PETER’S BUSINESS & FINANCE BRIEFING – Friday 9 May 2025, 06:00 Hong Kong
● US & UK announce deal to reduce tariffs ● China rate cuts come into effect ahead of trade meeting with US ● Divided Bank of England cuts interest rates by 25 Bps
Friday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 22,822 +46 points +0.2%
Nikkei 225 (Japan) Projected Open: 37,460 +531 points +1.4%
Quick Summary - 4 Things To Know Before Asian Markets Open
The Bank of England (BOE) cut interest rates by a quarter of a percentage point to 4.25% Thursday but was cautious about the prospects for future rate cuts. The nine-person monetary policy committee (MPC) was surprisingly divided. Five wanted the cut to 4.25%, two wanted a bigger cut to 4%, while two wanted no change. Further rate cuts are likely to be "gradual and careful", according to the Bank's governor Andrew Bailey. He said inflation easing was behind the decision to cut. But he warned the "past few weeks have shown how unpredictable the global economy can be" following the introduction of worldwide tariffs by Donald Trump.
Interest rate cuts have come into effect in China ahead of a weekend meeting between Chinese and US officials to discuss the trade war. China cut the seven-day reverse repurchase rates by 10 bps to 1.4% from 1.5%, with effect from yesterday. That will bring down the loan prime rate, the main policy rate, by around 10 bps. 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%. The RRR relaxation will be effective May 15.
The leaders of the US and the UK have announced an “historic” deal to reduce tariffs, the first since Trump announced ‘reciprocal’ duties on April 2. But experts warn it still leaves the UK facing higher tariffs on exports to the US than before Donald Trump took office. While the 10% worldwide tariff imposed by Trump in April remains in place, the UK won significant concessions on steel and auto tariffs that Trump had increased by an extra 25% in February and March. For agriculture, there will be "reciprocal market access" on beef.
President Xi Jinping said on Thursday that China is ready to work with Russia to resolutely defend the rights and interests of the two nations as well as those of developing countries in face of unilateralism and bullying. In talks with President Vladimir Putin during his state visit to Russia, Xi said relations between Beijing and Moscow "have grown more confident, stable and resilient in the new era," according to Xinhua News Agency. Xi is among more than 20 foreign leaders attending a military parade in Russia today marking 80 years since the defeat of Nazi Germany in World War II.
Fed In No Hurry To Cut Rates
The US Federal Reserve held rates steady yesterday defying Donald Trump, who has repeatedly called for the central bank to cut borrowing costs. “We don’t feel like we need to be in a hurry. We feel like it’s appropriate to be patient,” Chair Jerome Powell said. Justifying the move, the Fed chief said that the American economy is still solid, for now. But in a statement after the meeting, the FOMC warned “uncertainty about the economic outlook has increased further.” The committee added that, since they last met in March, “the risks of higher unemployment and higher inflation have risen”. Economists widely expect Trump’s tariffs to boost inflation and weigh on growth. That would pit policymakers’ two goals, price stability and maximum employment, against one another. Unsurprisingly, the US central bank voted unanimously Wednesday to keep the benchmark federal funds rate in a range of 4.25% to 4.5%, where it’s been since December.
Donald Trump criticised Jerome Powell once again Thursday, calling the central bank leader “a fool,” then later saying it’s “like talking to a wall” to get the Fed to ease monetary policy. In a Truth Social post, Trump wrote, ″‘Too Late’ Jerome Powell is a FOOL, who doesn’t have a clue. Other than that, I like him very much! Oil and Energy way down, almost all costs (groceries and “eggs”) down, virtually NO INFLATION, Tariff Money Pouring Into the U.S. — THE EXACT OPPOSITE OF “TOO LATE!” ENJOY!” Trump said of Powell, ″everybody’s cutting but him.” Trump went on to say, “Now, if the chairman of the Fed ... if he would lower interest rates like China did, like I think UK did, but like numerous other countries have done, it would be, it’s like jet fuel ... but he doesn’t want to do it,” Trump told reporters. “I think he doesn’t want to do it. Probably he’s not, he’s not in love with me. I think that it’s sort of a crazy reason, but that’s the way life is.”
