MNI US OPEN - BOJ Rate Hike Appears Almost Certain
EXECUTIVE SUMMARY
- RUBIO SLAMS BEIJING OVER SOUTH CHINA SEA, COMMITS TO ASIA ALLIES
- MNI BOJ PREVIEW - ALMOST CERTAIN TO HIKE
- NORGES BANK HOLDS, RATE CUT LIKELY IN MARCH
- EU PLANS SUBSIDY FOR EV CAR SALES TO COUNTER CHINA
Figure 1: Overnight JPY vols tipped to YTD highs ahead of BoJ
Source: MNI/Bloomberg
NEWS
MNI BOJ PREVIEW - JANUARY 2025: Almost Certain to Hike
The Bank of Japan (BoJ) will announce its latest monetary policy decision this Friday, with expectations that it will move further along its policy normalisation path. Both market consensus and our analysis suggest a 25bps rate hike as the most likely outcome. Looking ahead, the BoJ is expected to maintain a cautious path, with 25bps hikes every six months. In the January Outlook Report, we expect the BoJ to maintain its economic growth forecast but slightly raise its inflation outlook.
BOJ (Nikkei): BOJ Set to Vote for Rate Hike to 0.5% on Friday
The Bank of Japan is set to vote for a rate hike during its meeting scheduled for Friday, Nikkei has learned, taking a step further in its policy normalization process as inflation hovers above the bank's 2% target and wage hikes by domestic companies spread. The BOJ's policy rate will likely be raised from the current 0.25% to 0.5%, the highest level since October 2008.
US/CHINA(BBG): Rubio Slams Beijing Over South China Sea, Commits to Asia Allies
US Secretary of State Marco Rubio criticized Beijing’s “dangerous and destabilizing” actions in the South China Sea in his early days in office, as he discussed the contested waterway with counterparts from the Philippines and Indonesia. Rubio, the first of President Donald Trump’s cabinet members to be confirmed, reaffirmed Washington’s “ironclad” commitment to defend Manila in a call with Philippine Foreign Affairs Secretary Enrique Manalo, State Department spokesperson Tammy Bruce said in a statement on Wednesday.
US/CHINA (MNI INTERVIEW): China Preps for U.S. Tariffs, 10% Manageable
A senior Chinese policy advisor shares his outlook for U.S. tariffs. On MNI Policy MainWire now, for more details please contact sales@marketnews.com
US/CHINA (FT): Record Number of US Companies Weigh China Exit as Trump Tensions Rise
A record number of US companies in China are thinking about moving some operations out of the country or are already in the process of doing so, according to a new study, as geopolitical tensions rise with Donald Trump’s return to the White House. The annual survey by the American Chamber of Commerce in China found 30 per cent of respondents were exploring alternative sources for goods and relocating manufacturing out of the country last year, or had already done so - double the percentage in 2020.
US/CHINA (MNI): US Firms in China Less Optimistic for 2025
MNI (Beijing) US firms in China are less confident in the country's market growth and more pessimistic on U.S.-China relations this year, an American Chamber of Commerce in China survey showed on Thursday. In total, 68% of firms expected market growth in 2025, down from 76% in last year’s poll, while 27% of companies held pessimistic views on China-U.S. relations, up from 17% last year. Rising tensions between Beijing and Washington remained the top business concern for chamber members, but competition with state and privately owned domestic firms climbed to second position from fifth last year.
US (FT): Fed to Keep Rates on Hold for ‘Foreseeable Future’, Pimco Says
The Federal Reserve is poised to keep interest rates on hold “for the foreseeable future” and could even boost borrowing costs, as central bankers await clarity on Donald Trump’s policies, said bond fund giant Pimco. Dan Ivascyn, the $2tn asset manager’s chief investment officer, said he expected the US central bank to keep rates steady until there was “more clarity either on the data front or the policy front”.
US (BBG): Trump Maps Pivot From Quick Wins to Harder, ‘Solvable’ Problems
President Donald Trump spent the first days of his return to the White House sharing the spoils of victory with his most loyal followers and offering up red meat culture war wins with the stroke of his pen. But even as the new president celebrated the moment in the friendly confines of an Oval Office interview with Fox News host Sean Hannity on Wednesday, immense political and economic challenges loomed large. “They’re all solvable,” Trump said in the interview. “With time, effort, money, unfortunately; but they’re all solvable problems.”
