PETER’S BUSINESS & FINANCE BRIEFING – Thursday 8 May 2025, 06:00 Hong Kong
● Fed warns of rising economic risks as it leaves rates steady ● Trump officials to meet with Chinese counterparts ● China announces sweeping policy easing measures
Thursday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 22,431 -261 points -1.2%
Nikkei 225 (Japan) Projected Open: 36,925 +145 points +0.4%
Quick Summary - 4 Things To Know Before Asian Markets Open
The US Federal Reserve has left interest rates unchanged for the third meeting in a row, despite pressure from President Donald Trump to lower borrowing costs. The policymaking Federal Open Market Committee (FOMC) voted unanimously on Wednesday to keep the federal funds target in a range between 4.25 and 4.5%. Officials highlighted growing concerns that Donald Trump’s tariffs will trigger a fresh burst of inflation and weaken the jobs market. “Uncertainty about the economic outlook has increased further,” the FOMC said in a statement after the meeting. The committee added that, since they last met in March, “the risks of higher unemployment and higher inflation have risen”.
US Treasury Secretary, Scott Bessent, and top trade official Jamieson Greer will meet with their Chinese counterparts in Switzerland this week. The Chinese Foreign Ministry announced Wednesday that Vice Premier He Lifeng, Beijing’s top official for China-US economic and trade matters, will be meeting with Bessent and Greer in Switzerland. The meetings will take place on both Saturday and Sunday. The announcements signal a major step toward Washington and Beijing beginning negotiations amid an ongoing trade war which has seen Donald Trump ratchet up tariffs on Chinese goods to 145%, prompting Beijing to retaliate with additional levies of 125% on imports from the US.
Just hours after the meetings were confirmed, China’s central bank and financial regulators announced sweeping policy steps Wednesday, including interest rate cuts, to support growth amid mounting trade worries. China will cut the seven-day reverse repurchase rates by 10 bps to 1.4% from 1.5%, the People’s Bank of China Governor Pan Gongsheng said at a press briefing. That will bring down the loan prime rate, the main policy rate, by around 10 bps, the governor said. The central bank will also lower the reserve requirement ratio, which determines the amount of cash banks must hold in reserves, by 50 bps to 9.0%, unleashing additional liquidity of 1,000 billion yuan (US$138.6bn) into the market. The lower policy rates will come into force today, while the RRR relaxation will be effective May 15.
The Indian government said it has launched strikes on Pakistan and Pakistan-administered Kashmir in response to last month's deadly attack on tourists in India-administered Kashmir, in which 26 people were killed. Delhi says nine sites have been targeted, but no Pakistani military facilities were struck. Pakistan, which has denied any involvement in last month's attack, said that India hit six sites in what it described as a "cowardly attack". Pakistan's prime minister said Islamabad has made its "reply,” referencing Pakistan's claim that it shot down five Indian jets and a drone, which Delhi has not confirmed.
Fed Warns Of Rising Economic Risks As It Leaves Rates Steady
The US Federal Reserve has left interest rates unchanged for the third meeting in a row, despite pressure from President Donald Trump to lower borrowing costs. The policymaking Federal Open Market Committee (FOMC) voted unanimously on Wednesday to keep the federal funds target in a range between 4.25 and 4.5%. The decision is the first since Donald Trump's tariff announcements last month raised import taxes on goods from countries around the world, with imports from China facing duties of at least 145%.
Officials highlighted growing concerns that the tariffs will trigger a fresh burst of inflation and weaken the jobs market. “Uncertainty about the economic outlook has increased further,” the FOMC said in a statement after the meeting. The committee added that, since they last met in March, “the risks of higher unemployment and higher inflation have risen”.
The FOMC has not cut borrowing costs since December despite pressure from Donald Trump to lower borrowing costs. He has called on the Fed to lower rates "preemptively" and flirted with firing the head of the bank, criticising him as "a major loser" and "Mr Too Late" for not cutting rates fast enough. But Fed officials have signalled that they will remain on pause as they weigh the effects of the tariffs on the world’s biggest economy. Fed Chair Jerome Powell said Donald Trump’s call for the Federal Reserve to lower interest rates has no effect “at all” on the FOMC’s job or the way they do it.
