CHF/Euro/GBP maintain strength as European jawboning continues over US Greenland threat

Asia market update: CHF/Euro/GBP maintain strength as European jawboning continues over US Greenland threat but NATO Gen Sec Rutte injects note of rationalism; JP JGB yields power higher over prospect of fiscal expansion with potential LDP consolidation in Feb snap election.

General trend and developments

- Overall quiet trading with the US markets on holiday Monday after the week opened with a barrage of market reactions and continued European jawboning to Pres Trump’s threat to tariff 8 European nations until the US works out a deal for possession of Greenland.

- NATO Sec Gen Rutte sounding a rare note of rationalism, saying to cool down the rhetoric and focus on the issues at hand.
-Notably no safe haven value for US or JP currencies nor equities thus far.

-20-yr JGB auction followed the 2026 pattern of higher yields and lower demand with a wide tail of 25bps. Long-end of the Japanese yield curve steepens significantly with 20-30-40years +15-16bps amid concerns of fiscal expansion should PM Takaichi’s LDP party manage to consolidate its power in the Lower House election on Feb 8th. (E.g. Govt suggestions of suspending the sales tax for food items for 2 years - see below).

- Overnight Japan PM Takaichi confirmed to set the election date of Feb 8th, with a dissolution of the Lower House this Fri, Jan 23rd. indicated if her LDP-Ishin Coalition does not win a majority that another PM is likely. Takaichi promised if successful to end Japan’s ‘excessively tight’ fiscal policy while aiming to lower Japan’s debt-to-GDP and confirmed to suspend sales tax on food for two years.

- Meanwhile, Toyota Finance said to delay bond issuance until after mid-Feb on ‘issuer-related’ reasons.

-Japanese equities have remained lower since Friday’s ETF sale announcement out of the BOJ (reminder from Jan 16th: BOJ decided to execute guidelines for disposal of ETF and J-Reit; to implement the new ETF disposal policy on Jan 19th [Mon] – press); Incidentally, the steeper JGB yield curve, has offered no support for the TOPIX Banking index.

- China PBOC kept LPR rates for Jan left rates unchanged, as expected.

- More China loan subsidies in attempt to boost consumer demand after yet another month of dismal retail sales figures.

- OpenAI reportedly plans to debut first physical device in H2 2026 - Axios citing OpenAI Policy Chief-Spot Silver and Gold both saw fresh record highs.

- US equity FUTs -1.0% to -1.1% total since equity FUTs opened on Monday morning.

Looking ahead (Asian-weighted focus, using Asian time zone)

-Tue Jan 20th (Tue eve UK Jobs, DE Jan ZEW Economic Sentiment Index, Potential US SCOTUS decision on IEEPA tariffs and US Fed board member Lisa Cook).

- Wed Jan 21st ID Rate Decision, (Wed eve UK Dec CPI).

-Thu Jan 22nd JP Dec Trade Balance, KR Q4 GDP, AU Dec Jobs, (Thu eve US Final Q3 GDP, US Oct + Nov Core PCE).

- Fri 23rd JP Dec CPI, BOJ rate decision, Global PMIs, (Fri eve UK Dec Retail Sales).

Holidays in Asia this week

- Mon Jan 19th US market holiday.

Headlines/Economic Data

Australia/New Zealand

-ASX 200 opens -0.4% at 8,843.

-New Zealand Dec Performance Services Index: 51.5 v 46.9 prior - update.

China/Hong Kong

- Hang Seng opens flat at 26,544; Shanghai Composite opens +0.1% at 4,116.

- Pinduoduo: China said to deepen probe into the co. - US financial press.

- China PBOC monthly loan prime rate (LPR) setting: Leaves rates unchanged, as expected.

- China NDRC (state planner): To make strategic plan to expand demand during 2026-2030.

- NDRC [China State Planner]: China to study the establishment of a ‘national-level’ M&A fund.

- China said to favor targeted structural cuts in interest rates and the RRR [inline] - Shanghai Securities News.

- China Premier Li: External situation remains complex and uncertain this year -comments from seminar with analysts and entrepreneurs - State TV [overnight update].

- Apple: China Q4 iPhone shipments +28% y/y; Apple’s handsets accounting for one in every five shipments in the December quarter - Counterpoint [overnight update]

- China MOF: Establishes CNY500B guarantee program for private investment, involves CNY500B special guarantee for private investment over a 2 year period - financial press.

- China MOF to extend subsidized consumption loans to end-2026.

- China PBOC sets Yuan reference rate: 7.0006 v 7.0051 prior (strongest since May 18th, 2023).

