Emerging economies facing “sudden stop” of capital flows, JPMorgan warns

LONDON – Emerging markets could be seeing a dreaded “sudden stop” of capital flows as President Donald Trump’s ‘America First’ policies pump up the US economy and suck money away from poorer countries, investment bank JPMorgan warned on Thursday.

Analysts fear sudden stops in capital flows because they starve economies of the money they need to grow or even just keep going.

JPMorgan’s in-house indications show there were USD 19 billion worth of “net capital outflows” from developing economies not including China in the last quarter, with another USD 10 billion expected to flee in Q1.

“Put simply, using the widely accepted academic definition, this would signal that EM ex-China is on the verge of a sudden stop,” the bank said in a research note, adding that the phenomenon was not something “to be taken lightly”.

There are some caveats for now.

The current slowdown in capital flows is not being driven by an EM-centric event, but rather the tightening of financial conditions globally as Trump’s tariffs and tax cut pledges raise the possibility that US interest rates stay higher for longer.

With this in mind, “this is not a situation where specific EM countries are under pressure and are facing balance of payments or currency pressures as was the case in 1998-2002, 2013, 2015,” JPMorgan added.

Nor was it a case of weak US economy driving a “risk-off” worldwide sell-off. “Rather, it is one of a strong US economy and policy risks pulling flows out of EM,” analysts wrote.

How the situation plays out from here will depend on what Trump does and whether key US data on jobs, inflation, and retail sales prove strong enough to affect the Fed’s interest rate moves, JPMorgan said.

Even if a sudden stop does take hold in EM, most economies should be able to absorb that shock. JPMorgan said those most at risk were Romania, Malaysia, South Africa, and Hungary.

(Reporting by Marc Jones in London; Editing by Nia Williams)

China stocks edge up on Beijing’s plan for insurers to buy mainland shares

HONG KONG – Chinese stocks ended slightly higher on Thursday, supported by the financial sector, while Hong Kong shares closed down, as investors digested Beijing’s latest plans to encourage insurance companies to purchase shares listed on the mainland.

The blue-chip CSI300 index was up 0.2% and the Shanghai Composite Index climbed 0.5% at the close, giving up most of its early gains.

Insurance firms, banks, and the broader financial sector outperformed, rising 3.5%, 2.3% and 1.9%, respectively.

China announced further measures on Wednesday to bolster its stock market.

Under the plan jointly released by six financial regulators including the securities regulator, big state-owned insurance companies will be directed to raise the size and proportion of their investments in Chinese A-shares traded on the mainland and equity funds.

Wu Qing, head of the China Securities Regulatory Commission (CSRC), said on Thursday the plan will bring in hundreds of billions of yuan of new capital every year from state-owned insurers.

It also involves guiding mutual fund managers to increase equity funds under their management.

The measures, which follow US President Donald Trump’s threat to impose a 10% punitive duty on Chinese imports, temporarily lifted market sentiment.

But persistent concerns over US tariff threats and the outlook for domestic economic growth later offset some of the optimism.

Hong Kong’s Hang Seng Index and the Hang Seng China Enterprises Index retreated 0.4% and 0.2%, respectively.

“The implication (for the market) could be short-lived because the structural problem is still there. Most of the investors are still quite cautious at this point,” said Gary Ng, senior economist at Natixis.

Investors are unlikely to relinquish fully their preference for safe-haven assets, such as government bonds, Ng said.

Analysts also said the measures would probably only benefit certain groups of stocks.

“From an equity perspective, funds could end up increasing positions towards less volatile, larger domestic companies,” said Kai Wang, Asia equity market strategist at Morningstar, referring to high dividend stocks or large-cap companies such as Moutai.

Chinese stocks began 2025 with deep losses as investors fretted possible US tariffs would add to the pressure on a sluggish economy.

