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StreetAccount Summary - Asian Market Recap: Nikkei +1.02%, Australia ASX +0.57% as of 03:10 ET

Jan 29 ,2025

  • Synopsis:

    • The few Asia equity benchmarks trading Wednesday finished mostly higher in a quiet session. Japan's Nikkei and Topix gapped higher and finished on their highs. New Zealand stocks ended higher, Australia's ASX led by IT stocks. India trading higher but is still headed for a fourth consecutive month of losses. Thailand the only other market open and was a few points down. US futures turning more positive, Europe higher at the open as ASML jumps. US dollar flat, AUD weakened on inflation news, yen strengthening. Treasuries mixed, Australia sovereign yields higher. Crude oil, base metals and precious metals largely unchanged. Some strength in cryptocurrencies.

    • Tuesday's tech rally continued into Wednesday as question marks began to emerge over DeepSpeek's cost claims and amid a probe by Microsoft into whether it obtained OpenAI data legally. The White House is also currently assessing national security implications while Italy's regulator has asked for clarity on data protection, and Australia warned users over privacy.

    • In macro news today, Australia Q4 headline inflation fell to 2.4% and underlying (trimmed mean) inflation cooled by more than forecast, opening the door to a RBA rate cut. December BOJ minutes were mixed in tone with several members wishing to wait for more information on wage developments and Trump policies, but they also included hints members were willing to keep hiking rates. RBNZ chief economist Conway noted disinflation is on track hinting at further easing ahead. Ahead today, Fed expected to leave interest rates unchanged Wednesday with Chair Powell likely to be asked about potential inflation impact of Trump policies.

    • Alibaba (9988.HK) said it had released a new version of its Qwen 2.5-Max AI model that it claims surpasses DeepSeek. Honda Motor (7267.JP) is said to be considering the launch of a sub-$0K EV in North America markets. HSBC (5.HK) is set to close its equity underwriting and advisory units in Europe and US. SoftBank (9984.IN) is in talks to invest in AI robotics start-up Skild AI, valuing the company at $4B say reports. Whitehaven Coal's (WHC.AU) Q2 output almost doubled y/y and beat forecasts, said it is on track to achieve upper half of annual output and sales range.

  • Digest:

    • Australia inflation moderates, odds of February RBA rate cut firm:

      • Australia Q4 headline inflation fell to 2.4% y/y from 2.8% in Q3, just below consensus 2.5% and lowest since Q1 2021. Drop distorted by energy subsidies (electricity prices down 25.2% y/y). More important trimmed mean inflation narrowed to 3.2% y/y from 3.5%, less than forecast 3.3% and RBA's 3.4% projection, lowest in three years. Some moderation in sticky domestic services categories such as rents (smallest quarterly rise since Q1 2023), health (more people qualifying for subsidies) and insurance (smallest quarterly rise since Q2 2022). Discretionary inflation rose to 3.2% from 2.7%, while non-discretionary inflation fell to 1.8% from 2.9%. Separate December month inflation rose to in-line 2.5% y/y from 2.3% though trimmed mean inflation dropped to 2.7% from 3.2%, reinforcing disinflation traction towards end of 2024. Market-implied odds for February rate cut rose to 90% from 80% prior to data (Bloomberg). UBS, Capital Economics and Westpac all brought forward rate cut expectations to February from May, while Goldman Sachs now predicting consecutive rate cuts in April and May following February's reduction (The Australian).

    • BOJ board members bided their time in December:

      • Minutes for the December MPM remained largely consistent with preceding Summary of Opinions and Governor Ueda's press conference remarks. Members agreed they needed a little more information on wage developments and Trump policies before proceeding with a rate hike. Wages were a recurring theme, viewed as the foundation for positive domestic dynamics to offset uncertainties elsewhere. In retrospect, they were otherwise ready to move, contrasting with dovish market takeaways at the time. Discussions of inflation risk entirely focused on the upside and the rate of progression in cost passthrough. Still, some saw upside inflation risks as insufficient to justify a hike in isolation. One member downplayed the risk of falling behind the curve. Yet, this was debated by another member expressing concerns about the risk of having to adjust more rapidly if upside inflation risks materialized. Another essentially suggested the time was ripe for a hike, though supported staying on hold in December, mindful of seasonal volatility amid low volumes. Discussions continued on neutral rate though were inconclusive.

