Global Market Quick Take: Asia – February 12, 2025

Key points:

• Macro: Powell sees no urgency to alter rates given strong economy
• Equities: Tesla is down 6.3% after BYD launched its free smart driving features
• FX: GBP rose above 1.244 as BoE's Mann favoured a larger rate cut
• Commodities: Gold held steady just below its record high
• Fixed income: The front end outperformed, leading to a steeper yield curve

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Disclaimer: Past performance does not indicate future performance.

Macro:

• Fed Chair Powell stated that there's no urgency to change the federal funds rate, as the Fed's policy is less restrictive, and the economy is strong. He cautioned against easing policy too quickly, which could affect inflation progress, or too slowly, which might weaken the economy. Powell highlighted significant progress toward the Fed's goals, with a solid labor market and inflation nearing the 2% target.
• Trump has issued an executive order enforcing a 25% tariff on steel and aluminum imports, without allowing any exceptions or exemptions.

Equities: 

• US - U.S. stocks had a mixed session on Tuesday amid Fed Chair Jerome Powell's cautious remarks on interest rates and President Trump's 25% tariffs, raising trade war concerns. The S&P 500 was stable, the Nasdaq 100 fell 0.3%, and the Dow rose 0.3%. Powell reiterated no rush to cut rates, citing strong economy and inflation above 2%. Tariffs boosted steel and aluminium stocks like Cleveland-Cliffs (+4.9%), Nucor (+0.6%), and Alcoa (+0.7%). Apple gained 2.2% on AI news with Alibaba, while Tesla fell 6.3%. Coca-Cola shares jumped 4.8% on strong earnings. Investors focus on Wednesday's CPI report for Fed insights.
• Hong Kong – HSI dropped 227 points (1%) to 21,295 on Tuesday, breaking its recent upward trend, as U.S. futures fell ahead of upcoming inflation data. In the auto sector, Geely Auto sank 10.3% and Xpeng 9.1% due to competitive concerns with BYD's free smart driving features across its car models. Nongfu Spring declined 6.2%, while Trip.Com and Semiconductor Manufacturing each fell 4.9%.
• Germany - DAX rose by 0.6% to close at 22,034 on Tuesday, reaching a new record high, fuelled by gains in technology stocks and banks.
• UK - FTSE 100 reached a record high despite volatility from Trump's metal tariffs. BP fell 0.4% due to a 35% profit drop, while Entain plunged over 10% after CEO Gavin Isaacs' sudden departure, sparking takeover concerns. Airline stocks declined as TUI warned of slower bookings.

Earnings this week:

• Wednesday: CVS Health, Barrick Gold, Biogen, Generac Holdings, Kraft Heinz

• Thursday: Datadog, John Deere, Coinbase, Twilio, DraftKings

• Friday: Moderna, Enbridge, Magna International, Portland General Electric, Fortis

FX:

• USD weakened against G10 peers despite Trump's tariff announcement, as markets expect negotiations. DXY closed at 107.94. Powell's Senate testimony echoed prior remarks, while focus shifts to his House testimony and US CPI data. The Federal Budget deficit is expected to widen.
• GBP and SEK led gains, with GBP rising due to BoE's Mann advocating a 50bps rate cut over 25bps, citing reasons like cutting through noise and anchoring expectations. Despite her dovish dissent, Mann maintains a hawkish stance. GBPUSD rose above its 21 DMA to 1.244.
• USDJPY rose to around 152.50, influenced by rising US Treasury yields, particularly long-term yields, after recent US metal tariffs.
• Major economic data: US CPI, Fed Chair Powell Testimony, BoC Summary of Deliberations

Commodities:

• Oil prices rose as US sanctions impacted Russian crude supplies, with West Texas Intermediate up 1.4% to over $73 a barrel. Russian output fell below its OPEC+ quota, and Chinese refiners received larger discounts. Despite short-term gains, the long-term outlook is clouded by forecasts of a global surplus, with the Energy Information Administration predicting bigger surpluses for this year and next.
• Gold stayed just below its record high as the US central bank showed no rush for more interest-rate cuts, while traders eyed a potential global trade war boosting safe-haven demand. Bullion was near $2,900 an ounce, after briefly topping $2,942. Fed Chair Jerome Powell signaled patience in easing monetary policy.

Fixed income:

• Long-term Treasury yields rose by over 4 basis points, steepening the yield curve, after Federal Reserve Chair Jerome Powell reiterated no immediate need to cut interest rates. Strong demand in a 3-year note auction contributed to this steepening. The US 10-year yield closed at 4.535%, up nearly 4 basis points. Meanwhile, European bonds underperformed US bonds due to concerns about declining gas supplies and high prices.

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