Markets climb on trade ease, AI boost 22/01/2025

HOT stories for today

China warns of Trade war risks

• Chinese Vice Premier Ding Xuexiang cautioned that a trade war yields “no winners,” as China, the world’s second-largest economy, braces for potential tariffs under U.S. President Donald Trump’s newly inaugurated administration. “Protectionism leads nowhere. [A] trade war has no winners,” Ding stated Tuesday, via an official English translation at the World Economic Forum in Davos, Switzerland. His speech echoed Chinese President Xi Jinping’s 2017 Davos address, warning that “pursuing protectionism is like locking oneself in a dark room.”
• Following his second inauguration Monday, Trump suggested tariffs on Mexico and Canada could begin in February. Regarding China, he hinted tariffs could pressure ByteDance, the Beijing-based owner of TikTok, to divest the app, which faces potential bans in the U.S. Ding attributed China’s economic difficulties to external factors and “temporary pains” from restructuring, with the country pivoting from real estate to technology-driven growth. He also called for global AI governance through the United Nations, warning of “unimaginable consequences” if global systems fracture, asserting no nation could escape unscathed.

Stocks on the move:

• Apple (AAPL): Shares dropped 4% after Jefferies downgraded the stock to underperform from hold, citing a "subdued" AI outlook and concerns about missing revenue expectations in its upcoming fiscal Q1 earnings report. Loop Capital also downgraded the stock to hold.
• Charles Schwab (SCHW): Shares rose over 3% following a stronger-than-expected fourth-quarter earnings report.
• Walgreens Boots Alliance (WBA): The stock plunged 12.7% after the U.S. Justice Department filed a nationwide lawsuit, alleging Walgreens knowingly filled illegal prescriptions for opioids and other addictive painkillers.
• Tesla (TSLA): Shares fell 0.57% Tuesday, erasing earlier gains driven by Trump’s decision to end the ‘EV mandate.’ The decline mirrored a broader slump in the EV sector.
• Netflix (NFLX): Shares surged over 14% after fourth-quarter earnings exceeded expectations. The company surpassed 300 million paid memberships, adding a record 19 million subscribers, driven by its content lineup, product improvements, and seasonal trends.

Today’s action

• Asia-Pacific markets saw mixed performance Wednesday, with Chinese stocks declining after U.S. President Donald Trump suggested a 10% tariff on China. Meanwhile, Korean tech stocks surged, with SK Hynix (+2.52%) and LG Electronics (+2.85%) leading gains amid reports that South Korean companies may relocate production from Mexico to the U.S. in response to Trump’s protectionist policies. European markets are poised to maintain positive momentum.
• In the U.S., the major indices advanced overnight, as Trump’s trade comments were perceived as less aggressive than anticipated. S&P 500 futures climbed 0.31%, Nasdaq 100 futures rose 0.69%, and Dow Jones Industrial Average futures remained near flat. Earnings season continues Wednesday, with reports expected from Procter & Gamble (PG), Johnson & Johnson (JNJ), Halliburton (HAL), and GE Vernova.

Wahtclist: AAPL, NFLX, TSLA, PG, JNJ, HAL, GEV, COIN

Bitcoin
 

• US crypto stocks ended the day lower after President Donald Trump’s first day in office, which passed without mentioning cryptocurrency, despite industry speculation about immediate action. Coinbase (COIN) fell 8.5% during early trading to $274.80 but recovered nearly flat at $294.19. MicroStrategy (MSTR), a major Bitcoin buyer, also traded primarily flat, ending 1.87% lower at $389.10 after rebounding from an early 7% dip.
• In contrast, Bitcoin continued its upward momentum, climbing 3.45% in the past 24 hours to $105,770, according to CoinMarketCap data. It is inching closer to its all-time high of $108,659. Should Bitcoin reclaim and sustain levels above the $109,000 resistance, it would signal renewed bullish momentum. Coupled with strong volume and alignment across technical indicators such as the MACD and moving averages, this breakout could pave the way for further upside, potentially retesting higher price zones.
  Watchlist: Bitcoin: 89 000-109 000, Ethereum: 2900-3600, Solana: 220-296.5

Forex
 

• The Japanese Yen (JPY) retreated from a one-month high against the US Dollar (USD) on Tuesday, as the USD/JPY pair extended its rebound during Wednesday’s Asian session. Risk-on sentiment in equity markets pressured the safe-haven yen, while a modest recovery in US Treasury yields supported the dollar. Diverging monetary policy expectations between the Bank of Japan (BoJ) and the Federal Reserve (Fed) are expected to limit significant JPY downside ahead of the BoJ meeting starting Thursday.
• In other currency movements, the EUR/USD pair dipped to 1.0415 during Asian trading hours, with the Euro (EUR) weakening against the US Dollar (USD). The decline followed US President Donald Trump’s renewed tariff threats targeting the European Union (EU). Additionally, anticipation of an interest rate cut at the European Central Bank’s (ECB) January meeting added pressure on the Euro. Market participants will closely watch ECB President Christine Lagarde’s speech later on Wednesday for further cues.
  Watchlist: EUR/USD: 1.0170-1.0500, USD/JPY: 154.7-159

Basic Materials
 

• West Texas Intermediate (WTI), the benchmark for US crude oil, trades around $75.55 in Wednesday’s Asian session, extending its decline. The drop follows US President Donald Trump’s announcement of potential tariffs on key trade partners and plans to ramp up US oil and gas production. Additionally, the EIA’s projection of lower oil prices in 2025 amid ongoing uncertainties weighs further on market sentiment.
• Gold (XAU/USD), meanwhile, continues its ascent for the third consecutive day, climbing beyond the $2,750 mark to its highest level since early November. The surge is driven by safe-haven demand fueled by Trump’s tariff threats and growing bets that the Federal Reserve will implement two rate cuts this year. A modest USD rebound and a risk-on mood have done little to limit the yellow metal’s upward momentum.
  Watchlist: GOLD 2500-2800, US Oil: 75.00-79.50
   

Key Economic Events Today:

EST time:

10:00 am: USD CB Leading Index
10:15 am: EUR ECB President Lagarde Speaks
06:50 pm: JPY Trade Balance

Earnings 

BMO (Before the US Market opens)

PG              Procter and Gamble
JNJ             Johnson and Johnson
ABT            Abbott Laboratories
GEV            GE Vernova
APH            Amphenol Corp.

AMC (After the US Market closes): KMI, DFS, STLD

The TEFS Analyst team wishes you a successful day!