China sets rates, trade war fear dissipates?

The People’s Bank of China’s interest rate decision tops a busy Asia-Pacific economic event calendar on Thursday, with many stock markets around the world at new peaks or hugging recent highs as investors try to make sense of the blitz of headlines surrounding global trade tensions.

A trade war between the US and its major trading partners would be damaging for growth and markets, so you would think investors are pricing that risk into their portfolios.

Minutes of the Federal Reserve’s Jan. 28-29 policy meeting on Wednesday showed that officials were concerned about the inflationary impact of Trump’s agenda, with firms saying they expect to raise prices to pass through the cost of import tariffs.

The World Trade Organization, meanwhile, said that discussions were “constructive,” after China condemned tariffs launched or threatened by US President Donald Trump that could upend the global trading system.

But these risks may be losing their grip on markets. That’s not to suggest complacency is taking over – there have been a few wobbles recently – but the S&P 500, MSCI World, and benchmark European and UK equity indices are forging new highs.

Perhaps investors are becoming inured to it all, or they believe Trump’s stance is posturing to secure concessions and the outcome will be less severe than feared.

Either way, Asian markets are struggling more, with China’s travails, the strong dollar and high US bond yields cooling local optimism. But there are pockets of strength, like Hong Kong-listed Chinese tech shares, and sentiment and capital flows toward China are improving.

Investors cheered the optics of President Xi Jinping’s meeting this week with the country’s private sector leaders, the result of which could be a more substantial recovery in China’s growth, especially the tech sector.

Indeed, Bank of America’s latest fund manager survey showed that China macro sentiment improved in February for the first time in four months. This was the first uptick in China’s prospects outside of any policy stimulus announcement in the past three years, suggesting a ‘DeepSeek effect’ may be at play.

The most bullish development for risk assets this year would be a pick-up in Chinese growth, the survey showed, far outweighing other potential scenarios like AI productivity gains, Fed rate cuts or a Russia-Ukraine peace deal.

The PBOC on Thursday is expected to leave its benchmark one- and five-year lending rates unchanged at 3.1% and 3.6%, respectively, as authorities walk the fine line between prioritizing financial stability and providing more stimulus at a time when Beijing is facing fresh trade tensions.

The PBOC has shifted towards implementing an “appropriately loose” monetary policy stance this year, but the weak exchange rate and banks’ evaporating profits are limiting its easing efforts.

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

– China interest rate decision

– Australia unemployment (January)

– South Korea producer price inflation (January)

(By Jamie McGeever)

Oil settles up on supply hits, traders cautious on Ukraine peace talks

Oil prices settled higher on Tuesday as supply disruptions mounted in Russia and the US, while talks to end the war in Ukraine capped gains as this could boost supply from Moscow.

Brent crude futures rose 62 cents, or 0.8% to settle at USD 75.84 a barrel. US West Texas Intermediate crude futures rose USD 1.11, or 1.6%, to settle at USD 71.85 a barrel, catching up with the gains Brent registered on Monday, when the US contract traded without settlement due to a holiday.

Brent rose 48 cents in the previous session after Ukrainian drones attacked a pumping station in Russia on the Caspian Pipeline Consortium pipeline, which moves crude from Kazakhstan to world markets.

Oil flows through the pipeline were reduced by 30-40% on Tuesday, Russian Deputy Prime Minister Alexander Novak said. A 30% cut would equate to a 380,000 barrels per day reduction in oil supply, per Reuters calculations.

“Brent already benefited yesterday from the CPC supply disruptions, but generally it will come down to how long and how big the disruption is,” UBS analyst Giovanni Staunovo said.

Oil markets received another supply shock on Tuesday as Russia’s Black Sea port of Novorossiisk suspended loadings due to a storm, two sources familiar with the matter said.

Exports from the port in February were revised up by 0.24 million metric tons from an initial plan to 2.25 million tons or some 590,000 barrels per day, sources said Monday.

