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On April 26, according to the Wall Street Journal, in order to simplify the negotiations on reciprocal tariffs, US negotiating officials plan to use a new framework developed by the Office of the United States Trade Representative (USTR), which lists major categories of negotiations, such as tariffs and quotas, non-tariff trade barriers, digital trade, product origin principles, economic security and other commercial issues. In these categories, US officials will put forward specific requirements for individual countries, but people familiar with the matter emphasized that this document may also be adjusted at any time. People familiar with the matter said that the United States initial plan is to negotiate with 18 major trading partners in turn over the next two months. The initial plan is to alternately participate in the talks with six countries per week for three weeks (six countries in the first week, another six countries in the second week, and another six countries in the third week) until the deadline of July 8. If US President Trump does not extend the 90-day suspension period he set by then, those countries that cannot reach an agreement will begin to face reciprocal tariffs.On April 26, after the United States announced additional tariffs on goods from many countries, Peruvian business people expressed concerns that the US governments extreme measures would disrupt the global trade order and may even trigger a global economic recession. Alvaro Barrenechea Chavez, vice president of the Peruvian-Chinese Chamber of Commerce, said that the negative impact of the US tariff policy has begun to emerge and hoped that the US government would rethink. Recognizing the importance of countries working together to promote development, I think this is the best way to become a true "world citizen."Market news: Musks xAI company plans to raise about US$20 billion in a financing round.Conflict situation: 1. Ukrainian top commander: Russia tried to use air strikes as a cover to increase ground attacks, but was repelled by Ukraine. 2. Ukrainian Air Force: Russia launched more than 103 drones in the night attack on Ukraine. 3. Local officials said Ukraine launched an attack in the Belgorod region of Russia, killing two people. 4. The local governor said that Russia launched an attack on the Dnipropetrovsk region of Ukraine, killing one person and injuring eight people. Peace talks: 1. Trump: ① The situation between Russia and Ukraine is gradually becoming clear, and they are "very close" to reaching an agreement. ② Ukraine is unlikely to join NATO. ③ Ukraine has not yet signed the rare earth agreement and hopes that the agreement can be signed immediately. ④ It is foreseeable that the United States will conduct commercial cooperation with Ukraine and Russia after reaching an agreement. 2. Russian Foreign Minister: Russia is "ready to reach an agreement on Ukraine." 3. Russian Presidential Assistant Ushakov: Russia and the United States will continue to maintain active dialogue. 4. Russian Presidential Assistant: Putin discussed the possibility of resuming direct negotiations between Russia and Ukraine with the US envoy. 5. The differences between the United States, Europe and Ukraine are clear. The documents show that European countries and Ukraine have raised objections to some of the US proposals to end the Russia-Ukraine conflict. 6. Market news: As part of the peace agreement, the United States asked Russian President Putin to abandon the demilitarization requirement. Other situations: 1. President of Hungarys OTP Bank: We hope to return to all business areas in Russia after the (Russia-Ukraine) conflict ends. 2. Ukrainian President Zelensky: US ground forces are not necessary for Ukraine. 3. Trump said Crimea will remain in Russia, Zelensky: Never recognize it. Agreeing with Trumps view, Crimea cannot be recovered by force. 4. NATO Secretary-General Rutte met with Trump and senior US officials to discuss defense spending, NATO summit, and the Ukrainian conflict.Rising global trade risks, overall policy uncertainty and the sustainability of U.S. debt top the list of potential risks to the U.S. financial system, according to the Federal Reserves latest financial stability report released on Friday. This is the first time the Fed has conducted a semi-annual survey on financial risks since Trump returned to the White House. 73% of respondents said that global trade risks are their biggest concern, more than double the proportion reported in November. Half of the respondents believe that overall policy uncertainty is the most worrying issue, an increase from the same period last year. The survey also found that issues related to recent market turmoil have received more attention, with 27% of respondents worried about the functioning of the U.S. Treasury market, up from 17% last fall. Foreign withdrawals from U.S. assets and the value of the dollar have also risen on the list of concerns.

