Global Market Quick Take: Asia – February 03, 2025

Key points:

• Macro: Trump imposed 25% tariffs on most goods from Mexico, Canada, 10% on China
• Equities: US tariffs lead to significant drops in Dow, S&P, Nasdaq futures
• FX: USD strengthened due to Trump’s tariffs
• Commodities: WTI rose but Gold flat due to a stronger USD amid uncertainty
• Fixed income: The U.S. yield curve experiences a bear flattening

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

Disclaimer: Past performance does not indicate future performance.

Macro:

• Trump imposed 25% tariffs on all imports from Mexico and Canada, except for a 10% tariff on Canadian energy products. Additionally, imports from China will face an extra 10% tariff on top of existing duties, with no exceptions. In response, Canadian Prime Minister Trudeau denounced the tariffs as violations of the USMCA trade agreement. Canada plans to impose 25% tariffs on CAD 155 billion worth of US goods, with CAD 30 billion taking effect on February 4th and the remainder in 21 days.
• Mexican President Sheinbaum launched a retaliatory tariff plan against the US, advocating for dialogue over tariffs and mentioning a 'Plan B' in response to US tariffs. She noted that 25% tariffs will significantly impact both economies and rejected US claims of Mexico's ties to drug cartels, criticizing the US for not controlling illegal drug sales domestically.
• China's Commerce Ministry announced plans to implement countermeasures against new US tariffs, emphasizing that Fentanyl is an issue for the US to address.  The ministry also stated that China will contest the tariffs through the WTO and highlighted that trade wars have no winners.

Equities: 

• US - US stock futures dropped on Monday following President Trump's new tariffs on major trading partners, raising economic concerns. Dow Jones futures dropped by 1%, S&P 500 futures by 1.6%, and Nasdaq 100 futures by 2.1%.
• Australia - ASX 200 Index fell by about 2% to below 8,400 on Monday due to new US tariffs on Mexico, Canada, and China, raising concerns about global trade disruptions. Australian retail sales declined by 0.1% in December, supporting a dovish outlook for the Reserve Bank of Australia. All sectors saw losses, with major declines in BHP Group (-2.3%), Commonwealth Bank (-2.2%), and Zip Co (-4.3%).
• Earnings this week: Palantir, NXP Semi, Idexx Labs, Advanced Micro Devices, Qualcomm, Alphabet, Spotify, MicroStrategy, Amazon and Arm Holdings

FX:

• The Dollar index rose to over 108.3 following the US's implementation of a 25% tariff on goods from Mexico and Canada and a 10% levy on imports from China. In retaliation, Canada announced its own tariffs, Mexico considered imposing levies on US goods, and China planned to file a lawsuit with the WTO.
• The tariffs take effect Tuesday. USD Index rose approximately 1.2% to USDCNH traded to a high of 7.3816 , USDMXN to 21.37, and USDCAD to 1.4755. EURUSD fell 2.3% to $1.0125 before recovering. USDCHF traded to a high 0.92 and GBPUSD dropped 0.8% to $1.23, while the USDJPY remained stable at 155.70 per dollar.
• Major economic data: US payrolls report, UK and Indian central bank rate decisions

Commodities:

• Oil prices surged after Trump imposed significant tariffs on various imports, including crude oil from Canada and Mexico, potentially leading to increased costs for consumers. WTI crude climbed by as much as 3.7% to $75.18, while the increase in Brent crude was less pronounced. Meanwhile, gold prices edged lower as the strengthening USD overshadowed haven demand, with gold trading near $2,790, still close to a record high, as the world prepares for potential trade wars.

Fixed income:

• Treasury futures displayed mixed performance following U.S. President Donald Trump's implementation of 25% tariffs on Canada and Mexico and 10% on Chinese goods, starting Tuesday. Trade war concerns pushed the 2-year Treasury yield up by 7 basis points to 4.27%. The U.S. yield curve bear-flattens, complicating the Federal Reserve's policy easing outlook. The 10-year yield rose by 2 basis points to 4.56%.

For a global look at markets – go to Inspiration.