PETER’S BUSINESS & FINANCE BRIEFING – Monday 19 May 2025, 06:00 Hong Kong
● Japan’s economy contracts for first time in a year ● Hong Kong’s economy expands 3.1% y/y in Q1 ● Moody’s strips US of top-notch triple-A credit rating
Monday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 23,298 -47 points -0.2%
Nikkei 225 (Japan) Projected Open: 37,840 +86 points +0.2%
Quick Summary - 4 Things To Know Before Asian Markets Open
Donald Trump said Friday he will set tariff rates for US trading partners "over the next two to three weeks", saying his administration lacks the capacity to negotiate deals with all of its trading partners. Trump said Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick “will be sending letters out essentially telling people” what “they’ll be paying to do business in the United States.” “I think we’re going to be very fair. But it’s not possible to meet the number of people that want to see us,” the president said during a meeting with business executives in the United Arab Emirates. Trump asserted there are “150 countries that want to make a deal.” He didn’t say how many, or which, nations would receive letters.
The US was downgraded by Moody’s Ratings on Friday due to government debt that’s approaching US$37 trillion. Moody's Ratings has lowered the US credit score to Aa1 from Aaa, citing concerns about ballooning debt and deficits that will damage America's standing as a global capital destination. The one-notch cut comes more than a year after Moody’s changed its outlook on the US rating to negative. Moody’s has now joined Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top, triple-A position.
Japan’s economy has contracted for the first time in a year. Japan’s economy shrank 0.2% quarter-on-quarter in the quarter ended March, a sharper fall than expected and after 0.6% growth in Q4 2024, preliminary government data showed Friday. The GDP figure was a larger drop than the 0.1% contraction expected by economists polled by Reuters and leaves the economy at risk of falling into a technical recession this quarter depending on the hit from the US levies. On an annualized basis, Japan’s GDP contracted 0.7% in the first quarter, also more than the 0.2% fall expected by the Reuters poll. It marks a sharp reversal from an upwardly revised 2.4% growth in Q4.
Hong Kong’s economy expanded by 3.1% year-on-year in Q1, in line with preliminary estimates and accelerating from an upwardly revised 2.5% growth in Q4 2024. The pickup was largely driven by strong external demand, particularly in the exports of goods and services, as businesses front-loaded shipments in anticipation of imminent US tariff hikes. However, private consumption continued to decline, falling by 1.1% (vs -0.2% previously), reflecting subdued domestic sentiment.
Trump Says US To Set Tariff Rates For Other Nations In Weeks
Donald Trump said Friday he will set tariff rates for US trading partners "over the next two to three weeks", saying his administration lacks the capacity to negotiate deals with all of its trading partners. Trump said Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick “will be sending letters out essentially telling people” what “they’ll be paying to do business in the United States.” “I think we’re going to be very fair. But it’s not possible to meet the number of people that want to see us,” the president said during a meeting with business executives in the United Arab Emirates. The US president asserted there are “150 countries that want to make a deal.” He didn’t say how many, or which, nations would receive letters. The countries that get them “could appeal it,” Trump added, without explaining how that process would work.
Negotiations are still ongoing with several economies, including Japan, South Korea, India and the European Union. Trump recently agreed to a trade framework with the UK and to a mutual temporary tariff reduction with China to buy more time for talks. “We have four or five other deals coming immediately,” Trump said on May 9, Following the deal with the UK. “We have many deals coming down the line.”
India Disputes Trump Claim It Is Ready To Charge US 'No Tariffs'
Donald Trump said last week, India has made an offer to drop tariffs on US goods, as the Asian nation negotiates a deal to avert higher import taxes. Speaking Thursday at an event with business leaders in Qatar, Trump said the Indian government has “offered us a deal where basically they are willing to literally charge us no tariff.” Trump didn’t provide further details of New Delhi’s apparent offer. However, India's External Affairs Minister Subrahmanyam Jaishankar said trade talks between India and the US are ongoing and "any judgment on it would be premature" until a "mutually beneficial" agreement is reached. India's foreign minister S Jaishankar countered the claim saying talks are still going on and "nothing is decided till everything is". Jaishankar said on Thursday that any trade deal has to be mutually beneficial and work for both countries. The statement is in stark contrast to comments by Trump. The US President slapped tariffs of up to 27% on Indian goods in April. Delhi is attempting to negotiate a trade deal during Trump's 90-day pause on higher tariffs, which ends on 9 July.
Trump Criticises Apple Over Plan To Ship US iPhones From India
Donald Trump has hit out at Apple’s plans to produce more iPhones in India as a way of avoiding US tariffs on Chinese-made goods, as he continues to push the tech group to manufacture its best-selling device in America. Speaking in Qatar, the US president said he had “a little problem with Tim Cook yesterday” after the Apple chief executive confirmed last week that Indian factories would supply the “majority” of iPhones sold in the US in the coming months. The Financial Times previously reported that Apple planned to source from India all of the more than 60mn iPhones sold annually in the US by the end of next year. Trump criticised that idea on Thursday, saying he told Cook, “we are treating you really good, we put up with all the plants you built in China for years. We are not interested in you building in India.” He claimed that Apple would be “upping their production in the United States” following the conversation.
Trump’s comments signal a cooling in the president’s relationship with Apple, one of the US’s most valuable companies. It comes as the iPhone maker already faces huge challenges in replicating its vast Chinese supply chain and production facilities in the US, which rely on a skilled high-tech manufacturing workforce that is now overwhelmingly concentrated in Asia. Apple’s pivot to India is the highest profile result of Prime Minister Narendra Modi’s drive to boost local manufacturing and attract companies seeking to diversify away from China. Trump’s criticism of these plans come as India and the US, its biggest trading partner, are negotiating a bilateral trade agreement.
Trump Tells Walmart To 'Eat The Tariffs'
Donald Trump blasted Walmart on Saturday after the world’s largest retailer warned last week that it would have to raise prices in its stores despite the US-China détente. “Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain,” Trump wrote on Truth Social. “Between Walmart and China they should, as is said, “EAT THE TARIFFS,” and not charge valued customers ANYTHING. “I’ll be watching, and so will your customers!!!” Walmart CFO John David Rainey said in an interview with CNBC on Thursday that, “we have not seen price increases at this magnitude, in the speed in which they’re coming at us before, and so it makes for a challenging environment.”