A cold snap in the US has hit oil supply. The North Dakota Pipeline Authority estimated that production in the country’s No. 3 producing state would be down by as much as 150,000 barrels per day.

Keeping prices in check, US and Russian delegates held a 4-1/2-hour meeting in Saudi Arabia to discuss ways to halt the deadliest conflict in Europe since World War II. Ukraine was not represented and Russia hardened its demands.

If a deal is reached, Washington and its allies could drop sanctions on Russian oil supplies.

“Everyone is waiting on what is going to happen with Russia and Ukraine,” Mizuho oil analyst Robert Yawger said. “That’s not something that’s going to happen in the next 15 minutes, so the market is going to stay cautious,” he added.

In a potential boost for oil prices, US inventories and trade data due on Thursday could show lower net-imports for crude oil last week, Staunovo said.

However, expectations of a heavy refinery maintenance season could weigh on demand in the weeks ahead.

“There is plenty of crude out here on the offer with refinery turnarounds beginning in March seen as heavy,” United ICAP Energy Specialist Scott Shelton told clients in a note on Tuesday.

US crude oil and gasoline stockpiles likely rose last week, a preliminary Reuters poll showed on Tuesday.

Traders are also waiting for clarity on whether OPEC+ will proceed with plans to boost oil supply from April, or delay that to a later date.

(Reporting by Shariq Khan; Additional reporting by Paul Carsten, Colleen Howe, and Trixie Yap; Editing by David Goodman, Jan Harvey, and David Gregorio)

Japanese investors turned net buyers of overseas bonds, equities in January

Japanese investors turned net buyers of foreign equities in January amid a global equity rally that shrugged off trade tensions, and resumed purchasing foreign bonds after a three-month hiatus.

According to Japan’s Ministry of Finance, local investors bought 1.6 trillion yen (USD 10.54 billion) of foreign equities in Japan, the biggest purchases in 2 years.

“It appears Japanese retail investors continue to rebalance away from yen cash to risk assets, especially foreign equities,” said Shusuke Yamada, an analyst at BoFA.

“The jump in January flow suggests rebalancing activity remains firmly in place as households protect their wealth from a negative real interest rate and the falling yen.”

A breakdown of inflows by types of investors showed investment trusts made net purchases of 1.7 trillion yen, which Barclays attributed to new investments in NISA as tax exemption brackets were renewed at the turn of the year.

NISA, or the Nippon Individual Savings Account, is a Japanese government tax-free stock investment programme for individuals, aiming to turn the trillions of yen held in cash by households into investments in stock markets.

Meanwhile, a rise in US Treasury yields prompted Japanese investors to purchase 1.1 trillion yen in foreign bonds last month, following three consecutive months of net sales.

In the final quarter of 2024, they had aggressively sold foreign bonds, particularly targeting European markets.

Bank of Japan data showed domestic investors divested 13.2 trillion yen worth of European bonds during this period, with sales of French, Italian, and Spanish bonds totaling 1.9 trillion yen, 689 billion yen, and 342 billion yen, respectively.

(USD 1 = 151.8000 yen)

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Kim Coghill)

Gold rises as Trump tariff uncertainty fuels safe-haven demand

Gold prices rose over 1% on Tuesday as concerns over economic growth, due to uncertainty surrounding US President Donald Trump’s tariff plans, prompted safe-haven flows into bullion.

Spot gold gained 1.2% to USD 2,932.79 an ounce as of 2:11 p.m. ET (1911 GMT) after hitting a record high of USD 2,942.70 last week.

US gold futures settled 1.7% higher at USD 2,949.

“We are seeing increased safe-haven demand due to the disrupted nature of the Trump administration and we have also got a bullish chart posture,” said Jim Wyckoff, a senior market analyst at Kitco Metals.

Since taking office last month, Trump has swiftly redrawn the global trade battlefield with a series of tariffs, while plans are already in motion for sweeping reciprocal tariffs, aimed squarely at any nation that taxes US products.

“Central bank buying should also continue to provide support,” Commerzbank analysts said in a note.