HKMA Leaves Base Rate Unchanged
Following the Fed's decision, the Hong Kong Monetary Authority (HKMA) left its key base rate unchanged at 4.75%. The HKMA said in a statement the Fed's decision was in line with market expectations. "The markets are expected to focus on developments relating to US tariff measures and the US interest rate path, both of which are subject to considerable uncertainty," the statement said. Leading local banks including HSBC, Bank of China (Hong Kong) and Standard Chartered on Thursday kept their prime lending rates steady after the Fed decision. HSBC and Bank of China (Hong Kong) kept their prime lending rates unchanged at 5.25%, and Standard Chartered remained at 5.5%. Their deposit rates also remained unchanged.
Mortgage borrowers and companies are likely to benefit from a sharp fall in the Hong Kong interbank offered rates (Hibor), with the lower cost of funding expected to boost the city’s property market and economy. The one-month Hibor, which is linked to mortgage loans, weakened to a 30-month low of 2.0945% on Thursday, a drop of almost 1 percentage point from a day earlier, according to data from the Hong Kong Association of Banks. The rates for three and six months fell by 61 bps and 34 bps, respectively.
Bank Of England Cuts Rates
The Bank of England (BOE) cut interest rates by a quarter of a percentage point to 4.25% Thursday but was cautious about the prospects for future rate cuts. The nine-person monetary policy committee (MPC) was surprisingly divided. Five wanted the cut to 4.25%, two wanted a bigger cut to 4%, while two wanted no change. The two MPC members who favoured a bigger 50 bps cut believe inflationary pressures in the UK are already contained and that trade wars could hit global growth and export prices more than expected, pulling down UK inflation. The more hawkish MPC members worry that households have become more sensitive to short-term movements in prices. This could mean that a temporary bump in inflation lasts longer as workers push for higher wages to maintain living standards.
UK interest rates are now down a full percentage point from their peak. Further rate cuts are likely to be "gradual and careful", according to the Bank's governor Andrew Bailey. He said inflation easing was behind the decision to cut. But he warned the "past few weeks have shown how unpredictable the global economy can be" following the introduction of worldwide tariffs by Donald Trump. He stressed that monetary policy was not on a preset course, saying, “interest rates are not on autopilot, they cannot be. The MPC must continue to respond carefully to the evolving circumstances and the outlook for inflation in the UK.”
The MPC believes wage growth is now slowing significantly, with private sector pay growth set to fall to around 3.75% by the end of the year. This reflects a weaker jobs market, with many companies holding headcount flat and unemployment set to rise to 5% in 2026. However, the BoE said April’s increase in payroll taxes had not led to widespread redundancies, even though it had had a big effect on business confidence.
The Bank of England expects UK economic growth to be stronger than previously thought this year, but weaker after that. The projections expect GDP to grow by 1% this year, marking an upgrade from the 0.75% growth predicted in the Bank's report in February. This is largely due to growth over the first three months of 2025 being higher than anticipated. But the forecast for 2026 has been downgraded to 1.25% growth, from 1.5% previously. The Bank also cut its growth outlook for the world economy to 1.5% in 2026, from 2% previously, due to US tariffs and uncertainty over global trade.
Traders moved to scale back their bets on a further rate cut coming at the next meeting in June, after the vote showed that two rate-setters wanted to leave rates unchanged, surprising analysts. The market is pricing a roughly 25% chance of another quarter-point cut in June, down from around 50% before the vote, according to levels implied by swaps markets.
“Overall it’s a hawkish surprise,” said Francesco Pesole, an FX strategist at ING, citing in particular chief economist Huw Pill’s vote for no change, which Pesole said “hinders expectations for a shift to faster easing”. He also noted the Bank kept the “gradual and careful approach” wording around further easing. Mathieu Savary, chief European strategist at BCA Research, said the MPC’s split vote showed the committee was “still unwilling to declare victory on inflation” and signalled that the Bank of England “needs clear proof of softer growth and cooling wage gains before cutting again”.