US (BBG): Rubio Plans to Visit Panama in First Trip as Trump Eyes Canal
Secretary of State Marco Rubio plans to travel to Panama as part of a trip to Latin America as soon as next week, a person familiar with the matter said, underscoring President Donald Trump’s seriousness about taking back the Panama Canal. Rubio also plans to visit Guatemala, El Salvador and Costa Rica, according to the person, who asked not to be identified discussing private deliberations.
US (BBG): SoftBank, OpenAI Eye $19 Billion for US AI, Information Says
SoftBank Group Corp. and OpenAI each plan to commit $19 billion of capital to Stargate, the $100 billion US AI endeavor President Donald Trump unveiled this week, the Information reported. The two companies would then both own 40% of Stargate, the tech outlet said, citing comments by Chief Executive Officer Sam Altman to colleagues.
MNI US EARNINGS SCHEDULE: Industrials in Focus
Industrials in focus, with earnings to take some focus off Trump's first days in office.
NORGES BANK (MNI): Norges Bank Holds, Rate Cut Likely in March
Norges Bank left its key policy rate unchanged in Jaunary, having now held at 4.5% since December 2023. Policymakers stuck guidance that the first cut this cycle is likely to come in March. Norges Bank's assessment was that its December forecasts were largely holding good with "underlying inflation and unemployment have been roughly as projected" and the forecasts will be updated alongside the March decision.
UK (FT): Elon Musk Said Reform UK Donation May Be Difficult With Donald Trump in Office
Elon Musk has privately downplayed the chances of making a donation to Nigel Farage’s Reform UK, telling an associate it will not be easy to give money to the British party after he joined the US government. The associate said Musk told them earlier this month that Donald Trump’s inauguration would complicate his ability to donate to Reform because of the tech billionaire’s role running a waste-cutting unit in the new administration.
UK (MNI): CPI Changes Delayed a Year
Regarding the UK CPI changes, they have now been delayed until March 2026 rather than coming in in March 2025 as was previosuly announced. This is largely going to impact things like supermarket prices. At the moment no discriminatory pricing is included (so things like Clubcard prices and Nectar prices etc aren't included as you have to be a member but can still purchase at the non-member price) and multibuy discounts (buy one get one free etc) are not included. Effectively it means that food prices etc are overstated. But they were overstated this year and last year too - so Y/Y and M/M there should be little distortion in the near-term. Full ONS explanation and details here.
EU/CHINA (FT): EU Plans Subsidy for EV Car Sales to Counter China
Brussels has promised to help Europe’s embattled car industry potentially by using pan-EU subsidies to boost demand for electric vehicles. Teresa Ribera, executive vice-president of the European Commission, told the Financial Times at the World Economic Forum in Davos that officials were still “shaping” options for an incentive programme.
CHINA (MNI): China to Attract Long-term Funds for Stock Market
MNI (Beijing) China will steadily increase the proportion of A-share investment by medium-and long-term funds by setting an investment ratio and extending the assessment period, Wu Qing, chairman of the China Securities Regulatory Commission told reporters on Thursday. Mutual funds are required to raise A-share investment by at least 10% each year over the next three years, said Wu. Large state-owned insurance companies should strive to invest 30% of their annual new premiums in A-shares starting from 2025, Wu added.
CHINA (MNI): CSRC to Promote Investment Value of A-shares
MNI (Beijing) China’s top securities watchdog said it will increase policy support to promote the quality and investment value of listed companies and strengthen regulations to improve the capital market ecosystem. Wu Qing, chairman of the China Securities Regulatory Commission told reporters on Thursday that the CSRC will further increase the supply of high-quality listed companies and support more benchmark high-tech firms to enter the A-share market.
CHINA (MNI): China to Remain Second Largest Import Market
MNI (Beijing) China is set to remain the world's second largest import market in 2025 for the 16th year running, following last year's 2.3% growth, according to He Yadong, Ministry of Commerce Spokesperson on Thursday. Regarding trade issues with the United States, He said China hoped both sides can promote the stable China-U.S. economic and trade relations.
JAPAN (MNI): Fitch Affirms Japan at A; Outlook Stable
Fitch Affirms Japan at A; Outlook Stable. The rating agency notes that "Japan's 'A' ratings balance the strengths of an advanced, wealthy economy with correspondingly robust governance standards and public institutions, against weak medium-term growth prospects and very high public debt. The central bank's monetary strategy and broad domestic investor base continue to support relatively low bond yields and the government's financing capacity, despite gradual monetary policy tightening. Persistent current account surpluses, a large external asset position and the yen's reserve currency status also support the rating.
