Nikkei surges again to cross 35,000, crypto-relateds up on US ETF approvals

Asia Market Update: Nikkei surges again to cross 35,000; Crypto-relateds up on US ETF approvals; KR BOK dovish hold; BOJ regional report on 9 regions; US CPI tonight.

General trend

- After yesterday’s +2.2% burst (while the rest of Asia declined) Japan’s Nikkei again came out swinging, +2%, crossing 35,000 for the first time since Feb, 1990.

- Exporters in Japan rise amid JPY weakness, incl. Panasonic +5%, Toyota, Fast Retailing +2.3% (reports Q1 today), Nintendo +0.5% to record high and major automakers all +3-4%, Advantest +2%, Tokyo Electron +2.5%.

- Fast Retailing [largest Nikkei component] extends rise (+2.3%) ahead of Q1 earnings today.

- Hang Seng made a welcome recovery, up over +2%, lead by Tech Index +3%.

- Bank of Korea left interest rates unchanged, as expected, with KRW dropping slightly post-result. BOK Gov said there is now less need for rate hikes, although it is premature to discuss rate cuts.

- Japan FX reserves highest since July 2022.

- Australia Nov Trade Balance highest since May 2023.

- US Treas Sec Yellen confirmed that the Trump tariffs on China could be partially revised.

- Thai consumer confidence at nearly 4-year high.

- US equity FUTs slightly up during Asia trading.

Looking ahead (Asian time zone)

- Thu night US CPI.

- Fri China CPI, PPI, Balance of Trade.

- Fri UK GDP and Industrial Production.

- Fri night US PPI.

Holidays in Asia this week

- N/A.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 7,467.

- Australia Nov Trade Balance (A$): 11.4B v 7.5Be.

- Some economists still expect one last RBA rate hike during Feb [Q4 CPI data is due on Jan 31st (Wed)] – Australian Press [update].

- New Zealand Nov Building Permits M/M: -10.6% v +8.8% prior.

China/Hong Kong

- Hang Seng opens +0.4% at 16,154.

- Shanghai Composite opens -0.1% at 2,873.

- (US) Treasury Sec Yellen: Confirms Trump tariffs on China could be partially revised - US press (overnight update).

- China SMEs report improved performance in 2023; SME Development Index 89.2 v 88.4 y/y - China press.

- China Pres Xi: Willing to develop good ties with EU countries - State TV (overnight update).

- China to step up its fight against corruption in areas including the tobacco, finance, energy, medicine industries and project bidding; Also to focus on tackling cross-border corruption – press (overnight update).

- China Pres Xi: China seeks stable, health, sustainable ties with US (overnight update).

- China PBOC sets Yuan reference rate: 7.1087 v 7.1055 prior (weakest since Dec 14).

- China PBOC Open Market Operation (OMO): Sells CNY27B in 7-day reverse repos;

Japan

- Nikkei 225 opens +1.3% at 34,871 (highest since Mar 1990).

- Nikkei 225 crosses 35,000 for 1st time since Feb 23, 1990.

- Japan Dec FX Reserves: $1.29T v $1.27T prior (highest since July 2022).

- Japan Nov Preliminary Leading Index CI: 107.7 v 107.9e; Coincident Index: # v 114.5e.

- Bank of Japan (BOJ) quarterly Regional Economic Report (Sakura): Raises assessment for 2 of 9 regions, maintains 6 of 9 and cuts 1 region.

- Former BOJ official Sakurai said BOJ is fully prepared to end negative rate policy, sees Apr 2024 as the most likely timing – US financial press [update].

- Bank of Japan (BOJ) futures currently pricing 15bps in rate hikes during whole 2024 v over 30bps by Apr 2024 m/m (overnight update).

- OECD urges BOJ to gradually raise short-term interest rates and continue efforts to make YCC more flexible.

- Toyota (7203.JP) India Exec says Co. will globally roll out vehicles with solid state batteries in a couple of years - India Investor Summit.

- Brazil Pres Lula talked with Japan PM Kishida about potential for a Japan-MERCOSUR trade agreement (overnight update).

South Korea

- Kospi opens flat at 2,597.

- BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 3.50%; AS EXPECTED.

- Bank of Korea (BOK): Economic growth to improve with recovery in exports; Inflation projected to its slowing trend.

- *Bank of Korea (BOK) Gov Rhee post-rate decision press conference: Sees less need for rate hikes.

- South Korea Jan 1-10 Y/Y: Exports +11.2%, Imports -8.3%.

- US and 7 other countries condemn North Korea's actions to provide missiles to Russia – press (overnight update).

Other Asia

- (TW) US Senior Administration Official: US has full confidence in Taiwan's democratic process, does not have a favored candidate

- Thailand Dec Consumer Confidence: 62.0 v 60.9 prior [46-month high].

- Malaysia Nov Industrial Production Y/Y: 0.6% v 1.3%e.

- India govt plans to lower fiscal deficit by at least 50bps in FY25 - India press.

- Taiwan official: China could stage more drills between the election and May 20th 2024 when the new president takes office (overnight update).

- Thailand PM Srettha said to have spoken about interest rates with BOT (central bank) [overnight update).

North America

- US SEC approves 11 Bitcoin ETF proposals - press.

- GOOGL Said to be laying off 'hundreds' of people; relates to voice-activated assistant software - Press.

- (US) BofA Dec credit & debit card spending per household +0.2% y/y v +0.5% y/y prior; Holiday spending started strong, but lagged somewhat in December; Saw some significant ‘gaps’ in spending across categories and households.

- (US) MBA Mortgage Applications w/e Jan 5th: +9.9% v -10.7% prior.

- (US) DOE CRUDE: +1.3M V -0.5ME; GASOLINE: +8.0M V +2ME; DISTILLATE: +6.5M V +1ME.

- (US) Treasury Sec Yellen: Reviewing China tariffs, the tariffs could be made more 'strategic'.

- (US) Fed's Williams (voter): Fed not near point where the banking sector liquidity is scarce; Will need restrictive policy stance for some time.

Europe

- Yemen Houthis spokesperson says UN Resolution on Red Sea navigation is a 'political game'; Says the US is the one violating international law – press.

- (DE) German govt reportedly resumes weapons deliveries to Saudi Arabia with air defense missiles - press.

- (UK) BOE Gov Bailey with members Breeden and Hall in Parliament: Important to return UK inflation to target.

- (EU) ECB's Schnabel (hawk, Germany): It is too early to discuss rate cuts; Phillips curve points to the prospect of a soft landing; Markets understand well that our policy is data-dependent and we have clearly defined the elements of our reaction function.

- (EU) ECB De Cos (Spain): The strength of monetary policy transmission has been surprising, the risks to economic growth are still skewed to the downside.