EQUITIES: Aus & Japanese Equities Higher, Focus Turns To FOMC & Earnings
Jan-29 04:18
Asian equities are higher today, tracking Wall Street’s tech-led rebound, as focus shifted to the Fed's rate decision and US Big Tech earnings. Japan and Australia led gains, while most regional markets were closed for Lunar New Year. The MSCI Asia Pacific Index rose 0.2%, with Sony and Toyota among the biggest boosts.
- Japanese stocks rebounded as Nvidia’s 8.9% rally helped ease concerns over DeepSeek’s AI model impact. The TOPIX is 0.75% higher, while the Nikkei is trading 0.80% higher
- Australia's ASX 200 jumped 0.80% after cooler-than-expected inflation data boosted expectations of an RBA rate cut in February. Tech led gains (+2.3%), while uranium stocks rebounded. BHP and Rio Tinto fell, but Fortescue gained 1%.
- US equity futures are trading mixed today, with the NASDAQ up 0.10% while Dow Futures down 0.05% lower, this follows the NASDAQ jumping 2% overnight, while the S&P 500 closed 0.90% higher.
- Markets are watching the Fed's rate decision on Wednesday, where rates are expected to remain unchanged but Powell’s guidance on a possible March cut will be key. Major US tech earnings from Tesla, Microsoft, and Meta are due the same day, followed by Apple on Thursday. The ECB will also announce its policy decision on Thursday, alongside Eurozone GDP and unemployment data. Other notable releases include US Q4 GDP (Thursday), PCE inflation, and employment cost index (Friday), which will shape expectations for Fed policy in 2025.
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AUSSIE BONDS: Heavy Session Despite Empty Local Calendar
Dec-30 04:12
ACGBs (YM -7.0 & XM -9.5) are slightly above Sydney session lows but remain sharply weaker on a data-light session.
- Today, the local calendar was empty apart from RBA's Jones-Fireside Chat at Conexus at the Superannuation Chair Forum. The next data releases are CoreLogic Home Value and S&P Global PMI Mfg on January 2.
- While cash US tsys are little changed in today’s Asia-Pac session, Friday’s heavy session continues to weigh on the local market.
- US data this week includes MNI PMI and Pending Home Sales on Monday, FHFA housing data on Tuesday, weekly claims and construction spending on Thursday, and ISMs on Friday.
- Cash ACGBs are 6-9bps cheaper with the AU-US 10-year yield differential at -15bps.
- Swap rates are 3-7bps higher, with the 3s10s curve steeper.
- The bills strip is weaker, with contracts -2 to -4.
- RBA-dated OIS pricing is flat to 4bps firmer across meetings, with August. A 25bps rate cut is more than fully priced by April (124%), with a 58% probability of a February cut.
OIL: Crude Steady On Light Holiday Trading
Dec-30 04:09
Oil prices are little changed during APAC today with volumes remaining light. WTI is around $70.64/bbl following a high of $70.75 and Brent is $73.83/bbl (March contract) after reaching $73.92. Surplus concerns continue to offset geopolitical developments resulting in range trading. The USD index is slightly lower.
- The possibility that conflict in the Middle East will impact oil supplies continues to worry markets. Israel now appears to be focussing on the Iran-backed Houthi rebels in Yemen.
- The strength of China’s oil demand has worried markets and while there is some optimism that increased stimulus in 2025 may boost it, the lack of details limited the upside to oil. US exports of crude to China fell 46% in 2024, according to Kpler, due to weak demand but also China shifting to other sources such as Iran and Russia.
- Increased US supply was a factor that contributed to OPEC’s decision to delay its output normalisation but the outlook has become clouded with the election of Trump to the US presidency. He is likely to boost US production further while tightening sanctions on Iran.
- US December MNI Chicago & Dallas Fed PMIs and November pending home sales print as well preliminary December Spanish CPI.
US TSYS: Cash Bonds Little Changed, 10YY At Higher Since May
Dec-30 04:00
TYH5 is 108-13, -0-01 from NY closing levels.
- Cash US tsys are dealing little changed across benchmarks on a newsflow-light Asia-Pac session.
- The US tsy 10Y yield is hovering around to 4.625% - the highest since late May'24.
- Markets will be closed on Wednesday for the New Year's Day holiday; otherwise, they will have full sessions for the balance of the week. Data includes MNI PMI and Pending Home Sales on Monday, FHFA housing data on Tuesday, weekly claims and construction spending on Thursday, and ISMs on Friday.
