Yen volatility kept alive by BoJ rate bets

EU mid-market update: Chips fly on TSMC beat; Yen volatility kept alive by BOJ rate bets; Surprise PBOC easing and shipping giant Maersk plans return to Suez canal.

Notes/observations

- Semiconductors ripping higher after TSMC delivered a record quarter and bullish forward guidance: strong Q4 prints and Q1 revenue/gross margin guidance much above consensus, plus initial FY26 capex $52–56B and ~30% FY26 revenue growth commentary reinforced the “AI capex upcycle” view. European suppliers rallied (ASM International, ASML, BESI, Suss). Luxury had initial pop but faded: Richemont’s strong sales growth helped set the tone, but the sector turned mixed quickly as investors weighed Asia/China demand concerns and margin pressure from high gold prices, FX and tariffs.

- UK data surprised to upside with Nov GDP rising 0.3% MoM against a 0.1% with industrial production +1.1% and manufacturing +2.1%, partly offset by construction -1.3%. Trade balances were weaker with visible trade deficit at -£23.7B. Some analysts see Q4 avoiding contraction and modest momentum into early-2026, while others stress “one-off” drivers and expect softer growth ahead amid jobs/fiscal drag, keeping the BoE path debated. Further on data, France inflation confirmed soft in final reading. Bund yields little changed after 2025 German GDP in line with 0.2% estimate, as bond supply seen easing after a heavy issuance week.

- Busy overnight Asia session after China PBOC stepped up targeted easing. Flagged 25bp cuts to structural policy tool rates and relending rates (to 1.25%, effective Jan 19th), plus measures to support credit to priority sectors. Reiterated no intention to use FX depreciation for trade competitiveness. Bank of Korea (BOK) remained cautious, leaving rate at 2.50% as expected, for 5th straight pause. KRW price action still sensitive to US rhetoric/jawboning and local rate moves.

- Japanese politics is bleeding into FX and JGBs. Reports around a potential snap election and reflation agenda keep JGB sell-off / inflation risk in focus. Unconfirmed source this morning suggested BOJ were ‘likely’ to hold rates steady this month. OIS pricing for an April BoJ hike ticked higher alongside FX volatility and repeated verbal intervention.

- On trade front, risk re-intensifies for chips: White House signaled Trump may impose broader semiconductor tariffs (and derivatives), keeping a policy overhang on global tech supply chains even as AI demand stays strong.

- Geopolitics still hot amid tensions in Iran. US is moving a carrier strike group toward the CENTCOM area near Iran, but near-term market pricing eased after Trump comments implying tensions might be cooling - prompting profit-taking in havens and a pullback in oil’s geopolitical premium.

- Maersk signals a decisive normalization of global logistics by committing to its first structural return to the Trans-Suez route on January 26, effectively ending a two-year strategic avoidance of the Red Sea. This pivotal move transitions the MECL service from tentative testing to a formal stepwise resumption, marking a confident restoration of the critical East-West trade artery.

- OpenAI is reportedly engineering a vertically integrated "subscription-plus-hardware" ecosystem to rival Apple, explicitly targeting high-retention dominance by anchoring its AI models in proprietary consumer devices. This strategic pivot, headlined by the "Sweetpea" headset and advanced 2nm silicon, aims to physicalize their software advantage through seamless on-device inference and indispensable wearable tech.

- Asia closed mixed with KOSPI outperforming +1.6%. EU indices -0.4% to +0.4%. US futures +0.1-0.7%. Gold -0.3%, DXY +0.1%; Commodity: Brent -4.3%, WTI -4.4%; Crypto: BTC +1.9%, ETH +1.6%.

Asia

- Japan Dec PPI M/M: 0.1% v 0.2%e; Y/Y: 2.4% v 2.4%e.

- Australia Jan Consumer Inflation Expectation: 4.6% v 4.7% prior.

- Bank of Korea (BOK) left Repo Rate unchanged at 2.50% (as expected) for its 5th straight pause under the current phase of its easing cycle. BOK dropped phrase 'to leave room for rate cuts' from policy statement (**Note: lean towards a less dovish stance). Won currency recently weakened due to yen weakness, heightened geopolitical risks, and continued investment overseas by residents. Inflation was expected to gradually decline to the 2% level.

- Bank of Korea (BOK) Gov Rhee post rate decision press conference noted that if if BOK were to stabilize FX market using policy interest rates, it would have to be a hike of about 200-300bps.

