Chinese tech’s big return?

Federal Reserve (Fed) Chair Jerome Powell’s testimony yesterday went smoothly. He said that the Fed’s ‘policy stance is now significantly less restrictive than it had been’, the economy remains strong and that they ‘do not need to be in a hurry to adjust our policy stance.’ That was in line with his previous remarks. Powell also didn’t want to get too political. He said that ‘it’s not the Fed’s job to comment on the tariff policy’, that the impact of the tariffs is unknown but could eventually increase the inflationary pressures as someone will have to pay for them. The markets didn’t give a crazy reaction. The US yields rose slightly but the dollar index gave back gains and tested the 50-DMA to the downside. In the equity space, the Dow Jones advanced 0.30%, the S&P500 was flat, while Nasdaq 100 slightly retreated.

All eyes are on today’s US inflation update. The US headline inflation is expected to steady near 2.9% y-o-y in January, core inflation may have eased from 3.2% to 3.1%. A set of softer-than-expected inflation numbers could help sooth inflation worries and encourage a deeper retreat in the US dollar and a further advance across the major peers. While a stronger-than-expected set of inflation figures could fuel worries, back a further rise in the US yields and the dollar, and weigh on risk appetite.

China appetite returns

Chinese tech stocks are surfing on the DeepSeek wave. Alibaba for example gained more than 40% since mid-January while Warren Buffet-backed BYD rallied more than 7.50% today in Hong Kong and is also up by a hefty 42% since a month. The news that the company plan to integrate software from DeepSeek in its cars and the announcement that they will offer God’s Eye – their driver assistance system – in China for free help boosting the outlook for the Chinese EV giant and narrow the gap with Tesla – which on the other hand is falling from grace on slowing sales - not only due to the slowing global appetite for electric cars but also due to Elon Musk’s involvement in world politics.

Overall, stocks in Hong Kong didn’t look this promising in a while, and there is substantial room to extend gains before retesting the 2018 and 2021 peaks. Chinese tech giants have two key advantages. 1. They have Big Tech names that have a proven track record for building game-changing technology – like Alibaba and Tencent. And 2. Chinese consumers tend to be easier to adopt new technologies allowing the technology advances to spread faster.

Does that counterweigh the political, geopolitical and trade risks? Time will tell.

Oil and Gas

US crude rallied past the 50-DMA and rebounded lower after touching the $73.70pb yesterday. The sight of a more than 9mio barrel build in US inventories suggested by yesterday’s API report somehow killed joy. The freshly breached 50-DMA could act as a short-term support for a further extension of the gains in the short run, but we may see a strong resistance approaching the $74.50 mark, near the 200-DMA and the major 38.2% Fibonacci retracement on the latest selloff.

Elsewhere, the European nat gas futures extend gains on melting gas reserves and on the upcoming cold days that will further draw down the reserves, while the US nat gas futures successfully held ground near a key Fibonacci support and remain upbeat.

In the individual space, BP – which gained more than 7% on news that Elliott Investment Management steps in to tidy up things, lost a meagre 0.62% yesterday after announcing that their income dropped 35% last quarter due to lower oil and gas prices and lower profits from its refineries. 430-445p could be an interesting entry level for investors who would like to take a chance on Elliott’s plans to shift focus from renewable to traditional energy sources.