Morning Wrap (20.05.2025)

Asian markets mixed with China leading gains after Beijing's rate cut. China's Shanghai Shenzhen CSI 300 and Shanghai Composite rose about 0.3% and 0.2% respectively, while Hong Kong's Hang Seng jumped 1%. Australia's ASX 200 added 0.5% following the RBA rate cut. Japan's Nikkei 225 and TOPIX both gained after confirmation of ongoing U.S.-Japan trade talks. U.S. stock futures fell 0.2% as investors awaited a House vote on Trump's tax bill.

China warns U.S. Huawei chip restrictions undermine trade truce as Chinese Ministry of Commerce officials stated that recent U.S. warnings against using Huawei's Ascend computer chips "seriously undermined the consensus reached at the China-U.S. high-level talks in Geneva." Beijing threatened "firm measures" if Washington "continues to substantially damage China's interests." The U.S. Department of Commerce issued the warning just a day after both countries announced a 90-day deescalation of tariffs.

Reserve Bank of Australia cuts rates to two-year low with a 25 basis point reduction to 3.85%, its second cut this year. The RBA cited diminished inflation risks and warned that global economic uncertainty would likely weigh on Australian growth. The central bank trimmed its 2025 GDP forecast to 2.1% from 2.4% previously and projected unemployment to rise slightly more than initially expected. Markets are pricing in 57 basis points of additional easing by year-end.

Oil prices flat as Iran nuclear talks falter with Brent crude futures steady at $65.55 per barrel and WTI edging up 0.1% to $62.20. Iran reaffirmed that its uranium enrichment program is "absolutely non-negotiable," a major sticking point in nuclear negotiations with the U.S. Meanwhile, potential Russia-Ukraine ceasefire talks following a Trump-Putin phone call Monday failed to significantly impact oil markets, with analysts noting no major breakthroughs.

China cuts benchmark lending rates for the first time since October, lowering the one-year loan prime rate by 10 basis points to 3.0% and the five-year LPR to 3.5%. Major state banks including ICBC, Agricultural Bank of China, China Construction Bank, and Bank of China also reduced deposit rates by 5-25 basis points. The moves aim to stimulate consumption and credit growth amid trade tensions, though analysts note Beijing may be "under less pressure to introduce necessary stimulus" following the U.S. trade truce.

Japan-U.S. trade talks advancing with a third round of ministerial-level discussions expected by Friday, according to Kyodo News. Japan's top trade negotiator Ryosei Akazawa maintained that Tokyo's position demanding elimination of all U.S. tariffs remains unchanged. Japan faces a 10% general tariff plus a 25% duty on automobile shipments unless a deal is reached before July. Reports suggest Japan may propose increased agricultural imports and revised automobile standards as concessions.

Vietnam-U.S. trade negotiations underway in Washington until May 22, as Vietnam seeks to avoid threatened 46% tariffs. The Vietnamese trade ministry reported discussions on "resolving fundamental issues of mutual concern" during the second round of formal bilateral talks. Trade Minister Nguyen Hong Dien also held discussions with Westinghouse regarding nuclear technology collaboration.

Crypto stablecoin bill advances in U.S. Senate with the Republican-sponsored GENIUS Act clearing a key procedural vote 66-32. The legislation would establish a regulatory framework for stablecoins and create a certification committee comprising Treasury, Federal Reserve, and FDIC officials. Despite criticism from Senator Elizabeth Warren, the bill is expected to receive a full floor vote this week before heading to President Trump for approval. Bitcoin rose 2.3% to $106,011 following the news.

Chinese coal imports from Russia fall 13% in April to 7.397 million metric tons, with overall coal imports declining 16% year-on-year. Russian shipments may increase in coming months as Moscow plans to support its coal industry with rail transportation discounts and guaranteed exports. Imports from Australia declined 3% to 6.97 million tons, while shipments from Indonesia tumbled 20% to 14.286 million tons amid pricing disputes.