Contrarian Updates on 23 Apr 2025

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Key Macro & Technicals

 

 

Market Commentary 

·       FX majors been mixed last few weeks with NZD/$ gaining +4.8% alongside general USD weakness. Even less movement across Asia FX particularly $/INR and $/CNH. However did noticed the $/CNH has quietly probed the breakout point of a potential ascending triangle formation. USD Index has also broken out from double top and downside momentum is gathering steam.

 

·         On 21/04, the USD fell on fears on a possible shake-up in the Federal Reserve, casting doubt over the future independence of the central bank. White House economic advisor Kevin Hassett has suggested that Trump and his team are studying if they could fire Fed Chair Jerome Powell. The statement came after Trump revived a threat to oust Powell from the role, accusing him of not moving fast enough to bring down interest rates.

 

  

·         On 11/04, USD Index slumped on escalation on US-Sino Trade War despite the temporary relief rally due to the 90-day tariff pause didn’t last long as it didn’t include China. Instead Trump ratcheted up duties on Chinese imports to an effective 145%, further escalating tensions between the world’s two largest economies. China then retaliated with a new 125% tariffs on US imports up from 84%. Longer-dated US treasuires also selling off, putting 10Y yields on course for their biggest weekly jump since 2001. DB analysts commented “we are witnessing a simultaneous collapse in the price of all US assets including equities and USD versus alternative reserve FX and bond market. The market has lost faith in US asset so instead of closing the asset-liability mismatch by hoarding dollar liquidity it is actively selling down US assets themselves”.

 

·         On 13/04, JPM Bruce Kasman quipped that “the post-Liberation Day back-pedalling has led some to breathe a sign of relief but not for us. A 10% universal tax is still a very large shock and huge 145% tax on China is prohibitive. You cannot stop trade between the world’s two largest economies and not expect damage everywhere. We maintain our call for a 60% likelihood of a US/global recession”.

 

·         On 21/04, Capital Economics analyst have said “indirect damage” has been done to the USD by the tariffs, generating extreme uncertainty about the broader economic outlook and undermining confidence in the US institutions and asset markets. The levies also sparked dislocations in the US treasury market as the bonds actually sold off sharply rather than acting as safe haven during last month S&P selloff. In their view, its is no longer hyperbole to say that the USD’s reserve status and broader dominant role is at least in question, even if the inertia and network efforts that kept it on top for decades are not going away anytime soon”.

 

·         In 2024, China earned a record $3.5T from exports, 16% of which went to Southeast Asia its biggest market. Beijing in turn, has paid for railways in Vietnam, dams in Cambodia and ports in Malaysia as part of its 1B1R initiative that seeks to bolster ties abroad. Malaysia’s Trade Minister Tengku Zafrul Aziz told BBC ahead of XJP’s visit that “We can’t choose and will never choose between China and US. If the issue is about something we feel is against our interest, then we will protect ourselves”. This reaction pours cold water on the White House intention to use upcoming negotiation with small nations to pressure them into limiting their dealings with Beijing. The development is particularly acute as instead of granting concessions to Trump 2.0 this time, China is digging in and XJP went on a personal visit to Vietnam, Malaysia and Cambodia citing that Beijing is SEA’s better friend than the truculent US administration.

 

·         On 14/04, ING analyst noted ECB’’s stance has likely shifted since its March meeting, according to as new US tariffs on European goods, coupled with a rising EUR and falling energy prices have raised concerns over growth and disinflation in the medium term

 

·         On 14/04, Barclays economists said that Trump’s administration’s 90-day pause on reciprocal tariffs is unlikely to mark a distinct shift in the broader trade policy towards countries outside China. The pause, announced after a surge in Treasury yields and sharp equity losses, exempts China and preserves the base 10% tariff on other countries. At the same time, tariffs on China were raised from 64% to nearly 150%, lifting the overall US trade-weighted average tariff to 30%. For the rest of the world, the effective rate has declined to around 12%, down from 17% before the suspension.

 

·         On 17/04, Kyiv and Washington signed a memorandum of understanding to develop mineral resources in Ukraine to pay back US support since 2022. This paves the way for an economic partnership deal and setting up an investment fund for the reconstruction of Ukraine. However this updated deal does not involve any security guarantees.

