Morning Wrap (28.02.2025)

Asian markets plummeted on Friday with Japan's Nikkei 225 crashing 3.2% to its lowest level since mid-September, while South Korea's KOSPI tumbled 3.1%. The selloff followed Nvidia's sharp decline on Wall Street despite better-than-expected earnings, as investors focused on profit margin concerns. SoftBank shares slumped 5.3%, Tokyo Electron fell 5.1%, while Samsung Electronics and SK Hynix dropped 2.2% and 4.7% respectively.

Trump reaffirmed tariff plans, confirming that 25% tariffs on Mexican and Canadian imports will take effect March 4, alongside an additional 10% duty on Chinese goods. This comes just days before China's National People's Congress meets next week, where analysts now expect more stimulus announcements may be forthcoming. The tariff threats have sent trade-sensitive currencies like the Australian dollar (-0.4%) and South Korean won (-0.7%) tumbling.

Hong Kong's Hang Seng dropped 2.6% on Friday but remains set to gain nearly 15% in February, driven by investor enthusiasm surrounding DeepSeek's AI advancements. Despite concerns over U.S. tariffs, Chinese tech stocks have surged, with Alibaba shares up 48% and Xiaomi climbing more than 37% this month. DeepSeek, considered comparable to leading players like OpenAI, has bolstered confidence in China's technological capabilities.

Japan's housing market weakened further as housing starts declined 4.6% year-over-year in January, steepening from December's 2.5% drop and surpassing market forecasts of a 2.6% fall. This marks the ninth consecutive month of contraction and the fastest pace since August. Meanwhile, Tokyo's core consumer prices rose 2.2% year-on-year in February, decelerating from January's 2.5% increase but remaining above the Bank of Japan's 2% target.

Oil prices retreated in Asian trading, with Brent falling 0.4% to $73.30 and WTI down 0.4% to $69.70 per barrel. Both benchmarks are heading for their first monthly drop since November, as Trump's tariff threats and concerns about global economic growth outweighed supply disruption concerns from Venezuela sanctions and Iran's "maximum pressure" campaign. OPEC+ is currently deliberating on whether to proceed with a planned output increase in April.

The U.S. dollar strengthened against most currencies as traders awaited the PCE price index release later today, which could influence the Federal Reserve's interest rate trajectory. The dollar index rose 0.1% in Asian trading, while most Asian currencies extended declines. The Japanese yen bucked the trend, edging up 0.2% to 149.60 against the dollar, supported by Tokyo's inflation data and BOJ rate hike expectations.

Bitcoin plunged below $80,000 for the first time since November, falling as much as 5% to $79,650 during Asian trading. The cryptocurrency has shed a quarter of its market value since mid-December when it topped $108,000, with enthusiasm waning for Trump administration crypto policies. Ether similarly tumbled nearly 6% to a 13-month low of $2,149, with investor confidence also shaken by a recent $1.5 billion hack at exchange Bybit.

Thailand's manufacturing production contracted less than expected in January, dropping 0.85% year-on-year versus a forecast 2.55% decline. While marking the sixth consecutive month of contraction on an annual basis, output rose 8.7% from December. The industry ministry maintained its forecast for output growth of 1.5% to 2.5% this year, citing government stimulus measures, stronger exports, tourism, and the central bank's recent interest rate cut.