Yen rises and Japanese equities fall

Asia Market Update: Yen rises and Japanese equities fall, Various news point to coming shift in JP rates; Focus on ECB rate decision tonight.

General trend

- The yen has risen from 150.6 to 148.4 over the past 36 hours, with the move accelerating today upon a number of stories indicating a near-term pivot by the Japan BOJ to positive rates:

--- The BOJ will be happy with a healthy uptick in January labor cash earnings and while real wages fell they did so at the slowest pace in 13 months.

--- Japanese 6-month bill auction today produced its first positive yield in over a decade.

--- Japan 2-year notes rose to over 0.2%, the highest since 2011.

--- Miizuho Bank raised its long-term prime rate by 10bps to 1.60%.

--- Some govt officials in Japan said to support BOJ to raise interest rates in 'near-term'.

--- Japan's largest industrial union said that Full-time worker pay +6.7% during Spring wage talks.

--- After initially opening up 0.6%, the Nikkei did not enjoy the rising Yen nor the prospect of higher rates, falling over 1%, with exporters and tech (including chip-relateds) leading the fall.

- In opposing circumstances, the China 30-year govt bond fell to a record low of 2.39%.

- Australia and China both posted large trade surpluses today.

- US equity FUTs down during Asian trading.

Looking ahead (Asian time zone)

- Thu Mar 7th (Thu night ECB rate decision).

- Fri May 8th (Fri night US non-farm payrolls).

- Sat May 9th CN Feb inflation.

Holidays in Asia this week

- Fri Mar 8th India.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 7,333.

- Australia Jan Trade Balance (A$): 11.0B v 11.5Be.

- Australia Jan Home Loans Value M/M: -3.9% v 2.0%e.

- Australia, Vietnam agree on comprehensive Strategic Partnership - press.

- New Zealand Q4 Manufacturing Activity Q/Q: -0.7% v -2.8% prior.

- New Zealand RBNZ's Gov Orr to speak at events in London from Mar 12-13 - financial press.

- New Zealand sells total NZ$ vs. NZ$500M indicated in 2027, 2032 and 2041 bonds.

China/Hong Kong

- Hang Seng opens -0.1% at 16,417.

- Shanghai Composite opens flat at 3,040.

- CHINA FEB YTD TRADE BALANCE: $125.2B V $110.3BE.

- CHINA FEB YTD TRADE BALANCE (CNY-DENOMINATED): 890.9B.

- (CN) China MOF to issue bonds in Hong Kong on Wed 13 Mar - HKMA statement.

- China Pres Xi: Will bring forward work meeting on carbon targets; Told political advisors that China will curb pollution.

- China PBOC Gov, MOFCOM Minister, China NDRC and CSRC's Qing joint press conference at NPC: Room for RRR to fall further.

- China PBOC Gov Pan: Will support high quality Chinese firms to list shares overseas.

- China Foreign Minister Wang Yi: To submit draft resolution to United Nations General Assembly on International Cooperation of AI Development.

- Former China PBOC Gov Yi Gang said to suggest insurance system for property presale funds - Press.

- China PBOC sets Yuan reference rate: 7.1002 v 7.1016 prior.

- China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos; Net drains CNY107B v drains CNY314B prior.

Japan

- Nikkei 225 opens +0.6% at 40,331.

- JAN LABOR CASH EARNINGS Y/Y: 2.0% V 1.2%E

- Japan Feb FX Reserves: $1.28T v $1.29T prior.

- Japan sells ¥4.0T vs. ¥4.0T indicated in 6-Month Bills; Avg Yield: +0.0259% v -0.1042% prior, bid-to-cover: 3.79x v 3.40x prior.

- Mizuho Bank 8411.JP To raise long-term prime rate by 10bps to 1.60%.

- Japan releases weekly flows data [period ended Mar 1st]: Foreign buying of Japan equities: +¥283.9B v -¥206.3B prior; Japan buying of foreign bonds: +¥484.6B v -¥250.1B prior.

- Japan Feb Tokyo Avg Office Vacancies: 5.9% v 5.8% prior.

- Bank of Japan (BOJ) Junko Nakagawa: Japan's economy making steady progress to achievement of price target.

