Daily Market Summary – Mar 24th

New U.S. Tariffs and Their Global Impact

President Donald Trump's administration is preparing to impose new tariffs on April 2, with uncertainty surrounding their scope and impact on global markets. Reports suggest that while blanket duties on sectors like automobiles, pharmaceuticals, and semiconductors may not be implemented, a 25% tariff on countries purchasing oil or gas from Venezuela is planned. Treasury Secretary Scott Bessent indicated that the tariffs might target a 'Dirty 15' of nations with trade imbalances with the U.S. The ongoing tariff threats have affected business expectations and market sentiment, with companies concerned about inflation and profit margins. The Federal Reserve noted potential upward pressure on price growth due to tariff threats, though the extent remains unclear. Meanwhile, the U.S. is proposing billion-dollar levies on Chinese ships to curb China's dominance in shipbuilding, which could double or triple shipping costs and disrupt global trade. The proposal aims to revive the U.S. shipbuilding industry but faces criticism for potentially harming the U.S. economy by making American goods expensive and diverting trade to Canada and Mexico.

Hyundai's U.S. Investment to Avoid Tariffs

Hyundai Motor Co. has announced a $20 billion investment in the United States, including a $5 billion steel plant in Louisiana, as part of efforts to avoid U.S. tariffs. This move aligns with President Trump's push for foreign companies to increase U.S. production amid escalating trade tensions. Hyundai's strategy includes a new electric vehicle plant in Georgia and battery joint ventures. Trump's tariff policies, including potential sectoral tariffs on autos and other industries, have created uncertainty in the market, affecting companies like Nucor Corp. and United States Steel Corp. The auto industry, with integrated supply chains across North America, is particularly vulnerable to these tariffs. Hyundai's investment aims to localize production and mitigate policy risks, while Trump's broader trade policies continue to impact investor sentiment and market dynamics.

China's Fiscal Strategy Amid U.S. Tariff Threats

China is delaying its budget implementation to preserve fiscal power amid potential U.S. tariff impacts. In the first two months, combined expenditure in China's main fiscal accounts rose by 2.9% to 5.65 trillion yuan, the weakest start since 2022. Despite a 2.9% drop in total income and a 15.7% slump in land sales, China issued a record 2.4 trillion yuan in government bonds to cover the deficit. Economists expect fiscal expenditure to accelerate from the second quarter as U.S. tariffs affect Chinese exporters. Policymakers claim ample tools to support the economy, but the shortfall between spending and income doubled to 622 billion yuan, funded by heavy debt issuance. Meanwhile, Chinese Premier Li Qiang urged global business leaders to resist protectionism and support globalization at the China Development Forum in Beijing, amid escalating trade tensions with the U.S. Li warned against decoupling and breaking supply chains, emphasizing the need for cooperation between the U.S. and China.

European Lawmakers Push for Semiconductor Support

European lawmakers are urging the European Commission to quickly implement a new support program for the semiconductor industry, focusing on AI chips and addressing technological gaps. A letter signed by 54 lawmakers criticized the slow progress of the original 2023 Chips Act and emphasized the need for Europe to become an attractive location for R&D, production, and investment. The call follows similar demands from European chip industry firms, highlighting the urgency due to geopolitical developments and competition between the U.S. and China. The letter also noted the failure to attract advanced chipmakers, such as Intel, and stressed the importance of protecting European industry from extraterritoriality. Meanwhile, the European Central Bank is considering lowering borrowing costs due to factors like lower energy prices, euro appreciation, and potential trade tensions with the U.S. Since the ECB's March meeting, markets have anticipated further rate cuts, and policymakers are preparing for their next meeting on April 17, where they will assess new data and potentially adjust their monetary policy stance.

BYD Surpasses Tesla in Annual Revenues

BYD has surpassed Tesla in annual revenues for the first time, with sales reaching $107.2 billion compared to Tesla's $97.7 billion. BYD's profits also hit a record high, increasing by more than a third to 40.3 billion yuan. The company introduced a fast-charging system that significantly boosted its stock price, which has risen over 50% this year. Despite its success, BYD's market value is still less than a fifth of Tesla's. In the UK, BYD outsold Tesla for the first time, marking a 500% annual increase in sales. Tesla's sales declined by 8% amid a price war and rising interest rates. BYD's expansion into the UK and Europe and its competitive pricing strategy have strengthened its position in the global EV market.

Malaysia Faces Economic Challenges from Trade Disputes

Malaysia's central bank anticipates significant growth challenges due to global trade disputes and geopolitical tensions, impacting exports and economic stability. Governor Abdul Rasheed Ghaffour expects a challenging external environment in 2025, despite a growth forecast of 4.5% to 5.5%. Malaysia aims to leverage domestic growth and a diversified export structure to mitigate risks. Concerns include potential U.S. tariffs on semiconductors, affecting Malaysia's significant semiconductor export market. The government forecasts 5% trade growth in 2025, down from 9% in 2024. The central bank focuses on maintaining price stability and managing inflation, with expected short-term price increases due to subsidy reductions and tax expansions. The ringgit's performance will be influenced by external policy shifts.

Russia Warns of Prolonged Low Oil Prices

Russia's central bank warns of a potential prolonged low oil price cycle due to the capacity of the United States and OPEC to flood the market, reminiscent of the 1980s price collapse that contributed to the Soviet Union's downfall. This warning comes amid U.S.-Russia talks on Ukraine and potential U.S. sanctions. The central bank highlights risks from increased U.S. and non-OPEC oil production, with OPEC's spare capacity near record highs. Russia's economy, heavily reliant on oil and gas, faces challenges from low oil prices and a strong rouble, impacting budget parameters. Historical financial shocks from low oil prices, such as the 1998 default and 2008 economic stabilization efforts, underscore the potential impact. Russia and Saudi Arabia emphasize the importance of the OPEC+ deal for market stability, with Saudi Arabia capable of increasing production significantly.

Financial Markets React to Trade and Economic Developments

Financial markets showed mixed movements with U.S. stock futures rising and the dollar wavering amid upcoming data releases, Chinese earnings, and potential U.S. tariff hikes. S&P 500 and Nasdaq 100 futures increased, while the euro and emerging markets like Turkey's lira experienced fluctuations. James Hardie's shares fell after announcing a major acquisition. Key economic indicators and earnings reports are expected this week, but U.S. President Trump's tariff plans are likely to dominate market sentiment. U.S. Treasury yields have decreased, and investors are cautious about Trump's trade policies. Hong Kong shares have seen significant gains, but recent declines suggest uncertainty. Gold and bitcoin remain strong, and diplomatic efforts are anticipated to address tariff concerns, though not immediately.