 

·         During Trump’s 1^st term as president, the US and Japan signed a bilateral trade deal in 2019 that cut tariffs on US farm goods, Japanese machine tools and other products whilst staving off threat of higher US car duties. Although the agreement did no cover automobile trade, then PM Shinzo Abe said he had received assurances from Trump that US would not impose “Section 232” national security tariffs on Japanese car imports. “Between President Trump and I, myself, this has been firmly confirmed that no further, additional tariffs will be imposed” Abe told a news conference after signing the deal. Japan however was no exempted from Trump’s latest 25% tariff slapped on all automotive imports in the US. Hence, Japan now has “grave concern over the consistency with regards to the latest US automotive tariffs and 2019 bilateral trade deal”. $/JPY has hit a 7M low at 140.65 on 21/04 on market speculation that Japan could face US pressure to prop up the JPY to help Washington reduce the huge US trade deficit.

 

 

·         Within equities space, the larger movers have been MSCI Asia +5.8% with STI, SENSEX, Nifty and Russia Index rallying 6.6 – 8.4%. On a deeper dive, STI filled the gap at 3800 overnight after the 1000 points fall in SPX earlier this month whilst SENSEX continues to breakout from congestion channel. Russia Index at 2946 appears to be targeting the gap as well. Also, whilst US equity indices have been stabilising noticed there SPX has broken of falling wedge last week which makes retracing to 5492 and 5647 which represent 50% and 61.8% Fibo levels a real possibility. Those would be decent levels to exit/ trim US equity position susing the rally momentum this trading cycle given Trump flip-flopping. Also, SPX rally been broad-based this time based on AD line.

 

·         Unsurprisingly VIX has fallen 22.3% but interestingly smart beta dividend and momentum volatility has actually increased 11.2% and 10.6% respectively. No major moves within fixed income but there has been unexpected development in that UST not been acting as a safe haven lately. This time though REITs are not the uptrend with risk-in momentum with MAPL and CDLT both +7.5% and 6.3% respectively.

 

·         On 22/03, the Big Short Investor Danny Moses commented that the market have not yet factored in the impact of mass cut in spending. He told Fortune the DOGE cut’s have jeopardized private contractors, small businesses and the labour market. Trump has fired more than 24k federal workers many of whom expect difficulty finding private sector jobs due to their specificity of their expertise. An additional 75k employees took deferred resignation opportunity which allowed them to receive pay and benefits through September. DOGE’s mass cuts already has begun to jeopardize major contracts with Accenture telling investors that its Federal Services business, representing 8% global revenue lost US government contracts. One of the reason markets have not factored in impact of firings is the lag in government date. Whilst the Bureau of Labor Statistics reporting about 10k fewer federal government jobs in Feb, the survey period for the report very likely ended before many of the firings were carried out. Should a substantive number of federal works fail to find new jobs, spending will likely slow, a not-insignificant hit to the US economy made up of nearly 70% consumer spending.

 

 

 

·         On 13/04, Bridgewater Associates Ray Dalio warned today US is teetering on the edge of recession, citing economic disruptions caused by Trump’s tariff campaign and broader global instability. He also said “I think that right now we are at a decision-making point and very close to a recession and that the tariffs are like throwing rocks into the production system”. The uncertainty he noted is weighing heavily on investment decisions and could damage long-term productivity. Beyond tariffs, Dalio also flagged deeper concerns about the confluence of risks facing the global economy. He cited a ballooning US debt, widening budget deficit and growing geopolitical instability as ingredients for a potential economic shock. Finally, he said “we’re having profound changes in the world order and if you take tariffs, if you take debt, if you take the rising power challenging existing power … how that’s handled could product something that is much worse than a recession”.

 

·         On 14/04, Citi has downgraded US equities to neutral from overweight, reflecting the current uncertainty in the macroeconomic outlook, elevated valuations, and mounting earnings downgrade pressures. Whilst some tariff-related risk have been priced out following Trump’s 90-day pause on trade restrictions, Citi believes the US remains vulnerable to further economic drag. Citi’s proprietary Earnings Revision Index recently hit “recessionary” levels of -40%, underlining the risk of further downgrades. The bank new top-down forecast for global earnings growth is 4%, well below the 10% expected by bottom-up consensus. Citi upgraded Japan to overweight, pointing to more attractive valuations and reduced risk of US trade conflict. Japanese equities are trading at the 15^th percentile valuation multiple over the last 25Y and have already priced in bearish EPS scenarios. The UK equities also upgraded to Overweight as well citing “cheap valuations, while its defensive nature could help if volatility persists”. For EM equities, they have downgraded to underweight from neutral, driven by China’s heavy exposure to current tariffs and risk that elevated trade barriers could persist despite recent sign of progress.