The market’s focus has now shifted to the US Federal Reserve’s January meeting minutes, due on Wednesday, for clues into the central bank’s interest rate trajectory.

“If the economy starts to sputter because of the trade tariffs and such, then we could see some lower interest rates,” Wyckoff added.

Safe-haven bullion benefits from geopolitical and economic uncertainties and tends to thrive in a low-interest rate environment as it yields no interest.

“While the broader trend remains intact, the risk of a deeper pullback cannot be ignored at these elevated levels. For gold to reach new highs, it may take an escalation in the geopolitical risks, particularly about Ukraine,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.

Among other metals, spot silver was up 0.2% at USD 32.84 an ounce. Platinum rose 0.9% to USD 983.75 and palladium climbed 2.5% to USD 986.50.

(Reporting by Anmol Choubey and Ishaan Arora in Bengaluru; Editing by Maju Samuel and Mohammed Safi Shamsi)

Investors went on January emerging market buying spree, report shows

LONDON – Investors piled into emerging market countries’ debt to the tune of USD 45 billion and bought up USD 2 billion of Chinese stocks in January, a closely followed report from the Institute of International Finance showed on Tuesday.

The trade body cited how markets were being buffeted by the plans of returning US President Donald Trump to reshape the global order, as well as the continuing evolution of artificial intelligence.

Emerging market countries saw a USD 35.4 billion ‘net inflow’ of international money in January although there was sharp divergence between debt and stocks, the report showed.

Debt flows surged to USD 45 billion, including USD 8.1 billion into China where interest rates have been falling due to its ongoing economic strains.

Equities struggled overall in emerging markets, suffering USD 11.5 billion of outflows not including China, which enjoyed USD 2 billion of inflows.

The divergence between debt inflows and equity outflows underscores “the continued investor preference for the relative stability of fixed-income instruments amid persistent geopolitical uncertainty, US monetary policy risks, and global economic headwinds,” the IIF said.

The data covered January but MSCI’s main emerging market stocks index showed a sizeable rally took off around the middle of the month.

Since then, that index has climbed nearly 10% and the emergence of the DeepSeek AI tool has helped top Chinese tech stocks like Baidu, Alibaba, and Tencent surge 30%, 62%, and 40% respectively.

The selling elsewhere in emerging markets was “exacerbated” by a contrasting selloff in US ‘Big Tech,’ the IIF estimated.

The correlation between emerging market credit spreads and US tech equities has tightened significantly in recent years, with a 91.2% correlation between broad EM credit spreads and the Nasdaq 100.

The report also pointed blame at the “renewed protectionist measures from the Trump administration, particularly the imposition of tariffs on a range of sectors.”

India has been most impacted, with foreign investors pulling more than USD 20 billion from its stocks since October, when Trump’s election win started to look more likely. South Korea and Taiwan stocks also saw outflows exceeding USD 1 billion each.

Emerging market debt remained strong, however. January saw total debt inflows of USD 45 billion, with EM ex-China attracting USD 36.8 billion and China adding USD 8.1 billion.

The resilience of emerging market local currency debt was “particularly notable” the IIF said, citing continued foreign demand for bonds in Brazil, India, and Poland.

Emerging market central banks maintaining relatively high interest rates will make “EM debt an attractive carry trade” the IIF said, if US rates stay as high as expected.

(Reporting by Marc Jones; Editing by Bernadette Baum)

Yen rallies on growth data, dollar steady around two-month low

SINGAPORE/LONDON – The yen rose on Monday in a boost from upbeat Japanese growth data, while the dollar hovered near its lowest in two months after investors dialed down their bets on US tariffs.

The dollar last traded down 0.58% against the yen at 151.44 after data showed Japan’s economy grew more than expected in the fourth quarter on improved business spending and a surprise rise in consumption.

That cemented the case for more rate hikes from the Bank of Japan this year. Markets are now pricing in roughly another 37 basis points worth of increases by December.

