V-plunge and recovery in another volatile Asia session, JP election this weekend

General trend and developments

-A sea of red continued at the Asia opening. Silver hit $65 handle. Gold below $4700. BTC touched $60k with ETH ~$1,700. Microsoft now -26% of its all-time highs last year, with all Mag 7 stocks now below their highs (Apple and Alphabet best performed, down just ~5% from highs).

-However, a mini V-shaped recovery took place across risk assets as the Asia session progressed, although still shy of levels seen earlier in the US session.

-US equity FUTs continued their slide this week before coming off their worst levels.

- Currencies regained some of their lost ground against the Dollar, after Sterling threatened 1.35.

-Kospi was by far the worst performer again in Asia, plunging -5% shortly after the open, to below 5K, but pared half those losses as the Nikkei and Hang Seng also recovered from >1% losses to edge into positive territory later.

-Further reports in Japan the ruling parties expected to win >300 seats in Sunday's lower house elections [out of 465 seats], possibly even a ‘super majority’ of >310 votes, which would enable the effective bypassing of the Upper House on legislation.

-BOJ board member Masu struck a more neutral tone today compared to his rather hawkish tone in his last public comments in Nov 2025. Yen overall held its strength vs USD.

-Overnight OIS chances of a 25bps hike by the BOJ in March edged up to 27.0% (vs 24.5% day before), by April up to 75.5% (vs 74.5% day before) and by June up to 104.5% (vs 104% day before).

-Japan Household Spending remained in contraction for December, comes days after JP Retail Sales in Dec fell sharply and much worse than expected.

-Rio Tinto flat on the ASX after Glencore (ADRs -6.7%) ending merger discussions, the companies declining to extend the bid deadline past Feb 5th.

-Trump Admin today launched its new discounted drug website for US consumers to enjoy Most-Favored-Nation pharmaceutical prices as per the rest of the world; https://trumprx.gov/

-South Korea recorded a record Dec Current Account Balance of $18.7B in December. KRW (Won) fell back down to 1,472,

-Amazon down -11% down on poor outlook amid yet more Mag7-raised Capex guidance at already elevated levels.

- US equity FUTs -0.4% to -0.7% during Asia trading.

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

-Fri Feb 6th (Fri night US Jan Nonfarm Payrolls delayed to next Wed; US Michigan Consumer Sentiment).

-Sun Feb 8th Japan and Thailand elections.

Holidays in Asia this week

-Mon Feb 2nd Malaysia.

-Fri Feb 6th New Zealand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -1.3% at 8,780.

- RBA Gov Bullock: Inflation has fallen substantially since peak in 2022, but will not be back into the target range until mid-2027.

- Pilbara Ports: Clear port has been activated for all ports, effective for Feb 6th [appears to be weather-related].

China/Hong Kong

- Hang Seng opens -2.0% at 26,354.

- Shanghai Composite opens -0.9% at 4,040.

- Shanghai Futures Exchange (SHFE) reportedly to raise trading limits of international copper futures - press.

- China MOF sells 1-year bonds and 30-year long-term bonds.

- China said to issue plan to drive Chinese medicine development for 2026-30 - press.

- China PBOC sets Yuan reference rate: 6.9590 v 6.9507 prior.

- China PBOC sells total of CNY331.5B in 7-day and 14-day RRPs; Net drain CNY146B.

Japan

- Nikkei 225 opens -0.7% at 53,435.

- Japan sells ¥4.7T vs. ¥4.7T indicated in 3-Month Bills; Avg Yield: 0.7486% v 0.7516% prior; Bid-to-cover: 3.22x v 3.20x prior.

- Japan Dec Household Spending Y/Y: -2.6% v -0.3%e.

- Japan end-Jan Foreign Reserves: $1.39T v $1.37T prior.

- Japan Trade Data for Jan 1-20th: Exports Y/Y: 15.3%; Imports: 6.0%.

- More reports circulate that Japan LDP seen winning majority by "large" margin in upcoming election - press; Japan ruling parties expected to win over 300 seats in lower house elections [out of 465 seats] - Nikkei.

- US Pres Trump: Japan elections results are very important to the future of Japan; Endorses PM Takaichi, will host Takaichi at White House on March 19th - Truth Social post.

- BOJ Board Member Masu: Appropriate and Timely Rate Hike is Needed.

Korea

- Kospi opens -2.9% at 5,013.

- South Korea Dec Current Account Balance: $18.7B v $12.9B prior.

- South Korea Foreign Min says not 'intentionally' delaying US investment; US requested progress on non-tariff barriers - Yonhap.

- President Trump: to allow North Korea to receive humanitarian aid - South Korea Press.

