February 19th, 2025

Market wrap: US equities muted amid tariff news, gold hits near record high, digital assets is the future

The economic landscape of the past week has been shaped by a complex interplay of policy announcements, market reactions, and strategic corporate moves, all set against a backdrop of global uncertainty. At the forefront of these developments was President Trump’s indication of imposing tariffs on automobile, semiconductor, and pharmaceutical imports, potentially starting from April 2nd. This move, ostensibly aimed at encouraging foreign manufacturers to invest in US production facilities, could have profound implications, particularly for industries where international supply chains are deeply integrated.

The automobile sector, already navigating through the challenges of electrification and autonomous driving, now faces the added complexity of potential tariff hikes. For European carmakers like Volkswagen and BMW, and Asian giants like Toyota and Hyundai, the implications are stark. The tariffs could increase the cost of vehicles for US consumers, potentially dampening demand, or push these companies towards establishing or expanding manufacturing operations in the US This shift, while beneficial for local job creation, comes with its own set of challenges, including high setup costs, cultural integration, and the need for skilled labor. Moreover, the environmental impact of such a move could be significant, considering the carbon footprint associated with new production setups.

Despite these looming threats, US equity markets showed a tempered response. The MSCI US index managed a slight increase of 0.3 per cent, with gains predominantly in Energy and Materials sectors, suggesting perhaps an anticipation of benefits from increased domestic production or from sectors less directly impacted by the tariffs. However, this muted market reaction might also indicate a ‘wait-and-see’ approach from investors, expecting either negotiations or modifications to the tariff policy before its full implementation.

The Federal Reserve’s stance, as articulated by various officials, was to maintain current interest rates, reflecting a cautious approach to monetary policy amidst these trade uncertainties. Yet, the market’s expectation for a rate cut by September, as priced into futures, shows an underlying belief that the Fed might eventually need to counteract any adverse economic effects of these tariffs, like inflation or a slowdown in consumer spending. This is mirrored by a rise in the 10-year US Treasury yield to 4.55 per cent, suggesting a market adjusting to new realities of potentially higher inflation or a stronger dollar, which indeed rose by 0.5 per cent to above 107.

Gold’s steady hold near record highs, with a 1.4 per cent increase, underscores the market’s search for safety amid these geopolitical and trade tensions. Meanwhile, Brent crude oil’s recovery after OPEC+’s suggestion to delay supply increases could signal a tighter oil market, which might benefit energy companies but also stir inflation concerns.

In Asia, the economic narrative was somewhat divergent. The Reserve Bank of Australia’s rate cut to 4.10 per cent was a move to stimulate an economy facing external pressures, yet it came with warnings against expecting too much from further monetary easing. In China, the decline in the CSI300 index by 0.9 per cent reflected ongoing concerns about economic stability and the impact of US trade policies. The Hang Seng China Enterprises Index’s initial gains fizzled out, pointing to a cautious optimism regarding government support for the private sector.

Turning to the digital economy, significant movements are afoot in the cryptocurrency space. Robinhood Markets’ planned expansion into Singapore through Bitstamp, an exchange it acquired for US$200 million, highlights a strategic push into Asia’s burgeoning crypto market. This move not only aims at leveraging Bitstamp’s regulatory and institutional strengths but also reflects a broader trend of integrating cryptocurrencies into mainstream finance, albeit with careful consideration of regulatory landscapes.

Hong Kong’s proactive stance on digital assets was vividly illustrated at the Coindesk Consensus Hong Kong 2025 conference, where the CEO of the Securities and Futures Commission, Julia Leung, outlined plans for new crypto products like derivatives and margin lending. This aligns with Hong Kong’s ambition to become a leading center for digital assets, especially post the 2021 crypto ban in mainland China. The issuance of nine digital asset trading licenses, with more applications in review, and the drafting of stablecoin regulations, all point towards a strategic pivot to capitalise on the global crypto boom.

From my perspective, these developments are indicative of a world where traditional economic structures are being challenged by new policies and technological advancements. The potential tariffs could lead to a reconfiguration of global supply chains, impacting not just trade but also environmental and employment policies. The Fed’s cautious approach to interest rates reflects a delicate balancing act between supporting growth and controlling inflation. Meanwhile, the rise of digital assets in regulated markets like Hong Kong and Singapore signifies a shift towards a more tech-driven financial ecosystem, where regulation will play a crucial role in shaping market dynamics.

This economic juncture requires companies and investors to be agile, adapting not just to policy changes but also to technological innovations. The interplay between these economic, regulatory, and technological shifts will continue to define the strategies and fortunes of businesses worldwide, making this a critical time for strategic foresight and adaptability.