 

 

·         On 14/04, European equities were boosted as Trump exempted smartphones, computers and other electronic devices and components from his reciprocal tariffs. This followed the US president imposing 145% tariffs on products from China earlier this month, a move that threatened to take a toll on tech giants like Apple. Trump pushed back on reports that certain electronics has been exempted from his sweeping tariff plan saying products like smartphone and laptops still subject to existing 20% fentanyl-related tariffs

 

 

·         On 21/04, China has imposed sanctions on US congress members, government officials as well as head of NGO for “egregious behaviour on HK-related matters”. The sanctions come in response to the US sanctioning 6 Chinese and HK official last month, which Chinese foreign ministry Guo Jiakun “strongly condemns”. China’s Ministry of Commerce also issued stern warnings to countries against striking trade agreement with the US which could undermine its interests following report that the Trump administration intends to offer tariff relive in return for curbs on trade with Beijing. Interesting that Trump started being even-handed when he came to power in Feb targeting countries based on their trade surpluses but now he shows US true colors with his anti-China policies.

 

·         On 14/04, Taiwan first phase of tariff talks with US went smoothly and the government hopes to take this challenge as an opportunity to promote a new Taiwan-plus-the-United States layout for trade according to President Lai Ching-te. Major semiconductor producer Taiwan has been due to be hit with a  32% tariff by Trump until he puts all tariffs ex-Chinna on hold for talks to take place. TSMC the world largest contract chipmaker, announced last month an extra $100B investment in the US. Lai said Taiwan has already been signing trade and IP agreement with countries such as Britain and Canada and also want to join the CPTPP.

 

·         On 14/04, Italian billionaire Gianlugi Aponte’s family-run business is emerging as the lead investor of a group seeking to buy 43 ports from conglomerate CK Hutchison. The Aponte family Terminal Investment Limited which manages a diverse portfolio of container terminal according to its website, will the be sole owner of all the ports once the deal is completed except for two in Panama that will be controlled by Blackrock Inc. The port facilities at the strategic waterway account for about 4% of the total value of the deal. Li Ka-shing is expected to make more than $19B. CK Hutchison faced a barrage of criticism from China on its decision to sell most of its $22.8B port business to Blackrock. The deal has become highly politicised as the conglomerate is thrust into the crosshairs of an escalating China-US trade war.

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·         Nowadays, Chinese companies are racing to build factories around the world and forge new global supply chains, driven by a desire to circumvent tariffs and secure access to market. This has shifted the narrative from Chine being a destination of FDI to becoming the major source of investment. Generally speaking, China’s outbound investment boom is accretive as it is helping industrialize poor countries like Indonesia and Morocco and diversify and technologically upgrade the economies of middle-income countries like Brazil, Turkey, Mexico and Thailand.

 

 

·         In India’s case however, China is trying to isolate the world’s biggest and more important developing country from its new economic world order given US-led globalisation retreat. Beijing is encouraging Chinese companies to build plants in “friendly countries” whilst discouraging them from investing in others as a kind of industrial diplomacy. In particular, Beijing appears to be limiting Apple’s manufacturing partner Foxconn from bringing Chinese equipment and Chinese works to India and some of their Chinese workers in India were even told to return to China. This informal Chinese ban extends to other electronic firms and Beijing has told Chinese automakers specifically not to invest in India. They also been reportedly blocking export of Chinese solar equipment and tunnel boring machines made in China by Germany’s Herrenknecht for export to India have apparently been held up by Chinese customs. Whilst India has been more than unfriendly to China this trend is more strategic as China rather not build up the manufacturing capabilities of its biggest potential rival.    

 

·         In Europe, China’s Ministry of Commerce has told Chinese automakes like BYD, SAIC and Geely to pause investments in EU countries that voted in favour of tariffs on Chinese EV and increase investments in EU countries that voted against them. Hungary stands out as the largest recipient of Chinese FDI in Europe by far, including a massive $7B, 100GWh CATL battery plant and new BYD plant slated to start production this year. After Spain abstained from voting on Chinese EV tariff, CATL signed as $4.3B deal with Stellantis to build a battery plant in Spain

 

·         Brazil by far the largest recipient of Chinese FDI in Latin America is another country where warm relations have been reward with new Chinese factories. Brazil’s President Lula has sought to partner with Chinea to reindustrialize Brazil’s economy with BYD and Great Wall Motor both building EV factories after taking over former auto plants from Ford and Mercedez. Brazil’s rising tariffs on all imported EVs have helped spur Chinese EV makers to localize production without antagonizing Beijing unlike EU which is specifically targeting EV imports from China

 

·         In contrast, the Philippines is a country where Chinese firms have been wary of investing in part due to South China Sea tensions. For year, the Philippines has received only a fraction of the levels of Chiense FDI that its Southeast Asian peers like Thailand and Indonesia have received. The situation worsened after President Ferdinand Marcos Jr took a more confrontational stance with China in 2022. Since then, many Chinese infrastructure projects stopped and investment from Chinese SOE dried up.

