Morning Wrap (19.02.2025)

Asian markets traded mixed as Trump's latest tariff threats weighed on sentiment, with Japan's Nikkei 225 and Hong Kong's Hang Seng falling 0.4% and 0.7% respectively. However, South Korea's KOSPI surged 1.8% to a five-month high, buoyed by tech strength and improving political conditions following the conclusion of President Yoon's impeachment trial.

President Trump announced plans to impose 25% tariffs on automobiles, pharmaceuticals, and semiconductor imports. Auto tariffs could come as early as April, while implementation timing for other sectors remains unclear as manufacturers are given time to establish U.S. operations. The move sparked concerns in major trading partners, with Japan formally raising the issue given its significant auto industry exposure.

Bank of Japan board member Hajime Takata signaled further rate hikes ahead, warning that maintaining low rates could lead to excessive risk-taking and inflation pressures. Markets are pricing in an 80% probability of a rate increase to 0.75% in July, with the 10-year JGB yield hovering near 1.425%.

The Reserve Bank of New Zealand cut its benchmark rate by 50 basis points to 3.75% and projected two more 25bp cuts in April and May. Governor Orr indicated a lower terminal rate than previously forecast, targeting around 3% by year-end as the bank moves to support the struggling economy.

Oil prices edged higher after Ukrainian drone strikes targeted a Russian crude-pumping station, disrupting supply from Kazakhstan. Brent crude rose 0.3% to $76.04 while WTI gained 0.3% to $72.03. The Caspian Pipeline Consortium reported a 30-40% reduction in shipments following the attack.

Hong Kong's financial regulator announced plans to expand cryptocurrency services, considering approval for new virtual asset derivatives and margin lending products for certain investors. The city has issued nine digital asset trading platform licenses with eight more applications under review as it aims to establish itself as a regional crypto hub.

The U.S. dollar steadied as markets assessed trade tensions and Russia-Ukraine peace talks, while the New Zealand dollar recovered from earlier losses to trade at $0.572 following the RBNZ's rate decision. The Japanese yen strengthened slightly to 151.83 per dollar amid growing expectations of BOJ policy tightening.

China's property market showed continued weakness as new home prices stagnated for a second straight month in January, while year-on-year prices fell 5.0%. The crisis-hit sector faces persistent challenges from high inventory levels, weak demand, and long-term demographic headwinds, prompting calls for additional support measures.

Elon Musk's X platform is reportedly in talks to raise funds at a $44 billion valuation, matching the original Twitter acquisition price. The potential funding round signals a significant turnaround from Fidelity's December valuation of $12.3 billion, supported by surging user activity around the U.S. presidential election and returning advertisers.

The broader Chinese stock market maintained its upward momentum as President Xi's recent meeting with tech CEOs and promises of increased private sector support boosted sentiment. The Shanghai Shenzhen CSI 300 and Shanghai Composite both gained about 0.7%, continuing the AI-driven rally.