[TrueZhuo Finance] Walsh nominated as Fed Chair; Dollar surges, gold and silver plunge
Trump nominated Kevin Warsh as the next Federal Reserve chairman, and the confirmation process may face obstruction from some senators. Warsh's relatively hawkish policy stance drove a sharp rally in the U.S. dollar on Friday, while gold and silver suffered heavy selling. Trump increased pressure on Iran, with Iran's supreme leader warning of a potential "regional war".
Overnight Highlights
– U.S. stock indexes closed lower on Friday as investors viewed Trump's nomination of Warsh to replace Fed Chair Powell as a hawkish choice while also digesting corporate earnings and high inflation data. Long-term U.S. Treasury prices fell, as Trump's choice was seen as negative for bonds given Warsh's inclination to shrink the Fed's balance sheet. The dollar rebounded from sharp selling earlier in the week, which analysts called an overreaction in the short term. Oil prices dipped slightly, consolidating recent gains but remained near six-month highs amid ongoing U.S.-Iran tensions. Gold plunged, posting its biggest one-day drop since 1983.
International News
– Trump nominated Kevin Warsh as the next Fed chair, saying no White House pressure would be needed for the former Fed governor to cut rates. Some senior Democratic senators questioned Warsh's lack of independent judgment and threatened to obstruct the confirmation process until the Justice Department drops its criminal probe of current Chair Powell.
– Wall Street figures said Trump's pick of Warsh to lead the Fed was a relatively hawkish choice likely to resist balance sheet expansion, which would support the dollar and steepen the Treasury yield curve.
– U.S. producer prices rose more than expected in December, showing firms are increasingly passing on tariff costs, which may keep inflation pressures elevated.
– Fed Vice Chair for Supervision Bowman said the central bank can afford to be patient on further rate cuts given high inflation and potential data distortions from last year's record-long government shutdown.
– The St. Louis and Atlanta Fed presidents both favored pausing further rate cuts to avoid exacerbating inflation, while Fed Governor Waller saw policy as still restrictive and needing more easing.
– The Bloomberg Dollar Index posted its biggest one-day gain in over eight months on Friday, while gold saw its largest intraday drop in 40 years and silver its worst ever, abruptly reversing precious metals' recent sharp rally. CME Group announced higher margin requirements for Comex gold and silver futures starting Monday's close.
– The U.S. government entered a partial shutdown on Saturday local time while awaiting House approval of Trump's funding deal with Democrats.
– Trump tightened pressure on Iran, sanctioning its interior minister and several Revolutionary Guard commanders while urging a nuclear deal. Iran's Supreme Leader Khamenei warned Sunday of a potential "regional war".
– OPEC+ confirmed at a Sunday meeting it would maintain output in March. Delegates said production plans after the first-quarter pause would be decided at the next meeting on March 1.
– Eurozone Q4 GDP beat expectations and German inflation accelerated in January, with the ECB expected to keep rates on hold at least through next year-end.
– Nvidia (NVDA.US) CEO Jensen Huang said the company will join OpenAI's latest funding round, calling it potentially Nvidia's biggest investment yet. Huang stressed Nvidia's $100 billion OpenAI proposal was "never a promise" and it would evaluate each round.
– Bitcoin fell below $80,000, touching its lowest since April 2025 over the weekend and plunging nearly 40% from October's record high.
Greater China News
– Chinese President Xi Jinping called for the yuan to become a global reserve currency in an article in Qiushi Journal.
– China's official January manufacturing PMI unexpectedly plunged to 49.3, far below forecasts, as factory activity contracted again and business confidence deteriorated sharply. Bloomberg Economics sees weakening momentum requiring policy support, with a rate cut possible by late February.
– China's 2025 budget deficit hit a record 12.7 trillion yuan, with social welfare spending growing at its fastest since 2017, reflecting shifting fiscal priorities amid U.S.-China trade tensions.
– China allowed foreign investors to sign the Global Master Repurchase Agreement (GMRA) for bond repos in the interbank market, aiming to open the fixed-income market and boost yuan asset appeal.
– China's securities regulator plans to expand strategic investor types for listed firms, setting a minimum 5% stake. CSRC Chairman Wu Qing met listed companies Friday to stress stabilizing market momentum.
– The Shanghai Futures Exchange will raise silver futures' daily price limits from February 3's settlement.
– $CHINA VANKE(02202.HK) forecasts its 2023 loss widened by two-thirds to a record 82 billion yuan due to lower property project settlements and additional impairments.
– $BYD COMPANY(01211.HK)'s January vehicle sales fell 30% year-on-year, highlighting challenges for the EV maker amid subsidy cuts and weak demand.
– Macau's January gaming revenue rose 24% year-on-year to 22.6 billion patacas (~$2.8 billion), beating estimates.
– U.S. House China Committee Chair John Moolenaar urged Treasury Secretary Bassett to have CFIUS act on a Chinese pharma firm's investment in FastWave Medical.
Commodities & Forex
– The Bloomberg Dollar Index posted its biggest daily gain in over eight months after Trump's relatively hawkish Fed chair pick.
– Brent crude held steady, notching its best monthly gain in four years as investors watched Iran tensions. Gold saw its largest intraday drop in 40 years and silver its worst ever, abruptly reversing precious metals' rally.
Earnings & Data Watch
– U.S. January ISM Manufacturing PMI (prior: 47.9, est.: 48.5).
– China January RatingDog Manufacturing PMI (prior: 50.1, est.: 50.3).
Source: Golden Horse Capital Management (HK) Ltd.
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