Trump’s South Korean tariff threat brushed off by markets
|Asia market update: Trump’s South Korean tariff threat brushed off by markets; Inflation indicators ease ahead of FOMC and AU CPI; JP 40-yr JGB auction tomorrow.
General trend and developments
-Trump’s overnight South Korea tariff threat (extra 10% tariffs on multiple products due to Korea not yet passing the US trade agreement into law) has made us wonder if there are any implementation risks for other Asian trade deals [Reminder from Jan 14th: Taiwan Gov’t said: Full text of the US trade agreement will be submitted to the Taiwan Parliament for review in accordance with statutory procedures]‘.
- As it turned out, Korean stocks brushed off the news to lead Asia +2.5% with the Won also steady, even before the Korean parliament confirmed it would indeed be passing the US-Korea trade deal by end-Feb.
- Relatedly, Malaysia said it had yet to receive any official timeline from US on US trade agreement ratification.
- Ahead of the FOMC on Wed night (Asia time) "Truflation“ proxy of US aggregated inflation index dropped to 1.20%, below April’s ‘liberation day’ levels for the first time.
- Key RBA concern eases ahead of crucial inflation print tomorrow; notes the slight cooling of capacity utilization during Dec.
- Korea chipmaker Hynix +7% on MSFT exclusive deal for HBM chips supply.
- Following the NY Fed rate check on the Yen on Friday leading to a sustained surge in JPY against all crosses, Bank of Japan OIS overnight chances of a hike in March now up to 31% vs 25% Fri, while April now at 81.5% vs 79% Fri, and June chances now up to 109.5% vs 102% Fri.
- US equity FUTs +0.3% to 0.5% during Asia trading.
Looking ahead (Asian-weighted focus, using Asian time zone)
- Wed Jan 28th JP BOJ Minutes (2 mtgs ago), AU Dec CPI, (Wed night US FOMC).
- Thu Jan 29th NZ Dec Trade Balance, NZ Jan ANZ Business Confidence, SG MAS Policy Statement, PH Q4 GDP, JP Jan Consumer Confidence.
- Fri Jan 30th 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.
- Thu Jan 29th Malaysia.
Headlines/economic data
Australia/New Zealand
- ASX 200 opens +0.8% at 8,928.
- Australia Dec NAB Business Confidence: 3 v 2 prior.
- Australia 10-year yields rise to highest since Nov 2023.
- Australia sells A$1.0B v A$1.0B indicated in 2031 Bonds; Avg Yield: 4.4382%; bid-to-cover: 3.46x.
- RBNZ: New Zealand Dec Credit Card Spending M/M: -2.5%; Y/Y: -0.3%.
China/Hong Kong
- Hang Seng opens +0.3% at 26,863; Shanghai Composite opens -0.2% at 4,125.
- China Commerce Ministry (MOFCOM): Will strive to create advantages for attracting foreign investment; Will roll out new policies in a timely manner.
- China Shanghai Futures Exchange said to adjust limits for some silver, copper and tin contracts - press.
- China PBOC: Plans to develop CNY offshore market in 2026; Reiterates call to expand and innovate policy toolbox.
- China reportedly warns its people of travelling to Japan for Lunar New Year; Citizens face 'severe' safety threats - press.
- China PBOC Open Market Operation (OMO): Injects CNY402B; Net injects CNY78B v drains CNY8B prior.
- China Dec Industrial Profits Y/Y: 5.3% v -13.1% prior.
- China social security funds end of 2025 balance at CNY10.0T - financial press.
- China said to have removed Erick Tsang as Hong Kong Mainland Affairs Chief due to health reasons - China state media.
Japan
- Nikkei 225 opens -0.1% at 52,847.
- Japan Dec PPI Services Y/Y: 2.6% v 2.7% prior.
- Japan business lobby Keidanren chief Tsutsui: Need to monitor US tariff impact at micro level - financial press.
- Follow Up: BOJ accounts reportedly give no clear sign Japan intervened on Japanese yen (JPY) on Friday, Jan 23rd - press.
Korea
- Kospi opens -0.3% at 4,932.
Follow up: South Korea Ruling Party: Aims to pass special act on US trade deal by the end of Feb -Yonhap.
- US Pres Trump: Increasing South Korean TARIFFS on Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15% to 25% - Truth Social post [overnight update].
