Key Highlights

• RBA deputy governor Andrew Hauser strikes vigilant tone against inflation.
• China summons battery makers to curb price wars and overcapacity.
• China to approve purchases of the Nvidia H200 chip for commercial use.

Chart of the Day

iFlow Carry starts the year in positive statistical significance

^{Source: BNY}

The geopolitical environment continues to be a source of concern, but this is not translating into market volatility. Matching the price action in other risk assets, iFlow Carry has hit the ground running for 2026 and reached positive statistical significance relatively quickly. In fairness, the move has been coming for a while: back at the end of November when equity markets were recovering, FX flows were pushing against this level for a while; we believe that this time there will be an opportunity for some degree of consistency in interest.

Similarly, iFlow Carry holdings – whose natural position is positive significance due to the cost of carry itself – have hit their highest levels in 18 months. As always, we look to identify the underlying currency drivers, as they will also be candidates for an unwind when risk-off inevitably comes. Based on normalized flow figures as of January 6, we can see that ranked by yield, TRY, BRL and COP are currently performing well. They are the top three yielders but also rank in the top ten for flows. Meanwhile, CNY and THB are now among the lowest yielders and have very poor flow ranks as well. This is also reflected in flow rankings, where MYR is performing poorly, signaling a soft environment for APAC-based funders. This remains the main currency group where we see gains against the dollar. In contrast, EM FX in LatAm and EMEA continue to benefit from real rates.

What's Changed?

Trading has been dominated by the pause to risk-taking linked to policy pushes from the Trump administration to block institutional home buying and to limit defense industries from buybacks and dividends. Stocks fell in the U.S. yesterday, while APAC and EMEA shares remain in the red and U.S. futures are lower. The mood shift on risk-taking also has links to economic data worries: weak Japanese wages, lower confidence surveys, hawkish central bankers and U.S. jobs numbers. The bond markets will be significant, given that supply isn’t fully meeting demand, with the torrid borrowing of $260bn from IG and governments to start the year pushing yields higher. The factors driving today are not temporary, but hopes remain that they will not prove long-lasting.

• U.S. housing emergency. President Trump’s move to ban big investors from buying single-family homes may need Congressional approval. The president suggested that more details on the plan for affordable housing will follow at Davos.
• A 50% jump in the U.S. defense budget has been requested. President Trump is also pushing for a record $1.5tn defense budget in 2027, with “Dream Military” goals of a “Golden Dome” air defense system and new battleships.
• Economics still matters. The BoJ’s quarterly report shows companies plan to offer same wage hikes in 2026 as they did in 2025. Pass-through price pressures on input, labor and distribution costs are high. Wages fell by 2.8% y/y in real terms in November, sending JGBs lower and leaving BoJ hike expectations waiting for April’s wage round.
• Oil and gold. Oil is higher after another large U.S. inventory drop and ongoing doubts about supply, with President Trump’s plans to control Venezuela crude seen as insufficient. Oil executives want guarantees before investing in Venezuela, with a meeting at the White House set for Friday. USD is again looking at the 98.80 breakout zone today, leaving alternatives like gold and silver lower. Bitcoin is also down 1.25%, taking it back to $89.5k.
• Tech and investments. Anthropic is planning a new $10bn funding round that would value the maker of the Claude chatbot at $350bn. This is nearly double its valuation at the time of the September F funding round. Samsung’s quarterly profits tripled after AI demand lifted chip prices, with DRAM up 30%, NAND up 20% – both expected to remain strong in 2026. China allowing Nvidia H200 chip sales soon adds to sector positives.

Bottom line: The pause that refreshes hope stands out. Oil is higher, defense spending hopes are ongoing in the EU and the U.S. and the pullback in Asia shares and modest dip in EMEA highlight stalling global diversification pressures, while U.S. IT investment flows continue to point higher. The link between USD gains and U.S. share losses matters today and will be important in interpreting the jobs risks tomorrow, as investors abroad may buy the dip in U.S. shares but will require ongoing hedging. Market participants will continue to watch the dollar as a barometer for risks in bonds and stocks, as we head into another day of important data releases: trade deficits will be important for Q4 growth, while productivity will be key for inflation watching into Q1. 

