APAC stocks mixed & PBoC reportedly plans policy overhaul - Newsquawk Europe Market Open

• APAC stocks were ultimately mixed with most major indices higher although the gains were capped following the negative handover from the US.
• PBoC is reportedly to plan a policy overhaul as pressure mounts on the economy; likely it would cut interest rates at an appropriate time.
• European equity futures indicate a slightly softer cash open with Euro Stoxx 50 futures down 0.1% after the cash market closed higher by 0.5% on Thursday.
• USD is a touch softer, EUR/USD remains on a 1.02 handle, and Cable is sub-1.24.
• Looking ahead, highlights include German Unemployment Rate, US ISM Manufacturing PMI, US House Speaker Vote, Fed’s Barkin & ECB's Lane.

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US TRADE

EQUITIES

• US stocks were marginally sold on the first trading session of 2025 with relative outperformance in the Russell, while sectors were predominantly lower with notable weakness in Consumer Discretionary, which was weighed on by Tesla's (TSLA) downside after it reported disappointing Q4 delivery numbers. Real Estate and Materials also lagged, while Energy, Utilities, and Communication Services outperformed with Energy stocks buoyed by the upside in crude and natgas prices.
• SPX -0.22% at 5,869, NDX -0.17% at 20,976, DJIA -0.36% at 42,392, RUT +0.07% at 2,232.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US President Biden decided to block the sale of US Steel (X) to Nippon Steel (5401 JT), according to The Washington Post.
• US President-elect Trump named a team to work in conjunction with US Treasury Secretary nominee Scott Bessent with Ken Kies to be Assistant Secretary for Tax Policy and he named Cora Alvi as Deputy Chief of Staff.

APAC TRADE

EQUITIES

• APAC stocks were ultimately mixed with most major indices higher although the gains were capped amid the holiday closure in Japan and after the negative handover from the US where the dollar strengthened and Tesla deliveries disappointed.
• ASX 200 was underpinned with energy and gold miners leading the advances after recent gains in underlying commodity prices.
• KOSPI outperformed despite reports of a standoff between a military unit and South Korean investigative authorities attempting to arrest impeached President Yoon, while acting President Choi ordered to deploy market stabilising measures swiftly and boldly if volatility heightens.
• Hang Seng and Shanghai Comp traded mixed despite falling yields amid a report the PBoC is said to plan a policy overhaul as pressure mounts on the economy and would likely cut interest rates from the current level of 1.5% at an appropriate time. Nonetheless, some support was seen for Hong Kong tech stocks after an NDRC official said they will sharply increase funding from ultra-long treasury bonds this year to support "two new" programmes and will broaden the consumer trade-in initiative to include smartphones, while the mainland failed to benefit amid the ongoing US-China trade-related frictions.
• US equity futures (ES +0.2%) nursed some of the prior session's losses alongside the mostly constructive mood in the major Asia-Pac indices.
• European equity futures indicate a slightly softer cash open with Euro Stoxx 50 futures down 0.1% after the cash market closed higher by 0.5% on Thursday.

FX

• DXY took a breather after opening 2025 with broad-based gains despite relatively thin newsflow, while participants now look ahead to ISM Manufacturing PMI due later today and with Fed's Barkin (2027 voter) also scheduled to speak at a Maryland Bankers event.
• EUR/USD was off lows but remained beneath the 1.03 handle after slipping to its weakest level since late 2022 owing to the recent dollar strength, while the single currency was also not helped by mixed PMI releases and rhetoric from ECB's Stournaras who sees rates falling to about 2% around Autumn.
• GBP/USD attempted to regain some composure following yesterday's underperformance and retreat to sub-1.2400 territory, while reports noted that UK Chancellor Reeves warned ministers to consider cuts to frontline services to fund above-inflation pay increases for public sector workers.
• USD/JPY marginally eased back overnight but retained the recently reclaimed 157.00 status with trade muted amid the market closure in Japan.
• Antipodeans eked slight gains alongside a firmer CNY and reports of support measures from China's state planner.
• PBoC set USD/CNY mid-point at 7.1878 vs exp. 7.2868 (prev. 7.1879).

FIXED INCOME

• 10yr UST futures kept afloat but with the upside limited after recent whipsawing and data releases which showed a surprise fall in initial jobless claims, while overnight cash trade was shut owing to the market holiday closure in Tokyo.
• Bund futures were rangebound following yesterday's fluctuations and somewhat mixed PMI figures from Europe, while the attention turns to Germany's Unemployment Rate.

