Equities trade mixed in the face of FX vol

Asia market update: Equities trade mixed in the face of FX vol; JPY, CNH, THB rise; Nikkei lags; Gold and Silver fresh highs.

General trend and developments

- Initially a third positive day in a row for Asia equities, although the Nikkei fell into the red as the session continued after a good start – likely impacted by the higher Yen. ASX in Australia outperformed +1.1%, with AU REITS +3% and Goodman Group +9% after securing a A$14B data center deal in Europe.

- Japanese Yen kept recovering lost ground from Friday after Japan Fin Min Katayama overnight delivered her strongest warning yet of impending FX intervention by the BOJ/MOF by saying she is “absolutely ready and have a free hand to take bold action”. JPY/USD strengthened back to hit 156, wiping out all of its losses post-Ueda on Friday. even as Katayama said that the Yen had stabilized somewhat since yesterday. Comes also on the back of Top FX diplomat Mimura warnings on Monday.

- Former BOJ board member Adachi warned for next year that Japan’s fiscal 'woes' may cause more Yen falls and rises in yields. With yields being the biggest risk to Japan’s economy in 2026 Adachi said the BOJ may be forced to review taper plan if the bond rout persists.

- Japan govt reported to be keeping FY26 general budget issuance below ¥30T (not including any extra issuance for the ¥11.7 in supplementary budget), while also seeking to issue ¥1.0T in bonds related to US investments. [Note this last figure is only around $64B, a small fraction of the $550B pledged to the US, indicating the lion’s share expected to be invested through private enterprise].

- Meanwhile, Japan reportedly to be likely to assume long-term interest rates of ~3% for FY26 budget, highest in 20 years.

- Notable volatility in various Asia currencies continues; China offshore Yuan continues its managed march higher, as CNH moved up into the 7.01 handle amid another strong fix out of the PBOC; Thai authorities to hold meeting on Thai baht appreciation today; Korean officials expressing daily concern about the weak Won as it hits a multi-month low of 1,483 and India’s rupee (INR) for now has strengthened back into 89 handle, with IN 10-year yields +5bps.

- Spot Silver fell just short of hitting $70/oz for the first time, at $69.994/oz, while Spot Gold rose to a fresh record high >$4,500/oz.

- Australia RBA Minutes saw the board seeing a hold in rates at 3.60% ‘for some time”, however, emphasized it would be important to see inflation figure for Q4 in late January, while some members assessed that, on balance, financial conditions were a little restrictive.

- Japan and Australia yield curves fell, with AU 3-years -5bps following release of the RBA Minutes.

- Think Tank Rhodium Group wonders how China will meet is growth target, seeing China actual GDP to be <3.0% in 2025, with late 2025 seeing only ~1%.

- China’s top legislature, the NPC Standing Committee produced its first report from its end of year meeting. On the topic of housing and urban development China govt said it will support developers' / property firms' "reasonable financing needs”. [No indication whether this may include troubled property developer Vanke, which managed to buy another 30 days reprieve from its bond holders last night.].

- Samsung hit another record high after yesterday’s news that its HBM4 chips had posted the highest score in Nvidia testing, suggesting significant orders for the new chips in 2026.

- Overnight New Zealand govt confirmed to have finalized its long-running Free Trade Agreement negotiations with India, reducing tariffs on 95% of NZ exports to India, but notably Not including dairy products - as noted by Fonterra shortly thereafter and underscored by India saying that it would Never open up its dairy market to free trade. However, India did say that it expects bilateral trade to double over the next 5 years.

- Oil prices moved up yesterday after no breakthrough was reported in this weekend’s Ukraine talks in Florida.

- In trade-related news Indonesia’s chief trade official anticipated that Trump and Prabowo to sign US-Indonesia trade agreement by end-Jan, 2026.

- Pres Trump noted that Auto and home insurance rates have also increased; Plans to meet with other insurance companies, such as in the auto and real estate fields.