Hang Seng Index, ASX200, Nikkei 225: Fed Fear Weighed on Sentiment

Alice Wang

Mar 02, 2023 16:08

Market Overview

It was a bearish morning for the Asian markets, with the Hang Seng Index giving up some gains from the China PMI-fueled rally.


Economic indicators from the US and hawkish Fed chatter hit investor risk sentiment this morning. In February, the US ISM Manufacturing PMI continued to reflect a contraction across the sector.


However, sub-components of the report pointed to a pickup in inflationary pressure, weighing on riskier assets.


The ISM Manufacturing PMI increased from 47.4 to 47.7 in February. While the continued contraction across the manufacturing sector was bearish, the inflation sub-component showed further evidence of sticky inflation.


In February, the ISM Manufacturing Prices Index jumped from 44.5 to 51.3 versus a forecasted 45.1. Hawkish Fed commentary also fueled Fed Fear, with Fed Dove Neel Kashkari talking about being open to a 50-basis point rate in March.


The NASDAQ Composite Index and the S&P 500 responded to the stats and the Kashkari comments, falling by 0.86% and 0.47%, respectively. The Dow avoided the red, eking out a 0.02% gain.

Looking Ahead

This morning, the US Futures had a mixed session. The Dow mini was up 69 points, while the NASDAQ mini was down 54.75 points, reflecting investor uncertainty ahead of the US session.


It is a relatively busy day on the US economic calendar. US jobless claims, unit labor costs, and nonfarm productivity numbers will be in focus. While nonfarm productivity numbers will draw interest, the jobless claims and unit labor costs will likely have more influence.


A further decline in initial jobless claims, a jump in labor costs, and hawkish Fed chatter would further fuel market bets of a more hawkish Fed monetary policy outlook. FOMC member Waller will speak after today’s stats. Investors will want to know how high the Fed will be willing to go.


However, following the PMI numbers from China, today’s losses were modest considering the US inflation numbers, Fed commentary, and today’s stats.

ASX 200

The ASX 200 was down 0.02%. Disappointing building approval figures failed to spook investors. In January, building approvals tumbled by 27.6%, reversing a 15.3% increase from December. Economists forecast a more modest 8.0% decline. The numbers reflected the effects of RBA monetary policy on the housing sector.


Mining stocks continued to move northwards. Rio Tinto (RIO) and BHP Group Ltd (BHP) were up by 3.75% and 3.61%, respectively, with Fortescue Metals Group (FMG) gaining 3.80%. Newcrest Mining (NCM) trailed, rising by 1.56%.


Oil stocks were also on the move. Woodside Energy Group (WDS) and Santos Ltd (STO) saw gains of 1.60% and 0.57%, respectively. WTI Crude and Brent Crude gains delivered support, with Brent Crude up 0.07% to $84.37 this morning.


However, Bank stocks continued to struggle. ANZ Group (ANZ) and Westpac Banking Corp (WBC) slid by 2.18% and 1.81%, respectively. Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) saw losses of 1.21% and 1.11%, respectively.

Hang Seng Index

The Hang Seng was down 0.40% this morning as investors shifted attention to the US economic calendar and the Fed. There were no stats from China or HK to influence sentiment this morning.


However, HK retail sales numbers for January will be out after today’s market close.


Looking at the main components of the Index, Tencent Holdings Ltd (HK:0700) was down 1.57%, with Alibaba Group Holding Ltd (HK:9988) sliding by 4.46%.


However, it was a mixed morning for banking stocks. HSBC Holdings PLC fell by 0.16%, while China Construction Bank (HK: 0939) and Industrial and Commercial Bank of China (HK:1398) saw gains of 1.01% and 0.25%, respectively.


CNOOC (HK: 0883) found support from the upswing in crude oil prices, rising by 0.36%.