In a press conference following Wednesday’s announcement, Powell said that although the US economy remains “healthy”, the levies could put the central bank in a position in which both sides of its dual mandate to foster maximum employment and 2% inflation are challenged. “If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment,” Powell said. He also reiterated his recent statements that the central bank was in no hurry to change policy as it assesses the effects of tariffs. He said the “right thing to do is await further clarity”. He added, “we don’t feel like we need to be in a hurry. We feel like it’s appropriate to be patient,” he said. “And when things develop … we can move quickly when that’s appropriate.”
The Fed’s preferred personal consumption expenditures price index rose at a 2.3% annual pace in March, while the jobless rate remained near historic lows of 4.2% in April. The US economy shrank in the first three months of the year for the first time since 2022. Officials said those figures were driven by firms rushing goods into the country ahead of tariffs rather than a decline in wider activity. But, surveys have indicated that businesses and consumers are deeply concerned about how Trump’s levies will affect their respective prospects.
The policy changes pose a dilemma for the Fed, which has to decide whether to focus more on the potential for inflation to go up or more on the risk of rising unemployment. Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott, said, “I can’t recall a time when the Fed has upgraded both growth and inflation risks quite so starkly.” William English, a former senior Fed adviser said, “they’re in a bad situation. If I were there, I would be suggesting that they stay put for now.” Adam Posen, president of the Peterson Institute for International Economics said moving faster to cut rates now raises the risk that the Fed will have to reverse course months later by increasing rates. Because the economy has just been through a period of high inflation, assuming that consumers and businesses will expect inflation to decline after an initial increase “is a bad risk for the central bank to take,” Posen said. However, other analysts fear that by holding rates steady as the economy slows, the Fed is setting up to keep rates unnecessarily high, risking a sharper downturn. “The longer they’re on hold, the more they’re passively tightening,” said George Goncalves, head of US macro strategy at MUFG, Japan’s largest bank. Waiting until July or September to cut rates raises the prospect the Fed will have to make larger, half-percentage-point cuts. “That’s just too long of a wait. You might lose that chance of really catching the economy,” he said.
Trump Officials To Meet With Chinese Counterparts
US Treasury Secretary, Scott Bessent, and top trade official Jamieson Greer will meet with their Chinese counterparts in Switzerland this week. The announcements signal a major step toward Washington and Beijing beginning negotiations amid an ongoing trade war. “While in Switzerland, Secretary Bessent will also meet with the lead representative on economic matters from the People’s Republic of China,” the statement from the US Treasury Department said. Greer “will also meet with his counterpart from the People’s Republic of China to discuss trade matters” while in Geneva, his office said. “We have shared interests,” Bessent said later on Fox News. The current tariff war “isn’t sustainable,” said Bessent, “especially on the Chinese side. And, you know, 145% tariffs, 125%, is the equivalent of an embargo. We don’t want to decouple, what we want is fair trade.” Bessent told Fox News, “my sense is that this will be about de-escalation, not about the big trade deal. But we’ve got to de-escalate, before we can move forward.”
The Chinese Foreign Ministry announced Wednesday that Vice Premier He Lifeng, Beijing’s top official for China-US economic and trade matters, will be meeting with Bessent and Greer in Switzerland. The meetings will take place on both Saturday and Sunday. The Chinese commerce ministry said in a statement, “based on thorough consideration of global expectations, China’s own interests, and calls from US businesses and consumers, China has decided to agree to engage with the US.” It also warned the US not to “use talks as a cover for coercion and blackmail”. Noting that other countries were already negotiating with the Trump administration, the ministry added, “it must be emphasised that appeasement does not bring peace, and compromise does not earn respect.”
Those would be the first confirmed trade talks between the two countries since Donald Trump ratcheted up tariffs on Chinese goods to 145%, prompting Beijing to retaliate with additional levies of 125% on imports from the US. Trump said earlier Tuesday that China wants to meet, and that the US will do so “at the right time.” “They want to negotiate, and they want to have a meeting and we’ll be meeting with them at the right time,” Trump said at the White House during a meeting with Canadian Prime Minister Mark Carney.
On Wednesday, Trump said he would not consider lowering the United States’ 145% tariffs on China in order to spur trade-war negotiations with Beijing. Trump flatly answered “no” when asked at the White House if he was open to pulling back on the steep import duties in order to get China to the negotiating table.