As a retail giant and the largest grocer in the country, Walmart is often seen as a bellwether for the health of retailers and US consumers. Rainey said he is “pleased with the progress that’s been made by the Trump administration on tariffs from the levels that were announced in early April, but they’re still too high.” That is despite a 90-day reprieve that lowered duties on Chinese imports to 30%. Goods from dozens of other countries face a 10% duty. Walmart imports electronics and toys from China and produce including avocados and bananas from Central and South America. Following Trump’s social media post, Walmart said in a statement, “we have always worked to keep our prices as low as possible and we won’t stop. We’ll keep prices as low as we can for as long as we can given the reality of small retail margins.”
Walmart joined a growing number of companies that have increased prices or warned that higher prices are coming due to tariffs. Microsoft said earlier this month that it has increased the recommended retail prices of Xbox video game consoles and some controllers. Barbie maker Mattel announced earlier this month it is moving production out of China but still expected to have price increases for its toys. And Ford warned it would have to raise prices on some cars.
Walmart maintained its sales forecast for the year on Thursday but declined to provide an earnings or operating income forecast for the second fiscal quarter, citing the frequent changes in the Trump administration’s tariff policies. Major US retailers, including Target, Home Depot and Lowe’s, are expected to share their own outlooks on the impact of tariffs when they report results this week.
US Considers Adding Chinese Chipmakers To Export Blacklist
The Trump administration plans to put a number of Chinese chipmaking companies on an export blacklist, but some officials want to delay the move to avoid hurting efforts to strike a long-term trade agreement with China. The commerce department has compiled a list of Chinese companies, including memory chipmaker ChangXin Memory, to add to the “entity list,” according to a Financial Times report. The Bureau of Industry and Security, the commerce department arm that oversees export controls, had drafted a list that also includes the subsidiaries of Semiconductor Manufacturing International Corp (SMIC), China’s biggest chipmaker, and Yangtze Memory Technologies (YMTC), its largest memory chipmaker, the report said. SMIC and YMTC are already on the list.
But the timing of the move has been complicated by the trade deal agreed by China and the US in Geneva to slash reciprocal tariffs for 90 days to help reach a broader trade deal. Some Trump administration officials have argued that putting export controls on critical Chinese groups now could jeopardise the negotiations. But others pointed out that Republicans criticised the Biden administration for delaying taking competitive actions against China to facilitate what they called “zombie diplomacy”.
American companies cannot sell to Chinese groups on the entity list without government licences, which have become increasingly hard to obtain. US security officials are concerned that it has been too easy for China to obtain American technology, which has supported its military in developing hypersonic weapons and modelling nuclear weapons.
China & US Trade Reps Meet On Sidelines Of APEC Summit
South Korean authorities on Thursday said Chinese and US officials have met on the sidelines of the annual Asia-Pacific Economic Cooperation (Apec) session of trade representatives, Reuters reported Thursday. Korea's Industry and Trade Ministry said Chinese trade envoy Li Chenggang met US Trade Representative Jamieson Greer, in a sign of potential further progress to address trade frictions between the world's biggest economies.
It comes as Apec warned that exports from a region that accounts for around half of world trade will slow sharply this year, and will barely grow at all, in the wake of US tariff announcements. The 21-member bloc projected exports in the region would rise only 0.4% this year, compared with 5.7% last year, in an analysis report released at its 2025 meeting of ministers responsible for trade in South Korea's resort island of Jeju. It also cut its regional economic growth forecast for this year to 2.6% from the previous 3.3%. "Trade growth is set to decline sharply across Apec due to lower external demand, particularly in manufacturing and consumer goods, while rising uncertainty over goods-related measures weighs on services trade," the bloc said in a statement.
Despite the 90-day truce in the US-China trade war, US levies on Chinese products stand at 30%. While much lower than before the thaw last week, the current rate is high enough to wipe out 70% of Chinese shipments to the world’s largest economy in the medium term, Bloomberg Economics has projected.
SE Asian Nations Face Pressure Over Chinese Tariff ‘Backdoor’ To US
Vietnam, Indonesia and other countries in southeast Asia are coming under pressure to clamp down on the rerouting of Chinese goods as they head into tariff negotiations with the US. Chinese exports to the region jumped more than 20% last month, offsetting a plunge in US-China trade and highlighting accusations from the Trump administration that countries in south-east Asia were helping Chinese manufacturers avoid punitive tariffs. Officials and trade experts said this practice, known as trans-shipment, has become a critical issue in negotiations with the US, with the Trump administration demanding countries in the region crack down to secure relief from some of the highest levies imposed on America’s trading partners. “South-east Asia is coming under more pressure than other regions in the world because of origin-washing,” said Sharon Seah, coordinator of the Asean studies centre at Singapore’s Iseas-Yusof Ishak Institute. “The US thinks that the Chinese will use the region as a backdoor to continue exporting to the US markets.”
Japan To Hold Out For Better Trade Deal With US
Japan has signalled it is prepared to hold out for a better deal with Donald Trump over trade tariffs, pushing for full removal of his 25% duty on imports of Japanese cars rather than risk a domestic political backlash. The US’s biggest outside investor and closest ally in Asia is keen to avoid any souring of relations with Washington. But pressure from business leaders and members of Prime Minister Shigeru Ishiba’s own Liberal Democratic party to reject any agreement that puts the country’s automotive sector at risk or threatens domestic farmers has forced him to recalculate, officials and analysts told the Financial Times. Officials said a deal was now unlikely to be reached before elections for Japan’s upper house of parliament that are due by late July and are already expected to be difficult for Ishiba’s highly unpopular administration.
The automotive and auto parts sectors are the biggest exporters from Japan to the US. The Trump tariffs’ impact on the operating profits of the country’s top auto companies is expected to be about ¥2 trillion (US$13.7bn) in the current financial year. Japan’s domestic agriculture industry, also a big employer, is something Ishiba said he would not sacrifice. However, it remains unclear how much leverage Tokyo has over the White House.