- South Korea NPS (National Pension Service) said to be considering adjusting FX hedging, local stock investment ratios.

- BOJ Gov Ueda: Mechanism under which wages and prices rise moderately in tandem likely to be sustained.

- Treasury Sec Bessent reiterated stance that excess volatility in the FX market was undesirable.

Global conflict/tensions

- Pres Trump: Zelenskiy to blame for current stalemate in Russia-Ukraine negotiations; Putin "ready to make a deal". Unsure Zelenskiy wanted peace deal.

- Pres Tump: Iran's government could fall due to unrest but "any regime can fail. Had uncertain about (Crown Prince) Pahlavi's ability to lead Iran. Had ‘good authority’ that the Iranian regime’s killing of protesters was ‘stopping’ and that reportedly planned executions would not happen.

- Denmark sent troops to Greenland as talks with US stall.

Europe

- France Government survived two no-confidence votes.

Americas

- President Trump said he did not plan to fire Federal Chair Powell despite a Justice Department probe into the central bank's renovation.

- Fed Beige Book noted Economic activity had picked up at a “slight to modest pace” in most parts of the US since mid-November.

Trade

- US Treas Sec Bessent discussed critical minerals with Australia's treasurer.

- White House Spokesperson noted that Trump might impose broader tariffs on imports of semiconductors and their derivative products.

Energy

- US began to sell Venezuelan oil, with an official saying it had booked $500M in sales.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.32% at 613.52, FTSE +0.39% at 10,224.30, DAX -0.12% at 25,272.89, CAC-40 -0.42% at 8,296.25, IBEX-35 -0.06% at 8,296.25, FTSE MIB +0.47% at 45,863.50, SMI +0.35% at 13,493.50, S&P 500 Futures +0.33%].

Market focal points/key themes: European indices open mixed with a downward bias and failed to gain traction in the early part of the session; among sectors leading the way higher are technology and consumer discretionary; among sectors leading the way lower are energy and industrials; tech sector supported following TSMC’s earnings beat; oil & gas subsector under pressure following drop in Brent; Keurig Dr Pepper launches offer for JDE Peet’s shares; reportedly Sanofi to raise bid for Ocular after bid rejection; earnings expected in the upcoming US session include BlackRock, Goldman Sachs, Morgan Stanly, and JB Hunt.

Equities

- Consumer discretionary: Adidas [ADS.DE] +1.5% (analysts action), Richemont [CFR.CH] -2.5% (sales).

- Energy: Shell [SHEL.UK] -0.5% (reportedly U.S. is moving a carrier strike group from the South China Sea to the CENTCOM area of responsibility near Iran, a move taking about a week to complete).

- Industrials: Taylor Wimpey [TW.UK] -2.5% (trading update; strong UK data).

- Technology: ASML [ASML.NL] +5.5% (TSMC Capex guidance).

Speakers

- ECB Economic Bulletin reiterated stance that determined to ensure that inflation stabilizes at its 2% target in the medium term.

- France Fin Min Lescure noted that. Reiterated to follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance Feb Livert to decrease slightly but remain significantly above inflation.

- Canada and China said to sign various MOUs including energy cooperation and forestry.

- China PBoC Dep Gov Zou announced a cut of interest rate on structural policy tool (One-Year Relending Rate) by 25bps to 1.25%; to lower down payment floor for commercial mortgages to 30%. Stressed that China had no intention to use CNY currency depreciation for trade purposes. Noted that USD/CNY moved below the 7.00 level at end-2025 due to easing trade tensions with US and weakening dollar index.

- China FX Regulator (SAFE): To formulate a basket of policy measures to promote cross-border financing.

- Japan Fin Min Katayama stated that fiscal reform would be impossible without economic growth. Fiscal policies to be topic for voters in election.

- BOJ said to likely keep its policy steady at the upcoming Jan decision. A weak yen currency could have an impact on the rate path going forward.

Currencies/fixed income

- USD was steady during the session as geopolitics continued to dominate market attention. Iranian airspace was reopened to alleviate any imminent US military strike on Iran. Trump did note that he had ‘good authority’ that the Iranian regime’s killing of protesters was ‘stopping’ thus nullifying any immediate attack.

- GBP/USD only slightly firmer in the session despite a beat on the monthly GDP reading for Nov. Pair at 1.3435 by mid-day.

- EUR/USD steady at 1.1630 in listless trade.

