Market volatility as traders assess Trump comments amid digesting Inauguration

Asia market update: Market volatility as traders assess Trump comments amid digesting Inauguration and future direction of travel; BOJ decision on Fri.

- Markets at first welcomed the inauguration of Pres Trump, seemingly in relief that their worst fears on trade under the new US administration might not be realized – yet.

- 10-year USTs fell by a further 8bps as currencies and equities rose overnight on press reports that Pres Trump would lay out his trade ‘vision’ today, but would not yet impose new tariffs.

- However, markets turned around in an instant today as Trump unexpectedly confirmed that he was thinking of indeed imposing the threatened 25% tariffs on Mexico and Canada, perhaps by Feb 1st. Equity markets lost their gains, currencies spiked lower, China offshore Yuan (CNH) had been as strong as 7.25 went collapsed back to 7.29.

- Markets may have overreacted to the Mexico / Canada headlines, which was a throw-away line by Trump to the press as he signed Executive Orders. Prices headed back towards the prior currency/equity friendly direction.

- Pres Trump did not disappoint on expectations with a blizzard of Executive Orders and Actions, from energy and EVs to DEI and federal worker policies; From AI to free speech and TikTok, as well as to examine trade practices of other nations along with establishing an “External Revenue Service” to collect funds for the US govt from its trading partners.

- Bitcoin’s wild ride continued up and down in range $99-110K, rising in anticipation of a positive Trump Exec Order for crypto, but then falling when none was yet forthcoming.

- Another well-supported Japan bond auction, today being the 40-year JGB monthly auction.

- Japan’s Top FX diplomat Mimura warned of “disorderly” and “speculative” FX moves, while also warning of the impact of a weak Yen on real wages. JPY/USD briefly hit a 1-month high back above 155.

- US equity FUTs slightly up during Asian trading.

Looking ahead (Asian time zone)

- Fed blackout period this week ahead of Jan 29th FOMC policy decision.

- Davos WEF (World Economic Forum) annual meeting will run Jan 20-24.

- Tue Jan 21st (Tue eve DE ZEW Jan Econ Sentiment).

- Wed Jan 22nd KR Jan Consumer Confidence, NZ Q4 CPI.

- Thu Jan 23rd JP Dec Trade Balance, KR Adv Q4 GDP.

- Fri Jan 24th JP & AU & IN Jan Flash PMI, JP Dec CPI, BOJ Rate Decision, (Fri eve DE & UK Jan Flash PMIs, Fri night US Jan Flash PMIs, US Dec Home Sales).

Holidays in Asia this week

- Mon Jan 20th US markets closed (Monday US time).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,356.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 85.8 v 87.1 prior (update).

- BHP.AU Reports Q2 Iron Ore Production: 66.2Mts, +2% q/q (65.7Mte); Says well positioned to continue strong momentum into the second half with a number of assets now expected to deliver production in the upper half of their respective ranges - update.

- New Zealand Dec Total Card Spending M/M: 1.5% v -0.1% prior.

- New Zealand Dec Performance of Services Index: 47.9 v 49.5 prior (10th month of contraction - update).

- New Zealand Dec Non Resident Bond Holdings: 61.7% v 61.2% prior.

China/Hong Kong

- Hang Seng opens +1.0% at 20,128; Shanghai Composite opens +0.4% at 3,256.

- Trump to assess the adherence of China to the US-China trade agreement to determine if enforcement or changes are required - Draft Trump Trade memo.

- Counterpoint Research: Apple's Q4 iPhone sales in China -18.2% y/y.

- NIO DigiTimes: Speculation 'emerges' over Xiaomi potentially acquiring NIO.

- China Human Resources Ministry: 2024 urban new job creation at 12.6M.

- China President Xi: Reiterates stance to implement a more proactive macro policy in 2025.

- China Premier Li Qiang: Our development faces challenges; Need more economic growth points- HKMA: Official launch of direct linkage between Central Moneymarkets Unit of Hong Kong and Central Securities Depository System of Macao.

- Nvidia CEO Huang: To continue to cooperate with China.

- China Integrated Circuit Industry Investment Fund [Big Fund 3] to establish a CNY60.1B jv with Shanghai-based PE Fund – update.

- China said to appoint Zou Lan as Dep Gov of PBOC – press [overnight update].

- China PBOC sets Yuan reference rate 7.1703 v 7.1886 prior (strongest since Nov 8th, 2024).

- China PBOC Open Market Operation (OMO): Injects CNY256B in 7-day reverse repos; Net injects CNY201B v injects CNY101B prior.

Japan

- Nikkei 225 opens +0.7% at 39,163.

- Japan Top FX Diplomat Mimura: Need to closely watch if China recent export strength will continue.

- Japan PM Ishiba: Want to establish a relationship of trust with Pres Trump – press.

- Japan Fin Min Kato: Looks forward to developing US-Japan ties - financial press.

- Japan Econ Min Muto: Want to cooperate with US on semiconductors - financial press.

