Market Quick Take - 20 March 2025

Market Quick Take - 20 March 2025

Market drivers and catalysts

• Equities: Fed dovish; Tesla, Boeing rally; Earnings in focus
• Volatility: VIX sharply down post-Fed; focus on economic data and earnings
• Digital Assets: XRP surges post-SEC decision; Bitcoin stable; crypto stocks strong
• Currencies: Turkish lira slumps. Sterling awaits rate decision
• Fixed Income: US Treasury yields trade softer after FOMC
• Commodities: Copper surge continues, gold hits fresh record. Crude rangebound
• Macro events: Rate decisions from SNB, Riksbank and BOE

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

Macro data and headlines

• The FOMC's projections have solidified expectations for at least two rate cuts this year, due to a softened economic outlook with weaker growth, rising unemployment, and higher inflation linked to President Trump's policies. The Fed will also slow its balance sheet runoff starting next month, reducing the monthly cap of Treasuries allowed to mature from $25 billion to $5 billion.
• Federal Reserve Chair Jerome Powell downplayed concerns about economic growth and inflation from President Trump's trade tariffs, describing their effects as temporary, which helped calm financial markets, though it risked damaging the Fed's credibility if the inflationary impact proves lasting
• Turkish lira slumps after Istanbul's mayor, Ekrem Imamoglu, a prominent politician and chief opponent of President Erdogan, was arrested on charges of fraud and terrorism following the revocation of his university diploma, a move that could hinder his ability to contest Erdogan.

Macro calendar highlights (times in GMT)

0700 – Germany Feb PPI
0830 – SNB Rate Decision
0830 – Riksbank Rate Decision
1200 – BOE Rate Decision
1230 – US Initial Jobless Claims
1230 – Philadelphia Fed Manufacturing Index (Mar)
1500 – Existing Home Sales (Feb)

Earnings events

• Thursday: Accenture, Nike, Micron, Fedex, Lennar, Hapag-Lloyd, Darden Restaurants
• Friday: Carnival Cruise

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

Equities

• US: US equities surged Wednesday after the Fed maintained rates and indicated two cuts later this year. S&P 500 +1.08%, Nasdaq +1.41%, Dow Jones +0.92%. Tech and consumer discretionary sectors led gains, supported by easing volatility. Tesla (+4.7%) rose after securing Robotaxi permits, Boeing (+6.8%) jumped on lower-than-expected cash burn, while Nvidia gained 1.8%. Futures continued higher early Thursday. Investors now eye jobless claims data and earnings from Nike, FedEx, Micron, and Darden Restaurants.
• Europe: European markets were mixed, nearing record highs. STOXX 50 +0.5%, CAC 40 +0.7%, DAX -0.4%. Sentiment buoyed by Germany's increased deficit spending and optimism around a Russia-Ukraine ceasefire. Industrials rose notably, led by Schneider and Safran (each +2%). Rheinmetall dropped 4.5% as investors took profits in defence stocks. Markets anticipate today's interest rate decisions from the SNB and BoE.
• Asia: Asian markets mostly gained, tracking US optimism after the Fed's dovish stance. KOSPI +0.5% driven by chipmakers Samsung and SK Hynix. Australian ASX 200 +1.1% supported by softer employment data, fueling rate-cut expectations. Hong Kong’s HSI -1.1% as investors booked profits in tech, notably Tencent (-4.1%) amid heightened AI investment plans. China’s markets dipped slightly, pausing after recent gains; PBoC held rates steady as expected.

Volatility

• Volatility sharply decreased after Fed Chair Powell's dovish signals, with VIX down 8.3% to 19.90, dropping below the key 20 level. Short-term indicators (VIX1D, VIX9D, VVIX) also saw notable declines. Market sentiment today remains influenced by Powell’s comments. Attention now shifts to the Philadelphia Fed Manufacturing Index and Existing Home Sales, alongside key earnings releases.

Digital Assets

Bitcoin retreated slightly but remains elevated at $85,848 (-1.1%), while Ethereum (-1.98%) is at $2,015. XRP continues strong (+7.3% to $2.4599) after the SEC ended its lawsuit against Ripple, significantly boosting sentiment. Crypto-related stocks advanced, led by MicroStrategy (+7.4%) and Coinbase (+4.8%). Altcoins generally tracked Bitcoin’s sentiment with moderate gains.

Fixed Income

• US Treasuries rose, reversing earlier losses after the Fed's new forecasts. The bank expects half a percentage point rate cuts this year, consistent with December's predictions, and will slow balance sheet reduction next month. Gains persisted during Chair Powell's press conference, with yields richer, bringing 2-year yields below 4% with US 10-year yields trading around 4.25%, after peaking at nearly 4.32% pre-announcement. Powell suggested tariff-related inflation is likely temporary, supporting Treasuries' gains.

Commodities

• HG copper in NY trades near the May 2024 record at $5.20 per pound as the relentless surge continues due to a global trade dislocation triggered by Trump’s push for tariffs on imports of the metal. Traders are rushing copper to the US, thereby tightening the rest of the world ahead of tariffs. In London the LME price has reached 10,000 per ton and currently trades 13.5% below New York.
• Gold hit a fresh record above $3055 an ounce in response to a softer dollar and lower bond yields after the FOMC’s projected slower US growth and higher tariff-related inflation, raising the fear of stagflation. Silver and platinum both struggling to keep up with bullion, with the XAUXAG ratio back above 90.
• Crude remains rangebound, with Brent bouncing from $70 after US stockpiles data showed strong fuel consumption. Overall, the risk of an economic slowdown continues to be offset by risks to supply from US sanctioned countries, especially Iran.

Currencies

• USD stayed strong but trimmed gains after the Fed kept the Federal Funds Rate at 4.25-4.50% and slowed balance sheet reductions. Despite unanimous decision, Fed's Waller preferred the current pace. FFR forecasts remained unchanged, GDP forecasts were downgraded, and Chair Powell reiterated no rush to cut rates.
• GBP traded above the 1.30 level against USD ahead before inching lower ahead of today’s BoE announcement, with Chancellor Reeves set to announce significant spending cuts at next week’s Spring Statement
• JPY strengthened, with USDJPY falling for a second day to 148.25 as US yields softened post-FOMC. The BoJ held rates at 0.5%, noting moderate economic recovery and rising inflation expectations.
• TRY dropped 12% to 41 against USD, then settled above 39 per USD, hitting a record low due to political unrest. Istanbul's mayor, Ekrem Imamoglu, a key rival to President Erdogan, was detained on fraud and terror charges.