Global Market Quick Take Europe - 27 January 2025

Global Market Quick Take: Europe – 27 January 2025

Key points

• Equities: US futures tumbling, led by tech on fears China’ DeepSeek may disrupt AI complex
• Volatility: VIX steady; futures rise; SKEW signals tail-risk; Fed and earnings in focus
• Digital Assets: Bitcoin drops below $100K; altcoins follow
• Currencies: US dollar firms on weak risk sentiment, reversing some of Friday’s weakness
• Commodities: Gold’s trade lower after failing to reach a fresh record high
• Fixed Income: Treasuries trade higher ahead of heavy week of bond auctions
• Macro events: Germany IFO, US New Home Sales, US 2-year & 5-year T-Note Auction

The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.

Macro data and headlines

• Chinese artificial intelligence startup DeepSeek rocked global technology stocks Monday, with the Nasdaq leading the decline as it raises questions over America’s technological dominance. The Chinese AI startup's new model is cost-effective and runs on reduced-capability chips. The development raises questions about the high valuations of leading AI companies like Nvidia and the investment case for the entire AI supply chain.
• US President Trump cancelled the assessment of any tariffs against Colombia after reaching a deal with the country on delivering deportees to the country by plane. This after Trump threatened 25% tariffs against imports from Columbia for its refusal to allow a plane with deportees to land.
• An FT article rounding up FactSet estimates suggests that Wall Street banks expect that Tesla’s sales growth this year may only reach 16 percent versus 2024, below the 20-30 percent that Musk predicted last October. The low growth would be in part on US President Trump’s dismantling of EV buying incentives.

Macro events (times in GMT)

Germany Jan IFO Business Climate (0900), US Dec New Home Sales (1500), US Treasury 2-year auction (1630), US Treasury 5-year auction (1800)

Earnings events

• Today: AT&T, Progressive Corporation, Chrisitan Dior Express, Verizon, NextEra Energy
• Tuesday: LVMH, SAP, RTX, Stryker, Boeing, Lockheed Martin, Starbucks, GM
• Wednesday: Microsoft, Meta, Tesla, ASML, T-Mobile US, ServiceNow, IBM, Danaher
• Thursday: Apple, Visa, Mastercard, Roche, Blackstone, Thermo Fisher Scientific, Shell, Caterpillar, Comcast, UPS, ABB
• Friday: ExxonMobil, Abbvie, Chevron, Samsung, Novartis, Eaton

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

Equities

• US: US equities ended lower on Friday, with the S&P 500 down 0.29%, the Dow slipping 0.32%, and the Nasdaq shedding 0.59%, as semiconductor stocks like Nvidia (-3.1%) and Texas Instruments (-7.5%) weighed on the market. DeepSeek, a Chinese AI startup, rattled the tech sector with its claim of a ChatGPT rival at a fraction of the cost, causing Nasdaq futures to drop 1.8% overnight. This week’s focus shifts to earnings from Apple, Microsoft, Meta, and Tesla, alongside the Fed’s interest rate decision and PCE inflation data.
• Europe: European stocks were steady on Friday, with the STOXX 600 flat at 530.07 and the DAX slipping 0.22%, as gains in luxury stocks like Burberry (+9.9%) offset declines in telecom and energy. Rising Eurozone bond yields pressured sentiment, but optimism around Thursday’s expected ECB rate cut and Trump’s softer tariff tone buoyed markets.
• Asia: Asian markets were mixed Monday, with Hong Kong’s Hang Seng rising 0.80% while China’s CSI 300 edged up 0.1% ahead of the Lunar New Year. Gains in China were tempered by weaker-than-expected PMI data, while broader markets struggled with geopolitical concerns after Trump’s tariffs on Colombia stoked fears of more trade tensions.

Volatility

Market volatility remains subdued ahead of a pivotal week, with the VIX at 14.85 (-1.13%) and S&P 500 weekly expected moves at 1.27%. However, VIX futures spiked 8% to 17.70, signaling rising hedging activity ahead of the Fed’s rate decision and PCE data. Options activity shows investors bracing for volatility in key names like Nvidia, Tesla, and Meta. Despite the calm VIX, a SKEW of 173 suggests growing tail-risk concerns

Digital Assets

Bitcoin fell 3.47% to $99,044, erasing weekend gains amid broader risk-off sentiment and lingering uncertainty over Trump’s vague crypto policies. Altcoins followed suit, with Ethereum (-4.58%) and Solana (-5.33%) among the biggest losers. Trump’s memecoin ($TRUMP) plunged another 14%, extending its post-launch decline to 60% amid volatility and ethical concerns

Fixed Income

• US Treasuries yields trades softer despite a heavy week of bond auctions and the FOMC meeting, starting today with the sale of USD 69 billion in 2-year Notes, and USD 70 billion in 5-year Notes.
• Global yields dropped in the Asian session to start the week on a steep sell-off in tech stocks that is impacting broad risk sentiment.

Commodities

• Gold trades lower on profit taking after failing to reach a fresh record high on Friday. Trumps weekend spat with Columbia highlights the US administration’s willingness to use heavy-handed tactics, affecting risk sentiment and the dollar. Focus on the stock market today and the potential fallout from the DeepSeek news (see above).
• Crude prices continue to soften amid concerns about the economic impact of Trump’s aggressive tariff stance against several key trading partners, while also urging OPEC to help lower prices through higher production.

Currencies

• The US dollar traded weakly on Friday on Trump’s remarks suggesting he would prefer not to impose tariffs on China. Weak US data also weighed, as the flash January Services PMI from S&P Global dipped to 52.8 vs. 56.5 expected and 56.8 in December. Trump’s tariff tirade back-and-forth against Colombia over the weekend and the bottom falling out of risk sentiment offered the greenback some support in the Asian session to start the week.
• The BoJ rate hike failed to support the JPY on Friday as global rates rose later in the day, but the JPY firmed in the crosses if not against the US dollar to start the week as global yields dipped on broad weakness in risk sentiment.