Still awaiting Trump reciprocal tariffs

 Asia market update: Still awaiting Trump reciprocal tariffs; China offers to help end Ukraine War; Asian equities follow US up post-CPI; Aussie firms address tariff uncertainty on calls; Focus on US Jan PPI.

General trend

- Pres Trump in remarks to the press Wednesday evening, ET, said that there would be an announcement on reciprocal tariffs, "If not tonight, then tomorrow morning".

- China unexpectedly offered to help US Pres Trump to end the Ukraine war, including holding a Beijing-led Trilateral Summit with Trump and Putin, as well as China being involved in "peacekeeping" after a truce. Little initial reaction in markets, with Oil continuing down at day's lows, Gold kept edging back up and currencies maintained positive bias against USD this week (other than the weaker Yen).

- US equities dipped sharply following the US Jan CPI but nearly fully recovered by the close for the S&P500 and ended the day at highs for the Nasdaq.

- Asian equities (other than Shanghai Composite) continued the positive theme, with Nikkei and Hang Seng outperforming +1.5%. JP automakers Toyota +1.8%, Honda +1.9% perhaps partly on overnight Yen weakness following JPY strength earlier in February.

- Japan Jan PPI saw its highest y/y figure since May, 2023, in a further indication of inflation returning to target for the BOJ. 10-year JGB yields kept rising, to 1.37% [highest since 2010].

- Australian 10-year yields have risen as much as 25bps over the past week, largely in line with USTs, which saw a further 10bps rise following the US Jan CPI release overnight. Implied probability of a 25bps point cut by the RBA this month has come down to 90% from 95% yesterday. (Note also that Australia Feb Consumer Inflation Expectation Survey today matched Apr 2024 high).

- Trend Micro shares limit up in Japan on buyout interest from multiple large US firms.

- Some Australian companies reported on potential US tariffs, but did not expect a significant negative impact if imposed. (Temple & Webster, South32).

- Further pressure on AI business models that receive subscription income (e.g. OpenAI) as Baidu’s Ernie bot said to be available free from Apr 1st, 2025 (Baidu shares +10%).

- US equity FUTs +0.3% to +0.5% during Asian trading.

Looking ahead (Asian time zone)

- Thu Feb 13th (Thu night UK prelim Q4 prelim GDP, US Jan PPI).

- Fri Feb 14th KR Unemployment, (Fri night Jan US Retail Sales).

Holidays in Asia this week

- Tue 11th Japan.

- Wed 12th Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,548.

- Australia Feb Consumer Inflation Expectation Survey: 4.6% v 4.0% prior (matches Apr 2024 high).

- Tropical Cyclone Zelia currently a Category 4 storm; Port of Port Hedland closed on the approach of Tropical Cyclone Zelia.

- Australia said to have expressed concern to China over certain 'aircraft interaction' - US financial press.

- Australia sells total A$150M vs. A$150M indicated in indexed 2.50% Sep 2030 bonds.

- New Zealand Jan Total Card Spending M/M: 0.0% v 1.5% prior (update).

- New Zealand Fin Min Willis: Wants to see another supermarket operator; Govt is prepared to remove regulatory barriers.

China/Hong Kong

- Hang Seng opens +0.5% at 21,958; Shanghai Composite opens -0.1 at 3,343.

*(CN) China offers proposal to help US Pres Trump end war in Ukraine – WSJ.

- Baidu’s Ernie bot said to be available free from Apr 1st, 2025 - financial press.

- China PBOC sets Yuan reference rate: 7.1719 v 7.1710 prior.

- China PBOC Open Market Operation (OMO): Injects CNY126B in 7-day reverse repos; Net drains CNY150B v prior drains CNY139B.

Japan

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

- Japan Jan PPI (domestic CGPI) M/M: 0.3% v 0.3%e; Y/Y: 4.2% v 4.0%e (highest since May 2023 of 5.1%).

- Japan 10-year JGB yield rises to 1.37% [highest since 2010].