Note: Holiday-shortened week for Xmas, Boxing Day will see a short week for the Americas, Europe and parts of Asia, with lower liquidity. Asian markets trading normally all this week including Japan, China, Taiwan, Vietnam, with countries such as Malaysia, Philippines, Singapore and South Korea are in holiday for only Christmas Day (Thurs, Dec 25th).

- US equity FUTs flat to -0.1% during Asian trading.

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

- Mon Dec 22nd to Sat Dec 27th (Beijing): China NPC Standing Committee 19th Session, with key discussions on national development planning, environmental codes and childcare expected.

- Tue Dec 23rd (Tue night US Oct Q3 GDP (2nd est.), US Oct Durable Goods).

- Wed Dec 24th KR Dec Consumer Confidence, JP BOJ MPM Minutes.

- Thu Dec 25th JP Nov Housing Starts.

- Fri Dec 26th JP Nov Unemployment, JP Nov Industrial Production, JP Nov Retail Sales.

Holidays in Asia this week

- Wed Dec 24th Early market closes for Australia, New Zealand, UK, US.

- Thu Dec 25th Australia, Hong Kong, Indonesia, Malaysia, New Zealand, Philippines, Singapore, South Korea, UK, US.

- Fri Dec 26th Australia, Hong Kong, Indonesia, New Zealand, UK, US.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.3% at 8,726.

- (AU) Australia Central Bank (RBA) Dec Minutes: Board judged it too early to know if rise in inflation would prove persistent.

- Follow Up: New Zealand Trade Min: Expects to double two-way trade with India in 5 years - follows FTA between the 2 countries.

- New Zealand confirms it has finalized free trade agreement with India; To be signed H1, 2026 - PM Luxon[overnight update].

- Fonterra: Commenting on NZ-India FTA: Disappointing that talks with India were unable to secure significant new core dairy access opportunities for NZ into Indian dairy market – statement [overnight update].

- India govt statement on India-New Zealand FTA: Confident of doubling bilateral trade over next 5 years [overnight update].

China/Hong Kong

- Hang Seng opens +0.3% at 25,875; Shanghai Composite opens +0.1% at 3,919.

- China actual GDP again grew <3.0% in 2025 and late 2025 saw only ~1% cites estimates from think tank [Rhodium Group] - financial press [update].

- China's top legislature National People's Congress Standing Committee (NPCSC): Held policy conference on housing, urban development on Dec 22-23rd - China state media.

- Bytedance: Plans to spend ~$23B in Capex in 2026; To include CNY85.0B in spending on AI processors - FT (cf. 2025 expected Capex $20B with $12B (~CNY84B) on AI infrastructure).

- Beijing court gives guilty verdict on former Chairman of Zhongzhi Entreprise Group (formerly large Chinese shadow bank)- state media.

- China reportedly calls on companies to resume global semiconductor, supply chains – press [overnight update].

- China Commerce Ministry (MOFCOM): To impose up to 42.7% deposits on EU dairy products following probe; To impose anti-dumping duty [overnight update].

- Hong Kong Nov CPI Composite Y/Y: 1.2% v 1.3%e [overnight update].

- China Vanke bondholders approve decision on vote for 30-day extension of CNY2B bond due Dec 15th; However, bondholders Reject a one-year extension - financial press, citing sources [overnight update].

- China PBOC 7-day repo rate drops to lowest since Jan, 2023.

- China PBOC sets Yuan reference rate: 7.0523 v 7.0572 prior (strongest since Sept 30th, 2024).

- China PBOC Open Market Operation (OMO): Injects CNY59B in 7-day Reverse Repos; Net drains CNY76B v drains CNY63.6B prior.

Japan

- Nikkei 225 opens -0.1% at 50,374.

- Japan Fin Min Katayama: Will not comment on FX levels nor interest rates - financial press.

