Global Market Quick Take: Asia – March 20, 2025

Key points:

• Macro: FOMC projections hints at multiple rate cuts
• Equities: US equities rebounded after Fed, Nasdaq 100 gained 1.4%
• FX: TRY dropped 12% due to political unrest and Imamoglu's detention
• Commodities: Copper prices in London soared to a five-month high
• Fixed income: Treasuries surged as Fed retained 50bps cut projection

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Disclaimer: Past performance does not indicate future performance.

Macro:

• The FOMC's projections have solidified expectations for at least two rate cuts this year, due to a softened economic outlook with weaker growth, rising unemployment, and higher inflation linked to President Trump's policies. The Fed will also slow its balance sheet runoff starting next month, reducing the monthly cap of Treasuries allowed to mature from $25 billion to $5 billion.
• Istanbul's mayor, Ekrem Imamoglu, a prominent politician and chief opponent of President Erdogan, was arrested on charges of fraud and terrorism following the revocation of his university diploma, a move that could hinder his ability to contest Erdogan.
• BoJ kept its key short-term interest rate at about 0.5%, the highest since 2008, matching market expectations. This followed January's rate hike and preceded the U.S. Federal Reserve's announcement. The BoJ cautiously assessed global risks impacting Japan's recovery, noting domestic uncertainties from higher U.S. tariffs and international challenges.

Equities: 

• US - On Wednesday, US equities soared after the Federal Reserve maintained interest rates, as expected, and hinted at two additional cuts this year. The S&P 500 rose by 1.1%, the Dow Jones climbed 384 points, and the Nasdaq 100 led with a 1.4% rise. Powell was not overly concerned with the potential impact of tariffs, calling its inflation impact ‘transitory’. Tech stocks retained morning gains as volatility eased, with Nvidia up 1.8%, Broadcom 3.7%, and Alphabet 2.2% higher. Tesla rose by 4.7% after Musk’s social network X secured $1 billion in equity funding. The Fed’s slower balance sheet reduction boosted market sentiment and liquidity.
• EU - European stocks rose for the fourth session, nearing record highs, supported by increased deficit spending and hopes for a Russia-Ukraine ceasefire. The STOXX 50 gained 0.5% and the STOXX 600 rose 0.3%. Germany approved more fiscal spending, while Putin agreed to a limited ceasefire. Consumer discretionary stocks rebounded, and Schneider and Safran led industrials with over 2% gains. Defence stocks paused as investors took profits.
• HK – HSI rose 0.12% to 24,771, reaching a three-year high, driven by financial stocks. In China, the PBoC is likely to maintain key lending rates at record lows in its Thursday review. Xiaomi reached a record high before trimming gains after revising its 2025 EV delivery target to 350,000 units. BYD maintained its upward momentum following the launch of a new EV charging system and plans to establish a factory in Germany.

Earnings this week:

• Thursday: Nike, Accenture, FedEx, Micron Technology, Pinduoduo
• Friday: NIO, Carnival Corporation, MiniSO Group, Soy Good, Zeekr, Torrid

FX:

• USD stayed strong but trimmed gains after the Fed kept the Federal Funds Rate at 4.25-4.50% and slowed balance sheet reductions. Despite unanimous decision, Fed's Waller preferred the current pace. FFR forecasts remained unchanged, GDP forecasts were downgraded, and Chair Powell reiterated no rush to cut rates.
• GBP traded above 1.30 level against USD ahead of Thursday's BoE announcement, with Chancellor Reeves set to announce significant spending cuts at next week’s Spring Statement
• EUR initially weakened due to early dollar strength but recovered to nearly reclaim the 1.09 level.
• JPY strengthened, with USDJPY falling below 149 as US yields softened post-FOMC. The BoJ held rates at 0.5%, noting moderate economic recovery and rising inflation expectations.
• TRY dropped 12% to 41 against USD, then settled above 39 per USD, hitting a record low due to political unrest. Istanbul's mayor, Ekrem Imamoglu, a key rival to President Erdogan, was detained on fraud and terror charges, following the revocation of his university diploma, potentially preventing him from challenging Erdogan.
• Major economic data: UK Unemployment Rate, BoE Interest Rate Decision, US Existing Home Sales, US Initial Jobless Claims, JP Inflation Rate

Commodities:

• Brent crude oil futures stayed near $71 per barrel, pressured by rising US inventories and economic concerns. The EIA reported a 1.75 million barrel stockpile increase. Investors eye the Fed's decision and trade tensions. OPEC plans to boost production, adding supply pressure. Putin agreed to halt strikes on energy infrastructure, potentially allowing Russian oil back into markets.
• Gold remained above $3,040 per ounce, near record highs, as the Fed held rates steady. Trump's tariffs prompted forecasts of rate cuts by 2025. Gold hit $3,047 amid geopolitical tensions. Israel struck Gaza, and Putin agreed to halt attacks on Ukrainian energy sites. US trade tensions rose with a 25% steel and aluminum tariff. Gold is up over 16% this year.
• Copper rose for the second day amid geopolitical risks and a weakening dollar. Vladimir Putin agreed to limit attacks on Ukrainian energy infrastructure for 30 days but rejected a broader ceasefire.

Fixed income:

• Treasuries rose, reversing earlier losses after the Fed's new forecasts. The bank expects half a percentage point rate cuts this year, consistent with December's predictions, and will slow balance sheet reduction next month. Gains persisted during Chair Powell's press conference, with yields richer, bringing 2-year yields below 4%. US 10-year yields settled around 4.255%, after peaking at nearly 4.32% pre-announcement. Powell suggested tariff-related inflation is likely temporary, supporting Treasuries' gains.

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