Global Market Quick Take: Asia – February 10, 2025

Key points:  

• Macro: Trump announces new 25% tariffs on all steel and aluminium imports 
• Equities: DBS Q4 profit up 10%, announces increased dividends for 2024
• FX: DXY rose to 108.2 amid tariff threats and delayed cuts 
• Commodities: Copper trades above $4.50 due to supply concerns from Chile 
• Fixed income: 2-year Treasury yield hits 2-week high  

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Disclaimer: Past performance does not indicate future performance.  

 Macro: 

• On Sunday, Trump stated that he will announce new 25% tariffs on all steel and aluminum imports into the U.S. on Monday. These tariffs would be in addition to the existing duties on metals, marking another significant escalation in his trade policy overhaul. Trump will also announce reciprocal tariffs on countries that tax US imports and would “affect everyone”. 
• US unemployment rate dropped to 4.0%, below the expected 4.1%. Unemployment decreased by 37,000 to 6.85 million, and employment increased slightly to 163.9 million. The labor force participation rate rose to 62.6%, and the employment-population ratio to 60.1%. 
• US added 143K jobs, below December's revised 307K and the 170K forecast. Gains were seen in health care (44K), retail trade (34K), social assistance (22K), and government (32K). 
• Canada's unemployment rate dropped to 6.6% from 6.7%, defying expectations of a rise to 6.8%. This eased concerns about a weakening labor market, indicating greater robustness than forecasted. 
• China's inflation rose to 0.5% from 0.1%, surpassing the 0.4% forecast and reaching its highest since August 2024. This was due to the Lunar New Year, government stimulus, and supportive monetary policy. Food prices rebounded, and non-food prices increased, while transport costs decreased more slowly. The monthly CPI increased by 0.7%, the highest in 11 months, but below the 0.8% estimate. 

Equities:  

• US - US stocks fell on Friday as investors reacted to potential new tariffs from the Trump administration and rising inflation expectations. The S&P 500 and Nasdaq dropped 0.9% and 1.3%, respectively, while the Dow declined by 443 points. Reports of possible reciprocal tariffs and higher one-year inflation expectations at 4.3% increased market anxiety. The January jobs report showed 143K new jobs, slightly below expectations, but with a reduced unemployment rate of 4.0%. Amazon shares fell 4% due to weak revenue guidance despite strong earnings. For the week, the S&P 500 and Nasdaq rose 1.5% each, and the Dow gained 0.8%.
• EU - The DAX dipped toward 21,880 on Friday, near recent highs, as traders reviewed a US jobs report indicating strong labor conditions. German industrial production saw its largest drop in five months, and Porsche AG shares decreased nearly 6% due to impairments and weak 2025 sales guidance. The DAX is up about 0.7% for the week.
• DBS Group's Q4 net profit rose 10% to S$2.62 billion, with total income up 10% to S$5.51 billion. The bank plans a 15 cents per quarter capital return dividend and a final dividend of 60 cents, totaling S$2.22 per share for 2024. Annual net profit increased 11% to S$11.41 billion, surpassing expectations. DBS anticipates a slight decline in net interest margin, offset by loan growth.
• Earnings this week: Coca-cola, Cisco, Mcdonalds, Shopify, Palo Alto, Airbnb, Twilio, AppLovin, Applied Materials, SMCI

FX: 

• The dollar index (DXY) increased to 108.2 following President Trump's tariff threats against countries with trade levies on the US. Fed rate cut expectations were delayed due to strong wage growth and low unemployment.
• EUR dropped below $1.04 due to a widening US-Europe interest rate gap. Strong US jobs data boosted the dollar, while ECB rate cuts and potential easing pressured the euro. Concerns over US tariffs and deflation may lead to the ECB rate falling to 1.87% by December. 
• GBP steadied at $1.24 after the Bank of England cut rates and growth forecasts, raising inflation concerns. Traders expect more easing. US markets ignored the jobs report, aligning with the Fed's stable rate outlook. 
• CAD rose to 1.43 against USD from a 22-year low, driven by strong labor data reducing rate cut urgency. Unemployment fell to 6.6%, but the Ivey PMI dropped to 47.1, supporting policy easing expectations. The BoC plans to resume asset purchases in March. 
• JPY, which usually benefits from risk-averse sentiment, was affected by Trump's tariff discussions focusing on Japan. Trump seeks to eliminate the trade deficit with Japan, potentially using tariffs to achieve this goal, leading USDJPY to weaken to approximately 151.30. 

• Major economic data: ECB President Lagarde speech, BoC market participant survey

Commodities:

• Gold stayed above $2,860, near record highs, as expectations grew for major central banks to ease monetary policrom energy transitions. Chile's copper commission warned of potential risks from geopolitical tensions and US tariffs. 
• WTI March crude futures rose overnight but faded due to Trump tariff concerns, settling at $71.00, up $0.39 or 0.55%. Despite this gain, crude marked its third consecutive weekly decline. 

Fixed income:  

• Treasury futures declined as attention shifted from the soft January jobs report to a strong upward revision and higher-than-expected earnings, with the unemployment rate falling to 4%. This led to a selloff, leaving yields near session lows and widening SOFR swap spreads. Treasury yields were cheaper by 5 to 6.5 basis points, with the 10-year yield at about 4.48%. Canadian bonds underperformed, trading roughly 5.5 basis points cheaper than Treasuries, influenced by block sales in 10-year note futures.

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