(Reporting by Summer Zhen; Editing by Jacqueline Wong, Sherry Jacob-Phillips and Barbara Lewis)

Trump policies likely to raise bond market’s inflation fears, top money managers say

NEW YORK – Giant US asset managers overseeing well over USD 20 trillion are anticipating continued price pressures because of President Donald Trump’s immigration and trade policies, a scenario that will likely keep threatening the bond market this year.

Vanguard, the world’s second-largest asset manager, which manages over USD 10 trillion, said in a first-quarter fixed income outlook report seen by Reuters that it expects “progress on inflation to stall,” with core measures of price pressures stuck above the Federal Reserve’s 2% target and above 2.5% for most of 2025.

Trade and immigration policies implemented by Trump’s Republican administration could complicate the picture further, it said in a report written by its active fixed income team, led by Sara Devereux, the global head of fixed income group.

“While our base-case outlook is positive, we emphasize that the uncertainty created by the incoming administration creates a broader range of potential outcomes for growth, inflation, and monetary policy, both domestically and abroad,” it said.

Investors are waiting for more announcements from the new administration about policies on tariffs, immigration and tax cuts. Trump, who began a second term in the White House on Monday, vowed this week to hit the European Union with tariffs and said his administration was discussing a 10% punitive duty on Chinese imports – lower than the 60% he promised during his 2024 presidential campaign.

He also said he was thinking of imposing 25% tariffs on imports from Canada and Mexico on Feb. 1.

The impact of Trump’s policies on inflation and growth will depend on their scope and sequencing, said Libby Cantrill, PIMCO’s head of public policy, and Allison Boxer, an economist at the bond-focused investment firm, which manages USD 2 trillion in assets.

But in a scenario where tariffs increase and budget deficits widen due to expected tax cuts, growth could decelerate this year while inflation rises. “In our baseline outlook, we expect modestly higher core inflation of around 20 to 40 basis points in the US in 2025,” they wrote in a note on Thursday. “The negative growth effects would likely be of a similar size.”

Vanguard also warned about the possibly negative-growth impact of tariffs, depending on their size and distribution. “Geopolitical retaliation could increase business uncertainty and further constrain growth,” it added.

RISING YIELDS

US government bond yields, which rise when prices decline, have surged over the past few months, partly in anticipation of pro-growth policies under a Trump administration which could also reignite price pressures, complicating the Fed’s efforts to bring inflation down to its target.

Benchmark 10-year yields declined marginally after Trump’s inauguration on Monday, as his tariff talk was less aggressive than feared. Yields were last at 4.65%, down from more than a one-year high of 4.8% last week but still about 100 basis points higher from September, when the Fed started easing rates.

BlackRock, the world’s largest asset manager with USD 11.6 trillion in assets, expects yields will keep rising due to a combination of higher inflation and rising government debt levels. It is bearish on long-term government bonds, expecting 10-year yields will keep rising above 5%.

“We have never before seen today’s combination of sticky inflation, higher policy rates and high and rising debt levels,” the BlackRock Investment Institute, the asset manager’s research arm, said in a note this week.

“This combination represents a fragile equilibrium supporting investor demand for long-term bonds,” it said.

(Reporting by Davide Barbuscia; Editing by Paul Simao)

Oil falls as Trump urges OPEC to lower prices

NEW YORK – Oil fell 1% on Thursday after US President Donald Trump urged Saudi Arabia and OPEC to bring down its cost during his address at the World Economic Forum.

Uncertainty over how Trump’s proposed tariffs and energy policies would affect global economic growth and energy demand also weighed on prices.

Brent crude futures settled 71 cents, or 0.9%, lower at USD 78.29 a barrel. US West Texas Intermediate crude (WTI) settled down 82 cents, or 1.09%, to USD 74.62.

Prices dipped after Trump announced he would ask Saudi Arabia and OPEC to bring down the cost of oil during his speech at the World Economic Forum in Davos, Switzerland.

