Date Issued – 19th March 2025
Preview
Asian markets dipped ahead of the Fed’s policy decision as traders exercised caution, while gold hit a record high, reflecting demand for safe-haven assets. India joined the global steel tariff wave, aiming to shield domestic producers from surging Chinese exports, with steelmaker shares rallying on the news. Oil prices extended losses for a second day, pressured by rising U.S. crude inventories and trade tensions, while geopolitical risks in Ukraine added to market uncertainty.
Meanwhile, Tencent’s upcoming earnings and AI strategy updates are in focus, as investors look for clarity on its growth potential amid rising valuations. Geopolitical tensions remain heightened after Russian President Putin rejected a full Ukraine ceasefire, with ongoing conflict likely to sustain volatility in energy and defense markets. Investors are advised to monitor developments closely and maintain cautious positioning across sectors.
Asian Markets Retreat Ahead of Fed Decision
Asian equities reversed a three-day rally as traders exercised caution ahead of the Federal Reserve’s policy decision. Japanese and South Korean stocks edged higher, but declines in Chinese equities dragged a regional benchmark into negative territory. Meanwhile, gold extended its record-breaking run above $3,030 an ounce, reflecting heightened demand for safe-haven assets. Futures for the S&P 500 and European stocks ticked up after Tuesday’s losses, though uncertainty surrounding U.S. trade policies and recession fears continues to weigh on sentiment.
The Fed is widely expected to hold rates steady, with investors keenly watching Chair Jerome Powell’s press conference for clarity on the central bank’s economic outlook amid trade-related headwinds. Elsewhere, the yen weakened as the Bank of Japan reiterated its cautious stance on global trade risks, while Chinese banks cut consumer loan rates to bolster growth.
Investment Insight
With markets on edge ahead of the Fed’s decision, investors should brace for heightened volatility, particularly in equity and currency markets. Safe-haven assets like gold may remain attractive in the near term, given persistent trade uncertainties and geopolitical risks. However, any dovish signals from the Fed or its dot plot update could provide a short-term boost to risk assets. Cautious positioning in diversified portfolios is recommended as central banks globally navigate an increasingly complex economic backdrop.
India Joins Global Steel Tariff Wave Amid Surging Chinese Exports
India is set to impose temporary 12% safeguard tariffs on a range of steel imports, joining a global trend of protectionist measures as nations respond to a steel glut fueled by record Chinese exports. The Commerce Ministry stated the tariffs, aimed at preventing damage to domestic producers, will initially apply for 200 days pending further review. This move follows President Donald Trump’s recent 25% steel import duties, which threaten to redirect excess Chinese steel to other markets. Shares of Indian steelmakers, including Steel Authority of India Ltd. and Tata Steel Ltd., rallied on the news.
With Indian steel output rapidly expanding, the tariffs are expected to offer short-term relief to domestic producers, though global oversupply remains a persistent challenge.
Investment Insight
The imposition of steel tariffs in India signals increasing trade protectionism amid global supply-demand imbalances. Investors in the steel sector should monitor how these measures stabilize domestic prices and impact producer margins. While Indian steelmakers stand to gain in the near term, global oversupply and slowing demand continue to pose structural risks. Diversified exposure across geographies and industries could help mitigate volatility as global trade tensions escalate.
Oil Extends Losses Amid Rising Stockpiles and Trade Tensions
Oil prices fell for a second consecutive day as U.S. crude stockpiles rose by 4.6 million barrels, according to industry data, adding pressure to a market already weighed down by trade tensions and macroeconomic concerns. Brent crude slipped toward $70 a barrel, while West Texas Intermediate hovered near $66. Investors are bracing for official inventory data and the Federal Reserve’s interest rate decision later on Wednesday, as a risk-off sentiment persists across markets. Weak Chinese demand, escalating U.S.-China trade frictions, and OPEC’s plans to increase output further dampen the outlook for crude, despite ongoing geopolitical risks, including heightened tensions involving Iran and Ukraine.
