A positive end to the week

After a couple of days of risk aversion, it's good to see some green re-enter the screens, and that at least should provide Asia with a more positive start to trading than it has seen in recent days.

As far as individual markets go, yesterday's stock recovery also brought with it some increase in US Treasury yields, which were up almost 3bp to 1.045%, but despite this, the USD slid against the EUR slightly, and it is looking as if back at these lower yield levels, the USD has returned to behaving more as a risk-on / risk-off currency. If that is the case, then Asian FX should recover some ground today and with the KRW having been easily the most battered of all the Asian currencies this week, I would look for that to bounce the most today. The KRW might also take come comfort from strong industrial production figures out already this morning - more on that later.

Before we turn to the events of the day, its worth a quick backward look to see what also may have influenced sentiment yesterday.

One further spot of bright news regarding the Covid-19 pandemic was the third phase results from Novovax, which should probably get regulatory approval shortly (I say that, though the process seems very slow in some regions...EU). But that puts another source of the vaccine on the table, or at least it will shortly. That could get a further boost if the Johnson and Johnson vaccine also gets approval, especially as that only requires one jab I am led to believe, so could double the speed of vaccination.

We got 4Q20 GDP out of the US yesterday. Here's a link to James Knightley's commentary on that. But it was only slightly below consensus expectations, with consumer spending not growing too well. But as JK notes, this will pass. There are good reasons to be positive about growth in 2021. That release makes tonight's personal income and spending figures less interesting, but we do get University of Michigan sentiment data, and within that, the inflation expectations figures that have been creeping up recently. They will be worth a look. Jobless claims last night were also a bit better than expected, dropping slightly from last week.

As mentioned, we've already had some positive industrial production figures from Korea this morning for the December period. but the 3.7%MoM gain for industrial production owes mainly to a negatively autocorrelated series (it is whip-sawing), and the underlying rate of growth (while still decent and appearing to pick up pace) is not as strong as that one monthly figure suggests. Production strength is also not widely spread across the economy, with services, construction, and public administration all weakening from last month and the all-industry index only managing a 0.5% gain from last month. None of this is going to change anyone's expectations for BoK policy, which we see as being on hold for most of the year.

Malaysian Trade data and Thai production figures are also out today - for more on them - please check out our sister publication, ASEAN Morning Bytes.

Fingers crossed the good start persists for the whole of the day. Happy Friday and have a pleasant weekend.