“The key takeaway for us is that the nominal household consumption grew significantly faster than real consumption and their divergence remained wide, which may activate the BOJ’s inflation-fighting mode,” said Krishna Bhimavarapu, APAC economist at State Street Global Advisors.

“At the very least, this data removes the fears of stalling consumption, and is positive for the BOJ to deliver another hike, which could now come sooner rather than later.”

In the broader market, the dollar was struggling to recoup its losses after a selloff on the back of Friday’s weak US retail sales data and as investors cheered a delay in the implementation of President Donald Trump’s reciprocal tariffs.

US stock and bond markets were closed, with traders off for Presidents’ Day, although the dollar was still trading on international markets.

The dollar index last stood at 106.76, flat on the day, after tumbling 1.2% last week. It fell to 106.56 on Friday, its lowest since mid-December.

GEOPOLITICS IN FOCUS

Geopolitics remained in focus with reports that talks aimed at ending the Russian-Ukraine conflict will begin in Saudi Arabia this week.

The euro was last down 0.1% at USD 1.0482, having traded at its highest in two weeks on Friday at around USD 1.051.

Sterling was up 0.1% at USD 1.2596, after hitting a two-month high of around USD 1.263 on Friday.

“The dollar weakness… was a function of both ongoing optimism that maybe tariffs are not going to be as disruptive as originally thought – that of course, remains to be seen, the Ukraine story is still bubbling in the background there,” said Rodrigo Catril, senior FX strategist at National Australia Bank.

“And then the data, of course, playing to the idea that maybe the US exceptionalism is running out of steam, so it’s weighing on the US dollar.”

The Australian dollar rose to a two-month high against a weaker dollar and last bought USD 0.6366, ahead of a rate decision from the Reserve Bank of Australia (RBA) on Tuesday.

The RBA is expected to deliver a quarter-point cut, marking its first reduction in over four years as it joins other major central banks in their easing cycles.

The kiwi similarly scaled a two-month top before paring some gains to trade at USD 0.5736, ahead of the Reserve Bank of New Zealand’s policy decision on Wednesday, where markets have priced in a 50 basis-point reduction.

(Reporting by Rae Wee in Singapore and Harry Robertson in London; Editing by Sonali Paul, Bernadette Baum, Angus MacSwan, and Ed Osmond)

Goldman Sachs raises year-end gold price forecast to USD 3,100

Goldman Sachs on Monday raised its year-end 2025 gold price forecast to USD 3,100 per ounce, up from USD 2,890, citing sustained central bank demand.

The bank estimates that “structurally higher central bank demand will add 9% to the gold price by year-end, which combined with a gradual boost to ETF holdings as the funds rate declines.”

This should outweigh the drag from normalizing investor positioning, assuming uncertainty diminishes, Goldman Sachs added.

However, if policy uncertainty, including tariff concerns, remains high, Goldman sees the potential for gold to surge to USD 3,300 per ounce by year-end due to prolonged speculative positioning.

The bank has also revised its central bank demand assumption upward to 50 tonnes per month from the previous estimate of 41 tonnes.

If purchases average 70 tons per month, gold prices could climb to USD 3,200 per ounce by the end of 2025, assuming positioning normalizes, Goldman said.

Conversely, if the Federal Reserve keeps interest rates steady, the bank expects gold to reach USD 3,060 per ounce in the same period, the bank added.

Reiterating its “Go for Gold” trading recommendation, Goldman Sachs said that while declining uncertainty could lead to a tactical pullback in prices, long gold positions remain a strong hedge.

This is particularly relevant in the face of potential trade tensions, Federal Reserve subordination risks, and financial or recessionary threats, which could push prices toward the upper end of Goldman’s high-uncertainty range, the bank said.

Additionally, if concerns over US fiscal sustainability escalate, Goldman Sachs sees gold rising an extra 5% to USD 3,250 per ounce by December 2025.

Growing fears of inflation and fiscal risks could drive speculative positioning and ETF flows higher, while worries about US debt sustainability may encourage central banks, especially those with large US Treasury reserves, to increase their gold purchases, the investment bank added.