- Japan PM Administration is seeking to keep FY26 general budget JGB issuance <¥30.0T; new JGB issuance is estimated at within ¥30.0T v ¥28.6T y/y - Nikkei [update].

- Japan PM Takaichi will Not implement irresponsible tax cuts - Nikkei.

- Japan Fin Min Katayama: Absolutely ready to take action; have free hand to take bold action; can take action as set UT in US-Japan joint accord [overnight update].

- Former Bank of Japan (BOJ) Board Member Adachi: Japan fiscal 'woes' may cause more Yen falls, yield rises - financial press.

- Former BOJ board member Sakurai: First hike to 1.00% could come around June or July; BOJ likely sees neutral rate sitting somewhere around 1.75% [overnight update].

- Japan MOF sells ¥249.8B v ¥250B indicated of JGBs in Liquidity Enhancement Auction.

Korea

- Kospi opens +0.5% at 4,127.

- South Korea Nov Retail Sales Y/Y: 4.2% v 6.7% prior.

- Bank of Korea (BOK) Dep Gov: Expects one-sided FX moves on ease going forward; cites policy measures.

Other Asia

- Singapore Nov CPI M/M: 0.2% v 0.0% prior; Y/Y: 1.2% v 1.3%e.

- Follow up: Indonesia Chief Trade Negotiator Hartarto: Met with USTR Greer, meeting went well; Trump and Prabowo to sign US-Indonesia trade agreement by end-Jan, 2026 - financial press.

- Taiwan Nov Unemployment Rate: 3.4% v 3.3%e [overnight update].

North America

- JNJ: Jury in Baltimore TALC case said to award $1.56B to asbestos cancer victim; the co. plans to immediately appeal the verdict [refers to the Craft verdict].

- (VE) US Pres Trump: Have spoken with US oil companies about a post-Maduro Venezuela; Reiterates land strikes will not be limited to Venezuela.

- US Pres Trump: Announces new Golden Fleet; Approved construction of two new battleships immediately, with plans to build another eight “very quickly” and ultimately field 20-25 of these vessels over the coming years.

- (BR) Brazil Dec FGV Consumer Confidence: 90.2 v 89.8 prior.

- (CA) Canada Nov Industrial Product Price M/M: 0.9% v 0.3%e.

- (US) Nov Chicago Fed National Activity Index: -0.21 v -0.17e.

- (BR) Brazil Tax Nov Collections (BRL): 226.8B v 261.9B prior.

- (US) Fed's Miran (dovish dissenter): Shelter CPI was somewhat distorted by shutdown, but recent data should push people in dovish direction; Have not decided on 25 or 50 bps cut at next meeting.

- (MX) Mexico Pres Sheinbaum: To introduce plan to boost public private investment.

- (US) TREASURY $69B 2-YEAR NOTE AUCTION DRAWS 3.499% V 3.489% PRIOR; BID-TO-COVER RATIO: 2.54 V 2.68 PRIOR AND 2.63 OVER THE LAST 12 AUCTIONS.

- BAC CEO Moynihan: Projects a stronger economic growth in 2026 at 2.4% (prior: 2.0%); AI spending continues, helping with 2026 growth.

Europe

- (UK) Dec Lloyds Business Barometer: 47 v 42 prior.

- (IE) Ireland Nov PPI M/M: 0.0% v 0.7% prior; Y/Y: -5.3% v -3.5% prior.

- EU) ECB’s Vujcic (Croatia): Next rate move could be in either direction.

Levels as of 01:20 ET

- Nikkei 225 -0.1%; ASX 200 +1.1%; Hang Seng flat; Shanghai Composite +0.2%; Kospi +0.6%.

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

- EUR 1.1756.117.81; JPY 155.91-157.08; AUD 0.6655-0.6571; NZD 0.5790-5818.

- Gold +0.9% at $4,511/oz; BTC -1.1% at $87,975; Crude Oil -0.3% at $57.84/bbl; Copper -0.1% at $5.4972/lb.