Trump Downplays Trade Negotiations
Donald Trump has appeared to move away from the idea that he would engage in back-and-forth trade negotiations with various countries. He said he would prescribe tariff levels and trade concessions for partners looking to avoid higher duties. Trump said he would put down "very fair numbers" for trade, which could be a low number, and that countries would either accept or reject the terms, with no room for negotiation. “We’re going to put very fair numbers down, and we’re going to say, here’s what we want. And congratulations, we have a deal. And they’ll either say ‘great,’ and they’ll start shopping, or they’ll say, ‘not good,’” Trump said Tuesday at the White House as he met with Canadian Prime Minister Mark Carney.
Trump said he was tired of questions about when deals would be struck. “We don’t have to sign deals. We could sign 25 deals right now if we wanted,” he said. “We will sign some deals. But much bigger than that is we’re going to put down the price that people are going to have to pay to shop in the United States.” His statement contradicts Treasury Secretary Scott Bessent’s comments earlier this week. Bessent told CNBC on Monday that “we’re very close to some deals,” echoing comments Trump made himself on Sunday that agreements could come as early as this week. Trump said he had already gotten some nations to agree to concessions, saying India had agreed to roll back tariffs on American goods.
Meanwhile, the European Union plans to impose additional tariffs on about €100 billion in US goods if ongoing trade talks fail to yield a satisfactory result. The EU is expected to share a paper with the US this week to try to kick-start the negotiations, with proposals including lowering trade and non-tariff barriers and boosting investments in the US. The EU has already targeted €21 billion of US goods with tariffs in response to Trump's 25% duty on steel and aluminium exports, and is considering further measures on top of those including targeting services and restricting the export of certain goods. The EU agreed earlier this month to delay for 90 days the implementation of those measures after the US lowered its so-called reciprocal rate on most EU exports to 10% from 20% while the negotiations are taking place.
China Announces Sweeping Policy Easing Measures
Just hours after it was confirmed that US and Chinese officials will meet in Switzerland to discuss trade matters, China’s central bank and financial regulators announced sweeping policy steps Wednesday, including interest rate cuts, to support growth amid mounting trade worries. China will cut the seven-day reverse repurchase rates by 10 bps to 1.4% from 1.5%, the People’s Bank of China Governor Pan Gongsheng said at a press briefing. That will bring down the loan prime rate, the main policy rate, by around 10 bps, the governor said. The central bank will also lower the reserve requirement ratio, which determines the amount of cash banks must hold in reserves, by 50 bps to 9.0%, unleashing additional liquidity of 1,000 billion yuan (US$138.6bn) into the market. The lower policy rates will come into force today, while the RRR relaxation will be effective May 15, according to state media Xinhua.
The officials also announced measures to support financing for several key sectors, including technology and real estate, along with establishing a Rmb 500 billion relending tool for consumption and elderly care. They will also expand an existing tech relending fund by RMB 300 billion. The aim is to encourage banks to lend to these sectors.
The real estate sector will also be supported. The PBOC will reduce the mortgage rates under the nation’s housing provident fund, a government-backed housing lender, by 25 bps. Rates on five-year loans for first-time homebuyers will be trimmed to 2.6% from 2.85%, the governor said. It will also gradually lower the amount of cash that auto financing firms must hold in reserves to zero from the current 5%. China is also preparing more measures to support small and medium enterprises and the private sector, which will be announced soon, Li Yunze, the head of the financial regulatory administration, said at the briefing.
Robin Xing, chief China economist at Morgan Stanley, said the overall policy stance remained “reactive and supply-centric”, and as such could only partially offset tariffs shocks. But he said the package beat “market expectations and indicated room for further easing as needed”. Jianwei Xu, senior economist for Greater China at Natixis, said the “RRR cut is one of the vital moves to mitigate the economic impact caused by tariffs. But stimulus measures need to be massive this year to achieve China’s 5% GDP target.” Jason Chan, a senior investment strategist at Bank of East Asia, said, “investors may be more cautious that both sides may not be able to make a deal in the near term and that’s why Chinese policymakers need to roll out so many easing measures prior to the meeting.”
Lynn Song, Chief Economist, Greater China, ING said “the package is coming now because of the scheduling of US-China trade talks. This way, the easing won't be seen as a knee-jerk reaction to tariff developments. Song added, “China's policy response after the escalation of the trade war has been quite calm and measured. Beijing has remained confident this year in stabilising growth despite external headwinds. Monetary policy aside, fiscal policy support will also continue to roll out. We expect these efforts will eventually bear fruit, though it will be challenging to restore consumer confidence, which is closer to historic lows than historic averages. Stabilising asset prices and restoring wage growth are important factors in this process.”
