Global Market Quick Take Europe - 21 January 2025

Global Market Quick Take: Europe – 21 January 2025

Key points

• Equities: Trump tariff delay, autos lead Europe, Hong Kong gains, Netflix earnings
• Volatility: VIX futures slightly lower, muted moves, earnings watch
• Digital Assets: Bitcoin $101,820 (-5.2%), memecoin volatility, altcoins down
• Currencies: USD lower as Trump waits on tariffs, but mention of coming large tariffs on Canada and Mexico weigh
• Commodities: Crude stumble; investment metals bid as trade wars loom
• Fixed Income: US treasury yields plunge after Trump’s inaugural address
• Macro events: UK Earnings and Jobs data, Germany ZEW, Canada CPI

Saxo’s Q1 2025 Quarterly Outlook is out, and can be accessed here

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

Macro data and headlines

• Donald Trump’s Inaugural Address failed to mention the implementation of tariffs in his speech. But a story circulated earlier yesterday that he has issued a memo instructing federal agencies to review trade policy, specifically with China, Canada and Mexico, particularly on concerns related to persistent trade deficits and currency manipulation.
• Later in a short press conference, Trump mentioned that he would probably put 25% tariffs on Mexico and Canada on February 1, which led to sharp weakness in the Canadian dollar and Mexican peso.
• Trump also linked the sale of TikTok by China’s Bytedance to the threat of tariffs against China if a deal was not struck within 75 days.

Macro events (times in GMT)

UK Nov Earnings (0700), UK Nov. Unemployment Rate (0700), UK Dec. Jobless Claims Change (0700), UK Dec. Payrolls Change (0700), Germany Jan. ZEW Survey (1000), Canada Dec. CPI (1330), New Zealand Q4 CPI (2145)

Earnings events

• Today before open: Charles Schwab, 3M Company, DR Horton
• Today after close: Netflix, Capital One Financial, United Airlines, Interactive Brokers
• Wednesday: Procter and Gamble, Johnson & Johnson, Abbott Laboratories, Progressive Corporation, GE Vernova
• Thursday: Intuitive Surgical, GE Aerospace, Texas Instruments, Union Pacific, Christian Dior, CSX
• Friday: American Express, Verizon, NextEra Energy

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

Equities

• US: US stock futures pared earlier gains as traders assessed President Trump’s inaugural actions, including potential tariffs on imports from Canada and Mexico. Futures for the Dow, Nasdaq 100, and S&P 500 traded flat after initial optimism faded. Meanwhile, the dollar index fell 0.8%. Friday’s session had capped the best week for US markets since November, driven by easing inflation expectations and strong corporate earnings. Attention now turns to Netflix’s Q4 earnings report after the bell.
• Europe: European markets closed higher on Monday, buoyed by reports that President Trump would not impose immediate tariffs. The STOXX 50 rose 0.6%, while the FTSE 100 hit a record high of 8,521. Autos outperformed, with BMW (+3.5%) and Mercedes-Benz (+2.7%) leading gains. The World Economic Forum in Davos added to the optimistic tone. Data from Germany showed a 0.8% YoY rise in December PPI, its fastest gain since mid-2023.
• Asia: Asian equities were mixed as traders reacted to President Trump’s absence of immediate trade tariffs in his inauguration speech. Hong Kong’s HSI extended gains, rising 0.7% to 20,067, with tech and property stocks outperforming. In China, the PBoC maintained lending rates at record lows, supporting sentiment. However, broader regional markets remained cautious as Trump’s potential tariff measures and policy unpredictability loomed over global trade.

Volatility

VIX futures fell slightly to 17.12 (-0.69%) after Trump’s first day in office. The absence of major economic releases today keeps volatility subdued, though earnings from Netflix and other major companies may spark localized activity. ETF options saw notable activity in Bitcoin and Treasury bond ETFs last Friday, hinting at investor interest in diverse hedges amid potential policy-induced swings in anticipation of yesterday’s inauguration event.

Digital Assets

Bitcoin fell 5.2% to $101,820 as uncertainty surrounding President Trump’s crypto policies weighed on markets. Hopes of crypto-friendly executive orders faded as Trump’s inaugural actions focused on trade and energy. Additionally, volatility spiked after the launch of $TRUMP and $MELANIA memecoins. Altcoins followed Bitcoin lower, with Ethereum down 5.2% and Solana dropping 3.8%. Bitcoin-related ETFs like IBIT saw increased trading interest last Friday, reflecting mixed sentiment.

Fixed Income

US Treasury yields opened sharply lower as bonds rallied sharply all along the curve in a bull flattening move, with the US 10-year benchmark treasury yield retreating 9 basis points to trade 4.54% this morning and the 2-year falling some 6 basis points. This was apparently in reaction to Trump’s inaugural address, which failed to mention across the board tariffs.

Commodities

• Crude prices trade lower for a third day as traders exit recent established longs while trying to connect all the dots in Trump’s inaugural speech and what they overall mean for supply and demand. In the short term, potential tariffs on Canada and Mexico may lower supply to the US and boost prices while incentives to boost domestic production may counter that fear.
• Gold and silver trade higher, with the yellow metal challenging resistance above $2725, supported by lower yields and rising geopolitical temperature, with the initial focus on a trade war with Canada and Mexico. Traders now await news on whether import tariffs will include key metals traded in New York, a risk that in recent weeks has driven futures prices above their relative value as traders covered short positions.

Currencies

• The US dollar was sharply weaker yesterday on a Wall Street Journal story citing a memo circulated by President Trump that would not seek to immediately impose tariffs, but instead to instruct federal agencies to launch a series of investigations into US trade relationships with China, Canada and Mexico. Later, in a press conference, Trump made impromptu remarks about slapping 25% tariffs on Mexico and Canada on February 1, linking that threat to illegal immigration and the drug trade. CAD and MXN fell sharply after strong rallies yesterday.
• The JPY surged broadly on the further drop in US treasury yields in late trading yesterday, as USDJPY dipped briefly below 155.00, posting a new post-December FOMC low before bouncing back into the range above 155.00 overnight. The BoJ is now over 90% priced to hike its policy rate by 25 basis points at its meeting this Friday.