CN deflation persists, JP continues prep for exiting NIRP

Asia Market Update: CN deflation persists; JP continues prep for exiting NIRP; Nikkei fresh 34-yr highs; US initial jobless in focus tonight.

General trend

- China deflationary woes continued with Jan CPI coming in at the slowest annualized pace in 15 years, and PPI recording its 16th straight negative reading.

- In another sign that Japan’s NIRP era may soon be over, Japan's largest commercial banks have allowed trillions of yen to be build up in -0.1% accounts at the BOJ since the October 2023 YCC adjustment - in apparent anticipation of the end of sub-zero rates.

- In a similar vein, today BOJ Dep Gov Uchida said that it was hard to imagine a path of continuous rate hikes but noted that before the BOJ introduced negative rates, it applied a 0.1% IOER, (and the) overnight call rate moved in a range of 0.0-0.1%. “If we were to move back to that situation it would be equivalent to a 0.1% interest rate hike.”

- Chip designer ARM +22% A/H on raised FY24 guidance as the adoption of Armv9 technology increases – with typically at least double the royalty rates for equivalent Armv8 products.

- Japan’s Nikkei 225 powered ahead again, over 2% to fresh 34-year highs, powered by 10% gains in Softbank Group today.

- US equity FUTs flat during Asian trading.

Looking ahead (Asian time zone)

- Fri 9th RBA Bullock speech, CN Current Account (prelim).

Holidays in Asia this week

- Thu Feb 8th Taiwan, Indonesia, Vietnam.

- Fri Feb 9th Taiwan, China, Hong Kong, Indonesia, Malaysia, Singapore, South Korea, Vietnam.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 7,627.

- Australia regulator ASIC to crack down on predatory, high-cost lending practices to consumers and businesses in 2024 - Australia press.

- Australia Jan Foreign Reserves (A$): 89.4B v 93.9B prior (overnight update).

- New Zealand PM Luxon: Auckland fuel tax cuts to end on Jun 30 - New Zealand press.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2031, 2033 and 2037 bonds.

China/Hong Kong

- Hang Seng opens -0.6% at 15,988.

- Shanghai Composite opens +0.1%% at 2,832.

- Hong Kong Jan Foreign Reserves: $423.2B v $425.6B prior (overnight update).

- CHINA JAN CPI M/M: 0.3% V 0.1% PRIOR; Y/Y: -0.8% V -0.5%E [slowest annualized pace since 2009].

- CHINA JAN FOREIGN RESERVES: $3.219T V $3.220TE (overnight update).

- China replaces head of Securities Regulator (CSRC) with appointment of Wu Qing as Chairman – press (overnight update).

- China Pres Xi: Praise China's economic achievements and stable prices; Targets strengthening economic recovery in 2024 - state TV (overnight update).

- China National People's Congress (NPC) reportedly to hold meeting on Feb 26-27th – press (overnight update).

- (US) New report says Chinese hackers have had access to some US infrastructure systems for ‘at least five years’ – CNN (overnight update).

- Alibaba BABA Reports Q4 (CNY) adj EPS 18.97 v 19.26 y/y, Rev 260.4B v 261.3Be; Approves $25B increase to share buyback program through the end of Mar 2027 (~12% of market cap) (overnight update).

- China PBOC sets Yuan reference rate: 7.1063 v 7.1049 prior.

- China PBOC Open Market Operation (OMO): Sells CNY90B in 7-day reverse repos; Sells CNY255B in 14-day reverse repos; Net injects CNY302B v drains CNY148B prior.

Japan

- Nikkei 225 opens 0.4% at 36,258.

- Japan Dec BOP Current Account: ¥744.3B v ¥1.138Te.

- Japan Jan Bank Lending Y/Y: 3.1% v 3.1% prior.

- Japan Jan Tokyo Avg Office Vacancies: 5.8% v 6.0% prior.

- Bank of Japan (BOJ) Dep Gov Uchida; Hard to imagine a path of continuous rate hikes - speech
Market is expecting a very smooth rate path trajectory.

- Japan releases weekly flows data [period ended Feb 2nd]: Foreign buying of Japan equities: ¥308.4B v ¥721.0B prior; Japan buying of foreign bonds: ¥456.6B v ¥385.5B prior.

- Bank of Japan (BOJ) announcement related to outright bond buying operations: For 1~3 Years; 3~5 Years; 5~10 Years and 10~25 Years maturities.