- Japan sells ¥700B VS. ¥700B indicated in 40-year bonds; yield at lowest acceptance price: 2.5700% V 2.5500% prior; bid-to-cover: 2.75X V 2.24X prior.

Korea

- Kospi opens +0.5% at 2,533.

- South Korea Jan 1-20th Exports Y/Y: -5.1% v 6.8% prior; Imports Y/Y: -1.7% v 7.5% prior.

- South Korea Dec PPI Y/Y: 1.7% v 1.4% prior (update).

- Bank of Korea (BOK) Gov Rhee to meet South Korea ruling party floor leader on Jan 22nd [Wed] - Local media.

- South Korea's suspended Pres Yoon arrives at Constitutional Court for impeachment trial - Korea press.

- South Korea Acting President Choi: To actively use cooperation opportunity in shipbuilding; seeks phone talks with Trump; To discuss on extra fiscal input issue with parliament.

Other Asia

- EU and Malaysia restart talks on a Free Trade Agreement - follows Malaysia PM visiting Brussels.

- Indonesia said to consider Nickel output cuts in order to support prices - FT.

North America

- (MX) Mexico Ruling Party calls to defend the country's 'independence' - financial press.

- *(US) Pres-elect Trump: confirms "we are thinking in terms of 25% tariffs on Mexico and Canada; i think we will do it on Feb 1st." - financial press.

- *(US) Pres Trump further executive orders (1st series): - White House documents; Will announce the American First Trade Policy; Will end leasing to massive wind farms.

- (US) Pres Trump further comments on geopolitics and other topics (incl TikTok):

- US Senate Committee advances nomination of Sec State nominee Rubio to full Senate - Senate Aide (update).

- (US) Former FTC Chair Lina Khan will step down from role as Commissioner in the next few weeks - financial press.

- (US) Follow up: Vivek Ramaswamy says will Not serve in Trump's DOGE - White House statement.

- (US) Incoming White House official: Trump to sign memorandum on inflation to envision all govt response to inflation; No specific target for oil price; Confirms Trump will move to end birthright citizenship and put end to EV mandate and DEI programs.

- *(US) Pres Trump: Will sign series of executive orders today; Declaring National Emergency on energy and Mexican border - Inauguration Speech.

- *(US) Donald J. Trump sworn in as the 47th president of the United States.

- (US) Reportedly one of the first executive orders Trump plans to sign today as president will be aimed at establishing the Department of Government Efficiency (DOGE) whose work will include updating federal software systems to “private-sector standards” - Semafor.

- *(US) Pres-elect Trump said to lay out his trade "vision", but will not impose new tariffs yet; To direct federal agencies to study trade policies, investigate trade deficits, unfair trade practices and evaluate US trade relationships with China, Canada, Mexico - WSJ citing memo.

- (US) Pres-elect Trump is expected to designate several cartels as foreign terrorist organizations through executive action; Now expected to sign between 190-215 executive actions - CBS News.

- (US) Port of Houston Authority: Due to the expected wintry weather conditions, all eight public facilities will be closed on Tuesday, Jan. 21st - financial press.

- (US) Storm Prediction Center has issued a rare, "extremely critical" wildfire risk outlook for Monday, January 20th; Cold air may spill westward into the Great Basin, setting up yet another period of strong, offshore Santa Ana winds in Southern California - Axios.

Europe

- (UK) Bridgewater Ray Dalio said to 'warn' of UK debt 'death spiral'; More borrowing might be required to service debt - FT.

- (EU) ECB's Kazimir (Slovakia): A rate cut next week is 'a done deal', Three to four cuts in a row are feasible (inline) - financial press.

- EUR/USD Extends gains over 1% for largest daily rise in 14 months after WSJ report that Trump will not impose new tariffs yet.

- (RU) Russia Pres Putin: Congratulates Trump ahead of inauguration; We want long-lasting peace in Ukraine and open for dialogue with US administration.

- (EU) Reportedly plans ban on PFAS 'forever chemicals' in consumer products with exemptions for essential industrial uses - press (update).

- (UK) UK Northern Ireland Office rejects NI unionist call to pull EU's Stormont brake decision; UK will consider alighting with EU chemical labeling rules – press.

- (IL) Houthi statement: To limit attacks on commercial ships to Israel-linked vessels; To resume attacks on ships linked to Israel, US and UK if these countries attack Yemen.

Levels as of 00:20 ET

- Nikkei 225 +0.1%, ASX 200 +0.7%, Hang Seng +1.3%; Shanghai Composite +0.1%; Kospi +0.3%.

- Equity S&P500 Futures +0.2%; Nasdaq100 +0.1%; Dax -0.4%; FTSE100 -0.1%.

- EUR 1.0354-1.0435; JPY 154.77-156.24; AUD 0.6209-0.6289; NZD 0.5622-0.5689.

- Gold +0.5% at $2,744/oz; Crude Oil +0.4% at $76.69/brl; Copper -0.5% at $4.2957/lb.