; Nasdaq100 +0.1%; Dax -0.5%; FTSE100 +0.4%.
– EUR 1.0381-1.0404; JPY 149.10-150.15; AUD 0.6210-0.6339; NZD 0.5599-0.5635.
– Gold -0.7% at $2,876/oz; Crude Oil -0.5% at $70.01/brl; Copper -0.7% at $4.5613/lb.