Global Market Quick Take: Asia – January 09, 2025

Key points:

• Macro: CNN reports Trump may declare national economic emergency
• Equities: US stocks slightly higher in volatile session. Markets closed tonight.
• FX: GBP fell to 1.236 on strong dollar and rising yields
• Commodities: Natural Gas rises over 6% and copper trades above $4.16
• Fixed income: 30-year bond auction produced the highest yield since 2007

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

Disclaimer: Past performance does not indicate future performance.

Macro:

• Eurozone producer prices rose 1.6%, driven by a 5.4% energy cost surge, surpassing expectations. Prices for intermediate and durable consumer goods fell, while capital and non-durable goods remained stable.
• CNN reported that President-elect Donald Trump may declare a national economic emergency to justify broad tariffs on allies and adversaries. This would enable him to use the International Economic Emergency Powers Act to manage imports during the emergency.
• US mortgage applications declined 3.7% for the week ending January 3. Home purchase applications fell 7%, while refinance applications rose 2%. The average 30-year mortgage rate increased to 6.99%.
• US private businesses added 122K workers, the lowest in four months, down from 146K in November and below the 140K forecast. Annual pay growth for job-stayers slowed to 4.6%, the lowest since July 2021, while job-changers saw a slight decline to 7.1%.
• US initial jobless claims dropped by 10,000 to 201,000 for the week ending January 4, the lowest in eleven months, defying expectations of 218,000. The 4-week average fell to 213,000. Outstanding claims rose by 23,000 to 1,867,000, below the 1,870,000 forecast.
• December 2024 FOMC minutes indicated increased inflation risks from strong data and policy changes. Officials expected inflation to reach 2% but noted potential delays, with some suggesting slowing policy easing.

Equities: 

• US - US stocks were slightly higher overnight in a volatile trading session, with S&P 500 gaining 0.1% while Nasdaq 100 just slightly higher by 0.04%. A CNN report indicated President-elect Trump might declare a national economic emergency for a new tariff program, souring risk sentiment in early European trading. However, stocks recovered the losses by the end of the day.
• Japan – Nikkei 225 continues to trade around the key 40,000 level for the past few sessions. Labour cash earnings this morning showed strength with a 3% gain yoy, highest in 32 years, ahead of BOJ’s meeting later this month. Softbank’s Arm Holdings is exploring a deal for Oracle-backed Ampere Computing. Ampere Holdings was last valued at $8b in 2021 but talks are still ongoing.

FX:

• USD strengthened amid European fixed income weakness and Trump's tariff plans, peaking DXY at 109.37. It was unaffected by mixed US data. Fed's Waller sees minimal tariff inflation impact and supports 2025 cuts. FOMC Minutes suggests a January pause.
• EURUSD dipped on mixed European data and Trump's tariff rhetoric. German retail sales and industrial output were weak. Despite tariff concerns, the Euro rebounded as US Treasury yields eased, lifting the pair above 1.03 ahead of Thursday's Eurozone retail sales.
• GBP weakened as gilt yields surged, with the 10-year surpassing 2023 highs and the 30-year nearing 1998 levels. Rising UK borrowing costs may lead to public spending cuts, according to reports. Despite fiscal discipline comments, GBPUSD remained around 1.236.
• AUDUSD weakened as Australia's November CPI came in hotter than expected, though the trimmed mean softened. TRY hit a record low of 35.4 per USD due to a stronger dollar, sluggish economic growth, and anticipated policy easing.

Commodities:

• Gold was around $2,655 per ounce, and Silver stayed above $30 as investors reacted to the Fed's cautious stance amid tariff uncertainties from President-elect Trump. WTI crude  fell to $73.3 per barrel, pressured by a strong dollar and potential tariffs, but supported by declining US stockpiles. Natural gas surged over 6% to above $3.6/MMBtu due to supply disruptions and strong demand, with faster-than-expected storage depletion from cold weather. Copper held above $4.16 per pound, buoyed by hopes of Chinese economic stimulus.

Fixed income:

• Treasuries recorded slight gains, with the yield curve steepening as the 2s10s spread topped 40 basis points for the first time since 2022. This followed a rebound from earlier declines that had pushed 10- and 30-year yields to their highest in months, driven by rising gilt yields and inflation concerns, sparking a global bond selloff. The market stabilized with weaker December ADP employment data and strong demand for a 30-year bond auction. The FOMC's December meeting minutes had little effect. US 10-year yield peaked near 4.73% while UK 10-year yield rose 14 basis points to 4.82%, its highest since 2008, before settling around 4.80%.

For a global look at markets – go to Inspiration.