ASIA STOCKS: AI Tech vs $100 Oil Key to Asia's Next Move for Stocks
The escalation of the US-Iran conflict and the blockade of the Strait of Hormuz triggered a violent risk-off rotation, with oil-dependent economies like Japan and India bearing the brunt of the selling in equities.
The Nikkei 225 suffered its third-largest point drop in history on Monday -2,800 points as investors dumped Automakers and Tech as the weak Yen + high oil combination threatened to crush corporate margins. Defense stocks and financial institutions with trading Houses were the only positive areas. This sees the NKY back below 54,000 and down over 8% month to date.
India’s VIX spiked over 20% this week as the Nifty 50 broke below its 200-day moving average. Auto and FMCG sectors were hammered on fears that $100 oil would lead to immediate fuel price hikes, denting rural and urban discretionary spending. A spike in bond yields put pressure on banks given expected mark-to-market losses on their government bond holdings.
Chinese markets were the most resilient this week, partly because China is less reliant on oil imports for its energy, making it less physically sensitive to the Hormuz blockade than Japan or Korea. Beijing officially set a 2026 GDP growth target of 4.5%–5.0%, whilst the government signaled a reluctance to deploy large-scale stimulus, maintaining a budget deficit target around 3%–4% of GDP. Key bourses are mixed this week though both gains and losses were modest, outperforming their regional peers.
Korea's KOSPI is down, though losses capped due to their flagship AI names. The KOSPI is down around -1.8% for the week with SK Hynix flat and Samsung down just -0.7%
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US TSYS: Cash Closed, Risks of Better NFP Not Priced
With Japan closed, it was only futures that traded today with volumes low. The 10-Yr traded in a range of 112-15+ to 112-19, finishing at the top end of the range for a gain of +02 today.
Its a big day Wednesday for data given the delayed Non Farm Payrolls and various Fed Speakers.
US Data/Speaker Calendar (prior, estimate). All times ET
02/11 0700 MBA Mortgage Applications (-8.9%, --)
02/11 0830 Change in Nonfarm Payrolls (50k, 67k)
02/11 1000 KC Fed Schmid moderated discussion on economy, mon-pol
02/11 1015 Fed VC Bowman moderated discussion
02/11 1130 US Tsy $69B 17W bill auction
02/11 1300 US Tsy $42B 10Y Note auction (91282CPZ8)
02/11 1400 Federal Budget Balance (-$144.7B, -$94.4B)
02/11 1600 Cleveland Fed Hammack on leadership (no text, Q&A)
Source: Bloomberg Finance L.P. / MNI
- There is a US$69bn 17-week and a US$42bn 10-Yr auction tonight
Yields have fallen more than expected in recent days, taking them back below the mid point of the 1 m range. The data suggests the economy is slowing (as evidenced by the recent peak in GDPNow) and yields should be lower. However the risks are now (given recent moves) that NFP in line or marginally stronger could see a modest unwind of the recent rally.
ASIA STOCKS: Positive Bias Continues on JN / AI Optimism; Eyes on NFP
- Despite Japanese markets closed today, optimism from the PM's recent landslide victory continued to provide a supportive regional backdrop. The day’s primary driver was cooling U.S. retail sales. This raised expectations for Federal Reserve rate cuts later this year, boosting risk appetite across the region. Markets look ahead tonight to non farm payrolls for further indications for rates with Trump talking up NFP prospects, whilst FED officials suggest rates are on hold for some time.
- China's CPI for January missed expectations whilst the PPI remained in contraction, though base effects were strong. While this underscored weak domestic demand, it also increased expectations for further stimulus from Beijing to hit its 2026 growth target. Moves in China's major bourses were muted today with HSI up +0.4% whilst CSI 300 was down -0.15%
- The KOSPI and TAIEX - both considered tech heavy - were higher today with the TAIEX up +1.6% on TSMC gains of +2.4% and the KOSPI up +1.2% despite a mixed day for AI stocks. Despite recent global volatility in tech valuations, Asian tech hubs like South Korea and Taiwan remain well supported by global investors with recent days seeing in a surge of inflows into Taiwan stocks.
- The JCI has delivered three consecutive days of strong gains, up +1.6% today at 8,270; near to the upside resistance via the 100-day EMA at 8,359. Momentum indicators remain bearish for the JCI with the MACD line below the signal. A negative MACD value means the 12-day Exponential Moving Average (EMA) is significantly below the 26-day EMA.
FOREX: USD - BBDXY Testing 1175-1180 Into Employment Data
The BBDXY has had a range today of 1179.42 - 1183.25 in the Asia-Pac session; it is currently trading around 1179, -0.25%. The USD has fallen below most short-term supports and is looking to the lows seen in January now. It does not take a lot for the sellers to come back to market as nobody wants to miss out on this trade. The break lower in US yields is just adding to the USD headwinds and the market will be bracing for more bad news from the employment data tonight. On the day, the first resistance is toward the 1185-1187 area and then 1195 where I suspect we could see sellers return. A sustained break below 1175-1180 could potentially signal the start of another leg lower targeting 1150 first and then potentially 1115.
- EUR/USD - Asian range 1.1886-1.1915, Asia is currently trading 1.1915. The pair is consolidating around 1.1900 as the USD comes back under pressure and we await US employment data tonight. Price action has been pretty constructive after the initial sell-off and the support just below 1.1800 proved to be solid, can it now build some momentum from that base ? On the day, the first support is back toward the 1.1860-1.1890 area and then 1.1770-1.1800.
- GBP/USD - Asian range 1.3632-1.3670, Asia is currently dealing around 1.3665. The pair like everything is trying to bounce as the USD struggles. GBP looks like 1.3580-1.3730 to me for now as we wait to see if the big USD could potentially break lower. Should this play out then a move back above 1.4000 is back on the cards.
- Cross asset : SPX +0.30%, Gold $5057, US 10-Year 4.14%, BBDXY 1179, Crude Oil $64.48
- Data/Events : Italy Industrial Production
Fig 1: GBP/USD Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
