Asia Morning Bytes

Macro outlook
Global: Markets focused on the sharp fall in the unemployment rate after Friday’s US labour report was released, largely ignoring a much softer non-farm payrolls figure. The resulting sell-off in equities was not large, and Asian equity futures are looking more mixed than down early this Monday, offering no strong directional clues to trading. US Treasury markets also sold off, though not that much, with the 2Y US treasury (UST2) actually showing a small (-0.2bp) decline in yields against the 4.1bp rise in 10Y UST yields. Little change in front-end yields also offered the opportunity for the EUR to claw back some ground vs the USD and EURUSD rose from about 1.13 to about 1.1350 as of writing. Asian FX was mixed, with the THB and PHP both softening while SGD and INR gained. Most currency pairs were little changed.

General Asia & Pacific: Asia’s data calendar is heavy on trade reports this week with Australia, China and the Philippines all slated to report the latest export and import data. Recent trends in China and the Philippines are likely to extend this week with double-digit gains forecast for both inbound and outbound goods. The week also features inflation data from China (PPI and CPI) while the Bank of Korea (BoK) will hold a policy meeting on Friday. We are not expecting any change in terms of policy from the BoK this week.

China: Covid spreads to Tianjin, a city close to Beijing. This is after a couple of cases were found in Shenzhen. As the Winter Olympics is coming closer, the Chinese government has restricted people flows. We expect more restrictions on people flows and social distancing measures to be announced. Aggregate finance data is due any day this week. After the PBoC cut RRR and a small cut in the 1Y Loan Prime Rate, aggregate finance as well as new yuan loans should see an increase on a monthly basis even though it is the last month of the year when banks usually are not active in lending.

India: India’s daily Covid case numbers have risen to 180,000, continuing the steep gains that began a little over a week ago when daily figures averaged around 7,000. It remains to be seen whether India’s demographics and previous infection history provide any defence in line with what was seen in South Africa where the Omicron wave has largely run its course. India’s vaccination rates lag those of the rest of the region.

What to look out for: Inflation from China and the US
US wholesale inventories (10 January)
South Korea BOP current account and trade balance (11 January)
Australia trade balance and retail sales (11 January)
Philippine trade balance (11 January)
Fed officials Mester and Bullard speaking engagement (11 January)
South Korea unemployment rate (12 January)
Japan BOP current account and trade balance (12 January)
China PPI and CPI inflation (12 January)
India CPI inflation and industrial production (12 January)
US MBA mortgage application and CPI inflation (12 January)
Fed official Bullard speaking engagement (12 January)
US PPI inflation and initial jobless claims (13 January)
Fed official Kashkari speaking engagement (13 January))
BoK policy meeting (14 January)
India trade balance (14 January)
US Michigan sentiment, retail sales and industrial production (14 January)
Fed officials Barkin and Evans speaking engagement (14 January)
Source: ING