Shipping Routes Between US & China Come Under Strain
Container liners are cancelling shipping routes that link the US and China across the Pacific due to the trade war, resulting in plunging fees, fewer services, and more uncertainty. German container shipping group Hapag-Lloyd has cancelled 30% of China-to-US bound shipments while Swiss liner Kuehne + Nagel expected a 25% to 30% drop in bookings from China to the US. The trade war is also affecting other areas of the shipping industry, including dry-bulk operators and tanker owners, with flows of crude and other commodities being disrupted or halted. Although Trump and other senior officials have talked up the chances of a potential deal with China, any resolution of the dispute may take months to hammer out.
As a result, fees are plunging. The cost of shipping a 40-foot box from Shanghai to Los Angeles hit the lowest since 2023 in late March, according to the data from Drewry Shipping Consultants, a maritime advisory firm. A tally of rates across global routes has also softened. “It’s a trade lane on what is a global highway,” said Joe Kramek, chief executive officer at the World Shipping Council, whose members operate 90% of global liner capacity. “So it does have ripple effects all the way across.”
Pakistan Vows To Respond After India Launches Air Strikes
The Indian government said it has launched strikes on Pakistan and Pakistan-administered Kashmir in response to last month's deadly attack on tourists in India-administered Kashmir, in which 26 people were killed. Delhi says nine sites have been targeted, but no Pakistani military facilities were struck. Pakistan, which has denied any involvement in last month's attack, said that India hit six sites in what it described as a "cowardly attack". The Indian army said that Pakistan "fired artillery" across the dividing lines in Kashmir in response. Pakistan has claimed that it has shot down five Indian aircraft as they were heading toward Pakistani territory. “Pakistan has every right to give a robust response to this act of war imposed by India, and a strong response is indeed being given,” Pakistan’s Prime Minister Shehbaz Sharif said soon after the strikes, according to the Associated Press.
The strikes, which took place at night, have triggered heavy artillery shelling along the de-facto border between the two countries. India said at least 10 civilians have died and 32 injured in Indian-administered Kashmir. Pakistan said 26 people have been killed and 46 injured in Indian air strikes and firing along the border. Witnesses reported explosions in Pakistan-administered Kashmir, near the city of Muzaffarabad. Footage also captures several loud explosions there. Kashmir, which both India and Pakistan claim in full but administer only in part, has been a flashpoint between the two countries since Partition in 1947.
Citing Article 51 of the UN Charter, Pakistan has asserted its right to self-defence and warned that it reserves the right to respond to India “at a time, place and manner of its choosing” to avenge the loss of civilian lives and the "violation" of its sovereignty. After a national security meeting in Islamabad on Wednesday, Pakistan's prime minister said Islamabad has made its "reply." He was referencing Pakistan's claim that it shot down five Indian jets and a drone, which Delhi has not confirmed.
Indian Foreign Secretary Vikram Misri said at a press conference, "it was deemed essential that the perpetrators and planners of the 22 April attack be brought to justice." He added that India had intelligence that "further attacks" were "impending". "There was thus a compulsion both to deter and to pre-empt," he said. Misri spoke in some detail about the "barbarity" of last month's attack in Indian-administered Kashmir which he said was carried out by "Pakistani and Pakistan-trained terrorists". He did not share any evidence of this in the briefing.
Xi Warns Against Sowing Discord Ahead Of Moscow Visit
President Xi Jinping on Wednesday called on both China and Russia to jointly resist any attempts to sow discord in the friendship and mutual trust between the two sides, the Associated Press reported. Xi made the remarks in a signed article published on Wednesday by the Russian Gazette newspaper ahead of his arrival in Russia for a state visit and attendance at the celebrations marking the 80th anniversary of the Victory in the Soviet Union's Great Patriotic War. This year, he noted, also marks the 80th anniversary of victories in the Chinese People's War of Resistance Against Japanese Aggression and the World Anti-Fascist War, as well as the founding of the United Nations.