What You Need to Know

President Trump has signed a presidential memorandum directing the U.S. to withdraw from 66 international organizations, including 35 non-UN and 31 UN entities, deemed contrary to American interests. This follows a review of U.S. participation in global bodies that allegedly undermine sovereignty, waste taxpayer funds or promote agendas conflicting with U.S. values. The move aims to save taxpayer money and prioritize “America First” policies. Trump previously withdrew the U.S. from the World Health Organization, the Paris Climate Agreement and the UN Human Rights Council and restricted funding to UNRWA, emphasizing domestic priorities such as infrastructure, military readiness and border security. S&P Mini -0.18% to 6950.75, DXY +0.111% to 98.793, 10y UST +0.6bp to 4.154%.

Reserve Bank of Australia deputy governor Andrew Hauser has reaffirmed that interest rates are unlikely to fall soon, despite November’s inflation easing to 3.4%. Hauser emphasized that the data had been broadly expected and that inflation remains above the RBA’s 2-3% target. The central bank will review the quarterly CPI figures later this month before its February 3 meeting, but Hauser stressed that decisions focus on long-term inflation trends, not short-term fluctuations. While rate cuts are “very low” in the near term, Hauser outlined two scenarios for future easing: a global shock that weakened demand or improved supply capacity enabling growth without inflation. He also noted that geopolitical risks, including Venezuela tensions, could influence global markets and domestic policy. ASX -0.266% to 5402.66, AUDUSD -0.447% to 0.6691, 10y ACGB -9.1bp to 4.668%.

Japan’s Regional Economic Report for January 2026 shows all nine regions reporting moderate economic recovery with some localized weakness, consistent with October 2025 assessments. Public investment remains high or increasing across regions, while business fixed investment is generally rising moderately. Private consumption is demonstrating resilience despite price rises, supported partly by inbound tourism in Kanto-Koshinetsu. Housing investment is relatively weak or flat in most regions, affected by factors such as the 2024 Noto Peninsula earthquake and U.S. tariffs. Production trends are mostly flat with some temporary declines, while employment and income situations are improving moderately nationwide. Nikkei -1.626% to 51117.26, USDJPY -0.032% to 156.71, 10y JGB -4.1bp to 2.081%.

China has convened a closed-door meeting with around 16 leading power and energy storage battery companies, signaling a high-level effort to curb price wars and rein in overcapacity in a sector that commands nearly 70% of global market share. The meeting was held jointly by the Ministry of Industry and Information Technology and the NDRC, the country’s market regulator and energy administration, and focused on restoring market order amid rapid industry expansion. Regulators pledged tighter price supervision, stronger enforcement on product quality and intellectual property, and enhanced capacity monitoring with early-warning mechanisms. Authorities warned that aggressive price competition and unchecked capacity growth risk undermining the industry’s long-term sustainability, despite China’s strong global competitive position. CSI 300 -0.817% to 4737.65, USDCNY -0.122% to 6.9831, 10y CGB -1.2bp to 1.885%.

China plans to approve imports of Nvidia’s H200 AI chips as early as this quarter for select commercial uses, according to people familiar with the matter, marking a partial reopening of a key market for the U.S. chipmaker. The approvals would exclude military use, sensitive government agencies, critical infrastructure and state-owned enterprises, with applications outside these areas subject to case-by-case review. Chinese firms including Alibaba and ByteDance have signaled interest in ordering more than 200,000 units each. The move follows U.S. approval for H200 exports, which are older-generation chips, and comes as Beijing seeks to balance security concerns with commercial demand, even as domestic rivals such as Huawei and Cambricon expand capacity amid China’s push for semiconductor self-sufficiency.

What We're Watching

U.S. Q3 nonfarm productivity is expected at 5.0% q/q vs. 3.3% in Q2 2025, with unit labor costs forecast to ease to 0% q/q vs. 1.0% in Q2 2025.

U.S. weekly initial jobless claims forecast to rise to 212k vs. 199k the week prior.

U.S. October trade deficit is expected to widen to -$58.5bn from $-52.8bn in September.

U.S. October wholesale trade sales forecast to fall -0.2% m/m vs. -0.2% m/m in September.

U.S. November consumer credit is seen rising to $10.146bn vs. $9.178bn in October.

U.S. Treasury sells $80bn in 4-week bills and $80bn in 8-week bills.

What iFlow is Showing Us

Mood: iFlow Mood has stabilized at 0.188 but the overall mood is deteriorating. Equity demand turned flat, while core sovereign bond selling picked up.

FX: LatAm and EMEA currencies were better-bid, whereas APAC currencies were broad sold. Within the G10, USD, GBP and JPY were light bought, against outflows in the rest led by EUR and NZD.