JAPAN (MNI): Japan Govt Keeps Econ Assessment; Tweaks Bankruptcies
Japan’s government left its overall economic assessment in January for the sixth straight month but tweaked its view on bankruptcies for the first time since September 2024, the Cabinet Office said on Thursday. The assessments on other major components, such as exports, private consumption, capital investment and production, were left from the previous month. The government said that the Japanese economy is recovering at a moderate pace, although it recently appears to be pausing in part.
MNI CBRT PREVIEW - JANUARY 2025: Easing Pace to Be Maintained
The CBRT is widely expected to continue rate cuts with a 250bp reduction to the one-week repo rate following the start of its easing cycle in December. Signals from central bank officials indicate that market expectations of continued rate cuts appear accurate, while further declines in key inflation indicators will provide policymakers with room to act.
RUSSIA (MNI): No 'New Elements' in Trump Tariff & Sanctions Threat - Kremlin
Reuters reporting comments from Kremlin spox Dmitry Peskov. Says on US President Donald Trump's threat of sanctions and tariffs on Russia "We don't see any particularly new elements here", adding "Trump in his first term was a president who often resorted to sanctions." Peskov referring to Trump's post on his Truth Social platform on 22 Jan promising "Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States" if the war in Ukraine continues. On the prospect of talks with Trump Peskov says "We remain ready for equal and mutually respectful dialogue." Peskov: "we are waiting for signals, waiting for signals that have not yet been received,"
INDIA (BBG): India to Overcome Impact From Trump Policies, Modi Official Says
Prime Minister Narendra Modi’s relationship with the world’s biggest economies will help India overcome any “negative impacts” from shifts in global trade under President Donald Trump, a top official said on Wednesday. “It has been very clear that the entire world looks at India as a trusted country,” said Ashwini Vaishnaw, India’s electronics and technology minister in an interview with Bloomberg’s Menaka Doshi in Davos. “I will say that trust will outweigh any of the negative impacts.”
S. KOREA (BBG): South Korea Probe Team Seeks Indictment of Yoon Over Martial Law
South Korean anti-corruption agency asked prosecutors to indict impeached President Yoon Suk Yeol on insurrection charges after wrapping up a preliminary investigation into his ill-fated martial law declaration. The Corruption Investigation Office for High-ranking Officials said they have decided to send Yoon’s case to the Seoul Central District Prosecutors’ Office on Thursday.
DATA
JAPAN DATA (MNI): Japan Dec Exports Rise; Autos Fall
- JAPAN POSTS JPY130.9 BLN TRADE SURPLUS IN DEC
- JAPAN DEC EXPORTS +2.8% Y/Y; NOV +3.8%
Japan’s exports posted their third straight rise in December, up 2.8%, but softer than November's 3.8%, thanks to the rise in shipments of semiconductors and their manufacturing equipment, and despite a fall in automobile shipments, data released by the Ministry of Finance showed on Thursday. Automobiles exports fell 5.9% in December following November's 5.2% drop, while semiconductor manufacturing equipment sales rose 10.6%, down from 32.1% in the prior month. Imports rose 1.8% y/y, the first rise in two months following -3.8% in November.
JAPAN DATA (MNI): Japan Corp Loan Demand Rises - BOJ Survey
Demand for financing by Japanese corporates via banks rose slightly from three months ago in the wake of increased sales and capital investment, and the drop of internally-generated funds, the senior loan officer opinion survey on bank lending practices released by the Bank of Japan showed on Thursday. The index for corporate fund demand rose to +10 in January from +9 in October, while the benchmark for fund demand expected for the next three months stood at +3, unchanged from the previous survey, indicating it will remain solid.
FOREX: JPY Vols Tipped to New YTD High Ahead of BoJ Decision
- JPY markets remain of interest, with overnight vols capturing the Friday BoJ rate decision. Implied vol expiring Friday is bid, tipped up to 19 points for the first time since mid-December as markets anticipate a 25bps hike to 0.50% in Japan. JPY is suitably slightly firmer early Thursday, but price action is generally contained.
- USD/JPY is just below the Y156.50 mark at typing, with Y156.29 marking soft support ahead of the weekly (post-tariff headlines) low of Y154.78.
- The USD Index holds above the weekly low, but remains comfortably off the year's best levels. That said, the underlying uptrend remains in tact given the stabilisation above the 50-dma support this week. The upswing in near-term momentum remains a key driver here and notably the premium for the 50-dma over the 200-dma is at a new cycle high today (~2.8%) and the largest since late 2022.
