Daily Brief Macro: Emergency or policy? Unpacking Trump’s take on US energy and metals and more

• Trump signed emergency declarations to address energy and minerals inadequacy in the US
• Plans to impose tariffs on Mexico and Canada, pressure OPEC to lower prices
• Unclear what powers these declarations unlock, potential impact on energy and metal projects

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• Let’s start with DeepSeek.
• The trajectory toward singularity may be accelerating faster than previously forecasted.
• With barriers to entry for AI development rapidly lowering and efficiency gains fueling greater demand rather than less, it seems inevitable that this trend will reshape the AI landscape.

• Asia bottomed out in mid January and has been recovering on “Trump tariff” hesitation. But Deepseek’s LLM threatens to upend US AI superiority and has dented the AI investment theme.
• We think the AI story is far from over; the hyperscalers’ investments should continue. We keep faith on the beneficiaries – TSMC and SK Hynix, and on Taiwan in particular.
• Asian equities could run if foreign flows revive on USD moderation. But the earnings season underscores US earnings profile superiority. Asia seems pedestrian in comparison. Watch earnings estimate trajectories closely.

• As we had forecast in Sep’24, the S$NEER has depreciated since the Oct’24 policy statement (despite officially unchanged policy). SS$NEER likely to depreciate further, with SGD reaching S$1.39/US$ by end-Mar’25. 
• The productivity rebound, bolstered by 10%YoY growth in machinery investment in Q3/24, enabled ULCs to moderate, rising just 0.9%YoY economy-wide (slowest in 4 years), helping contain headline and core inflation.
• We expect inflation to remain below 2%YoY in 2025, while real GDP grows 3.2% (above the government’s “1 to 3%” growth forecast), driven by investment and productivity growth in H1.

• We are underweight Chinese equities and the renminbi because our business cycle indicators show the economy is yet to bottom. 
• Troublingly risk aversion among companies and households is becoming entrenched. Xi and the property market crisis are paralysing the private sector and killing entrepreneurial spirit.
• We are  more concerned about the domestic economy and the government’s stance toward private enterprises than Trump’s trade war.

• The Riksbank cut its policy rate by 0.25pp to 2.25%, in line with the consensus forecast, citing weak economic activity and contained inflation risks.
• Forward guidance suggests a cautious approach to future rate cuts, with policymakers closely monitoring the delayed impact of previous reductions on demand and inflation.
• External risks, including geopolitical tensions and economic policy uncertainty in major economies, alongside domestic factors like the krona’s exchange rate, will be key in shaping the future interest rate trajectory.

• The Bank of Canada reduced its policy rate by 25 basis points to 3% and announced the end of quantitative tightening, aligning with expectations, as inflation remains stable around 2%.
• The economic outlook is clouded by external risks, particularly the threat of new US tariffs. Meanwhile, domestic conditions show a soft labour market, weak business investment, and moderate GDP growth projections of 1.8% in 2025 and 2026.
• The Bank has signalled a cautious, data-dependent approach to future rate adjustments, monitoring inflation risks, trade policy developments, and the effectiveness of past monetary easing.

• Labour’s new long-term growth plans have merit but limited short-term impact, as infrastructure and investment projects take years to deliver economic benefits.
• Despite policy rhetoric, the UK economy is structurally struggling, with GDP stagnation, persistent inflation, and fiscal constraints limiting immediate growth prospects.
• Political motives overshadow immediate economic substance, as ambitious projections serve electoral strategy rather than offering near-term economic transformation.