Source: https://e27.co/market-wrap-us-equities-muted-amid-tariff-news-gold-hits-near-record-high-digital-assets-is-the-future-20250219/

Anndy Lian

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com

j j j

February 13th, 2025

Market wrap: Inflation surprises, geopolitical shifts, and crypto’s resilience amid uncertainty

5 key points:

– US January inflation at 3.3% shocked markets, influencing Fed policy expectations.
– Trump’s move to negotiate an end to the Russia-Ukraine war impacts markets.
– Bond yields surged with the 10-year at 4.621%, reflecting hawkish Fed expectations.
– Equities, especially tech, showed resilience despite inflation fears and rate hike concerns.
– Cryptocurrencies rebounded, supported by geopolitical news and institutional interest from Goldman Sachs.

The global financial markets have been a whirlwind of volatility this week, driven by a hotter-than-expected US inflation report for January, shifting expectations for Federal Reserve policy, and unexpected geopolitical developments. As a journalist with a front-row seat to these unfolding events, I find myself reflecting on the broader implications for investors, policymakers, and the global economy.

The US core Consumer Price Index (CPI) for January came in at 3.3 per cent year-over-year, surpassing forecasts of 3.1 per cent and inching up from the prior reading of 3.2 per cent. This stubborn inflationary pressure has sent ripples through bond markets, equities, and even the nascent crypto space, while President Donald Trump’s surprising move to negotiate an end to the Russia-Ukraine war adds another layer of complexity.

In this article, I’ll unpack these developments, explore their interconnected impacts, and offer my perspective on where we might be headed next.

Let’s start with the inflation data, which has dominated headlines and reshaped market sentiment. The January core CPI print of 3.3 per cent was a stark reminder that inflation, despite the Federal Reserve’s aggressive efforts, remains a persistent challenge. Economists and markets had anticipated a slight cooling to 3.1 per cent, but the unexpected uptick—driven in part by soaring egg prices (up 15.2 per cent in a month), rising rents, and higher gas and food costs—has forced a recalibration.

Posts on X captured the immediate reaction, with many users noting the surprise and speculating on the Federal Reserve’s next moves. One post highlighted that core CPI, excluding volatile food and energy prices, has now remained above 3 per cent for 45 consecutive months, underscoring the stickiness of underlying inflation. This data, confirmed by reports from Reuters and other outlets, has significant implications for monetary policy.

Federal Reserve Chair Jerome Powell, in his second Congressional testimony this week, reiterated the Fed’s commitment to taming inflation but acknowledged that “more work” is needed. His words, while measured, did little to soothe markets, as traders pushed back expectations for the next rate cut from September to December. This shift, reflected in futures markets, signals a growing consensus that the Fed will maintain higher interest rates for longer, a scenario that could weigh on economic growth and risk assets.

The bond market’s reaction was swift and decisive. US Treasuries tumbled across the curve, with the 10-year yield rising 8.6 basis points to 4.621 per cent and the 2-year yield climbing 7.2 basis points to 4.355 per cent. The widening of the 2-year and 10-year yield spread by 2.2 basis points to 27.4 basis points suggests that investors are pricing in a more hawkish Fed stance in the near term, with longer-term yields reflecting concerns about sustained inflation. For bond investors, this is a challenging environment. Higher yields, while attractive for new buyers, mean mark-to-market losses for those holding existing Treasuries.

From my perspective, this dynamic underscores the delicate balancing act the Fed faces: tightening too aggressively risks tipping the economy into recession, but easing prematurely could allow inflation to spiral further. Powell’s testimony, while reaffirming the Fed’s resolve, left open questions about the pace and magnitude of future rate hikes, leaving markets in a state of heightened uncertainty.

Equities, predictably, felt the heat. US stocks initially fell sharply after the inflation data, with the MSCI US index ending the day down 0.3 per cent. The energy sector was the biggest underperformer, dropping 2.8 per cent, likely due to a combination of profit-taking and concerns about demand in a higher-rate environment.

However, tech buyers stepped in later in the session, helping to pare losses. This resilience in tech, despite rising yields, is noteworthy. It suggests that investors still see value in growth stocks, particularly in sectors like technology, which have been buoyed by strong earnings and innovation.

Yet, the broader market remains vulnerable. The S&P 500’s correlation with other risk assets, including cryptocurrencies, highlights the interconnectedness of today’s markets. Posts on X noted this linkage, with users pointing out that altcoins like Ethereum, XRP, and DOGE saw slight gains alongside the S&P 500, underscoring crypto’s sensitivity to equity market movements. For investors, this correlation is a double-edged sword: it amplifies gains during bullish periods but exacerbates losses when sentiment turns sour.

