Market Round-Up: Markets Rattled by U.S. Fiscal Strain, Trade Pause, and Asia Tech Results

Market Round-Up for May 19-24, 2025

Skyline of Hong Kong

This week, global financial markets grappled with a mix of fiscal policy shifts, central bank manoeuvres, and evolving trade dynamics. In the U.S., investor sentiment was shaken by rising Treasury yields and concerns over escalating federal debt.

Meanwhile, a temporary trade truce between the U.S. and China offered a glimmer of hope, even as underlying tensions persisted. Central banks across major economies maintained cautious stances, balancing growth support with inflation containment. Earnings reports from key companies in the U.S., China, Singapore, and Hong Kong provided insights into corporate resilience amid these macroeconomic challenges.

1. U.S. Fiscal Concerns Intensify Amid Rising Treasury Yields

U.S. financial markets experienced heightened volatility as investors reacted to the implications of President Trump's proposed tax legislation, which is projected to add $3.8 trillion to the national debt over the next decade. The Congressional Budget Office warns that, if tax provisions are made permanent, the U.S. debt-to-GDP ratio could rise to 200% by 2055.

Consequently, yields on 30-year Treasury bonds surged above 5%, reflecting increased government borrowing costs not seen in nearly two decades. This spike in yields contributed to significant stock market declines, with the S&P 500 dropping 1.6% and the Dow Jones Industrial Average losing 816 points on May 21.

2. U.S.-China Trade Truce Offers Temporary Relief

On May 12, the U.S. and China agreed to a 90-day pause in their ongoing trade war, significantly reducing tariffs by 115%. Chinese tariffs on U.S. goods were lowered to 10%, while U.S. tariffs on Chinese goods dropped to 30%.

This agreement, reached during talks in Geneva, was welcomed as a move to de-escalate tensions that have threatened the global economy. However, the truce is seen as temporary, with underlying issues remaining unresolved.

3. China's Economic Measures Amid Trade Pressures

In response to ongoing trade tensions and domestic economic challenges, China's central bank implemented a 10-point monetary policy package aimed at stabilizing markets.

Measures included reserve requirement and interest rate cuts, as well as new tools for tech financing. These steps underscore China's efforts to bolster economic confidence and support innovation-driven growth amid global uncertainty.

4. U.S. Corporate Earnings Reflect Mixed Outcomes

The U.S. earnings season presented a mixed picture. While a healthy number of companies beat earnings estimates in the first quarter, uncertainty surrounding the impact of U.S. tariffs clouded the outlook.

Retail giant Target reported disappointing earnings and reduced its annual profit outlook, citing boycotts and backlash over scaled-back diversity programs. Conversely, tech companies like Coinbase saw gains, with COIN leading S&P gainers on crypto sector optimism.

5. Chinese Tech Firms Navigate Earnings Amid Economic Shifts

Chinese technology companies faced a challenging earnings season. Baidu, for instance, is expected to impress investors with its earnings report, as the current season has been a letdown for China's big tech stocks. The company aims to capitalize on the AI rally, despite facing a low bar for earnings boosts.

6. Singaporean Companies Report Robust Earnings

Singapore's corporate sector showed resilience, with companies like SATS reporting earnings of $243.8 million for the full year FY2025, increasing more than three-fold from the previous year. The growth was attributed to an expanded network and increased business volume. Similarly, Singtel posted a net profit of S$4.02 billion for FY25, with underlying net profit rising 9% to S$2.47 billion.

7. Hong Kong's Earnings Season Highlights Market Volatility

Hong Kong's earnings season reflected ongoing market volatility. Fitch Ratings anticipates continued earnings volatility for Hong Kong securities companies due to trade tensions and economic uncertainties, despite a 56% net profit increase in 2024.

Looking ahead, major companies like Meituan and Xiaomi are scheduled to release their Q1 2025 earnings next week, which will provide further insights into the region's economic health.

Conclusion

This week underscored the intricate interplay between fiscal policies, trade dynamics, and corporate performance across global markets. While temporary trade truces and central bank interventions provided short-term relief, underlying structural challenges and geopolitical tensions continue to pose risks. Investors remain vigilant, balancing optimism with caution as they navigate an increasingly complex economic landscape.