US China Hawks Concerned About Trump’s Middle East Deals
Trump’s flurry of artificial intelligence deals during his tour of the Middle East is opening a rift within his own administration. The deals involve the sale of tens of thousands of semiconductors to Saudi Arabia and over a million accelerators to the UAE, which could be used to develop AI models, but some officials worry that these chips could ultimately benefit China. China hawks are growing increasingly concerned the projects are putting US national security and economic interests at risk. Some senior administration officials are seeking to slow down the deals over concerns the US hasn’t imposed sufficient guardrails to prevent American chips shipped to the Gulf from ultimately benefiting China, which has deep ties in the region. Other officials argue that the deals are necessary to maintain US dominance in AI and prevent countries from turning to Chinese alternatives.
Trump Says No deal On Ukraine Until He Meets Putin
Donald Trump said he will be speaking to Russian President Vladimir Putin by phone today about ending the war in Ukraine, saying the call would be about "stopping the 'bloodbath'". In a post on Truth Social, the US president said the call would take place at 10:00 EDT (22:00 Hong Kong time) and he would then speak to Ukrainian President Volodymyr Zelensky, and the leaders of some Nato countries.
Russia and Ukraine agreed to exchange 1,000 prisoners each and discussed a potential ceasefire, but no truce was announced, after direct talks in Istanbul on Friday, their first face-to-face talks in three years. Vladimir Putin declined to attend the talks, even though he had initially proposed them. Trump had offered to attend the talks in Turkey if Putin would also be there. Instead, the Kremlin sent a low-level delegation to take part in the talks in Turkey, angering top European diplomats as well as Ukrainian President Volodymyr Zelenskiy. The talks were described as a “sham” by Zelenskiy, who sent Defence Minister Rustem Umerov to lead his team. The negotiations in Istanbul’s Dolmabahce Palace lasted about two hours on Friday and concluded with no agreement on a ceasefire. At the meeting, the Russian representatives set out demands for full control of all four regions in the east and southeast of Ukraine that the Kremlin claimed sovereignty of in 2022 despite not fully controlling them. They also demanded recognition of Crimea, which Russia seized in 2014. Ukraine and European countries have demanded that Putin commit to a 30-day unconditional ceasefire to create space for negotiations on a peace deal.
European leaders are preparing new sanctions against Russia if a ceasefire is not reached. To pressure Putin to negotiate a peace deal, the EU is currently working on a new sanctions package to hit Russia’s financial sector, targeting third-party banks that are supporting Moscow’s war effort.
Trump told reporters it shouldn’t have come as a surprise that Vladimir Putin didn’t show up, saying there’ll be no resolution of Russia’s war until the two of them meet. The Russian leader is trying “to play for time,” Polish Foreign Minister Radoslaw Sikorski told reporters. “We hope that the president of the United States sees this mockery for what it is and draws the right conclusions.”
US Credit Rating Downgraded By Moody’s
The US was downgraded by Moody’s Ratings on Friday due to government debt that’s approaching US$37 trillion. Moody's Ratings has lowered the US credit score to Aa1 from Aaa, citing concerns about ballooning debt and deficits that will damage America's standing as a global capital destination. The one-notch cut comes more than a year after Moody’s changed its outlook on the US rating to negative. Moody’s has now joined Fitch Ratings and S&P Global Ratings in grading the world’s biggest economy below the top, triple-A position. “While we recognize the US’ significant economic and financial strengths, we believe these no longer fully counterbalance the decline in fiscal metrics,” Moody’s wrote in a statement. The move could result in investors demanding higher yields on Treasuries.
“For those looking for a signpost to tell us when to stop adding to our national debt, they should look no further than Moody’s downgrade,” said Michael Peterson, chief executive of the Peter G Peterson Foundation. “It’s unacceptable for a great country like America to harm its own credit rating.”
Joseph Lavorgna who worked at the White House National Economic Council in the first Trump administration, said the timing of the downgrade is “very strange,” given that Congress is in the midst of working that major bill. The 100% debt-to-GDP ratio is also “not unusual” in the world, said Lavorgna, who’s now SMBC Nikko Securities chief US economist. The US is the fastest-growing industrialized nation and has the best productivity per capita, so the downgrade doesn’t make sense, he said.
The downgrade comes as the federal budget deficit is running near US$2 trillion a year, or more than 6% of GDP, and the overall debt level for the US has surpassed the size of the economy, with higher interest rates pushing up the cost to service the government's debt. The US government is on track to surpass record debt levels set after World War II in just four years, reaching 107% of gross domestic product by 2029, the Congressional Budget Office warned in January. That estimate doesn’t include the potential effect of a sweeping Republican tax cut.
On Friday lawmakers in Washington continued to work towards a massive tax-and-spending bill that’s expected to add trillions to the federal debt over the coming years. A key House committee on Friday failed to advance that massive tax-and-spending bill after hard-right Republicans demanded even deeper cuts to healthcare for the poor and disabled. Proposed cuts in Medicaid would be used in part to renew 2017 GOP tax cuts that largely benefitted the wealthy and corporations and fulfil populist campaign promises by Trump to eliminate taxes on tips and overtime. Trump is counting on passage of what he calls the “big beautiful bill” to ease some of the hit to households and businesses from the president’s new tariffs and restore confidence in his stewardship of the economy. It’s incredibly rare for bills to fail at this step in the process, with the committee vote typically serving as a rubber-stamp to the bill before it moves to the House floor.
US Consumer Sentiment Nears Record Low On Inflation Concerns
New data Friday showed US consumer sentiment has fallen to the second-lowest level on record, and inflation expectations climbed to multi-decade highs. The preliminary May sentiment index declined to 50.8 from 52.2 a month earlier, according to the University of Michigan. That was lower than all but one estimate in a Bloomberg survey of economists. The main reason cited was President Donald Trump’s trade war. Nearly three-quarters of respondents to the Michigan survey spontaneously mentioned tariffs. The topic crosses partisan lines, including a notable share of Republicans bringing it up.
Consumers expect prices to rise at an annual rate of 7.3% over the next year, the highest since 1981, and 4.6% over the next five to 10 years, the highest since 1991. Despite concerns about tariffs driving up prices, recent government data showed limited inflationary pressures, with consumer prices minus food and energy rising less than forecast for the third straight month.