 

·         Commodities wise we see risk-on too with SPSCI +3.2% and XAU/$ and XAG/$ both moving higher by 7% and 7.8% last few weeks. Whilst crude oil only moved +2.8% we have seen NG futures dropping 19.2% in the same time period. However, did notice a potential falling wedge forming on crude oil futures. Crypto currencies also been very resilient lately and SOL/$ +29.5% outpacing BTC/$.

 

·         On 13/03, Abu-Dhabi backed MGX made a $2B crypto investment in Binanace deepening ties between the world’s largest crypto exchange and the UAE. The exchange has been growing its links with the UAE under CZ’s successor Richard Teng, who was previously head of Abu Dhabi Financial Services Authority.

 

·         On 20/04, RBC analysts noted that commodities markets are now at the heart of an intensifying global trader war and even if tariffs were rolled back in full, damage from broken trade relationship and heightened uncertainty would linger. The brokerage uses the industry cost curve as a benchmark to measure potential downside, with historical data suggesting that commodities tend to hover around the 90^th percentile of the cost curve. Any move below that typically prompts production cuts and at current sport levels, iron ore would have to another 18% to hit its cost support $80/t. Copper need to declines 24% and aluminium 12% to trigger the same.

 

·         On 16/04, crypto analyst Michael van de Poppe forecasting that BTC could reach a new ATH in the next 3M. His assumption is based on the correlation between BTC price and M2 supply and he also expect this to happen with $/CNY heading lower, fall in gold price and rise in altcoin prices. Bitcoin has also hit 25% milestone on road to the next halving.    

 

 

·         On 13/04, GS hikes end-2025 gold price target to $3700, which it’s third such hike this year. The bank had in March hiked its 2025 gold price target to $3300 and warned in an extreme risk case, gold could reach as high as $4500.

 

·         On 16/04, Asian government are now looking to buy more US oil and gas as they scramble to lower their trade surplus with Washington to ease their trade burdens. Many of them run large trade surpluses with the US and are major energy importers. India plans to end taxes on US ethane and LPG imports but analysts are saying there is limited scope for India to increase US ethane imports due to lack of shops, storage tanks and crackers that process the liquid gas. Trump also wants Japan, South Korea and Taiwan to join the $44B natural gas export project in Alaska. The project aims at transporting gas south from Alaska’s remote north a 1300-km pipeline to be shipped LNG to these countries bypassing Panama Canal. Japan’s Mitsubishi Corp may consider investing and Taiwan’s CPC Corp signed an agreement with Alaska Gasline Development Corp to buy LNG and invest in the project, a move Taiwan’s President Lai Ching-te said would ensure the island’s energy security.

 

·         On 17/04, Petrobras will reduce the price of diesel sold to distributors by an average of BRL 0.12 after Trump’s tariffs

 

·         On 17/04, KSA Defence Minister Prince Khalid bin Salman arrived in Tehran for weekend talks between Iran and US over Iran’s nuclear programme. Iran and KSA agreed to a 2023 deal brokered by China to re-establish relations after years of hostility which threatened the stability and security in the Gulf and helped fuel conflicts from Yemen to Syria. “Ties between the Saudi and Iranian armed forces have been improving since the Beijing agreement” according to Iran’s armed forces chief of staff Mohammad Bagheri. Iranian Supreme Leader Ali Kamenei also sent his foreign minister to Mosow with a letter to Putin to brief the Kremlin about nuclear negotiations with the US which has threatened to bomb the Islamic Republic. Turmp has repeatedly threatened Iran with bombing to extend tariffs to third countries that buy Iranian oil if Tehran doesn’t come to an agreement with Washington over its disputed nuclear programme. Russia, a longstanding ally of Tehran playing a role in Iran’s nuclear negotiations with the West as a veto-wielding UN Security Council member and signatory to an earlier nuclear deal Trump abandoned during his 1^st term in 2018. Putin has kept on good terms with Khamenei as both Russia and Iran are cast as enemies by the West but Moscow is not keen to trigger a nuclear arms race in the Middle East.