Global Market Quick Take: Asia – March 17, 2025

 Key points:

• Macro: Germany closer to borrowing reforms with parliamentary vote this week
• Equities: S&P 500 recovered on Friday, rising 2.1% while Nasdaq 100 gained 2.5%
• FX: AUD, NZD lead G10; boosted by China sentiment, PBoC cut speculation
• Commodities: Spot gold remains elevated after breaking $3,000
• Fixed income: Treasuries dropped as the yield curve flattened.

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Disclaimer: Past performance does not indicate future performance.

Macro: 

• US consumer sentiment fell to 57.9 in March 2025, the lowest since November 2022, from 64.7 in February, missing the forecast of 63.1. This is the third monthly decline, with consumers worried about policy and economic uncertainty.
• US year-ahead inflation expectations rose to 4.9% in March 2025, the highest since November 2022, up from 4.3% in February, according to the University of Michigan Consumer Survey's preliminary estimate.
• The British economy shrank by 0.1% in January 2025, after a 0.4% growth in December, missing expectations of a 0.1% increase. The production sector contributed most to the decline, dropping 0.9% after a 0.5% rise previously.
• Chancellor Merz agreed with the Green and Social Democrat parties on borrowing reforms, allowing a parliamentary vote next week. The changes exempt defence spending from debt limits and create a €500 billion infrastructure fund. Investors lowered expectations for ECB rate cuts as policymakers turned hawkish, with President Lagarde warning that trade disruptions and increased spending could affect inflation stability.
• Treasury Secretary Scott Bessent says he is not worried about the recent market downturn, saying corrections are healthy. He believes that the policy changes will be beneficial for the financial markets over the longer term, aligning with President Trump’s view that he is not concerned about short-term market volatility because of his policies.

Equities:

• US - US stocks rallied on Friday, with the S&P 500 rising 2.1%, the Dow gaining 674 points, and the Nasdaq 100 up by 2.5%. Reduced fears of a government shutdown and resilient investors boosted markets, as Senate Minority Leader Chuck Schumer backed a Republican funding bill. Despite weak consumer sentiment hitting its lowest since November 2022, tech stocks rebounded, led by Nvidia's 5.3% rise. Tesla, Meta, Amazon, Apple all rose over 1%, while Palantir surged 8.3% amid defence spending concerns.
• EU - DAX rose 1.9% to 22,987 on Friday, outperforming other indices due to reports of Germany’s chancellor-in-waiting Friedrich Merz and major political parties agreeing on increased state borrowing, ahead of next week's parliamentary vote. Defence stocks like Rheinmetall rose 6.3%, materials climbed, with Heidelberg Materials up 3.8%, and banks performed well. Daimler Truck increased over 2% after exceeding Q4 earnings expectations and providing a strong outlook. BMW shares dropped 0.3% due to a projected profit decline for 2024 and a modest earnings margin forecast for 2025.
• HK – HSI rose 2.1%, to 23,960 on Friday, ending a five-day losing streak amid hopes of avoiding a government shutdown. Sentiment was boosted by expectations of new stimulus for China's domestic consumption and cash incentives in Hohhot to encourage births. Despite Friday's gains, the index fell 1.1% for the week.

Earnings this week:

• Monday: Townsquare Media, Inspired Entertainment, SAIC, Sonida Senior Living, Diversified Energy, Quarterhill, FibroGen, Sangamo Therapeutics, Open Lending, Quanterix
• Tuesday: StoneCo, Maravai LifeSciences, Waldencast, HealthEquity, Surf Air Mobility, Inovio Pharmaceuticals, OmniAb, ZTO Express, Absci
• Wednesday: General Mills, Williams-Sonoma, Signet Jewelers, Five Below, Kingsoft Cloud, Tencent
• Thursday: Nike, Accenture, FedEx, Micron Technology, Pinduoduo
• Friday: NIO, Carnival Corporation, MiniSO Group, Soy Good, Zeekr, Torrid

FX:

• Dollar index (DXY) fell slightly on Friday but remained flat for the week amid tariff and growth concerns. The University of Michigan report was weak, with sentiment below forecasts and inflation expectations rising. Next week includes the Federal Open Market Committee meeting. The index ranged between 103.560 and 104.090, now at 103.75.
• AUD and NZD, led the G10 performance, buoyed by positive risk sentiment in China and speculation of a PBoC reserve requirement ratio cut. AUDUSD and NZDUSD reached highs of 0.5749 and 0.6326, respectively, with Australian jobs data as the main focus next week.
• Safe-haven currencies CHF and JPY lagged due to upbeat sentiment. JPY was pressured by wage data below expectations. USDJPY hit 149.02, USDCHF traded around 0.8840. SNB and BoJ meetings are next week, with SNB possibly cutting rates, while BoJ is expected to maintain rates.
• EUR gained slightly due to German fiscal reform, while GBP fell due to UK GDP contraction driven by manufacturing and construction slowdowns. GBPUSD traded above 1.29, and EURUSD peaked at 1.0912.
• Major economic data: China Industrial Production, China Retail Sales, US Retail Sales, Canada Housing Starts, ECB President Lagarde Speech

Commodities:

• Oil prices increased as China plans to boost incomes. Crude fell over $10 a barrel since January due to the US-China trade war. Goldman Sachs cut Brent forecasts. Brent crude rose above $71, with WTI near $68. Beijing will stabilise markets and raise wages, reports Xinhua.
• Gold broke above $3,000 last Friday, as investors weighed the US government's shutdown avoidance against growth concerns. Safe-haven demand has boosted bullion 14% this year. Spot gold rose 2.6% last week.

Fixed income:

• Treasuries declined as the yield curve flattened. German bond selloff increased pressure on Treasury yields, alongside corporate issuance hedging. Dealers expect $35 billion in issuance this week. The 10-year yield was near daily highs at 4.305%, within the weekly range of 4.15% to 4.35%.

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