Aurelia Butler

(Reuters) – A look at the day ahead in Asian markets. A pause in the global bond selloff took some wind out of the dollar’s sails and allowed equities to regain their footing early on Tuesday but Wall Street’s wobble ahead of U.S. inflation data could put Asian markets back on the defensive on Wednesday. The dollar and Treasury yields losing steam should offer emerging and Asian markets some welcome respite. But the reversal in U.S. stocks could ensure it is short-lived, especially with U.S. CPI inflation numbers landing after Asia has closed. Asian markets were buoyant on Tuesday. The MSCI Asia ex-Japan index rebounded from a five-month low and blue chip Chinese stocks leaped more than 2.5%, as regulators pledged more support for markets and local chip firms rallied after the U.S. stepped up its tech curbs. Japanese stocks went the other way, however, after Bank of Japan Deputy Governor Ryozo Himino flagged the chance of a rate hike next week. The Nikkei 225 index chalked up its biggest fall in two and a half months, slumping 1.8%.That’s the regional local backdrop to the open on Wednesday, where the main local event will be Bank Indonesia’s policy decision. Spooked by recent currency volatility, BI is widely expected to keep its main interest rate on hold at 6.00%.With inflation at the lower end of the central bank’s target range of 1.5%-3.5%, monetary policy is being directed towards stabilizing the rupiah, which is down around 7% against the dollar from its September peak. Like most emerging countries, Indonesia has been hit hard by spiking U.S. bond yields and the dollar “wrecking ball”, a tightening of financial conditions that is restricting BI’s ability to ease policy.According to Goldman Sachs, Indonesia’s financial conditions have deteriorated sharply since late September, mainly due to the rise in long rates and decline in equities. They are now the tightest since October 2023, and close to the tightest since October 2022.The threat of a global trade war and punitive U.S. tariffs on many countries – especially China – continues to weigh on market sentiment as U.S. president-elect Donald Trump’s Jan. 20 inauguration draws closer.Meeting with European Council President Antonio Costa on Tuesday, Chinese President Xi Jinping said China and the European Union have a robust “symbiotic” economic relationship and Beijing hopes the bloc can become “a trustworthy partner for cooperation”. Meanwhile, Trump said on Tuesday he will create a new department called the External Revenue Service “to collect tariffs, duties, and all revenue” from foreign sources.South Korea’s won is one of the best-performing Asian currencies this year, but could fall on Wednesday after Yonhap reported that authorities investigating impeached President Yoon Suk Yeol were at his official residence to execute an arrest warrant. Here are key developments that could provide more direction to markets on Wednesday:- Indonesia interest rate decision- South Korea unemployment (December)- Japan services tankan survey (January) More

TOKYO (Reuters) – Japanese manufacturers’ sentiment recovered in January after a dip last month thanks to better conditions for materials industries, but their outlook remains flat due to uncertainty over proposed Trump policies, the Reuters Tankan poll found.The improving business confidence is positive for the Bank of Japan’s (BOJ) view that wage-driven economic growth will lead to stable inflation around its 2% target and justify a further rate hike as early as its next policy meeting on Jan. 23-24.The survey of 505 non-financial major Japanese firms found manufacturers’ mood rising to plus 2 in January from the previous month’s minus 1, which had marked the first negative reading in 10 months.The Reuters Tankan indexes are calculated by subtracting the percentage of pessimistic respondents from optimistic ones. For the latest survey, 235 firms responded on condition of anonymity between Dec. 24 and Jan. 10.The recovery in mood was most conspicuous among upstream industries such as steel, oil refinery and chemicals thanks to a pick-up in global demand, while machinery sectors such as autos and electronics saw their sentiment deteriorating in January.On a three-month-ahead outlook, manufacturers’ level of confidence is seen unchanged at plus 2 in April.Even among sectors that turned more optimistic, respondents cited some worrisome factors that kept their outlook neutral.”While the plant-related business remains robust, there are fears the automotive parts business will suffer from Japanese automakers’ struggles in China and Southeast Asia. The semiconductor-related business is also facing a delayed recovery in market conditions,” a manager at a ceramics company wrote in the survey.Domestic demand in Japan remains weak, multiple chemical firm managers said.The ambivalent views echo BOJ’s own tankan poll result in December, which showed a slight improvement in the current conditions but a deteriorating outlook.Managers remained unsure about the future of U.S. government policies, particularly on international trade, with President-elect Donald Trump taking office on Jan. 20.”It’s difficult to take any action now given the uncertainty about what policies will be implemented and whether tariffs will really be increased,” wrote a manager of a machinery maker.Meanwhile, the service-sector index inched up to plus 31 in January from 30 in the month prior. The index is expected to stay flat at 31 in April.”With high domestic consumer confidence, the number of customer visits, including inbound tourists, is growing steadily,” wrote a retail company manager.A manager at a construction firm said there has been some progress in passing on costs to service prices to secure profits despite a labour shortage.Recent data showed wage hikes broadening in Japan with the inflation rate staying above BOJ’s 2% target, cementing market expectations that an interest rate hike is possible in the near term, even as consumer spending and factory output remain soft. More

