GOLD: Gold Prices Moderates on Global Markets Volatility. 

ACGBs (YM -5.0 & XM -2.0) are cheaper despite US tsys finishing near the bottom of the session range.

• US tsys richened after JOLTS data, job openings were lower than expected in Dec at 7.6m (cons 8.00m) after an upward revised 8.156m (initial 8.098m) in Nov.
• Focus turns to Wednesday morning's ADP private employment data ahead of Friday's headline NFP data for January.
• Australia’s S&P Global PMIs: Composite Index rises to 51.1 from 50.2 in December, while Services Index rises to 51.2 from 50.8 in December.
• Cash ACGBs are 2-4bps cheaper with the AU-US 10-year yield differential at -8bps.
• Swap rates are 1-3bps higher, with the 3s10s curve flatter.
• The bills strip bear-steepened, with pricing -1 to -5.
• RBA-dated OIS pricing is flat to 3bps firmer across meetings today. A 25bp rate cut is more than fully priced for April (132%), with the probability of a February cut at 90% (based on an effective cash rate of 4.34%).
• The AOFM announced yesterday the issue by syndication of a new 4.25% 21 March 2036 Treasury Bond. The issue will be of a benchmark size and priced today. Initial price guidance is a spread of 2 to 5bps to XMH5. 

The Q4 unemployment rate rose 0.3pp to 5.1%, in line with consensus and the RBNZ, to be its highest since the Covid-impacted Q3 2020. Employment fell 0.1% q/q to be down 1.1% y/y after -0.6% & -0.6% in Q3, which was revised lower. Wages growth continues to moderate and is either near 3% or under. Given the data printed close to the RBNZ’s November forecasts, which also suggested a 50bp rate cut in Q1 2025, another 50bp on February 19 remains likely.

NZ unemployment rate %

• There is growing spare capacity in the labour market with the Q4 underutilisation rate rising to 12.1% from 11.6% in Q3 and 10.7% a year ago. Thus it is not surprising that hours worked fell for the fourth straight quarter down 0.5% q/q and 2.5% y/y. The number of unemployed grew 5.4% q/q & 26.8% y/y after -24.4% y/y in Q3.
• Job shedding was focused in full-time jobs, another sign of weakness in the labour market. Any cautious hiring is occurring in the part-time sector with PT jobs rising 0.2% q/q to be up 1.4% y/y.
• The labour cost index rose 0.6% q/q with the annual rate moderating to 3.3% from 3.8%, the lowest since Q1 2022. Private wages rose 0.6% q/q, slightly higher than the RBNZ forecast, to be up 2.9% y/y down from 3.4% in Q3.
• The minimum wage is set to rise only 1.5% on April 1, while lower inflation and labour demand should continue to weigh on other wages, which should make the RBNZ comfortable that inflation is sustainably within its 1-3% band.

NZ wages y/y%

Source: MNI - Market News/Refinitiv

Since Monday's near fresh record peak of 7.3734, USD/CNH has largely been tracking south. We saw a brief blip higher above 7.3300 as China responded to the 10% tariff imposition with its own tariffs and other measures. However, China's move wasn't seen as an escalation. USD/CNH tracks at 7.2870 in early Wednesday dealings, after a 0.34% gain for Tuesday's session. In US trade, the Golden Dragon equity index rose 2.65%. 

• US President Trump didn't seem concerned by China’s retaliation and will speak to President Xi “at the right time”.
• Intra-session lows on Tuesday came at 7.2746. Current spot levels are close to the 50-day EMA, we are back sub the 20-day EMA, which is near 7.3000. The 100-day EMA remains further south close to 7.2540.
• Onshore markets return today after the LNY break, with eyes on the USD/CNY fixing. The last fixing was 7.1698 (record on Jan 27 last week). Since then, USD indices have gravitated higher, but only marginally. The risk may be for a relatively benign outcome given recent tariff implementations by both countries and China not wanting to inflame tensions any more with fresh sharp yuan depreciation pressures.
• Also benefiting the CNH during US trade was softer US data, including the JOLTS print, which helped drag US yields lower.
• Today on the data front we have the Caixin services PMI for Jan. The market consensus is 52.4, versus 52.2 prior.