- Some govt officials in Japan said to support BOJ to raise interest rates in 'near-term' - US financial press.

- (JP) Japan's UA Zensen Union (Japan's largest industrial union): Full-time worker pay deals currently at 6.7%, incl base-pay rise of 5,15%, higher than last year - Japanese press.

- BOJ Gov Ueda: Despite temporary rises in market volatility in the face of the GFS, the European debt crisis and the turmoil in the banking sector in Mar 2023, the financial system in APC region has remained resilient (overnight update).

- BOJ officials said to have differing views on rate timing (as earlier speculated), but generally getting more confident of stronger wage growth – press (overnight update).

- Reportedly at least one of the nine Bank of Japan (BOJ) policy board members 'likely to say lifting negative rates is reasonable' at the March 18-19th policy meeting – Jiji (overnight update).

- JAPAN SELLS ¥900B VS. ¥900B INDICATED IN 30-YEAR JGB BONDS; AVG YIELD: 1.7700% V 1.7910% PRIOR; BID-TO-COVER: 2.93X V 3.18X PRIOR.

South Korea

- Kospi opens +0.5% at 2,653.

Other Asia

- Thailand Feb Consumer Confidence: 63.8 v 62.9 prior (4 year high).

- Philippines Central Bank (BSP) Gov Remolona: Prior rate hikes seem to have worked (overnight update).

- Singapore Central Bank (MAS) Dep MD Robinson: Sees Core CPI at 2% by early 2025 under current policy (overnight update).

North America

- (US) Fed's Kashkari (non-voter): If inflation flares again that could justify rate hike.

- (US) Fed's Daly (voter): Recognize high rates also raise housing costs, committed to finishing the job on inflation.

- (US) Reportedly US regulators are expected to significantly reduce the extra capital banks must hold under a proposed rule; The regulatory discussions are in their early stages and no decisions have been made - press.

- (US) Haley said to exit Republican presidential race, but not to immediately endorse Trump for GOP nomination; To be announced in a speech Wed's morning - press.

- (US) FEB ADP EMPLOYMENT CHANGE: +140K V +150KE; Job-changers median change in annual pay 7.6% v 7.2% prior (the first acceleration since November 2022).

- (US) TEXT RELEASE OF FED CHIEF POWELL UPCOMING SEMI-ANNUAL TESTIMONY IN CONGRESS; Do not expect it will be appropriate to reduce policy rate until we have greater confidence that inflation is slowing sustainably.

- (CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 5.00%; AS EXPECTED.

- (US) JAN JOLTS JOB OPENINGS: 8.863M V 8.850ME; Quits rate 2.1% v 2.2% prior.

- (US) FED CHIEF POWELL SEMI-ANNUAL TESTIMONY IN CONGRESS Q&A: RATE CUTS WILL DEPEND ON THE PATH OF THE ECONOMY, INCOMING DATA WILL DETERMINE WHEN RATE CUTS BEGIN.

- (CA) Bank of Canada (BOC) Gov Macklem: We most likely won't get to 2% inflation this year - post rate decision press conference; Will not cur rates at same pace which they were raised.

Europe

- (UK) OFFICE FOR BUDGET RESPONSIBILITY (OBR); Sees CPI below BOE's 2% target in few months (overnight update).

- (UK) Chancellor of the Exchequer (Fin Min) Hunt: Lower taxes mean higher growth; Need to boost GDP per capita, not just GDP - Spring Budget speech; Confirms to cut main National Insurance by 2ppts to 8% as well as self employed NI to 6%, from Apr (overnight update).

- (EU) EU reportedly moving closer to imposing additional tariffs on Chinese EVs entering the bloc, citing new proof that the government in Beijing is providing illegal financial support for the industry – press (overnight update).

Levels as of 00:20 ET

- Nikkei 225 -1.0%; ASX 200 +0.4% ; Hang Seng -0.6%; Shanghai Composite -0.1%; Kospi +0.3%.

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

- EUR 1.0893-1.0907; JPY 148.40-149.40; AUD 0.6561-0.6589; NZD 0.6126-0.6151.

- Gold +0.4% at $2,165/oz; Crude Oil -0.1% at $79.08/brl; Copper +0.3% at $3.8810/lb.