FI: LatAm, especially Mexico, saw good demand for government bonds, followed by Indian government bonds and UK gilts. iFlow showed most selling in Turkish government bonds, and light selling in U.S. Treasurys and Australian, Canadian and Indonesian government bonds.

Equities: Broad selling in the G10, led by the U.K, Europe and Hong Kong. Peru posted the most buying, while Chinese equity buying momentum continues.

Quotes of the Day

“Whenever you find yourself on the side of the majority, it is time to pause and reflect.” – Mark Twain

“Now and then it’s good to pause in our pursuit of happiness and just be happy.” – Guillaume Apollinaire

Economic Details

U.S. December job cut announcements fell sharply to 35,553, down 50% m/m and 8% y/y, marking the lowest monthly total in 17 months, according to Challenger, Gray & Christmas. Despite the late-year improvement, total announced job cuts in 2025 reached 1.21 million, up 58% y/y. This figure, the seventh-highest annual total since 1989, was driven by a surge in government layoffs, technology restructuring and warehousing cuts. The fourth quarter recorded 259,948 job cuts, the highest Q4 total since 2008. Hiring plans showed tentative improvement, with December hiring intentions rising to 10,496, the highest December reading since 2022, though full-year planned hires fell 34% y/y to the lowest level since 2010, highlighting continued labor market adjustment. 

Euro area November consumer expectations showed little change in inflation views, with median perceived inflation over the past 12 months and expectations for inflation one, three and five years ahead all remaining unchanged. Short-term inflation expectations stayed at 3.1%, while three-year and five-year expectations were stable at 2.5% and 2.2%. Nominal income growth expectations were unchanged at 1.2%, while expected spending growth eased to 3.4%. Economic growth expectations turned slightly more negative, and expected unemployment one year ahead edged down to 10.9%, indicating a broadly stable labor market outlook. Housing expectations softened, with expected home price growth and mortgage rates both decreasing marginally, while perceptions of credit tightening over the past year eased. Euro Stoxx 50 -0.066% to 5919.64, EURUSD -0.026% to 1.1672, BBG AGG Euro Government High Grade €-2.6bp to 2.997%.

The EU’s December business and consumer survey showed broadly stable sentiment, with the Economic Sentiment Indicator edging down by 0.1 points m/m to 96.8 in the EU and falling by 0.4 points to 96.7 in the euro area. Both remained below their long-term averages. The Employment Expectations Indicator fell by 0.9 points in both regions, reflecting weaker hiring plans in services, retail trade and construction, partly offset by modest improvement in industry. Industry confidence rallied slightly on better production expectations, while services and construction confidence were broadly unchanged and retail trade weakened. Consumer confidence was largely stable, despite rising price perceptions. Selling price expectations stayed elevated across sectors, while economic uncertainty eased marginally in December.

Euro area November producer prices rose 0.5% m/m, following a 0.1% m/m increase in October, while prices fell 1.7% y/y. The m/m increase was driven primarily by energy prices, which rose 1.8% m/m, alongside gains of 0.3% in intermediate goods, 0.1% in capital goods and 0.3% in durable consumer goods, while non-durable consumer goods declined by 0.2%. Excluding energy, producer prices increased by 0.1% m/m. On a y/y basis, energy prices fell sharply (-7.4%), while prices excluding energy rose 1.0%, supported by increases in capital goods at 1.8%, durable consumer goods at 2.0% and non-durable consumer goods at 1.1%.

The euro area November unemployment rate was 6.3%, down m/m from October’s 6.4% but up y/y from 6.2%, while the EU rate was flat m/m at 6.0% but up y/y from 5.8%. The number of unemployed people decreased by 71k m/m in the euro area and by 97k in the EU, but increased by 253k and 416k, respectively, on a y/y basis. Youth unemployment eased m/m, with the euro area rate falling to 14.6% and the EU rate to 15.1%, though both were higher y/y. Female unemployment in the euro area edged down to 6.5%, while the male rate remained stable at 6.1%, pointing to a broadly resilient but gradually softening labor market.