- AUD and NZD sit slightly softer as global equities roll slightly off this week's highest levels. European stocks are in very minor negative territory into the NY crossover as prices roll off record highs, dragging risk sensitive stocks with it. Adding to the pressure here is gold prices, which are through yesterday's lows and prompting a softer precious metals backdrop.
- Weekly US jobless claims data and Canadian retail sales are the calendar highlights, although more attention will likely be paid to Trump's video-link appearance at the World Economic Forum in Davos - set for 1600GMT/1100ET.
EGBS: Post Auction Bounce in Major Futures Fades
The post-OAT auction bounce in major EGB futures has largely faded, with OAT futures eyeing a test of session lows at 122.48. OATs are currently -28 ticks at 122.54, after bouncing to 122.77 following the auction cut-off.
- France sold MT OATs at the top of its target range (E12.992bln), with strong/in-line bid-to-cover ratios and lowest accepted prices above the prevailing secondary market mid-prices. IL OATs are due at 1050GMT.
- The auction has nonetheless helped the 10-year OAT/Bund spread unwind a portion of its earlier widening, though the spread remains 1bp wider today.
- Bund futures are -25 ticks at 131.60. The medium-term trend condition remains bearish, with a breach of the 20-day EMA at 132.32 required to strengthen a bullish theme.
- German yields are up to 1.5bps higher, with 10-year peripheral spreads to Bunds also widening.
- Bank of Spain Governor Escriva is scheduled to speak from 1030GMT, while the EC’s flash consumer confidence reading is due at 1500GMT.
- Regional focus remains on tomorrow’s January flash PMIs.
GILTS: Yields a Little Higher, Strong Auction Demand Fails to Spur Buying
Gilts initially steady after smooth digestion of the GBP4.25bln 4.375% Mar-28 auction, which provided a tight tail (tightest for 3-Year auction since January ’24) and solid cover ratio, despite the uptick in the amount on offer.
- Selling then creeps back in.
- Pre-auction setup across gilts and EGBs, coupled with a move higher in oil & European gas prices, had weighed ahead of the auction.
- Futures -22 at 91.73, session low.
- Yesterday’s low has been pierced, with the bearish technical setup in the contract intact.
- Initial support comes in at the Jan 20 low (91.10).
- Yields 1-2bp higher, 5s lead the selling.
- GBP STIRs little changed on the day.
- BoE-dated OIS showing 65bp of cuts through ’25 vs. 64.5bp late yesterday.
- We still look for 25bp cuts in February and May, ~22bp and ~40bp priced through those meetings, respectively.
- SONIA futures now flat to -2.5 owing to the modest gilt weakness.
- Comments from U.S. President Trump and U.S. weekly jobless claims data eyed from here, flash services PMI data due Friday.
EQUITIES: Recent Gains for Eurostoxx 50 Futures Result in Breach of Resistance
A bull cycle in the Eurostoxx 50 futures contract remains intact and the contract traded higher on Wednesday. Recent gains have resulted in a breach of 5054.00, the Jan 8 high, to confirm a resumption of the uptrend. The focus is on a climb towards 5261.57, a Fibonacci projection point. Key short-term support has been defined at 4931.00, the Jan 13 low. Initial firm support lies at 5053.69, the 20-day EMA. S&P E-Minis have traded higher this week, marking an extension of last week’s bull phase. Gains undermine a recent bearish theme. The contract has traded through the 50-day EMA and note that resistance at 6107.50, the Dec 26 high, has been breached. The clear break strengthens a bullish theme and opens 6178.75, the Dec 6 high and key resistance. Initial firm support to watch is 5961.75, the Jan 16 low.
- Japan's NIKKEI closed higher by 312.62 pts or +0.79% at 39958.87 and the TOPIX ended 14.55 pts higher or +0.53% at 2751.74.
- Elsewhere, in China the SHANGHAI closed higher by 16.54 pts or +0.51% at 3230.164 and the HANG SENG ended 78.21 pts lower or -0.4% at 19700.56.
- Across Europe, Germany's DAX trades higher by 27.38 pts or +0.13% at 21281.14, FTSE 100 lower by 8.76 pts or -0.1% at 8536.19, CAC 40 up 6.01 pts or +0.08% at 7843.41 and Euro Stoxx 50 down 11.57 pts or -0.22% at 5194.26.
- Dow Jones mini down 30 pts or -0.07% at 44323, S&P 500 mini down 14.5 pts or -0.24% at 6106, NASDAQ mini down 116.5 pts or -0.53% at 21884.75.
