ASIA STOCKS: Asian Equities Edges Lower Following FOMC Minutes
Asian equities broadly declined on Thursday as risk sentiment weakened following the Fed’s latest meeting minutes, which signaled no urgency to cut rates. The stronger yen weighed on Japanese exporters, while concerns over potential U.S. tariffs on autos, semiconductors, and pharmaceuticals pressured South Korean markets.
- The ASX 200 in Australia dropped 1.1% driven by a rising unemployment rate and declines in banking and mining stocks. New Zealand’s NZX 50 fell 0.7%.
- Japan’s Topix Index fell 0.8%, the Nikkei 225 declined 1% as a stronger yen pressured exporters like Toyota (-1.5%), with additional selling in auto and pharmaceutical sectors amid U.S. tariff threats on cars, chips, and drugs.
- South Korea’s KOSPI dipped 0.70%, with auto stocks like Hyundai Motor (-0.49%) and shipbuilders like HD Korea Shipbuilding (-5.02%) leading losses after Trump’s tariff comments, though Samsung Electronics (+0.17%) and LG Energy Solution (+1.64%) gained.
- Chinese rare earth stocks could rise after the government proposed restricting mining to state-owned firms. Meanwhile, Alibaba faces a key earnings test after a recent AI-driven rally, earnings are expected today.
- Elsewhere, quantum computing stocks in South Korea (Iwin Plus +16%) and Japan ( NF Holdings +5%) advancing after Microsoft’s quantum chip announcement.
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JGBS: Cash Bonds Richer But Trump Tariff Talk Has Seen Gains Pared
In Tokyo morning trade, JGB futures opened stronger, hitting +19 compared to settlement levels, in line with stronger US tsy futures (TYH5), which hit 109-02, +0-17 compared to closing levels. However, the move has been pared to +10 for JYH5 on Trump tariff news.
- News just out that Trump suggests tariffs on Canada and Mexico could take effect on February 1 has caused a sharp reversal.
- Cash US tsys were sharply richer early in today’s Asia-Pac session, with yields 6-9bps lower after yesterday’s holiday. However, that has been pared on the Trump news to 4-6bps richer.
- Today’s local calendar is empty apart from 40-year supply.
- Cash JGBs are 1-2bps richer across benchmarks. The benchmark 10-year yield is 1.5bps lower at 1.185% versus the cycle high of 1.262%.
- Swap rates are slightly lower. Swap spreads are wider.
US TSYS: Tsys Future Give Back Some Morning Gains, Following Tariff Headlines
- Tsys futures have reversed earlier gains, as we now trade back at opening levels following comments from Trump about 25% tariffs on Canada & Mexico. TY last trades +07 at 108-25 after earlier hitting a high of 109-02.
- Volumes in futures have surged with TY seeing over 300% the 5-day average volumes
- Cash tsys are trading 4bps to 6bps lower across the curve, with the belly outperforming, the 7yr is leading the way. 2yr was last -4bps at 4.242%, while the 10yr is -5.7bps at 4.57%. The 2s10s is -1.5bps at 32.368.
President Trump may enact 25% tariffs on Mexico and Canada at the beginning of February, he says during remarks in the Oval Office, per bbg.
FOREX: USD Rebounds On Trump Tariff Remarks, CAD and MXN lose 1%
The USD has swung sharply higher, following comments from US President Trump, that tariffs would be enacted on Canada and Mexico (most likely on Feb 1 per comments on Trump). the BBDXY index is up +0.50%, last near 1309.
- USD/CAD has surged over 1%, last near 1.4475. USD/MXN is up 1.10% as well, the pair last around 20.75. Both currencies are slightly away from worst levels. AUD/USD has lost 0.9%, back to the low 0.6220 region.
- USD/CNH is up to close to 7.2900, around 0.40% firmer.
- Broader risk appetite is softer, with US equity futures off sharply and back in the red.
