At a glance:

• South Korea’s Q4 GDP unexpectedly contracted, highlighting macro weakness, though equities surged to record highs on improved global risk sentiment.

• Japan’s exports rose for a fourth month but missed forecasts, while USD/JPY remained volatile ahead of the Bank of Japan meeting.

• Australia’s jobs data smashed expectations, lifting the AUD and pulling forward RBA rate-hike pricing.

• Regional FX moves were driven by shifting rates expectations and easing tariff rhetoric.

• Gold traded sideways, consolidating near recent highs.

South Korea’s economy contracted 0.3% q/q in Q4, sharply missing expectations for modest growth. Investment, construction and exports all weighed on activity, while full-year GDP slowed to 1.0%, marking the weakest annual expansion since 2020 and reinforcing concerns about underlying momentum.

However, the growth disappointment was largely ignored by equity markets. South Korea’s stock benchmark surged past 5,000 points for the first time, powered by strong gains in chipmakers. The index is now up around 19% for the month, buoyed by improved global risk sentiment. Donald Trump backed away from fresh tariff threats against European nations, helping ease broader market weakness.

In Japan, exports rose 5.1% y/y in December, extending the recent run of gains but falling short of forecasts as shipments to the US dropped sharply. Imports beat expectations, narrowing the trade surplus. The yen was choppy: USD/JPY initially climbed toward 158.50, slipped back to around 158.20, and then weakened again, pushing above 158.60 as the session progressed. Japanese government bond yields continued to calm following their sharp surge earlier in the week. The Bank of Japan meets today and tomorrow, with an on-hold decision widely expected ahead of further policy normalisation later in the year.

Australia delivered the standout data. Employment jumped 65.2k in December, far exceeding forecasts, while the unemployment rate fell to 4.1%. The strength of the report lifted the Australian dollar and pushed markets to price roughly a 50% chance of a February rate hike from the Reserve Bank of Australia. The AUD surged to a 15-month high on the release and has since extended gains, with the NZD rising in sympathy, though to a lesser degree.

Gold was little changed, trading sideways around US$4,800 as markets consolidated after recent strong gains.

Asia-Pac
stocks:

• Japan
  (Nikkei 225) +2%, breaking
  its run of 5 days of consecutive losses
• Hong
  Kong (Hang Seng) -0.1%
• Shanghai
  Composite -0.15%
• Australia
  (S&P/ASX 200) +0.7%