Bank Of Japan Policymakers Divided On Interest Rate Rises
Bank of Japan (BoJ) policymakers were divided in March over how soon the central bank should raise interest rates again as uncertainty stemming from US tariff policies heightened, minutes of their meeting showed on Thursday. Some members remain prepared to raise interest rates further, contingent on the BoJ’s economic and inflation outlooks being met. However, several members flagged external risks, particularly those stemming from evolving US trade policy.
Xi Fortifies China Economy Before Trade Talks With US
Xi Jinping has finally agreed to discuss a potential resolution of the trade war launched against his country by Donald Trump. 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 US Treasury Secretary, Scott Bessent, and top trade official Jamieson Greer in Switzerland. The meetings will take place on both Saturday and Sunday. But first, Xi sought to buttress the Chinese economy ahead of planned negotiations in Switzerland, unveiling sweeping measures to stabilize markets, boost tech innovation and protect small businesses. On Wednesday, China’s central bank announced across-the-board rate cuts alongside other steps that could pump 2.1 trillion yuan (US$291 billion) into the economy. 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%. The lower policy rates came into force yesterday, while the RRR relaxation will be effective May 15.
Carlos Casanova, Senior Economist, Asia at Union Bancaire Privée, Hong Kong, wrote in a note Thursday, “despite the proactive stance by authorities ahead of trade negotiations with the US and stronger Labor Day activity, we believe the recent announcement will only partially offset the impact of existing tariffs. Incremental monetary support may not suffice, as we estimate the direct impact from declining US exports to be around 5% of GDP in 2025, excluding secondary effects through sentiment channels. Therefore, we anticipate further measures will follow.”
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.
Economists at HSBC predicted the US would roll back tariffs to 50%, while Morgan Stanley’s Robin Xing said a “gradual approach” was more likely. Tariffs at those levels would still threaten to wipe out the bulk of US-China trade, requiring the Chinese government to unleash more monetary and fiscal stimulus later this year to hit a growth target of around 5%. The current situation “is a lose-lose scenario” for all involved, Citigroup economists including Xiangrong Yu wrote in a Wednesday note, while still forecasting prohibitively high tariff levels would remain in place for six to 12 months.
US & UK Announce Deal To Reduce Tariffs
The leaders of the US and the UK have announced an “historic” deal to reduce tariffs, the first since Trump announced ‘reciprocal’ duties on April 2. But experts warn it still leaves the UK facing higher tariffs on exports to the US than before Donald Trump took office. Currently, most goods imported to the US from the UK face 10% tariffs, with higher rates on steel, aluminium, and cars. The UK also charges tariffs on some US goods. Donald Trump posted on Truth Social saying, "the agreement with the United Kingdom is a full and comprehensive one that will cement the relationship between the United States and the United Kingdom for many years to come. Because of our long time history and allegiance together, it is a great honour to have the United Kingdom as our FIRST announcement. Many other deals, which are in serious stages of negotiation, to follow!"
The deal announced Thursday sees reduced tariffs for cars entering the US and UK. US imposed car export tariffs will reduce from 27.5% to 10%. This applies to a quota of 100,000 UK cars, which is almost the total the UK exported last year. While the 10% worldwide tariff imposed by Trump in April remains in place, the UK won significant concessions on steel and auto tariffs that Trump had increased by an extra 25% in February and March. The 25% steel tariffs are now reduced down to zero and a tariff on US ethanol entering the UK has been removed. For agriculture, there will be "reciprocal market access" on beef which means that UK farmers will be given a quota for 13,000 metric tonnes of beef to be exported to the US, and the US granted the same. UK negotiators avoided straying into politically contentious areas, such as reducing the UK’s digital services tax, opening healthcare markets to American companies or making changes to UK food standards rules to allow products such as chlorine-washed chicken and hormone-treated beef.
However, the agreement is far from what has traditionally been thought of as a trade deal. Rather it is an exemption from some of the trade tariffs that Trump has imposed in recent weeks. While there are carve outs for some sectors, the universal 10% tariff on other items remains. The White House made no mention of how the framework met the objectives of raising revenue or reshoring manufacturing. Moreover, Thursday’s announcement was only the framework of terms of this narrow agreement, and there’ll be much work to be done on negotiations and the legal paperwork in the coming months. Many specifics about the deal were not immediately clear, and nothing was signed during the Oval Office event. “The final details are being written up,” Trump said. “In the coming weeks we’ll have it all very conclusive.”
