• Asian equity markets trade mostly higher with Japanese markets closed for a public holiday
• FX markets traded mostly sideways with AUD slightly underperforming
• Highlights today include Eurozone consumer confidence and speeches from Fed’s Bostic, Williams & Rosengren

ASIA

Asia equity markets traded mostly higher as the positive tone seeped tspanough from last Friday’s performance on Wall St. where all majors printed fresh record levels despite the NFP miss, while the DJIA extended above the 25,000 level and posted its best start to the year in over a decade. As such, ASX 200 (+0.1%) and KOSPI (+0.4%) were positive in which with the latter outperformed ahead of inter-Korean talks which begin tomorrow. The tone for the rest of the Asia-Pac region was mostly reserved tspanoughout the day amid the absence of Japanese participants due to public holiday, while Shanghai Comp. (+0.4%) and Hang Seng (-0.1%) were choppy after the PBoC refrained from liquidity operations and amid reports of tighter shadow banking regulations, as well as PBoC researcher comments regarding scope for higher rates.

PBoC Deputy Head of Research Ji Min stated that there is room for a rate increase in the short-term. (China Daily)

PBoC skipped open market operations again today citing relatively high bank liquidity. (Newswires)

PBoC set CNY mid-point at 6.4832 (Prev. 6.5043)

Chinese FX Reserves (USD)(Dec) 3.140tln vs. Exp. 3.130tln (Prev. 3.119tln). (Newswires)

Japanese PM Abe has called on BoJ Governor Kuroda to maintain efforts to reflate the economy. (Newswires)  

UK/EU

UK Visa December Consumer Spending fell 1.0% vs. Prev. decline of 0.9%. (Newswires)

UK PM May is expected to conduct a cabinet reshuffle today which would affect a quarter of her cabinet, according to UK press. Furthermore, it was also reported that PM May is to appoint a cabinet minister for a no deal Brexit in the reshuffle. (Guardian/Telegraph)

German Chancellor Merkel stated that she thinks they can manage to form a coalition. (Newswires)

ECB’s Weidmann said that the ECB should set a date to end its asset purchase program. (El Mundo)

FX

FX markets were choppy with the greenback initially pressured as the Asia-Pac region reacted to the weaker than expected US NFP jobs data and as EUR/USD rebounded in early trade amid optimism from German Chancellor Merkel on forming a coalition. However, the moves were later pared amid a lack of further drivers and sparse overnight calendar, which helped the USD-index reclaim the 92.00 level. Elsewhere, CAD remained firm in which USD/CAD continued to test a break below the 1.2400 handle after Friday’s stellar Canadian jobs data and GBP/USD traded indecisive but nonetheless sspanugged off reports of an impending cabinet reshuffle and appointment of a ‘no-deal Brexit’ minister. Finally, AUD softened on cross-related underperformance in AUD/NZD and bearish Australian government iron ore prices forecasts, while KRW also suffered amid touted intervention after officials reiterated to take measures on one-sided price action.

COMMODITIES

Commodity prices were largely unchanged with WTI crude futures taking a breather from the New Year rally which had underpinned prices to their highest close in over 3 years. Elsewhere, gold prices consolidated alongside a range-bound greenback, while copper was also relatively flat and held near last week’s lows.

Australia's government sees iron ore prices dropping 20% this year to an average USD 51.50/ton, due to increasing global supply and moderating Chinese demand. (Newswires)

GEOPOLITICAL

US President Trump on Saturday said he would be open to talks with North Korea’s leader and also claimed credit for inter-Korean talks which will begin on Tuesday. (Newswires)

China MOFCOM is to restrict crude exports to North Korea following UN rules. (Newswires)

North Korean Leader Kim is said to have a kidney problem, according to South Korean press. (Newswires)

US

The US Treasury yields were higher on Friday, with the curve mildly bear-steepening. Despite headline payrolls disappointing, the wages data continue to point to growth, albeit at a subdued rate when compared to previous recoveries. The data did little to suggest the Fed will alter course, and in combination with optimism about the impact of tax reform, traders were content to end the week selling Treasuries. US 10-Year T-Note Futures settled 5 ticks lower at 123-16+.

Fed’s Mester (Voter, Hawk) said she would be happy with tspanee/four hikes in 2018 and that she was encouraged by the “strong” US Employment Situation Report for December. (Newswires)

Fed’s Williams (Voter, Neutral) said Fed should raise interest rates tspanee times this year as the already strong economy will be further boosted from tax cuts. (Newswires)

Fed’s Harker (Non-Voter, Soft Hawk) said it could take some time for the next Fed rate hike and that a lack of wage pressure is the reason behind his caution. (Newswires)

Fed’s Bullard (Non-Voter, Dove) repeated his recent view that the Fed should 'wait and see' regarding further rate hikes and argued that the central bank has made no progress towards inflation since 2015. (Newswires)

White House Chief Economist Hassett stated that the Fed would not need to tighten policy at a quicker pace in response to the recent tax reductions. (Newswires)