- Japan sells ¥4.00T vs. ¥4.00T indicated in 6-Month Bills; Avg Yield: -0.1042% v -0.1723% prior, bid-to-cover: 3.40x v 3.70x prior.

- Bank of Japan (BOJ) Dep Gov Uchida; Hard to imagine a path of continuous rate hikes - speech.

- Japanese funds bought a record Net ¥18T of US sovereign debt in 2023 - official data release.

- Softbank Group 9984.jp Shares up 10% after unit ARM earnings beat and forward guidance.

- Japan BOJ Exec Dir Shimizu: Inflation so far has been driven by cost-push factors - Japan press.

- Japan's largest commercial banks allow trillions of yen to build up in -0.1% accounts at the BOJ; In apparent anticipation of the end of sub-zero rates - Japan press.

South Korea

- Kospi opens +0.4% at 2,620.

- South Korea Pres Yoon: To manage consumer prices through deregulation (overnight update).

- SK Hynix (000660.KR) with TSMC creates AI Chip Alliance - South Korea press.

- South Korea Fair Trade Commission delays online platform regulation plans; to collect additional opinions on the plans amid US concerns.

Other Asia

- Taiwan Tourism Administration stops new group trips to China amid tourism, air route spat – press (overnight update).

- Taiwan Jan Trade Balance: $2.5B v $8.8Be (overnight update).

- Thailand Central Bank (BOT): Ready to cut key rate if consumption falls sharply - Thailand press.

- THAILAND CENTRAL BANK (BOT) LEAVES BENCHMARK INTEREST RATE UNCHANGED AT 2.50%; AS EXPECTED (overnight update).

- Thailand PM Srettha: Disagree with MPC decision to leave policy unchanged (overnight update).

- Singapore Jan Foreign Reserves: $357.8B v $351.0B prior (overnight update).

North America

- ARM Reports Q3 $0.29 v $0.25e, Rev $824M v $765Me; Raises FY24 $1.20-1.24 v $1.06e, Rev $3.16-3.21B v $3.03Be (prior: $1.00-1.10, Rev $2.96-3.08B).

- (US) DEC TRADE BALANCE: -$62.2B V -$62.0BE.

- (US) Fed's Kashkari (non-voter): Economy is being remarkably resilient allow us to take more time to look at data before cutting rates.

- (US) DOE CRUDE: +5.5M V +1.5ME; GASOLINE: -3.1M V +0.5ME; DISTILLATE: -3.2M V -2ME.

- (US) Fed's Kugler: Unexpected consumer strength could slow inflation path; Wage growth moderating, firms adjusting prices less; The pace of inflation continues to slow.

- (US) Congressional Budget Office (CBO) 10-year outlook: Forecasts US FY24 Net interest costs at 3.1% of GDP v 2.4% y/y, rising to 3.9% in FY 2034.

- (US) Fed's Collins (non-voter): Could see rate cuts in later FY24; Needs more data before supporting any cuts, but cuts should be gradual and methodical; Progress back to 2% inflation could be uneven and bumpy.

- (US) DEC CONSUMER CREDIT: $1.6B V $16.0BE.

- (US) Fed’s Barkin (voter): It makes sense to be patient on rate cuts; I’m more in the world of elevated uncertainty; Inflation coming down nicely but worried that it could be a 'head fake' - press interview.

Europe

- (UK) Jan RICS House Price Balance: -18% v -22%e [highest since Oct 2022].

- (IL) Israeli official: Some of the demands made by Hamas in the counter proposal are 'entirely unacceptable' - press - (IL) Sky News Arabia tweets: Israeli sources indicate Netanyahu gave the green light for a ceasefire in Gaza during the periods separating the stages of the expected deal with Hamas.

- (EU) ECB's Simkus (Lithuania): ECB could cut in April or June; The time for easing is approaching, but uncertainty remains high.

- (DE) German Chancellor Scholz: If the US does not deliver weapons to the Ukraine, Germany is not big enough to make up the gap; This is a real danger.

Levels as of 00:20 ET

- Nikkei 225 +2.2% ; ASX 200 +0.3% ; Hang Seng -1.2% ; Shanghai Composite +1.1% ; Kospi +0.3%.

- Equity S&P500 Futures flat; Nasdaq100 flat, Dax flat; FTSE100 +0.1%.

- EUR 1.0770-1.0789; JPY 147.93-148.59; AUD 0.6520-0.6532; NZD 0.6107-0.6124.

- Gold -0.2% at $2,047/oz; Crude Oil +0.2% at $74.05/brl; Copper +0.4% at $3.7703lb.