- USD/JPY trading at 158.50 area. Reports circulated that BOJ would likely keep its policy steady at the upcoming Jan decision but pay more attention to the impact of a weak yen currency which could have an impact on the rate path going forward. Some BOJ officials said to see a rising economic hit from a weak yen. The Yen was only a tad firmer in the session as OIS overnight chances of a BOJ 25bp hike in April rose to 43.5% vs 38.5% Verbal intervention also continuing in the pair ahead of the key 160 level.

- 10-year German Bund yield last at 2.83%, France 10-year Oat at 3.51% and 10-year Gilt yield at 4.36% 10-year Treasury yield: 4.15%; 10-year JGB: 2.15%.

Economic data

- (SE) Sweden Dec PES Unemployment Rate: 3.8% v 3.7% prior.

- (NL) Netherlands Dec Unemployment Rate: 4.0% v 4.0% prior.

- (DE) Germany Dec Wholesale Price Index M/M: -0.2% v +0.3% prior; Y/Y: 1.2% v 1.5% prior.

- (UK) Nov Monthly GDP M/M: 0.3% v 0.1%e; 3M/3M: +0.1% v -0.2%e.

- (UK) Nov Industrial Production M/M: 1.1% v 0.2%e; Y/Y: +2.3% v -0.4%e.

- (UK) Nov Manufacturing Production M/M: 2.1% v 0.4%e; Y/Y: +2.1% v -0.3%e.

- (UK) Nov Construction Output M/M: -1.3% v -0.3%e; Y/Y: -1.1% v -0.1%e.

- (UK) Nov Index of Services M/M: 0.3% v 0.1%e; 3M/3M:0.2 % v 0.0%e.

- (UK) Nov Visible Trade Balance: -£23.7B v -£20.4Be; Overall Trade Balance: -£6.1B v -£2.5Be.

- (SE) Sweden Dec Final CPI M/M: 0.0% v 0.0% prelim; Y/Y: 0.3% v 0.3% prelim.

- (SE) Sweden Dec Final CPIF M/M: 0.1% v 0.1% prelim; Y/Y: 2.1% v 2.1% prelim.

- (SE) Sweden Dec Final CPIF (ex-energy) M/M: 0.3% v 0.3% prelim; Y/Y: 2.3% v 2.3% prelim; CPI Level: 417.96 v 417.83 prior.

- (NO) Norway Dec Trade Balance (NOK): 42.9B v 41.3B prior.

- (NO) Norway Q4 Industrial Confidence: 2.6 v 0.2 prior.

- (CN) China Dec YTD New Yuan Loans (CNY):16.3T v 16.161Te.

- (CN) China Dec YTD Aggregate Financing (CNY): 35.6T v 35.269Te.

- (CN) China Dec M2 Money Supply Y/Y: 8.5% v 8.0%e; M1 Money Supply Y/Y: 3.8% v 3.9%e; M0 Money Supply Y/Y: 10.2% v 10.6% prior.

- (FR) France Dec Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 0.8% v 0.8% prelim.

- (FR) France Dec Final CPI EU Harmonized M/M: 0.1% v 0.1% prelim; Y/Y: 0.7% v 0.7% prelim; CPI (Ex-Tobacco) Index: 119.76 v 119.80e.

- (ES) Spain Dec Final CPI M/M: 0.3% v 0.3% prelim; Y/Y: 2.9% v 2.9% prelim.

- (ES) Spain Dec Final CPI EU Harmonized M/M: 0.3% v 0.3% prelim; Y/Y: 3.0% v 3.0% prelim.

- (ES) Spain Dec CPI Core M/M: 0.4% v 0.1% prior; Y/Y (final): 2.6% v 2.6% prelim.

- (CZ) Czech Nov Retail Sales (ex-auto) Y/Y: 4.6% v 3.4%e.

- (TR) Turkey Dec Central Govt Budget Balance: -528.1B v 169.5B prior.

- (DE) Germany Preliminary 2025 Annual GDP Y/Y: 0.2% v 0.2%e; Maastricht Budget Deficit to GDP ratio: -2.4% v -2.7% prior.

- (IT) Italy Nov Industrial Production M/M: +1.5% v 0.5%e; Y/Y: +1.4% v -0.2%e; Industrial Production NSA (unadj) Y/Y: +1.4% v -0.3% prior.

- (IS) Iceland Dec International Reserves (ISK): 968B v 989B prior- (IT) Italy Nov General Government Debt: €3.125T v €3.132T prior.

