AUSSIE BONDS: Sharply Cheaper, Global Bonds Weighs, Bldg Apps On The Rise

Australian household spending rose 0.4% m/m to be up 4.3% y/y in December, the highest since March. November was revised up significantly to +0.8% m/m & 3.2% y/y from 0.4% & 2.4%. This is consistent with the retail sales data released yesterday showing a recovery in household spending. Consistent with this is the third straight monthly rise in discretionary spending in December.

• Total household spending volumes rose 1.4% y/y in Q4 up from 0.2% in Q3 signalling a pickup including a solid quarterly rise in the national accounts version due on March 5. Furnishings, transport, clothing and recreation saw increases in annual growth. 

Australia real household consumption y/y%

Source: MNI - Market News/ABS

• Discretionary spending rose 0.6% m/m and 4.6% y/y in December, the highest in almost a year and the strongest of the main categories, after 0.9% & 2.8%. The growth was due to new vehicles, eating out, air travel & streaming services. Non-discretionary fell 0.2% m/m to be up 3.7% y/y.
• Services expenditure rose 0.3% m/m to be up 4.2% y/y down from 5.3% y/y, while goods rose 0.4% m/m to be up 4.4% y/y up from 1.5% y/y. There wasn’t payback for the discount-induced 1.2% m/m rise in goods spending in November.
• The ABS noted that “consumers have capitalised on the end-of-year sales season, driving a sustained rise in spending to finish 2024”.
• The household spending data will replace retail sales from 30 July 2025.

Australia household consumption y/y%

Source: MNI - Market News/ABS

• Investors pulled out $1.4b from the broad iShares MSCI Emerging Markets ETF (EEM) in January, the largest outflow since August, as traders focused on country-specific bets amid Trump-driven policy uncertainty.
• The iShares MSCI Mexico ETF (EWW) saw $309m in inflows, benefiting from delayed US tariffs and a more dovish Fed stance on inflation. However, some inflows may reflect short-selling activity, as short interest in EWW hit a one-year high.
• The iShares MSCI India ETF saw $796m in outflows, the largest since March 2020, amid concerns over slowing economic growth (forecasted at 6.3%-6.8%).
• China/Hong Kong saw $160m in inflows, mainly driven by the KraneShares CSI China Internet ETF.
• Additionally, broad stock ETFs saw $42.5m in inflows, while EM bond funds had $101.8m in outflows, bringing total EM ETF assets down slightly to $347.1b.

Asian equities are rebounding this morning as investor sentiment improved following the US decision to delay tariffs on Mexico and Canada, it is a quiet session in the region for economic data with investors largely just watching headlines out of the US.  

• South Korea's KOSPI rose 1.6%, led by a recovery in tech and auto exporters, after Monday’s sharp losses. Samsung (+3.5%) and Hyundai (+2.2%) were key drivers, though EV battery stocks fell following weak earnings from LG Chem and Posco Holdings. Foreign funds remained net sellers.
• Japan's Nikkei 225 climbed 1.5%, while the Topix rose 1.3%, as electronics and automakers bounced back. Toyota (+3%) was the top contributor, benefiting from easing trade war concerns and stronger US manufacturing data.
• Australia's ASX200 is 0.50% higher while Hong Kong futures signaled gains. US futures also rose after the S&P 500 pared losses overnight, last trading 0.42% higher.