Global Market Quick Take: Asia – January 27, 2025

Key points:

• Macro: Trump announced 25% emergency tariffs on Colombian imports,
• Equities: US equities lower on Friday but gained 2% last week
• FX: GBP rose above $1.24 as UK PMI exceeded expectations
• Commodities: Gold prices came close to reaching record highs
• Fixed income: Hedge funds extended net shorts in SOFR and 10-year note futures

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Disclaimer: Past performance does not indicate future performance.

Macro:

• US President Trump announced 25% emergency tariffs on Colombian imports, increasing to 50% in a week, following Colombia's refusal allowing two US deportation flights to land in Colombia. He also imposed a travel ban, visa revocations for Colombian officials, and plans to enforce full sanctions on Colombia's financial sectors, stating that these measures are just the beginning.
• Fox News reported that Colombian President Petro reversed course and offered his plane to return migrants from the US while imposing retaliatory tariffs of 25% on all US imports.
• Elon Musk is reportedly investigating the use of blockchain to enhance efficiency in the US government.

Equities: 

• US - US stocks ended the day lower on Friday as the markets took a breather following a week of gains, reflecting on mixed corporate earnings and policy signals from President Trump. Despite the day's declines, all three major indices recorded nearly 2% gains for the week. The tech-heavy indices were particularly affected by a significant decline in semiconductor stocks, with Nvidia dropping 3.1% and Texas Instruments plummeting 7.5% due to disappointing forecasts. In terms of corporate performance, Amex and Verizon reported strong results, while Texas Instruments and Boeing faced challenges.
• Earning for the week – Apple, Microsoft, Meta, Tesla, Visa, Mastercard, ExxonMobil, Chevron, IBM, Intel, Boeing, T-Mobile, ASML, UPS, AbbVie, Gerneral Motors, Lockheed Martin, Danaher, Caterpillar, Comcast, Starbucks, Lam Research

FX:

• USD weakened, with the DXY falling to 107.210, affected by President Trump's remarks against China tariffs and his push for lower interest rates. January's US S&P Global Flash PMI data was mixed, showing a larger-than-expected drop in services and a surprising rise in manufacturing.
• The BoJ increased rates by 25bps to 0.50% with an 8-1 vote, Nakamura dissenting. They indicated future hikes if economic conditions align with forecasts. Ueda's initial hawkish stance shifted to dovish due to flexible policy comments, impacting Japanese assets. USDJPY rose to 156.57, then fell to 154.86.
• GBPUSD rose above $1.24 as UK PMIs exceeded expectations. Despite improved data, concerns persist over declining orders, employment drops, and rising costs. The Bank of England is expected to cut rates by 25 bps in February, without accelerating cuts. EURUSD climbed towards $1.05.
• CAD strengthened past 1.434 per USD due to a weaker U.S. dollar and improved risk sentiment. However, gains are limited by tariff threats and declining crude oil prices, potentially pressuring the Bank of Canada to cut rates by 25 bps.

Commodities:

• Oil prices fell as Trump imposed sanctions and tariffs, affecting global economic stability. The U.S. targeted Colombia, its fourth-largest oil supplier. Despite U.S. pressure to lower prices, OPEC and allies will increase output by 120,000 barrels per day from April.
• Gold prices neared record highs due to a weaker dollar and haven demand amid global uncertainty. Trump's trade comments weakened the dollar, boosting gold. Hedge funds increased net-long positions by 10% to the highest level in 12 weeks by January 21, according to U.S. data.

Fixed income:

• Treasury note futures climbed due to worries about U.S. tariffs and as investors geared up for a substantial issuance of debt later today. In options, interest grew in hedging against a potential 10-year yield drop next month. Gains were led by front-end tenors post-PMIs, pushing the 2s10s spread to session highs. Hedge funds extended net shorts in SOFR and 10-year note futures, per the latest CFTC report.

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