The survey was conducted between April 22 and May 13, a period that ended just after the US and China agreed to temporarily reduce tariffs on each other while they negotiate a trade deal. Still, “temporary pauses are unlikely to convince consumers that trade policy has stabilized enough for consumers or businesses to plan effectively for the future,” Joanne Hsu, director of the survey, said in a statement.
US Housing Starts & Building Permits Weaker Than Expected
Other new data showed a weaker-than-expected rebound in housing starts. They rose 1.6% last month. However, the figure came in slightly below market expectations, as elevated mortgage rates and high inventory levels continue to weigh on the housing market. Meanwhile, building permits fell by a steeper-than-feared 4.7% to the lowest in eleven months.
US Retail Sales Stall
Growth in US retail sales decelerated notably in April, reflecting consumers pulling back spending on cars, sporting goods and other categories of imported goods amid concerns about rising prices from tariffs. After loading up on purchases to front-run Trump’s tariffs, figures suggest consumers are tempering their spending and will fuel concerns of weaker economic growth. The value of retail purchases, not adjusted for inflation, increased 0.1%, Commerce Department data showed last week. That followed a revised 1.7% gain in March, which was the largest in two years. Seven of the 13 categories in the retail report posted decreases, including apparel and gasoline, while spending at restaurants and bars rose firmly for a second month. The retail data suggests consumers are tempering their spending, which could fuel concerns of weaker economic growth, and economists predict that spending will look weaker in the coming months.
US Factory Output Declines For First Time In 6 Months
US factory production declined in April for the first time in six months, marking a soft start to the second quarter for manufacturers encumbered by higher import duties. The 0.4% decrease in manufacturing production followed an upwardly revised 0.4% gain a month earlier. Excluding autos, factory production fell 0.3% in April. The retreat in manufacturing, which accounts for three-fourths of total US industrial production, followed a healthy advance in the first quarter as many customers boosted orders before the brunt of Trump’s tariffs took effect. Capacity utilization at factories fell to 76.8%, and surveys of manufacturers showed weakness, with a gauge of factory activity remaining in contraction territory. “If you are in the stagflation camp, these data aren’t confirming your thesis,” said Jamie Cox at Harris Financial Group.
Dimon Says US Recession Remains A Possibility On Tariff Fallout
A US recession remains a possibility as tariff fallout continues to buffet global economies, according to JPMorgan Chase Chief Executive Officer Jamie Dimon. “Hopefully we’ll avoid it, but I wouldn’t take it off the table at this point,” Dimon said in a Bloomberg Television interview. Dimon hopes the recent thaw in US-China tensions will last, and that a quick resolution to trade uncertainties is needed. The Trump administration’s tariff policies have been jolting markets for more than a month, and Dimon said some clients are holding back on investments because of all the volatility. But he believes America remains a good investment destination.
Japan’s Economy Contracts For First Time In A Year
Japan’s economy contracted 0.2% quarter-on-quarter in the quarter ended March, a sharper fall than expected and after 0.6% growth in Q4 2024, preliminary government data showed Friday. The GDP figure was a larger drop than the 0.1% contraction expected by economists polled by Reuters and leaves the economy at risk of falling into a technical recession this quarter depending on the hit from the US levies. On an annualized basis, Japan’s GDP contracted 0.7% in the first quarter, also more than the 0.2% fall expected by the Reuters poll. It marks a sharp reversal from an upwardly revised 2.4% growth in Q4. Japan follows the US in registering negative growth in the first quarter. With its potential growth rate projected at around 0.6%, the lowest among Group of Seven nations, Japan’s economy has seen at least one quarterly contraction in every year since the pandemic.
A drop in exports and a jump in imports resulted in net trade weighing on the economy in the first three months of the year following a hefty boost in the previous quarter. Consumer spending, which accounts for roughly half of the economy, was largely flat. Consumption has stayed below its pre-pandemic level as inflation saps purchasing power. The cost of living has been rising well above the BOJ’s 2% target this year, led by a jump in food inflation. The price of rice, the nation’s staple food, continued to surge in March, increasing 92% from a year earlier.
The first contraction under Prime Minister Shigeru Ishiba’s watch adds to concerns about the resilience of the economy and is likely to fuel ongoing political debate over the need for tax cuts or cash handouts ahead of an upper house election this summer. Ishiba’s approval rating remains under pressure in local polls, hitting the lowest level of his premiership this month.
Japan’s GDP data comes at a time when the country is locked in trade negotiations with the US, with initial talks between both sides so far not yielding a conclusive deal. The Bank of Japan had recently warned on May 13 that the country’s economy is likely to moderate going forward, saying that this would be due to the effects of trade policies worldwide. “Negative demand shocks are expected, including the impact of increased uncertainties on business fixed investment and household consumption, a decrease in the volume of exports to the United States and a deterioration in Japan’s export profitability,” the BOJ wrote. The BOJ held rates at 0.5% on May 1 for a second straight meeting.
South Korea's Export Price Growth Slows
South Korea's export prices rose 0.7% from a year earlier in April, marking the 16th consecutive month of growth but slowing sharply from March's 6.3% increase. Growth in manufactured goods prices eased significantly (0.6% vs 6.4%), while agricultural, forestry, and marine product prices surged 9.2%, accelerating from 7.7% the month prior. On a monthly basis, export prices fell 1.2%, which was largely attributed to the appreciation of the Korean won, after a 0.4% gain in March. The slowdown comes as South Korea faces mounting external pressure, including newly announced US tariffs of up to 49% by President Trump, with a 10% blanket duty already in place. Although full implementation is delayed by 90 days, concerns are rising over the impact on the export-reliant economy. Meanwhile, political uncertainty is intensifying ahead of a June 3 snap presidential election following the ouster of President Yoon Suk Yeol after his brief declaration of martial law.
South Korea's import prices fell 2.3% year-over-year in April, reversing March's 3.4% gain and snapping a five-month streak of increases. The decline was mainly due to lower global oil prices and the appreciation of the Korean won.
