China Tells Lenders to Boost Financial Support for Consumption

As U.S. President Donald Trump's wide-ranging trade war rouses fears of recession, global investors have found an unlikely new sanctuary: Chinese equities.

Hong Kong's benchmark Hang Seng Index - where many major Chinese companies are listed - is up 17% since Trump entered the White House in January.

That compares to an about 9% drop in the S&P 500, which has also shed $4 trillion in market value from record highs last month.

Trump's erratic pronouncement on tariffs and moves to slash federal government spending have challenged assumptions about the appeal of U.S. stocks, which have vastly outperformed most of their global counterparts since 2021.

Investors have moved from believing in "TINA" - There is No Alternative to U.S. assets - to "TIARA" - There Is A Real Alternative - said Andy Wong, a senior Hong Kong-based executive at Pictet Asset Management.

Much of the Chinese rally has been led by technology shares that have risen 29% so far in 2025, hitting their highest level in more than three years last week. Like many of the new China equities bulls, Wong said he sees opportunities in tech, defense and consumer-facing plays.

Source: Theedgemarkets

U.S. Commerce Secretary Howard Lutnick says a recession would be "worth it" to get President Donald Trump's economic policies in place, while Treasury Secretary Scott Bessent has spoken of a coming period of "detox" and Trump himself says the economy is in "transition."

However it plays out, history shows recessions - should it come to that - are costly affairs: The pain is never spread equally, and the outcome - from the length and depth of the downturn to the speed and breadth of recovery - is unpredictable.

SHRINKING GDP

In general terms a recession is when the total output of an economy, called gross domestic product, declines in a meaningful way. One common rule of thumb is that when GDP contracts for two consecutive quarters, the country is in recession.

But that doesn't really capture it. The National Bureau of Economic Research's Business Cycle Dating Committee, which determines when recessions begin and end, looks beyond GDP at things like unemployment, personal income excluding government benefits, consumer spending and industrial production.

Those might deteriorate just a bit for a long time. Or they might crash so hard that it is obviously recessionary, such as during the COVID-19 pandemic when activity fell fast but rebounded quickly to yield only a two-month recession, the shortest on record in the U.S.

By contrast, a sluggish economy in 2016 never tilted into a declared recession.

NBER never declares recessions in real time. That's left for others to ponder by looking at things like changes in the unemployment rate, where rises of a half percentage point or more within a year have in the past meant recession is underway.

Nothing in hard data like unemployment, GDP or consumer spending currently suggests that is happening. The conversation is in the air because of recent surveys showing declining business and consumer sentiment, and because of memories of Trump's first term, when tariffs far smaller than those proposed now, and preceded by tax cuts, caused global economic growth to stall.

WHAT CAUSES RECESSIONS?

As of January, the risk of a U.S. recession was considered small. A low unemployment rate and rising wages meant consumers were continuing to spend, inflation was drifting down towards the Federal Reserve's 2% target, and the U.S. central bank had cut interest rates by a full percentage point since September. Fed officials considered it a stable foundation for continued growth, and many economists thought the central bank had nailed a "soft landing" from the high inflation of 2021 and 2022.

That's a rare feat: Sometimes it is central bank policy that triggers a downturn, most famously in the early 1980s when then-Fed chief Paul Volcker sent the economy into a painful recession with crushing interest rate hikes to tame high inflation.

This time, the volatility in sentiment, the declines in stock market wealth, and the worries of a coming drop in activity stemmed from Trump's move to rewire global trade with broad and steep tariffs on major U.S. trading partners.

Such shocks are the other sources of downturns. The pandemic was another one, as was the combined shock in the early 2000s from the crash in tech stocks and the September 11, 2001, attacks on the U.S.

WHO PAYS THE BILL?

Recessions come with costs. Business profits fall, as do stock prices, which can then amplify the impact as investors reduce their own consumption. Incomes fall and government deficits rise as more people qualify for benefits meant to offset economic weakness, known as automatic stabilizers.

One reason the pandemic shutdown gave way to a period of strong economic growth was the amount of government support under both the first Trump administration and former President Joe Biden. Both administrations left huge deficits in their wake, which some feel may limit the government's response this time if the economy does sink.

But typically the most notable recession feature is rising unemployment, a fact that puts the heaviest burden of any downturn on those thrown out of work.

Rising U.S. unemployment tends to fall disproportionately on Blacks and Hispanics, but each downturn is different.