Speaking of cryptocurrencies, the crypto market has shown surprising resilience amid this week’s turbulence. Bitcoin and other major altcoins posted modest gains on Wednesday, a recovery that coincided with President Trump’s unexpected announcement of phone calls with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy to negotiate an end to the Russia-Ukraine war.

This development, reported by Bloomberg, marks a shift from previous US policy and has eased concerns about disruptions to Russian crude supplies. Brent crude, which fell 2.3 per cent to US$75.18 per barrel after US crude inventories rose, reflects this easing of geopolitical risk. For the crypto market, Trump’s move is a potential tailwind. Bitcoin, often seen as a hedge against geopolitical uncertainty, benefited from the news, with prices ticking higher. Ethereum, XRP, and DOGE followed suit, though gains were modest.

From my perspective, this recovery is encouraging, but it’s tempered by the broader macro environment. The stronger-than-expected US inflation data earlier in the week had initially pressured crypto prices, as higher rates typically weigh on speculative assets. Yet, the crypto market’s ability to rebound suggests that investor appetite for digital assets remains strong, particularly in light of institutional adoption.

On that note, Goldman Sachs’ latest filing with the Securities and Exchange Commission, published on February 12, 2025, caught my attention. The investment bank reported holding US$2.05 billion in Bitcoin and Ethereum ETFs as of the end of 2024, a significant increase from earlier quarters.

This move, detailed in reports from Cointelegraph and Decrypt, reflects a broader trend of institutional interest in cryptocurrencies. Goldman Sachs’ investments, split between BlackRock’s iShares Bitcoin Trust, Fidelity’s Wise Origin Bitcoin Fund, and Ethereum-focused ETFs, signal a growing acceptance of digital assets on Wall Street.

However, it’s worth noting that Goldman Sachs has historically been critical of cryptocurrencies, with executives like Sharmin Mossavar-Rahmani comparing the recent crypto enthusiasm to the tulip mania of the 1600s. This dichotomy—between the bank’s public skepticism and its substantial investments—raises questions. Is Goldman Sachs hedging its bets, or is it simply responding to client demand?

From my perspective, this tension highlights the evolving nature of the crypto market. Institutional adoption, fueled by a more favorable regulatory environment under the Trump administration, is driving growth, but skepticism persists. For retail investors, Goldman Sachs’ involvement is a double-edged sword: it validates the asset class but also introduces new risks, as institutional flows can amplify volatility.

Shifting focus to Asia, the latest economic data from India adds another layer of complexity to the global picture. Softer-than-expected industrial output and inflation figures have raised concerns that India, one of the world’s fastest-growing major economies, may be entering a softer growth patch.

Asian equity indices were mixed in early trading, reflecting uncertainty about the region’s trajectory. For investors, this is a reminder that global markets are interconnected, and weakness in one region can spill over into others.

From my perspective, India’s challenges underscore the uneven nature of the global recovery. While the US grapples with inflation, emerging markets like India face growth headwinds, creating a divergent policy landscape. For central banks, this divergence complicates coordination efforts, as rate hikes in the US could exacerbate capital outflows from emerging markets.

Looking ahead, the interplay between inflation, monetary policy, geopolitics, and risk assets will continue to shape markets. The US inflation data has dashed hopes for rate cuts in 2025, with traders now pricing in a more hawkish Fed stance. President Trump’s move to negotiate an end to the Russia-Ukraine war is a potential de-escalation, but its impact on energy markets and global risk sentiment remains uncertain. The crypto market, buoyed by institutional adoption and geopolitical developments, is showing resilience, but it’s not immune to macro pressures.

For investors, navigating this landscape requires a careful balance of caution and opportunism. From my perspective, the key takeaway is that uncertainty is the new normal. Inflation, while stubborn, is not insurmountable, but it will require sustained policy efforts. Geopolitical risks, while easing in some areas, remain a wildcard.

And cryptocurrencies, while volatile, are increasingly part of the mainstream financial system. As we move forward, staying informed, critically examining narratives, and remaining adaptable will be essential. The markets, as always, will test our resolve, but they also offer opportunities for those willing to navigate the complexity.

Source: https://e27.co/market-wrap-inflation-surprises-geopolitical-shifts-and-cryptos-resilience-amid-uncertainty-20250213/

Anndy Lian

www.anndy.com

j j j

February 11th, 2025

Global risk sentiment holds steady amid tariffs, AI optimism, and crypto shifts

The financial landscape is navigating an ever-shifting environment, with risk sentiment holding steady despite significant macroeconomic developments on 11 February 2025.

