GLOBAL MACRO: US Average Tariff Rate Low, Making Many A Target

Chinese stocks surged as the US considered gradual tariff hikes, boosting sentiment alongside pledges from Chinese authorities to stabilize markets. The CSI 300 has gained 2%, ending a four-day losing streak, while the Shenzhen Composite and Shanghai Composite are 2.7% and 1.9%, respectively. Major gainers included Beijing Kingsoft Office Software (+8.7%) and Hithink RoyalFlush Information Network (+8.8%). A gauge of Chinese stocks in Hong Kong climbed 1.6%, with the Hang Seng Index benefiting from oversold conditions, last up 1.70%. Investors anticipate positive measures from a regulatory briefing on financial support for economic development later today.

• Trump's economic team is considering a gradual rollout of tariffs, increasing 2-5% monthly, to enhance negotiating leverage while minimizing inflation risks. However uncertainty remains around trade policies is fueling global economic headwinds and driving up long-term borrowing costs, as per BBG.
• Chinese travel-related stocks, such as China Eastern Airlines and TongCheng Travel, gained after the government announced plans to boost tourism through the use of vouchers and expansion of its visa-free policy.
• Chinese pharmaceutical stocks rise after China vows to continuously adjust the country’s catalog of medicines covered by insurance to include qualified innovative drugs.
• GS is expecting the Chinese government to deploy extra monetary and fiscal easing and support for the home market.
• The HSI is likely benefitting from extreme oversold conditions as the HSI put/call ratio nears lows.
• Across the market, small-cap equities are outperforming large-cap today, with the CSI 1000 & 2000 up 3.55% & 4.10% respectively, while Tech stocks are the top performing sector in the CSI 300, financials & Property lagging. While in Hong Kong, the HS Tech Index is trading 3.65% higher while the Mainland Property Index is up just 1.15%.
• Some point through the session there will be a briefing from Chinese regulators, this could lead to positive headlines which could support Greater Chinese stocks.

• The NZD/USD is trading above Monday's highs, last +0.38% at 0.5604 as NZGBS yields surge with the 2yr rising 11.1bps to 3.751%, following the Q4 NZIER Business Opinion Survey.
• The currency still remains in a bearish trend, with 0.5640 (20-day EMA) seen as key resistance, the pair hasn't managed to trade above the 20-day EMA level since early October.
• AUD/NZD has seen a 0.26% drop last 1.1035, although we still remain trading within the past 3 months range of 1.1000-1.1100.
• RBNZ dated OIS pricing is 3-18bps firmer across meetings, with late 2025 leading. 45bps of easing is priced for February, with a cumulative 108bps by November 2025. The expected official rate for November has firmed 30bps since Friday’s close.

NZGBs are significantly cheaper on both an outright and a relative basis. Benchmark yields have risen by 10–11bps, with the NZ-US and NZ-AU 10-year yield differentials widening by 9bps and 12bps, respectively. 

• In contrast, cash US Treasuries and ACGBs are ~1bp richer during today’s Asia-Pacific session. The local market's underperformance appears to be driven by the positive signals from the Q4 NZIER Business Opinion Survey and its influence on OIS pricing, which is tempering expectations for RBNZ easing.
• To sum up, the survey showed that a net 16% of businesses expect the economy to improve, vs 1% expecting it to get worse in Q3. This was the first positive outlook since Q2 2021. After seasonal adjustment, a net 9% of businesses expect the economy to improve, vs a revised 4% expecting deterioration in Q3.
• Swap rates are 8-13bps higher, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is 3-18bps firmer across meetings, with late 2025 leading. 45bps of easing is priced for February, with a cumulative 108bps by November 2025. The expected official rate for November has firmed 30bps since Friday’s close.
• Tomorrow, the local calendar is empty.  
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$175mn of the 3.50% Apr-33 bond and NZ$75mn of the 1.75% May-41 bond.