- (EU) Euro Zone Nov Industrial Production M/M: 0.7% v 0.5%e; Y/Y: 2.5% v 2.0%e.

- (EU) Euro Zone Nov Trade Balance: €10.7B v €13.7B prior; Trade Balance NSA (unadj): €9.9B v €18.4B prior.

- (CA) Canada Dec Existing Home Sales M/M: -2.7% v -1.8%e.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sells total €5.851B vs. €5.0-6.0B indicated range in 2029, 2041 and 2071 SPGB bonds.

Looking ahead

- Nigeria Dec CPI Y/Y: No est v 14.5% prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (IE) Ireland Dec CPI M/M: No est v -0.2% prior; Y/Y: No est v 3.2% prior.

- 06:00 (IE) Ireland Dec CPI EU Harmonized (final) M/M: No est v 0.6% prelim; Y/Y: No est v 2.7% prelim.

- 06:00 (IE) Ireland Nov Trade Balance: No est v €4.3B prior.

- 06:00 (IT) Italy Nov Total Trade Balance: No est v €4.2B prior; Trade Balance EU: No et v -€1.3B prior.

- 06:00 (ZA) South Africa Nov Electricity Production Y/Y: No est v -5.2% prior; Electricity Consumption Y/Y: No est v -7.2% prior.

- 07:00 (BR) Brazil Nov Retail Sales M/M: 0.3%e v 0.5% prior; Y/Y: 0.1%e v 1.1% prior.

- 07:00 (BR) Brazil Nov Broad Retail Sales M/M: 0.4%e v 1.1% prior; Y/Y: -0.5%e v -0.3% prior.

- 07:00 (BR) Brazil CONAB Crop Production Report.

- 07:00 (MX) Mexico Oct Gross Fixed Investment M/M: +1.7%e v -0.3% prior; Y/Y: -3.9%e v -6.7% prior; Private Consumption Y/Y: 4.0%e v 3.6% prior.

- 08:00 (BR) Brazil Dec Vehicle Production: No est v 219.1K prior; Vehicle Sales: No est v 238.6K prior; Vehicle Exports: No est v 35.7K prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Jan Empire Manufacturing: +1.0%e v -3.9 prior.

- 08:30 (US) Jan Philadelphia Fed Business Outlook: -1.0e v -8.2 prior (revised from -10.2).

- 08:30 (US) Initial Jobless Claims: 215Ke v 208K prior; Continuing Claims: 1.90Me v 1.914M prior.

- 08:30 (US) Nov Import Price Index M/M: -0.2%e v 0.0% prior; Y/Y: -0.1%e v 0.3% prior; Import Price Index (ex-petroleum) M/M: 0.0%e v 0.2% prior.

- 08:30 (US) Nov Export Price Index M/M: 0.0%e v 0.0% prior; Y/Y: No est v 3.8% prior.

- 08:30 (CA) Canada Nov Manufacturing Sales M/M: -1.1%e v -1.0% prior; Wholesale Sales ex Petroleum M/M: 0.1%e v 0.1% prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:35 (US) Fed’s Bostic.

- 09:00 (PL) Poland Central Bank (NBP) Gov Glapinski post rate decision press conference.

- 10:00 (PE) Peru Dec Unemployment Rate: 5.9%e v 5.9% prior.

- 10:00 (PE) Peru Nov Economic Activity Index (Monthly GDP) Y/Y: 2.5%e v 3.6% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (IL) Israel Dec CPI M/M: -0.1%e v -0.5% prior; Y/Y: 2.6%e v 2.4% prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 16:00 (US) Nov Total Net TIC Flows: No est v -$37.3B prior; Net Long-Term TIC Flows: No est v $17.5B prior.

- 16:30 (NZ) New Zealand Dec Manufacturing PMI: No est v 51.4 prior.

- 16:45 (NZ) New Zealand Dec Food Prices M/M: No est v -0.4% prior.

- 19:30 (SG) Singapore Dec Non-oil Domestic Exports Y/Y: 9.2%e v 11.6% prior; Electronic Exports Y/Y: No est v 13.1% prior.

- 23:00 (MY) Malaysia Q4 Advance GDP Y/Y: 5.4%e v 5.2% prior; Annual 2025 GDP Y/Y: 4.8%e v 5.1% prior.

- 23:30 (JP) Japan to sell 3-Month Bills.