COMMODITIES

• Crude futures were little changed overnight but held on to the prior day's gains after climbing alongside the advances in natgas prices in the wake of the Ukraine/Gazprom transit deal expiring without a renewal.
• US President Biden is reportedly planning to permanently ban new offshore oil and gas development in portions of the country's outer continental shelf during his final weeks in the White House, according to Bloomberg.
• Slovak PM Fico said the Slovak coalition and government are to discuss in the coming days reciprocal measures for the end of the Ukraine gas transit and an alternative for Slovakia would be restarting gas transit through Ukraine, or compensation mechanisms, while the Slovak government delegation is to discuss the gas situation in Brussels on Tuesday.
• Goldman Sachs sees significant risks that TTF gas prices rally towards oil-switching economics in a EUR 63-84/MWh range in the coming months.
• Spot gold plateaued after steadily climbing yesterday with the precious metal unfazed by the recent dollar strength.
• Copper futures lacked conviction amid the mixed risk appetite in Asia and were only briefly underpinned after China's state planner announced support efforts.

CRYPTO

• Bitcoin was choppy and briefly reclaimed the USD 97,000 level before returning to flat territory.

NOTABLE ASIA-PAC HEADLINES

• PBoC is reportedly to plan a policy overhaul as pressure mounts on the economy and said it was likely it would cut interest rates from the current level of 1.5% at an appropriate time, while the report noted it would prioritise “the role of interest rate adjustments” and move away from “quantitative objectives” for loan growth in what would amount to a transformation of Chinese monetary policy, according to FT.
• China's NDRC held a briefing regarding high-quality growth and announced it will sharply increase funding from ultra-long treasury bonds this year to support "two new" programmes, while it is to broaden the consumer trade-in initiative to include smartphones. NDRC expects consumption to maintain steady growth in 2025 and noted China's economy is facing many new difficulties and challenges in 2025 but added there is ample room for macro policies in 2025. Furthermore, the NDRC deputy head announced an allocation of CNY 100bln in 2025 for two new and two major projects in advance, while it will push major reforms in 2025 to stabilise expectations, boost confidence and promote development, as well as step up efforts surrounding employment.
• South Korean investigative authorities visited President Yoon's residence to attempt to carry out an arrest warrant but were prevented from carrying out the arrest amid a standoff with a military unit, while two South Korean military officials including the martial law commander were indicted and detained by prosecutors. Furthermore, South Korean acting President Choi ordered to deploy market stabilising measures swiftly and boldly if volatility heightens, as well as announced to prepare tax support measures for small and medium-sized firms to boost corporate investment.

GEOPOLITICS

MIDDLE EAST

• Israeli military said it attacked and destroyed medium-range rocket launchers at a Hezbollah military site in southern Lebanon.
• Israeli army noted sirens sounded in several areas of central Israel after a rocket was fired from Yemen, according to Sky News Arabia.
• Israeli PM Netanyahu approved of the delegation to resume ceasefire negotiations in Qatar's Doha, according to the PM’s office cited by Reuters.
• Israeli negotiators will travel to Doha on Friday for a last-ditch effort to reach a breakthrough in the negotiations over the Gaza hostage and ceasefire deal before Trump assumes office, according to Axios citing Israeli officials.
• Hostage negotiations are reportedly not stuck and there has been progress, via The Jerusalem Post citing sources familiar with the matter.
• Sky News Arabia correspondent reported huge explosions in Syria's Aleppo amid Israeli raids.
• US President Biden reportedly discussed plans to strike Iran's nuclear sites if Tehran speeds towards a nuclear bomb, according to Axios. White House national security adviser Sullivan presented Biden with options for a potential US attack on Iran's nuclear facilities if the Iranians move towards a nuclear weapon before January 20 in a meeting several weeks ago that remained secret until now. Biden and his national security team discussed various options and scenarios during the meeting, which took place roughly one month ago, but the president did not make any final decision, while a US official with knowledge of the issue said the White House meeting was not prompted by new intelligence or intended to end in a yes or no decision from Biden. Instead, it was part of a discussion on "prudent scenario planning" of how the US should respond if Iran were to take steps like enriching Uranium to 90% purity before January 20. Furthermore, another source said "There are currently no active discussions inside the White House about possible military action against Iran's nuclear facilities".

RUSSIA-UKRAINE

• Ukrainian President Zelensky said US President-elect Trump can be decisive in the war and can help Ukraine stop Russian President Putin.

EU/UK

NOTABLE HEADLINES

• UK Chancellor Reeves warned ministers to consider cuts to frontline services to fund above-inflation pay increases for public sector workers, according to The Times.