Weak US tone bleeds across to Asia, except HK outperforming

Asia Market Update: Weak US tone bleeds across to Asia, except HK outperforming, later boosted by HK property support measures; US House passes budget bill; META $200B spend on AI data centers.

- Global yields followed UST yields down (UST 10-years down to mid-Dec levels), as money shifted out of stocks (particularly tech) into sovereign bond safety. The somber mood flowed over to the Nikkei (below 38K for first time since Dec 2nd) and the ASX but the Hang Seng rebounded 3.1% to outperform Asia. HK Mainland Properties +3.6%.

- Yields later ticked back up as the session continued, with USD/JPY clawing back +0.4% to 149.50.

- Hong Kong's annual budget saw land sales for commercial use being paused in an attempt to limit supply. Announced further property support measures, discloses budget deficit reduction plans.

- After the close META reported to be considering $200B AI data center campus, coming just days after reports circulated by traders that Microsoft's CEO saw potentially less need for data centers going forward than prior planned.

- The goods-heavy Jan CPI for Australia came in just slightly below expectations.

-After some toing and froing, the US House passed a Republican budget 'blueprint' for Trump's agenda; Measure to be sent to the Senate. However, many hurdles still to cross in the Senate and 'hundreds' of details to be worked out in coming months.

- Aussie iron ore names weighed down today.

- Further signs of sustainable inflation out of Japan last night, with both Nationwide and Tokyo Dept Store sales for Jan north of 5% y/y.

- Super Micro Computer finally released Q2 earnings, stock +22% AH.

- US equity FUTs +0.4% to +0.5% during Asian trading.

Looking ahead (Asian time zone)

- Wed 26th (Wed eve DE Mar Consumer confidence).

- Thu 27th NZ Feb Business Confidence, (Thu night US Q4 GDP (2nd est).

- Fri 28th JP Jan Retail Sales, (Fri night Feb DE CPI, Jan Core PCE).

- Sat 1st (CN Feb NBS Mfg PMI).

Holidays in Asia this week

- Mon Feb 24th Japan.

- Tue Feb 25th Philippines.

- Wed Feb 26th India.

- Fri Feb 28th Taiwan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 8,251.

- AUSTRALIA JAN CPI Y/Y: 2.5% V 2.6%E.

- Australia Q4 Construction Work Done: 0.5% v 1.0%e.

- Australia sells A$800M vs. A$800M indicated in 3.75% Apr 2037 bonds; Avg Yield: 4.666% v 4.3459% prior; bid-to-cover: 3.67x v 3.22x prior.

- Australia Cabinet meeting called for next Monday [Mar 3rd] amid increasing speculation over federal election date – Australian press.

China/Hong Kong

- Hang Seng opens +0.9% at 23,238; Shanghai Composite opens +0.2% at 3,351.

- Hong Kong Q4 Final GDP Q/Q: 0.8% v 0.8% advance; Y/Y: 2.4% v 2.4% advance.

- Hong Kong Financial Sec Chan: Confirms HK continues to record a higher budget deficit this year; to increase the scale of bond issuance; forecasts 2025 GDP growth of 2-3% - budget address.

- (US) Follow up: United States Trade Representative (USTR) announced a proposal for new port fees targeting Chinese shipping companies and vessels – Flexport (see Feb 23rd Follow up fxi fees).

- DEEPSEEK.IPO Reportedly DeepSeek accelerating the launch of the successor to January's R1 model and likely to release next-generation R2 model as soon as possible v prior timeline of May 2025 - press.

- China Commerce Ministry (MOFCOM) : Opposes EU sanction against Chinese companies dealing with Russia noting that such action affects China-EU commerce negatively.

- China MOFCOM: China Vice Commerce Minister Wang meets with [certain] US business leaders; Wang 'clarified' China's position on US tariffs.

- China Pres Xi: Urges to maintain stability across society; To calmly respond to domestic, international challenges - China state news.

- JD.com 9618.HK China SAMR [competition regulator] holds meeting to hear views on fair competition; met with JD.com and Longi.

- Hong Kong government is using a local ChatGPT-style AI tool [HKGAIVI] powered by DeepSeek - SCMP [update].

- China PBOC Advisor: CPI will decline 'moderately' in Feb.