Other Asia

- (IN) India Central Bank (RBI) leaves repurchase rate unchanged at 5.25%; As expected.

- (VN) Vietnam Jan CPI Y/Y: 2.5% v 3.1%e.

- (VN) Vietnam Jan Retail Sales Y/Y: 9.3% v 9.8% prior.

- (VN) Vietnam Jan Industrial Production Y/Y: 21.5% v 10.1% prior.

- (VN) Vietnam Jan Trade Balance: -$1.7B v +$1.5Be.

- (TW) Taiwan Jan CPI Y/Y: 0.7% v 1.2%e.

- (TW) Taiwan Jan Foreign Reserves: $604,5B v $602.6B prior.

- (TW) Taiwan Central Bank: Stepped in today to offer USD liquidity; Demand is higher today on foreign outflows.

- (PH) Philippines Dec Unemployment Rate: 4.4% v 4.4% prior.

- (PH) Philippines Central Bank (BSP) Gov Remolona: Interest rate swap volumes 'surge' in Philippines - financial press.

- (ID) Indonesia Jan Foreign Reserves: $154.6B v $156.5B prior.

- (ID) Indonesia FSA: Responds to Moody's downgrading Indonesia Outlook to negative from stable; FSA to keep strengthening financial sector resilience.

- (IN) India Trade Ministry official: 1st part of US-India trade agreement almost ready; joint agreement to be signed virtually by mid-March - (IN) India Trade Ministry official: 1st part of US-India trade agreement almost ready; joint agreement to be signed virtually by mid-March.

- (KW) Kuwait Oil Co CEO: In discussions with American partners for potential shale oil & gas development.

North America

- (US) Dec JOLTS Job Openings: 6.542M v 7.250ME; Ratio of job openings to unemployed workers (VU) at 0.87 v 0.91 prior.

- (US) Jan Challenger Job Cuts: 108.4K v 35.6K prior (highest to start year since 2009); Y/Y: +117.8% v -8.3% prior.

- (US) Initial Jobless Claims: 231K v 212KE; Continuing claims: 1.844M v 1.85ME.

- (US) BOFA institute: in the week ending Jan 31st total card spending -3.2% Y/Y v +6.6% Y/Y prior week v +1.8% on average in Dec; The slowdown was most likely due to winter storm fern. HI, groceries, gas, transit & general merch decelerated significantly.

- (US) Weekly EIA Natural Gas Inventories: -360 BCF vs. -373 BCF to -377 BCF indicated range.

- (US) US and Russia negotiating extension to New START nuclear treaty - Axios (as expected).

-(CA) Bank of Canada (BOC) Gov Macklem: Rate policy shouldn't try to mitigate structural change, rate cuts can't address lost production capacity; deep structural changes transforming economy - speech text.

-(MX) Mexico Central Bank (BANXICO) leaves overnight rate unchanged at 7.00%; As expected.

Europe

- (EU) ECB leaves key rates unchanged; As expected.

- (EU) ECB Chief Lagarde: Stronger euro adds to external challenges and could bring inflation down more than expected - Prepared Remarks.

- (UK) Bank of England (BOE) leaves bank rate unchanged at 3.75%; as expected; Notes judgments on further easing 'will become closer call'.

- (UK) Bank of England (BOE) Feb minutes: Voted 5-4 to keep policy steady; Breeden, Dhingra, Ramsden and Taylor voted for 25BPS cut.

- (EU) ECB said to standardize repo lines; New repo line framework to be introduced next week with aim of enhancing global role of the Euro - press.

- (UK) PM Starmer: None of us knew depth or darkness of relationship between Mandelson and Epstein; No one is above accountability.

- (UK) BOE Gov Bailey: Disinflation is on track; should be scope for further easing - post rate decision press conference.

- (IE) Ireland Jan Unemployment Rate: 4.7% v 4.7% prior.

- (CZ) Czech Central Bank (CNB) leaves 2-week REPO rate unchanged at 3.50%; As expected.

Levels as of 00:20 ET

Nikkei 225 +0.4%; ASX 200 -2.0%; Hang Seng -1.4%; Shanghai Composite +0.2%; Kospi -2.9%.

Equity S&P500 Futures -0.5%; Nasdaq100 -0.7%; DAX +1.1%; FTSE100 -0.8%.

EUR 1.1801-1.1766; JPY 0.6388-0.6367; AUD 0.6947-0.6897; NZD 0.5972-0.5929.

Gold +0.9% at $4,823/oz; BTC -7.4% at $65,549, Crude Oil +0.6% at $63.66/bbl; Copper +0.3% at $5.7372/lb.