Global Market Quick Take: Asia – February 06, 2025

Key points:  

• Macro: ADP jobs report hotter than expected and US trade deficit widens due to tariffs 
• Equities: Alphabet, AMD, and Uber shares fell due to disappointing earnings and guidance 
• FX: USDJPY breaks 153 on strong data, hawkish BoJ expectations 
• Commodities: Gold prices soared to a record high 
• Fixed income: Treasuries rose as long-end yields fell, flattening the yield curve 

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Disclaimer: Past performance does not indicate future performance.  

 Macro:  

• ADP report revealed that private employers added 183,000 jobs in January, exceeding the expected 150,000 and surpassing December's 176,000. Job growth was robust in leisure and hospitality, but manufacturing showed weakness. 
• Treasury Secretary Scott Bessent says the Trump administration is focused on bringing down 10-year yields through lowering inflation and the fiscal deficit. He aims to do this via expanding the energy supply and through the efforts of Elon Musk’s DOGE group. 
• US trade deficit widened to $98.4 billion, up from November's revised $78.9 billion and exceeding forecasts of $96.6 billion. This marks the largest deficit since March 2022, driven by a goods deficit increase to $123 billion and a reduced services surplus of $24.5 billion, as companies rushed to secure goods before new tariffs. 
• US ISM Services PMI fell to 52.8 from December's revised 54, below the 54.3 forecast, indicating slower services sector growth. Business activity and new orders saw smaller increases, while inventories contracted for the third month. However, employment and new export orders rose faster, and price pressures eased. 
• Eurozone private sector activity expanded, with the Composite PMI at 50.2 and Services PMI at 51.3, fueled by domestic demand. Manufacturing contraction slowed, employment grew, and backlogs decreased. Input costs surged, raising output charges, but business sentiment stayed optimistic. Producer prices rose 0.4%, driven by energy and consumer goods, with increases in France, Spain, and Italy, but a slight decline in Germany. Year-on-year, producer prices were unchanged. 
• UK Composite PMI rose to 50.6, showing slight growth driven by services at 50.8, while manufacturing contracted at 48.3. New work fell sharply, leading to significant job cuts. Economic uncertainty and high interest rates impacted demand. Cost inflation peaked since April 2024, and business optimism hit its lowest since December 2022. 

Equities:  

• US - US stocks rebounded from early losses as long-term Treasury yields declined amid mixed earnings and economic data. The S&P 500 and Nasdaq 100 rose about 0.3%, and the Dow Jones gained over 200 points. Broadcom and Nvidia led the gains with gains of 6% and 4.5%, respectively, alongside strong performances in defensive stocks. Softer ISM Services PMI data reinforced expectations of Fed rate cuts, while the ADP report confirmed strong job growth. Conversely, Alphabet fell 7.5% due to missed cloud revenue and high AI spending, AMD dropped over 10% due to lower data centre revenue, and Uber fell by 7% following weak guidance.
• ARM is down 6.3% in the post market despite reporting earnings that beat both top and bottom lines and provided guidance in line with expectations. Having rallied 40% YTD, the revenue outlook failed to ignite further optimism on the stock.
• Hong Kong – HSI fell 1.3%, reversing prior gains, as China imposed tariffs on US goods in retaliation for new US tariffs. Uncertainty increased as no call was scheduled between Trump and Xi Jinping. A private survey showed China's services sector growth slowed to a four-month low in January, impacting sentiment.
• China - CSI 300 declined 0.58% as markets reopened after the Lunar New Year break, amid trade tensions and economic uncertainties. E-commerce stocks were hit after the US Postal Service blocked parcels from China and Hong Kong.
• Earnings this week: Roblox, Peloton, Amazon, Pinterest, Eli Lily

FX:

• USD weakened for the third day as trade tensions with Canada and Mexico eased, shifting focus to US-China relations. Despite China's WTO complaint, trade optimism persisted. The ISM Services PMI fell unexpectedly to 52.8 in January. The Dollar Index (DXY) dropped below 108, hitting a low of 107.296 before recovering to around 107.62.
• JPY rose to below 153 against USD, a seven-week high, due to strong wage and services data, boosting expectations of a hawkish Bank of Japan. Real wages increased, and the services PMI was revised up to 53.
• CAD rose to a seven-week high as tariff risks eased, with USDCAD trading slightly above 1.43. GBP rose slightly to around 1.25 ahead of the Bank of England meeting, where a 25bps rate cut is anticipated. The EUR's movement was driven by USD selling, with EURUSD trading around 1.04.
• Major economic data: BoE Interest rate decision, US Initial Jobless Claims, Canada Ivey PMI

Commodities: 

• Oil prices hit their lowest closing of the year as traders exited the market after President Trump's inauguration. The drop was driven by Trump's Middle East and energy tariff policies, causing a $17 billion outflow from crude and fuel markets. 
• Gold prices hit a record high above $2,882.36 an ounce before easing back. Demand is up due to short-term market tightness, as dealers rush to move metal to the U.S. before tariffs. A weaker dollar made gold cheaper, with spot gold rising 1% to $2,873.69 an ounce. 

Fixed income:  

• Treasuries strengthened as long-end yields fell over 10 basis points, flattening key yield curve spreads. The rally was driven by gains in European bonds, and the Treasury Department's announcement that supply increases are not expected soon. Long-end swap spreads widened with cash outperforming swaps. 10-year yields ended richer by around 9 basis points at 4.42%. Most gains occurred in the U.S. morning after a significant drop in the January ISM services index, supported by futures activity, including a major block trade purchase of the Ultra Bond contract. 

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