- Hong Kong Jan Trade Balance (HK$): +2.1B v -9.0Be.

- China PBOC sets Yuan reference rate: 7.1732 v 7.1726 prior.

- China PBOC Open Market Operation (OMO): Injects CNY549B in 7-day reverse repos; Net injects CNY10B v prior drains CNY171B.

Japan

- Nikkei opens -0.2% at 38,249.

- BOJ Outright Bond Purchase Operation for 3~5 Years; 5~10 Years; 10~25 Years; And Inflation-indexed JGB’s; (Reduced purchase amounts inline with Dec guidance).

- Japan ruling parties and Ishin (innovation party) said to be prepare to unveil budget agreement - financial press.

- Japan govt to support undersea cable investment for the sake of national security - Nikkei.

Korea

- Kospi opens flat at 2,629

- South Korea Trade Min Ahn to meet with US Commerce Sec Lutnick during US trip; Aims to boost protection for Korea from potential US tariffs - financial press.

Other Asia

- (TW) China Taiwan Affairs Office: Taiwan chip industry and powerful enterprises have even been given away as 'souvenirs' [asked about the future of Taiwan Semi (TSMC)].

- (TW) Follow up: Reportedly Taiwan’s coastguard caught and detained a Chinese-owned freighter in the act of cutting a subsea cable; Taiwan coastguard noted that "it was unclear whether the cable had been severed intentionally" – FT.

- Taiwan Jan Industrial Production Y/Y: 5.1% v 8.5%e.

North America

- US Pres Trump to participate in first Cabinet meeting of his second term at 11am ET, Wednesday - financial press.

- (US) Follow up: US House passes Republican budget 'blueprint' for Trump agenda; Measure to be sent to the Senate - WSJ.

- META *Said to be considering $200B AI data center campus – TheInformation.

- (CL) Follow up: Chile declares state of emergency due to power outage; Rules out cyberattack - press.

- (US) Pres Trump signs executive order to consider tariffs on copper (update).

- (US) FEB RICHMOND FED MANUFACTURING INDEX: +6 V -3E; Volume of new orders: 0 v -4 prior.

- (US) FEB CONSUMER CONFIDENCE: 98.3 V 102.5E; Average 12-month inflation expectations surged from 5.2% to 6% in February.

- (US) Feb Dallas Fed Services Activity: 4.6 v 7.4 prior.

- (US) US Senators call for new funding for air traffic control training and incentives to retain veteran controllers - statement.

- (US) House Speaker Johnson: There may not be a vote later on Tuesday.

- (US) TREASURY $70B 5-YEAR NOTE AUCTION DRAWS 4.123% V 4.330% PRIOR, BTC 2.42 V 2.40 PRIOR AND 2.39 OVER THE LAST 12.

- (US) Treasury Sec Bessent: US has an economy that is brittle underneath due to excessive spending by Biden admin.

Europe

- (UK) Feb CBI Retailing Reported Sales: -23 v -20e.

- (UK) PM Starmer said to cut aid budget and immediately increase defense spending; To address House of Commons on defense and security at 12:30PM GMT - press.

- (UK) PM Starmer: Increase in defense spending is an opportunity to rebuild Britain's defense base.

- (EU) ECB's Stournaras (Greece): It's too early to discuss pausing cuts - Politico interview.

- (UR) Ukraine has agreed to mineral deal terms with the US - FT.

- (IR) Iran govt: Will not have direct talks with US on nuclear issues; to coordinate with Russia, China on such matters.

- (RU) Russia Govt Spokesperson Peskov: Prospects for cooperation with US over rare earths but only possible after peace.

Levels as of 00:20 ET

- Nikkei 225 -0.7%, ASX 200 -0.2%, Hang Seng +3.1%; Shanghai Composite +0.7%; Kospi +0.4%.

- Equity S&P500 Futures +0.4%; Nasdaq100 +0.5%; Dax +0.1%; FTSE100 +0.7%.

- EUR 1.0495-1.0525; JPY 148.62-149.60; AUD 0.6324-0.6354; NZD 0.5710-0.5733.

- Gold +0.4% at $2,930/oz; Crude Oil +0.3% at $69.14/brl; Copper +0.9% at $4.7405/lb.