- China PBOC Open Market Operation (OMO): Injects CNY324B; Net drains CNY35B v injects CNY72B prior.

Japan

- Nikkei 225 opens -0.4% at 53,348.

- Japan sells ¥800B vs. ¥800B in 20-year JGB bonds; AVG YIELD: 3.2530% V 2.9160% prior; bid-to-cover: 3.19X V 4.10X prior.

- Follow up: Japan Economy Min Kiuchi: Will consider impact of food sales tax cuts on yields, FX - financial press.

- Japan DPP Head Tamaki (opposition party): No need for sales tax if real wage growth is achieved, closely watching situation now - financial press.

- China Dec visitors to Japan -45% y/y - Japanese press.

- Japan PM sets Feb 8th as election date; will seek ruling coalition majority; If coalition does not win majority, another PM is likely; Will keep eye out on speculative FX moves, ready to take necessary action [overnight update].

- Japan PM Takaichi confirms dissolving parliament on Jan 23rd (as speculated); to hold snap election on Feb 8th; My admin will put end to excessively tight fiscal policy [overnight update].

- Japan, US have reportedly short-listed a few projects as the first candidates under planned U.S.-bound $550B investment, including large-scale infrastructure project involving SoftBank Group in data centre construction - press [overnight update]-Japan to spend ¥39B from reserves for rare earth supply - press [overnight update].

-Fitch affirms Japan sovereign rating at A; Outlook stable [overnight update].

Korea

- Kospi opens flat at 4,900.

- South Korea Dec PPI Y/Y: 1.9% v 1.9% prior - update.

Other Asia

- Taiwan Vice Pres: We (will) balance the trade balance between Taiwan and the US - financial press.

- Vietnam Pres Cuong: Nation facing challenges; Growth remains below potential.

- (IN) India signs several pacts with UAE on LNG supply, defense and nuclear energy; Aim to double bilateral trade to $200B by 2032.

North America

- (US) Pres Trump on Davos: Primary message is how well the US is doing; We have to have Greenland - financial press prior to taking off from Florida to Davos.

- (US) White House: President Trump to deliver special address at the Davos WEF at 2:30 PM CET on Wed.

- US DOJ said to loosen some gun regulations - WAPO, citing sources.

- (US) Pres Trump won't say if he would or wouldn't use force to seize Greenland; Notes 100% conviction with following through on EU tariffs - NBC citing phone call.

- (US) Treasury Sec Bessent: European retaliation over tariffs would be “very unwise”; Have a hot economy, expect investment to accelerate in next few months - Davos.

- CANADA DEC CPI M/M: -0.2% V -0.3%E; Y/Y: 2.4% V 2.2%E.

- (CA) Canada Q4 BoC Overall Business Outlook Survey: -1.8 v -2.3 prior.

- IMF WORLD ECONOMIC OUTLOOK (WEO): Raises 2026 Global GDP growth forecast from 3.1% to 3.3%.

- (DE) German Chemical Industry Association (VCI): EU-US tariff spiral would cause high economic costs in both Europe and the US.

Europe

- (DK) Greenland Resources [MOLY.CA] signs MOU with German GMH Gruppe for the supply of molybdenum.

- (FR) France PM Lecornu: Will respect deficit target at 5% of GDP in 2026.

Reminder: Earlier, France PM Lecornu to use Article 49.3 powers to pass 2026 budget without vote in parliament.

- (EU) Foreign Policy Chief Kallas: Europe has slate of tools to protect our interests; Arctic security is a shared transatlantic interest; Tariff threats are not the way to go about this.

- (FR) France PM Lecornu to use Article 49.3 powers to pass 2026 budget without vote in parliament - French press (risks another no-confidence vote and fall of govt).

- (EU) Economic Commissioner Dombrovskis: US tariff threats are not acceptable; Need to find constructive solution for Greenland; Territorial integrity is important.

- (EU) ECB: To require banks to conduct reverse stress tests on geopolitical and foreign currency exposures.

Levels as of 00:20 ET

Nikkei 225 -1.0%; ASX 200 -0.7%; Hang Seng +0.1%; Shanghai Composite -0.1%; Kospi +0.2%.

Equity S&P500 Futures -0.2%; Nasdaq100 -0.3%; DAX -0.2% FTSE100 -0.1%.

EUR 1.1633.116.73; JPY 157.85-158.28; AUD 0.6707-0.6741; NZD 0.5789-5836.

Gold +2.3% at $4,703/oz; BTC -1.0% at $95,198, Crude Oil -0.2% at $59.31/bbl; Copper -0.5% at $5.8790/lb.