Germany’s November manufacturing orders rose 5.6% m/m and increased by 10.5% y/y in real terms, according to provisional data from Destatis. The m/m rise was less dramatic at 0.7% when large orders are excluded. Over the September-November period, orders were up 4.0% versus the prior three months, or 2.1% excluding large contracts. Growth was driven by sharp increases in fabricated metal products and other transport equipment, reflecting sizable large-scale orders, alongside moderate gains in electrical equipment, machinery and data-processing, electronic and optical products. By goods category, investment goods orders rose by 7.9% m/m, intermediate goods by 1.0% and consumer goods by 8.2%. Foreign orders increased by 4.9% m/m, while domestic orders rose 6.5%. Real manufacturing turnover increased by 2.7% m/m and was up 0.1% y/y. DAX +0.078% to 25141.73, EURUSD -0.026% to 1.1672, 10y Bund +4.8bp to 2.86%.

German public finance data for the first three quarters of 2025 showed total spending up 5.6% y/y and revenues up 6.0% y/y, with €1.598tn in expenditure against €1.491tn in receipts. This resulted in a financing deficit of €107.6bn, which was broadly unchanged y/y. All government levels recorded deficits, with the federal government contributing the largest shortfall, while municipalities posted a record deficit of €28.3bn as spending growth outpaced revenues. Tax and quasi-tax revenues rose 7.1% y/y, supported by social security contributions and strong Länder taxes, while property tax receipts remained broadly flat following reforms. Interest expenditure increased sharply at the Länder level, while social insurance deficits narrowed to €11.2bn despite higher outlays.

France’s November balance of payments showed the current account returning to a deficit of €0.8bn, following a €1.4bn surplus in October, as the goods trade deficit widened to €3.7bn from €2.1bn while the services surplus narrowed to €3.7bn from €4.4bn. On a 12-month rolling basis, the current account balance deteriorated to a deficit of €11.0bn, compared with a surplus of €1.6bn a year earlier. The financial account recorded net capital inflows of €37.0bn over 12 months, driven by strong other investment inflows of €114.4bn, while portfolio investment registered net outflows of €63.8bn and direct investment inflows amounted to €1.6bn. CAC 40 -0.162% to 8220.6, EURUSD -0.026% to 1.1672, 10y OAT +0.9bp to 3.531%.

Italy’s labor market softened slightly m/m in November, with employment falling 0.1% m/m, or 34k, as declines among women, fixed-term employees, the self-employed and those aged 15-24 and 35-49 outweighed gains for 25-34-year-olds, while employment was broadly stable for men, permanent employees and those aged 50+. The employment rate edged down to 62.6%. Unemployment declined by 2.0% m/m, or 30k, lowering the unemployment rate to 5.7%, while youth unemployment fell to 18.8%. Inactivity among those aged 15-64 increased by 0.6% m/m, lifting the inactivity rate to 33.5%. On a y/y basis, employment rose 0.7%, or 179k, and the employment rate increased by 0.3 percentage points. FTSE MIB -0.029% to 45545.65, EURUSD -0.026% to 1.1672, 10y BTP +0.8bp to 3.524%.

Dutch November household consumer spending rose by 0.5% y/y (October: +0.9%), driven by a 0.9% increase in spending on services, particularly transport, communication and medical services. Durable goods expenditure grew 1.4% y/y, led by footwear, electrical appliances and clothing, while food, drink and tobacco spending increased by 1.1%. Spending on other goods, including energy and motor fuels, declined by 3.4%. Despite this growth, the CBS Consumption Radar indicated more unfavorable conditions for December consumption due to negative consumer sentiment on future unemployment and slower labor force growth. AEX -0.898% to 970.36, EURUSD -0.026% to 1.1672, 10y NGB +0.8bp to 2.931%.

U.K. house prices fell 0.6% m/m in December following a 0.1% m/m decline in November, while annual growth slowed to 0.3% y/y from 0.6% previously, according to the Halifax House Price Index. The average property price declined to £297,755, the lowest level since June. On a three-month basis, prices were up 0.2%, pointing to broadly flat momentum at the end of the year. Regional performance remained uneven, with Northern Ireland the strongest market, recording a 7.5% y/y increase, followed by Scotland at 3.9% y/y and Wales at 1.6% y/y. In England, the North East led with 3.5% y/y growth, while London prices fell 1.3% over the year. FTSE 100 -0.252% to 10022.91, GBPUSD -0.164% to 1.3436, 10y gilt +0.1bp to 4.417%.