Some experts downplayed the impact of the deal, saying the path taken that the US took with the UK cannot easily be repeated with other nations where America has a large trade deficit. “It’s a very small win, and it’s limited in scope,” said Josh Lipsky, chair of international economics at the Atlantic Council. Asked if that baseline tariff is a template for future trade deals, Trump said, “That’s a low number.” “They made a good deal,” Trump said of the UK. “Some will be much higher because they have massive trade surpluses.”
Pakistan Signals Potential Retaliation For India Air Strikes
Tensions remained high between Pakistan and India, with the former saying it reserves the right to retaliate after India launched targeted strikes in Pakistan and Pakistan-administered Kashmir, signalling a potential escalation. PM Shehbaz Sharif said Pakistan responded to India's strikes by downing five Indian jets and at least one drone, a claim Delhi has not confirmed. Pakistan said it had shot down 25 drones Wednesday night, while India said it has neutralised drones and missiles. Pakistan’s army said 31 civilians were killed and 57 injured in the latest attacks. Meanwhile, India's army says at least 15 civilians were killed by Pakistani shelling on its side of the de facto border. India says the missile strikes overnight into Wednesday were a response to a deadly militant attack on Indian tourists in Pahalgam last month, for which Islamabad denies involvement. Indian-administered Kashmir has seen a decades-long insurgency which has claimed thousands of lives. India and Pakistan both claim Kashmir in full.
Donald Trump has offered to mediate in the first big international crisis to erupt since his inauguration, to prevent Indian missile strikes against Pakistan from spiralling into a nuclear stand-off between the countries. The US president said he hoped “they can stop now”. “If I can do anything to help, I will be there,” he said on Wednesday. “My position is I get along with both, I know both very well and I want to see them work it out.”
Xi: China-Russia Ties More Confident & Stable
President Xi Jinping said on Thursday that China is ready to work with Russia to resolutely defend the rights and interests of the two nations as well as those of developing countries in face of unilateralism and bullying. In talks with President Vladimir Putin during his state visit to Russia, Xi said relations between Beijing and Moscow "have grown more confident, stable and resilient in the new era," according to Xinhua News Agency. Xi is among more than 20 foreign leaders attending a military parade in Russia on Friday marking 80 years since the defeat of Nazi Germany in World War II.
Ahead of Thursday’ Moscow summit with Vladimir Putin and second world war Victory Day celebrations, Xi drew a parallel between modern-day US “hegemony” and the “arrogant fascist forces” of 80 years ago. In an article published in the media in both countries, Xi said that “the just forces of the world, including China and the Soviet Union, fought bravely and defeated the arrogant fascist forces side-by-side”. He added, “80 years later, unilateralism, hegemony and bullying are extremely harmful. Humanity is once again at the crossroads.” Xi added that China and Russia would work together to “decisively defend the interests and rights of our states and all developing countries and form an equal, balanced multi-polar world and inclusive, accessible economic globalisation”.
Moscow struck a similar note in the run-up to the summit, which Russia’s foreign ministry said would “send a powerful signal against attempts to rewrite the results of the second world war”. Europe was “preparing for war with Russia like the Third Reich once did”, the ministry added, according to state newswire Tass. Putin added that he would visit China this year for celebrations marking the anniversary of Japan’s defeat in the second world war.
Taiwan Exports Growth Exceeds Expectations
Exports from Taiwan soared by 29.9% year-on-year to US$48.66 billion in April, far exceeding market expectations of a 16% gain and accelerating from 18.6% growth in the previous month. This robust performance was likely driven by front-loading activities as businesses rush to ship goods ahead of impending US tariffs. As a key hub for global chip and hardware manufacturing, Taiwan is navigating heightened trade risks following Donald Trump's decision to impose a 32% tariff on Taiwanese goods, albeit with a 90-day suspension announcement. Shipments increased across all major export commodities, including information, communication, and audio-video products (60.5%) and electronic products parts (26.8%). Among key trading partners, exports jumped to ASEAN countries (60.2%), followed by the USA (29.5%) ahead of the impending tariff measures, and to Mainland China and Hong Kong (22.3%).
