Macro Wrap

China's factory activity contracted to the slowest pace since August, as production fell ahead of China’s eight-day Lunar New Year holiday. The official manufacturing purchasing managers’ index fell to 49.1 from 50.1 in December, suggesting weak global demand both production and new orders as it fell to a five-month low, The non-manufacturing measure of activity in construction and services fell to 50.2 from 52.2 last month. China's industrial profits for corporates fell for a third straight year in 2024, seeing a contraction of 3.3% in 2024. Profits at state-owned firms dropped 4.6% in 2024, those at foreign firms fell 1.7% and private-sector companies recorded a 0.5% rise in earnings. Sentimentally negative for industrial commodities and metal mining stocks.

The possibility of a trade war erupted on Sunday between the United States and Colombia, as sudden imposition of a 25% emergency tariff in Colombia and threaten to escalate the tariffs to 50 percent in a week. Colombia is not a big trading partner but could send signals to larger trading partners to US. to fall in line with Trumps dictate, The. Sentimentally negative for global financial markets.

The USD fell against all its G-10 peers on Fri after President Trump appeared to soften his approach toward tariffs on China. The US Dollar Index (DXY) slipped 0.6% to close at 107.443 and registered its worst week since Nov 2023. US Treasuries rose on Fri, underpinned by weaker-than-expected Jan preliminary readings for S&P Global US services and composite PMIs. The 2-year yield fell 2.3 bps to 4.266% while the 10-year yield dropped 2.2 bps to 4.621%.

US consumer sentiment fell to 3-mth low of 71.1 in Jan, from 74.0 in Dec as concerns about unemployment and the impact of potential tariffs on inflation weighed. The expectations index also fell to 6-mth low of 69.3 from 73.3. Consumers see rising prices ahead, with 1-yr ahead inflation rising to 3.3% in Jan from 2.8% in Dec, the highest since last May. Meanwhile, 5 to 10-yr inflation rose to 3.2% from 3.0%. US existing home sales increased 2.2% m/m to an annualized rate of 4.24m in Dec, up from 4.15m in Nov. However, for all of 2024, sales reached the lowest since 1995 and marked the third straight annual decline as homeowners and buyers grappled with rising rates.

The S&P PMI, US businesses started 2025 still in an upbeat mood, with rising optimism notable in the manufacturing sector (50.1 vs 49.4) though service providers (52.8 vs 56.8) also entered 2025 in confidence. Although overall growth (52.4 vs 55.4) slowed slightly, sustained confidence due to policy support from the new administration suggests that this slowdown might be short-lived. Sentimentally positive for USD.

Eurozone kicked off 2025 mildly encouraging, with the manufacturing sector (46.1 vs 45.1) drag easing and the services sector (51.4 vs 51.6) growing moderately. Germany drove the improvement, while France contracted. Sentimentally positive for Euro.

Oil posted its first weekly drop this year after President Trump called for lower prices after his inauguration. On Friday, Russian President Vladimir Putin reiterated he is open to discussing Ukraine and oil prices with Trump. Overall, WTI settled little changed at $74.66 /bbl while Brent rose 0.3% to settle at $78.50 /bbl after dropping for the past six sessions. Sentimentally positive for Indian rupee.

Markets in China will be closed from 28 Jan to 4 Feb (8 consecutive days) for the Lunar New Year holidays. Philippines will be closed on Wed (29 Jan) for LNY holiday while markets in Malaysia and Singapore will be closed for 29 and 30 Jan and Hong Kong will have an extended holiday from 29 to 31 Jan.