The U.K.’s December Decision Maker Panel survey indicated a gradual easing in firms’ price and wage pressures alongside weak employment dynamics. Firms reported realized annual own-price growth of 3.7%, down 0.1 percentage points from the prior three-month period, while year-ahead expected own-price inflation edged lower to 3.6%, implying a modest deceleration over the next year. Year-ahead CPI inflation expectations stood at 3.4%, with three-year-ahead expectations at 2.9%, both broadly stable. Annual wage growth eased to 4.4%, while expected wage growth over the next year declined to 3.7%. Employment conditions remained weak, with realized employment growth at -0.4% and expected employment growth also at -0.4%, signaling limited hiring momentum ahead.

The SNB’s minutes for its December monetary policy decision indicate that policymakers judged the Swiss economy to be stabilizing amid elevated uncertainty, with companies expecting slightly stronger growth in Q4 led by services and construction, while manufacturing showed tentative improvement despite underutilization and margin pressure. Inflation eased more than expected, standing at 0.0% in November, driven by lower hotel, rent and imported goods prices, with core inflation also softening. GDP contracted in Q3 due to the performance of pharmaceuticals, while unemployment edged higher. The outlook improved modestly following reduced U.S. tariffs, with GDP growth seen at just under 1.5% in 2025 and around 1% in 2026. The Governing Board judged monetary conditions appropriate and left the policy rate unchanged at 0%. SMI +0.059% to 13331.83, EURCHF +0.008% to 0.93158, 10y Swiss GB +0.2bp to 0.279%.

Switzerland’s December CPI was flat m/m and rose 0.1% y/y, with the index unchanged at 106.9 points, while average annual inflation in 2025 stood at 0.2%. Core inflation, excluding fresh and seasonal products, energy and fuel, was flat m/m and increased by 0.5% y/y. Domestic product prices rose 0.2% m/m and 0.5% y/y, while imported product prices fell 0.8% m/m and declined by 1.6% y/y. M/m price falls were recorded for international package holidays, medicines and vegetables, offset by higher prices for hotels, supplementary accommodation and private transport hire. The Swiss HICP increased 0.1% m/m and 0.2% y/y in December.

Sweden’s December CPI was flat at 0.3% y/y, unchanged from November, while prices were flat m/m with a 0.0% change between November and December, according to flash estimates from Statistics Sweden. Inflation measured by CPIF eased to 2.1% y/y from 2.3% previously, with prices up 0.1% m/m. CPIF-XE inflation, excluding energy, moderated slightly to 2.3% y/y from 2.4% in November, while the m/m increase was 0.3%. The data indicate stable headline inflation alongside a modest deceleration in underlying measures. Statistics Sweden noted that the CPI rate was unchanged in December, while both CPIF and CPIF-XE fell on a y/y basis according to preliminary calculations. OMX -0.608% to 2945.277, EURSEK +0.37% to 10.7684, 10y Swedish GB -1.2bp to 2.886%.

Norway’s November industrial production increased by 2.4% m/m, reversing declines in the previous two months, according to seasonally adjusted data from Statistics Norway. The rebound was broad-based, with most industries recording growth, led by oil refining, chemical and pharmaceutical manufacturing, up 4.6%, partly reflecting a recovery after maintenance stoppages in October. Shipbuilding and oil platform construction rose 4.6%, metal products increased by 2.4%, and data and electrical equipment manufacturing gained 2.8%. Despite the m/m rise, industrial activity declined 0.9% over the September-November period vs. the previous three months, driven mainly by a 7.4% fall in oil refining, chemical and pharmaceutical industries. Overall activity levels have flattened since mid-2025. OSE +0.148% to 1683.81, EURNOK +0.372% to 11.8172, 10y NGB -1.2bp to 4.15%.

Norway’s November industrial turnover rose 0.8% m/m, according to seasonally adjusted data from Statistics Norway, following broadly flat performance through much of 2025. Over the September-November period, industrial turnover declined by 0.4% compared with the previous three-month period, with the turnover index at 131.9 versus 132.4 previously. The three-month contraction reflected weaker activity in both domestic and export markets after strong growth from mid-2024. By industry, oil refining, chemical and pharmaceutical manufacturing contributed most negatively in the three-month period, with turnover down 4.8%, alongside food manufacturing, and ship and oil platform building. On a m/m basis, higher turnover in food manufacturing, and ship and platform construction supported the November increase, while data and electrical equipment industries weighed on growth.

