Markets across the globe remained relatively steady as various economic indicators and policy statements emerged from key regions. Australian business confidence showed signs of improvement, nearly reaching its long-term average, while South Korea's state think tank, KDI, lowered its GDP growth forecast for 2025 from 2.0% to 1.6%. European Central Bank (ECB) Chief Christine Lagarde affirmed that conditions for economic recovery remain intact despite global uncertainties. Meanwhile, the probability of a rate hike by the Bank of Japan rose significantly, and the Kospi index in South Korea opened with a positive gain of 0.5% at 2,532 points.
In addition to these developments, South Korea's top think tank, KDI, expressed concerns over the impact of US President Donald Trump's expanding tariffs. The President announced his expectations for upcoming meetings over the next four weeks, focusing on cars, drugs, and chips. These tariffs have not disrupted markets significantly, with currency movements staying muted except for the Indian rupee, which saw its sharpest one-day rally since 2022, reaching 86.6 against the US dollar.
The construction sector in Ireland experienced a downturn as the Construction PMI fell to 48.2 from a previous 51.6, indicating a contraction. Meanwhile, the Trump Administration continued its push for European allies to purchase more US weapons for Ukraine. Despite these geopolitical tensions, Bitcoin remained stable, oscillating around the $97-98K level.
Federal Reserve Chair Jerome Powell is set to begin his first of two days of annual testimony tonight. Investors are keenly awaiting this testimony along with the upcoming US January Consumer Price Index (CPI) data set to be released on Wednesday night Asia time. Additionally, China's local governments have been proactive in managing financial stability by issuing or planning to issue CNY378 billion in special bonds by 2025 to refinance hidden debts.
Australian business confidence has shown a promising rebound, nearing its long-term average. This improvement suggests an optimistic outlook among businesses regarding future economic conditions despite global challenges. The sentiment has been buoyed by improved economic activity and positive consumer spending indicators.
Conversely, South Korea's KDI has revised its GDP growth forecast downward for 2025 to 1.6%, reflecting concerns about domestic and international economic pressures. The think tank highlighted potential risks stemming from escalating trade tensions and uncertainties in global supply chains, which could hinder economic growth.
ECB Chief Christine Lagarde reassured markets by stating that the fundamental conditions for a recovery remain in place. Lagarde emphasized the importance of continued fiscal support and monetary policy measures to sustain economic momentum across the Eurozone.
In Japan, the likelihood of a rate hike by the Bank of Japan has risen sharply, with the Overnight Index Swap (OIS) probability of a 25 basis point hike in July increasing to 83.5%. This shift signifies growing speculation about the central bank's response to rising inflationary pressures.
South Korea's Kospi index showed resilience by opening with a 0.5% gain at 2,532 points. This positive start reflects investor optimism despite broader economic concerns in the region.
KDI's concerns about US tariffs were echoed by South Korean policymakers who fear potential disruptions in trade and economic stability. President Trump's tariff announcements have sparked apprehension among trading partners, though markets appear to have absorbed this news without significant volatility.
The Indian rupee's sharp rally against the US dollar marked its most significant single-day gain since 2022, closing at 86.6. This movement was driven by foreign capital inflows and improved investor sentiment toward India's economic prospects.
Ireland's construction sector faced challenges as indicated by a decline in the Construction PMI to 48.2 from 51.6 previously. This drop suggests contractionary pressures within the sector amid broader European economic headwinds.
The Trump Administration's push for European allies to increase their purchase of US weapons for Ukraine highlights ongoing geopolitical tensions and the strategic importance of military alliances. The administration's stance underscores its commitment to supporting Ukraine amidst regional conflicts.
Despite these geopolitical developments, Bitcoin maintained stability within a narrow trading range of $97-98K. The cryptocurrency market continues to demonstrate resilience amid fluctuating investor sentiment.
Investors are closely monitoring Federal Reserve Chair Jerome Powell's upcoming testimony for insights into US monetary policy direction. Powell's testimony is expected to provide valuable guidance on interest rates and inflationary trends.
Furthermore, market participants are anticipating the release of the US January Consumer Price Index (CPI) data scheduled for Wednesday night Asia time. This key economic indicator will offer insights into inflation dynamics and potential implications for monetary policy adjustments.
China's proactive approach to managing local government debts through special bond issuances highlights its commitment to maintaining financial stability. The planned issuance of CNY378 billion in special bonds by 2025 aims to address hidden debts and support sustainable economic growth.