Imports to Taiwan soared by 33.0% year-on-year to US$41.5 billion in April, accelerating from 28.8% growth in March and exceeding market expectations of an 18.9% increase. Taiwan’s trade surplus widened to a three-month high of US$7.21 billion in April, from US$6.27 billion in the same month of the previous year, exceeding market expectations of US$6.38 billion.
Malaysia Holds Key Interest Rate Steady As Expected
The Central Bank of Malaysia held its benchmark interest rate steady at 3% as expected during its monetary policy meeting yesterday, marking the eleventh consecutive period of unchanged rates. The central bank reiterated its supportive stance on economic growth, noting that the current policy setting remains appropriate in light of its latest assessment of inflation and growth prospects. Headline and core inflation averaged 1.5% and 1.9%, respectively, in the first quarter of 2025, with overall inflation expected to remain manageable for the rest of the year amid moderate global costs and subdued domestic demand pressures. Meanwhile, preliminary estimates showed that the country's annual GDP growth slowed to a one-year low of 4.4% from a 5% gain in the previous quarter. Looking ahead, although growth is expected to be anchored by resilient domestic demand, escalating trade tensions and heightened global policy uncertainties are likely to weigh on the external sector.
Philippines GDP Misses Expectations In Q1
The Philippine economy expanded 5.4% year-on-year in the first quarter of 2025, up from a 5.3% advance in the previous quarter. The latest reading missed the expectation of a 5.7% expansion compiled in a poll by Reuters. The country said the main contributors to growth were sectors including manufacturing, financial and insurance activities, as well as wholesale and retail trade.
US Initial Jobless Claims Ease From 2-Month High
Initial jobless claims in the United States fell by 13,000 to 228,000 in the week ending May 3rd, slightly below market expectations of 230,000, to mark a sharp contrast with the two-month high from the previous week. In the meantime, outstanding unemployment claims fell by 29,000 to 1,879,000, easing from the over three-year high halfway through April. The result continued to reflect a resilient labour market when compared to historical levels.
In separate data, unit labour costs in the US nonfarm business sector rose by 5.7% in the first quarter of 2025, surpassing economists’ expectations of a 5.1% increase and accelerating sharply from a downwardly revised 2.0% gain in the previous period, according to a preliminary estimate. This marked the largest quarterly rise in labour costs since an 8.3% jump in Q1 2024. On an annual basis, unit labour costs were up 1.3% in Q1, with manufacturing unit labour costs increasing by 0.7%.
Trump To Rescind AI Chip Curbs
The Trump administration plans to rescind Biden-era artificial intelligence chip curbs as part of a broader effort to revise semiconductor trade restrictions that have drawn strong opposition from major tech companies and foreign governments, Bloomberg News reported. The repeal, which is not yet final, seeks to refashion a policy launched under President Joe Biden that created three broad tiers of countries for regulating the export of chips from Nvidia and others. The Trump administration will not enforce the so-called AI diffusion rule when it takes effect on May 15 and is actively working toward a new rule that would strengthen the control of chips abroad. Shares of chipmakers rose Wednesday in New York after Bloomberg News reported on the move. Nvidia climbed 3.1%, and the Philadelphia Stock Exchange Semiconductor Index gained 1.7%.
Toyota Warns Profits Set To Fall 21% As Trump Tariffs Take Their Toll
Toyota Motor forecast Thursday a 21% profit decline for the current financial year, as the strain from Donald Trump’s tariffs and an appreciating yen take some of the shine off strong hybrid demand. The world’s top-selling automaker expects operating income to total ¥3.8 trillion (US$26bn) in the year to March 2026, versus ¥4.8 trillion in the year that just ended. That was roughly in line with the ¥4.75 trillion average of 25 analysts surveyed by LSEG. The forecast “tentatively” includes an estimated US tariff impact of ¥180bn for the months of April and May.
