Overview: The tech sell-off in the US yesterday, ostensibly driven by higher rates, carried over into trading today. South Korea, China, and Hong Kong led the regional sell-off. News that China's zero Covid tolerance led to a lockdown of the city of Xian with a population of around 13 mln played on fears of more supply chain disruptions. A second city, Yuzhou, considerably smaller, has also been lockdown. Japan, India, and several smaller markets gain. European bourses, where tech is less prominent have edged higher and the Stoxx 600 is extending its gain for the third consecutive session. US futures are softer. Asia and most European bonds yields have risen today, while the US 10-year is steady around 1.64%. Of note, with Italian politics rising as an issue ahead of the presidential contest later this month, maybe helping lift the 10-year BTP to new six-month highs near 1.22%. The US dollar is seeing its recent gains trimmed against the major currencies. The Japanese yen is recovering a little after falling to five-year lows yesterday. The Canadian dollar is the laggard today, amid a sell-off in its bonds. The emerging market currency complex is mixed, and the JP Morgan EM FX index is recouping about half of yesterday's 0.35% loss. Gold is firm but remains within Monday's range (~$1798.50-$1832). Among the industrial metals we monitor, iron ore bounced back after yesterday's minor loss and is at its best level since Xmas eve. Copper is being turned back after yesterday's rally stalled near the $448 cap. Crude oil is consolidating yesterday's gain and February WTI is near $77.00. US LNG firm but within the $3.50-$4.00 range, while European (Dutch) is extending yesterday's dramatic gain (31.6%).

Asia Pacific

While China has moved quickly to impose lockdowns where cases of the virus appear, the tech sector is off to a poor start. The Heng Seng Tech Index fell 4.6% today, the most since July, and the third consecutive drop. Tencent is reducing its investments, and this took a toll on companies it backed. Some link Tencent decision to Beijing's push against anti-competitive practices. The NASDAQ Golden Dragon Index, which tracks Chinese lists companies fell 4.3% yesterday. The tech sell-off was also clear in the US where the NASDAQ shed 1.3%. Japan's "Mothers" gauge weighted toward small and medium-sized software and technology companies fell 5% to its lowest level since May 2020. In the last hours of trading, after HK tightened social restrictions, the equity loss intensified.

Japan reported that December auto sales were 10.2% lower than a year ago. Yesterday, the US reported disappointing December auto sales. Auto sales were expected to have risen to their best level since August but instead fell to a 12.44 mln unit annual pace. It was the lowest since September and reflects a 23.6% decline from December 2020. Last year, US auto sales averaged 14.93 mln a month compared with 14.41 mln in 2020 and 16.91 mln in 2019. Although supply is argued to be a bigger problem than demand, some producers, like GM, have reported a substantial rebuilding of inventories.
https://www.fxmag.com/currencies/dollar-eases