“Trump’s call for lower oil prices will naturally be welcomed by consumers and businesses but received warily by the US oil industry and other global suppliers,” said Clay Seigle, senior fellow for energy security at the Center for Strategic and International Studies.

The energy industry has been calling for increased investments in global oil and gas projects, but bringing down oil prices could raise concerns about the economics of new projects, he added.

US crude oil stockpiles slipped to their lowest level since March 2022 last week even as refining activity slowed, the Energy Information Administration (EIA) said on Thursday. But the drawdown was smaller than analysts had expected. Distillate inventories also declined, while gasoline inventories rose, the EIA said.

The broader economic implications of US tariffs could further dampen global oil demand growth, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova.

Trump has said he would add new tariffs to his sanctions threat against Russia if the country does not make a deal to end its war in Ukraine.

He also vowed to hit the European Union with tariffs and impose 25% tariffs on Canada and Mexico. On China, Trump said his administration was discussing a 10% punitive duty because fentanyl is being sent from there to the US

On Monday he declared a national energy emergency intended to provide him with the authority to reduce environmental restrictions on energy infrastructure and projects and ease permitting for new transmission and pipeline infrastructure.

There will be “more potential downward choppy movement in the oil market in the near term due to the Trump administration’s lack of clarity on trade tariffs policy and impending higher oil supplies from the US”, OANDA senior market analyst Kelvin Wong said in an email.

(Reporting by Nicole Jao, Paul Carsten, Emily Chow, and Trixie Yap. Editing by Mark Potter and Nick Zieminski)

Trump uncertainties push safe-haven gold to near all-time high

Gold prices soared to near three-month highs on Wednesday, trading just below its record peak, fuelled by a soft dollar and lack of clarity around US President Donald Trump’s policy plans, which investors fear could trigger trade wars and elevate market volatility.

Spot gold added 0.4% to USD 2,755.2 per ounce as of 02:29 p.m. ET (1629 GMT). Prices were at their highest since Oct. 31 when they hit their all-time high of USD 2,790.15.

US gold futures settled 0.4% higher at USD 2,770.90.

The dollar index dipped to a more-than-three-week low earlier in the session, making greenback-priced bullion less expensive for holders of other currencies.

“There are uncertainties with proposed tariffs and other things, and gold typically does well when there’s a large or even a moderate amount of uncertainty in the market, it’s a natural place where people gravitate to,” said Ryan McIntyre, senior portfolio manager at Sprott Asset Management.

Trump said his administration was discussing imposing a 10% tariff on goods imported from China on Feb. 1, the same day that he previously said Mexico and Canada could face levies of around 25%.

Gold is often viewed as a haven during times of economic and geopolitical turmoil, but Trump’s proposed policies are broadly regarded as inflationary, potentially compelling the US Federal Reserve to sustain elevated interest rates for an extended period to rein in rising price pressures.

Trump has not provided many details about his proposed tariffs, making investors question the aggressiveness of the move and the depth of its potential impacts.

“(Trump) has been perhaps just a shade less hawkish on tariffs as feared, which helps — less/lower tariffs is taken to indicate lower inflation hence potential for more rate cuts,” said Tai Wong, an independent metals trader.

Spot silver was steady at USD 30.86, but hovered near a one-month high it hit on Jan. 16.

Platinum rose 0.8% to USD 950.50 and palladium gained 3% to USD 987.41.

(Reporting by Anjana Anil in Bengaluru; Editing by Vijay Kishore, Krishna Chandra Eluri, and Alan Barona)

Top NYSE exec sees robust US IPO activity in 2025

DAVOS, Switzerland – A strong US economy and lower interest rates could foster a surge in the number of initial public offerings in 2025, building on the recent momentum, a top executive at the New York Stock Exchange said on Wednesday.

The change of guard at the Securities and Exchange Commission may also streamline the process to go public, potentially easing the burden for private companies weighing IPOs, the exchange’s vice president of listings and services, Chris Taylor, told the Reuters Global Markets Forum.

