Morning Wrap (25.03.2025)

Chinese shares lead Asian market declines with Hong Kong's tech index slumping as much as 3.8% in its steepest drop in three weeks. Alibaba fell over 3% after its chairman warned of a potential AI datacenter bubble, while Xiaomi dropped up to 6.6% following discounted share sales. US and European equity futures edged lower.

Bank of Japan minutes reveal rate hike discussions with policymakers considering the pace of future interest rate increases. BOJ members noted that real interest rates remain "significantly negative" despite the January hike to 0.5%, with one suggesting rates should reach around 1% by late 2025.

Japanese PM Ishiba plans anti-inflation measures to be implemented promptly after the fiscal 2025 budget passes, according to Kyodo news. Japan's inflation rate rose to 3.6% in December 2024, the highest since January 2023.

Markets price out extreme tariff risks as signs emerge that Trump's April 2 "Liberation Day" tariffs may be more focused than initially feared. Reports suggest the reciprocal tariffs will target about 15 countries with significant trade imbalances rather than broad industry-wide levies.

Investors remain cautious ahead of tariff implementation with Blackstone President Jon Gray advising patience: "Watch this tariff diplomacy evolve and make investment decisions over a longer period." Fed's Raphael Bostic cited tariff impacts for his reduced outlook of just one rate cut this year.

Gold holds near $3,000 milestone rising slightly to $3,015/oz after retreating from last week's record high of $3,057. Haven demand persists despite improving risk appetite as uncertainty remains over Trump's tariff agenda.

Indonesian rupiah hits Asian Financial Crisis lows amid mounting concerns over the nation's fiscal trajectory under President Prabowo Subianto's expansive initiatives, which have led to significant budget cuts in education and public works sectors.

China's PBOC unveils monetary policy changes allowing banks to bid for different prices on one-year loans (medium-term lending facility), the latest move in efforts to revamp China's monetary toolkit. China's 30-year bond futures advanced following the announcement.

Alibaba chairman signals hiring reboot with Joseph Tsai announcing plans to resume recruitment after 12 consecutive quarters of headcount decline. Tsai cited President Xi's February meeting with tech entrepreneurs as a "very clear signal to the business community" to reinvest and hire.

Oil holds gains with WTI little changed while gold stays steady near record high. The Bloomberg Dollar Spot Index was little changed, with the euro at $1.0803 and Japanese yen at 150.56 per dollar.

Cryptocurrencies retreat with Bitcoin falling 1.6% to $86,504 and Ether declining 1.9% to $2,045 amid economic uncertainty.

Australia prepares budget announcement with Treasurer Jim Chalmers set to unveil government budget later Tuesday. Economists predict an underlying cash deficit of A$40 billion through June 2026, better than the A$46.9 billion forecast in December.