Global Market Quick Take: Asia – February 04, 2025

Key points:

• Macro: Trump delays tariffs on Mexico and Canada
• Equities: Palantir jumps 23.5% post-market on earnings beat and guidance
• FX: CAD and MXN strengthen against USD as Trump delays tariffs
• Commodities: Gold trades at record high while oil fell
• Fixed income: US Treasury yields were mixed, with 2-year shifting the most

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Disclaimer: Past performance does not indicate future performance.

Macro:

• US President Trump delayed tariffs on Mexico and Canada for 30 days. US President Trump shared on Truth that he had a very friendly conversation with Mexican President Sheinbaum. During the discussion, she agreed to deploy 10,000 Mexican soldiers immediately at the US-Mexico border. They also agreed to pause the anticipated tariffs for one month to allow for further negotiations. Additionally, Canada has committed to securing the US Northern Border, and the tariffs announced on Saturday will be temporarily suspended for 30 days to determine if a final economic agreement with Canada can be reached.
• Euro Area inflation increased to 2.5% from 2.4% in January, surpassing expectations, mainly due to rising energy costs. Non-energy goods inflation remained at 0.5%, while services and food inflation slowed. Core inflation held steady at 2.7%, slightly above forecasts.
• Canada's Manufacturing PMI dropped to 51.6 from 52.2, indicating slower growth. Despite rising export sales due to US clients advancing orders before tariffs, market uncertainty over tariffs and potential trade wars caused manufacturer hesitation.
• US ISM Manufacturing PMI rose to 50.9, marking the first expansion after 26 months of contraction. New orders, production, and employment increased, while supplier deliveries slowed slightly, inventories fell, and price pressures intensified.

Equities: 

• US - On Monday, US stocks fell despite recovering some losses after President Trump postponed Mexican import tariffs by a month following discussions with President Claudia Sheinbaum. The S&P 500 and Nasdaq 100 dropped 0.7% and 0.8%, while the Dow Jones fell 122 points after rebounding from a 665-point fall. Automakers and major tech stocks, including Apple (-3.4%), Nvidia (-2.8%), and Tesla (-5.2%), struggled amid tariff concerns. In contrast, healthcare, energy, and consumer staples outperformed as investors shifted to defensive sectors.
• Palantir surged 23.5% in the post market to reach $103 after beating both revenue and earnings estimates, while offering strong revenue guidance of $858m to $862m for the current quarter.
• Earnings this week: NXP Semi, Idexx Labs, Advanced Micro Devices, Qualcomm, Alphabet, Spotify, MicroStrategy, Amazon and Arm Holdings

FX:

• USD strengthened as new US tariffs on Canadian and Chinese goods were set for February 4th. The DXY peaked at 109.880 but later eased after Mexico announced a one-month tariff delay, contingent on border troop deployment to curb drug trafficking.
• President Trump agreed to delay U.S. tariffs on Canadian and Mexican imports for 30 days after both countries committed to preventing fentanyl trafficking into the US. CAD strengthened past 1.45 against USD and MXN strengthened past 20.5 against USD.
• G10 currencies weakened after Trump's tariff announcements, with EUR hit by EU tariffs. A US-Mexico tariff delay offered brief relief, but most G10 currencies, except GBP, stayed down. JPY and GBP outperformed due to risk aversion and a smaller UK trade deficit. By close, EURUSD was 1.0290, USDJPY at 154.70, and GBPUSD at 1.24.
• Major economic data: US JOLTs Job data

Commodities:

• WTI crude traded at $73 as OPEC+ confirmed gradual output increases and dropped the US EIA as a source. Tensions with Trump continue as he urges more oil supply. New US tariffs on Mexico, Canada, and China add uncertainty, with 25% on most goods from Mexico and Canada, and 10% on Canadian energy and Chinese goods. Canada and Mexico supply a quarter of US crude.
• Gold hit a record $2,820 per ounce due to looser monetary policies and uncertain US trade policies. US tariffs on China and Canada, along with delayed restrictions on Mexico, fueled demand for safe assets amid unpredictability.

Fixed income:

• Treasury prices were volatile as traders reacted to President Trump's tariff announcements on Canada, Mexico, and China, with further fluctuations after he delayed the 25% tariffs on Mexico by a month. By day's end, the Treasury curve twist flattened; short-term yields were cheaper due to inflation risks, while long-end yields had a risk-off bid amid growth concerns. Globally, bonds outperformed Treasuries, with bunds and gilts richer by 7.5 and 5 basis points, respectively. Canadian 2-year yields notably outperformed Treasuries by 14 basis points, anticipating an emergency rate cut before the March 12 policy meeting.

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