“There are certainly a lot of companies that are thinking about accessing public markets. Interest rates for the time being have stabilized. There’s a lot of confidence trickling within the US right now,” Taylor said, on the sidelines of the World Economic Forum in Davos, Switzerland.

The comments illustrate growing optimism in corporate boardrooms, where executives are moving forward with their IPO plans after a prolonged period of uncertainty.

An expected wave of deregulation and corporate tax cuts under the Trump administration has also boosted sentiment.

Genesys, an AI-driven developer of call center software, and Sweden’s payments giant Klarna are among the heavyweights expected to go public in the US in the next few months.

PRIVATE FOR LONGER

While the IPO market is showing signs of recovery, some of the most high-profile startups such as OpenAI and SpaceX have preferred to stay private for longer, raising money from venture capital investors instead.

Critics say the reluctance to list stems from the costly and cumbersome paperwork associated with an IPO.

Taylor said the new SEC regime could be more favorable.

“We think (public markets) are the best place for price discovery, access to capital and universal access to investment. We’re very hopeful that things will become more positive,” he said.

(Reporting by Divya Chowdhury in Davos and Niket Nishant in Bengaluru; edited by Alan Barona)

US yields rise as investors brace for volatility, await more Trump policies

NEW YORK – US Treasury yields were modestly higher in quiet trading on Wednesday, with no clear direction, as investors grew more cautious and awaited more announcements from the new administration about policies on tariffs, immigration, and tax cuts.

US President Donald Trump on Tuesday vowed to hit the European Union with tariffs and said his administration was discussing a 10% punitive duty on Chinese imports because fentanyl is being sent from China to the US via Mexico and Canada. The proposed 10% tariffs on Chinese goods, however, were far lower than the 60% duty Trump promised during his campaign.

On Monday, Trump said he was thinking of imposing 25% tariffs on imports from Canada and Mexico from Feb. 1.

The tariff threats have left the bond market in limbo and traders increasingly puzzled by the delay in action. Market participants overall were hesitant to make big bets unless Trump made more definitive policies.

Andy Wells, chief investment officer of investment management firm SanJac Alpha LP in Houston, said he thought the trend higher in Treasury yields will continue.

“It makes complete sense considering inflation is persisting. We’re looking at 3% inflation instead of 2% and we don’t think the Fed (Federal Reserve) will cut rates this year.”

“There would be a lot of volatility in the first half,” he added. “There would be a lot of whippiness in the yield curve and that means a trend upward in rates.”

In afternoon trading, the benchmark Treasury 10-year yield was up 2.7 basis points (bps) at 4.601%. Since hitting a more than one-year high of 4.809% in mid-January, the 10-year yield has declined more than 20 bps.

US 30-year yields, meanwhile, were up 1.4 bps at 4.817%.

On the front end, the two-year yield, which is typically tied to the Fed policy outlook, edged higher by 1.2 bps at 4.293%.

Byron Anderson, head of fixed income at Laffer Tengler Investments in Scottsdale, Arizona, echoed the comments by SanJac’s Wells on inflation continuing to trend higher.

He cited Trump’s aggressive stance on immigration as a potential headwind for the Federal Reserve’s goal of bringing inflation down to the 2% average.

Trump on Monday kicked off his sweeping immigration crackdown, tasking the US military with aiding border security, issuing a broad ban on asylum, and taking steps to restrict citizenship for children born on US soil.

“Depending on the deportations, and what that number actually looks like, you could put pressure on the employment market and we could see a spike in wage growth,” Laffer’s Anderson said.

The US Treasury yield curve on Wednesday, meanwhile, was little changed, with the gap between two-year and 10-year Treasury yields at 30 bps US2US10=TWEB. On Tuesday, the curve hit its flattest level since late December of 27.8 bps.

BMO Capital Markets analysts, in a research note, said the flattening could be a “modest retracement of the bear steepening that has represented the ‘go-to’ Trump trade in the US rates market.”

