Global Market Quick Take Europe - 22 January 2025

Global Market Quick Take: Europe – 22 January 2025

Key points

• Equities: US rally on milder tariffs, Netflix +14%, HSI falls on China tariffs
• Volatility: VIX 15.06 (-4.74%), lower futures, AI options active, tariff uncertainty lingers
• Digital Assets: Bitcoin $105,494 (-0.5%), Solana +2.81%, crypto stocks mixed
• Currencies: USD weakened yesterday, but firmed slightly overnight on Trump tariff comments
• Commodities: Grains and precious metals the initial Trump 2.0 winners
• Fixed Income: US yield curve bear flattens as short yields rise
• Macro events: ECB President Lagarde to speak, US 20-year Treasury Auction

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

Macro data and headlines

• US President Trump moved to freeze more than USD 300 billion in green infrastructure spending authorized by the Biden administration, leaving projects in limbo
• US President Trump announced support for Stargate, a USD 100 billion AI infrastructure project that will be largely funded by Open AI, Oracle and Japan’s Softbank, touting the creation of 100,000 jobs related to the project.
• US President Trump said he could impose 10% across the board tariffs on Chinese imports on February 1, which dented risk sentiment in the Asian session.
• New Zealand Q4 CPI out at +0.5% Q/Q and 2.2% Y/Y vs. 0.5/2.1% expected, respectively and vs. 2.2% Y/Y in Q3.

Macro events (times in GMT)

US Dec. Leading Index (1500), ECB President Lagarde to speak (1505), US Treasury to auction 20-year notes (1800),

Earnings events

• Today: Procter and Gamble, Johnson & Johnson, Abbott Laboratories, GE Vernova, Progressive Corporation
• 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 stocks rallied on Tuesday, with the Dow climbing 1.24% (+538 points), the S&P 500 rising 0.88%, and the Nasdaq up 0.64%. Gains were supported by President Trump’s less-aggressive-than-expected trade measures, proposing targeted tariffs rather than blanket duties. Technology and travel stocks outperformed, with Oracle (+4%) surging after announcing its role in a $500 billion AI investment initiative. Netflix jumped 14% post-market on record subscriber growth, while Apple fell 3.2% on analyst downgrades. Futures point higher this morning, buoyed by optimism around corporate earnings.
• Europe: European stocks held near record highs on Tuesday, with the STOXX 50 flat and the STOXX 600 up 0.4%. Gains in luxury stocks like LVMH (+2.5%) and Hermes (+2.6%) offset losses in autos and renewables. Concerns over Trump’s proposed tariffs of up to 25% on Mexico and Canada pressured European exporters. Renewables dropped on fears of anti-climate policies, with Denmark’s Orsted sliding more than 10% after reporting impairment charges. Traders remain cautious as the US trade agenda unfolds.
• Asia: Asian equities saw mixed performance on Wednesday. Japan’s Nikkei 225 climbed 1.5%, led by SoftBank (+7.5%) on its role in a massive AI investment. Hong Kong’s HSI fell 1.78%, dragged lower by Trump’s threat of 10% tariffs on Chinese imports by February 1. Chinese markets also declined, with the CSI 300 dropping 0.9%. Investors are cautious as Trump’s tariff rhetoric resurfaces, raising fears of a protracted trade war. Meanwhile, robust corporate earnings in the US and optimism over AI investments supported tech-heavy indices in Japan and South Korea

Volatility

Volatility eased as the VIX fell to 15.06 (-4.74%) on Tuesday, with futures this morning slightly lower at 16.45 (-0.52%). Daily expected moves for the S&P 500 and Nasdaq remain modest at 0.45% and 0.72%, respectively. Market futures are higher, reflecting optimism following strong earnings from Netflix and Oracle. Notable options activity includes increased interest in AI-related stocks like Nvidia and Palantir, and treasury bond ETFs. Markets are adjusting to Trump's measured trade actions, but the potential for further tariff announcements could drive volatility.

Digital Assets

Bitcoin hovered near $105,000 (-0.5%) after climbing to recent highs, as traders remain cautious about Trump’s crypto policies. Trump’s silence on digital assets in his first executive orders created uncertainty, though optimism persists following his pardon of Silk Road founder Ross Ulbricht. Crypto stocks had a mixed session, with Coinbase (-0.44%) and Riot Platforms (-4.85%) underperforming, while IBIT rose 1.34%. Altcoins showed resilience, with Solana gaining 2.81%. The market now awaits signs of regulatory clarity amid Trump’s broader policy actions.

Fixed Income

• The US Treasury will auction its least popular maturity today, the 20-year. The benchmark 20-year yield rose as high as 5.08% last week before dipping as low as 4.84% yesterday, with 4.75% an important level on the way up.
• US high-yield spreads to US treasuries have plunged, with one Bloomberg measure of the spread at 258 basis points, after a recent high near 288 basis points and the all-time low for the indicator in November was 253 bps.

Commodities

• Oil prices fell after President Trump expanded his tariff threats from Canada and Mexico to Europe and China, potentially triggering a global trade war that may ultimately hurt growth, while initially raising gasoline and energy costs in the U.S., with Canada being its biggest supplier of much sought-after crude for refineries. Despite recent declines, crude prices are still up this year due to U.S. sanctions on Russia.
• Gold and silver prices have both benefited from the increased uncertainty caused by Trump’s announcements, including tariffs, with investors also evaluating their inflationary impact and effects on monetary policies. The China tariff threat saw gold reach an 11-week high overnight at USD 2,758, with silver closing in on resistance around USD 31.
• The grains sector, besides receiving support from adverse weather in Argentina, has ebbed and flowed on Trump news, with soybeans rising strongly on inauguration day, only to suffer a setback after Trump said his threat to hit all Chinese goods with a 10% tariff was still on the table—a move that could prompt retaliation from China, the world’s biggest soybean importer.
• Cocoa futures jumped on Tuesday as dry Harmattan winds threatened West African crops, with dryness and high temperatures causing cocoa pods to wither. As a result, deliveries to Ivory Coast’s ports are slowing, potentially raising the risk of a fourth consecutive annual deficit.

Currencies

• The US dollar stayed broadly weaker yesterday after an attempt at an intraday rally, with EURUSD above 1.0400 again this morning even after a small rally overnight on Trump comments on tariffs against China, poised close to a critical local resistance near 1.0437.
• The JPY weakened across the board late yesterday after an attempt at rallying as global yields recovered slightly from fresh lows, with EURJPY trading above 162.00.