(Reporting by Sherin Elizabeth Varghese in Bengaluru)

RBA poised, China tech booms, Japan GDP sizzles

There’s no shortage of market-moving news in Asia on Tuesday, with an Australian interest rate decision, China’s tech boom and sizzling Japanese GDP figures front and center for investors, against a backdrop of unfolding geopolitical drama around US-Europe relations and the Russia-Ukraine war.

On the economic front, the main event locally will be the Reserve Bank of Australia’s expected quarter-point cut to its cash rate to 4.10%, its first reduction in over four years.

Easing inflation has opened the door for a rate-cutting cycle, but only a shallow one – money markets are pricing in only 50 basis points of additional easing this year after Tuesday’s move.

If the RBA does lower rates on Tuesday, it will be one of the last G10 central banks to do so. Norway’s central bank hasn’t started easing yet, while the Bank of Japan is raising rates.

That cycle could accelerate, after figures on Monday showed Japan’s economy grew at an annualized 2.8% pace in the October-December quarter, nearly three times faster than the consensus 1.0% in a Reuters poll. The highest forecast in the survey of 17 economists was 2.2%.

The yen and Japanese Government Bond yields are on the rise. Recent inflation and wage growth data have also surprised to the upside, but the Bank of Japan will be cautious about raising rates after decades of deflation and ultra-loose policy.

Two-year and 10-year JGB yields are already the highest since 2008 and have risen sharply in recent months, roughly doubling since September. These are big moves, and the impact on businesses, households and investors remains to be seen.

The rebound in Chinese markets continues, meanwhile, with tech shares listed in Hong Kong hitting a three-year high on Monday as President Xi Jinping sat down with top tech leaders in Beijing. The Hang Seng tech index is up more than 30% in a month.

The symbolism of Xi’s rare meeting with tech leaders is powerful, reflecting policymakers’ worries over the economy and China’s technological development, and marks a sharp turnaround from the regulatory clampdown on tech four years ago.

Shares in Baidu plunged on Monday, however, wiping USD 2.4 billion off its market value after the search engine giant’s founder was not spotted at the meeting.

These market moves, in their own ways seismic in nature, come against truly seismic geopolitical developments around America’s ties with Europe and President Donald Trump’s role in brokering a truce between Ukraine and Russia with Russian President Vladimir Putin.

A peace deal – even a ‘dirty deal that clearly favors Russia’, in the words of Danske Bank – may boost risk appetite, and weigh on the dollar and oil in the short term. But the wider implications of a fracturing of 80 years of solid US-European relations since World War Two could raise risk premia across markets in the long term.

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

– Australian interest rate decision

– Singapore budget (fiscal year 2025)

– Hong Kong unemployment (January)

(By Jamie McGeever)

Dollar on track for weekly loss against euro as tariffs delayed

NEW YORK – The dollar was on track for a weekly loss against the euro on Friday as a delay in the introduction of trade tariffs planned by US President Donald Trump raised hopes that they may not be as bad as feared, while optimism about a peace deal between Russia and Ukraine helped the single currency rally.

The dollar index also fell to a nine-week low after data showed that retail sales fell more than expected in January, leading traders to raise bets that the Federal Reserve may cut rates two times this year.

“Markets are still hoping that tariff headwinds are not going to be as significant as perhaps previously feared, then probably the bigger element this week is enthusiasm about potential Russia-Ukraine ceasefire and to what extent that might be positive for European growth in particular,” said Vassili Serebriakov, an FX strategist at UBS in New York.

“The retail sales are probably a tertiary factor, but it’s kept the dollar on the back foot,” Serebriakov said.

The euro rose 0.32% to USD 1.0497 and got as high as USD 1.0514, the highest since January 27. It is on pace for a weekly gain of 1.7%.

The Japanese yen strengthened 0.37% against the greenback to 152.22 per dollar.