“While we are unquestionably on board with the bounce in Treasuries, there remains the lingering question: how far can the price action reverse in light of the inflationary angst that brought the market to the yield peaks seen last week?”

Also on Wednesday, the US Treasury successfully auctioned USD 13 billion in 20-year bonds, priced at 4.9%, lower than what the market expected at the bid deadline, suggesting solid demand.

The sale’s bid-to-cover ratio, another gauge of investor interest, was 2.75, higher than the 2.64 average.

Post-auction, US 20-year yields were up 1.4 bps at 4.889%.

(Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Hugh Lawson and Matthew Lewis)

China unveils plan to encourage insurance funds into stock markets

BEIJING – China said on Wednesday it will guide big state insurers and commercial insurance funds to increase investments in the A-share market, in the latest move to boost its lagging stock market.

Under a plan jointly released by six financial regulators including the securities regulator, big state-owned insurance companies will be directed to raise both the size and proportion of their investments in Chinese stocks listed on the mainland and equity funds.

The regulators will implement a long-term performance evaluation for state-owned insurance companies, with the annual return on equity weighted no more than 30% of the evaluation, and at least 60% for a longer three-to-five-year cycle.

The plan comes as Chinese stocks kicked off 2025 with deep losses on worries that US President Donald Trump will impose hefty tariffs on Chinese goods, heaping more pressure on an already sluggish economy.

The plan will increase the investments of China’s National Social Security Fund and pension funds into the stock market.

It will also guide mutual fund managers to steadily increase both the size and proportion of equity funds under their management.

China has unveiled a slew of measures to boost investor confidence and revive its stock market. Among measures to support capital markets over the past few months, authorities have rolled out swap and relending schemes totalling 800 billion yuan for stock purchases.

(Reporting by Ziyi Tang, Yukun Zhang and Ryan Woo; Editing by Jacqueline Wong and Alison Williams)

Oil eases to one-week low amid Trump tariff uncertainty

Oil prices eased to a fresh one-week low on Wednesday as the market considers how US President Donald Trump’s proposed tariffs could affect global economic growth and demand for energy.

Brent futures fell 29 cents, or 0.4%, to settle at USD 79.00 a barrel, while US West Texas Intermediate crude (WTI) traded 39 cents, or 0.5%, lower to settle at USD 75.44.

That puts Brent down for a fifth day in a row for the first time since September and WTI down for a fourth day in a row for the first time since November. Both crude benchmarks closed at their lowest since Jan. 9 for a second day in a row.

“Possible sanctions under the new Trump administration remain unclear, with possible tariffs related to Canada and Mexico now seemingly at the forefront of trader uncertainties,” analysts at energy advisory firm Ritterbusch and Associates said in a note.

Trump said his administration was discussing imposing a 10% tariff on goods imported from China on Feb. 1, the same day that he previously said Mexico and Canada could face levies of around 25%.

He also vowed duties on European imports, without providing further detail and threatened new tariffs against Russia if the country does not make a deal to end its war in Ukraine.

“The oil market’s attention is slowly turning away from US sanctions against Russia towards President Trump’s potential trade policy,” said ING analysts, adding that the energy complex has come under pressure with the growing threat of tariffs.

In Europe, French President Emmanuel Macron and German Chancellor Olaf Scholz sought to project unity at a meeting in Paris, as Europe struggles to respond with one voice to threats of tariffs from the United States.

The US president also said his administration would “probably” stop buying oil from Venezuela, a member of the Organization of the Petroleum Exporting Countries under US sanctions.

The US imported about 200,000 barrels per day (bpd) of oil from Venezuela during the first 10 months of 2024, up from an average of 100,000 bpd in 2023, according to the latest data from the US Energy Information Administration (EIA).

Iran, another OPEC member under US sanctions, delivered a conciliatory message to Western leaders in Davos on Wednesday, with a top official denying it wants nuclear weapons and offering talks about opportunities.