The money was left over from SAC’s $602 million settlement in March 2013 with the U.S. Securities and Exchange Commission over trades in drugmakers Wyeth and Elan by Mathew Martoma, who worked at an SAC unit and was later convicted.Pfizer said it deserved the $75.2 million because a neurologist who tipped Martoma about a 2008 Alzheimer’s drug trial owed a fiduciary duty to Wyeth, which Pfizer bought in 2009, because he had been a consultant there.U.S. District Judge Victor Marrero in Manhattan, however, ruled in November that Wyeth was not a victim of Martoma’s trading, and thus Pfizer was not entitled to funds left over after Wyeth and Elan investors who lost money were compensated.Pfizer appealed Marrero’s decision to the 2nd U.S. Circuit Court of Appeals in Manhattan. The appeals process often takes several months or longer.Cohen was not criminally charged. He changed SAC Capital’s name to Point72 Asset Management in 2014, and is now worth $21.3 billion according to Forbes magazine. More

Beginning in February, the rate, known as the crawling peg, will slow to 1% per month from a prior rate of 2% due to “the consolidation observed in the inflationary trajectory during the last few months, and in the expectations of a decrease in inflation,” the central bank said in a statement.Investors say the slower crawling peg for the peso could prolong a market rally that has been fueled by the pro-market policies of President Javier Milei and hopes for fresh IMF funds.Milei, who took office in December 2023, has launched a nationwide austerity push, slashing many public budgets. While poverty rates have increased, price rises have steadily slowed down from eye-popping double-digit increases each month.The central bank’s announcement came about an hour after official data showed that monthly inflation ticked up a tad in December, though the annual rate slowed further as Milei pushed tough spending cuts and austerity measures.”We’re pulverizing inflation,” Argentina’s economy ministry said in a post on X.The monthly rate, which came in at 2.7% as forecast by analysts, meant South America’s second-largest economy ended Milei’s first full year in office with annual inflation of 117.8%. The rolling 12-month rate has been slowing from an April peak near 300%.Still, many Argentines feel the pinch to their wallets, with housing and utility costs leading the December price increases.”People say inflation is going down, but here we always receive merchandise with different prices, it goes up and up,” said 77-year-old retiree Juan Carlos Gonzalez, who works at a produce stand to make ends meet.Analysts said seasonal price rises were behind the slight acceleration from the 2.4% monthly inflation logged in November, and markets greeted the data as good news. Traders expect inflation to keep cooling in 2025.The December data “confirms the disinflation process is continuing,” Economy Minister Luis Caputo said on X.WHAT’S NEXT?Traders have been betting that Argentina’s central bank will also cut the interest rate from its current 32%. The central bank is expected to cut the interest rate by around 500 basis points, brokerage Max Capital said ahead of the inflation data’s release on TuesdayWhile the central bank board meets every Thursday, a rate cut could come ahead of a Treasury tender on Wednesday, the company added. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Argentina’s libertarian President Javier Milei is slowing the monthly devaluation of the peso, extending an unorthodox currency policy that he says is essential to ending the country’s inflation crisis.Milei last year allowed the peso’s official exchange rate to weaken by just 2 per cent a month, or 22.8 per cent over the year, despite consumer prices rising 117 per cent in 2024 compared with 2023. That caused the peso to appreciate more than any other currency in real terms last year, fuelling concerns about the competitiveness of Argentine businesses among some economists.The so-called crawling peg devaluation will slow to 1 per cent a month starting in February, Argentina’s central bank said on Tuesday.The move aims to consolidate a dramatic fall in monthly inflation that has been Milei’s biggest achievement since he took office amid a dire economic crisis in late 2023.The month-on-month inflation rate has fallen from a peak of 26 per cent in December 2023 to 2.7 per cent in December 2024, largely thanks to Milei’s sweeping austerity programme. Authorities argue the 2 per cent devaluation has become one of the main drivers of continued price pressures.“With the attention set on midterm elections [in late 2025], where Milei-backed candidates will likely perform well, officials want to ensure that inflation remains under control,” said Luciano Sigalov, an analyst at Bull Market Brokers in Buenos Aires.Milei has described slowing the devaluation as an important step on the road to removing Argentina’s strict currency and capital controls, a top concern for foreign investors, which he has pledged to do in 2025.However, the slower crawling peg will also hasten the real appreciation of the peso and delay the rebuilding of Argentina’s central bank negligible foreign currency reserves, which “the market has identified as the biggest risks of Milei’s programme”, said Nery Persichini, head of research at financial services firm GMA Capital.Rapid real peso appreciations under previous Argentine governments have ended in abrupt devaluations and economic turmoil, when the central bank ran out of cash to prop up the strong currency.Milei has argued that a faster devaluation of the peso would set off a fresh bout of inflation, derailing the successful macroeconomic stabilisation that allowed Argentina to emerge from a recession in the third quarter of 2024.He says Argentina must retain competitiveness by deregulating the economy and lowering taxes and corporate borrowing costs, rather than devaluing the currency.The weakening of the real in neighbouring Brazil and low global prices for Argentine exports such as soy, which could hurt export revenue, as well as the strengthening of the US dollar, will put more pressure on Milei’s currency strategy in the coming months, Persichini said.“But the government’s success on inflation has [saved] Argentina from a bigger crisis and that’s what they want to keep prioritising,” he added. “They believe this is a risk worth taking, and it’s a risk they can manage.” More

