Asia FX steady with weak China data in focus; yen rises on BOJ hike bets

Asian equities opened with a modest decline as investors adopted a cautious approach ahead of the release of critical US economic data, which is expected to provide insights into future interest rate movements. The Japanese yen, however, gained strength during this period.

China has reported its first annual investment decline in 30 years, with economic data for November indicating deepening domestic issues. Retail sales have grown at their slowest pace in three years, and investment has sharply slowed, reflecting increased caution among consumers and businesses. This downturn comes despite a record trade surplus of $1.08 trillion, highlighting a significant gap between exports and imports.

China's new economic model, characterized by a trade surplus exceeding $1 trillion, poses significant risks to the future of Asia's Gen-Z, as it shifts economic advantages away from the region's youth. This surplus is largely fueled by a weakened renminbi, which has made Chinese exports more competitive globally.

In November, China experienced a significant decline in investment, falling more than 10 percent, marking a potential first investment decline in three decades. This downturn is largely attributed to the ongoing property crisis, exemplified by the financial distress of major developers like Vanke, which is struggling with substantial debt.

Ample oil supply is currently shielding China from the disruptions in Venezuelan oil flows, which have been exacerbated by geopolitical tensions and U.S. interventions. Recent events, including the U.S. seizure of a sanctioned tanker, have raised concerns about the stability of Venezuelan oil exports, impacting global oil prices and market dynamics.

Global stock markets exhibited mixed performance at the start of the week, with declines noted across Asia while European markets opened higher and U.S. stock futures indicated a modest increase. This reflects ongoing volatility as investors navigate uncertain economic conditions.

Japanese companies are signaling a willingness to raise wages in the upcoming year, despite concerns over potential profit impacts from tariffs. This trend is highlighted in a recent report from the Bank of Japan (BOJ), which indicates a positive outlook for wage growth in the country.

JGB futures saw a slight increase in early Tokyo trading as investors processed the Bank of Japan's (BOJ) latest Tankan survey, which gauges business sentiment in Japan. This uptick reflects market reactions to the economic outlook presented by the BOJ.