In other OPEC news, Saudi Arabia’s crude oil exports in November jumped to their highest in eight months.

US CRUDE DRAWDOWN SEEN EXTENDING

Analysts projected US crude stockpiles fell about 1.6 million barrels last week, ahead of data due from the American Petroleum Institute (API) trade group later on Wednesday and the US Energy Information Administration on Thursday.

Both weekly reports were delayed by a day due to the US Martin Luther King Jr. Day holiday on Monday.

If correct, that would be the first time energy firms pulled oil out of storage for nine weeks in a row since January 2018 when they withdrew oil for a record 10 consecutive weeks. That compares with a decrease of 9.2 million barrels in the same week last year and an average 800,000-barrel drawdown over the past five years (2020-2024).

Separately, several Texas ports began to resume operations on Wednesday after Winter Storm Enzo disrupted energy and shipping operations earlier this week.

(Reporting by Scott DiSavino in New York, Jeslyn Lerh in Singapore, Arunima Kumar in Bengaluru, and Enes Tunagur in London; Editing by Marguerita Choy, Emelia Sithole-Matarise, and Deepa Babington)

‘Giddy’ Wall Street hits new highs, BOJ looms into view

Whatever doubts investors may have surrounding the longer-term economic damage of US President Donald Trump’s proposed tariff agenda, they are giving his deregulation, tech-friendly and AI-supportive policies a huge thumbs up. Stocks are flying.

With strong earnings from streaming giant Netflix providing an extra tailwind, Wall Street’s sizzling performance on Wednesday should fuel a strong rise in risk appetite across Asia on Thursday. It’s unlikely that a moderate rise in bond yields and the dollar will get in the way of that.

The S&P 500 leaped to a fresh peak of 6,100 points on Wednesday and lifted the Nasdaq above the 20,000-point barrier to within a whisker of December’s record high of 20,204 points.

The tech and artificial intelligence fervor is intensifying again after Trump announced a private sector investment of up to USD 500 billion to fund infrastructure for AI. Trump said that ChatGPT’s creator OpenAI, SoftBank and Oracle are planning a joint venture called Stargate, which will build data centers and create more than 100,000 jobs in the United States.

Billionaire investor Stanley Druckenmiller told CNBC this week that optimism surrounding the US market and business outlook is reaching “giddy” levels in boardrooms. Judging by Wall Street’s boom, that giddiness is being mirrored across trading floors.

Another reflection of investors’ bullishness and hunger for income is the record demand seen at French, Spanish and UK debt sales over the last 24 hours. Remarkably, bids for the roughly USD 37 billion worth of debt on offer totaled around USD 400 billion.

A large part of that is seasonal, as fixed income investors deploy their allocations for the year in January. But still.

These are the global forces on Thursday likely to drive Asian markets, where investors also have the first estimate of fourth-quarter and full-year South Korean GDP data, Japanese trade figures, the latest inflation reading from Singapore and industrial production numbers from Taiwan.

Thursday is also the last full trading day before the Bank of Japan’s policy decision. Financial markets are increasingly confident that the BOJ will raise its short-term policy rate on Friday by a quarter of a percentage point to 0.5%, a level last seen during the Global Financial Crisis.

Given its history, the BOJ could well couch any tightening of policy in cautious terms, making it clear that policy ‘normalization’ will be carried out carefully and gradually. If the Fed delivered a ‘hawkish cut’ last month, the BOJ may be poised to deliver a ‘dovish hike’ on Friday.

Dollar/Yen is trading towards the lower end of the 155.00-159.00 range it has been in for the past month, the two-year Japanese Government Bond yield is buoyant, and the Nikkei 225 index is hovering just below the 40,000-point mark.

Here are key developments that could provide more direction to markets on Thursday:

– South Korea GDP (Q4)

– Japan trade (December)

– World Economic Forum in Davos

(Reporting by Jamie McGeever)

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