Global Market Quick Take: Asia – May 16, 2025

 Key points:

• Macro: Powell warns inflation volatility; PPI drops, retail sales slow
• Equities: Alibaba ADR fall 7.6% after missing revenue and income expectations
• FX: USD recovers; US maintains strong USD stance in trade deals, yields increase
• Commodities: Gold rallies as bond yields declined on weak US economic data
• Fixed income: Treasuries rose as retail sales control group data and PPI disappointed

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Disclaimer: Past performance does not indicate future performance.

Macro: 

• Fed Chair Powell warned of high long-term rates and inflation volatility from supply shocks, stressing anchored expectations for growth and reaffirming the Fed's 2% inflation target to prevent job losses.
• Prices paid to US producers unexpectedly dropped in April, the largest in five years, mainly due to shrinking margins, suggesting companies are absorbing tariff impacts. The producer price index fell 0.5% after no change in March, contrary to a predicted 0.2% rise. Excluding food and energy, the core PPI declined 0.4%, the steepest since 2015.
• US retail sales growth slowed sharply in April, with consumers cutting spending on cars, sporting goods, and other imports amid tariff-related price concerns. Retail purchases, unadjusted for inflation, rose by 0.1% (vs 0% est), following a revised 1.7% gain in March, the largest in two years. Retail control group fell 0.2% ( vs +0.3% est).
• US factory production dropped 0.4% in April, the first decline in six months, due to higher import duties and other challenges. Motor vehicles, computers, and apparel led the decrease, while business equipment output rose slightly. Capacity utilisation fell to 76.8%, and factory activity remained weak, staying in contraction territory.
• Japan's economy shrank by 0.7% annually in the first quarter, its first decline in a year, due to lower exports, higher imports, and stagnant consumer spending. This raises concerns about resilience and may lead to discussions on tax cuts or cash handouts before the summer election.

Equities:

• US - US stocks closed mixed Thursday. The S&P 500 rose 0.4%, driven by Cisco's 3.7% increase. The Dow gained 271 points, while the Nasdaq 100 was flat due to Amazon and Meta falling 2.4% and UnitedHealth fell 11% amid a federal investigation, impacting the health sector. Walmart dropped 0.4% after announcing tariff-related price hikes despite strong sales. GE rose 2.8% as Qatar chose GE engines for Boeing's aircraft order. Retail sales slowed in April, and wholesale inflation fell, easing price concerns and lowering Treasury yields. Fed Chair Powell warned of ongoing economic uncertainty, keeping markets cautious despite US-China trade optimism.
• EU - European stocks rebounded on Thursday, recovering from earlier losses. The Eurozone's STOXX 50 edged up to 5,410, while the STOXX 60 rose 0.5% to 546. Healthcare stocks bounced back, with Bayer and Sanofi rising 3% and 1%, respectively, as investors reacted to US President Trump's drug price cap signals. Utilities gained, with Iberdrola and Enel up nearly 2%. Deutsche Telekom climbed 2.6% after raising its full-year guidance despite economic uncertainty. Conversely, Siemens and Allianz fell after their earnings reports.
• HK – HSI fell 0.8% to 23,453, reversing gains as all sectors declined, led by tech, property, and consumer stocks. Sentiment weakened due to lower mainland Chinese markets and a 20-year low in China's new bank loans amid US-China trade tensions. Beijing's rollback of a rare earth export ban amid easing trade disputes failed to boost sentiment. Hang Seng Bank dropped 1.1% due to restructuring, while KE Holdings, Meituan, and SMIC also declined. Geely Auto rose 2.1% on strong quarterly profits. Alibaba ADR dropped 7.6% after missing fiscal Q4 earnings expectations. Revenue was 236.5 billion yuan, below the 237.2 billion forecast, and net income was 12.4 billion yuan, significantly lower than the expected 24.7 billion.
• SG - Singapore Airlines reported a record annual net profit of S$2.78 billion, aided by a S$1.1 billion one-off gain from merging Vistara with Air India. However, operating profit fell 37% to S$1.71 billion due to lower airfares amid increased competition.

Earnings this week:
Friday - Codere, Flowers Foods, Yatsen Holding, Brady Corporation, RBC Bearings

FX:

• USD experienced fluctuating price movements, ultimately recovering its initial losses as the DXY rose to 100.70. This rebound was supported by rising US yields and a Bloomberg report indicating that the US is not aiming to weaken the Dollar in trade agreements.
• EUR initially gained against the dollar but fell below the 1.12 level, with final CPI data from Germany and Spain aligning with preliminary figures, offering no surprises.
• GBP reversed its earlier gains, dropping below 1.33 level as the dollar strengthened, with attention now turning to upcoming UK GDP data.
• JPY outperformed, briefly pushing USDJPY below 146 before the dollar stabilised and recovered.
• Australian wage data exceeded expectations, leading to volatile trading. As a result, AUDUSD gradually declined, reaching approximately 0.6423 during APAC trading lows.
• Economic data – BoJ Nakamura Speech, EU Balance of Trade, US Building Permits Prel, US Export and Import Prices, US Michigan Consumer Sentiment Prel

Commodities:

• Oil steadied after two days of losses as a potential US-Iran nuclear deal risks increasing a surplus. WTI hovered near $62, and Brent was below $65. President Trump suggested a nuclear agreement is close.
• Gold recovered some losses as bond yields fell due to weak US economic data, increasing expectations for more Fed rate cuts. It rose to about $3,245 an ounce after a 2% gain, driven by a sharp drop in US producer prices and sluggish retail sales.

Fixed income:

• Treasuries gained momentum after retail sales control group data and the PPI came in lower than expected. The steepening trend following the data was strengthened by block trades in futures, while a rise in volumes for Eris SOFR swap futures appeared to support the rally and contribute to a re-tightening of dollar swap spreads. Initial trading saw a bid in swap spreads, prompted by a Financial Times report overnight regarding bank regulations.

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