Asia Breakfast Briefing - 19 Jan 2018 ASIAN PREVIEWQuiet end to the week f

ASIAN PREVIEW

Quiet end to the week for Asia with nothing of note in the calendar

Europe to feature Nov current account, German Dec PPI

UK"s retail sales arguably the highlight of the day

US to release prel Jan Michigan consumer sentiments

Fed officials Quarles and Bostic to speak

Viewpoint: Wages, Inflation Expectations and the BoJ

Viewpoint:Risk, Uncertainty and (Short) Volatility

Review of Australia"s Dec jobs report

Total employment change - act 34.7k, surv 15.0k, prev 61.6k rev to 63.6k

Part-time employment change - act 19.5k, prev 19.7k rev to 20.0k

Full-time employment change - act 15.1k, prev 41.9k rev to 43.6k

Unemployment rate - act 5.5%, surv 5.4%, prev 5.4%

Participation rate - act 65.7%, surv 65.5%, prev 65.5%

Key Takeaways

While Australia"s Dec headline employment change print was a beat, the underlying/accompanying data was less than inspiring.

Unlike Nov"s total jobs gains, which were spearheaded by strong full-time job additions (which are deemed to be a better indicator of long-term labour market health), Dec"s total jobs gains were led by part-time additions. Mixed signals were also seen from a Dec labour participation beat and a Dec unemployment rate miss, though the time series" broader trends are still not deemed to be materially hinged yet.

Also, monthly jobs blips ought to be taken with a pinch of salt given how the total employment change time series tends to be highly volatile in nature. Regardless, when it comes to the RBA, a world"s worth of strong prints on the employment change, the labour participation rate or even the unemployment rate front may not eventually mean much if measures of wage growth and inflation remain muted and elusive.

Market Reactions

AUD/USD saw knee-jerk gains on the headline Dec employment change beat, though said gains were quickly more than reversed as the underlying/accompanying jobs report data showed to be less than inspiring. That said, we do not expect today"s Aussie jobs report release to materially unhinge the pair from its 1.5-month bullish trend though some intraday pullbacks/consolidation may be seen. Moving forward, the pair is likely to take next cues from today"s slew of China data releases with the economy"s Q4 y/y GDP primed to moderate to 6.7% from Q3"s reading of 6.8%.

AUD/NZD too saw knee-jerk gains on the headline Dec employment change beat though said gains have too been faded with the pair now broadly unchanged from before the Aussie jobs report release. Regardless, the pair continues to persist in its broader sideways price action of between 1.1022 and its 200-day SMA (currently at 1.0841) with a mid-term rangebound play still looking live in the absence of fresh drivers for Antipodean divergence. Next AUD/NZD cues are also to be taken from the slew of China data releases later today.

ACGB yields slipped across all maturities following the Aussie jobs report, with bull flattening moves seen as longer end yields (10Y, 15Y, 30Y) declined more than short end yields (3Y). TY

OVERNIGHT SESSION WRAPS

US FX Close

EUR/USDUSD/JPYGBP/USDAUD/USDUSD/CADDOWDXYOPEN1.2243111.291.38870.79901.2446-97.8490.547HIGH1.2265111.301.39130.80071.2487CLOSED90.654LOW1.2220110.701.38550.79821.2415@90.408CLOSE1.2238111.061.38890.79971.241826017.8190.536

The USD Index was virtually unchanged heading into Thursday"s close after once again paring overnight strength throughout the afternoon with the Dollar hovering near Wednesday"s 3+ year low. Disappointing Housing Starts and Philly Feb Business Outlook data were offset by Jobless Claims falling the most since 2009. Uncertainty whether lawmakers will be able to reach an agreement on spending to avoid a Government shutdown Friday also continued to weigh. The Swiss Franc outgained all other G-10 currencies with Usd/Chf trending lower from an overnight 3-session high towards the 76.4% retracement of the .9421/1.0038 rise at .9567. Eur/Usd firmed after earlier dipping under the 38.2% retracement of the recent 1.1916/1.2323 rise at 1.2168 to snap a 2-day skid. Gbp/Usd posted its 6th consecutive session without a loss. Aud/Usd recovered from overnight weakness incurred after an unexpected rise in unemployment to finish in the black for the 6th time in 7 sessions. Usd/Nok fell for the 18th time in 21 days with the daily RSI falling to levels not seen since July. Usd/Jpy was once again in the red after pausing Wednesday, though did manage to pare losses. Chf/Jpy extended strength off the 10 January reaction low towards the 8 January 116.24 3.5-month high. Friday"s data is on the light side with the preliminary January University of Michigan Consumer Sentiment release and Fed speak from Bostic and Quarles.

