Global Market Quick Take: Asia – February 14, 2025

Key points:

• Macro: President Trump announced plans for reciprocal tariffs
• Equities: Robinhood rallied 14.1% and Coinbase rose 8.4% on positive earnings
• FX: USD weakened after Trump ordered an exploration of reciprocal tariffs
• Commodities: Gold closed at record high and Copper trades above $4.75
• Fixed income: Treasuries reverses to rally, flattening the yield curve

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Disclaimer: Past performance does not indicate future performance.

Macro:

• President Trump announced plans for reciprocal tariffs on countries imposing tariffs, VAT, or trade barriers on the US, with implementation expected in weeks. The Commerce Secretary indicated studies would be completed by April 1^st before being implemented, thereby allowing time for negotiations between trade partners. Countries can avoid US tariffs by lowering their own tariffs against US goods. Trump noted the EU reduced its VAT on US goods to 2.5% from 10%. Additional tariffs will cover autos, steel, aluminum, and pharmaceuticals over and above the reciprocal tariffs with no exemptions.
• US Core PPI rose 0.3% MoM in January, matching forecasts but easing from 0.4% previously. Year-over-year, it rose 3.6%, above the 3.3% consensus and top estimate of 3.4%, with the prior revised to 3.7%. The headline PPI increased by 0.4% MoM in January, surpassing the 0.3% consensus, with the previous month's figure revised up to 0.5%. YoY, it maintained a 3.5% pace, exceeding the 3.2% consensus and top forecast of 3.4%.
• US Initial jobless claims for the week ending February 8th fell to 213,000, below the expected 215,000, with the four-week average decreasing to 216,000. Continued claims dropped to 1.85 million, also below forecasts.
• UK economy grew by 0.1% QoQ in Q4 2024, surpassing expectations of a 0.1% contraction, after stagnation in Q3. Exports dropped 2.5%, but imports rose 2.1%. Gross fixed capital formation decreased, offset by increased inventories and a 0.8% rise in government spending. Household expenditure showed no growth.

Equities: 

• US - U.S. stocks surged on Thursday, easing inflation and trade concerns despite higher-than-expected inflation data. The S&P 500 rose 1%, the Nasdaq 100 added 1.4%, and the Dow increased by 343 points (0.7%). President Trump signed a memo to review reciprocal tariffs but likely implemented after April 1st. January's PPI rose 0.4%, above forecasts, but key PCE components indicated cooling inflation. Tech stocks led gains, with Tesla up 5.7%, Nvidia 3.2%, and Apple 2% after CEO Tim Cook hinted at a new product without revealing any details. Defence stocks fell as Trump proposed cutting defence spending, with Lockheed Martin, Northrop Grumman, General Dynamics, and Huntington Ingalls all declining. Robust earnings from Applovin (+24%), Robinhood (+14.1%), and Coinbase (+8.4%).
• Germany - DAX Index surged 2.14%, to a record 22,611, marking its fourth consecutive day of gains. The rise was driven by strong corporate earnings and optimism about a potential resolution to the Ukraine conflict, despite concerns over US trade policy. Rheinmetall led the DAX Index with a jump of over 9%. Siemens was among the top performers, gaining nearly 6% after reporting better-than-expected first-quarter profits. Auto stocks gained with Volkswagen (+6.5%), BMW (+5.7%), Mercedes Benz (+5.4%), and Porsche (+4.3%).
• Hong Kong – HSI fell 0.2% to 21,814, reversing earlier gains due to global trade uncertainties. Concerns included India's potential temporary tax on Chinese steel and possible US reciprocal tariffs. Property and tech stocks declined, with BYD Electronic (-8.0%), Xiaomi Corp. (-6.0%) and Lenovo (-5.5%). In contrast, Hong Kong Alibaba rose 2.6% following CEO Joe Tsai's announcement of an AI partnership with Apple.
• Earnings: Moderna, Enbridge, Magna International, Portland General Electric, Fortis

FX:

• The dollar index (DXY) fell below 107.09 after President Trump ordered an exploration of reciprocal tariffs against countries with unfair trade practices, targeting sectors like autos and semiconductors. The potential for negotiations eased immediate retaliation fears. The dollar weakened further as Trump and Putin agreed to initiate Ukraine peace talks, boosting the EUR with EURUSD rose above 1.04.
• GBP rallied 1% to above 1.256 support from a better-than-expected December GDP growth of 0.4% (forecasted at 0.1%). As a result, market expectations for the Bank of England's second 25bps rate cut shifted from September to the November meeting.
• CHF rose to 0.90 against USD as the dollar weakened on US-Russia Ukraine talks. Swiss inflation fell to 0.4% in January, its lowest in nearly four years, raising concerns about dropping below the Swiss National Bank's 0-2% target.
• USDJPY dropped 1.1% to 152.78, marking its largest decline since February 5. Meanwhile, USDCAD fell 0.9% to a session low of 1.4183, with the CAD reaching a new high for the year.
• Major economic data: EU GDP, US retail sales, US industrial production, Fed Lorie Logan speech

Commodities:

• WTI crude oil futures dipped 0.1% to $71.3 per barrel on Thursday, recovering from earlier losses due to optimism over a potential pause in new US tariffs. Earlier, potential Russia-Ukraine peace talks had pressured the market by raising expectations of reduced supply risks.
• Gold closed at a record high above $2,925 per ounce after President Trump announced plans for reciprocal tariffs on countries taxing US imports, heightening trade concerns. Strong US PPI data bolstered expectations of delayed Fed rate cuts, while a weaker dollar supported gold as investors sought safety amid uncertainties.
• Copper futures rose above $4.75 per pound, reaching multi-month highs amid fears that Trump might target copper with tariffs, potentially disrupting the global supply chain.

Fixed income:

• Treasuries surged after a PPI report confirmed core PCE forecasts, recovering from Wednesday's selloff due to strong CPI data. The long end led gains, supported by a successful $25 billion 30-year bond auction. The bid remained firm as the US dollar retained losses following Trump's directive for reciprocal tariffs. Yields fell up to 10 basis points on the long end, flattening the 5s30s and 2s10s spreads. US 10-year yields closed near richest after Trump's tariff remarks, down 9 basis points to around 4.53%, reversing Wednesday's cheapening.

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