ASIA STOCKS: Asian Equities Open Lower, As Tech Plunges & Trumps Tariffs

Asian equities are higher this morning, following Wall Street’s tech-led rebound after a sharp selloff. Japan and Australia led gains, while most regional markets were closed for Lunar New Year. The recovery came as Nvidia surged 8.9%, easing concerns over AI-driven valuations that had rattled investors earlier in the week. Australian inflation data showed a sharper-than-expected slowdown, pushing the Australian dollar lower and fueling bets on RBA rate cuts. 

• Japan's TOPIX is up 0.35%, while the Nikkei is 0.50% higher. Australia's ASX 200 is 0.80% higher and New Zealand's NZX 50 is 0.10% higher.
• US equity futures are slightly lower this morning after the NASDAQ jumped 2% overnight, while the S&P 500 close 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.

ACGBs (YM +6.0 & XM +4.5) are sharply higher after Q4 CPI data came in slightly below expectations across most metrics:

• Trimmed Mean CPI rose 0.5% q/q (vs. est. +0.6%) and 3.2% y/y (vs. est. +3.3%).
• Weighted Median CPI increased 0.5% q/q (vs. est. +0.6%) and 3.4% y/y (vs. est. +3.5%).
• Headline Consumer Prices rose 0.2% q/q (vs. est. +0.3%) and 2.4% y/y (vs. est. +2.5%).
• December's annual headline CPI matched estimates at +2.5% y/y.
• “The trimmed mean excluded price falls in both Electricity and Automotive fuel this quarter, alongside other large price rises and falls.” (ABS)
• Cash ACGBs are 4-6bps richer after the data with the AU-US 10-year yield differential at -15bps versus -10bps pre-data.
• Swap rates are 5-7bps lower, with the 3s10s curve steeper.
• The bills strip is richer, with pricing +4 to +7.
• RBA-dated OIS pricing is 3-7bps softer across meetings after the data. A 25bp rate cut is more than fully priced for April (136%), with the probability of a February cut at 89% (based on an effective cash rate of 4.34%). February was at 76% before the data. 

The A$ is weaker in the aftermath of the Q4 CPI print. We are back around 0.6225/30, off close to 0.40%. Jan 21 lows at 0.6209 will be in focus on a further pull back. In the bond futures space, ym +7 xm +5, slightly off best levels. OIS is 3 to 7bps softer across RBA meeting dates. 

• Q4 CPI was weaker than forecast across both headline and trimmed mean. More details to follow.