Global Market Quick Take: Asia – January 24, 2025

 Key points:

• Macro: Trump wants to bring down the cost of oil and demanded lower rates
• Equities: US markets reach new highs with S&P 500 closing above 6100.
• FX: The yen became the top performer among the G10 currencies
• Commodities: Brent crude is down 5%, nearing its biggest decline since November
• Fixed income: 10-year TIPS auction yielded 2.243%, the highest since January 2009

  ------------------------------------------------------------------

   

  Disclaimer: Past performance does not indicate future performance.

    

Macro:

• Donald Trump told world leaders at Davos that he will ask Saudi and OPEC to “bring down the cost of oil” and demanded an immediate drop in interest rates, ahead of next week’s Fed meeting on 29 Jan 2025.
• US President Trump emphasized during a Q&A at Davos that the EU treats the US unfairly, with tariffs making it challenging to export products to Europe. He also commented that the EU should not target major US tech companies like Apple (AAPL), Meta (META), and Google (GOOGL).

Equities:

• US - US stocks closed higher on Thursday, with the S&P 500 gaining 0.53% to hit a record high over 6,100, the Dow rising over 400 points, and the Nasdaq 100 up 0.3%. Investor optimism was fueled by President Trump’s call for rate cuts and lower oil prices at the World Economic Forum.
• Strong earnings from GE and Union Pacific boosted industrial stocks, while defensive sectors rebounded. The tech sector lagged behind others due to weakness in semiconductor stocks, following SK Hynix's warning about a sharper decline in demand for commodity memory chips. However, American Airlines' poor guidance led to an 8.7% drop in its shares.
• Europe– DAX continues to close at record highs, gaining 0.74% yesterday to reach 21,411. Euro Stoxx 50 also gained 0.22% while CAC 40 added 0.7%, making 8 straight days of gains.
• Earnings - American Express, Verizon and NextEra Energy

FX:

• The dollar slightly weakened as President Donald Trump addressed world leaders in Davos, advocating for lower US interest rates and cheaper oil. The yen emerged as the strongest performer among the Group of 10 currencies, with the Bank of Japan expected to consider a rate hike, with forward guidance viewed as neutral-to-dovish today
• USDCAD declined by 0.2% to 1.4354, as Canadian consumers took advantage of lower interest rates, resulting in the strongest holiday spending in nearly two years.
• EURUSD rose by 0.1% to 1.0423, with traders betting on the ECB to implement at least one half-point rate cut by mid-year.
• GBPUSD increased by 0.4% to 1.2364, with market attention focused on preliminary January PMI figures due Friday.

Commodities:

• Oil prices are dropping as Donald Trump threatens trade wars and asks Saudi Arabia and OPEC to reduce prices. West Texas Intermediate and Brent crude have fallen nearly 5% this week, heading for their biggest weekly decline since November. US crude inventories have decreased for the ninth consecutive week, contrary to earlier industry reports, and are below the five-year seasonal average.
• Gold hovers near its highest since October, driven by safe-haven demand amid global uncertainty. Trump's tariff threats and interest rate cut calls enhance its appeal. Traders watch the Federal Reserve's rate decision and Trump's domestic policies for potential impacts on gold prices.

Fixed income:

• Treasuries had mixed results, with intermediate to long-term yields rising and the yield curve steepening. The selloff was eased by a drop in oil prices following US President Trump's comments in Davos. In Treasury options, there was increased interest in bullish strategies, expecting the 10-year yield to reach 4% soon. A $20 billion auction of 10-year TIPS was awarded at 2.243%, the highest since January 2009. Demand for bullish hedges targeting a 10-year yield drop to around 4% was strong, particularly for April and May maturities.

For a global look at markets – go to Inspiration.