Global Market Quick Take: Asia – May 19, 2025

Key points:

• Macro: Moody's downgraded US credit from Aaa to Aa1
• Equities: US futures open down 0.4% after US credit downgrade
• FX: Dollar edged lower on Monday as Moody’s cuts US credit rating
• Commodities: Gold rebounded after its biggest weekly drop in six months
• Fixed income: China cut US Treasury holdings; the UK is now second-largest holder

------------------------------------------------------------------

Disclaimer: Past performance does not indicate future performance.

Macro:

• Moody's Ratings downgraded the US credit rating from Aaa to Aa1, citing growing worries over rising debt and deficits potentially harming the country's global capital appeal and raising borrowing costs. This aligns with similar actions by Fitch Ratings and S&P Global Ratings, marking the US below the top triple-A status. The downgrade follows Moody's shift to a negative outlook over a year ago, now revised to stable.
• University of Michigan consumer sentiment dropped to 50.8, its second-lowest level ever, with nearly 75% of respondents worried about tariffs. Consumers anticipate a 7.3% annual price increase next year, the highest since 1981, and 4.6% over the next five to ten years, the highest since 1991. Despite tariff concerns, recent data indicated limited inflationary pressures, with consumer prices excluding food and energy rising below expectations for the third consecutive month.

Equities: 

• US - Wall Street ended the week positively, with major indexes gaining due to easing US-China trade tensions. However, US credit downgrade by Moody’s after Friday close led to S&P futures opening 0.4% lower today. On Friday, the S&P 500 rose 0.7%, the Nasdaq 0.4%, and the Dow 331 points, eliminating year-to-date losses. A 90-day tariff truce boosted market sentiment, returning the S&P 500 to positive territory for the year. However, weak consumer sentiment slightly tempered the rally, as the University of Michigan’s consumer sentiment index fell to 50.8, its second-lowest on record, with inflation expectations rising to 7.3%. Tech stocks were mixed, with Alphabet up 1.2% and Meta down 0.5%. Coinbase rallied 9% on Friday in anticipation of its addition to the S&P 500, which takes effect today.
• EU - Frankfurt's DAX rose 0.3% to a record high of 23,767 on Friday, as traders remained cautious ahead of the weekend, awaiting updates on trade and the Russia-Ukraine situation. EU officials announced efforts for a broader tariff reduction deal with the US, beyond current negotiations with the UK and China, noting positive progress. Rheinmetall led corporate gains with a 2.4% rise, while Deutsche Borse, Vonovia, Deutsche Telekom, Fresenius SE & Co, Qiagen, and SAP increased between 1.2% and 1.5%. Conversely, E.ON (-2.9%), BASF (-2.3%), Porsche AG (-1.9%), and Heidelberg Materials (-1.8%) were the biggest laggards. The index rose 1.1% for the week, marking its fifth consecutive weekly gain.
• HK – HSI fell 0.5%, to 23,345 on Friday, marking its second consecutive decline amid sector-wide losses. Despite a rise in US futures, traders remained cautious ahead of China's key April data release next week, including industrial output and retail sales. The PBoC plans to review its benchmark lending rates, which have been at record lows due to domestic and external pressures. However, the Hang Seng gained about 2% for the week, its fifth straight weekly increase—the longest since February—boosted by upgraded growth forecasts for China. Alibaba dropped 3.9% after missing revenue estimates, while Hang Seng Bank (-3.3%), Swire Pacific (-3.2%), and Meituan (-3.1%) also saw significant declines.

Earnings this week:

• Monday: Trip.com
• Tuesday: Home Depot, Lowe’s, Palo Alto Networks
• Wednesday: Target, Snowflake, TJX
• Thursday: Toronto-Dominion Bank, Analog Devices, Autodesk, Intuit, BJ’s Wholesale Club, Ralph Lauren
• Friday: Booz Allen Hamilton, Workday

FX:

• USD gained slightly amid limited news and mixed US data on Friday, with April's import/export figures exceeding expectations and disappointing University of Michigan May data. The Trump administration is split over blacklisting Chinese chip makers, fearing trade talk impacts. Japan seeks to remove US car tariffs to avoid backlash.
• JPY rose 0.3% to 145.2 against USD. Japan's Q1 GDP contracted more than expected, and BoJ's Nakamura highlighted economic pressures from US tariffs, suggesting stable monetary policy for now.
• CHF edged lower toward 0.86 against USD. SNB Chairman Schlegel stated Switzerland is not a currency manipulator, intervening only to address CHF overvaluation. UBS is reportedly in talks to refund clients who suffered significant FX derivatives losses.
• AUD rose above 0.64. A Reuters poll showed most economists expect the RBA to cut the Cash Rate by 25 basis points to 3.85% in May, with a median forecast of 3.35% by year-end.
• Economic data: China April Home Prices, China April Retail Sales, China Industrial Production, China Fixed Assets Ex-Rural, US Fed Speech

Commodities:

• Oil prices stabilised after early declines amid Ukraine talks and US credit rating issues. Brent dipped below $65, WTI near $62. Trump and Putin to speak, but Putin may not concede.
• Gold rebounded after its largest weekly drop in six months, rising 1.3% to $3,245 an ounce due to US economic concerns and Moody's downgrade of the US credit rating to Aa1.

Fixed income:

• Treasury futures fell in early Asian trading after Friday's drop when the US lost its last top credit rating. The Bank of Japan will buy bonds in regular operations. Treasuries are in their longest weekly losing streak of 2025, driven by eased US-China trade tensions boosting US economic optimism. US debt declined for the third week, with two-year yields rising about 10 basis points to 3.99%. China reduced its US Treasury holdings in March, with the UK overtaking it as the second-largest foreign holder. Total overseas holdings rose by $233.1 billion to a record $9.05 trillion, with Japan, the UK, Canada, and Belgium increasing their investments.

For a global look at markets – go to Inspiration.