The 2007-2009 recession, for example, was both deep and long, emanating from a financial crisis that is among the most difficult types of downturns to resolve. Some have called it the "man-cession" because of large job losses in construction, manufacturing and finance - industries dominated by men. The pandemic downturn, by contrast, initially fell hard on women and Hispanics, with massive layoffs in the services sector.

UPSIDE TO THE DOWNTURN

If there is a bright side, it's that recessions lower inflation.

There has been talk lately of stagflation, with growing concerns that economic growth will slow or even shrink while inflation rises on the back of the U.S. tariffs aimed at Canada, Mexico, China and other trading partners.

But if a downturn is steep enough, inflation eventually slows as demand weakens, and prices can even drop, something Trump pledged would happen on his watch. In fact, it is unusual outside of recession for overall price levels to decline.

The Fed also would likely cut rates to soften the blow of a recession, causing markets to adjust to new expectations about growth and demand.

Drops in borrowing costs can benefit prospective home buyers in particular, with cheaper mortgage rates - which the Trump administration might also welcome - boosting housing markets and helping with the eventual recovery.

Source: Theedgemarkets

Key Highlights

• USD/JPY extended losses and tested the 146.60 zone.
• A major bearish trend line is forming with resistance at 148.80 on the 4-hour chart.
• EUR/USD is consolidating gains above the 1.0800 resistance zone.
• Bitcoin is facing many hurdles near the $85,000 resistance zone.

USD/JPY Technical Analysis

The US Dollar remained in a bearish zone below 148.80 against the Japanese Yen. USD/JPY extended losses below 147.50 before the bulls appeared.

Looking at the 4-hour chart, the pair tested the 146.60 zone and settled below the 100 simple moving average (red, 4-hour) and the 200 simple moving average (green, 4-hour). The pair started a minor recovery wave above the 147.50 level.

There was a spike above 148.50 but the bears were active near the 50% Fib retracement level of the downward move from the 151.30 swing high to the 146.63 low.

On the upside, the pair is facing resistance near the 148.80 level. There is also a major bearish trend line forming with resistance at 148.80 on the same chart. The next major resistance is near the 149.50 level and the 61.8% Fib retracement level of the downward move from the 151.30 swing high to the 146.63 low.

The main resistance is now forming near the 150.20 zone. A close above the 150.20 level could set the tone for another increase. In the stated case, the pair could even clear the 152.00 resistance.

On the downside, immediate support sits near the 147.50 level. The next key support sits near the 147.20 level. Any more losses could send the pair toward the 146.60 level. The main support could be 145.00.

Looking at EUR/USD, the pair remained stable and might soon now aim for a move toward the 1.1000 resistance.

Source: ACTIONFOREX

Gold hit a record high on Friday, as uncertainty over US tariffs and fears of trade tensions propelled prices, along with increased expectations of monetary policy easing by the Federal Reserve.

Spot gold eased 0.1% to US$2,983.78 (RM13,265.14) an ounce as of 0132 GMT, after hitting a record high of US$2,990.09 earlier in the session, within touching distance of the key US$3,000 milestone.

Bullion is also poised to log a second straight weekly rise, with a 2.5% gain so far.

US gold futures rose 0.2% to US$2,996.70.

"The risk-off market stance reflects investors' expectations that trade tensions are likely to get worse before it cools, and are turning to safe-haven gold once again as a hedge against portfolio volatility," said IG market strategist Yeap Jun Rong.

Latest in US President Donald Trump's multi-front trade war, the European Union responded to blanket US tariffs on steel and aluminium by imposing a 50% tax on American whiskey exports, prompting the president to threaten on Truth Social to charge a 200% tariff on imports of European wines and spirits.

"The psychological US$3,000 level is now coming into view for gold prices, and as we approach the second quarter, where reciprocal tariffs could trigger another wave of market turbulence, gold remains a compelling safe-haven asset in an environment where alternatives are scarce," Rong added.

Trump's tariffs are widely expected to stoke inflation and economic uncertainty, and have prompted gold to reach multiple record highs in 2025.

Gold is seen as a hedge against political risks and inflation.

Markets now await the Fed's monetary policy meeting next Wednesday. The central bank is expected to keep its benchmark overnight interest rate in the 4.25%-4.50% range.

Non-yielding bullion thrives in a low interest rate environment.

Meanwhile, Russian President Vladimir Putin said on Thursday Russia supported a US proposal for a ceasefire in Ukraine in principle, but sought a number of clarifications and conditions that appeared to rule out a quick end to the fighting.

Spot silver eased 0.2% to US$33.72 an ounce, platinum firmed 0.1% to US$995.30, and palladium gained 0.7% to US$964.32.

Source: Theedgemarkets

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