Global Market Quick Take: Asia – March 27, 2025

Key points:

• Macro: Trump declares 25% tariffs on all cars made outside the US
• Equities: Auto makers fell on Trump tariffs; Nasdaq 100 lost 1.8%
• FX: EUR pressured by tariff threats; GBP declined on weak CPI and budget update
• Commodities: Crude stockpiles fell by 3.34 million barrels, reaching a monthly low
• Fixed income: Treasury yields were cheaper as curve bear steepens

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Disclaimer: Past performance does not indicate future performance.

Macro:

• US President Trump declared a 25% tariff on all cars manufactured outside the United States. Trump stated that the auto tariffs would be implemented on 2nd April, with collection starting on 3rd April. He further noted that the reciprocal tariff rates on other goods would be lower than anticipated.
• US factory orders for business equipment unexpectedly fell in February amid tariff and tax policy uncertainty. Core capital goods orders dropped 0.3%, while shipments rose 0.9%. Machinery and equipment investment is set to rebound this quarter, but GDP growth may still slow.
• Trump has offered China a tariff reduction if they support a TikTok deal to an American company.
• Neel Kashkari from the Federal Reserve Bank of Minneapolis expects interest rates might decrease in the next year or two as inflationary pressures ease. Meanwhile, Alberto Musalem from the Federal Reserve Bank of St. Louis warns that tariff-related inflation could persist, possibly keeping rates steady, and stresses the importance of stable inflation expectations.
• UK February CPI came in weaker than expected at 2.8% yoy vs 3% estimated, falling from a prior 3% while the core figure printed 3.5% vs 3.6% estimated.

Equities: 

• US - US stock futures dropped on Thursday after President Donald Trump announced a 25% tariff on foreign-made cars, effective April 2. These tariffs coincide with reciprocal measures against countries imposing levies on US goods, which Trump stated would continue throughout his second term. Shares of General Motors and Ford fell by approximately 6% and 5%, respectively, following the news. The S&P 500 and Nasdaq 100 dropped by 1.12% and 1.8%, respectively, amid a tech stock selloff, while the Dow decreased by 0.31%. Leading the decline were major tech companies, including Tesla (-5.6%), Nvidia (-5.7%), Meta (-2.5%), Palantir (-4.4%), and Amazon (-2.2%).
• EU - European stocks fell on Wednesday, with the Stoxx 50 down 1.4% and the Stoxx 600 losing 0.7%, driven by concerns over potential US auto tariffs. The autos sector led the decline, dropping about 2.5%, following reports of Trump's impending trade measures announcement. The auto industry, reliant on North American trade, faces continued uncertainty after a temporary tariff exemption in March. UK markets also responded to lower-than-expected inflation data and the spring budget update.
• HK – HSI rose 0.6% to 23,483 on Wednesday, recovering from a near two-week low. Sentiment improved as the Trump administration indicated US tariffs might be more targeted than feared. Positive news included Morgan Stanley raising its 2025 targets for Chinese stocks and Goldman Sachs predicting further gains from earnings revisions. Most sectors advanced, led by tech, consumers, and property. WH Group surged 4.7% on profit growth and a special dividend, while Alibaba gained 1.4% after partnering with BMW on AI for cars in China. Other notable gainers were Shenzhou Intl. (12.4%), Haidilao Intl. (6.1%), and Akeso Inc. (4.0%).

Earnings this week:
Thursday: Bitfarms, Lululemon, Winnebago, TD SYNNEX, Braze
Friday: LpA, Katapult, Super League, zSpace, LiqTech

FX:

• USD gained strength due to headlines related to tariffs, stronger-than-expected Durable Goods data, and a subdued risk sentiment. DXY hit 104.50.
• EUR faced pressure from tariff threats, with reports indicating that EU Trade Chief Sefcovic anticipates President Trump will impose tariffs of approximately 20% on all 27 EU member states next week. EURUSD experienced a volatile day before declining due to the FT article, ending around 1.0750 and marking its sixth consecutive day of losses.
• GBP declined following weaker-than-expected UK CPI data and Chancellor Reeves's Spring Statement, which avoided new tax hikes. The OBR cut GDP forecasts and maintained a "very small" fiscal headroom of GBP 9.9 billion. GBPUSD hovering around 1.2880.
• CAD strengthened past 1.43 against USD. BoC Minutes showed a 25bps rate cut was made due to tariff threats and uncertainty, despite some members preferring to keep rates stable until more clarity emerged.
• JPY weakened as the USD was favoured due to higher US yields, despite support from weak Japanese services PPI data. USDJPY remains around 150.50, with BoJ Governor Ueda expecting inflation to align with the 2% target as cost-push factors fade.
• Major economic data: US GDP Growth Rate, US Initial Jobless Claims, ECB President Lagarde Speech, Fed Barkin Speech

Commodities:

• Oil prices held steady with US crude inventories dropping sharply, hinting at supply constraints. WTI was near $70 a barrel, and Brent settled below $74. Stockpiles fell by 3.34 million barrels last week, their lowest in a month, alongside a decline in gasoline inventories.
• Gold remained steady, near a record high, as President Trump announced tariffs on auto imports, increasing haven demand. Bullion was around $3,023 an ounce, close to last week's peak.

Fixed income:

• US Treasury losses spread across the curve after the $70 billion 5-year note auction underperformed slightly. Long-end dollar swap spreads dropped sharply, reversing an early February trade. SOFR options demand grew for Fed-on-hold strategies. Treasury yields were cheaper in a mild bear steepening move, while bunds and gilts outperformed. Gilts rallied in a bull flattening move after the DMO's gilt remit fell short of predictions.

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