PBOC official sees limited room to cut RRR amid better industrial production data and phase 1 trade deal

Asia Market Update: Asian indices trade mixed after US gains; Little initial impact seen from Chinese data, PBOC official sees limited room to cut RRR amid better industrial production data and phase 1 trade deal.

 

General Trend:

- Markets in China and Hong Kong trade flat during early part of session

- Equity gainers in Australia include Consumer and Resource firms

- Rio Tinto rises over 1.5% after quarterly production update and guidance

- Sectors moving higher in Japan include Marine/Transportation, brokerage and banks.

- China PBOC official said the RRR level is appropriate, sees limited room for additional reserve ratio cuts [Reminder: On Sept 24th 2019, PBOC Gov Yi Gang then said has relatively large policy room but should treasure such policy room, need to preserve room for normal monetary policy]

- US 30-year Treasury Futures decline; US Treasury Dept. said it plans to issue 20-year bond in H1 2020

- South Korean bond yields declined as 2 BOK board members voted for rate cut at today’s meeting

 

Headlines/Economic Data

Australia/New Zealand

- ASX 200 opened +0.1%

- (NZ) New Zealand Dec Manufacturing PMI: 49.3 v 51.2 prior

 

China/Hong Kong

- Shanghai Composite opened +0.2%, Hang Seng +0.4%

- (CN) CHINA Q4 GDP Q/Q: 1.5% V 1.4%E; Y/Y: 6.0% V 6.0%E

- (CN) CHINA DEC INDUSTRIAL PRODUCTION Y/Y: 6.9% V 5.9%E (fastest rise since March 2019*)

- (CN) China PBOC Monetary Dept Head Sun Guofeng: RRR level is appropriate; sees limited room for additional reserve ratio cuts (comments from Jan 16th)

- (CN) China PBOC sets Yuan Reference Rate: 6.8878 v 6.8807 prior

- (CN) China PBoC Open Market Operation (OMO): Injects CNY200B via 14-day reverse repos v injects CNY300B in 14-day prior; Net injection CNY200B v injects CNY300B prior

 

Japan

- Nikkei 225 opened +0.7%

- (JP) Japan Cabinet Office Mid-term Economic Projections: Doesn't see balanced budget this decade in baseline view; previous base case hadn't ruled out primary balance in FY29; optimistic forecast sees primary balance in FY27

- (JP) Japan MoF sells ¥900B v ¥900B indicated in 0.30% 20-year bonds; avg yield 0.3000% v 0.2860% prior; bid to cover 3.83x v 4.10x prior

- (JP) Japan Nov Tertiary Industry Index m/m: 1.3% v 1.0%e

 

Korea

- Kospi opened +0.6%

- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED

 

Other Asia

- (SG) SINGAPORE DEC NON-OIL DOMESTIC EXPORTS M/M: 1.1% V -1.5%E; Y/Y: 2.4% V -1.0%E (first y/y rise since early 2019); Exports to US +8.5% y/y, Europe +9.9% y/y, China +9.8% y/y

 

North America

- (US) Treasury to issue 20-year bond in H1'20, expects 'strong demand'; plans to issue this product in a regular and predictable manner in benchmark size

- (US) DEC ADVANCE RETAIL SALES M/M: 0.3% V 0.3%E; RETAIL SALES (EX-AUTO) M/M: 0.7% V 0.5%E (Released on Jan 16th)

- (US) Senate passes USMCA trade deal; bill now goes to Pres Trump's desk for signing (as expected); Vote was 89-10

- (US) Pres Trump confirms plans to nominate Judy Shelton and Christoper Waller for open Fed board seats - press

 

Europe

- (CN) EU Ambassador to China Chapuis: Investment negotiations with China now monthly, investment talks have entered 'critical' phase

 

Levels as of 00:20 ET

- Nikkei 225, +0.4%, ASX 200 +0.3%, Hang Seng -0.1%; Shanghai Composite -0.1%; Kospi -0.1%

- Equity Futures: S&P500 flat; Nasdaq100 flat, Dax +0.2%; FTSE100 flat

- EUR 1.1144-1.1130 ; JPY 110.29-110.08 ; AUD 0.6905-0.6883 ;NZD 0.6650-0.6629

- Gold +0.3% at $1,555/oz; Crude Oil +0.1% at $58.55/brl; Copper +0.1% at $2.855/lb