AUSSIE BONDS: ACGB Dec-34 Supply Well Absorbed

Japan's Dec current account in seasonally adjusted terms, printed ¥2731.6bn, close to market expectations and versus ¥3033.4bn prior. The trade balance, on a BoP basis was ¥62.3bn, below forecasts of ¥227.7bn (per the BBG consensus). In seasonally adjusted terms the trade balance was back in surplus though (¥214.1bn). This was the first such surplus since 2021. 

• The current account balance sits just off cycle highs in Dec, which is plotted below against the trade balance (which in millions of yen, not billions).
• Other data showed a bias to sell offshore debt in December, particularly in terms of the EU. There was a record amount of Italian debt sold, while outflows were also noted from Germany and France. Fiscal concerns a likely driver of such outflows. 

Fig 1: Japan Current Account & Trade Balance Trends (Yen) 

Source: MNI - Market News/Bloomberg 

The KPMG/REC Report on Jobs for January pointed to another downbeat assessment of the UK labour market.

• Most notable is probably that permanent salary growth eased to the "slowest in the current sequence of inflation" and was "well below the historical trend."
• Permanent placements continued to fall (at a relatively similar pace albeit slightly slower than in December). But perhaps more significantly, temporary placements fell at their fastest pace since mid-2020.
• Vacancies fell with the press release noting for permanent workers "the rate of contraction accelerating for the fifth successive month to a near four-and-a-half-year peak."
• Data was collected 9-27 January.
• In terms of implications for the MPC, this is a relatively closely watched release but we don't think it will be enough to really change any individual member's view. In many ways it just reinforces the signals seen in recent months. As we noted in our BOE Review, we think that we need one of Bailey, Breeden or Lombardelli to soften their stance if we are to see a March cut.

USD/CNH sits modestly higher in early Monday dealings, the pair last above 7.3100 (session highs rest at 7.3163). Early USD impetus has been given a boost by Trump tariff headlines, which stated that 25% tariffs will e imposed on Monday for all steel and aluminium imports. No timeline was specified on when they would come into effect though (per BBG). Spot USD/CNY finished Friday just near 7.2950, the highest closing level since Trump's inauguration on Jan 20. The CNY CFETS basket tracker slipped to 100.55 on Friday, lowest levels since mid Dec last year.

• China steel exports to the US are smaller than other major economies, but it is still major aluminium exporter to the US (at least in a relative sense, with Canada the largest). The USD amount of aluminium exports is not large though relative to total exports of China.  
• There is also the reciprocal tariff threat that Trump made last week, which would reportedly apply to all countries. An announcement on this is expected this week, although how China would fare is unclear. BBG notes average tariff levels imposed by China have come down a lot since it entered the WTO back in 2001.
• On Sunday, we had the China Jan inflation figures print, which showed slightly stronger headline and a further pick up in core inflation. Core y/y is now 0.60%y/y, up from recent cycle lows of 0.10% (Sep 2024). This is less deflationary fears at face value, although Jan may have been aided by seasonal spending related to LNY.
• Focus data wise this week will be on the Jan new loans/aggregate finance figures.