- South Korea Welfare Min: Will discuss review of pension fund's portfolio due to high FX volatility [overnight update].
- South Korea Jan Business Manufacturing Survey: 97.5 v 94.7 prior.
- South Korea industry ministry: presidential adviser to hold meeting with related ministries to discuss measures on trump's tariff threat.
- South Korea President Lee: Economy is gradually improving; To keep improving "unfair" rules in stock markets - comments at Cabinet meeting.
- Follow Up: South Korea Finance Ministry plans to hold talks with the US on South Korea parliamentary bill approval process for US-bound investment; will request help from parliament for swift approval of bill.
Other Asia
- (VN) China President Xi: Should deepen cooperation with Vietnam [overnight update].
- (PH) Philippines Dec Trade Balance: -$-3.5B v -$3.4Be.
- (ID) Indonesia Parliament selects Thomas Djiwandono as Indonesia Central Bank Dep Gov.
- (KZ) Reportedly oil majors have lost Kazakhstan field dispute valued at ~$4B - press.
- (TH) Thailand sells THB65.0B in 3-month bills: Avg Yield: 1.11788%.
North America
- (US) treasury $69B 2-year note auction draws 3.580% v 3.499% prior; bid-to-cover ratio: 2.75 v 2.54 prior and 2.60 over the last 12 auctions.
- (US) Nov preliminary durable goods orders: 5.3% v3.8%e; durables (ex-transportation): 0.5% v 0.3%e.
- (US) Jan Dallas FED manufacturing activity: -1.2 v -8.6e.
- (US) “Truflation“ proxy of US aggregated inflation index drops to 1.20% (below ‘liberation day’ for the first time) v 1.48% w/w v 2.51% m/m.
- (US) PJM Interconnection's peak power price to rise 241% to $2,300/MWh on Jan 27th - press [overnight update].
- (US) Treasury's $89B 3-month bills draw 3.580% v 3.590% prior, BTC 2.90x; $77B 6-month bills draw 3.525% v 3.520% prior, BTC 3.07x.
- (US) Trump: I just had a very good telephone conversation with Mayor Jacob Frey, of Minneapolis. Lots of progress is being made! Tom Homan will be meeting with him tomorrow in order to continue the discussion.
- (CA) Canada PM Carney said to be consider a visit to India in early March - financial press.
- (CA) Canada PM Carney: The review of the USMCA trade deal will be robust; Some of Trump's recent comments should be viewed in the context of the USMCA review.
- (CA) Canada International Trade Min Leblanc: Told USTR Greer that Canada isn't seeking trade deal with China (echoes earlier comments by PM Carney).
- (MX) Mexico Dec Unemployment Rate: 2.4% v 2.5%e.
Europe
- (ES) Spain Dec PPI M/M: +0.4% v -0.5% prior; Y/Y: -3.0% v -2.5% prior.
- (BE) Belgium Jan Business Confidence: -8.8 v -11.9 prior.
- (UK) PM Starmer: The UK will not be forced to choose between US and China.
- (UK) BOE's Gov Bailey: Banks are now better equipped to absorb losses in crises - Op Ed in The Banker.
- (EU) European Parliament Intl Trade Committee Chair Lange: No decision taken on US-EU trade agreement vote; Parliament negotiators to discuss issue next week.
- (RU) Russia Central Bank (CBR) survey of companies indicates that Q1 2026 investment growth will slow to rate that's below 2025 average - press.
- (RU) Russian Energy Min reportedly plans to lift gasoline export ban ahead of schedule - press.
-(DE) Germany Jan IFO business climate: 87.6 v 88.2E.
Levels as of 00:20 ET
Nikkei 225 +0.7%; ASX 200 +1.0%; Hang Seng +1.0%; Shanghai Composite +0.1%; Kospi +2.8%.
Equity S&P500 Futures +0.3%; Nasdaq100 +0.5%; DAX +0.1%; FTSE100 +0.1%.
EUR 1.1900-1.1870; JPY 0.6490-0.6468; AUD 0.6929-0.6907; NZD 0.5979-0.5959.
Gold +1.1% at $5,064/oz; BTC +0.7% at $88,536, Crude Oil -0.6% at $60.26/bbl; Copper -0.5% at $5.8723/lb.
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