- Japan PM Ishiba: No plans to review Govt-BOJ accord at this time - financial press.

- BOJ Outright Bond Purchase Operation for 1~3 Years; 5~10 Years; 10~25 Years and >25Years (Reduced purchase amounts inline with Dec guidance).

Korea

- Kospi opens +0.4% at 2,558.

- South Korea Dec M2 Money Supply M/M: 1.0% v 0.8% prior.

- South Korea Financial Services Commission (FSC): More discussion needed before introducing crypto ETFs; to gradually allow cos. to participate in the crypto market.

- South Korea reported to have fined Nomura, JPM, UBS and Morgan Stanley over short selling - Korean press.

- Follow up: South Korea to discuss tariffs on Chinese steel plates on Feb 20th - South Korea press.

Other Asia

- Thailand Jan Consumer Confidence: 59.0 v 57.9 prior.

- Indonesia Dep Trade Min Roro: Indonesia seeks trade pacts with EU, Peru amid US tariff risks.

North America

- XAI.IPO Musk: Grok 3 AI is 'scary smart'; Likely to be released "in a week or two".

- (US) MBA Mortgage Applications w/e Feb 7th: 2.3% v 2.2% prior.

- (US) Pres Trump: Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!

- (BR) Brazil Central Bank (BCB) Gov Galipolo: Moving towards restrictive rates; Inflation is uncomfortably above goal.

- (US) JAN CPI M/M: 0.5% V 0.3%E; Y/Y: 3.0% V 2.9%E; CPI (Ex Food and Energy) M/M: 0.4% v 0.3%e; Y/Y: 3.3% v 3.1%e.

- (US) Jan Real Avg Weekly Earnings Y/Y: 0.7% v 0.6% prior; Avg Hourly Earning Y/Y: 1.0% v 1.2% prior.

- (CA) Canada Fin Min LeBlanc: Canada won't invoke tariffs before the US does; Our focus is still on avoiding tariffs.

- (US) White House Economic Council Director Hassett: We will fix inflation, with or without the Fed; Expect interest rates will come down.

- (US) House Republicans release proposed budget text; Includes debt-limit increase of $4T.

- (US) Fed Chair Powell: Hindsight suggests that it would've been better to tighten earlier; Not sure how much of a difference an earlier move would have made - Testifying to House Financial Services.

- (US) President Trump: I just had a lengthy and highly productive phone call with President Vladimir Putin of Russia;

- (US) Fed's Bostic (hawk, voter for 2024; non-voter for 2025): The labor market is performing incredibly well.

- (US) Pres Trump: To sign reciprocal tariff order on wednesday or may do tomorrow morning.

- (US) US Pres Trump: Will likely meet with Russia's Putin in Saudi Arabia later this year.

Europe

- (UK) BOE's Pill (chief economist): Believe MPC can cut rates further but must remain cautious.

- (UK) Jan RICS House Price Balance: 22% v 28%e.

- (EU) ECB's Elderson (Netherlands): Inflation is converging towards target.

- (HU) Hungary Central Bank (MNB) Jan Minutes: Decision to keep policy steady was unanimous.

- (UK) BOE’s Greene: Disinflation process is broadly on track; Appropriate to maintain cautious and gradual approach to removing monetary restrictiveness.

- (EU) EU Trade Chief Sefcovic said to be in discussions with Trump to find solutions on tariffs - press.

Levels as of 00:20 ET

- Nikkei 225 +1.4%, ASX 200 flat, Hang Seng +1.9%; Shanghai Composite flat; Kospi +0.9%.

- Equity S&P500 Futures +0.3%; Nasdaq100 +0.5%; Dax +0.1%; FTSE100 +0.5%.

- EUR 1.0383-1.0439; JPY 154.12-154.67; AUD 0.6274-0.6300; NZD 0.5636-0.56461.

- Gold +0.7% at $2,949/oz; Crude Oil -0.9% at $70.72/brl; Copper +0.8% at $4.7310/lb.