Japanese manufacturers remain exposed as they export some of the vehicles they sell in the US from Japan, with Toyota sourcing about 26% of its vehicles sold there from its home country, according to Bernstein research. Koji Sato, Toyota chief executive, said that since Japanese government officials “are working hard right now and the details of tariffs are still moving, it remains very hard to predict the future. But at the moment, there are already tariffs that are being imposed, and that part has been reflected in our forecast for this fiscal year”. “In the short term, we have to look at how we allocate the cars. But over the medium to long term, appropriate products for the local area should be produced locally and delivered locally,” he added. While Toyota has seen its vehicle sales in China fall less than other Japanese automakers, it has still struggled to halt a sales decline in the world’s biggest auto market amid heavy competition from Chinese brands.
Toyota Chairman’s $42bn Toyota Industries Buyout Progressing
Toyota Motor Chairman Akio Toyoda is readying a major buyout of Toyota Industries. The US$42 billion purchase is making headway with the parties involved having picked financial advisers and working toward a tender offer as soon as November, Bloomberg News reported Thursday. The plan involves Toyoda's special purpose vehicle, advised by Nomura, making a tender offer for all shares in Toyota Industries, with Toyoda and Toyota Motor investing personally. The buyout, which would be Japan's largest-ever, aims to strengthen corporate governance by unwinding cross-shareholdings, and comes as Toyota seeks to rebuild trust in its governance after regulatory scandals.
Nintendo Forecasts Sales Of 15 Million Switch 2 Consoles
Nintendo said Thursday that it expects to sell 15 million units of its new Switch 2 console in the fiscal year ending March 2026. It is the first forecast for sales from the Japanese gaming giant since it announced the successor to its successful Switch device, which is due to go on sale in June. The Switch 2 will start at US$449.99 in the US and has improved features compared with its predecessor.
Revenue and profit plunged in the fourth quarter, the Japanese video game company said, although this was largely expected as Nintendo fans await the Switch 2 launch. Revenue fell 24.7% in the fourth quarter compared to the same period a year earlier, while profit plunged nearly 50%. Investors are also focused on Nintendo’s forecast for the fiscal year. The company expects net sales of ¥1.9 trillion, a 63% year-on-year rise but just short of LSEG estimates of ¥2 trillion. It expects net profit to jump 7.6% to 300 ¥billion, below LSEG estimates of ¥388.8 billion.
Asia-Pacific Markets Higher
Asia-Pacific markets closed higher after the US Federal Reserve kept rates unchanged as widely expected. Japan’s benchmark Nikkei 225 traded 0.4% higher to close at 36,929. South Korea’s Kospi rose 0.2%. Australia’s benchmark S&P/ASX 200 added 0.2%. In India, the BSE Sensex was 0.5% lower at 80,335. The Pakistan stock Exchange's benchmark KSE 100 plunged below the 103,000 mark on Thursday, down 6.7% on the day, before trading was halted after strikes between Pakistan and India risked a war between the countries. The decline marks a 15% plunge since hitting a record high of 120,000 last month.
Chinese Defence Stocks Surge
Chinese stocks also rose after the Federal Open Market Committee held its benchmark overnight borrowing rate in a range between 4.25% to 4.5%, where it has been since December and ahead of a weekend meeting of US and Chinese trade officials. Mainland China’s CSI 300 added 0.6% to close at 3,853.
Hong Kong stocks rose for a sixth straight day after Beijing unveiled measures to support the economy and improve confidence in the private sector ahead of US-China tariff talks this weekend. The Hang Seng index rose 84 points, or 0.4%, to 22,776. The index is still down 1.9% from April 2, when Trump imposed sweeping tariffs on all the US’ trading partners. The Hang Seng Tech Index climbed 0.6% Thursday.
