It is clear that the world is navigating a complex and uneasy landscape. I will be sharing my observations for 25 February 2025. Monday’s choppy trading session on Wall Street painted a vivid picture of the uncertainty gripping investors, with major US equity indices finishing the day as a mixed bag.
The MSCI US index slipped 0.6 per cent, dragged lower by a 1.5 per cent drop in the information technology sector, while the tech-heavy Nasdaq took an even sharper hit, tumbling 1.2 per cent. What’s driving this jittery sentiment?
Trade war fears are casting a long shadow, fuelled by President Donald Trump’s latest comments on sweeping tariffs targeting imports from Canada and Mexico, set to kick in next week after a month-long delay expires. Add to that his memorandum aimed at curbing Chinese investment in key American sectors like tech and energy, and you’ve got a recipe for heightened global risk aversion.
Let’s start with the trade war angle, because it’s the elephant in the room. Trump’s insistence that tariffs on Canada and Mexico “will go forward” has sent ripples through markets already on edge. These aren’t small players—Canada supplies roughly 60 per cent of US crude oil imports, while Mexico is a critical cog in the North American supply chain, particularly for auto parts and manufacturing.
A 25 per cent tariff on these imports, as Trump has hinted, could jolt consumer prices for everything from gasoline to cars, stoking inflation fears at a time when the Federal Reserve is gearing up to digest key inflation data later this week. The personal consumption expenditures (PCE) price index, a Fed favourite, is on the horizon, and any sign of tariff-driven price spikes could complicate its delicate balancing act between growth and inflation control.
Markets are already pricing in this tension, with US Treasury yields dipping slightly—10-year yields fell 2 basis points to 4.40 per cent, and 2-year yields hovered around 4.17 per cent. It’s a subtle shift, but it signals investors seeking safety amid the storm.
Across the Atlantic, there’s a glimmer of stability amidst the chaos. Germany’s federal election on Sunday delivered a win for Friedrich Merz and the conservative CDU/CSU coalition, a result that’s been met with cautious optimism. Merz’s victory sidesteps the extremes of populist upheaval, offering a steady hand to Europe’s largest economy at a time when trade tensions could easily spill over into the Eurozone.
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German stocks have seen a modest lift from this outcome, though broader European indices like the Stoxx 600 haven’t escaped the tariff-related gloom, shedding 0.7 per cent earlier this week. It’s a reminder that while domestic politics can provide a buffer, the interconnectedness of global trade means no one’s fully insulated from Trump’s tariff salvo.
Over in Asia, the mood is decidedly sour. The MSCI Asia ex-Japan index dropped 0.91 per cent on Monday, with Hong Kong’s Hang Seng and China’s CSI 300 relinquishing early gains to close down 0.58 per cent and 0.22 per cent, respectively. Chinese tech stocks, already battered by regulatory scrutiny and a slowing domestic economy, took another hit as Trump’s memorandum targeting Chinese investment in US tech and energy sectors added fuel to the fire.
This isn’t just about tariffs—it’s a broader signal of escalating US-China rivalry, with strategic sectors like semiconductors and renewable energy caught in the crosshairs. Early trading in Asia this morning showed indices still in the red, though US equity futures are hinting at a potential rebound when Wall Street opens later today. It’s a classic push-and-pull—risk-off sentiment clashing with bargain-hunting optimism.
Commodities, meanwhile, are telling their own story. Gold climbed 0.4 per cent to a record high on Monday, a clear sign that safe-haven demand is surging as investors brace for turbulence. Brent crude nudged up 0.5 per cent, buoyed by fresh US sanctions on Iran and OPEC’s pledge to offset overproduction, though the bigger picture remains murky.
Tariffs on Canadian oil could tighten North American supply chains, potentially pushing prices higher, but a broader trade war might dampen global demand, pulling them back down. It’s a tug-of-war that’s keeping oil traders on their toes. The US Dollar Index, meanwhile, held steady at 106.66, reflecting a market that’s not yet ready to bet big on either a flight to safety or a risk-on rally.
Now, let’s pivot to the crypto corner, where the mood is even bleaker. Ether, Solana, and Dogecoin are reeling, down 5 per cent, 8.3 per cent, and 7 per cent respectively, as the sector licks its wounds from last week’s massive hack—the biggest in its history. Since mid-December, most altcoins have shed 30-80 per cent of their value, according to Arca, a digital asset manager.
Bitcoin’s holding up better, hovering around US$94,300, but the broader crypto market is under siege. The guilty plea from OKX, a major exchange, for violating US anti-money laundering laws doesn’t help—it’s a US$505 million reminder of the regulatory risks still haunting the space.
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Yet, there’s a silver lining in South Korea, where the Financial Services Commission (FSC) just greenlit a roadmap for institutional investors to dive into digital assets. Starting in the second half of 2025, corporates can open real-name accounts to sell crypto for fiat, with plans to expand access gradually. Blockchain advisor Anndy Lian’s bold prediction—that this could vault South Korea to the top of global crypto trading by year-end—might seem ambitious, but it underscores the shifting tides in institutional adoption.
So, where does this leave us? From my vantage point, the global risk sentiment feels like a tightrope walk. The tariff threats are real and imminent, with Canada and Mexico bracing for impact next week. The US economy, already navigating a post-pandemic recovery, could face higher costs and slower growth if trade frictions escalate, though Trump’s camp would argue it’s a necessary move to protect American jobs.
China’s tech clampdown adds another layer of complexity, potentially accelerating a decoupling that’s been years in the making. Yet, there are counterweights—Germany’s political stability, South Korea’s crypto pivot, and the resilience of safe-haven assets like gold suggest pockets of calm amid the storm.
I can’t help but see this as a pivotal moment. The data backs up the unease: equity indices are faltering, yields are softening, and crypto’s taking a beating. But there’s also a case for cautious optimism—US futures are pointing up, and Asia’s losses could be a buying opportunity for the bold. My take? We’re in for a bumpy ride, but markets have a way of finding their footing.
The real test will come later this week with those US inflation numbers—if they’re hotter than expected, all bets are off. For now, I’d keep an eye on gold and the dollar, the quiet sentinels of a world holding its breath.
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