Market News

The main issue that market players are struggling to grasp right now is the relative uncertainty with regards to the duration of the US-Iran conflict. That mainly affects the energy security in the region, especially with regards to the Strait of Hormuz and threats to other oil and gas facilities in Gulf nations. In turn, that plays to the broader market mood such as risk sentiment and inflation fears.

From the early reaction, one can argue that we're not quite seeing a lot of fear priced in just yet. The baseline seems to be the case that Iran will slowly be incapacitated to the point where they won't be able to stir up much of a ruckus and normal operations resume eventually. But with each passing day that the status quo remains, markets…

• China five-year plan calls for more proactive fiscal policy
• China to continue 'moderately loose' monetary policy
• Iran denies that messages were sent to the US about negotiations
• China floats some tax changes
• A federal trade-court judge ordered a swift repayment of tariffs. Why it matters
• Australian January goods trade balance +2.631B vs +3.90B expected

Markets:

• Korean Kospi +8.6%
• Nikkei 225 +1.6%
• S&P 500 futures -0.2%
• WTI crude oil up $2.51 to $77.21
• US 10-year yields up 3 bps to 4.11%
• USD leads, AUD lags

Eyes were on Asian stock markets after yesterday's 11% drop in South Korean indices and they didn't disappoint with a 12% pop at the open led by Samsung. However the bids faded after the open and we're down to just +8.6% in astonishing trading for a…

It's only been a little over three trading days but markets are evidently fearful of inflation pressures returning to major economies. Even if not fully reflected in central bank pricing, in which the needle has definitely moved, then at least take caution from the bond market. 10-year Treasury yields are up 16 bps since the end of last week, keeping around 4.11% today.

With oil prices staying underpinned and the Strait of Hormuz under de facto closure, market players will slowly have to factor this short-term spike in price pressures a lot more in the weeks ahead.

It's sort of a repeat of the whole Russia-Ukraine conflict again, only with more uncertainty as to how long the disruption here might be. It could end as soon as tomorrow or…

• Will enhance the coordination of fiscal and monetary policy
• To optimise the structure of fiscal expenditure
• Will keep liquidity ample, improve sustainability of government finances
• To keep exchange rate basically stable, enhance flexibility of the yuan
• Will release the full potential of services consumption
• Will boost effective investment, balance attraction of foreign investment
• To greatly boost self-reliance in science and technology
• Will boost high quality development of real estate
• To promote healthy and stable housing market development
• Will promote high-quality and adequate employment
• To enhance advantages in rare earths, metals, and also use of strategic minerals
• Will encourage internet platforms, AI firms to expand overseas applications
• To…

This was out a few hours ago but it's important context in why oil prices are back near the post-war highs.

Previously on Wednesday, a report said that Iran had reached out the US about negotiations. They were Axios reports saying that Iranians had sent messages over the last few days but that the US didn't respond.

This report from Iran's Tasnim news agency cites an Iranian official who said:

"No ⁠message has been sent ​from Iran to the ​US, nor will any response be given to US messages. Iran's ​armed forces have prepared ​themselves for a long war."

Along those lines, Politico reports that the US has asked intelligence officers to post for 100 days. That's a much longer timeline than the 4-5 weeks that Trump floated but it could just be…

Chinese stocks are up more than 1% today after the National People's Congress revealed growth targets and some government priorities but now we're getting some details. Chinese consumer stocks are laggards so far, up around 0.5% but we're getting some notable headlines from the state planner now:

• Will improve the local tax system
• Will better leverage new policy-backed financial instruments and replenish the capital of major projects
• Will move consumption tax collection for some items down towards producers
• Will adjust and optimize the scope and rate of consumption tax

Again, we're not getting details here but it looks like some real action.

I can't remember a time when the national stock market of a large, developed country traded like this. The Kospi rose 12% at the open today and is still up 11.4%. That's after an 11% decline yesterday.

If this were a time of covid or there was a war in the Korean peninsula, these moves would be understandable but the war is 6500 kilometers away and the effects are only tangential via energy prices.

What's clear is that a mania swept over Korean stocks after years of ultra-depressed multiples. The gains were kicked off by memory stocks and the broader market taking a closer look at Samsung technology. That spread as local traders started trading with leverage and led to gigantic gains last year. Even if the index is cut in half, it still has…

Well, this is moving faster than anyone expected.

A federal trade court judge just told the Trump administration to start cutting checks — ordering refunds on the massive pile of tariffs the Supreme Court struck down last month. This is a significant potential bit of stimulus for the US economy as it relates to $130 billion.

Judge Eaton isn't in the mood to wait around. The the Manhattan-based Court of International Trade judge issued a written order directing the administration to begin the process of refunding importers and wants updates on Friday.

According to the WSJ, the government tried to get a pause while it appeals. Denied. A DOJ lawyer said they hadn't even figured out their position on refunds yet.

The China National People's Congress kicks off today and the five-year growth targets and plan are out, with Reuters obtaining a copy.

• 2026 GDP target set at 4.5% to 5%
• CPI target set at around 2%
• Growth rate set for 'reasonable rate' for the next five years
• Will set 2026 budget deficit at 4% of GDP
• Plan will stick to strategic aim of expanding domestic demand
• Will implement more proactive fiscal policy
• Unchanged quote on local government special bonds
• Will set up efforts to improve people's livelihoods
• Aims to achieve greater self-reliance and strength in science and technology
• Will address risks from real estate, local gov't debt, small and medium local financial institutions
• Will make fiscal policy play a positive role in boosting consumption and…

We are going to get a bounce in Asian stock markets today but the question is: How high.

Nikkei futures are trading at 56,310 versus the close yesterday of 54,245 in the cash market. That's a healthy 3.8% rally following a 3.6% decline yesterday. I should warn that cash prices don't always follow futures and with volatility this high, there will be two-way trading.

The chart tells something of the story. Yes, the decline yesterday was a blow but the index remains up 7.7% year-to-date and a whopping 45% in the past year. The market likes the low multiples in Japanese stock markets and some of the technology.

The Bank of Japan leader reiterated plans to continue with rate hikes and that's not a surprise given rising energy prices. The Japanese…

The Asia-Pacific economic calendar has only one highlight today and that's the Australian January trade balance in goods report. The consensus is a surplus of A$3.9 billion, in a solid improvement from +$3.337 billion in December.

Yesterday's price action in AUD was strange as it was a laggard despite the stronger GDP number. I tend to think the drop in gold prices and rout in mining stocks might have discouraged some of the thinking around an investment boom.

Naturally, all eyes remain on the Middle East but the market is clearly getting more comfortable with the risks around the war. Today, the US and Israel claimed "local air superiority" and said they've struck 1000 targets since Feb 28.

I wrote yesterday about the good news in the…