Global Market Quick Take: Asia – January 31, 2025

Key points:

• Macro: Trump renews commitment to impose tariffs and Canada and Mexico
• Equities: Stocks continue to rise despite mixed earnings
• FX: The US dollar strengthens against CAD and MXN
• Commodities: Gold hits a record high as a safe haven
• Fixed income: Treasuries trim gains due to tariff concerns

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Disclaimer: Past performance does not indicate future performance.

Macro:

• President Donald Trump's renewed commitment to impose 25% tariffs on imports from Canada and Mexico starting February 1st caused a stir in foreign exchange markets late in the New York trading session.
• The US economy grew 2.3% in Q4, below the 2.6% forecast, with strong consumer spending. PCE prices and jobless claims were better than expected. The Fed held rates steady, noting economic strength. The ECB cut rates by 25bps and suggested more cuts.

Equities: 

• US - US stocks rose on Thursday despite mixed earnings. The Nasdaq and Dow Jones increased by 0.5%, and the S&P 500 by 0.6%. Meta and Tesla saw gains, while Microsoft dropped over 6.2% due to a disappointing revenue forecast. Oracle and Broadcom rebounded from earlier losses. US GDP grew by 2.3% in Q4, below expectations.
• Japan - Nikkei 225 rose 0.25% to 39,514, and the Topix Index gained 0.23% to 2,782, marking a second day of gains. Chip-related stocks led the rally, with Advantest up 3.2% after boosting its profit forecast by 37% due to AI chip demand. Disco, Tokyo Electron, and Hitachi also gained. Bank of Japan's Deputy Governor hinted at possible rate hikes if economic conditions align.
• Germany - DAX rose to a record 21,731 on Thursday after the ECB cut the deposit rate by 25bps and hinted at more cuts. The Fed paused monetary easing, adopting a cautious stance. The Eurozone economy stagnated last quarter, with contractions in Germany and France. Deutsche Bank fell over 4% due to a larger-than-expected Q4 profit drop from legal provisions.
• Australia - ASX 200 rose 0.55% to 8,494, reaching record highs due to cooling inflation, prompting expectations of an RBA rate cut in February. Shares gained despite Wall Street's decline after the Fed paused its rate cuts, citing "somewhat elevated" inflation.

FX:

• The dollar index reached a session high after U.S. President Donald Trump confirmed plans to implement 25% tariffs on Canada and Mexico this Saturday. As a result, the Canadian dollar fell by more than 1%, with USDCAD climbing as much as 1.2% to 1.4595 before retreating.
• EURUSD slipped 0.1% to 1.0407, after having risen up to 0.4% earlier. ECB President Christine Lagarde stated that the decision to cut rates by 25 basis points was unanimous, easing worries that some policymakers might favor a larger cut.
• USDJPY dropped 0.6% to 154.25, following the Bank of Japan’s significant move last week to reduce its massive balance sheet, underscoring Governor Kazuo Ueda’s intent to steadily move toward policy normalization.
• Furthermore, GBPUSD edged down 0.1% to 1.2434, while USDCHF rose 0.3% to 0.9093.

Commodities:

• Oil prices are climbing as Trump plans tariffs on Canada and Mexico, possibly exempting crude. He has threatened 25% tariffs on imports from these countries and China, with a decision on crude exemptions expected soon. Canada exports 4 million barrels of oil daily to the U.S., and these tariffs could cause refiners to cut production.
• Gold reaches a new peak as investors seek refuge in safe-haven assets amid Trump's tariff threats. The metal benefits from rising demand driven by apprehensions about trade wars and economic growth. Gold is poised for its fifth straight weekly gain, with spot gold edging up 0.1% to $2,797.82 per ounce.

Fixed income:

• Treasuries closed with slight changes, having retreated from earlier highs as small gains faded late in the session following President Trump's threats of 25% tariffs on Canada and Mexico, which strengthened the dollar. Trading was earlier influenced by the FOMC's statements from Wednesday, euro-zone bond gains post-ECB policy announcement, and a surprising drop in U.S. initial jobless claims. Treasury yields were nearly unchanged, having bounced back from earlier declines to year-to-date lows, with the 10-year yield at 4.52%, trailing bunds and gilts by about 5 basis points. European rate movements, driven by the ECB's actions, had a notable impact on Treasuries, as euro-zone markets anticipated further ECB easing this year.

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