China and Russia are major countries with significant influence as well as constructive forces for maintaining global strategic stability and improving global governance, Xi said. The China-Russia relationship, he said, has a clear historical logic, a powerful internal driver and profound cultural heritage. The bilateral relationship is neither directed at any third party nor affected by any third party, he added. He also cautioned that the two countries should not be distracted by fleeting clouds or disturbed by high winds and rough waves of events. The Kremlin announced on Tuesday that Russian President Vladimir Putin will travel to China at the end of August and beginning of September, reciprocating Xi's visit this week.
Japan Composite PMI Revised Slightly Higher
The au Jibun Bank Japan Composite PMI stood at 51.2 in April, just above the flash estimate of 51.1 and up from March’s near 2-1/2-year low of 48.9. It marked the fifth expansion in private sector activity over the past six months, driven by a rebound in the service sector, even as factory output continued to decline. The Services PMI was revised higher to 52.4 from 52.2 in the preliminary estimate, up from a neutral 50.0 in March, which marked the lowest reading in five months. New orders rose for the sixth consecutive month, though only marginally, supported by the strongest increase in service sector sales in nearly a year. In contrast, manufacturers reported the sharpest drop in new orders since February 2024. Employment growth edged up to a three-month high, with staffing levels rising in both manufacturing and services. On the cost front, overall input inflation accelerated to a two-year high, fuelled by a stronger rise in service sector costs. This, in turn, prompted a slightly faster increase in composite selling prices.
Hong Kong Private Sector Continues To Weaken
The S&P Global Hong Kong PMI held steady at 48.3 in April, unchanged from March, signalling continued business contraction for the third consecutive month. New orders saw their steepest drop since June 2024, with export sales, particularly to Mainland China, declining sharply. As a result, output levels fell for the second time in three months, led by the wholesale and retail sector. Employment also dropped for the third straight month, though at a slower pace. On the price front, input prices rose at the softest pace of the year, while firms lowered selling prices to support sales. Looking ahead, business sentiment fell to its lowest since September 2020, with firms expressing pessimism amid heightened trade uncertainty and economic challenges.
Taiwan Inflation Cools Further In April
The annual inflation rate in Taiwan edged down to 2.03% in April from a revised 2.32% in the previous month. The slowdown was mainly driven by lower inflation across several sub-indexes, including food (4.34% vs 4.91% in March), housing (1.89% vs 2.21%) and health (1.96% vs 2.03%). On a seasonally adjusted monthly basis, consumer prices increased by just 0.05%, marking the smallest rise since December 2023, down from 0.17% in the previous month.
Asian Stocks Boosted By China Easing Plans
Asia-Pacific stocks mostly climbed after China’s central bank and financial regulators announced sweeping plans to cut key interest rates in an effort to shore up growth. It comes as US Treasury Secretary Scott Bessent and trade representative Jamieson Greer are set to meet with their Chinese counterparts this week.
Traders are also betting on a slower pace of interest-rate cuts from the US Federal Reserve this year, calculating that economic resilience will force policymakers to remain on hold for longer before easing more sharply in 2026. Ahead of the central bank’s latest policy decision, money markets were pricing three quarter-point reductions this year, one less than at the start of April. About a half point of additional cuts are expected next year, the most priced in for 2026 at any point in the current easing cycle. Market expectations for a cut at the June policy meeting have also faded since Friday, when employment data came in stronger than economists predicted. “Unless something bad happens between now and June, it means the Fed doesn’t need to go,” said Kevin Flanagan, head of fixed income strategy at Wisdom Tree.
Japan’s benchmark Nikkei 225 lost 0.1% to close at 36,780. Japanese markets were closed on Monday and Tuesday for public holidays. South Korea’s Kospi added 0.5%. In Taiwan, the Taiex closed 0.1% higher. Australia’s benchmark S&P/ASX 200 climbed 0.3%.
Indian markets shrugged off the latest tensions with Islamabad after New Delhi struck several targets within territory controlled by Pakistan in a military operation early Wednesday. The BSE Sensex closed 0.1% higher at 80,747. “Structural reforms, resilient domestic demand, and strong macro fundamentals continue to offer a compelling case,” said Mohit Mirpuri, an equity fund manager at SGMC Capital. “Investors may take a momentary pause, but this doesn’t derail India’s trajectory as a key allocation in emerging markets,” added Mirpuri. Investors also took heart from the progress on India’s trade talks with major trading partners, including a free trade agreement with the UK sealed Tuesday.
