CHINA PRESS: China Needs Public Investment To Escape Short-Term Spiral

The USD is up from earlier lows that were seen around the US/Asia Pac cross over earlier. We are around 0.20-0.40% weaker in terms of the G10 currencies versus the USD. The BBDXY index opened near 1305.3, but is now back around the 1308 level. This is still short of fresh cycle highs from Monday (just above 1325). 

• In the cross asset space, US equity futures are higher, but away from best levels (Eminis last +0.30%). EU equity futures are also up, after cash losses in Monday trade. US yields are firmer, but gains are less than 1bps at this stage.
• Regional equities are higher, as relief spreads on the US tariff pause against Mexico/Canada. HK markets are up, but we still have a China tariff deadline a few hours away (midnight time in the US), which is 1pm HK time.
• USD/CNH has drifted a little higher, last near 7.3170. Earlier lows were close to 7.3000. A reminder that China markets remain closed for the LNY break, they return tomorrow.
• AUD, ZND and NOK are all off around 0.30-0.35%. AUD/USD was last 0.6205/10, while NZD/USD was back close to 0.5615. USD/JPY is higher, last in the 155.20/25 region. All these pairs remain within recent ranges.
• Earlier we had Dec household spending data for Australia, which was close to expectations, but hasn't impacted the AUD greatly.
• The data calendar is clear for the remainder of the Asia Pac session. 

Australian household spending rose 0.4% m/m to be up 4.3% y/y in December, the highest since March. November was revised up significantly to +0.8% m/m & 3.2% y/y from 0.4% & 2.4%. This is consistent with the retail sales data released yesterday showing a recovery in household spending. Consistent with this is the third straight monthly rise in discretionary spending in December.

• Total household spending volumes rose 1.4% y/y in Q4 up from 0.2% in Q3 signalling a pickup including a solid quarterly rise in the national accounts version due on March 5. Furnishings, transport, clothing and recreation saw increases in annual growth. 

Australia real household consumption y/y%

Source: MNI - Market News/ABS

• Discretionary spending rose 0.6% m/m and 4.6% y/y in December, the highest in almost a year and the strongest of the main categories, after 0.9% & 2.8%. The growth was due to new vehicles, eating out, air travel & streaming services. Non-discretionary fell 0.2% m/m to be up 3.7% y/y.
• Services expenditure rose 0.3% m/m to be up 4.2% y/y down from 5.3% y/y, while goods rose 0.4% m/m to be up 4.4% y/y up from 1.5% y/y. There wasn’t payback for the discount-induced 1.2% m/m rise in goods spending in November.
• The ABS noted that “consumers have capitalised on the end-of-year sales season, driving a sustained rise in spending to finish 2024”.
• The household spending data will replace retail sales from 30 July 2025.

Australia household consumption y/y%

Source: MNI - Market News/ABS

• Investors pulled out $1.4b from the broad iShares MSCI Emerging Markets ETF (EEM) in January, the largest outflow since August, as traders focused on country-specific bets amid Trump-driven policy uncertainty.
• The iShares MSCI Mexico ETF (EWW) saw $309m in inflows, benefiting from delayed US tariffs and a more dovish Fed stance on inflation. However, some inflows may reflect short-selling activity, as short interest in EWW hit a one-year high.
• The iShares MSCI India ETF saw $796m in outflows, the largest since March 2020, amid concerns over slowing economic growth (forecasted at 6.3%-6.8%).
• China/Hong Kong saw $160m in inflows, mainly driven by the KraneShares CSI China Internet ETF.
• Additionally, broad stock ETFs saw $42.5m in inflows, while EM bond funds had $101.8m in outflows, bringing total EM ETF assets down slightly to $347.1b.