Global Market Quick Take: Asia – April 22, 2025

 Key points:

• Macro: Trump's pressure on Powell threatens Fed independence, sparking risk-off sentiment
• Equities: Equities continue to decline; Tesla reporting tonight after closed
• FX: Dollar Index falls below 99; EUR above 1.15 and JPY below 141
• Commodities: Spot gold hits yet another record high $3,444
• Fixed income: Treasury yield curve in twist steepening

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Disclaimer: Past performance does not indicate future performance.

Macro: 

• Further pressure from President Trump on Fed Chair Powell to lower interest rates raised fears about Fed independence, especially as NEC Director Hassett indicated Trump is exploring ways to dismiss Powell, sparking a risk-off session.
• Fed's Goolsbee (2025 voter) highlighted rising short-term inflation expectations, while long-term ones remain stable. He stressed focusing on this year's economic outlook, noting tariffs are one factor with potentially modest macroeconomic impact.

Equities:

• US - US stock futures stabilised on Tuesday after Monday's sharp selloff, driven by concerns over the Federal Reserve's independence. The Dow fell 2.48%, the S&P 500 dropped 2.36%, and the Nasdaq declined 2.55%, with all S&P sectors down, led by consumer discretionary, technology, and energy. Major tech stocks like Nvidia, Tesla, and Amazon suffered heavy losses.
• Japan - Nikkei 225 fell 1.3% to 34,280, and the Topix Index dropped 1.18% to 2,529, as a stronger yen affected export sectors. Investor sentiment was dampened by uncertainty in US-Japan trade talks, with Japan considering more soybean and rice imports. US officials raised concerns about trade barriers in Japan's automotive and rice sectors and urged increased purchases of American meat, fish, and potatoes.

Earnings this week:
Tuesday: VZ, GE, LMT, SAP, TSLA
Wednesday: BA, T, IBM, NEE, TXN
Thursday: INTC, GOOGL, TMUS, LRCX, PEP
Friday: ABBV, CL, PSX, POR, CNC

FX:

• USD weakened as the DXY index fell below 99.00, driven by economic uncertainties regarding tariffs and Fed Chair Powell's future. With UK and European markets closed, President Trump criticised Powell, calling for rate cuts, while Fed official Goolsbee's comments added little new information.
• NZD, EUR, JPY, and CHF performed relatively well, whereas the CAD lagged, possibly due to weak oil prices. Notably, AUDUSD and NZDUSD rose above 0.6400 and 0.6000, respectively.
• EUR gained from the dollar's decline, pushing EURUSD above 1.15, although it has since retreated after reaching its highest level since late 2021.
• GBP also advanced, briefly surpassing 1.34 before retracting some gains due to the light catalysts during the UK bank holiday.
• JPY strengthened, with USDJPY falling below 141 as the dollar faced pressure and investors sought the yen as a safe haven currency.
• Major economic data: Eurozone Government Budget to GDP, Eurozone Consumer Confidence Flash, BoE Breeden Speech, Fed Speech, IMF/World Economic Outlook

Commodities:

• Gold surged past $3,442 fuelled by a weaker US dollar, Trump's Fed criticism, and trade war worries. Trump has considered removing Fed Chair Powell and advocated for lower rates, while Austan Goolsbee warned against undermining Fed independence.
• Oil steadied after Monday's decline, driven by Trump's Fed criticism and US-China trade worries. WTI hovered near $63 following a 2.5% drop, while Brent ended above $66. Trump cautioned about a potential economic slowdown if rates aren't reduced.

Fixed income:

• The Treasury curve steepened significantly, with front-end yields dropping and long-end yields increasing by about 12 basis points. Swap spreads tightened, especially in the 20-year sector, amid a retreat from US assets. Yields were down 5 basis points in the 2-year sector and up 3 to 12 basis points from the 5-year to the long-end, with the 20-year sector underperforming.

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