STIR: $-Bloc Markets Firmer Over the Past Week, Except For NZ
In the $-bloc, rate expectations through December 2025 are mostly firmer over the past week, except for New Zealand. Canada’s year-end expectations firmed 17bps over the past week, with the US +12bps and Australia +8bps. New Zealand was unchanged.
- In the US, sequential price pressures in the January CPI report exceeded all expectations, but the hawkish impact was blunted 24 hours later by relatively benign PPI details.
- Following the data, Fed Chair Powell cautioned in his congressional testimony that while CPI “was above almost every forecast”, it would be “wise” to wait for the PPI report which would help fill in the gaps for PCE which is as he said “a better measure of inflation”.
- And while the January PPI aggregates came in above expected the broad array of individual price categories that feed into PCE came in significantly softer than most had anticipated, spurring analysts to downwardly revise their core PCE estimates to well below the CPI equivalent – if still too high for comfort.
- Looking ahead to December 2025, the projected official rates and cumulative easing across the $-bloc are as follows: US (FOMC): 4.01%, -32bps; Canada (BOC): 2.53%, -47bps; Australia (RBA): 3.56%, -78bps; and New Zealand (RBNZ): 3.04%, -121bps.
Figure 1: $-Bloc STIR (%)
Source: MNI – Market News / Bloomberg
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ASIA STOCKS: China & Hong Kong Equities Opening Slightly Lower
- China & Hong Kong equities are opening slightly lower in morning trade, although ranges are narrow. The Hang Seng is -0.30%, while CSI 300 is -0.40% with Tech & Healthcare sectors struggling the most.
- Chinese regulators plan to implement measures, including a swap facility and refinancing facility introduced by the PBOC, to stabilize the stock market. These tools are expected to inject approximately ¥400bi into the A-share market in 2025, according to strategists from CICC and CITIC Securities.
- Country Garden reported a record loss of ¥178.4b ($24.3b) amid China’s prolonged housing crisis, driven by impairments, declining margins, and weak sales. While its first-half 2024 loss narrowed to ¥12.8b, the developer faces mounting debt of ¥250b and ongoing challenges in its restructuring efforts, with a key wind-up petition hearing set for January 20. Shares remain suspended, having lost 97% of their value since 2018. Property Indices are underperforming the wider market this morning, with the Mainland Property Index -1.25%, while BBG China Property Developer Index is -0.90%.
CHINA PRESS: China M2 Increases In December
China’s M2 money supply reached CNY313.5 trillion in December, up 7.3% y/y, driven by the migration of government deposits and wealth management funds to resident and corporate deposits, according to Mingming, chief economist at CITIC Securities. Looking ahead, new credit and social financing are expected to increase y/y as authorities adopt a moderately easing monetary policy and guide financial institutions to increase credit supply, said Wang Qing, chief macro analyst at Orient Securities. (Source: Securities Daily)
CHINA PRESS: Authorities To Deepen Capital Market Reform
Authorities are expected to introduce practical guidelines aimed at reforming the M&A and restructuring market, as well as implement policies to attract pension, insurance and financial management funds to enter the capital market, Shanghai Securities News reported, citing Tian Xuan, director at the National Institute of Financial Research at Tsinghua University. The fund industry reforms will likely include reducing fund fees from investment products such as ETFs, Tian added.
