Global Market Quick Take: Asia – March 5, 2025

Key points:

• Macro: Trudeau announces 25% tariffs on US and Europe to boost defense industry
• Equities: CrowdStrike dropped 8% post-market due to weak earnings outlook
• FX: USD weakened on growth concerns; EUR rose on defense spending
• Commodities: Gold continues to rise for two consecutive days
• Fixed income: May fed funds futures hit record volumes with 50% rate cut odds

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Disclaimer: Past performance does not indicate future performance.

Macro:

• Prime Minister Justin Trudeau announced 25% tariffs on $155 billion of US imports, including beer, wine, and orange juice. He warned of further tariffs on C$125 billion of US products if President Trump's tariffs on Canadian goods persist for 21 days.
• Euro Area's unemployment rate held steady at a record low of 6.2% for the third month, below the expected 6.3%. This suggests a tight labour market despite economic slowdowns in major economies.
• European Commission President Ursula von der Leyen announced plans to boost Europe's defense industry, potentially mobilizing nearly €800 billion. She proposed greater fiscal flexibility for member states and €150 billion in loans to support these efforts.
• Secretary of Commerce Howard Lutnick suggested a possible tariff compromise between the US, Canada, and Mexico following Trump's 25% tariffs on Canadian and Mexican goods and a 10% duty on Chinese imports.

Equities: 

• US - US stocks dropped sharply on Tuesday, continuing losses from the previous day as escalating trade tensions unsettled the markets. The Dow and S&P 500 declined by 1.5% and 1.2%, respectively, while the Nasdaq 100 slipped 0.36% as tech stock gains softened broader losses. Tesla dropped 4.4% after data showed a nearly 50% year-over-year decline in its vehicle sales in China for February. GM and Ford also fell, by 4.6% and 2.9% respectively, due to worries over rising costs from tariffs. CrowdStrike fell more than 8% in the post market after issuing a worse than expected earnings outlook this quarter (64-66 US cents vs 96 US cents expected).
• EU - The DAX closed 3.5% lower at 22,329 on Tuesday, following a global sell-off driven by tariff concerns. European Commission President Ursula von der Leyen announced a €800 billion defence plan, including €150 billion in loans. Auto manufacturers faced heavy losses, with Continental dropping nearly 12% and Daimler Truck, BMW, Mercedes Benz, Volkswagen, and Porsche falling between 3.6% and 7.8%. Fresenius Medical Care shares fell 9.3% after Fresenius SE reduced its stake.
• HK – HSI fell 0.3% to 22,942 on Tuesday, weighed down by US-China trade tensions. Beijing imposed new tariffs on US agricultural products and restricted 25 US firms. Markets trimmed losses amid expectations from China's parliamentary session. BYD tumbled 7% after a discounted share sale.

Earnings this week:

• Wednesday: Zscaler, Marvell, Campbell, Foot Locker
• Thursday: Broadcom, Costco, BJ’s Wholesale Club, JD.com, Gap
• Friday: No notable earnings

FX:

• USD weakened due to concerns about US economic growth and weak data releases, leading to expectations of a 73 basis point rate cut by year-end. Initial gains from new tariffs on China, Mexico, and Canada were short-lived due to growth worries and retaliatory measures. Commerce Secretary Lutnick hinted that President Trump might roll back tariffs on Canada and Mexico on Wednesday. Dollar index (DXY) reached a year-to-date low of 105.74.
• EUR rose for the second session due to potential increased defense spending, overshadowing trade war concerns. European yields climbed after EU Commission President von der Leyen proposed a EUR 150 billion defense loan instrument. CDU leader Merz's announcement of a EUR 500 billion special fund for Germany further boosted the euro, pushing EURUSD to a year-to-date high of 1.0623.
• GBP strengthened due to broad USD weakness, pushing GBPUSD close to 1.28 level. Meanwhile, the JPY softened, with USDJPY stabilizing around 149 as risk appetite recovered.
• NZD and AUD gained due to broader risk sentiment. Initially lagging, they improved in the US afternoon, with AUDUSD hitting 0.6250 and NZDUSD reaching 0.5647. RBA Minutes showed a cautious stance on further rate cuts, with little market reaction.
• Major economic data: US ISM Services PMI, China National People’s Congress

Commodities:

• Gold stayed near a record high, driven by Trump's tariffs. Trading at $2,913 an ounce, it was $40 below last week's peak. Tariffs on China, Canada, and Mexico were increased, but possible reductions for Canada and Mexico were hinted at by US Commerce Secretary Howard Lutnick.
• Oil dropped post-settlement after Commerce Secretary Lutnick hinted at tariff relief for Mexico and Canada. WTI fell below $68 a barrel, about 0.5% lower, following slight earlier declines due to potential supply losses.

Fixed income:

• Treasury 10-year yields fluctuated by 15 basis points, initially dropping to 4.10% before reversing due to bund futures selling after Germany's €500 billion defence fund announcement. 10-year yields ended at 4.22%, and May fed funds futures reached record volumes, indicating nearly 50% odds of a rate cut at the May 7 FOMC meeting.

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