Trump raises CAD tensions while Iran seen de-escalated slightly

Asia market update: Risk assets sharply higher on early call for Warsh as Fed Chair; LME open delayed again; Trump raises CAD tensions while IRAN seen de-escalated slightly; No US Treasury FX manipulation reported.

General trend and developments

- USD sharply higher and risk assets fell hard after a series of escalating reports: First, Trump saying he would bring the US Fed Chair announcement forward to Friday, followed up by press reports that former Fed Gov Kevin Warsh (41% chance in betting markets yesterday) said to have met with Pres Trump at White House on Thursday, followed by breaking reports that the Trump Admin was indeed preparing Warsh for the top job.

- Adding to a sense of uncertainty was the London LME delaying its market opening due to 'technical issues' [follows the recent volatility seen with the metals complex, and a similar opening delay back in Nov].

- Pres Trump escalated tensions with Canada by prohibiting the sale of Gulfstream products in Canada and threatened to charge Canada a 50% tariff on any and all aircraft sold into the US.

- Markets interpreted Iran de-escalation from Trump saying he didn’t want to use force if it could be avoided. WTI crude -2%.

- US will host talks on rare earths with allies in DC next week. To discuss pricing, among others.

- For global shipping, Flexport Global Logistics saw TPEB capacity holding at 80-85% in January, with a slight bump to 90% in early February. In tandem out of Japanese shipper Mitsui O.S.K guided a hike.

- Japan after close today we will see if indeed there was BOJ intervention a week ago Friday following the sharp rise up in Yen from 159-152 into early this week.

- Japan’s 2-year JGB auction saw stronger demand than the 12-month average (3.60x) with 2-year yields -3bps after the auction, as the market begins to look to the Feb 8th Lower House snap election.

- January Tokyo CPI saw the Headline figure below 2.0% target for first time since 2024, but little impact on markets.

- US Treasury omitted to call for BOJ tightening in its semi-annual FX report.

- OpenAI said to be working toward Q4 IPO, comes as Amazon consider investing as much as $50B in OpenAI.

- Apple +1.4% after hours on beats on earnings and Rev and noting store traffic in China grew by double digits in Q1 (**Reminder Apple took smartphone sales lead in China off Huawei in Q4).

- During US session, software companies MSFT, NOW, SAP and others hit on fears of over-leverage on AI Capex as well as potential AI-demand destruction for their existing products from competitors to undercut existing pricing.

- US equity FUTs +0.4% to +.5% during Asia trading.

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

- Fri Jan 30th JP Jan Tokyo CPI, JP Dec Industrial Prod & Dec Retail Sales, AU Q4 PPI, (Fri eve DE, EU Q4 Flash GDP, US Dec PPI).

- Sat Jan 31st China Jan NBS Manufacturing PMI, KR Jan Exports.

Holidays in Asia this week

- Mon Jan 19th Australia, India.

- Wed Jan 28th Malaysia early close at 12:30pm local time.

- Thu Jan 29th Malaysia.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.3% at 8,955.

- Australia Q4 PPI Q/Q: 0.8% v 1.0% prior; Y/Y: 3.5% v 3.5% prior.

- Australia Dec Private Sector Credit M/M: 0.8% v 0.6%e; Y/Y: 7.7% v 7.4% prior.

- Australia sells A$1.0B vs. A$1.0B indicated in 4.25% 2036 Bonds; Avg Yield: 4.8039%; bid-to-cover: 3.33x.

- RBNZ: 2025 Residential Lending: +5.7% y/y.

- New Zealand Jan ANZ Consumer Confidence: 107.2 v 101.5 prior.

China/Hong Kong

- Shanghai Composite opens -0.6% at 4,131.

- China CSI SWS Non-Ferrous Metal Index -9.5%.

- Hang Seng opens -0.7% at 27,735.

- China PBOC Open Market Operation (OMO): Injects CNY478B; Net injects CNY353B v injects CNY144B prior.

- US Pres Trump: 'Very dangerous' for the US to get into business with China; more dangerous for Canada to get into business with China - financial press (update).

- UK and China have agreed to resume high level security discussions; China agrees to reduce tariff on UK whiskey to 5% from 10% - Chinese press.

- 'Gold fever' in China sparks $1.0B scandal as trading platform collapses - SCMP [update].

- HKMA: Agency steering group announces priorities for 2026-2028.

Japan

- Nikkei 225 FUTs in Singapore open -115 points at 53,230.

- Nikkei 225 opens 0.1% at 53,434.

- Japan Jan Tokyo CPI y/y: 1.5% v 1.7%E; CPI (ex-fresh food) y/y: 2.0% v 2.2%E (headline figure first time below 2.0% target since 2024).

- Japan Dec preliminary industrial production m/m: -0.1% v -0.4%E; y/y: 2.6% v 2.1%E.

- Japan Dec retail sales m/m: -2.0% v -0.5%E; y/y: -0.9% v +0.7%E.

- Japan sells ¥2.8T vs. ¥2.8T indicated in 2-year JGB bonds; avg yield: 1.2530% v 1.1290% prior; bid-to-cover: 3.88X v 3.26X prior (above 12-month avge 3.60x).

- China coast guard organized 134 patrols around Japan Senkaku islands over past five years - China state media.

- Japan sells ¥4.7T vs. ¥4.7T in 3-Month Bills; Avg Yield: 0.7516% v 0.7277% prior; Bid-to-cover: 3.20x v 2.79x prior.

