Global Market Quick Take: Asia – April 8, 2025

 Key points:

• Macro: Trump threatens a further 50% tariffs on China; Japan negotiates with Trump
• Equities: S&P 500 continues its decline by 0.2%, entering bear market
• FX: Bloomberg Dollar Index marked its top two-day rally since February 2023
• Commodities: Gold experienced its steepest three-day drop in more than four years
• Fixed income: 30-year bond yields had their biggest daily rise since March 2020

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Disclaimer: Past performance does not indicate future performance.

Macro: 

• Trump maintains his aggressive trade stance, threatening a 50% tariff on China if they don't remove their 34% retaliatory tariff on the US by Tuesday. He also stated that talks with China will be terminated, while negotiations with other countries will start immediately. While some countries seek tariff deals, WH Trade Adviser Navarro pointed to non-tariff barriers as the main issue. Stocks briefly surged and T-notes fell after a misinterpreted CNBC report on a 90-day tariff pause, which the White House dismissed as "fake news."
• Trump announced his agreement to meet Japanese officials for trade negotiations after a phone call with Prime Minister Shigeru Ishiba, leading to a 6% rally in Nikkei Index this morning.
• Japan's current account surplus reached a record JPY 4,060.7 billion in February, exceeding last year's JPY 2,737.1 billion and forecasts of JPY 3,800 billion. The goods account saw a JPY 712.9 billion surplus, with exports rising 10.4% and imports falling 1.9%.

Equities:

• US - U.S. stocks dropped for the third consecutive session on Monday as the White House intensified its tariff strategy, exacerbating market instability. The S&P 500 fell 0.23%, marking a 20% drop from its February peak and entering bear market territory. The Dow Jones lost 350 points (0.91%), and the Nasdaq was up by 0.2%, having entered a bear market last week due to recession fears from Trump's expansive trade policies. Markets briefly rose on reports Trump might pause tariffs for 90 days, excluding China, but the White House denied it, stalling the rally. Trump further threatened a 50% tariff on China, effective from 9th April if retaliatory duties weren't lifted.
• EU - The DAX closed 4.1% down at 19,762, after briefly turning positive amid false reports of a 90-day tariff pause. The Stoxx 50 dropped over 7%, closing 5.4% lower, and the Stoxx 600 ended down 4.5%. Germany's export-based economy faces a significant impact from these measures. Sectors such as utilities, retail, insurance, financial services, oil and gas, chemicals, tech, banking, and industrials experienced declines exceeding 5%, with Rheinmetall reducing losses after an earlier 20% drop and Commerzbank managing a slight recovery.
• HK - On Monday, the Hang Seng Index fell by 3,021 points (13.2%), its largest one-day loss since 1997, closing at 19,828. This marked the second session of significant declines, with sectors like tech, consumer, and financials seeing double-digit losses due to heightened trade tensions, as the U.S. maintained tariffs and China imposed retaliatory levies. President Trump insisted markets "take their medicine" until the trade gap is resolved. U.S. futures also dropped amid recession fears. Losses eased when Bloomberg reported China's possible cuts in borrowing costs and accelerated stimulus measures. Major decliners included Pop Mart (-22.9%), Prada Spa (-14.7%), CK Hutchison (-8.9%), Xiaomi (-21.1%), Semicon Manufacturing (-17.7%), Meituan (-15.4%), and Tencent (-13.3%).

Earnings this week:
Tuesday: Cal-Maine (CALM), Walgreens (WBA)
Wednesday: Delta (DAL), Constellation Brands (STZ)
Thursday: CarMax (KMX)
Friday: JPMorgan Chase (JPM), Morgan Stanley (MS), Wells Fargo (WFC), Bank of New York Mellon (BK), BlackRock (BLK)

FX:

• In turbulent trading, the dollar index rose as markets reacted to tariff reports. Wall Street executives criticised the US's global levies, as the gloomy economic outlook pushed stock markets down, with the Swiss franc outperforming its Group of 10 peers. The Bloomberg Dollar Spot Index climbed 0.6%, adding to Friday's nearly 1% gain, marking its best two-day rally since February 2023. The Barclays Dollar Sentiment Indicator shows the dollar in "max bearish" territory, with sentiment at its lowest since October 2024.
• USDJPY rose 0.7% to 147.98, as Trump and Japan's Prime Minister Ishiba agreed to continue tariff talks, though Ishiba warned the levies might hinder US investment goals.
• USDCHF fell 0.3% to 0.8584, EURUSD dropped 0.4% to 1.0918, GBPUSD slid 1.3% to 1.2721, its weakest in over a month.
• USDCAD increased 0.2% to 1.4248. Bank of Canada surveys suggest trade tensions with the US could elevate inflation pressures.
• The Norwegian krone fell 2% as WTI futures faced pressure, with USDNOK rising to 10.9893.

Commodities:

• Oil prices increased after a three-day slump as markets calmed. Brent approached $65 a barrel, while WTI traded above $61. Trump threatened a 50% import tax on China, the largest crude importer.
• Gold faced its worst three-day decline in over four years, driven by reactions to Trump's tariff policies. Bullion fell 2.7% before recovering some losses. Spot gold traded at $2,989 per ounce, while silver, palladium, and platinum remained stable.
• Chinese copper buyers boosted purchases as prices fell below $8,500 per ton yesterday, sparking a rebound amid global market turmoil. Copper initially dropped 7.7% but rallied nearly $1,000 within two hours, marking the largest intraday move since 2009. Copper in NY fell for the third day, down 20% from its peak.

Fixed income:

• Treasury market experienced a steepening selloff, with long-term yields rising sharply due to conflicting reports on Trump's tariff plans. Yields on 20- and 30-year Treasuries rose by nearly 20 basis points, steepening curves to multi-month highs. Yields were cheaper by 6 to 17 basis points, with the 10-year at 4.13% and the 30-year at 4.59%.

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