One of the most notable events in recent days has been President Donald Trump’s decision to impose a 25 per cent tariff on all steel and aluminium imports, a move that includes key trading partners like Mexico and Canada without any exemptions. This policy, enacted under Section 232 of the Trade Expansion Act, has sent shockwaves through global markets, raising fears of potential trade conflicts and their broader economic fallout.

Trump has also hinted at the possibility of further increasing these tariffs and suggested the introduction of reciprocal tariffs, which could be announced as early as today or Wednesday. These developments have heightened market uncertainty as investors and analysts closely monitor whether these threats will materialise and how they might reshape global trade dynamics.

At the same time, the US corporate earnings season has provided a stabilising force, with strong performances from American companies reinforcing confidence in the economy’s underlying health.

However, the interplay between these macroeconomic and microeconomic factors, alongside other global trends such as Japan’s potential reclassification of cryptocurrencies and significant Bitcoin acquisitions by firms like Strategy (formerly MicroStrategy), paints a multifaceted picture of the current financial environment.

In this article, I will explore these developments in detail, analyse their potential impacts, and offer my perspective on how they shape the global risk sentiment.

Tariffs and market reactions

Let’s start with the tariff announcement, which has dominated financial news and market discussions in recent days. President Trump’s decision to impose a 25 per cent tariff on steel and aluminium imports under Section 232—a provision that allows the president to restrict imports deemed a threat to national security—marks a significant escalation in US trade policy.

Unlike previous tariff actions, which often included exemptions for key allies, this move explicitly excludes Mexico and Canada, two of the United States’ largest trading partners. This lack of exemptions has raised concerns, as it signals a more aggressive and unilateral approach to trade policy. Trump’s comments over the weekend and his warning that tariffs could “go higher” have added to the uncertainty, with market participants now bracing for the possibility of reciprocal tariffs.

Reciprocal tariffs, if implemented, would involve matching the tariff rates of other countries on US exports, potentially triggering retaliatory measures from affected nations. The timing of these potential announcements—possibly today or Wednesday—has kept markets on edge, as investors weigh the risks of a broader trade conflict.

From a market perspective, the immediate reaction to the tariff news has been varied. US equity indices, as measured by the MSCI US Index, rose by 0.7 per cent on Monday, with strong performances in the energy sector (+2.2 per cent) and information technology (+1.5 per cent). This resilience suggests that, for now, investors are focusing on the positive fundamentals of American companies rather than the potential negative impacts of tariffs.

The US earnings season has been particularly strong, with many companies surpassing expectations despite what analysts had considered a high bar. This strength in corporate fundamentals has provided a buffer against the macro uncertainties, supporting risk sentiment in the short term.

However, the longer-term implications of tariffs cannot be ignored. Tariffs on steel and aluminium could increase input costs for industries such as manufacturing, construction, and automotive, potentially squeezing profit margins and stoking inflation. If reciprocal tariffs are introduced, US exporters could face higher costs in foreign markets, further complicating the economic outlook.

Turning to the bond market, US Treasury yields ended Monday’s session with mixed results. Shorter-term yields, such as the two year and seven year, edged lower, reflecting some caution among investors about the near-term economic impact of tariffs.

Conversely, longer-term yields, including the 10-year (+0.2 basis points to 4.497 per cent) and 30-year (+1.4 basis points to 4.707 per cent), inched higher, suggesting that investors expect inflationary pressures from tariffs to persist over the longer term. This divergence in yield movements highlights the uncertainty surrounding the Federal Reserve’s next moves. Tariffs, by increasing costs and potentially delaying rate cuts, could complicate the Fed’s efforts to balance inflation and growth.

The US Dollar Index, meanwhile, rose by 0.3 per cent, reflecting safe-haven demand amid the tariff-related uncertainty. Gold, a traditional safe-haven asset, surged by 1.7 per cent to a fresh record high, underscoring investor concerns about geopolitical and economic risks. In the energy market, Brent crude oil prices rose by 1.6 per cent, supported by signs of a tighter market and geopolitical tensions, including Russia’s failure to meet its OPEC+ quota and rising natural gas prices in Europe.

Asian markets and crypto regulations

In Asia, the HSCEI index rose by 2.1 per cent for the third consecutive day, driven by optimism surrounding DeepSeek’s AI model and a perception that tariff tensions might be less severe than feared. However, early trading sessions on Tuesday showed mixed results for Asian equity indices, with US equity futures pointing to a lower open. This divergence highlights the uneven impact of tariff-related developments across regions.

