Breakfast Bites - Directionless

The markets are a rollercoaster; No clarity on tariffs; Google reports after the close

Apr 24, 2025

Rise and shine everyone.

Markets are somewhat subdued this morning. Yesterday’s roller-coaster ride was to keep people on the sidelines. Liquidity is still very thin in US markets.

News flow is certainly driving the trend. Earlier yesterday, we heard that President Trump may be softening his stance but, Treasury Secretary Bessent came out and clarified that de-escalation would need to be mutual, denying suggestions that President Trump would unilaterally cut levies on Chinese goods. He also added that a full China deal make take 2-3 years. That’s a really long time!

Markets in Asia also traded without much direction today, after yesterday’s US trading action. The Hang Seng index reversed about half of yesterday’s gains, falling 1.2% to underperform regional peers. In contrast, the ASX rose 0.7%, showing relative strength. There seems to be a general lack of conviction globally.

Gold found some footing after its sharp pullback from the record $3,500/oz level. The reversal was halted around $3,280 and prices are currently hovering above $3,300, suggesting buyers are stepping back in at key support levels.

Thailand announced plans to tighten rules around Certificates of Origin, addressing a key US concern about Chinese goods being transshipped through Southeast Asia. Meanwhile, South Korea’s Q1 GDP contracted for the first time since late 2020, adding to concerns about regional growth momentum.

SK Hynix surprised to the upside, posting a 158% jump in net profit on strong AI chip demand. Despite the beat, the stock slipped 1.3%, possibly on profit-taking or broader market hesitation.

In Europe, Germany’s IFO survey showed improvement across business climate, current assessment, and expectations, building on yesterday’s better-than-expected manufacturing PMI. However, sentiment remains subdued and the services sector didn’t impress. German 10-year yields edged up to 2.49%.

UK-US trade talks remain on hold, but UK Chancellor Rachel Reeves hinted at potential flexibility, including a cut in auto import tariffs. She is set to meet US Treasury Secretary Scott Bessent on Friday.

Earnings season continues to pick up pace with key reports expected today from major European names including Adidas, Unilever, Nestle, Roche, and Nokia. Markets may remain in wait-and-see mode until more earnings roll in or tangible movement emerges on the US-China trade front.

Bessent at the IMF / World Bank Spring Meetings

Support for IMF and World Bank: Bessent affirmed the Trump administration’s willingness to work with the institutions as long as they remain committed to their missions, dismissing fears of a disruptive overhaul.
Endorsement of US Dollar Dominance: He reiterated the US dollar’s central role in the global financial system, saying it will remain the world’s reserve currency “for my lifetime.”
Skepticism of Alternatives: Bessent joked that no other country truly wants to be responsible for global reserve currency status, noting that recent euro strength could strain export-heavy European economies.
US Commitment to Global Engagement: His speech reassured markets and international partners that the US remains engaged with global institutions, prompting what observers called “a collective sigh of relief.”
US-China Trade Tensions: Bessent dismissed any notion of unilateral tariff cuts, calling the current US and Chinese levies “the equivalent of an embargo” and warning that the status quo is unsustainable without mutual de-escalation.

Tariff Updates

Trump Eases Auto Tariffs: Car parts may be exempt from new China, steel, and aluminum tariffs after industry pushback, though 25% auto and parts tariffs still apply.
Auto Industry Win: Exemptions could prevent price hikes, supply chain issues, and job losses in the US auto sector.
Shipping Disruptions: US ocean freight bookings from China down 60% post-tariffs; carriers cancel sailings, risking 2021-level surge pricing and summer shortages.
EU-China Thaw: EU and China close to lifting sanctions to restore relations and revive investment deal after US market access loss.

And this is what we got from China this morning.