Hong Kong GDP Growth In Line With Estimates
Hong Kong’s economy expanded by 3.1% year-on-year in Q1, in line with preliminary estimates and accelerating from an upwardly revised 2.5% growth in Q4 2024. The pickup was largely driven by strong external demand, particularly in the exports of goods and services, as businesses front-loaded shipments in anticipation of imminent US tariff hikes. External trade showed notable strength, with goods exports surging by 8.4% (up from 1.3% in Q4) and imports rising by 7.1% (vs 0.4% previously). Gross domestic fixed capital formation also returned to positive territory, growing by 2.8% after contracting by 0.7% in the prior quarter. However, private consumption continued to decline, falling by 1.1% (vs -0.2%), reflecting subdued domestic sentiment. Government spending also softened, rising by 1.2% compared to 2.1% in Q4. On a seasonally adjusted quarterly basis, GDP grew by 1.9%, the fastest pace in two years and an acceleration from the previous quarter’s upwardly revised 0.9% gain.
Following the data, the Hong Kong government kept its GDP forecast for the year unchanged in a range of 2 to 3%. The full-year forecast was made by Financial Secretary Paul Chan in his budget in late February, before the worsening of the US-China tariff war. Acting Government Economist Cecilia Lam said on Friday the SAR government is sticking to its GDP forecast for the year because it remains confident with local economic developments, having considered economic and trade data in March and April. She said that the local and global economies should be supported by the recent easing of global trade frictions, particularly between China and the United States. An improving mainland economy should also support Hong Kong's exports, she told a press conference. "The 90-day suspension of US tariffs gives us a window, especially for exporters, for exports to reach the overseas markets. Of course, this will relieve the downward economic pressure on the global economic outlook."
Malaysian Growth Slows
Malaysia’s economy grew 4.4% year-on-year in Q1, confirming initial estimates and easing from a downwardly revised 4.9% growth in the previous quarter. This marks the slowest pace of expansion in a year, reflecting softer output growth in manufacturing (4.1% vs 4.2% in Q4), construction (14.2% vs 20.7%), and services (5.5% vs 5%). Meanwhile, agricultural activity rebounded by 0.6%, following a 0.7% decline in the prior quarter. On the expenditure side, growth moderated in private consumption (5% vs 5.3%) and fixed investments (9.7% vs 11.8%), while government spending picked up (4.3% vs 4%). Net trade contributed positively to GDP, with exports rising 4.1% (vs 8.7%) and imports growing at a slower 3.1% (vs 5.9%). On a seasonally adjusted quarterly basis, the economy expanded by 0.7%, recovering from a revised 0.2% contraction in the previous period.
Singapore NODX Rises The Most In 9 Months
Singapore’s non-oil domestic exports (NODX) surged 12.4% year-on-year in April, far exceeding analysts’ expectations of a 4.0% increase and accelerating sharply from a 5.4% rise in the previous month. It marked the third consecutive month of export growth and the fastest pace since last July, boosted by rises in exports of both electronics and non-electronics. On a monthly basis, NODX soared 10.4%, rebounding sharply from a downwardly revised 7.5% fall in March, which was the steepest decline in a year.
Russian GDP Slows Sharply In Q1
Russia’s GDP grew by 1.4% in Q1, a significant slowdown from 5.4% growth in the same quarter last year, according to preliminary data. This represents the slowest pace of growth since the economy resumed expansion in Q2 2023. Earlier, the economy ministry had projected a slightly higher growth rate of 1.7% for the quarter. Looking ahead, the economy ministry projects annual growth of 2.5% for 2025, while the central bank offers a more cautious outlook, predicting growth between 1% and 2%.
Eurozone Trade Surplus Widens To Record Level
The Eurozone's trade surplus surged to a record €36.8 billion in March, up from €22.8 billion a year earlier, fuelled by a sharp rise in exports, particularly to the US as buyers rushed orders ahead of incoming tariffs. Exports jumped 13.6% year-on-year to €279.8 billion, its highest level ever, while imports rose by a slower 8.8% to €243 billion. Across the broader European Union, the trade surplus widened to €35.3 billion from €22.3 billion. EU exports climbed 15.2% to €254.8 billion, led by chemicals (+55%), machinery and vehicles (+6.5%), and food and drink (+5.6%). Notably, exports to the US surged 59.5%, while shipments also increased to Switzerland (+26.3%) and the UK (+4.8%). On the import side, the EU brought in €219.5 billion worth of goods, up 10.4%, with strong demand for food and drink (+25%), chemicals (+23.8%), and raw materials (+15.5%). Imports rose from China (+15.8%), the US (+9.4%), and the UK (+5.4%).
Week Ahead - May 19th to 25th
It will be a relatively quiet week in the US, with attention focused on developments surrounding tariffs, speeches by several Federal Reserve officials, and the release of S&P Global manufacturing and services PMIs. Data on existing and new home sales toward the end of the week will give the latest read on what has been a difficult spring selling season so far. Walmart warned last week that tariffs are going to force it to raise some of its everyday low prices. Other retailers including Home Depot, Target and Lowe’s will be under the spotlight this coming week for more clues on their pricing plans
In China, key economic indicators include industrial production, retail sales, the House Price Index, fixed asset investment, FDI, and a pivotal interest rate decision. Japan is set to publish inflation data and trade balance. Australia’s central bank will announce its interest rate decision. PMI data will be closely watched for Australia, Japan and India.
Globally, S&P Global PMI data will be released for the Eurozone and the UK. Germany will release the Ifo Business Climate Index, while the UK will report retail sales, and inflation data. Canada will issue updates on retail sales, inflation, and housing prices.
Nvidia Plans Shanghai Research Centre In New Commitment To China
Nvidia is seeking to build a research and development centre in Shanghai that would help the world’s leading maker of artificial intelligence processors stay competitive in China, where its sales have slumped due to tightening US export controls. Chief executive Jensen Huang discussed the plan with Shanghai’s mayor Gong Zheng when they met in the Chinese city last month, according to a Financial Times report. The R&D centre would research the specific demands of Chinese customers, and the complex technical requirements needed to satisfy Washington’s curbs. The actual core design and production will remain overseas, however, due to legal sensitivity around transferring intellectual property to China.
