Asia Market Quick Take – September 1, 2025

Key points:

• Macro: US Core PCE rises 2.9% as expected, highest since February
• Equities: Alibaba ADR is up 12.9% after posting strong cloud revenue
• FX: USD fell on PCE report; Fed remains dovish, cautious outlook
• Commodities: Silver nears $40; gold tests key $3,450 resistance
• Fixed income: Yield curve twist steepens on rate cut expectations

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Disclaimer: Past performance does not indicate future performance.

Macro:

• US Core PCE price index rose to a 2.9% annual rate, its highest since February, matching forecasts, while the monthly core index increased by 0.3%. The all-items index had an annual rate of 2.6% and a 0.2% monthly gain. The Fed uses the PCE index for forecasting, focusing on core inflation for long-term trends.
• U.S. personal spending rose 0.5% to $20.802 trillion in July 2025, matching expectations and marking the sharpest rise in four months. Durable goods spending rebounded by 1.9%, while services grew steadily at 0.4%. Nondurable goods nearly stalled at 0.1%.
• Germany's annual inflation rose to 2.2% in July 2025, surpassing June's 2% and expectations of 2.1%. It's the highest since March, with goods inflation at 1.3%, driven by food prices, and a smaller energy dip. Services inflation remained at 3.1%, and core inflation at 2.7%.
• The U.S. goods trade deficit grew to $103.6 billion in July 2025, exceeding expectations. Imports rose 7.1% to $281.5 billion, led by industrial supplies and consumer goods. Exports fell 0.1% to $178 billion, with declines in industrial supplies and consumer goods partially offset by gains in automotive vehicles.
• Fed's Daly (2027 voter) said policy will soon adjust as tariffs increase inflation and the labor market slows. She considers tariff-related price hikes temporary but stressed action is needed to avoid labor market harm.
• The Caixin China Manufacturing PMI fell to 49.5 in July 2025, down from 50.4 in June, below expectations. Factory activity contracted amid declining export orders and trade uncertainty. Output and employment dropped, while purchasing expanded. Input costs rose, but selling prices fell due to increased competition.

Equities: 

• US - U.S. stocks fell Friday as inflation concerns resurfaced. The S&P 500 dropped 0.6%, Nasdaq 1.2%, and Dow 0.2%. July’s Core PCE index rose 2.9% year-over-year, the fastest since February, matching expectations. Tech and AI stocks dragged markets, with Nvidia down 3.4% and Dell plunging 8.9% on competition and rising AI costs. Alibaba surged 12.9% on strong cloud results, while Caterpillar fell 3.6% and Marvell sank 18.6% on tariff and revenue worries. Despite the dip, S&P 500 and Dow posted a fourth straight monthly gain (2% and 3%), and Nasdaq rose 1% for its fifth. U.S. markets close Monday for Labor Day.
• EU - Frankfurt’s DAX fell 0.6% to 23,920 Friday, its lowest since Aug 5, marking a fifth straight loss. Caution grew amid French political uncertainty and rising tensions in Gaza and Ukraine. German inflation edged up to 2.2% in August, slightly above forecasts but near the ECB’s 2% target. Tech, retail, and auto stocks led declines, while defense names like Rheinmetall gained over 3% after Chancellor Merz downplayed prospects of Putin-Zelenskyy talks. The DAX slid 1.8% for the week and 0.6% for the month.
• HK - Hang Seng rose 0.3% to 25,078 Friday, snapping a three-day slide on strength in consumer and tech stocks. The index gained 1.2% in August, its fourth monthly rise, supported by robust inflows, attractive valuations, and pro-growth policies, especially in AI and tech self-sufficiency. EV makers led advances after Beijing vowed to curb “disorderly competition,” with Li Auto up 4.5%, Geely 1.7%, Great Wall 1.3%, and BYD 2.5%. Battery stocks also rallied, including Tianqi Lithium (+2.7%), Ganfeng (+4%), and Tianneng Power (+10.7%). Alibaba reported earnings after the HK close on Friday that miss expectations despite a triple digit percentage gain in AI business revenue. Sales from its cloud business grew 26%, accelerating from the previous 18%. Alibaba ADR closed up 12.9%. BYD experienced a 29.9% decline in quarterly profit to 6.4B yuan amid government efforts to curb price wars. Q2 revenue increased by 14% to 200.9B yuan. The company sold 2.49 million cars, achieving 45% of its annual target.