Chinese defence stocks surged Thursday after Pakistan’s apparent use of China-made weapons to down Indian jets. Pakistan’s Foreign Minister Ishaq Dar claimed on Wednesday that Pakistan deployed Chinese-made J-10C fighter jets in a clash with India’s air force, according to local state media. AVIC, through its subsidiary AVIC Chengdu Aircraft, manufactures the J-10C fighter jets reportedly used by Pakistan in the recent conflict. Another subsidiary, AVIC Aerospace, which produces military aircraft and helicopters, saw its Hong Kong-listed shares rise 2.7%. And Shenzhen-listed stocks of AVIC Chengdu Aircraft closed 20% higher. On Wednesday, its shares rose 17.1%, marking the most significant gain since last October. Shares of China State Shipbuilding Corporation, which builds military and civilian vessels, inched up 0.2%.
Shares of Chinese bubble-tea brand Auntea Jenny, the fourth-largest network of freshly made tea shops in China, rose as much as 75% in its Hong Kong trading debut, before closing 40% higher. The shares saw strong demand from retail investors in Hong Kong, with the allocation oversubscribed by over 3,616 times. The Shanghai-based company raised HK$272.8 million (US$35mn) in gross proceeds by issuing 2.4 million shares. China’s bubble tea market has now produced another billionaire couple. Husband-and-wife founders, Shan Weijun and Zhou Rongrong, have a combined net worth of about US$1.7 billion, according to the Bloomberg Billionaires Index.
European Stocks Higher
European stocks traded in positive territory on Thursday, amid a swathe of earnings reports and following the announcement of a UK-US trade deal. The pan-European Stoxx 600 was 0.4% higher, with most sectors and bourses seeing gains. London’s FTSE 100 fell 0.3% after a divided Bank of England cut interest rates by 25 bps but was cautious on the prospects for further cuts this year. Short-term UK government bonds sold off, as traders braced for a slower pace of cuts. That took the yield on rate-sensitive two-year bonds up 5 bps to 3.86%.
Sweden’s Riksbank on Thursday held its key interest rate steady, citing uncertainty in the global economy as a direct result of Donald Trump’s trade policies. Norway’s central bank Norges Bank also kept interest rates unchanged, noting that “trade barriers have become more extensive, and there is uncertainty about future trade policies.”
Danish shipping giant Maersk on Thursday posted stronger-than-expected first-quarter operating profit but warned that the current level of US-China trade tariffs could restrict global container market volumes. The company, widely regarded as a barometer of global trade, reported preliminary underlying earnings before interest, tax, depreciation and amortization (EBITDA) of US$2.71 billion for the first three months of the year, up 70% from the same period a year earlier and above expectations, Shares of Maersk closed 1.6% higher.
Stocks Higher On Wall Street After US-UK Trade Deal
US stocks rose Thursday after Donald Trump announced a trade deal framework between the US and United Kingdom, the first major agreement hatched since the US launched pre-emptive tariffs on most of the globe earlier this year. Trump said the administration has more trade discussions in the coming days. He said investments in the US from this and future trade deals could amount to US$10 trillion. "Everyone wants a deal," he said of other nations that he said include China.
US stock indices hit their highs for the day, at one point up 2% or more, after Trump highlighted the deal's benefits and spoke of coming tax cuts as getting the economy "zooming," up. But those gains eroded in the afternoon. The S&P 500 rose 0.6% and closed at 5,664. The Dow gained 254 points, or 0.6%, to settle at 41,368. The Nasdaq Composite advanced 1.1% to end at 17,928.
Tech shares saw a broad uptick after the Trump administration said Wednesday it will remove Biden-era chip restrictions. Shares of Alphabet rose 1.9% on Thursday after the company released a statement saying Google is continuing to see search query growth, pushing back on press reports Wednesday that cited an Apple executive saying there has been a decline in search on the Safari browser as more people use AI.
Boeing shares rose 3.3% after Commerce Secretary Howard Lutnick suggested the US-UK trade deal will lead to a multi-billion-dollar order of Boeing planes. “There’s going to be an announcement in the UK that they’re buying $10 billion worth of Boeing planes later today,” Lutnick said in the Oval Office. He did not say which airline would be placing the order or what model of plane is involved.
Treasury Yields Jump Higher
The yield on the US 10-year Treasury note climbed 11 bps to 4.38% on Thursday, snapping a two-day decline as investors weighed the Federal Reserve’s latest policy stance alongside new developments in global trade. The policy sensitive 2-year note saw its yield climb 10 bps to 3.88%.
US Dollar Gains As Fed In No Hurry To Cut Rates
The dollar added 0.8% against a basket of peers, benefiting from the Federal Reserve’s signal that it’s in no hurry to ease monetary policy. The British pound fell 0.4% to $1.3243 after the Bank of England cut rates by 25 bps. The euro was down 0.7% around $1.12 as markets digested a series of monetary policy decisions. The Japanese yen weakened 1.5% to ¥145.85 per dollar on Thursday, extending losses from the previous session. The offshore Chinese yuan fell 0.2% to around Rmb 7.24 per dollar, marking its third consecutive session of losses ahead of US-China trade talks. The Indian rupee fell to 85.7 per dollar from the six-month high of 85.2 touched on May 5th after escalating tensions with Pakistan drove investors to pivot toward assets outside of India.
Dollar Faces $2.5 Trillion ‘Avalanche’ Of Asian Sales
The dollar may face a US$2.5 trillion “avalanche” of selling as Asian countries unwind their stockpile of the world’s reserve currency. Asian exporters and investors may have amassed an “extremely large” pile of dollars through the years, widening the region’s trade surplus with the US, Eurizon SLJ Capital’s Stephen Jen and Joana Freire wrote in a note on Wednesday. As a US-led trade war deepens, some Asian investors might repatriate chunks of funds or ramp up levels of protection against a weakening dollar, potentially triggering an exodus from the world’s reserve currency. “We suspect these dollar hoardings by Asian exporters and institutional investors may be extremely large – possibly on the order of US$2.5 trillion or so – and pose sharp downside risks to the dollar vis-à-vis these Asian currencies,” Jen and Freire wrote.
Accelerating the multi-trillion-dollar flows may be “naked long-dollar positions” prevalent among Asian countries that run large external surpluses, he wrote, referring to positions that are not hedged against fluctuations in the dollar. Some of these countries include China, Taiwan, Malaysia and Vietnam. There is an “important imbalance in the world that puts the dollar in a vulnerable position,” Jen wrote in the latest report.
The US Dollar 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 Falls After Fed Caution
Gold extended its recent decline on Thursday, as a cautious outlook on US interest rates weighed on the appeal of the non-yielding asset. The Fed warned of rising risks of both inflation and unemployment, reinforcing its cautious stance on future rate changes. The precious metal settled 1.7% lower at $3,306 per ounce.
Oil Pares Losses
Brent crude oil futures rose above $63 per barrel on Thursday, paring losses from the previous session, supported by a larger-than-expected drop in US crude stock. Government data showed crude stockpiles fell by over 2 million barrels last week, surpassing the anticipated 1.7-million-barrel draw. Headwinds come from OPEC+ plans to accelerate production increases. Brent crude oil futures settled 3.9% higher at $63.35 per barrel.
Bitcoin Jumps Above $100,000
Bitcoin rose $100,000 for the first time since February, rising 6.5% to $103,100 on Thursday. The rally extends a surge that began Wednesday after announcements of US trade talks with China and a "major trade agreement" with the UK. Bitcoin hit a record of $109,241 on January 20 bolstered by optimism around Trump’s plans to nurture a friendly environment for US crypto operators. Bitcoin fell roughly 32% from its all-time high to below $75,000 in early April.
Peter Lewis’ Money Talk Podcast
On Friday’s “Peter Lewis’ Money Talk” podcast, I’ll be joined by Francis Lun, the CEO of GEO Securities, and Tim Huxley, Chairman of Mandarin Shipping. With a view from Australia, is Toby Lawson, former CEO at Statton Partners in Sydney.
The podcast is also available on Apple Podcasts, YouTube Studio and Spotify.
Spotify
YouTube Studio
https://www.youtube.com/playlist?list=PLnwqOJD9ie5gHH29bNfuG1Nscy8rdJo6O
Apple Podcasts
This podcast is sponsored by Surfin Group, which is headquartered in Singapore and offers online financial services to 60 million customers across 10 countries. You can find out more about them by going to their website www.surfin.sg