The Shanghai team would also work on global R&D projects including verification of chip designs, optimisation of existing products and sector focus research such as autonomous driving, the FT said. The Shanghai government had shown preliminary support for such plans, while Nvidia was lobbying the US administration for approval. The Silicon Valley company has about 2,000 employees in the Chinese city, mostly in sales and related support functions.
Alibaba Revenue Growth Disappoints
Alibaba’s quarterly revenue grew a disappointing 7%, casting a shadow on hopes of a Chinese tech sector revival that had been boosted by strong results from rivals Tencent and JD.com. The company reported sales of Rmb 236.5 billion (US$32.8bn) for the March quarter, versus an average estimate of 237.9 billion yuan. Net income almost quadrupled, though that was partly because of gains from equity investments. The company's AliCloud business, which is spearheading its drive into generative AI, missed earnings projections, clouding its outlook. Alibaba has pledged over 380 billion yuan toward AI infrastructure over the next three years, with a primary objective of attaining artificial general intelligence.
The overall miss stood out after rivals Tencent and JD.com both reported their fastest top-line expansions in years, stoking hopes of a Chinese tech sector revival after years of stagnation. Alibaba is seen as a barometer of the Chinese consumer economy because of its size. It posted better-than-expected growth in domestic retail after Beijing issued a plethora of incentives to counter US tariffs.
Fitch Puts 5 Taiwanese Life Insurers On Rating Watch Negative
Fitch Ratings has placed five Taiwanese life insurers' Insurer Financial Strength (IFS) Ratings on Rating Watch Negative (RWN). The affected insurers are Cathay Life Insurance, Fubon Life and KGI Life, with IFS Ratings of 'A'; Nan Shan Life with IFS Rating of 'A-', and Taiwan Life with IFS Rating of 'BBB+'. At the same time, Fitch has placed Shin Kong Life IFS Rating of 'BBB' on Rating Watch Evolving (RWE), and affirmed Chubb Life Insurance IFS Rating at 'AA-(twn)' with a Stable Outlook.
The RWN reflects increased risks to the insurers' capital and earnings, as well as their business risk profiles, following the sharp appreciation of the Taiwan dollar against the US dollar. The Taiwan dollar surged 8% over two days in early May, while FX hedging costs have soared and the potential for further Taiwan dollar appreciation remains. Taiwanese life insurers, with their large holdings of US dollar fixed-income assets and short positions in Taiwan dollar, have been adversely affected, and are exposed to a further rise in the local currency.
China Drops To No. 3 Holder of US Treasuries, Falling Behind UK
China shrank its holdings of US Treasuries in March, with the UK replacing it as the No. 2 overseas owner. The UK saw its stockpile rise to US$779.3 billion, putting it above China’s US$765.4 billion. The Chinese holdings reflected, in part, net sales of US$27.6 billion of long-term Treasuries. China was the top holder of Treasuries as recently as 2019, when Japan overtook it. Total overseas holdings of the debt rose US$233.1 billion, to US$9.05 trillion, Treasury Department figures showed Friday, with Japan, the UK, Canada, and Belgium among the countries increasing their holdings. While the release showed there was no revolt against American government securities in the first few months of the Trump administration, the data predates the destabilization of the US Treasuries market last month following Trump’s rollout of “reciprocal” tariffs.
Asian Stocks Trade Mixed Following Weak Japan GDP Print
Asia-Pacific markets were mixed Friday as investors assessed Japan’s latest GDP figures. Japan’s Nikkei 225 ended the session unchanged at 37,754 after data showed Japan’s economy contracted 0.2% quarter-on-quarter for the three months ended March. For the week, the index was up 0.7%.
Japan saw record foreign inflows into its equities and long-term bonds in April as investors fled US markets following Donald Trump’s imposition of reciprocal tariffs. Overseas investors bought ¥8.21 trillion (US$56.6bn) worth of equities and long-term bonds in April, according to government data. The net inflows were the largest for a calendar month since Japan’s finance ministry started collecting data in 1996, according to Morningstar.
Elsewhere in the region, South Korea’s Kospi closed 0.2% higher, for a weekly gain of 1.9%. Australia’s benchmark S&P/ASX 200 added 0.6%. Over the week, it rose 1.4%. India’s BSE Sensex declined 0.2% to 82,331. The index surged to its highest level since October last week, fuelled by optimism that India could be among the first to strike a deal with the US following upbeat comments by Trump and global funds pouring money into India.
Goldman Sachs Friday lifted its 12-month price target for Asian stocks, pointing to improved growth prospects and thawing US-China trade tensions. The bank revised its forecast for the MSCI Asia-Pacific ex-Japan index higher by 6.5%, setting a new target of 660. “A more constructive tariff backdrop suggests flat returns over the coming three months rather than a drawdown, but the upside may be constrained by continuing uncertainty over where tariffs will settle,” Goldman Sachs’ strategists wrote in a note. The firm also upgraded its global equity outlook to neutral, reversing its earlier underweight position.
Japanese Bond Yields Moving Higher
Yields in Japan's US$7.8 trillion government debt market are shifting higher at a rapid pace, particularly in longer-maturity bonds. The surge has pushed 30-year yields to within a whisker of a record high and to double the level of the benchmark 10-year rate, which has also ascended rapidly after being near zero just four years ago. The Bank of Japan's scaling back of bond purchases and the lack of buying from local investors, such as life insurers, are contributing to the surge, which has broad implications for monetary and fiscal policy. The steepening yield curve is seen as a reflection of shifting tides in Japan's monetary and fiscal waters, with the government facing higher servicing costs on its huge debt load and the risk of the trade war preventing the economy from outgrowing the problem.
Chinese Shares Slide
Chinese shares slid on Friday but notched a positive week. Mainland China’s CSI 300 dipped 0.5% to close at 3,889. Last week it climbed 1.1%. Hong Kong’s Hang Seng index slipped 108 points, or 0.4%, to 23,345. The index rose 2.1% for the week, its fifth straight weekly gain and the longest run since February. The Hang Seng Tech Index closed 0.3% lower Friday but rose 2.0% on the week.
Alibaba shares listed in Hong Kong fell 4.3% on Friday after the Chinese e-commerce giant missed earnings expectations for its fiscal fourth quarter on both the top and bottom line. While falling short of analyst expectations, revenue was nevertheless up 7% year-on-year. Alibaba’s net income was also still 279% higher year-on-year, off a low base. Alibaba said it saw some losses as a result of the disposal of some of its subsidiaries, which was offset by an increase in income from operations and changes to valuations of its equity investments.
