Market Reactions to Fed’s Rate Cut Indications Amid Global Economic Tensions

1

PDD Holdings' stock plummeted 29%, marking its largest drop in history, following warnings of slowed sales growth.The company faces fierce competition from rivals like ByteDance and Alibaba as it expands globally, with declining revenue and profit trends already evident. While PDD has found some success in the Chinese market through low-price strategies, it will face greater challenges as market competition intensifies. Meanwhile, Temu's global expansion, although successful, is under increasing regulatory scrutiny.

Analysis:

Impact on FX:Potential weakening of CNY due to concerns over Chinese tech stocks.

FX Pair:CNY/USD

Impact on Shares:Negative for PDD Holdings and other Chinese e-commerce stocks.

Companies:PDD Holdings, Alibaba (BABA)

2

XPeng Motors plans to establish manufacturing bases in Europe to reduce the impact of import tariffs on its electric vehicle sales.Facing upcoming tariffs from the European Union, XPeng joins other Chinese EV manufacturers in planning local production to address this challenge. XPeng also plans to build large data centers in Europe to support its advanced AI and assisted driving features. Despite facing weak domestic sales and global trade disputes, XPeng's collaboration with Volkswagen has shown positive results, helping to improve its gross margins.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:EUR/CNY

Impact on Shares:Positive for XPeng's stock if European expansion is successful.

Companies:XPeng Motors (XPEV), Volkswagen (VWAGY)

3

Asian stock markets fell as U.S. tech giants weighed on the market, shifting focus from Fed policy outlook to Nvidia's upcoming earnings report.Hong Kong and mainland China markets opened lower, following the weakness in South Korea and Australia. Investors have high hopes for Nvidia's earnings, which are expected to further guide market direction. Meanwhile, PDD Holdings' stock plummeted due to warnings of slowed sales growth. Global trade tensions and economic data also impacted market sentiment.

Analysis:

Impact on FX:Potential weakening of regional currencies if tech stocks continue to drag.

FX Pair:USD/JPY, AUD/USD

Impact on Shares:Negative for tech-heavy indices in Asia.

Companies:Nvidia (NVDA), PDD Holdings (PDD)

4

The Australian government plans to cap foreign student enrollments at 270,000 by 2025 to ease housing and infrastructure pressures caused by immigration.The new policy allocates 145,000 spots to university admissions, 95,000 to skills training, and 30,000 to other providers. However, the university sector warns that this cap could harm Australia's higher education industry, potentially leading to the loss of 14,000 jobs and costing the economy AUD 4.3 billion. International students are a major contributor to Australia's economy, contributing AUD 48 billion in 2023.

Analysis:

Impact on FX:Potential weakening of AUD due to concerns over economic impact.

FX Pair:AUD/USD

Impact on Shares:Negative for the Australian education sector.

Companies:Australian universities, education providers.

6

According to Eurizon SLJ Capital CEO Stephen Jen, with the Fed cutting rates, Chinese companies may convert approximately $1 trillion in dollar assets into yuan, potentially leading to a 10% appreciation of the yuan.As the Fed cuts rates, dollar assets become less attractive, potentially prompting Chinese companies to repatriate overseas investment funds. This inflow of capital could further strengthen the yuan, and the People's Bank of China may not intervene in such a scenario. However, rapid yuan appreciation could negatively impact export competitiveness and economic recovery, requiring careful management.

Analysis:

Impact on FX:Potential strengthening of CNY due to capital inflows.

FX Pair:CNY/USD

Impact on Shares:Positive for Chinese financial institutions, negative for exporters.

Companies:Chinese banks, export-oriented companies.

7

The South Korean government plans to increase spending in 2025 to support expected economic slowdown, with a planned budget of KRW 677.4 trillion (about $512 billion), up 3.2% from this year.The government will provide low-interest loans to support industries such as semiconductors, batteries, and biotechnology, and set up special funds to support K-pop performances and content creation. Additionally, the government will increase support for nuclear energy projects, weapons exports, and defense investments. With South Korea's aging population worsening, the government also plans to increase childcare subsidies and relax mortgage rules for families with children. Despite the increased spending, South Korea's debt levels remain relatively low.

Analysis:

Impact on FX:Potential strengthening of KRW due to fiscal support.

FX Pair:USD/KRW

Impact on Shares:Positive for South Korean technology and defense sectors.