US Treasury Close

10-YEAR30YY10YY5YY2YY2/105/3010Y SwapHIGH97-04

2.8962.6182.4212.05656.748.12.641LOW96-26+2.8472.5832.3992.03953.544.12.592LAST96-29+

2.8892.6092.4062.03956.647.72.619CHANGE- 4+/32+.032+.019+.002-.004+2.2+2.6+.021

TREASURIES CLOSE 3:05PM – Overnight, Chinese GDP data beat estimates, posting its first full-year pickup since 2010 and putting downward pressure on Treasuries. US 10-year yields pushed over 2.600 to post new 10-month highs with volumes picking up overnight as this milestone was passed. The long-end led the slide, staging a bear steepener. After a brief pause when North Americans rolled into work, mixed data pushed the long-end to new lows and the front end to the lower end of overnight ranges. Jobless Claims declined the most since April 2009, but Housing Starts and the headline Philadelphia Fed Factory Index both disappointed. Subsequently, Treasuries traded in a relatively narrow range. 10-year yields remained just below the key 2017/2016 peaks at 2.628/39 respectively. 5-year yields posted new 7-year 8-month highs while 2s, which had posted new 9-year highs, returned to session lows into the close. The curve remained near the steepest levels of the day with 5/30s stabilizing after probing the 2007 narrows at 44 near a Fibonacci equality projection at 42 (288/184 from 146) and 2/30s stabilizing from the 77 area, a level not seen since October 2007. 10, 5 and 2-year futures posted new contract lows. The Treasury announced that it would auction $26 bln in 2-year notes and $28 bln in 7-year notes next week. The $13 bln 10-year TIPS auction was well received, featuring the biggest stop in a year and a record low dealer award at 11%. The indirect award at 78.9% vs. 69.0% previously was also close to the record of 80.3% set last May. At 2.69, the bid-to-cover ratio was the highest since May 2014. NY Fed"s Dudley reiterated the case for three hikes in 2018 in an FT interview mid-afternoon. A vote is expected later this evening on stop-gap funding to avoid a government shutdown. Friday, data is on the light side with the preliminary January University of Michigan release and Fed speak from Bostic and Quarles.MO

DAY AHEAD

Time (GMT)CtyEventPeriodSurveyPrior18/1/18 21:30NZBusinessNZ Manufacturing PMIDec--57.718-01-18HKComposite Interest RateDec--0.32%18-01-18IDBank Indonesia 7D Reverse RepoJan-184.25%4.25%18/1/18 - 22/01/18IDMotorcycle SalesDec--55030318/1/18 - 22/01/18IDLocal Auto SalesDec--9614819/1/18 - 26/01/18PHBudget Balance PHPDec---8.6b18/1/18 - 25/01/18SLExports YoYNov--14.10%18/1/18 - 25/01/18SLImports YoYNov--0.20%19/1/18 02:00CHBloomberg Jan. China Economic Survey

19/1/18 07:00GEPPI MoMDec0.20%0.10%19/1/18 07:00GEPPI YoYDec2.30%2.50%19/1/18 07:30THForeign ReservesJan-12--$204.0b19/1/18 07:30THForward ContractsJan-12--$36.5b19/1/18 09:00ECECB Current Account SANov--30.8b19/1/18 09:00ECCurrent Account NSANov--35.9b19/1/18 09:00SPTrade BalanceNov---2511m19/1/18 09:30UKRetail Sales Ex Auto Fuel MoMDec-1.00%1.20%19/1/18 09:30UKRetail Sales Ex Auto Fuel YoYDec2.60%1.50%19/1/18 09:30UKRetail Sales Inc Auto Fuel MoMDec-1.00%1.10%19/1/18 09:30UKRetail Sales Inc Auto Fuel YoYDec2.60%1.60%19/1/18 09:30ITCurrent Account BalanceNov--6551m19/1/18 15:00USU. of Mich. SentimentJan P9795.919/1/18 15:00USU. of Mich. ExpectationsJan P85.384.319/1/18 15:00USU. of Mich. 1 Yr InflationJan P--2.70%19/1/18 15:00USU. of Mich. 5-10 Yr InflationJan P--2.40%19/1/18 15:00USU. of Mich. Current ConditionsJan P114.4113.819-01-18PHBoP OverallDec---$44m

Central Bank Watch

Time (GMT)CtyEventVoterBias19/1/18 01:10JNBOJ Outright Bond Purchase 5~10 Years

19/1/18 01:10JNBOJ Outright Bond Purchase 10~25 Years

19/1/18 01:10JNBOJ Outright Bond Purchase 25 Years~

19/1/18 13:45USFed"s Bostic Speaks on U.S. Economy in NashvilleAlt voterNeutral19/1/18 13:45USFed"s Bostic Speaks on the Economy

19/1/18 18:00USFed"s Quarles Speaks on Bank RegulationYesNeutral

Auctions

Time (GMT)CtyEvent01/1/18 - 31/01/18MAMalaysia to Sell 15Yr Bonds Due 2033 (Reopening)19/1/18 09:30INIndia to Sell INR30 Bln 6.84% 2022 Bonds19/1/18 09:30INIndia to Sell INR80 Bln 7.17% 2028 Bonds19/1/18 09:30INIndia to Sell INR20 Bln 7.73% 2034 Bonds19/1/18 09:30INIndia to Sell INR20 Bln 7.06% 2046 BondsDestinations: