Market Quick Take – 23 May 2025

Market drivers and catalysts

• Equities: US flat; Europe/UK down; fiscal concerns; tech and crypto outperform; solar, autos fall
• Volatility: VIX down; futures flat; long-dated call buying; SKEW up; options robust
• Digital assets: BTC ATH; IBIT inflows; banks eye stablecoin; whale transfers; COIN, altcoins higher
• Fixed Income: US long treasury yields tamed after another surge higher yesterday failed to hold.
• Currencies: USD rally late yesterday was reversed overnight. NOK top performer this week among G10 currencies.
• Commodities: Investment metals and grains the winners this week
• Macro events: US April New Home Sales

Macro data and headlines

• Japan’s annual inflation rate remained at 3.6% in April 2025, unchanged for the second month, matching the lowest level since December. Core inflation rose to 3.5% from 3.2%, exceeding expectations and reaching the highest since January 2023.
• Recent trade disputes and US tariffs may impact economic growth, but ECB officials expect disinflationary forces to dominate in the short term, aiding price stability. However, some warn that a prolonged trade war could lead to long-term inflationary effects by disrupting global supply chains.
• Fed's Waller highlighted market concerns over fiscal policy, stating the Fed won't buy bonds in primary auctions. He noted the economy's strong performance with minimal tariff impact and suggested potential rate cuts later if tariffs ease and stay near 10%.
• The S&P Global US Composite PMI rose to 52.1 in May from 50.6 in April, showing modest growth, the fastest since March but still weak historically. Business optimism improved slightly despite tariffs affecting demand, supply chains, and prices. Export orders fell, especially in services, and supply chain delays worsened.
• US initial jobless claims decreased by 2,000 to 227,000 for the week ending May 17th, below the expected 230,000, indicating labour market strength despite high interest rates. Unemployment claims increased by 36,000 to 1,903,000, above the expected 1,890,000, reflecting challenges in finding employment.
• US trade negotiators are pushing the EU to make unilateral tariff reductions on US goods or face “reciprocal” duties of 20% the FT reported. The US is unhappy that the EU only offered mutual tariff reductions rather than pledging to lower duties alone, while also excluding its digital tax as a point for negotiation.
• Beijing and Washington continued high-level contact with a Thursday call between senior officials, a sign that the two sides are maintaining active communications following their trade truce earlier this month. Meanwhile Japan’s top trade negotiator is due in Washington today for a third round of trade talks, with the avoidance of levies on its key auto industry a major focus point.

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Macro calendar highlights (times in GMT)

0600 – UK April Retail Sales
1400 – US April New Home Sales

Fed speakers: Goolsbee (1230), Musalem & Schmid (1335), and Cook (1600)

Earnings events

Next Week

• Tuesday: Xiaomi
• Wednesday: Nvidia, Salesforce, Synopsys, Veeva Systems, Agilent, HP
• Thursday: Dell, Marvell Technology, Lululemon, Zscaler, Netapp
• Friday: Costco

For all macro, earnings, and dividend events check Saxo’s calendar.

Equities

• US: US equities ended flat to modestly lower on Thursday as investors digested President Trump’s new tax-and-spending bill and its impact on fiscal stability. The S&P 500 and Dow edged down (SPX -0.04%, DJI nearly flat), while the Nasdaq 100 rose 0.15%. Moody’s downgrade of the US credit rating to Aa1, citing deficits, added to caution. Treasury yields briefly touched post-2023 highs before easing. Utilities, health, and energy lagged, while tech outperformed, with COIN (+5%) leading S&P gainers on crypto sector optimism. Solar stocks plunged on subsidy cuts in the bill. No major earnings today; attention turns to macro data and fiscal developments.
• Europe: European stocks pulled back sharply Thursday (STOXX 50 -0.55%, DAX -0.51%, CAC 40 -0.58%, FTSE 100 -0.54%) as US fiscal concerns, a larger UK deficit, and contracting Eurozone PMI weighed on sentiment. Germany’s ifo business climate improved, but private sector activity slipped back into contraction, especially in services. Autos and luxury stocks fell hard; Porsche (-4.2%), Merck (-2.9%), and ArcelorMittal (-3.8%) were notable laggards. In Switzerland, Sandoz edged down on valuation worries despite solid guidance. UK equities were hit by weak earnings and a disappointing manufacturing PMI.
• UK: FTSE 100 closed 0.54% lower on Thursday, driven by losses in property and industrials, and a wider government deficit. EasyJet (-2.6%) fell on a deeper H1 loss, while BT (+2.9%) gained after a profit rise and cost-cutting. PMI data was mixed: services rebounded but manufacturing shrank at the fastest rate in five years. Investors remain cautious as UK public finances deteriorate and global risk appetite weakens.
• Asia: Asia saw mixed action. Japan’s Nikkei rose 0.8% after strong CPI data signaled improving consumer demand, boosting the yen and bond yields. Chinese stocks (CSI300 +0.9% for the week) outperformed on optimism over US tariff de-escalation and new stimulus. Hong Kong’s Hang Seng climbed 0.5% early Friday, heading for its longest winning streak since February, led by tech and financials. BYD hit a record high, outselling Tesla in Europe for the first time. However, broader Asian bourses faced weekly losses, with US fiscal concerns capping upside.

Volatility

VIX fell 2.8% to 20.28, reflecting easing equity volatility as futures remained flat despite heavy macro news flow. Short-term measures like VIX1D and VIX9D retreated further. Options activity stayed robust—highlighted by a reported $3 billion in long-dated US equity call buying, mainly in tech megacaps, showing deep-pocketed investors seeking upside and volatility exposure. SKEW rose 1.3%, signaling elevated tail-risk hedging, but spot/futures calm suggests markets are pausing after recent swings. No major volatility events scheduled today.

Digital Assets

Bitcoin hit a new all-time high above $111,000 before modest profit-taking saw it slip to $110,631 (-1%). Ether (+0.15%) and Solana (+0.6%) also advanced. BlackRock’s IBIT ETF surged 2.3%, pulling in $530mn net inflows, its largest in two weeks, with no outflows since April—supporting BTC’s spot-led rally. US banks reportedly discussed a joint stablecoin, boosting regulatory optimism. Whale transfers and Bitcoin Pizza Day saw increased on-chain activity, but price impact was muted. Altcoins mostly gained; COIN rallied 5% on positive crypto sentiment.

Fixed Income

• US long treasury yields jumped further yesterday to new cycle highs before pulling back. Yesterday, the enormous Republican tax cut and spending bill passed the US House by a single vote, which leaves it to the Senate to either pass that bill (not likely) or come up with its own version, with some saying the bill may even be split in two. In short, we do not yet know the final outcome. The 10-year Treasury benchmark trades this morning at 4.54% after a push above 4.60% intraday yesterday, while the 30-year benchmark trades 5.05% after a spike to 5.15% intraday yesterday.
• Japan’s government bond yields at the long end of the yield curve found some support overnight as yields dropped several basis points for the 30-year JGB benchmark after Japan’s bond market was suddenly in focus earlier this week after a weak auction of 20-year JGB’s saw yields at the long end of the curve spike to levels not seen in 25 years.
• High yield credit spreads in the US widened again yesterday, with the Bloomberg high yield credit spread to US treasuries we track widening 4 basis points to 323 basis points.

Commodities

• The Bloomberg Commodity Index, stuck within a narrow range for six weeks, is heading for a weekly gain of 1.3% (5.2% YTD), supported by gains across precious metals and grains, and only partly offset by losses in energy and softs. Among the biggest gainers, we find platinum (11.5%), CBOT corn (4.7%), and gold (4.6%), while at the other end we find cocoa (-5.6%), gas oil, WTI, and Brent all down around 1.8%.
• Gold is heading for its best week in a month on raised US fiscal debt concerns following a jump in US long-end yields in response to Trump’s tax bill, which will swell an already elevated US debt pile. In addition, a softer US dollar also helped sustain gains above USD 3,300.
• Platinum, this week's highflyer, reached a fresh one-year high—trading near the 2024 peak at USD 1,096—supported by momentum buyers amid a tightening supply outlook. Meanwhile, silver’s fourth consecutive rejection around USD 33.70 resistance drove another sharp correction, partly due to an intraday copper tumble of 3.7%, before both finding a fresh bid during the Asian session
• Crude prices are heading for their first, albeit moderate, decline in three weeks on speculation a group of eight OPEC+ producers are considering another bumper 411,000 b/d production increase for July, the third in a row. This is in order to force prices lower in order to regain market share at the expense of high-cost producers, most notably in the US.

Currencies

• The US dollar put up a bit of fight in the US trading session yesterday as USDJPY backed up as high as 144.32 before falling back below 143.50 by late in the Asian session on Friday, while EURUSD trades 1.1320 after a push lower to a 1.1256 low late yesterday
• The Norwegian krone has been the strongest G10 currency this week, rising against all of its G10 peers on the week, with USDNOK at 10.16 this morning and approaching its lowest level since late 2023, which was 10.05. NOK may be strengthening as the market assesses the long-term weakness in the currency, which doesn’t fit with the country’s large net international investment position (NIIP) surplus if Norway’s government or its enormous pension fund built up on oil and gas profits decide to reallocate more spending domestically.

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