Global Market Quick Take: Asia – May 30, 2025

Key points:

• Macro: US appeals court reinstates Trump’s tariffs
• Equities: S&P 500 lost earlier gains of over 1% after Trump’s tariffs restated, up just 0.4%
• FX: Dollar weakened amid poor US economic data and new trade uncertainties
• Commodities: Oil is set for a second weekly decline ahead of the OPEC+ meeting
• Fixed income: Treasuries lift higher as yields on 20 year and 30 year falls below 5%

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Disclaimer: Past performance does not indicate future performance.

Macro: 

• The US Appeals Court reinstated Trump's tariffs during an appeal, as the Federal Circuit Court reviews filings. The US may ask the Supreme Court to keep tariffs, while the White House called the trade court ruling judicial overreach.
• The US economy contracted at an annualized rate of 0.2% in Q1 2025, improving from the initial 0.3% decline estimate, marking the first quarterly GDP contraction in three years. The revision was due to stronger fixed investment, offsetting weaker consumer spending and a larger trade drag.
• Fed Chair Powell met President Trump to discuss economic developments, stressing policy depends on economic data and will support employment and stable prices. Trump said not lowering interest rates is a mistake.
• Retail sales in Japan grew by 3.3% year-on-year in April 2025, exceeding the previous month's 3.1% gain and market expectations. This marks the 37th consecutive month of growth, supported by rising wages, and the fastest pace since January.
• Pending home sales in the US fell 6.3% in April 2025, sharply contrasting with the expected 0.9% drop and marking the steepest decline in a year, erasing the revised 5.5% increase in March.
• Tokyo's core CPI rose 3.6% year-on-year in May 2025, surpassing April's 3.4% and expectations. This highest inflation rate in over two years suggests potential further monetary tightening by the BoJ Governor Ueda reaffirmed the commitment to policy adjustments for inflation targets.

Equities:

• US - US stocks increased slightly on Thursday amid a mix of earnings optimism and tariff uncertainty. The S&P 500 and Nasdaq each gained 0.4%, while the Dow rose 117 points, buoyed by Nvidia's strong results and positive corporate news like Boeing's production plans. Nvidia shares climbed 3.2%, surpassing quarterly sales estimates thanks to AI chip demand, though US export restrictions on China could reduce next-quarter sales by $8 billion. Market gains were tempered by ongoing legal issues over President Trump's tariffs; a federal court had blocked most tariffs, but a US appeals court reinstated them, causing trade policy uncertainty. Best Buy fell 7% after lowering its full-year forecast due to tariff-related economic concerns. Meanwhile, US GDP contracted by 0.2% in the first quarter, a slight improvement on initial estimates of –0.3%.
• EU - European stocks reversed early gains on Thursday, with the STOXX 50 closing flat at 5,377 and the STOXX 600 dipping slightly to 548, despite each having increased by over 1% during the day. Initial optimism from a US Court ruling against President Trump's tariffs diminished as investors considered the administration's potential alternative legal measures. Focus shifted to the US economic outlook following weak data release. Auto Trader shares dropped 11.3% due to disappointing annual revenue, while Thyssenkrupp fell 5.4%, and Novo Nordisk and Siemens each declined 2.4%.
• HK - HSI rose 1.4%, to close at 23,573 on Thursday after a US court ruled against President Trump's broad tariffs. While the White House plans to appeal, the decision raised hopes for lower tariffs. Tech stocks led gains, up 2.5% following Nvidia's strong earnings. Consumer and financial stocks also advanced as UBS raised Hong Kong's 2025 GDP growth forecast to 2.2%. Notable movers included Loapu Gold (+7.6%), Meituan (+6.9%), Kuaishou Tech (+4.7%), and Trip.com (+3.3%). Pharma stocks jumped as China plans drug pricing reforms, with Wuxi Biologics up 9.8% and Innovent Biologics rising 3.1%.

Earnings this week:

• Friday: No notable earnings.

FX:

• USD weakened due to soft data releases, including GDP contraction, softer Core PCE, weaker pending sales, and higher jobless claims. Trade uncertainty increased after the Court of International Trade blocked Trump's tariffs, though an appeal temporarily reinstated them. DXY near 100 level.
• EUR gained strength, reclaiming the 1.1370 level after surpassing its 21-day moving average, driven by dollar selling.
• GBP was supported but faced resistance around 1.3500, with BoE Governor Bailey's comments having little effect, noting challenges due to inflexible and uncertain supply conditions.
• JPY strengthened, causing USDJPY to fall below 144 level, influenced by softer US yields following data releases and as stocks lost most of their early gains.
• Economic data – AU Retail Sales, AU Building Permits, JP Housing Starts, GE Inflation Rate, CA GDP Growth Rate, US Core PCE Pricing Index, US Personal Income, US Personal Spending

Commodities:

• Oil was heading for a second weekly decline before an OPEC+ meeting likely to increase supply. WTI stayed below $61, and Brent closed near $64. Saudi-led talks will determine July production levels.
• Gold rebounded near $3,314 an ounce as uncertainties over Trump's tariffs and economic strength persisted. It rose nearly 1% after a federal appeals court temporarily paused the ruling to block tariffs, with broad based dollar weakness.

Fixed income:

• Treasury futures rebounded reversing earlier losses from Asian hours, with yields falling after GDP data and unexpectedly high jobless claims. This trend continued into the 7-year note auction, which saw strong interest and results surpassing the when-issued level by over two basis points. There was notable demand for Eris SOFR swap futures, with numerous block trades in 5-year and 10-year maturities throughout the afternoon. Australian and New Zealand bonds mirrored Thursday's US Treasuries rally, while Japanese bond futures rose despite higher-than-expected Tokyo inflation and an upcoming two-year note auction.

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