The import price index, in terms of local currency, rose 7.0% in December from a year earlier, the fastest since last July, according to the Bank of Korea.It was the second consecutive month of gains in import prices, which affect consumer prices with a time lag, after a rise of 2.8% in November. The won ended December down 5.2% against the dollar, marking its largest monthly decline in 22 months, after reaching its weakest level since March 2009 due to domestic political turmoil. Last month, South Korea’s consumer inflation quickened to 1.9%, exceeding market expectations and near the BoK’s 2% target, with the central bank flagging a possibility of inflation accelerating further this month. The BoK is expected to lower interest rates by a quarter percentage point to 2.75% on Thursday, a month earlier than previously anticipated, to support a struggling economy amid risks from political uncertainty.The export price index rose 10.7% last month, also the fastest in five months, after climbing 7.0% in November. More

(Reuters) -Prime Minister Justin Trudeau, facing disagreements over how Canada should respond to threatened U.S. tariffs, will hold a cabinet retreat next week focused on defending Canadian interests, his office said on Tuesday.U.S. President-elect Donald Trump has promised to impose a 25% tariff on imports from Canada, which economists say would trigger a deep recession. Canada sends 75% of all exported goods and services to the United States. “Cabinet will protect and defend Canadian interests, strengthen Canada’s relationship with the U.S., and make unequivocally clear the mutually beneficial trade and security relationship the two countries share,” Trudeau’s office said.Trudeau, who will step down as prime minister in early March, is promising countermeasures if Trump carries out his threat and wants a united response from the federal government and 10 provinces. But splits are emerging and some provinces are unhappy with what they see as a lack of leadership from Ottawa.”The federal government … need to get their act together,” Ontario Premier Doug Ford (NYSE:F) said. Ontario, the most populous province and Canada’s industrial heartland, could lose up to 500,000 jobs if tariffs are imposed, he said.The premiers are due to meet Trudeau in Ottawa on Wednesday to discuss the potential tariff response.”We can’t have a divided Canada. We have to make sure we all stick together,” Ford told reporters.On Sunday, Foreign Minister Melanie Joly said Canada was not ruling out curbing energy exports to the U.S.But Danielle Smith, premier of oil-producing Alberta, predicted there would be a national unity crisis if Ottawa tried to shut off crude exports.”We won’t stand for that,” Smith said on Monday after meeting Trump in Florida. “I can’t predict what Albertans would do.”The Jan. 20-21 cabinet meeting will coincide with Monday’s inauguration of Trump, who is unhappy at what he says is lax security on the joint border. He has also mused about making Canada the 51st state.Canada responded by unveiling a C$1.3-billion ($909 million) border-security plan, with an emphasis on surveillance, intelligence and technology. More