Ahead Today
G3: US Conference Board Consumer Confidence
Asia: Bank of Korea policy meeting, Taiwan industrial production
Market Highlights
President Trump said tariffs scheduled to hit Canada and Mexico next month were “on time” and “moving along very rapidly” following an initial delay. Nonetheless following the remarks, a US official quoted by Bloomberg News said the fate of the special 25% levy on Canada and Mexico – tied to border security demands – was still to be determined. Meanwhile, Trump’s reciprocal tariffs that could hit all countries seems more likely to go forward in April according to the official.
Overall, while markets wait with bated breath on the exact shape and magnitude of tariffs, the broader macro backdrop seems to suggest that US economic activity is slowing down and more importantly disappointing market’s expectations. Yesterday’s Dallas Fed Manufacturing Activity Index is an example, coming in at -8.3 from 14.1 previously. Meanwhile, the S&P US Services PMI was weaker than expected, with also a sharp spike in inflation expectations weighing on the University of Michigan Sentiment Index. With all that, US economic surprises have been turning downwards much more than economic surprises in the rest of the world.
Part of the weakness near-term in activity surprises may be attributed to policy uncertainty arising from Trump’s tariffs. More broadly, we think markets are perhaps somewhat complacent on the absolute growth risks of tariffs right now, and see some risk that global risk appetite and equity markets correct further from here.
Regional FX
Asian currencies traded with a mixed to slightly negative tone with USD/CNH rising to 7.2569, while MYR (-0.19%), SGD (%-0.2%), and KRW (-0.1%) underperforming marginally. Alibaba’s shares tumbled by 10% in US trading session, with China tech stocks more broadly also taking some hit, marking a sharp reversal after a run-up amid optimism about artificial intelligence in the wake of Deepseek. Trump’s latest directive to the Committee on Foreign Investment in the US to limit Chinese spending on technology and other strategic US sectors may have been a catalyst for the sell-off. Moving forward, the next focus for the market will be China’s National People’s Congress in March, where markets will watch closely for any specifics on stimulus measures. Later today, the Bank of Korea will hold its policy meeting. The consensus together with ourselves are calling for a 25bps rate cut, but we think the guidance is unlikely to be a meaningfully dovish one and is more likely to lean towards a neutral tone on the path forward, given the uncertainties globally including on tariffs together with South Korea’s domestic situation.
