Hotter AU jobs sees AUD, bonds and RBA hike chances rise

Asia Market Update: Hotter AU jobs sees AUD, bonds and RBA hike chances rise; Greenland de-escalation sees JP yield curve flatten, but devil will be in the US-NATO detail?

General trend and developments

-Apparent gap between NATO Gen Sec Rutte “No compromise proposed over Greenland sovereignty” vs Pres Trump “The outlines of the Greenandic deal is everything that we wanted”.

-Australia 3-year bond yield +7bps after stronger Dec jobs data (highest since Nov 2023); Feb [3rd] RBA rate hike probability expected to rise after stronger Dec jobs data, but we still need to see the quarterly [Q4] CPI data on Wed [Jan 28th]. AUD jumped +0.5%.

-Australia Stats Agency (ABS): In December 2025, seasonally adjusted monthly hours worked reached a record high of over 2 billion hours for the first time.

-NZ yields quiet ahead of quarterly CPI data [Jan 23rd]. Slightly weaker demand seen at NZ’s weekly bond auctions, despite the higher yields offered.

-In Japan, OIS overnight chances of BOJ rate hike by April now up to 67.5% vs 57% day before. Note geopolitical risk reduced with Trump taking away as an option Greenland by military action - taking some risk off the table for a potential BOJ hike.

-Foreigners last week again very strong buyers of Japanese bonds and stocks for the second week running.

-Japanese exports lost momentum during the final few days of Dec., shipments to the US underperformed [Exports to USA Y/Y: -11.1% v +9.8% prior].

-Recent JGB volatility has died and flattening has continued, ahead of Friday’s BOJ decision and amid easing geopolitical tensions; Long-end of the UST curve also quiet in Asia [Reminder from Jan 21st: (US) Pres Trump said: Seeking immediate talks to acquire Greenland; I won't use 'excessive' force; US going 'heavy' into nuclear energy; See Q4 US GDP at 5.4% - Davos speech; [Jan 21st: US urged Japan to address bond market volatility ; cites comments from US Treasury Sec Bessent- Jiji].

-Weaker demand seen at Japan liquidity enhancement and bill auctions.

-South Korea Q4 data was weaker than expected, surprisingly negative for the quarter. Comes amid continued talk from foreign press extra Korea govt stimulus. Exports and construction investment drove the unexpected contraction in South Korea Q4 GDP.

-Won continued to strengthen to 1,466 vs USD. Bank of Korea Gov Rhee said Won has 'significant' room for correction.
-South Korea President Lee shows his clairvoyance as Kospi hits 5K [**Reminder on July 3rd 2025: Pres Lee: South Korea to prepare for a "Kospi 5,000 era"].

-Meanwhile, foreigners continued to pile into JGBs during early 2026 [weekly Japan MOF data].

-US equity FUTs +0.3% to +0.4% during Asia trading.

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

-Thu Jan 22nd (Thu eve US Final Q3 GDP, US Oct + Nov Core PCE).

-Fri 23rd JP Dec CPI, BOJ rate decision, Global PMIs, (Fri eve UK Dec Retail Sales).

Holidays in Asia this week

- Mon Jan 19th US market holiday.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.8% at 8,849.

- AUSTRALIA DEC EMPLOYMENT CHANGE: +65.2K V +27.0KE; Unemployment rate: 4.1% V 4.3%E.

- New Zealand Dec Total Card Spending M/M: -1.0% v +1.9% prior.

-New Zealand Nov Net Migration: 990 v 2.4K prior.

-REINZ: Sales and Median Prices Hold Strong into Summer - update.

- New Zealand sells total NZ$450M vs NZ$450M indicated in 2030, 2035 bonds.

China/Hong Kong

-Hang Seng opens +0.6% at 26,750; Shanghai Composite opens +0.2% at 4,126.

-US Treasury Sec Bessent: Held positive meeting with China Vice Premier He Lifeng, look forward to meeting Vice Premier again soon - X post.

-China PBOC vows to speed up cross-border RMB payment system - comments from 2026 payment and settlement working conf [overnight update].

-China said to curb "extremely low" pricing in govt purchases; Extends tax break for Invest gains from tech firms CDR until end-2027 - press [overnight update].

- TTN Summary of Davos session on "Chinese Economy: Fully Emerged?": Expects Chinese private sector capital to increasingly flow abroad as domestic markets open further and firms seek global expansion to mitigate trade pressures. [overnight update].

-TTN Summary on Davos panel on China's AI+ Economy: Targeting a 70% diffusion rate for AI agents and intelligent terminals across China by .2027, with the goal of exceeding 90% penetration by 2030 as part of the National AI+ Action Plan. [overnight update].

-(EU) Trade Commissioner Sefcovic: WTO needs to overhaul 'most favored nation' status - FT OpEd [overnight update].

-China PBOC sets Yuan reference rate: 7.0019 v 7.0014 prior.

-China PBOC Open Market Operation (OMO): Injects CNY210B; Net CNY31B v injects CNY123B prior.

-NDRC [China State Planner]: First batch of CNY93.6B ultra-long special Treasury-bond support equipment renewal funds in 2026 has been issued.

Japan

-Nikkei 225 opens 1.0% at 53,327

- JAPAN DEC TRADE BALANCE: ¥105.7B V ¥360.0BE; Trade balance adjusted: -¥208.6B v +¥62.9B.

