Asian stock markets showed modest gains on Monday as investors anxiously awaited the fate of looming tariffs. Meanwhile, Bitcoin experienced a notable surge following news that it would be included in a new U.S. strategic reserve of cryptocurrencies.
Bitcoin Soars Amid News of U.S. Cryptocurrency Reserve
U.S. President Donald Trump recently announced on social media that five digital assets, including Bitcoin, would be added to a new reserve. The digital assets named were Bitcoin, Ether, XRP, Solana, and Cardano.
Bitcoin, the largest cryptocurrency by market capitalization, surged by 10%, reaching $92,905. Ether, the second-largest cryptocurrency, saw a slight pullback, settling at $2,443 after climbing 13% over the weekend.
Asian Markets Show Modest Gains
MSCI’s broad index for Asia-Pacific shares outside Japan rose by 0.3%. In Japan, the Nikkei index increased by 1.0%, while Chinese blue chips gained 0.8%. This increase was driven by a slight uptick in the Caixin/S&P manufacturing PMI, which rose to 50.8 in February from 50.1.
Futures for the S&P 500 and Nasdaq remained flat, despite a late rally on Friday following a week of significant losses.
In Europe, EUROSTOXX 50 futures rose 0.3%, while FTSE futures and DAX futures increased by 0.6%.
Market Reaction to Political Developments
Investor sentiment was slightly bolstered by the news that European leaders were working on a peace plan for Ukraine to present to the United States. This development came after a heated exchange between Ukrainian President Volodymyr Zelensky and Trump in the Oval Office.
However, there were growing concerns about the U.S. economy. A series of weak data reports triggered fears of a possible recession. The Atlanta Fed GDPNow tracker, a closely watched economic indicator, dropped sharply from +2.3% to an annualized -1.5%.
On Sunday, U.S. Commerce Secretary Howard Lutnick confirmed that tariffs on Canada and Mexico would go into effect on Tuesday. However, President Trump would have the final say on whether the planned 25% tariffs would be implemented.
In addition to these concerns, a new 10% levy on Chinese imports is expected to take effect this week, just as the National People’s Congress opens its third annual session on Wednesday. There, stimulus measures and potential responses to U.S. tariffs could be announced.
The Impact of Tariffs on the Economy
JPMorgan economist Michael Feroli commented on the uncertainty of the situation, stating that it was difficult to determine whether President Trump’s tariff announcement was a bluff or a genuine policy shift. If the tariffs were to be implemented, they could pose a significant challenge to economic activity while potentially driving up consumer prices.
U.S. Payrolls Report and Federal Reserve’s Decisions
The uncertainty surrounding tariffs and economic data has heightened expectations for the release of the U.S. January payrolls report, which is due on Friday. A weak jobs report could lead to increased speculation that the Federal Reserve may need to cut interest rates by three times this year.
Currently, Fed fund futures predict 69 basis points of easing by December, up from 46 basis points just a week ago. The yield on 10-year U.S. Treasuries extended its recent rally, dropping to 4.220%. This marked a 35-basis-point decline for the month of February, the largest monthly drop since late 2023.
On Friday, Federal Reserve Chair Jerome Powell is expected to speak on the economic outlook shortly after the release of the jobs report. At least seven other Fed officials will also make appearances throughout the week.
European Central Bank’s Expected Rate Cut
Across the Atlantic, the European Central Bank (ECB) is widely anticipated to cut its rates by 25 basis points to 2.50% on Thursday. This follows a string of weak data reports. Many analysts expect the ECB to lower rates further, potentially to below 2% by the end of the year.
Currency Markets and Global Economic Sentiment
In currency markets, the euro rose by 0.5% to $1.0421, driven by optimism surrounding a potential Russian-Ukrainian peace deal. The euro had dropped as low as $1.0360 on Friday.
The U.S. dollar eased against several currencies. It fell to 1.4445 Canadian dollars after rising by 1.7% last week. It also dipped to 20.4586 Mexican pesos.
The U.S. dollar slightly weakened against the Japanese yen, dropping to 150.32 yen. The dollar index, which measures the greenback against a basket of currencies, also saw a slight decline, reaching 107.180.
Gold and Oil Markets
Gold prices firmed up by 0.5%, reaching $2,873 an ounce. This came after a 3% drop last week, which had sparked concerns about the metal’s future trajectory.
Meanwhile, oil prices showed slight recovery after a week of declines, which had been fueled by speculation that the U.S. might ease sanctions on Russian oil output. Additionally, fears of a potential global trade war could dampen energy demand.
Brent crude futures rose by 76 cents, reaching $73.57 per barrel. U.S. crude futures increased by 74 cents, hitting $70.50 per barrel.
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