Global Market Quick Take: Asia – March 4, 2025

Key points:

• Macro: Tariffs on Canada and Mexico begin Tuesday. Trump signs 20% tariff on China 
• Equities: Thales and Rheinmetall added more than 16% after Europe boost military budget 
• FX: USD drops due to concerns of slowing economic growth 
• Commodities: Oil prices hit yearly lows 
• Fixed income: 10-year yield fell to 4.15%, lowest since 9 Dec 

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Disclaimer: Past performance does not indicate future performance.  

 Macro:  

• US President Trump announced reciprocal tariffs starting April 2nd, with tariffs on Canada and Mexico beginning Tuesday. He stated there's no room for a deal on these tariffs and reiterated plans to double tariffs on China to 20%. Trump also mentioned penalizing countries with weak currencies, specifically China, and doesn't expect significant retaliation. The White House confirmed Trump signed an order for a 20% tariff on China. 
• The February ISM Manufacturing PMI was disappointing, with the main figure coming in at 50.3, below the expected 50.8. This underperformance was driven by significant drops in employment and new orders, both falling below 50, although prices paid saw a significant increase. 
• Japan's unemployment rate rose to 2.5%, exceeding market estimates and December's 2.4%. Unemployment increased by 20,000 to 1.74 million, while employment grew by 130,000 to 68.27 million.
• Euro Area's annual inflation rate eased to 2.4% from January's 2.5%, slightly above the expected 2.3%. Price growth slowed for services (3.7% from 3.9%) and energy (0.2% from 1.9%), but increased for unprocessed food (3.1% from 1.4%) and non-energy industrial goods (0.6% from 0.5%).
• The S&P Global Canada Manufacturing PMI dropped to 47.8 from 51.6, against expectations of 51.9. This marked the first decline in factory activity since August last year and the steepest since December 2023, due to contractions in output and new orders. 

Equities:  

• US - US stocks plunged on Monday after President Trump confirmed new tariffs, sparking economic fears. The S&P 500 fell 1.7%, Nasdaq 100 dropped 2.6%, and the Dow lost 649 points. Tariffs on agricultural products start April 2, with additional tariffs on Mexico, Canada, and China effective tomorrow. The tech sector was hit hardest, with Nvidia down 8.7% amid an investigation, and Broadcom, Tesla, and Amazon also seeing significant declines. The ISM report showed a sharp slowdown in US manufacturing and rising price pressures. 
• EU - European stocks surged on Monday, driven by a consensus to increase defense spending and broker a ceasefire between Ukraine and Russia. The Eurozone's STOXX 50 rose 1.6% to a record 5,551, and the STOXX 600 climbed 1.2% to 564. Over the weekend, European policymakers planned a potential peace deal for Ukraine and pledged to boost military spending. Airbus soared 6%, and Nokia gained 5.8% after announcing a 5G military application partnership with Lockheed Martin. Military manufacturers Leonardo and Dassault surged over 15%, while Thales and Rheinmetall added more than 16%.   
• HK – HSI rose 0.3% to 23,006, ending a two-day decline. China's National People's Congress is expected to set targets of 5% growth and a 4% budget deficit. Some hope US tariffs on China might be postponed after President Trump announced a 10% tariff starting March 4. Beijing is preparing countermeasures.   

Earnings this week:  

• Tuesday: Target, CrowdStrike, Flutter, Sea, On Holding  

• Wednesday: Zscaler, Marvell, Campbell, Foot Locker 

• Thursday: Broadcom, Costco, BJ’s Wholesale Club, JD.com, Gap 

• Friday: No notable earnings     

FX: 

• USD started the week weak due to poor ISM data but gained some support after President Trump announced new tariffs. He doubled tariffs on China to 20% and mentioned penalizing countries with weak currencies, including China. This pressured CAD, MXN, and CNH, but the USD's support was brief, with the DXY staying below 107.00. This pushed USDCAD to a session high of 1.4541 from 1.4370 and USDCNH to rise modestly to around 7.30.
• EUR rose steadily in the morning due to better-than-expected PMIs and stronger-than-expected EU HICP, with the EZ HICP Flash Y/Y at 2.4% (expected 2.3%, previous 2.5%). Encouraging HCOB PMI data from Italy, France, Germany, the EZ, and Switzerland (though Spain missed) also contributed, despite all remaining in contraction. EURUSD is around 1.0470, staying above its 50 DMA of 1.0388.
• JPY strengthened, with USDJPY falling below 150 due to dollar selling and haven demand. Lower Treasury yields, driven by soft US data and a risk-off theme in equities, supported the JPY. 
• GBP strengthened as a softer USD helped GBPUSD rise above 1.27 level. 
• Major economic data: Japan Consumer Confidence, Eurozone Unemployment Rate, Feb Williams Speech. 

Commodities:

• Oil prices hit their lowest this year as OPEC+ plans to resume halted production, increasing the crude surplus. WTI fell 2% to over $68, and Brent dropped below $72, following pressure from Trump to lower prices.
• Gold hovered near $2,892 an ounce after a 1.2% rise, with tariffs on Mexico, Canada, and China increasing. Tensions rose as the US paused military aid to Ukraine. 

Fixed income:  

• Treasury yields dropped to new yearly lows after Trump dismissed tariff relief for Canada and Mexico and doubled tariffs on China. Initial declines were offset by unexpected declines in new orders and employment in the February ISM report. Yields were richer by up to 7 basis points, with 10-year yield at 4.15%, lowest since Dec 9. 

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