-Japan releases weekly flows data [period ended Jan 16th]: Foreign buying of Japan equities: ¥874B v +¥1.1T prior; Japan buying of foreign bonds: -¥361.4B v +¥101.1B prior.

-Mizuho (8411.JP) CEO: Next opportunity for BOJ to hike is in Apr; See terminal rate minimum 1.5% - Davos [overnight update].

-Small but rising opposition party [Sanseito Party] said to 'warn' BOJ is raising rates too fast - financial press.

-JIP (Japan Innovation Party) leader Fujita: Markets appear concerned about aggressive fiscal policy - financial press [overnight update].

-*(US) TREASURY SEC BESSENT: IN TOUCH WITH JAPAN ON MARKETS, ASSURED THEY WILL STABILIZE MARKETS [overnight update].

- Japan sells ¥4.7T vs. ¥4.7T in 3-Month Bills; Avg Yield: 0.7277% v 0.7079% prior; Bid-to-cover: 2.79x v 3.17x prior.

- Japan MOF sells ¥698B v ¥700B indicated of JGBs in Liquidity Enhancement Auction.

- Japan Dec Crude Steel output 6.57Mt, -3.0% m/m; -4.8% y/y.

Korea

- Kospi opens +1.6% at 4,987.

-SOUTH KOREA Q4 ADVANCE GDP Q/Q: -0.3% V 0.2%E; Y/Y: 1.5% V 1.9%.

-Bank of Korea Gov Rhee said Won has 'significant' room for correction - Local Press.

- Large Wall St bank: South Korea is likely to announce fresh stimulus worth $6.8B - US financial press.

Other Asia

- INDONESIA CENTRAL BANK (BI) LEAVES BI RATE UNCHANGED AT 4.75%; AS EXPECTED [overnight update].

-Indonesia Central Bank (BI) Gov Warjiyo: Domestic economic activity has remained well but still under capacity - pre-rate decision press conference [overnight update].

- Follow up: Thai Central Bank Gov Vitai: Has intervened in baht (THB) "recently"; To introduce gold trading rules Jan 29th (Thurs) - financial press [overnight update].

- Malaysia Dep Fin Min Tong: Govt reviewing methods for implementing projects on off-budget basis - financial press.

- Philippines Pres Marcos reportedly does Not want Peso (PHP) to hit 60 vs USD - Financial press, citing Pres Office Under Sec.

North America

- (VE) US Energy Sec Wright: Venezuela oil production can be increased 30% from current 900K bpd over short- and medium-term - comments in Davos.

- (US) MBA Mortgage Applications w/e Jan 16th: 14.1% v 28.5% prior (3rd straight weekly rise).

- (US) USTR Greer: If Supreme Court rules against Pres Trump's tariffs, it would be hugely problematic; Don't know if we'll get comprehensive trade deal with China - Fox Business.

- US said to be actively seeking regime change in Cuba by end of 2026 - WSJ.

- (US) Pres Trump: Seeking immediate talks to acquire Greenland; I won't use 'excessive' force; US going 'heavy' into nuclear energy; See Q4 US GDP at 5.4% - Davos speech.

- (US) DEC PENDING HOME SALES M/M: -9.3% V -0.3%E (biggest decline since April 2020); Y/Y: -1.3% V -0.3% PRIOR; 1.18 million homes on the market – matching the lowest inventory level of 2025.

-(US) In oral arguments for Fed Gov Lisa Cook removal case, a majority of the Supreme Court Justices appear skeptical of the Trump Admin's case.

-(DK) US Pres Trump: Have framework for future deal with NATO over Greenland and entire Arctic region after meeting with NATO Sec Gen Rutte; Will not be imposing tariffs that were scheduled for Feb 1st - Truth Social post.

-(DK) US Pres Trump: The outlines of the Greenandic deal is everything that we wanted; The framework is a long term deal; Deal will include the Arctic; Pretty much have the concept of the deal.

Europe

-DK) Follow up: NATO Sec Gen Rutte: Reiterates did Not propose any compromise to Greenland sovereignty in talks with Pres Trump in Davos - NATO spokesper.

-(UK) JAN CBI INDUSTRIAL TRENDS TOTAL ORDERS: -30 V -33E.

- (FR) France Retail Dec Sales Y/Y: -1.0% v +0.6% prior.

- (UK) PM Starmer: UK won't yield to tariff threats over Greenland future; Use of tariffs to pressurize allies is wrong - Weekly Question Time in House.

- (EU) European Parliament freezes work on EU-US trade deal over Greenland dispute - WSJ citing Parliament Committee Chief Lange.

Levels as of 00:20 ET

Nikkei 225 +2.2%; ASX 200 +0.8%; Hang Seng -0.1%; Shanghai Composite -0.1%; Kospi +1.6%.

Equity S&P500 Futures +0.3%; Nasdaq100 +0.4%; DAX +1.3% FTSE100 +0.1%.

EUR 1.1670-1.1698; JPY 158.18-158.74; AUD 0.6754-0.6811; NZD 0.5836-0.5863.

Gold -0.70% at $4,798/oz; BTC +0.1% at $90,069, Crude Oil +0.2% at $60.69/bbl; Copper +0.1% at $5.7945/lb.