Norway’s lending data for November showed mixed trends across lending and deposits, with the interest rate on outstanding loans falling by 0.18 percentage points, while rates on new mortgages edged up by 0.02 percentage points. New mortgage rates rose to 5.12%, with floating rates increasing by 0.02 percentage points and fixed rates broadly unchanged at 4.87%. Rates on outstanding household mortgages decreased to 5.11%, driven by a 0.20 percentage point fall in floating rates, while fixed rates remained stable. Household deposit rates fell by 0.19 percentage points to 2.95%, and total deposit rates fell to 3.03%. NIBOR eased by 0.03 percentage points to 4.35%, while lending margins on new mortgages widened to 0.77%.

Hungary’s 2025 public finances showed higher revenues alongside increased expenditure. The central subsystem closed the year with a cash-based deficit of HUF 5.739tn, comprising a central budget deficit of HUF 5.500tn, a surplus of HUF 7.3bn in earmarked state funds and a social security deficit of HUF 245.9bn. Tax and contribution revenues rose 8.0% y/y, driven by a 9.5% increase in consumption-related taxes. Interest spending increased to HUF 4.198tn, up HUF 584.7bn y/y. Expenditure on public transport and utilities reached HUF 2.652tn, while pension and healthcare-related outlays rose to HUF 7,301tn and HUF 2.916tn, respectively. Budapest SI -0.612% to 115847.2, EURHUF -0.029% to 384.66, 10y HGB -5bp to 6.71%.

Czech November industrial production rose 5.7% y/y and increased by 2.4% m/m in real terms, supported by broad-based gains across most industrial activities and a favorable base effect. Growth was led by motor vehicles, fabricated metal products, rubber and plastics, electrical equipment, other transport equipment and basic metals, while mining and quarrying, particularly coal, and pharmaceuticals detracted. New orders increased by 4.1% y/y, driven by non-domestic orders up 6.3% y/y, while domestic orders rose 0.2% y/y; m/m, new orders declined by 1.1%. Order growth was strongest in motor vehicles and parts, fabricated metals and electrical equipment, and weakest in pharmaceuticals, chemicals, paper and textiles. Industrial employment fell 1.3% y/y. For context, EU27 industrial output rose 1.9% y/y in October. Prague SE +0.357% to 2755.84, EURCZK -0.087% to 24.257, 10y CZGB -0.1bp to 4.503%.

The Czech November unemployment rate rose to 3.3%, up 0.5 percentage points y/y, with male unemployment at 3.0% and female unemployment at 3.6%. The country had an employment rate of 75.3% among those aged 15-64, down by 0.03 percentage points y/y, with male employment at 79.9% and female employment at 70.8%. The economic activity rate reached 77.8%, up 0.3 percentage points y/y, indicating a higher proportion of economically active individuals. Male economic activity stood at 82.2%, exceeding the female rate of 73.4% by 8.8 percentage points in November and highlighting a persistent gender gap in labor force participation.

South Africa’s December manufacturing outlook remained weak but showed improving forward-looking signals, with the seasonally adjusted Absa PMI falling 1.5 points to 40.5, staying firmly in contractionary territory. The softer headline was driven mainly by sharp declines in inventories and employment, while new sales orders were broadly unchanged at a subdued 35.4. Business activity, however, rose sharply by 9.4 points to 46.1, though it remains below the neutral 50-point threshold. Importantly, expectations for business conditions over the next six months surged by 18.1 points to 68.8, the highest since September 2024, pointing to a more favorable H1 outlook. Input price pressures eased, with the purchasing price index falling to 50, helped by a stronger rand and easing fuel costs. JSE TOP 40 -0.504% to 109469.3, USDZAR +0.199% to 16.4859, 10y SAGB +9bp to 8.363%.

Japan’s December consumer confidence weakened slightly, with the Consumer Confidence Index at 37.2, down 0.3 points m/m on a seasonally adjusted basis. Among the subcomponents, overall livelihood declined by 0.3 points m/m to 35.9, employment fell by 0.2 points m/m to 41.5, and willingness to buy durable goods dropped by 0.7 points m/m to 30.2, while income growth was the sole improver, rising by 0.3 points m/m to 41.3. Price expectations a year ahead continued to firm up, with 91.8% of respondents expecting prices to rise, up 1.2 percentage points m/m. The share expecting prices to remain broadly unchanged fell to 3.6%, while those expecting prices to fall eased to 2.8%. Nikkei -1.626% to 51117.26, USDJPY -0.032% to 156.71, 10y JGB -4.1bp to 2.081%.

