ADDX Market Morning Wrap - 4th Feb

Stock Market

The suspension of US-Mexico tariffs caused a major reversal in US stocks during the trading session. The Dow Jones Industrial Average fell 665 points and then turned positive in late trading. The declines of other stock indexes were halved. The S&P 500 fell more than 1.9% at one point, the Nasdaq fell as much as 2.5%, and the chip index fell 3.3% at one point. The iShares MSCI Mexico ETF $EWW stopped falling and rose more than 2%, while the Canadian ETF $EWC continued to fall by more than 1%. The China Concept Index fell 3% and then rose by about 1%.

Key Events

1. $GM General Motors fell more than 6% and then halved its losses, $F fell 4.6% and then closed down 1.7%, and auto suppliers such as Aptiv and $AVY Avery Dennison, as well as engine manufacturer $CMI Cummins, saw their losses narrow significantly. $STZ Constellation Brands, which imports a large amount of alcohol from Mexico, fell more than 8% and then closed down 3.5%, $CMG Chipotle fast food, which imports avocados from Mexico, fell more than 3% and then turned up, clothing manufacturer $NKE fell nearly 5% and then closed down 0.4%, $LULU Lululemon fell 3.6% and then closed down nearly 1%, and $NUE Nucor Steel rose more than 2%
2. $MSTR , a major Bitcoin holder, stopped falling and turned up 3.7%, ending twelve consecutive weeks of Bitcoin buying
3. $C fell 4.9% at one point, twice as much as its competitors $JPM JPMorgan Chase, $Bank of America and $WFC Wells Fargo. The US-Mexico tariff may disrupt Citigroup's plan to sell or IPO its Banamex subsidiary in Mexico

Macro

1. The US ISM manufacturing index in January expanded for the first time since September 2022, ending 26 consecutive months of contraction. The employment, new orders and production indexes all increased, and the price payment index also rose more than expected, which to some extent eased the market's risk aversion. However, the risk of tariffs and retaliatory measures has caused traders to lower their bets on the Fed's interest rate cuts, estimating that the probability of two rate cuts in 2025 is only 50%.

Forex

The U.S. dollar once rose by more than 1% and rose strongly above the 109 mark. After the U.S.-Mexico tariffs were temporarily suspended, the increase narrowed significantly to 0.6%. The British pound unexpectedly outperformed non-U.S. currencies that were not safe-haven currencies.

The Mexican peso rose by more than 1% from its low in the past three years. The Canadian dollar fell against the U.S. dollar by 1.8% and then narrowed significantly, falling by 0.2% in the late trading.

Key Events

1. Elias Haddad, a strategist at Brown Brothers Harriman, said that warming relations between the UK and the EU could lead to a more favorable outlook for British business investment, which is a good sign for the pound and British financial markets. The pound rose against the euro for eight consecutive trading days, the longest cycle since 2021. "The pound outperformed because the Trump administration got the UK out of the tariff threat."
   

Cryptocurrency

$BTC , the largest market capitalization leader, once followed the decline of risk assets, falling from around $102,000 at the weekend to below $93,000. After the suspension of US-Mexico tariffs, it rose 5% to above $101,000, and Bitcoin futures stood at $103,000.

$ETH , the second largest, fell by 11% and then halved, with Ethereum futures falling by nearly 15%. Trumpcoin narrowed its decline to 4% and returned to around $19, but it was down nearly 80% from its previous high.

Market Events and Most Anticipated Earnings Releases

This week is also a busy earnings season for the US stock market. More than one-fifth of the S&P components will release their fourth-quarter reports, including $GOOGL , $AMD , and $SNAP after the market close on Tuesday, $DIS , $Uber, $QCOM , and $F Ford on Wednesday, and $LLY and $AMZN on Thursday. The US non-farm payrolls for January will also be released on Friday, and economists expect 175,000 new jobs to be created.