While US markets have been buoyed by strong earnings, Asian markets remain more exposed to trade risks, given their reliance on exports. The resilience of risk sentiment in Asia, particularly in China, can also be attributed to positive developments in the AI sector, with companies like DeepSeek demonstrating resilience despite trade tensions. However, the broader implications of tariffs on global supply chains and economic growth remain a concern, particularly for export-dependent economies.

Shifting focus to other global developments, Japan’s Financial Services Agency (FSA) is considering a significant regulatory change that could reclassify cryptocurrencies as securities. This potential shift, which could take effect by 2026, would have far-reaching implications for retail investors and the broader financial ecosystem. By classifying crypto as securities, Japan aims to strengthen investor protections, lower taxes on crypto investments, and enable domestic funds to invest in tokens.

This move could also pave the way for the approval of crypto exchange-traded funds (ETFs), including spot Bitcoin ETFs, which would attract institutional capital and boost market liquidity. Posts on X have highlighted the FSA’s plans, with some users speculating on the potential for tax cuts and ETF approvals.

However, these reports remain inconclusive, and the FSA’s final decision will depend on a comprehensive review of existing regulations. If implemented, this reclassification could position Japan as a leader in the global crypto market, potentially offsetting some of the negative sentiment surrounding tariffs.

Another notable development in the crypto space is the recent acquisition by Strategy (formerly MicroStrategy) of 7,633 Bitcoin for US$742 million between February 3 and February 9, at an average price of US$97,255 per Bitcoin. The firm now holds 478,740 Bitcoin, worth over US$46 billion, with an average purchase price of US$65,033 per Bitcoin.

This acquisition, representing 2.2 per cent of Bitcoin’s total supply, underscores the growing institutional interest in cryptocurrencies as a store of value and hedge against inflation. Strategy’s aggressive Bitcoin strategy has been closely watched by investors, with some viewing it as a bullish signal for the crypto market.

However, the timing of this acquisition, amid tariff-related uncertainty and rising gold prices, raises questions about the firm’s risk management approach. While Bitcoin has historically been seen as a safe-haven asset, its volatility and correlation with risk assets like equities could complicate its role in a tariff-driven market environment.

Balancing risk and optimism

From my perspective, the current global risk sentiment is a delicate balance between optimism and caution. On one hand, the strength of US corporate earnings and positive developments in sectors like AI and crypto provide a foundation for resilience. The MSCI US Index’s gains, driven by energy and tech, reflect confidence in the underlying fundamentals of the economy.

Similarly, Japan’s potential reclassification of crypto and Strategy’s Bitcoin acquisition signal growing institutional acceptance of digital assets, which could support risk sentiment in the longer term. On the other hand, the tariff announcement and the threat of reciprocal tariffs introduce significant uncertainty.

Tariffs, by increasing costs and disrupting supply chains, could stoke inflation and weigh on economic growth. The mixed performance of US Treasury yields, the surge in gold prices, and the rise in Brent crude oil all point to heightened concerns about the macroeconomic outlook.

In my view, the key question for markets is whether the positive microeconomic factors—such as strong earnings and innovation in AI and crypto—can continue to offset the negative macroeconomic risks posed by tariffs. While US markets have shown resilience so far, the potential for retaliatory measures from trading partners like China, Mexico, and Canada could escalate tensions and disrupt global trade.

For Asia, the optimism surrounding DeepSeek’s AI model and less severe tariff fears may provide temporary relief, but the region’s exposure to trade risks remains a concern. Japan’s potential crypto reclassification, if implemented, could be a game-changer, attracting capital and boosting sentiment. However, the success of this move will depend on the FSA’s ability to balance investor protections with market growth. Strategy’s Bitcoin acquisition, while bullish for crypto, also highlights the challenges of navigating a volatile market environment.

In conclusion, the global risk sentiment is supported by a combination of strong corporate fundamentals and positive developments in AI and crypto, but it remains vulnerable to tariff-related uncertainties. President Trump’s tariff announcement, under Section 232, has introduced significant risks, with the potential for reciprocal tariffs adding to the complexity. While US markets have been buoyed by earnings, the longer-term implications of tariffs on inflation, growth, and trade dynamics cannot be ignored.

In Asia, optimism surrounding AI and crypto provides a counterbalance, but the region’s exposure to trade risks remains a concern. Japan’s potential crypto reclassification and Strategy’s Bitcoin acquisition are positive signals, but their impact will depend on broader market conditions. As markets navigate this busy macro news backdrop, the interplay between microeconomic resilience and macroeconomic risks will shape the trajectory of global risk sentiment in the coming weeks and months.

Source: https://e27.co/global-risk-sentiment-holds-steady-amid-tariffs-ai-optimism-and-crypto-shifts-20250211/