As investors navigate trade dispute dynamics and await earnings reports from major tech companies on Wall Street, Asian stocks rose in line with US shares. However, Chinese markets dropped upon reopening. Following the Lunar New Year holidays, China’s stock market saw a decline on Wednesday, while Asian shares experienced an increase for the second consecutive day. After Alphabet and AMD suffered losses during after-hours trading, contracts for US and European stocks also fell. Increased demand for safe-haven assets propelled gold to a record high, and the Yen gained strength against the Dollar. Asian tech stocks mirrored the upward movement of their US counterparts, even as investor sentiment turned cautious regarding China, which retaliated shortly after the US imposed a 10% tariff on all imports from the country. The opening moves in the latest US-China trade conflict indicated that Xi is adopting a more conservative stance compared to Trump’s first term. The Yen appreciated in value due to solid domestic wage data and official comments about inflation, raising expectations that the Bank of Japan would continue increasing interest rates. Fears that the trade war could impede global economic growth overshadowed the announcement of stricter sanctions on Iran, resulting in a slight decline in commodities like oil.Hamas representative Sami Abu Zuhri condemned U.S. President Donald Trump’s suggestion of taking over the Gaza Strip, describing it as “ridiculous” and warning that such proposals could destabilise the Middle East. Trump proposed U.S. control over Gaza to focus on its economic development following the resettlement of Palestinians, a plan that would break with decades of U.S. policy on the Israeli-Palestinian conflict and provoke Arab nations. The announcement, lacking in details, was made during a press conference in Washington with Israeli Prime Minister Benjamin Netanyahu.In Europe French Prime Minister François Bayrou recently invoked Article 49.3 to pass parts of the state and social security budget bill without a parliamentary vote, prompting leftist parties, led by France Unbowed, to file a motion of no-confidence. This follows a similar scenario that led to the collapse of Michel Barnier’s government last year. However, stronger OAT performance and reduced 10Y OAT-Bund spreads suggest a different outcome this time. The government has proposed a modest deficit target of 5.4% of GDP and engaged opposition parties, with the Socialist Party confirming it won’t support the no-confidence motion. While this likely secures Bayrou’s position and advances the budget, the uneasy political dynamics and contentious reforms, such as pensions, remain potential challenges ahead.Key market-moving events on Wednesday include the release of service PMIs for the EU, Germany, France, and the UK, as well as EU producer prices and remarks from ECB chief economist Philip Lane. In the U.S., the ISM services survey, ADP employment report, and Treasury refunding announcement are scheduled. Additionally, speeches by Federal Reserve officials – Governor Michelle Bowman, Vice Chair Philip Jefferson, and Presidents Barkin and Goolsbee – could influence market sentiment.
Overnight Newswire Updates of Note
(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut (1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
CFTC Data As Of 31/1/25
Technical & Trade ViewsSP500 Pivot 6040
EURUSD Pivot 1.0435
GBPUSD Pivot 1.2614
USDJPY Pivot 153.77
XAUUSD Pivot 2692
BTCUSD Pivot 101,960
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