- Japan Dec Jobless Rate: 2.6% v 2.6%e.

Korea

- Kospi opens -0.2% at 5,210.

- South Korea and US do NOT reach conclusion during first day of trade talks; both sides are expected to hold more talks on tariffs - Yonhap.

- South Korea Dec Industrial Production M/M: 1.7% v 0.5%e; Y/Y: -0.3% v -2.0%e.

- South Korean Supreme Court confirms Japan company should pay KRW100M to victims of forced labour.

Other Asia

- (IR) France Foreign Min Barrot: EU adopted Iran sanctions.

- (IR) Iran: Added 1,000 strategic drones to armed forces.

- (IR) Saudi and Israeli officials said to visit Washington, DC, to discuss possible strikes on Iran - Axios (update).

- (IR) Iran Pres Pezeshkian met with Qatar Emir Al Thani and Pakistan PM Sharif to discuss use of diplomacy to ease tensions - Iranian state media.

- (SG) Singapore Dec Unemployment Rate: 2.0% v 2.0%e.

- (SG) Singapore Dec M2 Money Supply Y/Y: 6.2% v 5.7% prior.

- (ID) HSBC downgrades Indonesia stocks to neutral, cites concerns over growth.

- (ID) Indonesia IDX stock exchange CEO resigns; "Hope my resignation makes capital markets better" - financial press.

- (ID) Indonesia Chief Econ Min Hartarto: Pres Prabowo is monitoring Indonesia stock market condition; Reiterates commitment to maintain credibility, stability - financial press.

- (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed); to sell combined VND14.5T in 5-year, 7-year, 10-year, 15-year, 20-year and 30-year bonds on Feb 4th.

North America

- (US) Nov trade balance: -$56.8B v -$44.0BE.

- (US) Q3 final nonfarm productivity: 4.9% v 4.9% prelim; unit labor costs: -1.9% v -1.9% prelim.

- (US) initial jobless claims: 209K v 205KE; continuing claims: 1.827M v 1.85ME.

- (US) Nov factory orders: 2.7% v 1.6%E.

- (US) Nov final wholesale inventories m/m: 0.2% v 0.2%E.

- (US) Nov final durable goods orders: 5.3% v 5.3% prelim; durables (ex-transportation): 0.4% v 0.5% prelim.

- (US) weekly EIA natural gas inventories: -242 BCF vs. -215 BCF to -240 BCF indicated range.

- (US) Treasury $44B 7-year note auction draws 4.018% v 3.930% prior, bid-to-cover ratio: 2.45 v 2.51 prior and 2.61 over the last 12.

- (US) follow up: Trump administration said to be preparing Warsh for Fed Chair selection for Fri morning- financial press.

- (US) Sen Thune: cannot probably confirm new Fed Chair without Sen Tillis support.

- (CA) Canada Nov int'l merchandise trade (CAD): -2.2B v -0.7BE.

- (CA) US President Trump: Canada is effectively prohibiting the sale of Gulfstream products in Canada through this very same certification process. If, for any reason, this situation is not immediately corrected, I am going to charge Canada a 50% tariff on any and all aircraft sold into the United States of America.

- (US) President Trump: Affirms working with Congress to avoid shutdown; Republicans and Democrats to fund 'most' of the government until Sept

- (US) President Trump said to sue the IRS and UST for $10B in relation to tax-return leaks - US financial press.

- (CA) Bank of Canada (BOC) Gov Macklem: Elevated geopolitical risks and US trade policy seen as potential shocks.

- (MX) Mexico Pres Sheinbaum: Had productive and cordial call with US Pres Trump, we continue to make progress on trade issues and the bilateral relationship.

Europe

- (UK) LME said to delay market opening due to 'technical issues' [follows the recent volatility seen with the metals complex] - financial press.

- (EU) EIB Pres Calvino: Expect to reach 5% of EIB's lending for defense in 2026.

- (EU) US State Dept approves sales of F-100 to Spain for $1.7B - press.

- (UK) PM Starmer's Office releases statement on China visit.

- (UK) UK, China weigh cross-border asset-management scheme.

- (UK) Jan Lloyds Business Barometer: 44 v 50e.

- (UK) Daily Baltic Dry Bulk Index -0.7% at 2,002 points.

- (RU) Russia Govt aide Ushakov: Ukraine guarantees have not been agreed to with Russia; Territorial and other issues have not been solved in talks.

- (BE) Belgium Jan CPI M/M: 0.4% v 0.1% prior; Y/Y: 1.1% v 2.1% prior.

- (IE) Ireland Q4 Preliminary GDP Q/Q: -0.6% v -0.3% prior; Y/Y: 3.7% v 10.8% prior.

Levels as of 00:20 ET

Nikkei 225 +0.2%; ASX 200 -0.7%; Hang Seng -1.6%; Shanghai Composite -0.6%; Kospi +1.3%.

Equity S&P500 Futures -0.4%; Nasdaq100 -0.5%; DAX -2.0%; FTSE100 +0.2%.

EUR 1.1975-1.1895; JPY 0.6540-0.6495; AUD 0.7056-0.6978; NZD 0.6082-0.6032.

Gold -2.5% at $5,237/oz; BTC -5.9% at $82,980, Crude Oil -1.5% at $64.42/bbl; Copper -3.3% at $6.0743/lb.