US and British airstrikes against Houthi targets in Yemen dominated the news today in Asia. Despite being warned against attacking commercial ships in the Red Sea, Iranian-backed Houthi terrorists have accelerated their attacks. US and British strikes to ensure the safety and freedom of passage of cargo ships targeted radar facilities, storage sites and missile launch pads. The strikes were carried out by fighter aircraft based on the aircraft carrier USS Eisenhower, as well as Tomahawk missiles launched from submarines and surface ships. British fighter planes based in Cyprus participated. Support was provided by Australia, the Netherlands, Bahrain and Canada.
Financial markets responded mainly in a very subdued manner. The yen rose. USD/JPY is trading below 145.00 as published. Oil also rose, extending gains made on Thursday.
On the data front, the focus was on Chinese inflation data for December (we had trade data for the same month as well). The best that can be said about the inflation numbers is that while consumer price deflation has extended into a third month, it has eased slightly. The Producer Price Index (PPI), inflation at the “wholesale” level, has remained in a deep and persistent state of deflation.
The People’s Bank of China is scheduled to prepare the medium-term lending facility on Monday. There is a widespread expectation of a 10 basis point cut, see the bullets above for more on this.