Investment Insight
Oil markets are confronting a confluence of bearish factors, from oversupply concerns to slowing global demand. While short-term geopolitical risks may occasionally lift prices, investors should remain cautious, as weaker macroeconomic conditions and rising inventories could cap any sustained rebound. Energy sector exposure may be best approached selectively, focusing on resilient firms with strong balance sheets that can weather prolonged price volatility.
Tencent’s AI Ambitions in Focus as Chinese Tech Stocks Rally
Tencent Holdings Ltd. is set to report its strongest quarterly revenue growth in over a year, with investors closely watching its plans to capitalize on AI to complement its gaming, advertising, and WeChat businesses. While Tencent’s stock has gained 30% this year amid a broader Chinese tech recovery, it still trails Alibaba’s surge driven by AI investments. Analysts expect updates on Tencent’s AI strategy, including potential capital expenditures to rival Alibaba’s $53 billion AI commitment, to be pivotal for investor sentiment.
Tencent’s new AI services, built on its Hunyuan3D-2.0 model, aim to enhance monetization across its ecosystem, fueling optimism for long-term growth. However, with shares trading at 20 times forward earnings, rising valuations may require concrete financial performance and double-digit growth guidance to sustain momentum.
Investment Insight
Tencent’s ability to leverage AI to boost monetization and user retention will be critical to re-rating its stock higher amid rising valuations. Investors should assess Tencent’s capital allocation strategy, particularly in AI, and its ability to deliver margin expansion. While the stock has room to grow, near-term gains hinge on robust earnings guidance and execution. Broader exposure to China’s tech sector could benefit from Beijing’s stimulus measures, but caution is warranted as competition and elevated valuations may limit upside potential.
Market price: Tencent Holdings Ltd (HKG: 0700): HKD 539.50
Putin Rejects Ceasefire as Trump Declares Progress in Ukraine Talks
Russian President Vladimir Putin dismissed U.S. President Donald Trump’s demand for a 30-day ceasefire in Ukraine, agreeing instead to limit attacks on energy infrastructure. Despite the setback, Trump framed the call as a win, emphasizing progress toward broader peace negotiations. U.S. officials, including Secretary of State Marco Rubio, are set to continue talks in Saudi Arabia to refine details for a potential ceasefire.
Ukraine’s President Volodymyr Zelenskiy expressed skepticism, noting continued Russian drone attacks on Kyiv, and called for global rejection of Putin’s attempts to prolong the conflict. Meanwhile, European allies, including the UK and EU, reaffirmed plans to accelerate arms shipments to Ukraine, underscoring divisions in diplomatic approaches.
Investment Insight
The lack of immediate resolution in Ukraine signals continued geopolitical uncertainty, with implications for energy markets, defense sectors, and European equities. Investors should monitor developments closely, as prolonged conflict could sustain elevated energy prices and defense spending. Companies with exposure to renewable energy and defense production may see increased demand, while European industries reliant on stable geopolitical conditions could face headwinds. Diversifying portfolios to mitigate geopolitical risks remains prudent.
Conclusion
Markets remain on edge as geopolitical tensions and economic uncertainties dominate the global landscape. From the Federal Reserve’s policy direction to escalating trade protectionism and surging energy stockpiles, investors face a complex web of risks. Asian markets, oil prices, and steel tariffs highlight the fragility of economic recovery, while Tencent’s AI investment plans underscore the opportunity in tech despite elevated valuations.
Meanwhile, the Ukraine conflict continues to weigh on sentiment, sustaining volatility in energy and defense sectors. In this environment, a cautious, diversified approach remains essential as markets navigate competing forces of risk and opportunity.
Upcoming Dates to Watch
- March 19th, 2025: US Fed rate decision, Eurozone CPI, Brazil rate decision; Japan rate decision, industrial production
- March 20th, 2025: Australia unemployment, China loan prime rates, Switzerland rate decision, Taiwan rate decision, UK rate decision, US jobless claims
- March 21st, 2025: Japan CPI
Find below some of our Buy/Sell Recommendations. Balfour Capital Group is a distinguished global boutique investment management firm with $350 million AUM and over 1000 Clients.
Disclaimer: This post provides financial insights for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.
