Global Market Quick Take: Asia – February 07, 2025

Key points:

• Macro: BoE cuts rate by 25bps and US initial jobless claims increases by 11,000
• Equities: Amazon shares fell 4% after-hours due to a weaker-than-expected outlook
• FX: USDJPY falls below 152 on BoJ’s Tamura comments; GBPUSD fell 1% after BoE cut
• Commodities: Gold hit a record high of $2,860 and Copper at 4 month high of $4.50
• Fixed income: Yields move higher across short end of the Treasury curve

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Disclaimer: Past performance does not indicate future performance.

Macro:

• US Treasury Secretary Bessent mentioned that he had a very constructive meeting with Fed Chair Powell. He addressed misinformation about DOGE and the Treasury, clarifying that DOGE "absolutely" does not have the power to alter the system. Additionally, he emphasized a commitment to a strong dollar policy under Trump, assured that the US will never default on its debt, and expressed a desire to gather data on bondholders' views regarding the debt limit.
• Euro Area's retail trade volume fell by 0.2% month-over-month, missing expectations of a 0.1% drop. Food, drinks, and tobacco sales decreased by 0.7%, worsening from a 0.1% decline in November. Non-food product sales rebounded by 0.3% after two months of contraction, and fuel sales rose by 0.2%, following a 0.7% increase in November.
• BoE cut its benchmark rate by 25bps to 4.5% as expected, marking the third cut since August. All nine Monetary Policy Committee members supported the cut, with two advocating for a steeper 50bps reduction. The Bank plans gradual monetary easing due to growth concerns and persistent services inflation. It also lowered growth forecasts for the year, indicating a dovish shift in balancing growth and inflation risks.
• U.S. initial jobless claims increased by 11,000 to 219,000, surpassing expectations of 213,000. Recurring claims rose by 26,000 to 1,886,000, exceeding forecasts of 1,870,000. While still strong historically, the data aligns with expectations of a slight softening in the labor market for 2025.
• Japan's household spending rose by 2.7% year-on-year, exceeding the 0.2% market estimate and marking the first increase since July. This was the strongest growth since August 2022. Monthly spending increased by 2.3%, up from a 0.4% gain in November, defying expectations of a 0.5% decrease and marking three consecutive months of growth.

Equities: 

• US - US indices had a mixed close on Thursday as investors processed corporate results. s S&P 500 rose 0.3%, and the Nasdaq 100 gained 0.5%, marking a three-day winning streak, while the Dow fell by 125 points. Amazon is down 4% in the post market after reporting earnings that beat estimates but warned investors it could face capacity constraints in its cloud computing division this year despite plans to invest $100b towards AI.
• Qualcomm and Arm declined by 3.8% and 3.4%, respectively, and Skyworks Solutions plunged 24.7% after its earnings report. Ford dropped 7.1% due to a challenging 2025 outlook, and Honeywell fell 5.5% after weak earnings guidance and plans to split into three companies, impacting the Dow. In contrast, Philip Morris surged 11% on strong earnings, nearing a record high, and Eli Lilly gained 3.7% after an earnings beat.
• Europe - DAX rose 1.5% to a record 21,913, driven by corporate earnings and central bank expectations, despite trade war concerns. Market sentiment improved with Ukraine peace plan rumors. BASF surged 7% on new product registrations, while Siemens Healthineers and Infineon gained 6.1% and 5.1%, respectively.
• Hong Kong - HSI surged 1.4%, to 20,892 on Thursday. The rise was fuelled by US futures gains and optimism in China's AI sector, highlighted by DeepSeek's breakthrough. The tech index rose 2.6%, with Sunny Optical, Semiconductor Manufacturing, and Hua Hong Semiconductor posting strong gains. BYD surged 10% following news of its upcoming event to unveil an advanced intelligent driving system.

FX:

• USD remained mostly stable amid a quieter news day as markets awaited US payroll data. Initial jobless claims rose slightly more than expected, and Unit Labor Costs were soft. Treasury Secretary Bessent reaffirmed a strong Dollar policy under President Trump, while Fed comments added little new insight.
• JPY outperformed, bolstered by hawkish comments from BoJ Board Member Tamura, who advocated for gradual rate increases, suggesting rates should reach around 1% by late fiscal 2025. USDJPY fell to a low of 151.25 from a high of 152.89.
• GBP fell 1% to $1.23 after the Bank of England cut rates by 25bps, with two policymakers preferring a 50bps cut. The bank stressed a cautious approach amid disinflation progress.
• Major economic data: Canada unemployment rate, US NFP, UIS unemployment rate, Germany balance of trade.

Commodities:

• Oil prices fluctuated, with WTI crude above $70.5 per barrel as President Trump pledged to lower prices by increasing U.S. oil production. Meanwhile, Saudi Arabia raised March crude prices due to higher demand from China and India and disruptions to Russian supply from U.S. sanctions.
• Gold hit a record high of $2,860 per ounce as speculation of lower interest rates increased its safe-haven appeal amid economic and geopolitical risks. Weak services demand suggested slowing economic activity, leading investors to expect two Federal Reserve rate cuts this year.
• Copper futures climbed to a four-month high of nearly $4.50 per pound on Thursday, driven by a weaker US dollar and reduced concerns over a global trade war, as China chose restrained responses to US tariffs.

Fixed income:

• Treasuries saw modest declines, with yields slightly above the year-to-date lows from the previous day. The market was mainly driven by futures block trades amid a lack of other catalysts. In Treasury options, a notable March straddle sale indicated expectations of lower volatility. The 5s30s spread narrowed by about 1.3 basis points, following Wednesday's 4 basis point shift. Long-end dollar swap spreads widened further, making the 30-year spread roughly 2 basis points less inverted by day's end.

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