Japan’s corporate sentiment remained broadly stable in the Bank of Japan’s December Tankan survey, with large manufacturers’ sentiment holding steady and services-sector conditions remaining elevated. While profit expectations softened and labour shortages persisted, follow-up comments from a BOJ official highlighted easing trade uncertainty, improved cost pass-through and resilient demand, particularly linked to AI and semiconductors. Rising labour costs and price pressures were cited as headwinds, but overall the data and commentary reinforced the case for gradual policy normalisation. The BOJ is widely expected to deliver a rate hike at its December 18–19 meeting. In FX markets, the yen initially weakened following the Tankan release, with USD/JPY pushing toward the 156.00 level in early trade. However, the move quickly reversed as markets digested the details, with the pair sliding back to around 155.30, reflecting growing sensitivity to BOJ policy expectations.

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NZD/USD lost ground on remarks from Reserve Bank of New Zealand Governor Breman hinting at a further move lower in rates, if needed.

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Over the weekend, China’s finance ministry said it plans to issue ultra-long-term special government bonds next year, with proceeds earmarked for key national strategies, security initiatives and industrial upgrading. The announcement signals ongoing fiscal support, though the lack of detail around specific projects limited immediate market reaction.

Stress in the property sector remains acute. Bonds issued by China Vanke were sold heavily, with the developer still locked in negotiations with bondholders just one business day ahead of a key maturity and no agreement yet in place. Fresh data underscored the depth of the downturn, with new home prices falling month-on-month for a 30th straight month and existing home prices declining for a 31st consecutive month.

November activity data painted a mixed picture. Retail sales growth slowed sharply, reflecting weak consumer demand amid falling household wealth. The National Bureau of Statistics said the economy had “stabilised while improving,” citing firmer momentum in parts of industrial production and services, but acknowledged ongoing challenges. Officials pledged to step up counter-cyclical and cross-cyclical policy adjustments, signalling readiness to deploy further support if needed, though no specific measures were announced.

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In regional FX, the onshore yuan climbed to a 14-month high, while the Indian rupee continued to weaken, drawing further intervention from the Reserve Bank of India. Geopolitics Ukraine signalled a potential shift in its war aims, with President Volodymyr Zelenskiy indicating a willingness to drop NATO membership ambitions as peace talks with U.S. envoys in Berlin showed signs of progress.

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Note:

Rollover for U.S. equity index futures takes place on Monday, December 15, with liquidity expected to migrate into the next contract as volume and open interest shift.

Asia-Pac stocks:

  • Japan (Nikkei 225) -1.47%
  • Hong Kong (Hang Seng) -0.92%
  • Shanghai Composite -0.11%
  • Australia (S&P/ASX 200) -0.77%
Source: Investing Live