Shares of Japanese trading houses continued to rally Wednesday after Berkshire Hathaway CEO Warren Buffett and future successor Greg Abel said they expect to have a long-term relationship with the Japanese trading house conglomerates Berkshire first invested in several years ago. Shares of Marubeni rose 6.4%. Itochu climbed 3.5%, while Mitsubishi and Mitsui rose 3.7% and 3.1% respectively. Sumitomo rose 3.5%.
Chinese Stocks Rally
On the mainland, China’s CSI 300 index rose 0.6% to 3,832. Shares in Hong Kong made modest gains but closed well off their opening highs. The Hang Seng added 29 points, or 0.1%, to end the day at 22,692. The city’s benchmark index was up 2.4% shortly after the opening. The Tech Index was 0.8% lower.
Qatar Investment Authority and Sinopec are considering buying several hundred million dollars’ worth of Contemporary Amperex Technology’s (CATL) stock in its Hong Kong listing, Bloomberg News reported Wednesday. CATL has also been holding talks with other funds including Kuwait Investment Authority, the report said. Some of the firms could commit to buy a specific amount of shares as cornerstone investors, while others may place orders in the regular institutional offering. The listing could raise about $5 billion and could be Hong Kong's biggest since 2021. CATL has started gauging interest for its Hong Kong listing, which secured approval last month. It’s more good news for CATL, after JPMorgan and Bank of America decided to continue working on the blockbuster listing despite opposition from a US congressional committee. The House Select Committee on the Chinese Communist Party has raised concerns about CATL's alleged links to the Chinese military, but CATL has denied the allegations, and the banks are proceeding with the listing. Its Shenzhen-listed shares rose 3.0% on Wednesday, hitting the highest in more than a month.
European Stocks Slip
European stocks slipped lower after new retail data indicated eurozone sales weakened in March, amid growing unease about tariffs. Retail sales fell by 0.1% month-on-month in both the eurozone and the European Union in March, preliminary data from statistics office Eurostat showed on Wednesday.
The pan-European Stoxx 600 was 0.5% lower, with retail stocks down 2.2%, leading the losses. London’s FTSE 100 fell 0.4%, bringing to an end a record breaking 16 consecutive sessions of gains. Germany’s DAX index fell 0.6% after Friedrich Merz became Germany’s chancellor, but only after losing the first round of a confirmation vote in Parliament. Every previous modern chancellor won in the first round.
Europe’s pharmaceuticals industry is still reeling from Donald Trump’s Monday announcement that tariffs for the sector would be announced within the next two weeks. The healthcare sector was down 1.7%. Shares of Danish pharmaceutical giant Novo Nordisk bucked the sectoral trend to gain 1.3%, after the company’s first-quarter earnings came in above expectations. The firm cut its 2025 guidance, however, citing weakening demand for its blockbuster weight-loss drug Wegovy. Medical device manufacturer Ambu was the biggest loser in the Stoxx, with its stock falling 13.5% despite the company confirming its full-year guidance and assuring investors that it is “prepared and well-positioned to navigate” new US tariffs.
German carmaker BMW reiterated Wednesday expectations for its 2025 financial performance that it first laid out in mid-March. That contrasts with most of its peers, which have either suspended their guidance (Ford, Stellantis), cut it (GM) or excluded the impact of President Trump’s new tariffs (Volkswagen). Shares of BMW climbed 1.7% in Frankfurt.
US Stocks Rebound
On Wall Street Wednesday, US stocks rebounded from two days of losses following the FOMC meeting and as China and the US prepared to hold their first confirmed trade talks since President Donald Trump unleashed his global tariff war. The S&P 500 added 0.4% in choppy trading to close at 5,631. The Dow climbed 285 points, or 0.7%, and settled at 41,114. The Nasdaq Composite gained 0.3% to end at 17,738. Shares of Alphabet and Apple dropped 7.5% and 1.1%, respectively, after Eddy Cue, Apple’s services chief, said he believes that AI search engines will eventually replace standard search engines such as Google.
The Dow was boosted by shares of Disney after it reported results that beat Wall Street estimates. It also raised its outlook, citing strong performances from its theme parks and streaming. Shares of Disney closed 10.8% higher.