Japanese November labor cash earnings growth fell sharply to 0.5% y/y. This still represents a 47th consecutive increase, from a downwardly revised 2.5% y/y. Regular pay (scheduled cash earnings) was up +2.0% y/y, the 49th consecutive increase, vs. 2.2% in October. The -17% y/y fall in special cash earnings (bonuses, irregular pay) was a major drag on headline wage growth. November real cash earnings were down 2.8% y/y, from -0.8% y/y in October. Overall, nominal wages continued to rise, but real wages remained deeply negative due to elevated inflation. In other figures, Tokyo December average office vacancies fell to 2.22% vs. 2.44% in November, in a tenth successive monthly decrease, to the lowest level since June 2020. The vacancy rate for new buildings dropped sharply to 5.55% (-5.76 percentage points), while existing buildings fell slightly to 2.14% (-0.09 percentage points). The total vacant space decreased by approximately 18,000 tsubo due to large leases in buildings under one year old. The average rent rose by ¥101 to ¥21,409 per tsubo, continuing a steady upward trend (¥21,308 in November). Key wards such as Chiyoda and Minato saw notable falls in vacancy rates and rent increases.

Australia’s seasonally adjusted goods trade surplus narrowed to $2.94bn in November, down $1.42bn m/m from $4.35bn in October. The deterioration was driven primarily by weaker exports, while imports edged higher. November exports fell $1.35bn m/m (-2.9% m/m, 3.7% y/y) to $44.57bn, while imports increased by $63mn m/m (+0.2% m/m, 12.8% y/y) to $41.64bn. Exports were driven by non-rural goods (-4.5% m/m), reflecting a sharp fall in metal ores and minerals. Rural goods rose 9.6% m/m, partially offsetting weakness elsewhere. Non-monetary gold exports fell -7.8% m/m. By quantities, iron ore volumes dropped sharply in November (lump -14.4% m/m; fines -8.1% m/m), reinforcing the export drag. ASX -0.266% to 5402.66, AUDUSD -0.447% to 0.6691, 10y ACGB -9.1bp to 4.668%.

Indonesia’s 2025 fiscal outcome showed the budget deficit widening to IDR 695.1tn, equivalent to 2.92% of GDP, marking the highest ratio outside the pandemic years and nearing the legal 3% cap. The shortfall exceeded both the original 2.53% target and the revised 2.78% goal, reflecting higher spending aimed at supporting growth amid elevated global uncertainty and weaker revenues. State expenditure rose 2.7% y/y, while revenue fell 3.3% as tax collection reached only about 90% of target, weighed down by refunds, fiscal incentives and softer commodity prices. Investors remain focused on fiscal sustainability risks, with concerns that deficits may remain close to the 3% ceiling in the coming years. JCI -0.216% to 8925.471, USDIDR +0.108% to 16793, 10y IDGB +2bp to 6.123%.

Thai December consumer confidence slipped to 51.9 from 53.2 in November, marking the first decline in four months, according to a University of the Thai Chamber of Commerce survey. The deterioration was attributed to heightened political uncertainty following the dissolution of parliament and renewed tensions along the Thailand-Cambodia border, which are seen as risks to the pace of economic recovery. The survey indicated that consumers are increasingly cautious about the near-term outlook, reflecting concerns over domestic political stability and external geopolitical developments. Looking ahead to Q1, households are expected to remain restrained in spending as they await greater clarity on the border situation, the timing and outcome of elections and the scale of any potential economic stimulus measures. SET -2.001% to 1255.19, USDTHB +0.736% to 31.51, 10y TGN +5.2bp to 1.678%.

Hong Kong’s Financial Secretary Paul Chan predicts that IPO fundraising will surpass last year as strong demand persists, particularly from tech and innovation firms seeking alternatives to U.S. listings. Chan expressed cautious optimism about the IPO market, citing a strong pipeline of companies preparing to list and Hong Kong’s position as the preferred venue outside the U.S. He also expects the city’s economy to advance steadily in 2026, with detailed growth forecasts to be announced in next month’s budget. While the retail and dining sectors show modest recovery, Chan urged businesses to innovate and leverage policy support. He highlighted Hong Kong’s minimal exposure to Venezuela but stressed readiness for geopolitical risks, also confirming that confirmed HKEX will consult on adopting a “T+1” settlement cycle while monitoring global trading trends. Hang Seng -1.17% to 26149.31, USDHKD +0.062% to 7.7919, 10y HKGB -1.2bp to 1.417%.