    • RBNZ Chief Economist Conway notes disinflation is on track:

      • In a speech on long run growth and interest rates, RBNZ chief economist Conway noted estimated long-run neutral OCR 2.50-3.50% implied current OCR of 4.25% is still restrictive, and that drop in pricing intentions and declining inflation expectations leave door open to further easing. Said New Zealand's longer-term growth prospects have declined with an estimated potential output growth rate of 1.5-2.0% per year lower than in past years, driven primarily by weaker productivity and lower net migration. Stressed need for stronger productivity and investment as key to boosting potential output growth. Said absent any further shocks, RBNZ expects GDP growth to trend back to potential growth and interest rates to settle around neutral. Conway also acknowledged recent GDP revisions that showed growth was stronger than previously measured in 2022 and 2023, but weaker through mid-2024, and policy implications will be assessed at February's meeting. RBNZ still expected to cut by 50 bp in February after inflation maintained its cooling trend in Q4, though pace of rate cuts seen slowing thereafter.

    • Waning foreign interest in Indian bonds and equities:

      • Foreign appetite for Indian assets continues to wane in early part of 2025 with $305M directed to JP Morgan index-eligible bonds in January according to India Clearing Corp data, among lowest monthly total since index inclusion was announced in Sep-2023 (Bloomberg). Sharp rise in Treasury yields and weakening rupee market weighing on appetite for bonds with longer-dated securities experiencing bulk of outflows toward end of 2024. Meanwhile, Nifty 50 has fallen into correction territory and tracking for fourth straight monthly decline with global outflows totaling $19B since end of September (Bloomberg). India's economic slowdown and disappointing earnings, coupled with valuation scrutiny amid forward P/E of 19x, have incentivized foreign equity outflows. Outlook mixed with some anticipating recovery in bonds as securities are included in other global indexes such as Bloomberg's EM index and FTSE Russell this year. Expected RBI rate cuts also expected to encourage bond flows. For equities, domestic inflows remain strong with $8B so far this month and some fund managers remaining constructive longer-term, notwithstanding short-term caution.

    • Notable Gainers:

      • +3.8% 6758.JP (Sony): chairman/CEO Kenichiro Yoshida to become chairman only; president/CFO Hiroki Totoki has been newly appointed as president/CEO, effective 1-Apr

      • +3.6% 532977.IN (Bajaj Auto): reports Q3 earnings

      • +3.5% PLS.AU (Pilbara Minerals): reports Q2 spodumene production 188.2K dmt vs StreetAccount 185.3K dmt

      • +1.2% 2678.JP (ASKUL Corp): reports January non-consolidated net sales ¥27.34B vs year-ago ¥28.13B

      • +0.7% 7186.JP (Concordia Financial Group): proposes to change company name to Yokohama Financial Group

    • Notable Decliners:

      • -5.5% 500530.IN (Bosch Ltd): reports Q3 earnings

      • -5.1% 523405.IN (JM Financial): reports Q3 earnings

      • -3.5% 2002.JP (Nisshin Seifun Group): reports 9M results with year-on-year decline in operating profit

  • Data:

    • Economic:

      • Australia

        • Q4 headline CPI +0.2% q/q vs consensus +0.3% and +0.2% in Q3

          • Headline CPI +2.4% y/y vs consensus +2.5% and +2.8% in Q3

          • Trimmed mean CPI +0.5% q/q vs consensus +0.6% and +0.8% in Q3

            • Trimmed mean +3.2% y/y vs consensus +3.3% and +3.5% in Q3

        • December CPI +2.5% y/y vs consensus +2.5% and +2.3% in November

          • Trimmed mean CPI +2.7% y/y vs +3.2% in November

      • Japan January

        • Consumer confidence index 35.2 vs consensus 36.5 and 36.2 in prior month

    • Markets:

      • Nikkei: 397.91 or +1.02% to 39414.78

      • Hang Seng: Closed

      • Shanghai Composite: Closed

      • Shenzhen Composite: Closed

      • ASX200: 47.90 or +0.57% to 8447.00

      • KOSPI: Closed

      • SENSEX: 560.05 or +0.74% to 76461.45

    • Currencies:

      • $-¥: (0.34) or (0.22%) to 155.1880

      • $-KRW: (2.13) or (0.15%) to 1443.7500

      • A$-$: (0.00) or (0.25%) to 0.6238

      • $-INR: (0.08) or (0.09%) to 86.5189

      • $-CNY: (0.00) or (0.01%) to 7.2502

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