Nvidia shares rose 3.1% on reports that the Trump Administration plans to overhaul controversial regulations that would limit how many artificial-intelligence chips individual countries can buy, giving companies such as Nvidia a potential reprieve from tight export controls. The Commerce Department plans to replace the rule, which imposed caps on how many chips could go to individual countries. “The Biden AI rule is overly complex, overly bureaucratic and would stymie American innovation,” a Commerce Department spokesperson said.
Shares of Advanced Micro Devices rose 1.8% after a strong revenue forecast for the current period on demand for high-end personal computers capable of running AI software. The results bode well for Nvidia, AMD’s closest rival in AI processors, which reports later this month.
The AI server maker Super Micro Computer cut its sales outlook for its financial year, saying economic uncertainty led customers to delay orders. Its shares fell 1.4% Wednesday.
US companies are planning to buy back a record US$500bn of their own shares, as they seek to deploy their huge cash piles at a time when Trump’s policies are adding to uncertainty over making capital investments. Deutsche Bank said the tally of announced buybacks over the past three months is the biggest rolling three-month sum on record. The rush of repurchases comes as a better than forecast start to earnings season leaves US companies flush with cash. Corporate heavyweights, such as Apple, Visa, Wells Fargo, Delta Air Lines and 3M all announced plans to repurchase their shares during the ongoing first-quarter earnings season.
Treasury Yields Fall After FOMC Leaves Rates On Hold
US Treasury yields, which move inversely to price, fell to their lowest levels of the day after the Fed left rates on hold. The 10-year yield, which moves with growth expectations, dipped by 3 bps to 4.27%. The policy sensitive 2-year note was unchanged at 3.78%.
Asian Currencies Give Up Some Recent Gains
The US Dollar Index rose 0.6% to 99.85. Asian currencies gave up some of their recent gains against the dollar. The US dollar strengthened 0.4% against the Taiwan dollar Wednesday to trade at 30.2850, building upon the greenback’s 3% relative advance on Tuesday. The downward moves come after the Taiwanese dollar appreciated 6.5% on Monday and the prior Friday, hitting a new three-year high. The greenback still remains more than 5% lower versus the Taiwan dollar over the last week. The greenback also gained 0.9% against the Korean won on Wednesday. The won remains 2.8% higher relative to the dollar over the last week. The Japanese yen weakened 1.0% to ¥143.06 against the dollar. The offshore yuan was stable around Rmb 7.23 per dollar.
Regional currencies are benefitting from de-dollarization and diversification. Eurizon's Stephen Jen's estimates the “avalanche” of dollar selling that may take place if Asian countries unwind their stockpile, could reach US$2.5 trillion. The dollar gauge has dropped about 8% from a February high, and all Asian currencies have strengthened versus the greenback in the past month, with some countries potentially holding "naked long-dollar positions" that are not hedged against fluctuations in the dollar.
Gold Lower
Spot gold fell 1.9% to 3,364 per ounce. Futures contracts for May delivery had notched a record closing high on Tuesday.
Oil Retreats
Brent crude oil dropped 1.7% on Wednesday to just below $61 per barrel and touched new four-year lows driven by mounting economic uncertainty and muted optimism ahead of the upcoming US-China trade talks. Oil prices were already under pressure earlier in the week after OPEC+ pledged to accelerate production increases, intensifying fears of oversupply. EIA data showed that US crude inventories fell by 2.032 million barrels last week, more than market expectations.
Bitcoin Rallies
Bitcoin also rallied as the news of US-China trade talks sparked bullish crypto bets. Bitcoin rose 3.2% to top $97,500 before paring gains to end the day at $96,800, while Ether climbed as much as 4.2%. “We’re seeing a broad-based risk-on sentiment today, largely driven by the reopening of trade dialogue between the US and China. Global equities are up, gold is retreating, and the USD is modestly higher. This is a classic risk-on setup that is also lifting crypto markets,” QCP Capital trader Yuan Rong Tan said. Bitcoin hit a record of $109,241 in January riding a wave of optimism about US President Donald Trump’s pro-crypto agenda.
Peter Lewis’ Money Talk Podcast
On Thursday’s “Peter Lewis’ Money Talk” podcast, I’ll be joined by Andrew Freris, the CEO of Ecognosis Advisory, and Frederick Chu, an independent ETF consultant. We’re also going to get an update on Asia’s frontier markets with Ruchir Desai of Asia Frontier Capital.
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