ASIA: Asia's Chip Surge Collides with US Tech Tremors
Major Asian equity markets fell today as a global sell-off in technology shares triggered by concerns over artificial intelligence (AI) valuations, dampened risk appetite. A sharp overnight slide in U.S. tech shares—specifically the Nasdaq falling 2%—spilled over into Asia. Investors are reassessing high AI-linked valuations following disappointing margin outlooks from major tech firms like Cisco, which cited surging memory chip costs. Despite the daily losses, many regional benchmarks are on track to end the week with significant gains, supported by recent strong corporate earnings and massive AI-related capital expenditure plans.
After a spectacular start to the week following a decisive election victory for the LDP, the NIKKEI closed Tuesday at fresh highs of 57,650. Nearing the end of the week it is at 57,256 around -0.70% lower. Major tech company Softbank fell heavily Friday by -7.7% yet remains higher on the week following earlier gains.
As the Lunar New Year holiday approaches and following strong gains to start the week, China's major bourses are down -0.80-1.80% Friday whilst holding onto gains of +1.8% for tech heavy Shenzhen.
The KOSPI is the outlier today posting gains of +1% and +9.6% for the week with Samsung Electronics up over +13% as the company announced it had commenced mass production and shipment of sixth-generation High-Bandwidth Memory (HBM4) chips, critical for next-generation AI accelerators.
The tech sell off has erased gains at the start of the week for the NIFTY 50 as it now faces its third week out of four of losses; down -0.54% currently.
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JGBS: Slightly Cheaper, BOJ Ueda: Hikes As Economy Improves
JGB futures are holding weaker, -14 compared to settlement levels, after trading in a relatively narrow range in today’s session.
- (Bloomberg) “Japan’s inflation and wages are likely to keep rising moderately after the economy showed resilience last year, according to Bank of Japan Governor Kazuo Ueda. The BOJ will keep raising its benchmark rate in line with the improvement in the economy if its outlook materializes, Ueda says at a New Year conference in Tokyo. An appropriate adjustment of monetary easing will lead to long-term economic growth”
- BOJ-dated OIS assigns a 0% probability to a 25bp hike at the January MPM and around 14% by March 2026, with a full 25bp hike priced in by July.
- Cash US tsys are slightly richer, with a steepening bias, in today's Asia-Pac session.
- Cash JGBs are slightly cheaper across benchmarks. The benchmark 5-year yield is 0.1bp higher at 1.615% versus today’s fresh cycle high of 1.622%.
- Today’s 5-year JGB auction delivered weakish demand signals. The low price was below expectations at 99.81, the bid-to-cover ratio fell to 3.0811x from 3.1676x, and the tail widened to 0.05 from 0.04.
- Swap rates are little changed.
- Tomorrow, the local calendar will see PPI data.
Figure 1: BoJ-Dated OIS – Today
Source: Bloomberg Finance LP / MNI
GOLD: Gold Resumes Rally, New Highs in Place
- Gold's overnight decline was short lived as the rally resumed Wednesday in the Asia trading day.
- Bullion is up over +0.95% to US$4,629.51 to set yet another new high and into overbought territory on the 14day relative strength index.
- With geopolitical risks heightened, and potential criminal indictment against the FED Chairman, gold has exhibited 'safe haven status' behaviour even as equities rally.
Today's rally sees gold up over 6.6% year to date and has seen a wave of forecasts for it to top US$5,000 this year.
FOREX: USD-BBDXY Drifts Within 1205-1215 Range, Supreme Court Ruling To Come
The BBDXY has had a range today of 1211.17 - 1212.63 in the Asia-Pac session; it is currently trading around {BBDXY Index}. The USD largely ignored the softer CPI and drifted back up albeit within its range. On the day, it looks like more of the same while we trade within the 1205-1215 range, watch for any ruling from the Supreme court as well as a potential incursion into Iran to maybe provide a catalyst. This lack of a trend is being reflected in the CFTC data which shows very little positioning in the USD Index to start the year. A break above 1215-1216 could signal the potential for a deeper pullback.
- EUR/USD - Asian range 1.1636-1.1648, Asia is currently trading {EURUSD Curncy}. We are firmly back in the wider 1.1450-1.1850 range which dominated the last 6 months of the year and we need a catalyst to get a break and some sort of a trend going again. On the day, support is seen back toward the 1.1600-1.1620 area, a sustained break below 1.1600 could signal a deeper pullback may be on the cards.
- GBP/USD - Asian range 1.3420-1.3445, Asia is currently dealing around {GBPUSD Curncy}. The pair again topped out just below 1.3500 as the USD pushed back. On the day, watch to see if sellers can continue to keep the price below 1.3500, the bears need a break back below 1.3350/80 to signal a correction lower might be on the cards.
- Cross asset : SPX -0.10%, Gold $4625, US 10-Year 4.173%, BBDXY 1211, Crude Oil $60.94
- Data/Events : Italy General Government Debt
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