The dollar index was last down 0.35% at 106.72 and on track for a weekly loss of 1.3%. It reached 106.56, the lowest since December 12.

Trump on Thursday tasked his economics team with devising plans for reciprocal tariffs on every country that taxes US imports. Howard Lutnick, Trump’s pick for commerce secretary, said the administration would address each affected country one by one and said studies on the issue would be completed by April 1.

The broad announcement appeared designed at least in part to trigger talks with other countries, with a White House official saying Trump would gladly lower tariffs if other countries lowered theirs.

US Treasury Secretary Scott Bessent also said on Friday that the Trump administration is looking beyond tariffs and non-tariff barriers to examine currency manipulation as it studies the issue.

Analysts say that tariffs could add to inflation, keeping the dollar higher as the Fed holds rates higher for longer.

Trump also said on Friday he plans to impose tariffs on imported cars around April 2.

The euro and other European currencies have been supported this week by optimism that Russia and Ukraine will reach a peace deal.

Trump discussed the war in Ukraine on Wednesday in phone calls with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy.

Friday’s retail sales data, meanwhile, comes after Thursday’s producer price report for January pointed towards lower than previously thought core Personal Consumption Expenditures Price Index later this month, which is the Fed’s preferred inflation measure.

Futures traders are now pricing in 41 basis points of cuts for the year, fully reversing a move towards reduced rate cut expectations after consumer price data came in hotter than expected on Wednesday.

In cryptocurrencies, bitcoin gained 1.32% to USD 97,781.23.

(Editing by Toby Chopra; editing by Diane Craft)

US yields retreat after weak retail sales data

NEW YORK – US Treasury yields fell on Friday after data showed retail sales in the world’s largest economy tumbled in January, keeping the Federal Reserve on track to cut interest rates later this year.

The benchmark 10-year yield slid 5.6 basis points to 4.469%, declining for a third straight week. Over the last two days, the 10-year yield has fallen nearly 17 bps. US 30-year yields also eased, down 3.4 bps at 4.693%.

The two-year yield, which reflects interest rate expectations, declined 5.4 bps to 4.257%. On the week, however, it was up 3.2 bps.

US yields retreated after data showed retail sales dropped 0.9% last month after an upwardly revised 0.7% increase in December. Economists polled by Reuters had forecast retail sales, which are mostly goods and not adjusted for inflation, would dip 0.1%.

US import prices also showed a favorable inflation trend, rising 0.3% in January, which was slightly less than expected after an upwardly revised 0.2% gain in December. The surge in the cost of fuels was partially offset by declines in the prices of motor vehicles and consumer goods.

Overall, Andy Wells, chief investment officer of investment management firm SanJac Alpha LP in Houston believes the secular inflation environment will remain elevated although growth will slow a little bit.

“We’re kind of having a stagflation backdrop, not scary stagflation, just saying that growth is going to be slower, and the lower end of inflation will be a little higher than what we’re accustomed to,” said Wells.

“What that means is that rates will drift a little bit higher on the long end of the curve, but on the short end, it will be rangebound. The two-year we see that as rangebound.”

Earlier this week, data showed both consumer prices and producer price indexes both exceeded estimates, reinforcing expectations of one rate cut this year.

Following the retail sales data, US rate futures priced in 41 bps of easing this year, compared with 33 bps late Thursday, according to LSEG calculations. The next rate reduction is expected either at the Fed’s September or October policy meeting.

The yield curve, meanwhile, slightly reduced its steepness on Friday, with the spread between two-year and 10-year yields at 21.5 bps, compared with 22 late Thursday.

Analysts said this was likely a retracement of the steepening trend – in which yields on the long end of the curve are higher than those on the front end – that has been going on since the Fed launched its easing cycle in September.

Steepeners remain a popular trade in the bond market with the Fed being in a rate-cutting phase and the short end of the curve tethered to rate policy moves. The strategy involves buying short-dated Treasuries and reducing longer-dated exposure.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Alex Richardson, Nia Williams and Nick Zieminski)

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