Time: 09:50 GMT
COMMODITIES: Move Lower in WTI Futures Allows Overbought Trend to Unwind
The trend structure in WTI futures remains bullish despite the latest pullback. The move down is allowing an overbought trend reading to unwind. The latest strong impulsive climb resulted in a breach of $75.91, the Oct 8 high. Attention is on $79.48, the Apr 12 ‘24 high. A clear break of this hurdle would strengthen the bullish theme and open 80.63, a 3.236 projection of the Nov 18 - 22 - Dec 6 price swing. Support to watch is the 20-day EMA, at $74.20. Gold continues to trade higher this week. The yellow metal has breached resistance at 2726.2, the Dec 12 high and a key short-term resistance. The clear break of this hurdle strengthens a bullish theme and signals scope for an extension near-term. Sights are on $2790.1, the Oct 31 all-time high. On the downside, the first key support to watch is $2660.9, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat.
- WTI Crude down $0.01 or -0.01% at $75.43
- Natural Gas down $0.01 or -0.13% at $3.957
- Gold spot down $12.45 or -0.45% at $2743.81
- Copper down $3.65 or -0.85% at $426.55
- Silver down $0.29 or -0.94% at $30.5329
- Platinum down $4.77 or -0.5% at $946.48
Time: 09:50 GMT
| Date | GMT/Local | Impact | Country | Event |
| 23/01/2025 | 1100/0600 | *** |  TR | Turkey Benchmark Rate |
| 23/01/2025 | 1100/1100 | ** |  GB | CBI Industrial Trends |
| 23/01/2025 | 1330/0830 | ** |  CA | Retail Trade |
| 23/01/2025 | 1330/0830 | *** |  US | Jobless Claims |
| 23/01/2025 | 1330/0830 | ** | CA | Retail Trade |
| 23/01/2025 | 1500/1600 | ** |  EU | Consumer Confidence Indicator (p) |
| 23/01/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 23/01/2025 | 1600/1100 | ** | US | DOE Weekly Crude Oil Stocks |
| 23/01/2025 | 1600/1100 | ** | US | Kansas City Fed Manufacturing Index |
| 23/01/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 23/01/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 23/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for TIPS 10 Year Note |
| 24/01/2025 | 2200/0900 | *** |  AU | Judo Bank Flash Australia PMI |
| 24/01/2025 | 2330/0830 | *** |  JP | CPI |
| 24/01/2025 | 0001/0001 | ** | GB | Gfk Monthly Consumer Confidence |
| 24/01/2025 | 0030/0930 | ** | JP | Jibun Bank Flash Japan PMI |
| 24/01/2025 | 0300/1200 | *** | JP | BOJ Policy Rate Announcement |
| 24/01/2025 | 0700/0800 | ** |  SE | PPI |
| 24/01/2025 | 0700/0800 | ** | SE | Unemployment |
| 24/01/2025 | 0800/0900 | ** |  ES | PPI |
| 24/01/2025 | 0815/0915 | ** |  FR | S&P Global Services PMI (p) |
| 24/01/2025 | 0815/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 24/01/2025 | 0830/0930 | ** |  DE | S&P Global Services PMI (p) |
| 24/01/2025 | 0830/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 24/01/2025 | 0900/1000 | ** | EU | S&P Global Services PMI (p) |
| 24/01/2025 | 0900/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 24/01/2025 | 0900/1000 | ** | EU | S&P Global Composite PMI (p) |
| 24/01/2025 | 0930/0930 | *** | GB | S&P Global Manufacturing PMI flash |
| 24/01/2025 | 0930/0930 | *** | GB | S&P Global Services PMI flash |
| 24/01/2025 | 0930/0930 | *** | GB | S&P Global Composite PMI flash |
| 24/01/2025 | 1000/1100 | EU | ECB's Lagarde in dialogue on the global economic outlook | |
| 24/01/2025 | 1100/1100 | ** | GB | CBI Distributive Trades |
| 24/01/2025 | 1100/1200 | EU | ECB's Cipollone in panel discussion on the effects of CB digital currencies | |
| 24/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 24/01/2025 | 1330/0830 | CA | StatsCan Labour Force Survey: Revisions, 1987 to 2024 | |
| 24/01/2025 | 1445/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 24/01/2025 | 1445/0945 | *** | US | S&P Global Services Index (flash) |
| 24/01/2025 | 1500/1000 | *** | US | NAR existing home sales |
| 24/01/2025 | 1500/1000 | ** | US | U. Mich. Survey of Consumers |
| 24/01/2025 | 1800/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