On the upside, game operator NetEase surged 13% after Daiwa said the company’s first-quarter profit of 10.3 billion yuan beat its estimate by 29%.
China’s Gen Z consumer stocks have soared in value this year as China’s younger generation goes on a shopping spree. The buying is what analysts call emotional consumption, and it’s defying a wider malaise in China’s economy. Revenues at Gen Z favourites such as toymaker Pop Mart, jewellery firm Laopu Gold and drinks chain Mixue have soared, fuelling huge moves in their stock prices. Shares of Pop Mart are up 117% in Hong Kong so far this year. Laopu Gold has rocketed 178% higher in 2025, while Mixue has jumped 81%. “The new consumer is self-indulgent, devoted to hobbies, less price sensitive, and spends on things they can connect to emotionally or those that provide sensory pleasure,” said Li Shouqiang, a fund manager at Shenzhen JM Investment Management. “Essentially, anything that their elders consider frivolous.”
Hang Seng Index compiler added Midea Group, China’s biggest maker of home appliances, and logistics operator ZTO Express to Hong Kong’s stock benchmark, enlarging the number of constituents to 85 following a regular quarterly review. Midea and ZTO would join as benchmark index members after the close of trading on June 6, with an estimated weighting of 0.33% and 0.44%, respectively, Hang Seng Indexes said in a statement on Friday. No stock was removed in the review. The compiler also decided to add China’s biggest electric-vehicle maker BYD to the Hang Seng Tech Index and remove China Literature from the membership. There were no changes to the Hang Seng China Enterprises Index, a gauge tracking 50 of mainland’s biggest companies traded in Hong Kong.
CATL Raises US$4.6bn In HK Share Offering
Contemporary Amperex Technology, better known as CATL, raised US$4.6bn in its Hong Kong share listing. Investors clamoured for multiple times the shares available on the first day of the offering even though the Chinese EV battery maker restricted certain types of US investors. The shares will start trading on May 20.
European Stocks Close Higher
European equity markets closed higher on Friday. The pan-European Stoxx 600 index closed up by 0.4%, with household goods the best-performing sector gaining 1.2%. Mining stocks were the worst performers, slipping 1%. The Stoxx closed the week 2.1% higher, marking a fifth consecutive weekly advance. Since the market low in April, the broad benchmark has returned almost 17%. industrials have led the way, gaining 22%. Frankfurt's DAX trimmed early gains to close 0.3% higher on Friday, setting a fresh record high for the second day. London’s FTSE 100 rose 0.6% to a six-week high.
Shares of Cartier owner Richemont jumped 6.9% on Friday, leading the gains in the Stoxx, after the luxury giant posted better-than-expected fiscal fourth-quarter sales amid booming demand for its jewellery brands. The fourth-quarter sales bump was led by double-digit growth at the group’s Jewellery Maisons division, which includes Cartier, Van Cleef & Arpels and Buccellati.
Ozempic and Wegovy maker Novo Nordisk is replacing its chief executive, Lars Fruergaard Jorgensen, as the company battles against increased competition for its obesity and diabetes drugs. The Danish company has suffered a 53% decline in its share price over the last year, cutting more than US$300 billion off its market value after facing setbacks in trials of new weight-loss drugs and growing rivalry from Eli Lilly. Novo has had just three CEOs since 1990, and Jorgensen has spent his entire career with the company before being appointed for the top job in 2017. The company’s value has more than tripled since then. Share of Novo fell 1.8% Friday.
The European Central Bank’s interest rates are “relatively close to the terminal rate” if inflation stays within range, Governing Council member Martins Kazaks told CNBC. “Currently, if one takes a look at the dynamics of inflation, we are by and large within the baseline scenario and if the baseline scenario holds, then I think we are relatively close to the terminal rate already,” said Kazaks, who is also the Latvian central bank governor. The ECB’s key interest rate (the deposit facility rate) currently stands at 2.25% after the central bank’s governing council voted unanimously to reduce it by 25 bps in April. Kazaks also said that the market’s expectation of a 25 bps cut at the next ECB policy meeting on June 5 is “relatively appropriate, in my view.”
US Stocks Record Sharp Weekly Gain
On Wall Street, the S&P 500 rose Friday for a fifth session and posted a sharp weekly gain. The broad market index climbed 0.7% to end at 5,958. The Nasdaq Composite gained 0.5% to close at 19,211. The Dow rose 332 points, or 0.8%, settling at 42,655. Friday’s advance put the 30-stock benchmark into positive territory for 2025.
Stocks notched one of their biggest weekly increases this year, as easing trade tensions between the US and China buoyed appetite for risk assets and traders bet the Federal Reserve will step in to avoid a recession. Atlanta Fed President Raphael Bostic said he expects the US economy to slow this year but not fall into recession and reiterated that he sees one interest-rate cut in 2025. For the week, the S&P 500 surged 5.3%, and the Dow gained 3.4%. The Nasdaq Composite jumped 7.2% last week. US equity funds attracted about US$19.8 billion in the week through May 14, the first inflows in five weeks, according to Bank of America Corp.
The S&P 500 index on Tuesday turned positive for the year for the first time since February. The benchmark index has now rebounded almost 20% from its lowest closing level this year, recorded in early April when investors panicked over President Trump’s tariff blitz.
Technology stocks also had a strong week. Nvidia shares are up more than 15% for the week, lifted by optimism about a deal that would send millions of its chips to the United Arab Emirates over several years, and a smaller pact with Saudi Arabia. The agreements are fuelling optimism among industry executives that there will be few limits on chip sales to countries friendly with the Trump administration, despite worries about the hardware ending up in China. Meta Platforms advanced 8% last week. Shares of Apple climbed 6%, while Microsoft jumped 3%.
