Morning Wrap (07.03.2025)

Asian markets extend losses with Japan's Nikkei 225 plunging 2.1% and Australia's S&P/ASX 200 falling 1.6%. Hong Kong's Hang Seng inched 0.2% lower after jumping 3.2% in the previous session.

Trump establishes strategic bitcoin reserve via executive order, using bitcoin forfeited through government proceedings. The U.S. "will not sell any bitcoin deposited into the Reserve" according to crypto czar David Sacks, who compared it to "a digital Fort Knox."

Japanese yen strengthens to five-month high against the dollar, reaching 147.31 yen. The currency benefited from safe haven demand amid trade uncertainty and hawkish signals from the Bank of Japan, which indicated further rate hikes are coming.

Japanese government bond yields soared to near 16-year highs, reflecting increased rate hike expectations. Reports suggest growing chances of a May rate increase as inflation remains at 4%, twice the BOJ's target.

Chinese imports unexpectedly shrank 8.4% year-on-year in January-February, missing forecasts for 1% growth. Exports rose just 2.3%, below expectations and slower than December's 10.7% gain. The drop in imports spanned grains, iron ore, and crude oil.

Tesla added to Wedbush's "Best Ideas List" with an "Outperform" rating and $550 price target. Analysts cite an upcoming innovation cycle including a sub-$35,000 EV by mid-year and unsupervised FSD technology in June. Wedbush values the FSD technology at $1 trillion and expects Tesla to dominate the autonomous vehicle sector.

Trump suspends tariffs on Canada and Mexico until April 2, reversing course days after imposing 25% duties. Steel and aluminum tariffs will still take effect on March 12. The policy reversal has intensified market volatility and economic uncertainty.

Fed officials warn about trade policy uncertainty hampering business planning. Atlanta Fed President Raphael Bostic noted Trump's policies are clouding the U.S. economic outlook and could underpin inflation. Business and consumer confidence have plunged since January.

Chinese trade slowdown coincided with Lunar New Year and the first wave of U.S. tariffs. Analysts expect further impact as the recent increase to 20% tariffs takes effect. Beijing has begun scaling back commodity purchases in preparation for prolonged trade tensions.

Oil prices stabilize but head for worst weekly drop since October, with Brent and WTI set to lose between 4.5% and 5%. Prices pressured by trade uncertainty, OPEC+ production increases, and fears of slowing fuel demand.

U.S. targets Iran's oil sector with Treasury Secretary Scott Bessent announcing plans to "shut down Iran's oil sector." Reports indicate the U.S. is considering inspecting Iranian oil tankers at sea as part of Trump's "maximum pressure" strategy.

White House crypto summit scheduled for today, where Trump is expected to formally unveil plans for a reserve including five cryptocurrencies: bitcoin, ether, XRP, solana, and cardano.

U.S. jobs data and Fed Chair Powell's speech in focus today. Nonfarm payrolls expected to show 160,000 jobs added in February with unemployment holding at 4.0%. Fed funds futures currently price in three more rate cuts by year-end.

ANZ Research warns on India's growth prospects, suggesting GDP could slip toward 6% without decisive monetary action. The bank projects at least two more rate cuts by the Reserve Bank of India by June 2025 as February CPI is expected to decline to 3.8%.