Morning Wrap (12.02.2025)

Hong Kong stocks surged over 2% led by a remarkable tech rally, with Alibaba shares jumping 8.6% to a four-month high after The Information reported a strategic partnership with Apple to develop AI features for iPhones in China. The news reinforced growing optimism around Chinese tech companies' AI capabilities.

Federal Reserve Chair Powell struck a cautious tone in his congressional testimony, emphasizing that the strong economy and sticky inflation meant there was no rush to cut interest rates. Markets responded by pricing in just one rate cut by September 2025, down from previous expectations of two cuts this year.

Japanese yen extended its decline for a third consecutive day, weakening 0.7% to 153.63 per dollar amid mounting concerns about Japan's inclusion in Trump's tariff plans. The Japanese government formally requested exemption from the new 25% steel and aluminum duties, highlighting growing trade tensions.

Global bond yields climbed higher as investors repositioned ahead of key US inflation data, with the 10-year Treasury yield reaching 4.55%. Japanese and Australian sovereign yields also rose, reflecting broader market expectations that central banks will maintain higher rates for longer.

The cryptocurrency market showed signs of cooling after recent record runs, with Bitcoin falling 1.1% to $95,321 and Ether dropping 1.4% to $2,586. The pullback came as Trump plans to nominate crypto-friendly Brian Quintenz, current head of a16z crypto policy, to lead the CFTC.

Oil prices retreated after an industry report revealed a substantial increase in US crude inventories, with WTI dropping to $73.07 and Brent declining to $76.75. The market remains concerned about global demand amid escalating trade tensions and their potential impact on economic growth.

India's central bank ramped up its market intervention, offering to inject 2.50 trillion rupees ($28.85 billion) through an overnight variable rate repo auction - the largest single-day infusion in over a year. The move follows aggressive dollar sales to support the rupee amid portfolio outflows.

Russia launched a missile attack on Kyiv as US Treasury Secretary Bessent prepares for the first Trump cabinet visit to Ukraine, with early reports indicating one casualty and fires in four districts. The visit comes as Trump seeks agreements for access to mineral resources in exchange for defense aid.

Apple is exploring iPhone manufacturing opportunities in Indonesia as a strategy to lift a government-imposed sales ban on its latest models, according to Nikkei Asia. The initiative would mark Apple's first iPhone production venture in the country and comes as the company faces declining sales in China.

Chinese EV maker BYD reached new record highs as investors expressed confidence in its smart-driving strategy and growing competition with Tesla. UBS strategists suggested the broader AI-driven rally in Chinese stocks may be "less than halfway done," with Morgan Stanley and JPMorgan echoing this optimistic outlook.

Bank of Japan Governor Ueda warned about persistent food price inflation risks while maintaining the 2% target, noting that rising prices of commonly purchased products are negatively impacting people's lives. The comments follow the BOJ's recent decision to raise short-term rates to 0.5%, the highest level in 17 years.

Foxconn, Apple's main iPhone manufacturer, announced it can adjust production plans to navigate new US tariffs by leveraging its manufacturing presence in both the United States and Mexico. However, the company's chairman warned that overall tariffs will negatively impact the global economy and shrink markets.