Companies:Samsung (SSNLF), Hyundai (HYMTF)

8

Malaysia plans to implement a licensing system for social media and messaging platforms, sparking opposition from tech industry groups including Meta, Amazon, and Google.The industry argues that this plan lacks transparency and industry involvement, potentially stifling innovation and hindering current and future investment. The regulation aims to address the growing number of cybercrimes such as fraud, gambling, bullying, and child exploitation. However, tech companies are calling on the government to pause the plan and seek a cooperative solution that ensures fairness and sustainability for all stakeholders.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:MYR/USD

Impact on Shares:Negative for tech companies operating in Malaysia.

Companies:Meta (META), Amazon (AMZN), Google (GOOGL)

9

Goldman Sachs' Global Markets Chief, Scott Rubner, predicts that the S&P 500 could reach a new all-time high this week due to strong inflows from corporate buybacks and systematic funds, which could further heighten investors' FOMO (fear of missing out) sentiment.He estimates that about $17 billion in demand will come from automated trading and corporate buybacks each day this week, creating a highly favorable three-week trading window. However, Rubner also warns that this demand could dry up in three weeks, potentially leading to another market downturn. Nvidia's earnings report on Wednesday is expected to be the next major market test, with significant impact anticipated.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:USD/JPY

Impact on Shares:Positive for U.S. equities, especially tech stocks.

Companies:Nvidia (NVDA), S&P 500 Index (SPY)

10

SpaceX postponed the launch of a rocket carrying four private astronauts, originally scheduled for August 27, due to a helium leak on the ground side that requires further inspection.The mission, named Polaris Dawn, includes billionaire Jared Isaacman, two SpaceX engineers Sarah Gillis and Anna Menon, and former Air Force pilot Scott Poteet. The mission's highlight is a spacewalk planned by Isaacman and Gillis on the third day of flight. The mission also aims to achieve several secondary goals in space and test SpaceX's Starlink service. The entire mission is expected to last about five days.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:USD/JPY

Impact on Shares:Neutral to slightly negative for SpaceX-related stocks.

Companies:SpaceX, Tesla (TSLA)

11

Despite relatively calm skies between Israel and Lebanon on Monday, tensions over the potential for regional war remain high.Israel launched a preemptive strike on southern Lebanon on Sunday, destroying thousands of Hezbollah missile launchers. Israel claims the strike was based on intelligence showing Hezbollah was preparing to launch missiles at northern Israel and conduct drone attacks on a key intelligence center north of Tel Aviv. Although both sides have temporarily ceased action, negotiations are ongoing to achieve a ceasefire in Gaza. However, as low-intensity conflicts between Israel and Hezbollah continue, regional tensions persist.

Analysis:

Impact on FX:Potential strengthening of safe-haven currencies like JPY and CHF.

FX Pair:USD/JPY, USD/CHF

Impact on Shares:Negative for companies with exposure to the Middle East conflict.

Companies:Defense contractors, energy companies.

13

French President Emmanuel Macron will continue consultations to appoint a viable prime minister after ruling out the possibility of a government led by left-wing candidate Lucie Castes following the exclusion.Macron hopes to resolve the political deadlock in France's National Assembly, where no party has won a majority since the snap elections, by forming a centrist coalition. Although the left-wing alliance proposed Castes as prime minister, Macron believes she cannot gain support from other parties and is exploring the possibility of forming a stable government through cooperation with centrist parties. Meanwhile, France remains under interim government management.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:EUR/USD

Impact on Shares:Neutral to slightly negative for French equities due to political uncertainty.

Companies:French political context, French equities.

15

Former President Donald Trump, in an interview with former Navy SEAL turned YouTuber Shawn Ryan, stated that while Elon Musk, as CEO of Tesla and SpaceX and CTO of X, is extremely busy, he would still welcome Musk as a part-time adviser to the government.Trump mentioned Musk's extensive experience in AI and emphasized the importance of his input as the U.S. competes for the most advanced AI technology globally. Although Trump previously suggested bringing Musk into the Cabinet, he is now more inclined to have Musk participate in government affairs as a consultant, particularly on AI policy.

Analysis:

Impact on FX:Limited direct impact.

FX Pair:USD/EUR

Impact on Shares:Positive for Tesla and SpaceX stocks if Musk is seen as gaining more influence.

Companies:Tesla (TSLA), SpaceX