An index of manufacturing and transportation stocks is now the best performer this year among the benchmark’s 11 broad sectors following the US and China’s trade truce at the start of the week. It was lingering in third place as recently as a week ago. Those stocks are up 7.8% for the year, while the S&P 500 is up just 1%. The shift to industrials, with GE and Deere among companies leading the charge, is a bet that waning trade friction will help the US economy rebound after a feeble first quarter. “The whole ‘America First, Buy US’ is a really pro-industrial narrative,” said Jeff Buchbinder, chief equity strategist at LPL Financial. “A healthy bull market is led by the cyclical sectors that benefit most from economic growth.”
Some analysts say that it will be harder for markets to achieve gains from here without significant progress on negotiations with other trading partners such as Japan and South Korea. “We need some material trade deals that have real meat to them,” said Amanda Agati, chief investment officer of PNC Asset Management Group. “It is potentially an inflection point for the market.”
Treasury Yields Jump After Moody’s Downgrade
After markets closed Friday, Moody’s Ratings downgraded the US government's triple-A credit rating, citing large fiscal deficits and rising interest costs. The yield on the 10-year Treasury note rose to 4.49% from 4.45% in late trading. Before the Moody's downgrade, Treasury yields had declined for a second day to 4.44%. Treasuries saw a third straight weekly drop, the longest slide this year. The 10-year yield was up 6 bps over the week.
“The downgrade may indicate that investors will demand higher yields on Treasuries,” said Tracy Chen, a portfolio manager at Brandywine Global Investment Management. While US assets rallied in response to previous US downgrades from Fitch and S&P, “it remains to be seen whether the market reacts differently as the haven nature of Treasury and the US dollar might be somewhat uncertain.”
Fixed income investors are seeing a more concerning outlook than what the stock market is implying as Treasury yields remain stubbornly high, according to RSM chief economist Joseph Brusuelas. “Given the risks to the economy, a recession is still a coin flip this year, and recovery in the equity markets, bond yields should be falling,” Brusuelas wrote in a Thursday note. “They are not, and that is because fixed-income investors are sniffing out the logic of economic populism amid a move toward trade protectionism, which strongly implies higher inflation and rising long-term yields.” “Should Congress approve a large tax cut that is not paid for, don’t be surprised if the bond market pushes yields back toward mid-April highs, which captured the pushback against the trade conflict,” he added.
US Dollar Rises
The US dollar index pared early losses to trade 0.1% higher 100.98 on Friday, ending the week with a gain of 0.6%. The dollar rose despite data showing sentiment among options traders is the most negative in five years, with bets on a decline in the dollar over the next year at the highest level since 2020. These long-term options are typically used by money managers rather than short-term speculators, reinforcing the argument that a broader reassessment of dollar exposure is taking place. The dollar index is still close to its April lows, and investors are wary of returning despite the easing of China trade tensions that lifted other markets. The greenback has tumbled more than 6% in 2025 against a basket of currencies, its worst year so far in Bloomberg data going back two decades.
The yen was unchanged against the dollar at ¥145.62 after fresh data showed Japan’s economy contracted 0.2% quarter-on-quarter for the three months ended March, below economists’ estimates of a 0.1% contraction. Commonwealth Bank of Australia wrote in a note Friday, “a weak outcome for Japan’s GDP can weigh on the Bank of Japan’s rate hike pricing and push USD/JPY up towards resistance at 148.13.”
The offshore yuan edged 0.1% higher to around Rmb 7.21 per dollar on Friday, supported by a weakening US dollar amid soft economic figures. The euro traded around $1.1160, rebounding from one-month lows reached on May 12th. Sterling was down 0.2% at $1.3272.
Gold Sees Large Weekly Drop
Gold slipped 1.4% to $3,204 per ounce on Friday, for a weekly loss of 3.6%, as easing global trade tensions weakened its appeal as a safe haven. Benign inflation data from the US reinforced expectations that the Federal Reserve will cut interest rates at least twice this year.
Oil Rises For Second Week
Brent crude oil futures rose 1.4% to settle at $65.41 per barrel on Friday, logging a weekly gain of 2.3%, their second in a row, as easing US-China trade tensions boosted sentiment. Meanwhile, uncertainty lingered over a possible US-Iran nuclear deal. A deal could boost oil supplies by 200,000 to 300,000 barrels a day, increasing the likelihood of a significant oversupply later this year. NBC reported that Iran is willing to forgo nuclear weapons in exchange for immediate sanctions relief. Donald Trump told business leaders during the final leg of his Gulf trip, “I think we’re getting close to maybe doing a deal.” As Iran considers a US proposal presented during the fourth round of negotiations last week, Washington is ramping up the heat, announcing new oil sanctions and repeating threats of military strikes if Tehran walks away. If all sanctions on Iran are lifted, a flood of crude could hit global markets, adding to the existing oversupply and gloom in the market.
US Treasury Warns Hong Kong Banks Over Funding Iran Oil Trades
A US Treasury delegation met with Hong Kong banks in April to warn them against facilitating Iran oil shipments to China, according to a Bloomberg News report Friday. The banks were asked to take action to reduce the flow of funds supporting Iranian oil shipments and other illicit transactions, and to identify ultimate beneficial owners and flag suspicious transactions. The meeting was followed by the US Treasury sanctioning nine non-bank entities in Hong Kong allegedly involved in facilitating Iran oil shipments to China. While this isn’t the first time the US Treasury has dispatched delegates to talk with Hong Kong banks, the focus on Iran marks a new development in addition to past discussions on Russia.
China is the largest buyer of Iran’s oil exports. Nearly 6.1 million tons of Iranian crude was delivered to China’s independent refineries in April, according to commodities-tracking platform Kpler. Last year, China imported 75 million tons. According to official customs data, China does not import Iranian oil. Hong Kong-registered companies have been known to help Iran sell its oil to China. In November, US lawmakers said Hong Kong was a centre for financial crime. The SAR government objected and called it “malicious slander.”
Bitcoin Slightly Weaker
Bitcoin slid 0.4% Friday to $103,230. The cryptocurrency was down 0.6% for the week.
Peter Lewis’ Money Talk Podcast
On Monday’s “Peter Lewis’ Money Talk” podcast, I’ll be joined by Alex Wong, director at Alex KY Wong Asset Management, and David Friedland, Managing Director of Asia Pacific at Interactive Brokers. Providing a view from Mainland China is Brock Silvers, CIO at Kaiyuan Capital.
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